City Council Agenda Report
TO: Mayor Clauzel and Members of the City Council
FROM: Ken Irwin, City Manager
BY: Jennifer Riedeman, Finance Director
MEETING DATE: May 7, 2024
ITEM NO: 9.1
SUBJECT: Accept the City of Patterson’s 2022-23 Financial Audit Report, 2022-23 Single Audit Report, 2022-23 Transportation Development Act Funds Financial Audit Report, 2022-23 Abandoned Vehicle Abatement Program Financial Audit Report.
RECOMMENDATION
Motion to Accept the City of Patterson’s 2022-23 Financial Audit Report, 2022-23 Single Audit Report, 2022-23 Transportation Development Act Funds Financial Audit Report, 2022-23 Abandoned Vehicle Abatement Program Financial Audit Report.
BACKGROUND
The City of Patterson publishes financial statements presented in conformance with Generally Accepted Accounting Principles (GAAP). The financial statements were audited by the independent public accounting firm of The Pun Group, LLP, whose unmodified opinion is included within the financial section of the report. The unmodified opinion indicates that the financial statements present fairly the financial position of the City of Patterson as of June 30, 2023, and the results of operations, in accordance with generally accepted accounting principles. As part of the audit, The Pun Group, LLP also reviewed and performed a test of the City’s internal accounting control procedures to determine if there are any material weaknesses or instances of non-compliance. Based on the audit, there is no instance of non-compliance.
All non-Federal entities that expend $750,000 or more of Federal awards in a year are required to obtain an annual audit to comply with both the Single Audit Act Requirements and Federal Government’s Office of Management and Budget (OMB) standards. The Single Audit has been completed and the independent auditors have indicated that the City of Patterson has no instance of non-compliance.
The City of Patterson’s 2022-23 financial report, 2022-23 Single Audit Report, 2022-23 Abandoned Vehicle Abatement Program financial report and 2022-23 Transportation Development Act Funds financial report are available on the City’s website and are attached to this staff report.
Representative of The Pun Group will be present to discuss the audit and answer questions.
ANALYSIS
Governmental funds. The focus of the City of Patterson’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Patterson’s financing requirements. Spendable fund balance may serve as a useful measure of a government’s net resources at the end of the fiscal year.
As of June 30, 2023, the City of Patterson’s governmental activities reported an ending net position of $89,151,923, an increase of 7% primarily due to an increase in capital grants and contributions in the amount of $6,058,947 and $1,524,816 in taxes.
The General Fund is the chief operating fund of the City of Patterson. At the end of the current fiscal year, the committed, assigned and unassigned fund balance of the general fund was $17,464,253, while total fund balance was $18,163,163. The general fund’s ending fund balance increased by $1.3 million compared to the prior year.
As a measure of the General Fund’s liquidity, it may be useful to compare only the committed, assigned, and unassigned fund balance to total fund expenditures. Committed, assigned and unassigned fund balance represents 65.29% of the total general fund expenditures for the year, most of which is committed or assigned to meet future long-term obligations. The key factors in the increase of General Fund’s fund balance as follows:
· Overall, General Fund revenues (including transfers in) increased from last year by $2.3million or 9% and expenditures (including transfers out) increased by $6.1 million or 29% over the prior year. Tax related revenue increased by $914,045 due to increases in property tax as City residential and commercial real estate construction completed in FY 2023. In addition, sales tax revenue increased by $525,809. Intergovernmental grants experienced an overall decrease of $53,371 due to one-time funding received in FY 2022. In addition, License permit and fees decreased by $364,168 in fiscal year 2023. · The overall increase in expenditures in the amount of $5.5 million or 26% was attributed to increased capital outlay expenditures.
As of the end of the current fiscal year, the City of Patterson’s governmental funds reported combined ending fund balances of $96,375,412, a decrease of $965,761 in comparison with the prior year. The city’s non-major governmental funds ending fund balances of $23,359,972 or 24.25% constitute committed, assigned and unassigned fund balance, which is available for spending at the government’s discretion within the guidelines of the funding sources. The remainder of the fund balance of $73,015,440 is either non-spendable or restricted for purposes imposed by creditors, grantors, contributors, laws, or regulations of other governments or through enabling legislation.
Proprietary funds. The City of Patterson’s proprietary funds include the Water, Sewer and Garbage funds. As of June 30, 2023, the City’s total ending net position of $48,475,247 primarily due to an increase in capital grants and contributions in the amount of $6,075,266 as well as annual rate increases of 2% for Water and 6% for Sewer that took effect in July of 2022 and January of 2023, respectively. Garbage revenues increased by 6% as well.
Water operating revenue increased by $520,915, and expenses increased by $1,892,772 in fiscal year 2023, resulting in operating income of $1.4 million. Revenue increased primarily due to the implementation of the new water rates in January 2023. The Water Fund’s net position was $25,657,488. Of this amount, $24,436,630 was invested in net investment in capital assets, $3,066,323 was restricted for debt service and capital projects, and the unrestricted balance was a deficit of $1,845,465.
Sewer operating revenue increased by $728,940 and expenses increased by $2,786,925 in fiscal year 2023. The increase in operating revenue is primarily related to the 6% sewer rate increase in July 2022. As of June 30, 2023, the Sewer fund’s net position was $21,232,923. Of this amount, $24,265,046 was invested in net investment in capital assets, $71,202 was restricted for debt service and capital projects, and the unrestricted balance was a deficit of $3,103,325.
Garbage operating revenue increased by $249,778 in fiscal year 2023. The increase was due to an increase in garbage rates of 4.9% as well as an increase in the number of customers. Garbage expenses increased by $319,440 primarily due to increase in customers and the public outreach related to Senate Bill 1383, which requires every jurisdiction to provide organic waste collection services to all residents and businesses. As of June 30, 2023, the Garbage Fund’s net position was $1,584,836. Of this amount $163,423 was invested in net investment in capital assets and $1,421,413 was unrestricted.
The Unrestricted net position of the Enterprise Funds at the end of the year resulted a deficit of $3,527,377, a decrease of $10,856,314 from the prior year. This change is primarily the result of the acquisition and construction of capital assets.
FISCAL IMPACT
Acceptance of these reports does not affect the City’s budget or its financial condition. The report merely reflects an audit of the City’s financial records at June 30, 2023.