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 the City of Pasadena as of and for the year ended June 30, 2022, and have issued our report thereon dated March 17, 2023. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America, Government Auditing Standards , as well as certain information related to the planned scope and timing of our audit in our engagement letter October 17, 2022. Professional standards also require that we communicate to you the following information related to our audit. 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 the City of Pasadena are described in Note 1 to the financial statements.
As described in Note 1, the City changed accounting policies related to leases by adopting Statement of Governmental Accounting Standards Board (GASB Statement) No. 87, Leases, in fiscal year 2022.
Accordingly, the accounting change has been applied to the beginning period of adoption.
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 managements 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 Citys 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.
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To the Honorable Mayor and Members of the City Council City of Pasadena Page 2 The Other Postemployment Benefit (OPEB) expense, net OPEB liability, andcorresponding deferred outflows of resources and deferred inflows of resources for theCitys OPEB plans are based on certain actuarial assumptions and methods prepared byan outside consultant.Managements estimate of the claims payable liabilities related to workers compensationclaims are based on internal data and/or reports prepared by third-party claimsadministrators and general liability are based on City Attorneys Office reports.We evaluated the key factors and assumptions used to develop these estimated in determining that they 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 20 to the financial statementsThe disclosure of the claims payable reported in Note 18 to the financial statementsThe disclosure of the OPEB commitments reported in Note 21 to the financial statementsThe 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. Corrected misstatements Management did not identify and we did not notify them of any financial statement misstatements detected as a result of audit procedures. 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 auditors report. No such disagreements arose during our audit.
To the Honorable Mayor and Members of the City Council City of Pasadena Page 3 Circumstances that affect the form and content of the auditors report As previously communicated to you, the report was modified to include an emphasis of a matter to direct readers to Note 1 to the financial statements regarding adoption of new account guidance, GASB Statement No. 87. Management representations We have requested certain representations from management that are included in the management representation letter dated March 17, 2023. 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 Citys 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 auditors 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 auditors 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 entitys auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. Required supplementary information 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 compared the RSI for consistency with managements 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.
To the Honorable Mayor and Members of the City Council City of Pasadena Page 4 Supplementary information in relation to the financial statements as a whole 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 supplementary 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 March 17, 2023. Other information included in annual reports Other information (financial or nonfinancial information other than the financial statements and our auditors report thereon) is being included in your annual report and is comprised of introductory and statistical sections. Our responsibility for other information included in your annual report does not extend beyond the financial information identified in our opinion on the financial statements. We have no responsibility for determining whether such other information is properly stated and do not have an obligation to perform any procedures to corroborate other information contained in your annual report. We are required by professional standards to read the other information included in your annual report and consider whether a material inconsistency exists between the other information and the financial statements because the credibility of the financial statements and our auditors report thereon may be undermined by material inconsistencies between the audited financial statements and other information. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Our auditors report on the financial statements includes a separate section, Other Information, which states we do not express an opinion or any form of assurance on the other information included in the annual report. We did not identify any material inconsistencies between the other information and the audited financial statements. * * *This communication is intended solely for the information and use of the City Council and management of the City of Pasadena and is not intended to be, and should not be, used by anyone other than these specified parties. CliftonLarsonAllen LLP Irvine, California March 17, 2023