POINT ARENA CITY COUNCIL
AGENDA ITEM SUMMARY
AGENDA ITEM: IX A
MEETING DATE: 12/16/2025
TITLE
Annual Comprehensive Financial Report for Fiscal Year 2023-2024
RECOMMENDED ACTION
Receive and file the Annual Comprehensive Financial Report (ACFR) as presented.
ANALYSIS
Each year, the City engages an independent certified public accounting firm to conduct an audit of the City’s financial statements in accordance with Generally Accepted Accounting Principles (GAAP), Government Accounting Standards Board (GASB) requirements, and Government Auditing Standards. Chavan & Associates has served as Point Arena’s auditor since 2012.
The purpose of the annual audit is to provide reasonable assurance that the City’s financial statements are presented fairly and accurately, and to evaluate the City’s internal controls and compliance with applicable laws, regulations, contracts, and grant requirements.
The Annual Comprehensive Financial Report (ACFR) includes several key sections, most notably the Independent Auditor’s Report (page 1) and the Findings and Recommendations (page 41).
Sheldon Chavan, CPA and Managing Partner of Chavan & Associates, LLP, will present the Fiscal Year 2023–2024 audit findings.
FISCAL IMPACT
There is no fiscal impact with the presentation of this item.
ATTACHMENTS
1. Audit Report_COPA_FY23-34
2. Audit- Representation Letter_COPA_FY23-24
CITY MANAGER SIGNATURE
_________________________________
Molly C. Haviland, City Manager
CITY OF POINT ARENA
451 School Street
P.O. Box 67
Point Arena, CA 95468
(707) 882-2122
pointarena.ca.gov
Mayor Barbara Burkey
Vice-Mayor Anna Dobbins
Councilmember Jim Koogle
Councilmember Jeff Hansen
Councilmember Dan Doyle
Interim Cit Manager Peggy Ducey
July 9, 2024
Chavan & Associates, LLP
15105 Concord Circle, Ste 130
Morgan Hill, CA 95037
This representation letter is provided in connection with your audit of the basic financial statements of the City of Point Arena as of June 30, 2023 and for the year then ended, and the related notes to the financial statements, for the purpose of expressing opinions on whether the basic financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows, where applicable, of the various opinion units of the City of Point Arena in accordance with accounting principles generally accepted for governments in the United States of America (U.S.
GAAP).
Certain representations in this letter are described as being limited to matters that are material.
Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.
We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves as of March 22, 2024:
Financial Statements
• We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter, for the preparation and fair presentation of the financial statements of the various opinion units referred to above in accordance with U.S. GAAP.
• We acknowledge our responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. • We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud.
• We acknowledge our responsibility for compliance with the laws, regulations, and provisions of contracts and grant agreements.
• We have reviewed, approved, and taken responsibility for the financial statements and related notes.
• We have a process to track the status of audit findings and recommendations, as applicable. • We have identified and communicated to you all previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented.
• Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable.
• Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of U.S. GAAP, as applicable. • All events subsequent to the date of the financial statements and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed. • We have reviewed and approved the various adjusting journal entries that were proposed by you for recording in our books and records and reflected in the financial statements. • The effects of uncorrected misstatements summarized and aggregated by you during the current engagement are immaterial, both individually and in the aggregate, to the applicable opinion units and to the financial statements as a whole.
• There were no uncorrected misstatements to be evaluated • The effects of all known actual or possible litigation and claims have been accounted for and disclosed in accordance with U.S. GAAP, if applicable.
• All component units, as well as joint ventures with an equity interest, are included and other joint ventures and related organizations are properly disclosed, if applicable. • All funds and activities are properly classified.
• All funds that meet the quantitative criteria in GASB Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, GASB Statement No. 37, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments: Omnibus as amended, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, for presentation as major are identified and presented as such and all other funds that are presented as major are considered important to financial statement users.
• All components of net position, nonspendable fund balance, and restricted, committed, assigned, and unassigned fund balance are properly classified and, if applicable, approved. • Our policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position/fund balance are available is appropriately disclosed and net position/fund balance is properly recognized under the policy.
• All revenues within the statement of activities have been properly classified as program revenues, general revenues, contributions to term or permanent endowments, or contributions to permanent fund principal.
• All expenses have been properly classified in or allocated to functions and programs in the statement of activities, and allocations, if any, have been made on a reasonable basis. • All interfund and intra-entity transactions and balances have been properly classified and reported.
• Special items and extraordinary items have been properly classified and reported, if applicable. • Deposit and investment risks have been properly and fully disclosed. • Capital assets, including infrastructure assets, are properly capitalized, reported, and if applicable, depreciated.
• All required supplementary information is measured and presented within the prescribed guidelines.
• With regard to investments and other instruments reported at fair value:
o The underlying assumptions are reasonable and they appropriately reflect management’s intent and ability to carry out its stated courses of action. o The measurement methods and related assumptions used in determining fair value are appropriate in the circumstances and have been consistently applied. o The disclosures related to fair values are complete, adequate, and in accordance with U.S.
GAAP.
o There are no subsequent events that require adjustments to the fair value measurements and disclosures included in the financial statements.
• With respect to nonattest service(s), we have performed the following:
o Made all management decisions and performed all management functions; o Assigned a competent individual to oversee the services; o Evaluate the adequacy of the services performed;
o Evaluated and accepted responsibility for the result of the service performed; and o Established and maintained internal controls, including monitoring ongoing activities. • Arrangements with financial institutions involving compensating balances or other arrangements involving restrictions on cash balances, line of credit, or similar arrangements have been properly disclosed.
• We have evaluated the entity’s ability to continue as a going concern and appropriate disclosures are made in the financial statements as necessary under GASB requirements. Note 14 to the financial statements discloses all the matters of which we are aware that are relevant to the entity’s ability to continue as a going concern, including significant conditions and events, and management’s plans, and our ability to achieve those plans. • We have provided to you our views on reported audit findings, conclusions, and recommendations, as well as planned corrective actions.
Required Supplementary Information
• With respect to the required supplementary information accompanying the financial statements (as identified in the audit report table of contents):
• We acknowledge our responsibility for the presentation of the required supplementary information in accordance with U.S. GAAP and GASB.
• We believe the required supplementary information, including its form and content, is measured and fairly presented in accordance with U.S. GAAP and GASB. • The methods of measurement or presentation have not changed from those used in the prior period except for the effects from the implementation of new GASB statements.
Information Provided
We have provided you with:
• Access to all information, of which we are aware that is relevant to the preparation and fair presentation of the financial statements of the various opinion units referred to above, such as records, documentation, meeting minutes, and other matters; • Additional information that you have requested from us for the purpose of the audit; and • Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
• All transactions have been recorded in the accounting records and are reflected in the financial statements.
• We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.
• We have no knowledge of any fraud or suspected fraud that affects the entity and involves:
o Management;
o Employees who have significant roles in internal control; or o Others where the fraud could have a material effect on the financial statements. • We have no knowledge of any allegations of fraud, or suspected fraud, affecting the entity’s financial statements communicated by employees, former employees, vendors, regulators, or others.
• We are not aware of any pending or threatened litigation and claims whose effects should be considered when preparing the financial statements.
• We have disclosed to you the identity of the entity’s related parties and all the related party relationships and transactions of which we are aware, as applicable.
• There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in accounting, internal control, or financial reporting practices. • The City of Point Arena has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities.
• We have disclosed to you all guarantees, whether written or oral, under which the City of Point Arena is contingently liable, as applicable.
• We have disclosed to you all nonexchange financial guarantees, under which we are obligated and have declared liabilities and disclosed properly in accordance with GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, for those guarantees where it is more likely than not that the entity will make a payment on any guarantee. • For nonexchange financial guarantees where we have declared liabilities, the amount of the liability recognized is the discounted present value of the best estimate of the future outflows expected to be incurred as a result of the guarantee. Where there was no best estimate but a range of estimated future outflows has been established, we have recognized the minimum amount within the range.
• We have disclosed to you all significant estimates and material concentrations known to management that are required to be disclosed in accordance with GASB Statement No. 62 (GASB-62), Codification of Accounting and Financial Reporting Guidance Contained in PreNovember 30, 1989 FASB and AICPA Pronouncements. Significant estimates are estimates at the balance sheet date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which events could occur that would significantly disrupt normal finances within the next year. • We have identified and disclosed to you the laws, regulations, and provisions of contracts and grant agreements that could have a direct and material effect on financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds. • There are no:
o Violations or possible violations of laws or regulations, or provisions of contracts or grant agreements whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency, including applicable budget laws and regulations. o Unasserted claims or assessments that our lawyer has advised are probable of assertion and must be disclosed in accordance with GASB-62.
o Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by GASB-62.
o Continuing disclosure consent decree agreements or filings with the Securities and Exchange Commission and we have filed updates on a timely basis in accordance with the agreements (Rule 240, 15c2-12).
• The City of Point Arena has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset or future revenue been pledged as collateral, except as disclosed to you.
• •We have complied with all aspects of grant agreements and other contractual agreements that would have a material effect on the financial statements in the event of noncompliance. ______________________________
Peggy Ducey
Interim City Manager
CITY OF POINT ARENA
CALIFORNIA
ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2024
Chavan & Associates, LLP
Certified Public Accountants
16450 Monterey Road, Suite #5
Morgan Hill, CA 95037
CITY OF POINT ARENA, CALIFORNIA
AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
TABLE OF CONTENTS
TITLE PAGE
FINANCIAL SECTION:
Independent Auditor’s Report ............................................................................................................ 1 Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position ..................................................................................................... 5 Statement of Activities ......................................................................................................... 6 Fund Financial Statements:
Governmental Funds:
Balance Sheet ................................................................................................................... 7 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position .............................................................................................. 8 Statement of Revenues, Expenditures and Changes in Fund Balances ............................. 9 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities - Governmental Activities ............................................................................................. 10 Proprietary Funds – Enterprise Funds:
Statement of Net Position ................................................................................................. 11 Statement of Revenue, Expenses and Changes in Net Position ........................................ 12 Statement of Cash Flows .................................................................................................. 13 Notes to the Basic Financial Statements ...................................................................................... 15 REQUIRED SUPPLEMENTARY INFORMATION:
Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) - General Fund ............................................................................... 34 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) - Revolving Loan Fund .................................................................. 35 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) - State Gasoline Tax Fund .............................................................. 36 OTHER INDEPENDENT AUDITOR’S REPORTS:
Independent Auditor’s 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 ................................................................................................. 38 FINDINGS AND RECOMMENDATIONS:
Schedule of Findings and Responses .................................................................................................. 41 Financial Section
16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT
The Honorable Mayor and Members of the City Council
City of Point Arena, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, businesstype activities, and each major fund of the City of Point Arena (the “City"), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, and each major fund of the City of Point Arena, as of June 30, 2024, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of a Matter - Substantial Doubt About the City’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the City will continue as a going concern. As discussed in Note 10 to the financial statements, the City has suffered recurring losses from operations, significant declines in fund balances and net position, a reduction of operating cash to nominal levels, budget overages, deficit spending, and has stated that substantial doubt exists about the City's ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. 16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.
16450 Monterey Road. Ste. 5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Required Supplementary Information
Management has omitted the management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements are not affected by this missing information.
Accounting principles generally accepted in the United States of America require that the budgetary schedules, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency 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 do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 11, 2025 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
September 11, 2025
Morgan Hill, California
Basic Financial Statements
CITY OF POINT ARENA, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and investments $ 206,708 $ - $ 206,708
Accounts receivable 8,860 26,580 35,440
Internal balances 490,151 (490,151) -
Notes receivables 56,481 - 56,481
Capital assets:
Nondepreciable 348,995 298,190 647,185
Depreciable, net 3,847,657 917,665 4,765,322
Total Assets $ 4,958,852 $ 752,284 $ 5,711,136
LIABILITIES
Accounts payable $ 40,397 $ 13,669 $ 54,066
Accrued payroll and benefits 31,101 - 31,101
Line of credit 310,440 - 310,440
Total Liabilities $ 381,938 $ 13,669 $ 395,607
NET POSITION
Net investment in capital assets $ 4,196,652 $ 1,215,855 $ 5,412,507 Restricted for lower income assistance 400,685 - 400,685 Unrestricted (20,423) (477,240) (497,663)
Total Net Position $ 4,576,914 $ 738,615 $ 5,315,529
CITY OF POINT ARENA, CALIFORNIA
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2024
The notes to the financial statements are an integral part of this statement Operating Capital
Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities:
General government 484,925$ $ 13,991 $ 71,657 -$ (399,277) $ $ (399,277) Public safety 132,049 - 119,883 - (12,166) (12,166)
Streets and public works 70,241 - - - (70,241) (70,241) Community development 207,039 - 275,841 4,141 72,943 72,943 Culture and recreation 114,924 - 113,465 - (1,459) (1,459) Interest & Fees 26,798 - - - (26,798) (26,798)
Depreciation unallocated 190,361 - - - (190,361) (190,361) Total Governmental Activities 1,226,337 13,991 580,846 4,141 (627,359) (627,359) Business-Type Activities:
Wastewater 365,782 273,309 - 34,929 $ (57,544) (57,544) Pier 164,427 47,119 - - (117,308) (117,308)
Total Business-Type Activities 530,209 320,428 - 34,929 (174,852) (174,852) Total 1,756,546$ $ 334,419 $ 580,846 $ 39,070 (627,359) (174,852) (802,211) General revenues and transfers
General Revenues:
Taxes:
Property taxes 59,862 - 59,862
Gas taxes 29,903 - 29,903
Sales taxes 139,611 - 139,611
Transient occupancy taxes 101,405 - 101,405
Franchise taxes 18,762 - 18,762
Other taxes 368 - 368
VLF Swap 25,714 - 25,714
Investment earnings 1,447 - 1,447
Miscellaneous 60,872 - 60,872
Total general revenues and transfers 437,944 - 437,944
Change in Net Position (189,415) (174,852) (364,267)
Net Position - Beginning 4,766,329 5,679,796 913,467
Net Position - Ending $ 4,576,914 $ 5,315,529$ 738,615
Program Revenues
Net (Expenses) Revenues and
Change in Net Position
CITY OF POINT ARENA, CALIFORNIA
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE GOVERNMENT-WIDE STATEMENT OF NET
POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
State
Revolving Gasoline Capital Total
General Loan Tax Project Governmental
Fund Fund Fund Fund Funds
ASSETS
Cash and Investments $ 206,708 -$ -$ -$ 206,708 $
Accounts Receivable 8,860 - - - 8,860
Notes Receivable - 56,481 - - 56,481
Due from Other Funds 121,560 - - - 121,560
Advances to Other Funds 65,464 424,687 - - 490,151
Total Assets $ 402,592 $ 481,168 -$ -$ 883,760 $
LIABILITIES
Accounts Payable $ 20,297 $ 20,100 -$ -$ $ 40,397
Accrued Payroll and Benefits 27,199 3,902 - - 31,101
Line of Credit - - - 310,440 310,440
Due to Other Funds - - - 121,560 121,560
Total Liabilities 47,496 24,002 - 432,000 503,498
DEFERRED INFLOWS OF REOURCES
Unavailable Resources - 56,481 - - 56,481
FUND BALANCE
Restricted for:
Lower Income Assistance - 400,685 - - 400,685
Assigned for:
Self-Insurance 15,000 - - - 15,000
Skate Park 8,296 - - - 8,296
Unassigned 331,800 - - (432,000) (100,200)
Total Fund Balances 355,096 400,685 - (432,000) 323,781 Total Liabilities, Deferred Inflows
and Fund Balances $ 402,592 $ 481,168 -$ -$ 883,760 $
CITY OF POINT ARENA, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
Fund Balance - Total Governmental Funds $ 323,781
Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds because of the following:
CAPITAL ASSETS
Capital assets net of accumulated depreciation, used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds.
Capital assets $ 6,868,552
Accumulated depreciation (2,671,900) 4,196,652
LONG-TERM NOTES RECEIVABLES
Notes receivables are not available to pay for current period expenditures and, therefore, are deferred in the governmental funds. 56,481 Net Position - Governmental Activities $ 4,576,914
CITY OF POINT ARENA, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
State
Revolving Gasoline Capital Total
General Loan Tax Project Governmental
Fund Fund Fund Fund Funds
REVENUES
Property Taxes $ 59,862 -$ -$ -$ $ 59,862
Gas Taxes 2,627 - 27,276 - 29,903
Sales Taxes 139,611 - - - 139,611
Transient Occupancy Taxes 101,405 - - - 101,405
VLF Swap 25,714 - - - 25,714
Other Taxes 368 - - - 368
Intergovernmental 459,516 121,330 - 4,141 584,987
Licenses, Permits & Fees 13,991 - - - 13,991
Franchise Fees 18,762 - - - 18,762
Use of Money and Property:
Interest Income 282 17,578 - - 17,860
Other 60,872 - - - 60,872
Total Revenues 883,010 138,908 27,276 1,053,335 4,141
EXPENDITURES
Current:
General Government 472,241 12,419 - - 484,660
Public Safety 132,049 - - - 132,049
Streets and Public Works 56,979 - 5,946 - 62,925
Community Development 78,939 108,000 - - 186,939
Culture and Recreation 114,924 - - - 114,924
Capital Outlay 265 20,100 - 7,316 27,681
Debt service:
Interest & Fees - - - 26,798 26,798
Total Expenditures 855,397 140,519 5,946 34,114 1,035,976
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 27,613 (1,611) 21,330 (29,973) 17,359
OTHER FINANCING SOURCES (USES)
Transfers in 21,330 - - 5,075 26,405
Transfers (out) (5,075) - (21,330) - (26,405)
Total Other Financing Sources (Uses) 16,255 - (21,330) 5,075 - NET CHANGES IN FUND BALANCES 43,868 (1,611) - (24,898) 17,359 BEGINNING FUND BALANCES 311,228 402,296 - (407,102) 306,422 ENDING FUND BALANCES $ 355,096 $ 400,685 -$ (432,000) $ $ 323,781
CITY OF POINT ARENA, CALIFORNIA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES TO THE GOVERNMENT-WIDE
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 17,359 Amounts reported for Governmental Activities in the Statement of Activities are different because of the following:
LONG-TERM RECEIVABLES
In governmental funds, notes receivables are deferred because the amounts do not represent current financial resources that are recognized under the accrual basis in the Statement of Activities Unavailable revenue (16,413)
CAPITAL ASSET TRANSACTIONS
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense.
Current Year Depreciation (190,361)
CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES $ (189,415)
CITY OF POINT ARENA, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
Wastewater Pier
Enterprise Enterprise
Fund Fund Total
ASSETS
Current Assets:
Accounts receivable $ 18,218 $ 8,362 $ 26,580
Noncurrent Assets:
Capital assets, net 223,752 992,103 1,215,855
Total Assets $ 241,970 $ 1,000,465 $ 1,242,435
LIABILITIES
Current Liabilities:
Accrued payroll and benefits $ 6,289 $ 424 $ 6,713
Accounts Payable 6,607 349 6,956
Total current liabilities 12,896 773 13,669
Noncurrent liabilities:
Advances from other funds 126,682 363,469 490,151
Total Liabilities $ 139,578 $ 364,242 $ 503,820
NET POSITION
Net Investment in Capital Assets $ 223,752 $ 992,103 $ 1,215,855 Unrestricted (121,360) (355,880) (477,240)
Total Net Position $ 102,392 $ 636,223 $ 738,615
CITY OF POINT ARENA, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
Wastewater Pier
Enterprise Enterprise
Fund Fund Total
OPERATING REVENUES
Charges for services $ 273,309 47,119 $ 320,428
Total Operating Revenues 273,309 47,119 320,428
OPERATING EXPENSES
Salaries and benefits 126,533 77,045 203,578
Maintenance and operations 123,423 50,263 173,686
Professional fees 65,069 1,330 66,399
Administration 31,631 256 31,887
Depreciation 17,808 35,533 53,341
Total Operating Expenses 364,464 164,427 528,891
Operating Income (91,155) (117,308) (208,463)
NONOPERATING REVENUES (EXPENSES)
Intergovernmental 34,929 - 34,929
Interest expense (1,318) - (1,318)
Total Nonoperating Revenues (Expenses) 33,611 - 33,611
Change in Net Position (57,544) (117,308) (174,852)
BEGINNING NET POSITION 159,936 753,531 913,467
ENDING NET POSITION $ 102,392 $ 636,223 $ 738,615
CITY OF POINT ARENA, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
The notes to the financial statements are an integral part of this statement.
Wastewater Pier
Enterprise Enterprise
Fund Fund Total
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 278,750 $ 76,905 $ 355,655
Payments to suppliers (240,184) (87,898) (328,082)
Payments to employees (124,495) (80,927) (205,422)
Net cash provided (used) by operating activities (85,929) (91,920) (177,849)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Receipts from (payments for) interfund loans (due to-from/advances) 52,318 91,920 144,238 Interest paid on interfund loans and advances (1,318) - (1,318) Net cash provided (used) by noncapital financing activities 51,000 91,920 142,920
CASH FLOWS FROM CAPITAL RELATED FINANCING ACTIVITIES
Proceeds from capital grants 34,929 - 34,929
Net cash provided (used) by capital related financing activities 34,929 - 34,929 Cash and Investments - Beginning of Year - - -
Cash and Investments - End of Year -$ -$ -$
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income $ (91,155) $ (117,308) $ (208,463)
Adjustments to reconcile operating income to cash flows from operating activities:
Depreciation 17,808 35,533 53,341
Change in assets and liabilities:
Accounts receivable 5,441 30,086 35,527
Accrued payroll and benefits 2,038 (3,882) (1,844)
Unearned revenue - (300) (300)
Accounts payable and other accrued expenses (20,061) (36,049) (56,110) Cash Flows From Operating Activities $ (85,929) $ (91,920) $ (177,849) Notes to Basic Financial Statements
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Financial Reporting Entity
The City of Point Arena (City) was incorporated 1908, under the laws and regulations of the State of California (State). The City operates under a City Council/Manager form of government and provides the following services: public works, planning and zoning, building regulation, general administrative services, wastewater, pier and public safety (provided by Mendocino County Sheriff).
The City operates as a self-governing local government unit within the State. It has limited authority to levy taxes and has the authority to determine user fees for the services that it provides. The City’s main funding sources include property taxes, other intergovernmental revenue from state and federal sources, user fees, and sales and transient occupancy taxes.
The financial reporting entity consists of (a) the primary government, the City, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.
Financial accountability is defined as the appointment of a voting majority of the component unit’s board, and either (a) the City has the ability to impose its will on the organization, or (b) there is a potential for the organization to provide a financial benefit to or impose a financial burden on the City.
There are no component units of the City that meet the criteria for discrete or blended presentation.
Basis of Presentation
The City’s Basic Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board (“GASB”) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A.
These Statements require that the financial statements described below be presented.
Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the City) and its component units, as applicable. These statements include the financial activities of the overall City government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the City’s governmental activities and each segment of the business-type activities of the City. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meet the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the City's funds.
Separate statements for each fund category—governmental and proprietary—are presented. The emphasis of fund financial statements is on major individual governmental funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds, as applicable.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillary activities.
Major Funds
GASB defines major funds and requires that the City’s major governmental funds be identified and presented separately in the fund financial statements. All other funds, called nonmajor funds, are combined and reported in a single column, regardless of their fund-type.
Major funds are defined as funds that have assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds.
The City reported the following major governmental funds in the accompanying financial statements:
General Fund – The General Fund is the general operating fund of the City and is used to account for all financial resources except those required to be accounted for in another fund.
Revolving Loan Fund – The Revolving Loan Fund is used to account for revolving loans given to the lower income sector of the community for housing improvements, new construction and economic stimulus.
State Gasoline Tax Fund – The State Gasoline Tax Fund is used to account for gasoline tax and other State transportation related funds, including STIP exchange funds and traffic congestion relief funds.
These resources are restricted for street maintenance and improvements.
Capital Projects Fund – The Capital Project Fund is used to account for capital projects funded by grants and capital contributions expended for various street and capital improvement projects.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
The City also reports the following Proprietary funds:
Enterprise Funds – Enterprise funds are used to account for business-like activities provided to the general public. These activities are financed primarily by user charges, and the measurement of financial activity focuses on net income measurement similar to the private sector.
The reporting entity includes the following enterprise funds that are reported as major funds:
Wastewater Fund – The Wastewater Fund accounts for the operating, maintenance, and capital improvement of the wastewater reclamation facility, including collection, treatment, and distribution.
Pier Fund – The Pier Fund accounts for the operation, maintenance, and capital improvements of the municipal pier facility. The Pier facility provides services for commercial and recreational user groups.
Measurement Focus
Measurement focus is a term used to describe which transactions are recorded within the various financial statements.
On the government-wide Statement of Net Position and the Statement of Activities, governmental and business-type activities are presented using the economic resources measurement focus. The accounting objectives of this measurement focus are the determination of net income, financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Fund equity is classified as Net Position, which serves as an indicator of financial position.
In the fund financial statements, the “current financial resources” measurement focus is used for governmental funds. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period.
The enterprise funds utilize an “economic resources” measurement focus. The accounting objectives of this measurement focus are the determination of net income, financial position, and cash flows.
Enterprise fund equity is classified as net position.
Basis of Accounting
In the government-wide Statement of Net Position and Statement of Activities, governmental and business-type activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year. All other revenue items are considered to be measurable and available only when cash is received by the government. Expenditures (including capital outlay) are recorded when the related fund liability is incurred.
The enterprise funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Operating revenues in the fund are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.
The City may fund programs with a combination of cost-reimbursement grants, categorical block grants and general revenues. Thus, both restricted and unrestricted Net Position may be available to finance program expenditures. The City’s policy is to first apply restricted grant resources to such programs followed by general revenues as necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.
The City applies all applicable GASB pronouncements for certain accounting and financial reporting guidance including those applicable to accounting and reporting for proprietary operations. In December of 2010, GASB issued GASB No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements issued on or before November 30, 1989 into GASB authoritative literature. This includes pronouncements by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee on Accounting Procedure, unless those pronouncements conflict with or contradict with GASB pronouncements. All proprietary funds are accounted for using the accrual basis of accounting, where revenues are recognized when earned and expenses are recognized when incurred. Operating revenues and expenses for proprietary funds result from providing services and producing and delivering goods and/or services. They also include all revenues and expenses not related to capital and related financing, non-capital financing, or investing activities.
Cash and Cash Equivalents
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and shortterm investments with original maturities of three months or less from the date of acquisition.
State of California statutes authorizes the City to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, collateralized, non-negotiable certificates of deposits, commercial paper rated A1/P-1, medium-term corporate notes rated A or its equivalent or better by Moody’s or Standard & Poor’s, asset backed corporate notes, bankers’ acceptances, mutual funds, and the State Treasurer’s investment pool (Local Agency Investment Fund).
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Investments
Surplus funds are invested by the City in a pooled money investment account held with the State of California in the Local Agency Investment Fund (LAIF). The funds held at LAIF are invested in accordance with Government Code Section 16430 and 16480. The LAIF account is internally allocated between restricted funds and funds reserved by the City for special purposes and general operations.
LAIF issues a separate comprehensive annual financial report. Copies of the LAIF annual report may be obtained from the Local Agency Investment Fund, PO Box 942809, Sacramento, CA 94209-0001.
Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. In determining this amount, three valuation techniques are available:
Market approach - This approach uses prices generated for identical or similar assets or liabilities.
The most common example is an investment in a public security traded in an active exchange such as the NYSE.
Cost approach - This technique determines the amount required to replace the current asset. This approach may be ideal for valuing donations of capital assets or historical treasures. Income approach - This approach converts future amounts (such as cash flows) into a current discounted amount.
Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been maximized in fair value measures, and unobservable inputs have been minimized.
Receivables
In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Major receivable balances for the governmental activities include property taxes, sales and use taxes, intergovernmental subventions, interest earnings, and expense reimbursements.
In the fund financial statements, material receivables in governmental funds include revenue accruals such as property tax, sales tax, and intergovernmental subventions since they are usually both measurable and available.
Non-exchange transactions collectible but not available, such as property tax, are deferred inflows in the fund financial statements in accordance with the modified accrual basis, but not deferred inflows in the governmentwide financial statements in accordance with the accrual basis.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Interest and investment earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and available. The City’s experience is that all accounts receivable are collectible; therefore, an allowance for doubtful accounts is unnecessary.
Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. In the governmental fund financial statements, prepaid items are offset with a nonspendable fund balance for long-term assets to indicate they do not constitute current resources available for appropriation.
Capital Assets
The City's assets are capitalized at historical cost or estimated historical cost, if actual is unavailable, except for donated Capital Assets which are recorded at their estimated fair value at the date of donation. Policy has set the capitalization threshold for reporting at $5,000 for non-infrastructure capital assets and $25,000 for infrastructure capital assets.
As required by GASB, the City depreciates capital assets with limited useful lives over their estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets. The City depreciates using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated.
The City has assigned the useful lives listed below to capital assets:
Buildings and Improvements 20-50 years
Pier and Infrastructure 20-50 years
Machinery and Equipment 5-20 years
Computer software 5 years
Major capital outlay for capital assets and improvements are capitalized as projects are constructed.
Capital assets may be acquired using federal and state grants, contributions from developers, and contributions or grants from other governments. GASB 34 requires that these contributed assets be accounted for as revenue at the time they are contributed.
In the fund financial statements, capital assets arising from transactions acquired for use in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets acquired for use in proprietary fund operations are accounted for the same as in the government-wide statements.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Compensated Absences
Employees accrue personal leave, holiday, administrative leave, and compensatory time off benefits. City employees have vested interests in the amount of accrued time off and are paid on termination. All personal leave pay is accrued when incurred in the government-wide and proprietary financial statements.
A liability for the entire amount is reported in the governmental funds. The general fund is typically used to liquidate compensated absences. In order to control this future liability, compensatory time off, administrative leave, and floating holidays must be used by staff during the calendar year in which they are earned. At year end, employees will be paid for any comp time, administrative leave, or floating holidays earned, but not used during the year. No comp time, administrative leave, or floating holidays earned may be carried into a new calendar year.
Unearned Revenue
Unearned revenues in governmental funds arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. Unearned revenues in enterprise funds and the statement of net position arise when resources are received by the City before it has legal claim to them, (i.e., when grant monies are received prior to the incurrence of qualifying expenses).
Deferred Outflows/Deferred Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has no items reported as a deferred outflow of resources.
In addition to liabilities, the statement of position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has one item reported as a deferred inflow of resources in the fund financial statements. The item is unavailable revenues, which constitutes amounts reported that do not meet the 60 day criteria for accrual in the fund financial statements.
Net Position
In the government-wide financial statements, net position is classified in the following categories:
Net Investment in Capital Assets - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. In addition, deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt also are included in the net investment in capital assets component of net position
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Restricted Net Position - This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments.
Unrestricted Net Position - This amount is all net position that does not meet the definition of "net investment in capital assets" or "restricted net position." Fund Balances
The City does not have a policy identifying a minimum unassigned fund balance. Because amounts in the nonspendable, restricted, committed, and assigned categories are subject to varying constraints on their use, the remaining fund balances are otherwise unassigned.
In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental Fund Type Definitions, the City classifies governmental fund balances as follows:
Non-spendable includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints.
Restricted includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation.
Committed includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision-making authority and does not lapse at year-end. Committed fund balances are imposed by the City Council.
Assigned includes fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund balance may be assigned by the City Manager.
Unassigned includes fund balances within the funds which have not been classified within the abovementioned categories.
The City uses restricted/committed amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents/contracts that prohibit doing this, such as a grant agreement requiring dollar-for-dollar spending. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ from those estimates.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Property Tax Levy, Collection and Maximum Rates
State of California Constitution Article XIII A provides that the combined maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts.
The County of Mendocino assesses properties, bills for and collects property taxes on the following schedule:
Secured Unsecured
Lien dates March 1 N/A
Levy dates September 1 September 1
Due dates (delinquent as of) 50% on November 1 (December 10) March 1 (August 31) 50% on February 1 (April 10)
The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes are secured by liens on the property being taxed. Property taxes levied are recorded as revenue and receivables when they are collected during the fiscal year of levy or within 60 days of year-end.
Franchise Agreements
The City has entered into several agreements to provide services to persons residing inside the City limits. A description of these franchise agreements is as follows:
1. The City has granted Pacific Gas and Electric Company a franchise for electric transmission and distribution.
2. The City has granted Pacific Coast Disposal a franchise for residential and commercial garbage collection and disposal.
Interfund Activity
Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances to/advances from other funds”. All other outstanding balances between funds are reported as “due to/from other funds”.
Interfund activity and balances, if any, are eliminated or reclassified in the government-wide financial statements except for the net residual amounts due between governmental and business-type activities, which are reported as Internal Balances and the net amount of transfers between governmental and business-type activities, which are reported as Transfers-In or Transfers-Out. The effects of interfund services between funds, if any, are not eliminated in the Statement of Activities.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Advances between funds and due from/to other funds that are not restricted are offset by a nonspendable fund balance in applicable City funds to indicate the extent to which they are not available for appropriation and are not expendable available financial resources.
Budgets and Budgetary Accounting
The City Council establishes budgets for the General Fund and all Special Revenue Funds. Budgetary control is legally maintained at the fund level for these funds. Department heads submit budget requests to the City Manager. The City Manager prepares an estimate of revenues and prepares recommendations for the next year’s budget. The preliminary budget may or may not be amended by the City Council and is adopted by resolution by the City Council on or before June 30 in accordance with the municipal code.
The City Council may amend the budget by motion during the fiscal year. Only the Council can authorize transfers between funds and approve inter-fund loans. The City Manager is authorized to transfer budgeted amounts within a fund without formal council action or approval.
Expenditures may not legally exceed appropriations at the fund level, which is the legal level of control.
Supplemental appropriations, which increase appropriations, may be made during the fiscal year. There were no material supplemental appropriations made for the fiscal year ended June 30, 2024. Budget information is presented for the General and budgeted Special Revenue Funds in the fund financial statements. The budget information is presented on a basis consistent with generally accepted accounting principles. Appropriations, except open project appropriations, and unexpended grant appropriations, lapse at the end of each fiscal year.
Description of Risk Management
The City is exposed to various risks of loss related to torts, theft to, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The City carries commercial insurance for all risks except personal property. Settled claims resulting from these risks have not exceeded commercial insurance coverage in the past three years.
Implemented Accounting Pronouncements
GASB Statement No. 100, Accounting Changes and Error Corrections—an amendment of GASB Statement No. 62
This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. This Statement also prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections in previously issued financial statements. This statement did not have a material impact on the financial statements.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Upcoming Accounting and Reporting Changes
The City is currently analyzing its accounting practices to determine the potential impact on the financial statements of the following recent GASB Statements:
GASB Statement No. 101, Compensated Absences
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave.
Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences.
This Statement requires that a liability for certain types of compensated absences - including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities.
The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter.
GASB Statement No. 102, Certain Risk Disclosures
This Statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.
If a government determines that those criteria for disclosure have been met for concentration or constraint, it should disclose information in notes to financial statements in sufficient detail to enable users of financial statements to understand the nature of the circumstances disclosed and the government’s vulnerability to the risk of a substantial impact. The disclosure should include
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
descriptions for (1) the concentration or constraint (2) each event associated with the concentration or constraint that could cause a substantial impact if the event had occurred or had begun to occur prior to the issuance of the financial statements (3) actions taken by the government prior to the issuance of the financial statements to mitigate the risk. The requirements of this Statement are effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter.
GASB Statement No. 103, Financial Reporting Model Improvements This Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability.
This Statement establishes new accounting and financial reporting requirements or modifies existing requirements related to (a) Management’s discussion and analysis (MD&A) (b) Unusual or infrequent items (c) Presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position (d) Information about major component units in basic financial statements (5) Budgetary comparison information (6) Financial trend information in the statistical section.
The requirements of this Statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter.
NOTE 2 - CASH AND INVESTMENTS
As of June 30, 2024, cash and investments were reported in the financial statements as follows:
Governmental
Activities
Business-Type
Activities Total
Cash and investments $ 206,708 $ - $ 206,708
Government Wide
Statement of Net Position
Cash and investments consisted of the following as of June 30, 2024:
Deposits:
Deposits with financial institutions $ 205,118
Investments:
Local Agency Investment Fund 1,590
Total cash and investments $ 206,708
A. Cash Deposits
The California Government Code requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest and places the City ahead of general creditors of the institution.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
The fair value of pledged securities must equal at least 110 percent of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes that have a value of 150 percent of the City's total cash deposits. The City has waived the collateral requirements for cash deposits which are fully insured to $250,000 by the Federal Deposit Insurance Corporation (FDIC).
The bank balances before reconciling items totaled $220,948 at June 30, 2024 and were different from carrying amounts due to deposits in transit and outstanding checks. The banal balances were fully insured and collateralized by securities held by pledging financial institutions.
B. Fair Value Measurements
GASB 72 established a hierarchy of inputs to the valuation techniques with three levels:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are not observable
Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal.
The City’s investments were not subject to levelling.
C. Investment Policies
City Investment Policy
California statutes authorize cities to invest idle or surplus funds in a variety of credit instruments as provided for in the California Government Code, Section 53600, Chapter 4 – Financial Affairs. To address interest rate risk, credit risk, and concentration of credit risk, City invests in the State of California Local Agency Investment Fund (LAIF).
D. External Investment Pool
The City's investments with LAIF at June 30, 2024, include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following:
Structured Notes
These are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options.
Asset-Backed Securities
The bulk of asset-backed securities are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as CMO's) or credit card receivables.
LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The approved investments policy is listed on the LAIF website, located at http://www.treasurer.ca.gov/pmia-laif/.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
E. Risk Disclosures
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the term of an investment’s maturity, the greater the sensitivity to changes in market interest rates. It is the City’s practice to mitigate interest rate risk by investing in LAIF.
Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of an investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The City’s total investment portfolio was in LAIF as of June 30, 2024 to reduce the City’s exposure to credit risks.
Concentrations of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. As of June 30, 2024, the City had no investments in any one issuer (other than external investment pools which are not applicable) that represented 5% or more of the total City investments.
Custodial Credit Risk
For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government investment pools (such as LAIF).
As of June 30, 2024, the City’s investments had the following maturities:
12 Months
or Less Fair Value
Fair Value
Input Levels
Local Agency Investment Funds $ 1,590 $ 1,590 n/a
Investment Type
NOTE 3 - LONG-TERM NOTES RECEIVABLE/UNEARNED REVENUE
The City had the following long-term notes receivable as of June 30, 2024:
Original
Interest Loan Maturity Loan
Description Rate Date Date Amount Balance
Residential Loan 2.0% 1996 2032 $ 92,470 $ 17,575
Residential Loan 3.0% 1996 2032 92,470 15,431
Residential Loan 1.0% 2022 2032 29,350 23,475
Total Notes Receivable $ 369,290 $ 56,481
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Revolving loans are given to the lower income sector of the community for housing improvements, new construction and economic stimulus. Notes receivable are not resources currently available for expenditures and are not reported in the governmental funds balance sheet.
NOTE 4 - INTERFUND TRANSACTIONS
Interfund Receivables and Payables
Amounts due to or due from other funds reflect interfund balances for services rendered or short-term loans expected to be repaid in the next fiscal year. Advances to or from other funds are long-term loans between funds that are to be repaid in their entirety over several years.
As of June 30, 2024, interfund receivables and payables consisted of the following:
Due from Due to
Other Funds Other Funds
General Fund 121,560 $ -$
Capital Project Fund - 121,560
Total Due To/From $ 121,560 121,560 $
Advances to Advances from
Other Funds Other Funds
General Fund 65,464 $ -$
Revolving Loan Fund 424,687 -
Pier Fund - 363,469
Wastewater Fund - 126,682
Total Advances $ 490,151 $ 490,151
Interfund advances from the Revolving Loan Fund to the Wastewater Fund include a 2012 sludge loan of $128.626 bearing interest at 3.25% over 15 years. The balance was $21,237 as of year-end after current year interest of $1,318 and principal of $9,652.
Transfers
Resources may be transferred from one fund to another. Transfers routinely reimburse funds that have made an expenditure on behalf of another fund. Transfers may also be made to pay for capital projects or capital outlays, lease or debt service payments and operating expenses. As of June 30, 2024, the transferred interfund consisted of the following:
Transfers Transfers
In Out
General Fund $ 21,330 -$
State Gasoline Tax Fund - 21,330
Totals $ 21,330 $ 21,330
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
NOTE 5 - CAPITAL ASSETS
Changes in the governmental activity capital assets during the fiscal year were as follows:
Balance Deletions/ Balance
Capital Assets July 01, 2023 Additions Adjustments June 30, 2024 Non-depreciable:
Land $ 344,995 $ - $ - $ 344,995
Construction in Progress 4,000 - - 4,000
Total Non-Depreciable 348,995 - - 348,995
Depreciable:
Buildings and Improvements 229,325 - - 229,325
Machinery and Equipment 135,586 - - 135,586
Infrastructure 6,154,646 - - 6,154,646
Total Depreciable 6,519,557 - - 6,519,557
Less Accumulated Depreciation for:
Buildings and Improvements (130,834) (8,648) - (139,482) Machinery and Equipment (73,875) (6,557) - (80,432)
Infrastructure (2,276,830) (175,156) - (2,451,986)
Total Accumulated Depreciation (2,481,539) (190,361) - (2,671,900) Total Depreciable PPE - Net 4,038,018 (190,361) - 3,847,657 Total PPE - Net $ 4,387,013 $ (190,361) $ - $ 4,196,652 Changes in the business-type activity capital assets during the fiscal year were as follows:
Balance Deletions/ Balance
Capital Assets July 01, 2023 Additions Adjustments June 30, 2024 Non-depreciable:
Land $ 298,190 $ - $ - $ 298,190
Total Non-Depreciable 298,190 - - 298,190
Depreciable:
Pier 2,990,014 - - 2,990,014
Buildings and Improvements 1,550,274 - - 1,550,274
Machinery and Equipment 437,414 - - 437,414
Total Depreciable 4,977,702 - - 4,977,702
Less Accumulated Depreciation for:
Pier (2,185,236) (35,533) - (2,220,769)
Buildings and Improvements (1,490,403) (3,308) - (1,493,711) Machinery and Equipment (331,057) (14,500) - (345,557)
Total Accumulated Depreciation (4,006,696) (53,341) - (4,060,037) Total Depreciable PPE - Net 971,006 (53,341) - 917,665
Total PPE - Net $ 1,269,196 $ (53,341) $ - $ 1,215,855
Depreciation expense related to governmental activities of $190,361 was not allocated by major program or function for the fiscal year ended June 30, 2024, as shown in the statement of activities.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
Depreciation expense related to business-type activities was charged to functions and programs based on their usage of the related assets.
The amount allocated to each function or program is as follows:
Wastewater $ 25,851
Pier 27,490
Total Depreciation Expense $ 53,341
NOTE 6 - LINE OF CREDIT
In April of 2023, the City entered into a Line of Credit agreement with the Redwood Credit Union in an amount not to exceed $1,500,000 to act as bridge financing for the Mill Street and Center Street Capital Improvement Projects. The line of credit was to be paid through receipt of California State grant funding specific to the projects. The line of credit bears interest at Prime plus 1% on outstanding balances. The balance as of June 30, 2024, was $310,440.
NOTE 7 - FUND BALANCES
Fund balance for governmental funds is reported in classifications (nonspendable, restricted, committed, assigned, and unassigned) that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. As of June 30, 2024, fund balances were classified as follows:
Restricted
Lower Income Assistance
Fund balances in the Revolving Loan Fund were restricted for lower income sector assistance for housing, new construction, and economic stimulus
Assigned
Self-Insurance
Fund balances in the General Fund were assigned for liability claims made against the City.
Skate Park
Fund balances in the General Fund were assigned for the construction, improvements and repairs at the skate park.
NOTE 8 - RISK MANAGEMENT AND JOINT VENTURES (JOINT POWERS AGREEMENT) The City is currently a member of the Public Agency Risk Sharing Authority of California (PARSAC). Under PARSAC, the City is provided the following insurance coverage: Worker compensation and employers' liability coverage for bodily injury by accident or by disease, including resulting death, arising out of or in the course of the employee’s employment, with the City. Liability coverage for bodily injury, property damage, personal injury or public official's errors and omissions.
CITY OF POINT ARENA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024
The City does not have an equity interest in PARSAC. PARSAC exercises full powers and authority within the scope of the related agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations and liabilities of PARSAC are not those of the City, although the City retains an ongoing financial interest or an ongoing financial responsibility.
Audited financial information of PARSAC, as of and for the year ended June 30, 2024, can be found at http://www.parsac.org/.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The City participates in federal and state grant programs. These are subject to examination by grantors and the amount, if any, of disallowed expenditures cannot be determined at this time. The City expects such amounts, if any, to be immaterial.
The City is subject to litigation arising from the normal course of business. The City Attorney believes there is no pending litigation which is likely to have a material adverse effect on the financial position of the City.
NOTE 10 - LACK OF GOING CONCERN
The City has not properly monitored capital projects and determined the proper funding needs for those projects. In addition, no reserve or financing component was included in these projects and consultants continually exceeded project budgets without proper authorization. As a result, the City’s operating cash reserves have been reduced to nominal levels and management has used the temporary line of credit for cash deficits, threatening the City’s ability to remain a going concern. Management has discussed the following options with Council members in order to cure these deficits and reestablish operating cash reserves:
1) The City may incur additional debt to rehabilitate a city-owned property so the rental income derived from the property can be dedicated to the debt repayment. This will require a market valuation of the property and an analysis of improvement costs and rental value to determine the feasibility of the plan.
2) The City should also consider acquiring a new fund accounting software to account for all activities and institute purchase orders to manage both vendor purchases and consultant costs. Consultant performance will also need to be measured against full funding requirements before a contract is approved.
Required Supplementary Information
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Property Taxes 75,000 $ 75,000 $ 59,862 $ (15,138) $
Motor Vehicle In-lieu Tax 30,000 30,000 2,627 (27,373)
Sales Taxes 140,000 140,000 139,611 (389)
Transient Occupancy Taxes 198,000 198,000 101,405 (96,595) VLF Swap - - 25,714 25,714
TOT Measure AC 25,000 25,000 - (25,000)
Other Taxes 5,000 5,000 368 (4,632)
Intergovernmental 255,000 255,000 459,516 204,516
Licenses, Permits & Fees 26,000 26,000 13,991 (12,009)
Franchise Fees 12,000 12,000 18,762 6,762
Use of Money and Property:
Interest Income 1,000 1,000 282 (718)
Use of Property 3,000 3,000 - (3,000)
Other 50,000 50,000 60,872 10,872
Total Revenues 820,000 820,000 883,010 63,010
EXPENDITURES
Current:
General Government 480,000 480,000 477,316 2,684
Public Safety 120,000 120,000 132,049 (12,049)
Streets and Public Works 80,000 80,000 56,979 23,021
Community Development 22,000 22,000 78,939 (56,939)
Culture and Recreation 80,000 80,000 114,924 (34,924)
Capital Outlay 75,000 75,000 265 74,735
Total Expenditures 857,000 857,000 860,472 (3,472)
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES (37,000) (37,000) 22,538 59,538
OTHER FINANCING SOURCES (USES)
Operating Transfers In - - 21,330 21,330
Operating Transfers Out - (77,007) - 77,007
Total Other Financing Sources (Uses) - (77,007) 21,330 98,337 NET CHANGES IN FUND BALANCE $ (37,000) $ (114,007) 43,868 $ 157,875 BEGINNING FUND BALANCE 311,228
ENDING FUND BALANCE $ 355,096
Notes:
The expenditures in excess of appropriations as noted above were offset by unexpended appropriations in other categories and available fund balance.
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
CITY OF POINT ARENA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Investment Income:
Interest Income $ 20,000 20,000 $ 17,578 $ (2,422) $
Use of Property - - 121,330 121,330
Total Revenues 20,000 20,000 138,908 118,908
EXPENDITURES
Current:
General Government 20,000 20,000 12,419 7,581
Community Development - - 108,000 (108,000)
Capital Outlay - - 20,100 (20,100)
Total Expenditures 20,000 20,000 140,519 (120,519)
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES - - (1,611) (1,611)
NET CHANGES IN FUND BALANCE -$ -$ (1,611) $ (1,611)
BEGINNING FUND BALANCE 402,296
ENDING FUND BALANCE $ 400,685
Notes:
The expenditures in excess of appropriations as noted above were offset by unexpended appropriations in other categories and/or available fund balance.
CITY OF POINT ARENA
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
REVOLVING LOAN FUND
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Gas Taxes $ 40,000 $ 40,000 $ 27,276 $ (12,724)
Total Revenues 40,000 40,000 27,276 (12,724)
EXPENDITURES
Current:
Streets and Public Works - - (5,946) 5,946
Total Expenditures - - 5,946 (5,946)
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES 40,000 40,000 21,330 (18,670)
OTHER FINANCING SOURCES (USES)
Operating Transfers In - - - -
Operating Transfers Out (40,000) (40,000) (21,330) 18,670 Total Other Financing Sources (Uses) (40,000) (40,000) (21,330) 18,670 NET CHANGES IN FUND BALANCE -$ -$ - -$
BEGINNING FUND BALANCE -
ENDING FUND BALANCE -$
Notes:
The expenditures in excess of appropriations as noted above were offset by revenues in excess of expenditures.
CITY OF POINT ARENA
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
STATE GASOLINE TAX FUND
Other Independent Auditor’s Reports
16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
INDEPENDENT AUDITOR’S 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
The Honorable Mayor and Members of the City Council
City of Point Arena
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Point Arena (the City) as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise City’s basic financial statements, and have issued our report thereon dated September 11, 2025.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of City’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We identified certain deficiencies in internal control, described in the accompanying schedule of findings and responses as items 2024-001, 2024-002, 2024-003, 2024-004, 2024-005, 2024-006, 2024-007, 2024-008, 2024-009 that we consider to be material weaknesses
16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards, and which are described in the accompanying schedule of findings and responses as item 2024-002.
City of Point Arena’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City’s responses to the findings identified in our audit and described in the accompanying schedule of findings and responses. The City’s responses were not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the responses.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
September 11, 2025
Morgan Hill, California
Schedule of Findings and Response
CITY OF POINT ARENA, CALIFORNIA
SCHEDULE OF FINDINGS AND RESPONSES
JUNE 30, 2024
Finding 2024-001: Cash Receipts and Lack of Segregation of Duties (Material Weakness) – Repeat Finding
Criteria
The segregation of duties and responsibilities between different individuals for custody of assets, recordkeeping for those assets, and reconciliation of those asset accounts is an important control activity needed to adequately protect the City’s assets and ensure accurate financial reporting.
Condition
During our cash receipts testing, we found that the City does not complete cash receipts forms for every transaction and revenue collection is not routinely monitored at the Pier by a person that is independent of Pier operations.
Cause
The City should review and update their written procedures for processing cash receipts at the Pier.
There is also a lack of segregation of duties due to the size of the City and a general lack of resources.
Effect
There is an increased risk that Pier transactions may take place without proper accountability and that revenue may go uncollected or unreported. Without sufficient segregation of duties, the risk significantly increases that errors and fraud related to collection activities, including misappropriation of assets, could occur and not be detected within a timely basis.
Recommendation
Management and the Council should consider a formal evaluation of their risks associated with this lack of duties segregation over Pier cash collections. In response to the identified risks, consideration should be given to identifying and implementing controls that could help mitigate the risks associated with lack of segregation of duties, such as providing increased management oversight and an independent reconciliation of accounts. For example, the city might consider soliciting the assistance of independent consultants to perform certain functions including daily balancing and monthly reconciliations.
Views of Responsible Official(s) and Planned Corrective Actions The City agrees with the conditions noted and will implement the recommendations noted.
Finding 2024-002: Budget Tracking and Monitoring (Material Weakness) – Repeat Finding Criteria
The City Council establishes budgets for the General Fund and all Special Revenue Funds and budgetary control is legally maintained at the fund level for these funds.
Condition
During our review of the budget to actual reports, we noticed that the City’s actual expenditures exceeded appropriations in several different government functions and at the fund object level.
CITY OF POINT ARENA, CALIFORNIA
SCHEDULE OF FINDINGS AND RESPONSES
JUNE 30, 2024
For the fiscal year ended June 30, 2024, the City exceeded legally adopted budget appropriations as follows:
General Fund – Public Safety $12,049
General Fund – Community Development $56,939
General Fund – Culture and Recreation $34,924
Revolving Loan Special Revenue Fund $120,519
State Gasoline Tax Special Revenue Fund $5,946
Cause
The city did not monitor actual expenditures during the year to ensure expenditures did not exceed budgeted appropriations.
Effect
Expenditures incurred in the fund with excess expenditures over appropriations, could be considered invalid or void claims and, pursuant to state law, could result in personal liability for those individuals authorizing those expenditures.
Recommendation
We recommend the City establish and follow internal controls that include requiring accountability from employees responsible for individual budgets to ensure that budget appropriations are not exceeded in the future. We also recommend that management develop procedures to review actual expenditures as compared to budget at least every quarter with the Council and monthly with a finance committee established by the City Council.
Views of Responsible Official(s) and Planned Corrective Actions The City agrees with the conditions noted and will implement the recommendations noted.
Finding 2024-003: Change Orders and Capital Projects (Material Weakness) – Repeat Finding Criteria
Capital projects generally have a higher inherent risk because of their size and complexity. Key risks include implementing unnecessary change orders, unauthorized change orders, or over-priced change orders. Other risks include significantly changing the nature of the project, changing the original scope of work specifications without appropriate justification, and not ensuring change order requirements were properly monitored through completion. These risks can significantly impact the cost, quality, or time to complete the project. For local governments to mitigate the risks associated with change orders, their policies and procedures play a critical role.
Condition
It was noted during our audit that many City projects significantly exceeded estimates and budgets and that change orders were not utilized to document and approve the excesses.
Cause
The City’s Change order policies and procedures do not address commencement of work prior to approval, use of a third-party advisory body, use of root cause analysis, use of independent cost estimates, documentation of cost analysis, written record of explanation of differences between
CITY OF POINT ARENA, CALIFORNIA
SCHEDULE OF FINDINGS AND RESPONSES
JUNE 30, 2024
negotiated price and independent cost estimates, and verification of assumptions supporting independent cost estimates.
Effect
The City’s capital projects realized cost overruns and project delivery delays.
Recommendation
We recommend that the City implements a policy that requires change orders for all significant project specifications and cost changes. The City can define what changes are significant within the policy, but we recommend starting with any cost increases of $10,000 or more. The policy should require a review of change orders with significant cost adjustments against independent cost estimates. This practice serves to determine if there are differences between the independent cost estimates and the contractor estimate, which could prevent the overpricing of work. In addition, the City’s policy should prohibit construction work from starting, in relation to the increased scope, until change orders have been reviewed and approved. Finally, the City may want to consider creating an advisory committee that approves change orders, which would enhance project oversight and accountability.
Views of Responsible Official(s) and Planned Corrective Actions The City agrees with the conditions noted and will implement the recommendations noted.
Finding 2024-004: Grant Reimbursements – General Process (Material Weakness) – Repeat Finding
Criteria
Best practices dictate that the City has processes in place to ensure that grant reimbursements are filed in a timely manner and available grant funding is utilized to its fullest extent.
Condition
In review of the supporting documentation for expenditures, we noted that the City has incurred allowable expenditures that meet the condition for reimbursement under certain grants, but the City did not submit reimbursement claims for those grants.
Cause
The monitoring of grant projects and expenditures was insufficient.
Effect
The City may not be able to recover resources that would have otherwise been available had timely grant reimbursement claims been submitted.
Recommendation
We recommend that the City establish procedures to ensure requirements are met with regard to grant claims for reimbursement and that claims are submitted timely.
Views of Responsible Official(s) and Planned Corrective Actions The City agrees with the conditions noted and will implement the recommendations noted.
CITY OF POINT ARENA, CALIFORNIA
SCHEDULE OF FINDINGS AND RESPONSES
JUNE 30, 2024
Finding 2024-005: Accounts Payable (Material Weakness)
Criteria
According to the Governmental Accounting Standards Board, expenses should be recognized when the satisfaction of a performance obligation occurs. This is the point at which the entity has fulfilled its obligations to provide goods or services to the customer. For example, if a government entity provides services to a customer and the service is completed, the expense should be recognized at that time. This principle is consistent with the recognition of revenue, where expenses are recognized when the performance obligation is satisfied.
Condition
When we tested accounts payable, we noted that the City was incorrectly excluding some invoices accounts payable and expense/expenditure for services that were provided as of June 30.
Effect
Accounts payable and expenses were understated by $46,458.
Cause
The City did not review invoices paid after June 30 to determine if they were expenses and obligations as of June 30. The city does not have a monitoring process in place to ensure the accuracy of accounts payable and related expenses/expenditures.
Recommendation
We recommend that management implement written procedures that require accountants to review disbursements after June 30 for obligations that should be recognized as of June 30. Best practices dictate that this should be performed monthly. The procedures should require that invoices are entered into the accounting software as bills within a week of receipt. Also, any invoices received after June 30 that were deemed to be obligations as of June 30 should be journaled as of June 30 and the support for the journal entry should be maintained. The written procedures should include process for monitoring and reviewing the transactions posted and bills entered during the closing process.
Views of Responsible Official(s) and Planned Corrective Actions The City agrees with the auditor’s recommendation and will implement policies and procedures during fiscal year 2024-25 to address the causes of the condition(s) noted.
Finding 2024-006: Capital Assets (Material Weakness)
Criteria
Generally accepted accounting principles (GAAP) require the City to maintain records that properly account for capital assets. Capital asset records serve as a management tool and have an important bearing on management decisions, such as long‐range acquisition and abandonment projections.
CITY OF POINT ARENA, CALIFORNIA
SCHEDULE OF FINDINGS AND RESPONSES
JUNE 30, 2024
Condition
During the audit of the City’s capital assets we noted deficiencies in the City’s process to maintain the capital asset listing as it relates to additions, deletions, completion of projects (construction in progress to depreciable asset), and accumulated depreciation.
Effect
The City’s capital asset balance could incorrectly include or exclude capital assets and include incorrect calculations of depreciation expense.
Cause
Due to the high degree of personnel turnover and the limited City staffing, management has not sufficiently monitored capital assets record keeping.
Recommendation
The City should consider the need for additional staffing or training in the Administrative/Finance Department to ensure that a list of capital assets of $5,000 or more is accurately maintained and complete.
Views of Responsible Official(s) and Planned Corrective Actions Management agrees with the auditor’s recommendation and will implement policies and procedures during fiscal year 2024-25 to address the causes of the condition(s) noted.
Finding 2024-007: Bank Reconciliation (Material Weakness) Criteria
Sound accounting practices that to reduce the risk of fraud and error include control processes that ensure the tracking of deposits and outstanding check from the initial receipt, to the recording of items in the city’s accounting system, and then reconciling those items to bank statements.
Condition
During our testing of the City’s bank reconciliations, we found several outstanding checks in the bank reconciliation that were cleared in prior bank statements and prior periods. Many items were incorrectly dated back into the prior audit period, June 30, 2023.
Effect
The City’s cash balances and financial statements could be materially misstated.
Cause
Due to turnover and a lack of monitoring, bank reconciliations were not prepared timely and accurately.
Recommendation
The City should ensure that the City accountant has the ability, training, and resources to complete a bank reconciliation timely and accurately. The City Manager, or another person independent of preparation, should review the monthly bank reconciliations for each account to ensure that they are accurate and that transactions are not incorrectly dated when entered into the accounting software.
CITY OF POINT ARENA, CALIFORNIA
SCHEDULE OF FINDINGS AND RESPONSES
JUNE 30, 2024
Views of Responsible Official(s) and Planned Corrective Actions Management agrees with the auditor’s recommendation and will implement policies and procedures during fiscal year 2024-25 to address the causes of the condition(s) noted.
Finding 2024-009: Financial Reporting and Closing (Material Weakness) Criteria
Effective financial reporting requires timely and accurate closing of the accounting records at yearend. The Government Finance Officers Association (GFOA) recommends that municipalities implement structured and timely closing procedures to ensure complete and accurate financial statements. Additionally, internal control standards call for proper cutoff procedures to ensure transactions are recorded in the correct accounting period.
Condition
The City’s unaudited trial balance contained errors that required material audit adjustments. Critical closing activities such as the accrual of revenues and expenses, reconciliation of accounts, and review of prior adjusting journal entries were delayed or not performed.
Effect
The financial statements initially presented for audit were materially misstated. As a result, the preparation of the City’s financial statements was significantly delayed, and multiple post-closing audit adjustments were required to correct material misstatements. There is an increased risk of errors, omissions, or fraud going undetected due to ineffective period-end controls.
Cause
Turnover and a lack of monitoring lead to conditions noted.
Recommendation
Management should develop and implement a comprehensive year-end closing schedule with clear responsibilities and deadlines, document formal year-end closing procedures and ensure they are consistently applied, assign a qualified individual to oversee and monitor the closing process, train finance staff on proper cutoff procedures and year-end responsibilities, and perform post-closing reviews and reconciliations to identify and correct discrepancies before audit commencement.
Views of Responsible Official(s) and Planned Corrective Actions Management agrees with the auditor’s recommendation and will implement policies and procedures during fiscal year 2024-25 to address the causes of the condition(s) noted.