CITY OF POMONA
COUNCIL REPORT
January 24, 2022
To: Honorable Mayor and Members of the City Council
From: James Makshanoff, City Manager
Submitted By: Andrew Mowbray, Finance Director/City Treasurer SUBJECT: APPROVAL OF ANNUAL AUDIT REPORTS, FISCAL YEAR ENDED JUNE 30, 2021 RECOMMENDATION:
It is recommended that the City Council receive and file the annual audit reports for fiscal year ended June 30, 2021.
EXECUTIVE SUMMARY:
Section 1016 of the City Charter requires that the City Council employ a firm of certified public accountants to prepare an annual audit of all City accounts. In compliance with that provision, the City Council awarded a contract to Lance Soll & Lunghard LLP to perform the audit of fiscal year 2020-21 financial records of the City, Housing Authority, and Financing Authority. Based on the audit, the attached financial reports have been prepared. Once the City Council has received and filed these reports, the Annual Comprehensive Financial Report (ACFR) will be posted on the City’s webpage along with the several years of history already available for public view.
PREVIOUS RELATED ACTION:
On July 15, 2019, the City Council approved a contract with Lance Soll & Lunghard LLP to prepare the annual audit for the fiscal years ended June 30, 2020, June 30, 2021 and June 30, 2022. On April 5, 2021, the City Council received and filed the annual audit reports for fiscal year ended June 30, 2020.
DISCUSSION:
This report contains the following set of financials for fiscal year 2020-21:
The Annual Comprehensive Financial Report (ACFR)
The Pomona Housing Authority (the Housing Authority)
The auditors’ letter to the Mayor and City Council regarding the audit The ‘independent auditors’ report included in the financial reports indicates the statements are presented fairly, in all material respects, the financial condition of the governmental agencies, the business-type activities, each major fund, and the aggregate remaining fund information of the City, basically a ‘clean’ opinion.
Along with the Financial Statements, the auditors issue what is called an Audit Communication Letter. The purpose of this letter is to inform Council of any issues that may have come up during the audit such as difficulties encountered in performing the audit, uncorrected misstatements, disagreements with management and other audit findings or issues.
While the information presented within the reports is quite comprehensive, there are a few funds and events staff wishes to highlight. As shown on page 32 of the ACFR, the General Fund increased its fund balance by $14.6 million in 2020-21 resulting in just over $36.0 million fund balance at June 30, 2021.
General fund revenues increased $8.2 million in the fiscal year when compared to FY 2019-20. The anticipated impact of COVID was not felt in the major revenues of the City as originally projected. Property tax increased from FY 2019-20 at its normal rate due to the tax roll being prepared on assessed values prior to COVID. The City received significantly more sales tax than anticipated and $3.8 million more than the prior year. It was anticipated due to the lockdowns that sales tax would decrease but that wasn’t the case for Pomona as online sales contributed to the increase. Pomona isn’t a destination City and has a significant industrial presence which kept the tax base strong, in addition, Measure PG which enacted a 0.75 percent Transaction Use Tax was in full effect during FY 2020-21. The City took action in years past to consolidate the Successor Agencies debt reducing the amount on Required Obligation Payment Schedule (ROPS). The result of less ROPS obligation increases residual Redevelopment property tax funds. Lastly the City received $1.9 million one-time Corona Virus Relief (CRF) funds to help the City navigate through the impacts of COVID. General fund expenditures decreased by $6.6 million when compared to the prior year. A large reason for the decrease is the issuance of a Pension Obligation Bond. The Bond was issued to pay the City’s outstanding pension liability with CalPERS. The payment of the debt service in FY 2020-21 was significantly less than the Unfunded Accrued Liability that was required to be paid in the prior fiscal year. All in all, FY 2020-21 was a busy year with a lot different factors affecting how the City performed compared to the budget.
The financials for the City’s Enterprise Funds can be found on Page 36.
The Water fund accounts for the activities associated with the distribution and transmission of potable water to users. The Water fund had an increase in fund balance primarily due to increased usage throughout the fiscal year as well as increased water rates.
The Sewer fund accounts for the operation and maintenance of the City’s sewer network. The Sewer fund had an increase in fund balance due to the increased sewer rates.
The Refuse fund accounts for activities associated with refuse collection and curbside collection of recycling materials. The refuse fund had a $0.5 million decrease in fund balance due to increase in dumping fees.
The City created the Pomona Choice Energy Authority in the prior fiscal year. FY 2020-21 was the first full year it was in operation. The first year in operation resulted in a small increase in fund balance but required a loan from the Water fund to maintain basic operations.
The City addressed it’s long term concerns of the growing Pension Liability. The City issued a Pension Obligation bond (Series BJ) in August of 2021. The bond was issued to pay down the City’s Pension Liability. The proceeds of the bond were sent directly to PERS for investment. For June 30, 2021, the new Pension Obligation bond and the Net Pension Liability are presented in the government wide statement of Net Position. This is due to the Net Pension Liability actuarial having a measurement date of June 30, 2020. Any contributions made after the measurement date are presented as a deferred outflow in the statement of Net Position. In the fiscal year ending June 30, 2022, the deferred outflow or contribution to PERS will reduce the Net Pension Liability and only the Pension Obligation bond will be presented.
The City implemented GASB 84 in FY 2020-21. GASB 84 redefined what a Fiduciary activity is and how it should be reported. The implementation resulted in several activities no longer meeting the new criteria and had to be moved to the City’s General Fund.
The City annually submits its financial report to the Government Finance Officers Association (GFOA) for consideration of its Certificate of Achievement for Excellence in Financial Reporting and has done so again this year. The City has received this recognition for twenty-two years and believes this report continues to conform to GFOA program standards.
Prepared by:
Dustin Andolsen
Accounting Supervisor
ATTACHMENT(S):
Attachment No. 1 – Annual Comprehensive Financial Report for year ended June 30, 2021 Attachment No. 2 – The Pomona Housing Authority for year ended June 30, 2021 Attachment No. 3 – Auditors’ letter to Mayor and City Council for year ended June 30, 2021 Approval of Annual Audit Reports, Fiscal Year Ended June 30, 2021