PowerPoint Presentation — Orange City Council, August 22, 2023

State Auditor – Local Government High-Risk Program
August 25, 2023
AGENDA
Overview
Methodology for Ranking
Summary of Results
Orange County Cities Results
Questions/Comments

OVERVIEW

BACKGROUND
 California Government Code section 8546.10 authorizes the State Auditor to establish a high-risk local government agency audit program to identify agencies with high risk for Potential waste, fraud, abuse,
Mismanagement,
Major economic challenges, or
Efficiency/Effectiveness
 The program has two elements:
o Interactive dashboard https://www.auditor.ca.gov/local_high_risk/dashboard-csa o Conduct audits for cities designated as high risk
Audits
 If a city is designated as high risk as a result of a completed audit, it must submit a corrective action plan and provide updates every six months regarding its progress in implementing the corrective action plan.
 The high risk designation will be removed when, in our professional judgment, we determine that the city has taken satisfactory corrective action.

METHODOLOGY FOR RANKING

FINANCIAL INDICATORS
General Fund
Reserves (30 pts.)
Liquidity (10 pts.)
Revenue
Trends
(5 pts.)
Pension
Funding
(5 pts.)
Pension
Obligations
(10 pts.)
Pension
Costs
(5 pts.)
Debt Burden
(15 pts.)
OPEB Obligation (10 pts.)
Future
Pension
Costs
(5 pts.)
OPEB
Funding
(5 pts.)

FISCAL DISTRESS
Sufficient
Reserves
Debt
Burden
Cash
Position
Revenue
Trends
Pension
Obligations

RISK DESIGNATION
High
(0 – 41.76 pts.)
Moderate
(41.77 – 71.23 pts.)
Low
(71.24-100 pts.)

SUMMARY OF RESULTS

CITY OF ORANGE

LOW RISK
Financial
Indicator
Point
Possible Calculation Result FY 21 Result Orange
Debt Burden 15
High Risk = great than or equal to 100% (0 – 8.33 points) Moderate Risk = 40% to 99% (8.34 – 13.33 points)
Low Risk = less than 40% (13.34 – 15 points) 30% 14.16
Liquidity 10
High Risk = less than 100% (0 – 4.99 points)
Moderate Risk = 100.1% to 150% (5 – 7.49 points)
Low Risk = greater than 150% (7.5 – 10 points) 479% 10
Pension Funding 5
High Risk = less than or equal to 70% (0 – 3.5 points)
Moderate Risk = 70.1% to 80% (3.51 – 4.0 points)
Low Risk = less than 80% (4.01 – 5 points) 111% 5
OPEB Obligations 10
High Risk = greater than or equal to 100% (0 – 4 points) Moderate Risk = 50% to 99.9% (4.01 – 8.0 points)
Low Risk = less than 50% (8.01 – 10 points) 21% 10

MODERATE RISK
Financial
Indicator
Point
Possible Calculation Result FY 21 Result Orange
General Fund
Reserves 30
High Risk = less than 17% (0 – 6.5 points)
Moderate Risk = 17% to 57% (6.51 – 16 points)
Low Risk = greater than 58% (16.01 – 30 points) 36% 13.78 Revenue Trends 5
High Risk = less than or equal to 0% (0 – 2.5 points)
Moderate Risk = 0.1% to 10% (2.51 – 3.75 points)
Low Risk = great than 10% (3.74 – 5 points) 7% 3.38

HIGH RISK
Financial
Indicator
Point
Possible Calculation Result FY 21 Result Orange
Pension
Obligations 10
High Risk = great than or equal to 100% (0 – 4 points)
Moderate Risk = 50% to 99% (4.01 – 8 points)
Low Risk = less than 50% (8.01 – 10 points) 269% 0
Pension Costs 5
High Risk = greater than 10% (0 – 2.22 points)
Moderate Risk = 6% to 9.9% (2.23 – 3.33 points)
Low Risk = less than 6% (3.34 – 5 points) 14% 1.11
Future Pension
Costs 5
High Risk = greater than 10% (0 – 2.22 points)
Moderate Risk = 6% to 9.9% (2.23 – 3.33 points)
Low Risk = less than 6% (3.34 – 5 points) 14% 1.11
OPEB Funding 5
High Risk = less than or equal to 70% (0 – 3.5 points)
Moderate Risk = 70.1% to 80% (3.51 – 4.0 points)
Low Risk = greater than 80% (4.01 – 5 points) 0% 0

ORANGE COUNTY CITIES RESULTS

ORANGE COUNTY CITIES
Source: https://www.auditor .ca.gov/local_high_risk/lhr-main-landingand https://www.orangecountyinsiders.com/resources/orange-county-cities City
Overall
Rank
(out of 420)
Total Points
(out of 100)
Overall Risk
Designation Population
July 1, 2023
Sales Tax
2021
TOT
2021
UUT
Stanton 419 96.09 Low 37,970 8.75% 12.00% 5.00%
Laguna Woods 413 95.44 Low 17,452 7.75% 10.00%
Lake Forest 403 93.54 Low 85,742 7.75% 10.00%
Laguna Niguel 367 90.61 Low 64,239 7.75% 8.00%
Rancho Santa Margarita 360 90.14 Low 47,442 7.75%
Aliso Viejo 336 87.9 Low 51,824 7.75% 10.00%
Yorba Linda 330 87.3 Low 67,989 7.75% 10.00%
San Juan Capistrano 327 87.06 Low 34,955 7.75% 10.00%
La Palma 301 85.11 Low 15,413 8.75% 8.00% 5.00%
Dana Point 279 83.21 Low 32,821 7.75% 10.00%
Tustin 278 83.18 Low 79,430 7.75% 13.00%
Mission Viejo 273 82.92 Low 92,449 7.75% 8.00%
Villa Park 272 82.86 Low 5,773 7.75%
Laguna Beach 268 82.48 Low 22,795 7.75% 14.00%
Irvine 255 81.54 Low 309,031 7.75% 8.00% 1.50%
Fountain Valley 240 79.5 Low 56,495 8.75% 9.00%
Laguna Hills 238 79.33 Low 30,965 7.75% 10.00%
Seal Beach 237 79.21 Low 24,937 8.75% 12.00% 10.00%
Buena Park 227 77.04 Low 83,011 7.75% 12.00% 3.00%
Garden Grove 218 76.32 Low 170,488 8.75% 14.50%
Cypress 217 76.3 Low 49,926 7.75% 10.00%
Los Alamitos 213 76.09 Low 11,695 9.25% 8.00% 5.00%
San Clemente 175 72.95 Low 63,896 7.75% 10.00%

QUESTIONS/COMMENTS

Orange City CouncilAugust 22, 2023

Orange City Council
August 22, 2023