CITY OF POMONA
COUNCIL REPORT
January 9, 2023
To: Honorable Mayor and Members of the City Council
From: James Makshanoff, City Manager
Submitted By: Andrew Mowbray, Finance Director/City Treasurer SUBJECT: ANNUAL AUDIT REPORTS FOR THE FISCAL YEAR ENDED JUNE 30, 2022 RECOMMENDATION:
It is recommended that the City Council receive and file the annual audit reports for fiscal year ended June 30, 2022.
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 2021-22 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 January 24, 2022, the City Council received and filed the annual audit reports for fiscal year ended June 30, 2021.
DISCUSSION:
This report contains the following set of financials for fiscal year 2021-22:
The Annual Comprehensive Financial Report (ACFR)
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 $13.4 million in 2021-22 resulting in a fund balance of $49.7 million at June 30, 2022.
General fund revenues increased $14.8 million in the fiscal year when compared to the prior year. The largest portion of the unanticipated increase was sales tax. Sales tax increased $7.6 million when compared to FY 2020-21. FY 2021-22 brought a new Cannabis Business Tax which amounted to $2.1 million in new revenue to the City. The City authorized a limited amount of legal marijuana dispensaries in City limits which resulted in increased permit fees, increased sales tax and the new Cannabis Business Tax. Utility Users Tax increase $1.8 million across the board. Plan check fees increased $1.0 million from the PY due to increased building throughout the City.
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 balance increased by $9.9M primarily due to water rates increases and funding related to CIP projects.
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 $0.7 million increase in fund balance primarily due to a reduction in personnel cost.
The Pomona Choice Energy Authority’s (PCEA) second full year has proven thus far to be a more challenging year and required a loan from the Water fund to help pay for basic operating costs. PCEA recorded $34.8 million in revenues and $35.7 in expenditures resulting in an operating loss of $0.9 million.
To address long term concern of the City’s 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. The first year the Pension Obligation bond and the Net Pension Liability were presented in the government wide statement of Net Position. In the fiscal year ending June 30, 2022, the deferred outflow or contribution to PERS reduced the Net Pension Liability and actually created a Net Pension Asset. As of June 30, 2022, the decision to issue a Pension Obligation Bond proved to be prudent decision. Going forward the investment market’s volatility could prove to be an issue with the valuation of the Pension Liability or Asset.
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:
Raul Marquez
Principal Accountant
ATTACHMENT(S):
Attachment No. 1 – Annual Comprehensive Financial Report for year ended June 30, 2022 Attachment No. 2 – Auditors’ letter to Mayor and City Council for year ended June 30, 2022 Approval of Annual Audit Reports, Fiscal Year Ended June 30, 2022