City of Richmond
Presentation to the City Council
February 4, 2025
2024 Audit of
City of Richmond
Agenda
• Engagement Team
• Deliverables and Scope of the Audit
• Areas of Primary Audit Risk
• Auditor’s Report and Financial Statements
• Required Communications
• New Accounting Standards
3 Engagement Team
Audit Senior
Tim Ko
Engagement Team
5 Quality Control
Reviewer
Mitesh Desai, CPA
Engagement Partner
Ahmed Badawi, CPA
Audit Manager
Wenwei Zhao, CPA
IT Specialist
Omar Rahman, CPA,
CISA
Audit Staff
Mostafa Dawod
Audit Staff
Ahmed Fahmi
Audit Staff
Everly Ying
Deliverables and
Scope of the Audit
Deliverables and Scope of the Audit
7 • Report of Independent Auditors on City of Richmond Annual Comprehensive Financial Report (ACFR)
• Report on Internal Control Over Financial Reporting and on Compliance and Other Matters
• Independent Auditor’s Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with the Uniform Guidance
• Report of Independent Auditors on the Joint Powers Financing Authority Basic Financial Statements
• Report of Independent Auditors on the Housing Authority Basic Financial Statements • Preparation of Annual Report of Financial Transactions to the State Controller (City, Sewer District, JPFA and 3 non-CalPERS pension plans)
• Gann Limit Agreed Upon Procedures Report
• Communications with Those Charged With Governance
Areas of Primary
Audit Risk
Areas of Primary Audit Risk
9 • Assignment of staff based on consideration of audit risk. • Procedures to incorporate an element of unpredictability in the audit. • Consideration of the selection and application of significant accounting principles.
• Examination of journal entries.
• Review of accounting estimates for bias.
• Evaluation of business rationale for unusual transactions. • Evaluation of the appropriateness of fraud-related inquiries.
Risk of Management Override of Controls – The risk of management override of controls was addressed by the following procedures:
Areas of Primary Audit Risk
10 • Governmental Funds: Confirmed and validated property taxes, sales taxes, and other significant revenues and receivables.
• Proprietary Funds: Performed substantive analytical procedures and performed testing on material operating revenue and grant revenue items by reviewing backup.
Revenue and Receivables (Taxes, Grants, Notes, etc.) – Improper Revenue Recognitions:
• Investment Fair Value Estimates
• Capital Asset Useful Lives
• Pension and OPEB related estimates
• Claim Liabilities Estimates
Estimates – Review of Significant Accounting Estimates:
Auditor’s Report
and Financial
Statements
Auditor’s Report
12 • Audit performed in accordance with Generally Accepted Auditing Standards • Audit performed in accordance with Government Auditing Standards Auditing Standards
•Financial statements are fairly presented in all material respects •Significant accounting policies have been consistently applied •Estimates are reasonable
•Disclosures are properly reflected in the financial statements Unmodified Opinions
•Business-Type Activities, Aggregate Discretely Presented Component Units (RHA Properties, RHA Housing Corporation, and RHA RAD L LC), and Richmond Housing Authority Enterprise Fund for which we disclaimed the opinions. •The financial statements of the Richmond Housing Authority and RHA Properties, RHA Housing Corporation and RHA RAD LLC have not been audited for the year ended June 30, 2024.
Disclaimer Opinions
13 Cash &
Investments Receivables Capital
Assets Other Assets Deferred Outflow of
Resources
2022 $258,491,381 $169,220,876 $522,772,205 $3,063,791 $68,945,422 2023 $323,420,326 $163,966,805 $545,590,887 $5,654,707 $142,213,368 2024 $379,851,297 $170,411,335 $573,214,660 $1,410,349 $126,211,250 $-
$100
$200
$300
$400
$500
$600Millions
Assets and Deferred Outflows of Resources
Government-Wide Financial Statements
Government-Wide Financial Statements
14 Accounts
Payable and
Accrued
Expenses
Unearned
Revenues
Compensated
Absences Claims Liability Long-Term
Liabilities
Net Pension
Liability
Net OPEB
Liability
Deferred Inflows
of Resources
2022 $31,857,028 $31,172,999 $11,696,632 $51,092,602 $428,096,251 $214,292,774 $84,523,529 $216,258,371 2023 $29,331,789 $48,766,183 $11,881,418 $49,681,686 $430,164,553 $369,613,204 $74,720,798 $95,123,618 2024 $49,641,753 $46,056,862 $13,655,136 $52,171,564 $423,270,520 $377,759,466 $63,444,023 $86,214,631 $-
$100
$200
$300
$400
$500Millions
Liabilities and Deferred Inflows of Resources
Government-Wide Financial Statements
15 Net Investment in
Capital Assets Restricted Unrestricted
2022 $289,399,446 $117,744,474 $(453,640,431)
2023 $301,531,372 $140,566,552 $(370,535,080)
2024 $333,839,204 $171,522,933 $(366,477,201)
$(500)
$(400)
$(300)
$(200)
$(100)
$-
$100
$200
$300
$400
Millions
Net Position
Government-Wide Financial Statements
16 2022 2023 2024
Net Cost of Service $105,838,829 $118,272,590 $189,406,431 Tax Revenue $193,864,015 $200,930,805 $213,450,483
$-
$50
$100
$150
$200
$250Millions
Net Cost of Service to Tax Revenue - Governmental Activities General Fund
17 Expenditure Coverage
2022 2023 2024
Committed Fund Balance 3,383,453$ 3,720,697$ 3,748,566$ Assigned Fund Balance 6,397,688 9,530,225 6,106,044 Unassigned Fund Balance 44,935,389 55,196,962 65,262,325 Total Unrestricted Fund Balance 54,716,530$ 68,447,884$ 75,116,935$ Total Expenditures 167,927,396$ 180,085,786$ 198,640,109$ Unrestricted Fund Balance as
a % of Total Expenditures 32.58% 38.01% 37.82%
Number of months 4 5 5
GFOA recommendation No less than 2 months
Measure of the City's ability to operate with no revenues using available fund balance.
Pension Plans
18 2022 2023 2024
1% Decrease $365,238,299 $529,974,265 $533,178,403
Current Rate $213,846,269 $369,613,204 $371,906,028
1% Increase $88,289,588 $237,187,515 $238,671,498
$-
$100
$200
$300
$400
$500
$600Millions
Total Net Pension Liability
Sensitivity to Discount Rate
Other Postemployment Benefits Plans
19 2022 2023 2024
1% Decrease $98,970,262 $89,321,489 $77,385,958
Current Rate $84,523,529 $74,720,798 $63,444,023
1% Increase $72,419,629 $62,471,926 $51,693,207
$-
$20
$40
$60
$80
$100Millions
Total Net OPEB Liability
Sensitivity to Discount Rate
Required
Communications
Required Communications
21 Auditor’s Responsibilities
Opinion on whether financial statements are fairly
stated in accordance with U.S. GAAP
Evaluate internal control over financial reporting
including tone at the top
Evaluate compliance with laws, contracts, and grants.
Ensure financial statements are clear and transparent
Communicate with the governing body
Management’s Responsibilities
Management is responsible for the financial
statements
Establish and maintain internal control over
financial reporting
Making all financial records available to us
Establish internal control to prevent and detect fraud
Inform us of all known and suspected fraud
Comply with laws and regulations
Take corrective action on audit findings
Required Communications
22 • It is our responsibility to maintain independence
• We maintained our independence by strict adherence to the AICPA and the Board of Accountancy rules and regulations
• Other than preparing the financial statements, no services performed that could affect our independence.
Independence
• Within the time frame originally communicated to the City in our engagement letters.
Timing of the Audit
• The City adopted the following new pronouncements during the year:
• GASB Statement No. 100 – Accounting Changes and Error Corrections Significant Accounting Policies and Unusual Transactions Required Communications
23 • Investment Fair Value Estimates
• Capital Asset Useful Lives
• Pension Plans (actuarial assumptions)
• Other Post Employment Benefits (OPEB) Plans (actuarial assumptions) • Claim Liabilities Estimates
Management Judgement and Accounting Estimates
• No difficulties encountered
Difficulties Encountered in Performing the Audit
Required Communications
24 • Management has posted all proposed audit adjustments Significant Audit Adjustments and Unadjusted Differences • Delays in PAF Submission and Approvals
Deficiencies in Internal Control over Financial Reporting New Accounting Standards
25 2025
• GASB Statement No. 101 – Compensated Absences
• GASB Statement No. 102 – Certain Risk Disclosures
2026
• GASB Statement No. 103 – Financial Reporting Model Improvements • GASB Statement No. 104 – Disclosure of Certain Capital Assets Thank You for Allowing
us to Provide Audit
Services to the
City of Richmond.