1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
March 27, 2024
To the Honorable Mayor and Members of the City Council
City of Orange, California
We have audited the financial statements of the governmental ac tivities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Orange, California (the “City”) for the year ended June 30, 2023. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 28, 2023. Professional standards also require that we communicate to you the following information related to our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. As described in Note 1 to the financial statements, the City changed accounting policies related to sub scription-based information technology arrangements by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 96, in fiscal year 2022-2023. Accordingly, the cumulative effect of the accou nting change as of the beginning of the year is reported in the Statement of Activities. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All sig nificant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial stat ements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City’s financial statements were:
Management’s estimates of the net pension liability, total othe r postemployment benefits liability, and claims and judgments liability are based on actuarial valua tion estimates. We evaluated the methods, assumptions, and data used to develop the actuarial va luation estimates in determining that they are reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
To the Honorable Mayor and Members of the City Council
City of Orange, California
Corrected and Uncorrected Misstatements
Professional standards require u s to accumulate all known and l ikely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management.
Management has corrected all such misstatements. Further inform ation on these misstatements is detailed in the separately issued Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our s atisfaction, that could be sign ificant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter dated March 27, 2024.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professi onal standards require the con sulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledg e, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City’s audi tors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to management’s discussio n and analysis, the budgetary comparison schedules for the General Fund and the major special revenue fu nds, and the required pension and other postemployment benefits schedules , which are required supplemen tary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiri es of management regarding the methods of preparing the information and comparing the information for con sistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on the combining and individual fund financial statements and schedules which accompany the financial statements but are not RSI. With respec t to this supplementary information, we made certain inquiries of management and evaluated the form, content , and methods of preparing the information to determine that the information co mplies with accounting princip les generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate
To the Honorable Mayor and Members of the City Council
City of Orange, California
and complete in relation to our audit of the financial statemen ts. We compared and reconciled the supplementary information to the underlying accounting records used to prepar e the financial statements or to the financial statements themselves.
We were not engaged to report on other information included in the annual report which is comprised of the introductory and statistical sections, which accompany the fina ncial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in th e audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Future GASB Pronouncements
The following Government Accounting Standards Board (GASB) pronouncements will be effective for the following fiscal years’ audits and should be reviewed for proper implementation by management:
Fiscal Year 2023-2024
GASB Statement No. 99, Omnibus 2022.
Fiscal Year 2024-2025
GASB Statement No. 101, Compensated Absences.
Future Projects
Comprehensive Project, Financial Reporting Model.
Comprehensive Project, Revenue and Expense Recognition.
Major Project, Going Concern Uncertainties and Severe Financial Stress.
Major Project, Infrastructure Assets.
Practice Issue, Classification of Nonfinancial Assets.
Practice Issue, Risks and Uncertainties Disclosures.
Pre-Agenda Research Activities, Subsequent Events.
Restriction on Use
This information is intended solely for the information and use of the City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Brea, California