Agenda Item
City Council
Item #: 3.24. 1/10/2023 File #: 22-0729
TO: Honorable Mayor and Members of the City Council
THRU: Tom Kisela, Interim City Manager
FROM: Susan Galvan, Assistant City Manager
1. SUBJECT
Audited Financial Statements and Related Financial Reports for the fiscal year ended June 30, 2022.
2. SUMMARY
Financial Reports and Statements provided by independent auditors as a result of the annual financial audit for the fiscal year ended June 30, 2022.
3. RECOMMENDED ACTION
Receive and file the following documents for the fiscal year ended June 30, 2022:
1. Annual Comprehensive Financial Report
2. Audit Communication Letter
3. Independent Accountants’ Report on Agreed-Upon Procedures Applied to the Appropriations Limit Worksheets
4. Independent Accountants’ Report on Agreed-Upon Procedures Applied to the Investment Portfolio
5. Air Pollution Reduction Fund Financial Statements and Independent Auditors’ Report
6. Independent Auditors’ Report on Internal Control Over Financial Reporting
7. Housing Successor Fund Financial Statements
8. Single Audit of Federally Assisted Grant Programs
4. FISCAL IMPACT
None.
5. STRATEGIC PLAN GOALS
Goal 2: Be a fiscally healthy community
a: Expend fiscal resources responsibly
d: Effectively manage and develop City assets
6. DISCUSSION AND BACKGROUND
Lance, Soll, and Lunghard, LLP (LSL) provided audit services to the City for the fiscal year ended June 30, 2022. As an integral part of their audit, LSL considers the City’sinternal controls over our financial reporting and, while they did not express an opinion, their conclusion was they did not identify any deficiencies in internal control considered to be material weaknesses.
During their quarterly meetings, the newly formed Investment and Audit Committee reviews the City’s financial transactions with LSL and our investment advisors, Chandler Asset Management. The City City of Orange Printed on 1/5/2023Page 1 of 3
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Item #: 3.24. 1/10/2023 File #: 22-0729
financial transactions with LSL and our investment advisors, Chandler Asset Management. The City Finance staff includes two staff with extensive audit experience. Throughout the year, the Finance Department assists in various audits from outside agencies which provide assurance both financial and operational controls and efficiencies are in place and are being followed. Staff believes oversight of our financial position and reporting requirements is being properly maintained.
LSL’s testing resulted in a “clean” audit opinion. This provides assurance the City’s financial transactions are accurately recorded and can be relied upon not only for proper reporting of past financial results in the City’sFiscal Year (FY) 2022 Annual Comprehensive Financial Report (ACFR), but also on a go-forward basis as we craft the FY 2024 Budget. This is of utmost importance given the results reflected in the ACFR include fixed assets and restricted fund balances that are not readily available to staff for appropriation as budgeted expenditures for operating costs or Capital Improvement Projects.
LSL noted a finding for the City’sfailure to submit its FY 2021 ACFR to the Electronic Municipal Market Access (EMMA) website by the deadline prescribed by the 2021 Taxable Pension Obligation Bonds (POB) Official Statement. This is reported in both the Single Audit of Federally Assisted Grant Programs and the Report on Internal Control over Financial Reporting. Staff agrees with this finding and, while this task is the responsibility of a third-party consultant, the City has developed a review mechanism to ensure the report is submitted by its annual deadline of March 31. Per the POB indenture, a failure by the City to comply with the provisions of the continuing disclosure requirement does not constitute an event of default.
The following Reports, Letter, and Statements are presented for fiscal year ended June 30, 2022:
1. Annual Comprehensive Financial Report (ACFR) - This report is divided into three major sections: the Introductory Section, the Financial Section and the Statistical Section. The Introductory Section includes a Letter of Transmittal. The Financial Section comprises the Audit Opinion, Management’s Discussion and Analysis, and the Basic Financial Statements. The Statistical Section provides important historical and trend information about the City. The Audit opinion is an “unqualified opinion”, which states that, in the auditor’sopinion, the basic financial statements of the City are presented fairly in all material respects and are in conformity with generally accepted accounting principles.
2. Audit Communication Letter - a report of recommendations made to management by the auditors to improve internal controls and/or operating efficiencies within the City.
3. Independent Accountants’ Report on Agreed-Upon Procedures Applied to the Appropriations Limit Worksheets - procedures performed solely to assist the City in meeting the requirements of Section 1.5 of the Article XIIIB of the California Constitution.
4. Independent Accountants’ Report on Agreed-Upon Procedures Applied to the Investment Portfolio - independent review of investment operations and compliance with the City’s investment policy.
5. Air Pollution Reduction Fund Financial Statements and Independent Auditors’Report - audited financial statements in accordance with Generally Accepted Auditing Standards and the standards applicable to the financial audits contained in Government Auditing Standards.
6. Independent Auditors’Report on Internal Control Over Financial Reporting - a report to City of Orange Printed on 1/5/2023Page 2 of 3
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Item #: 3.24. 1/10/2023 File #: 22-0729
6. Independent Auditors’Report on Internal Control Over Financial Reporting - a report to describe the scope of testing of the City’sinternal control over financial reporting and the results of that testing.
7. Housing Successor Fund Financial Statements- audited financial statements in accordance with Generally Accepted Auditing Standards and the standards applicable to the financial audits contained in Government Auditing Standards.
8. Single Audit of Federally Assisted Grant Programs - audit of compliance requirements as described in the U.S. Office of Management and Budget (OMB) 2 CFR part 200, Uniform Grant Guidance.
7. ATTACHMENTS
· City of Orange Annual Comprehensive Financial Report and Summary of Audit Results · Audit Communication Letter
· Independent Accountants’ Report on Agreed-Upon Procedures Applied to the Appropriations Limit Worksheets
· Independent Accountants’ Report on Agreed-Upon Procedures Applied to Investment Portfolio
· Air Pollution Reduction Fund Financial Statements and Independent Auditors’ Report · Independent Auditors’ Report on Internal Control Over Financial Reporting · Housing Successor Fund Financial Statements
· Single Audit of Federally Assisted Grant Programs
City of Orange Printed on 1/5/2023Page 3 of 3
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