May 16, 2023
Finance Department
DATE: May 16, 2023
TO: Mayor Martinez and Members of the City Council
FROM:
Shasa Curl, City Manager
Nickie Mastay, Deputy City Manager
Mubeen Qader, Deputy Director of Finance
Subject:
State Audit Corrective Action Plan, Pension Funding
Policies
FINANCIAL IMPACT: No Fiscal Impact
PREVIOUS COUNCIL
ACTION:
May 2, 2023, December 20, 2022
STATEMENT OF THE
ISSUE:
California State Auditor’s 2021-806-Audit Corrective
Action Plan includes Implementing Pension (CalPERS)
funding policy.
RECOMMENDED ACTION:
RECEIVE a presentation regarding pension (CalPERS)
funding policies per the California State Auditor’s 2021- 806-Audit Corrective Action Plan – Finance (Nickie
Mastay 510-620-6609/ Mubeen Qadar 510-412-2077).
DISCUSSION:
On April 4, 2022, the City of Richmond was notified by the California State Auditor that they will be conducting an audit of the City as approved by the Joint Legislative Audit Committee on June 30, 2021. The State Auditor’s local audit program identifies and supports local government agencies that might be at high risk based upon analysis of the City’s audited financial statements. Richmond’s risk assessment began in February 2021 based upon the City’s June 2020 financial statements.
The Audit was initiated in May 2022, and was completed and published on November 10, 2022. During the audit process, the State Auditor held meetings with City staff to AGENDA
REPORT
May 16, 2023
review and discuss many aspects of the City’s financial management procedures and protocol. In compliance with the State Auditor’s request, City staff provided complete access to the City’s financial data and systems.
At the conclusion of the audit, the State Auditor formalized 11 recommendations that were presented to the City Council at the December 20, 2022, City Council meeting.
City staff incorporated the Auditor’s recommendation into a Corrective Action Plan (Attachment 1). One of the State Audit recommendations is regarding unfunded pension liabilities.
“To ensure that Richmond is able to fund its retirement-related costs, city staff should, by June 2023, propose to the city council a specific policy regarding funding of its pension trust fund for this purpose. Staff should report to the city council on estimated long-term savings from increasing its direct payments to Cal PERS compared to investing the same amounts in its pension trust fund. Staff members should use this information to inform their recommendations related to funding targets for the pension trust fund and should consider recommending that the council increase the city's payments directly to CalPERS.” (Attachment 1)
To implement the State Audit recommendations regarding CalPERS, the City entered into a contract with GovInvest to receive assistance for policy revisions per the following timeline.
Table 1: OPEB and CalPERS Funding Policy Revision Timeline City Council Meeting Action
May 16, 2023 Introduction to CalPERS
June 6, 2023 Policy Options and City Council Feedback
June 21, 2023 CalPERS Funding Policies Adopted
The presentation to the City Council will cover CalPERS Pension Basics, comparison to other agencies, and changes to CalPERS and the impact of the changes.
NEXT STEPS:
City staff will return to the City Council with proposed policy options on June 6, 2023.
DOCUMENTS ATTACHED:
Attachment 1 – State Auditor's Recommendations-Corrective Action Plan May 2023 Update