CITY OF POMONA
COUNCIL REPORT
January 22, 2024
To: Honorable Mayor and Members of the City Council
From: Anita Gutierrez, Acting City Manager
Submitted By: Andrew Mowbray, Finance Director/City Treasurer SUBJECT: APPROVAL OF ANNUAL AUDIT REPORTS, FISCAL YEAR ENDED JUNE 30, 2023 RECOMMENDATION:
It is recommended that the City Council receive and file the annual audit reports for fiscal year ended June 30, 2023.
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 Badawi & Associates to perform the audit of fiscal year 2022-23 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 June 6, 2022, the City Council approved a contract with Badawi & Associates to prepare the annual audit for the fiscal years ended June 30, 2023, June 30, 2024 and June 30, 2025.
On January 9, 2023, the City Council received and filed the annual audit reports for fiscal year ended June 30, 2022.
DISCUSSION:
This report contains the following set of financials for fiscal year 2022-23:
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 28 of the ACFR, the General Fund increased its fund balance by $13.3 million in 2022-23 resulting in an ending fund balance of $62.9 million at June 30, 2023.
General fund revenues increased $19.2 million in the fiscal year when compared to the prior year. The largest portion of the increase was Property Tax. Property tax increased $5.1 million when compared to FY 2021-22. The increase in property tax revenue was due to the increased local real estate market values. The other large increase was Utility Users Tax with an increase of $3.2 million which was due to increased rates to all utilities such as So Cal Edison and other utility providers. The City entered into a Proposition A exchange where the City sold Proposition A monies in exchange to receive general fund monies. The exchange resulted in $3.15 million additional general fund revenues in FY 2022-23.
The financials for the City’s Enterprise Funds can be found on Page 32.
The Water fund accounts for the activities associated with the distribution and transmission of potable water to users. The Water fund balance increased by $5.4M 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. As of July 1, 2023, refuse services were outsourced to Athens, a third party contractor. This activity will be reflected in the FY 2023-24 audit.
The Pomona Choice Energy Authority’s (PCEA) is in full operations and is looking healthier than ever. PCEA is looking to repay the Water fund on the advance early. It is also looking into opening an investment account with the excess cash on hand.
Pomona’s vigilant ongoing review and control over expenditure growth has been, and will continue as, a critical factor in maintaining and improving the City’s overall financial health. To ensure its fiscal health, on February 6, 2023, the City Council adopted resolution number 2023-06 approving the City’s Consolidated Fiscal Policies superseding the previous resolution 2011-49. This policy established guidelines for the City’s overall fiscal planning and management and is intended to foster and support continued financial strength and stability of the City. The policy is quite comprehensive and covers areas of Budget, Economic Development, Risk Management, Accounting-Auditing-Financial Reporting, Cash Management and Investments, and Debt Management. The policy also required a separate Fund Balance Policy to ensure fiscal health of the City. Part of the Fund Balance Policy adopted by the City Council on February 6, 2023, requires the General Fund to have a ‘Committed Fund Balance of 22% of operating expenditures. The policy provides a scale of a minimum of 22% and a maximum of 25%. Based on 2022-23 General Fund expenditure and fund balance numbers, the General Fund will meet the 22%.
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. Going forward the investment market’s volatility could prove to be an issue with the valuation of the Pension Liability or Asset but overall the decision to issue a Pension Obligation Bond proved to be prudent decision. Along with addressing the Pension Liability, the City is forward thinking in addressing the growing Other Post Employment Obligation (OPEB) liability. The City is working on a 115 Trust in order to help mitigate increased premiums and cost to the City. Look to FY 2023-24 for the City to take action on this plan.
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, 2023 Attachment No. 2 – Auditors’ letter to Mayor and City Council for year ended June 30, 2023 Approval of Annual Audit Reports, Fiscal Year Ended June 30, 2023