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The Honorable City Council
of the City of Pasadena
Pasadena, California
We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of City of Pasadena, California as of and for the year ended June 30, 2021, and have issued our report thereon dated January 19, 2022. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit.
Significant audit findings or issues
Qualitative aspects of accounting practices
Accounting policies
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by City of Pasadena, California are described in Note 1 to the financial statements.
No new accounting policies were adopted and the application of existing policies was not changed during fiscal year ended 2021.
We noted no transactions entered into by the entity during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates
Accounting estimates are an integral part of the financial statements 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 financial statements were:
The annual required contributions, pension expense, net pension liability and corresponding deferred outflows of resources and deferred inflows of resources for the City’s public defined benefit plans with CalPERS are based on actuarial valu ations
provided by
CalPERS.
The annual required contributions, pension expense, net pension liability and corresponding deferred outflows of resources and deferred inflows of resources for the Fire and Police Retirement System Plan are based on actuarial valuations provided by a third-party consultant.
The Honorable City Council
City of Pasadena
The Other Postemployment Benefit (OPEB) expense, net OPEB liability, and corresponding deferred outflows of resources and deferred inflows of resources for the City’s OPEB plans are based on certain actuarial assumptions and methods prepared by an outside consultant.
Management’s estimate of the claims payable liabilities related to workers’ compensation claims are based on internal data and/or reports prepared by third-party claims administrators and general liability are based on City Attorney’s Office reports.
We evaluated the key factors and assumptions used to develop these estimates in determining that they were reasonable in relation to the financial statements taken as a whole.
Financial statement disclosures
Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were:
The disclosure of the retirement commitments reported in Note 18 to the financial statements The disclosure of the claims payable reported in Note 16 to the financial statements The disclosure of the OPEB commitments report ed in Note 19 to the financial statements The financial statement disclosures are neutral, consistent, and clear.
Significant unusual transactions
We identified no significant unusual transactions.
Difficulties encountered in performing the audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Uncorrected misstatements
Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole.
Corrected misstatements
Management did not identify and we did not notify them of any financial statement misstatements detected as a result of audit procedures.
The Honorable City Council
City of Pasadena
Disagreements with management
For purposes of this communication, a disagreement with management is a disagreement on a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s’ report. No such disagreements arose during our audit.
Management representations
We have requested certain representations from management that are included in the management representation letter dated January 19, 2022.
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 entity’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.
Audits of group financial statements
We noted no matters related to the group audit that we consider to be significant to the responsibilities of those charged with governance of the group.
Quality of component auditor’s work
There were no instances in which our evaluation of the work of a component auditor gave rise to a concern about the quality of that auditor’s work.
Limitations on the group audit
There were no restrictions on our access to information of components or other limitations on the group audit.
Significant issues discussed with management prior to engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the entity’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement.
Other information in documents containing audited financial statements With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We com pared the RSI for consistency with management’s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI.
The Honorable City Council
City of Pasadena
With respect to the combining and individual nonmajor fund financial statements and schedules (collectively, the supplementary information) accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period or the reasons for such changes, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplem entary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated January 19, 2022.
The introductory and statistical sections accom panying the financial statements, which are the responsibility of management, were prepared for purpos es of additional analysis and are not a required part of the financial statements. Such information was not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we did not express an opinion or provide any assurance on it.
* * *
This communication is intended solely for the information and use of the City Council and management of the City of Pasadena, California and is not intended to be, and should not be, used by anyone other than these specified parties.
CliftonLarsonAllen LLP
Irvine, California
January 19, 2022
UNCORRECTED ADJUSTMENTS
Description Assets Liabilities
Fund Balance /
Net Assets
Net
Expense/Revenue
and Change in
Net Assets /
Fund Balance
Revenue recognized in surrent year that pertained to
previous years for Construction and Demolition deposits that were not valid deposits. (1,688,078)$ 1,688,078 $ Net current year misstatements (Iron Curtain Method) - - (1,688,078) 1,688,078 Net prior year misstatements - - 2,500,000 (2,500,000) Combined current and prior year misstatements (Rollover Method) -$ - $ 811,922$ (811,922) $ Financial statement totals 808,249,724 $ 237,002,895 $ 584,462,217 $ 67,112,766 $
SUMMARY OF UNCORRECTED MISSTATEMENTS - AUDIT
Year Ended June 30, 2021
Other Aggregate Remaining Funds
Effect of misstatements on:
City of Pasadena