City of Ripon | California
Money Purchase Thrift Pension Plan
Financial Statements
For the Years Ended June 30, 2023 and 2022
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Financial Statements
TABLE OF CONTENTS
PAGE
Independent Auditor’s Report ............................................................................................................................................ 1 Financial Statements:
Pension Trust Fund:
Statements of Fiduciary Net Position ........................................................................................................................... 4 Statements of Changes in Fiduciary Net Position ........................................................................................................ 5 Notes to the Financial Statements....................................................................................................................................... 7 2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements 1 INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and
Members of the City Council
City of Ripon, California
Opinion
We have audited the accompanying financial statements of the City of Ripon Money Purchase Thrift Pension Plan (the Plan), which comprise the statements of fiduciary net position – pension trust fund as of and for the years ended June 30, 2023 and 2022, and the related notes to the financial statements, which collectively comprise the Plan’s financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Plan as of June 30, 2023 and 2022, and the respective changes in fiduciary net position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City of Ripon Money Purchase Thrift Pension Plan, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Plan’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements 2 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Plan’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control‐related matters that we identified during the audit.
Required Supplementary Information
Management has omitted a management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the financial statements. Such missing information, although not a part of the financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic, or historical context. Our opinions on the financial statements are not affected by this missing information.
Clovis, California
December 4, 2023
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements 3 FINANCIAL STATEMENTS
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | JUNE 30, 2023 AND 2022 Pension Trust Fund
Statements of Fiduciary Net Position
The notes to the financial statements are an integral part of this statement. 4 2023 2022
ASSETS
Cash and cash equivalents 2,108,368 $ $ 2,061,769 U.S. government securities 1,262,370 981,712 Corporate obligations ‐ 654,246 Mutual funds 10,027,486 8,413,775 Common and preferred stock 1,120,371 1,108,640 Real estate investment trust 72,494 274,917 Total cash and investments 14,591,089 13,495,059 Receivables:
Participant notes receivable 129,141 94,664 Contributions receivable 38,675 33,750 Total assets 14,758,905 13,623,473
LIABILITIES ‐ ‐
NET POSITION
Restricted for pensions $ 14,758,905 $ 13,623,473 2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Pension Trust Fund
Statements of Changes in Fiduciary Net Position
The notes to the financial statements are an integral part of this statement. 5 2023 2022
Additions to net position attributed to:
Investment income:
Net appreciation (depreciation) in the fair
value of investments $ 259,461 $ (1,830,169) Interest 11,517 6,515 Dividends 371,512 252,799 Contributions:
Employer 521,373 489,720 Employee 426,786 406,315 Other income ‐ 7,438
Total additions 1,598,087 (674,820) Deductions from net position attributed to:
Benefits paid to participants 432,810 497,625 Administration 29,845 33,264 Total deductions 462,655 530,889 Changes in net position 1,135,432 (1,205,709) Total net position ‐ beginning 13,623,473 14,829,182 Total net position ‐ ending $ 14,758,905 $ 13,623,473 2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements 6 NOTES TO THE FINANCIAL STATEMENTS
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | JUNE 30, 2023 AND 2022 Notes to the Financial Statements
7 NOTE 1 – PLAN DESCRIPTION
The financial statements of the City of Ripon Money Purchase Thrift Pension Plan (the Plan), a single‐employer defined contribution plan, have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to fiduciary activities, and in accordance with the Plan agreement.
The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions. The Plan is sponsored by the City of Ripon, California (the City).
A. General
The Plan covers all permanent, full‐time employees, excluding public safety employees, of the City who have completed six consecutive months of employment. As of June 30, 2023 and 2022, the plan members totaled 76 and 67 respectively.
Plan provisions and contribution requirements are established and may be amended by the City Council of the City of Ripon. The Plan is subject to the provisions of Government Code Section 7504. The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) as ERISA does not apply to government sponsored plans.
Under the Internal Revenue Code, the Plan meets the requirements of Section 401(a) and is exempt from federal income tax under Section 510(a).
The City has the right under the Plan provisions to terminate the Plan by delivering to the trustee and administrator written notice of such termination. In the event of plan termination, participants will become 100% vested in their accounts.
B. Employee Contributions
Eligible employees can elect to defer 5% of their compensation to the Plan. The Plan allows additional employee elective contributions up to 6.6% of annual compensation.
C. Employer Contributions
The City makes contributions to the Plan equal to 10% of the total compensation, excluding overtime, of all participants in the Plan under the mandatory provision and up to 3.3% of the qualified employee’s annual compensation under the voluntary provision.
The City entered into a Memorandum of Understanding with the Union representing its employees which requires the City to “pick up” the 5% employee contribution referenced above. All such contributions are designated as employee contributions and are fully vested.
D. Participant Accounts
In accordance with the trust agreement, each member directs the investments held in his/her individual account. The participants’ accounts are held by a corporation‐administered trust fund.
E. Vesting
Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the City contributions under the mandatory provision and earnings thereon is based on years of continuous service. A member is 100% vested after six years of credited service. Participants are fully vested in the City contributions under the voluntary provision and earnings thereon.
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | JUNE 30, 2023 AND 2022 Notes to the Financial Statements
8 NOTE 1 – PLAN DESCRIPTION (Continued)
F. Payment of Benefits
Upon termination of service or attainment of earliest retirement age of 55, a participant may elect to receive the value of the account under one of the methods as described in the Plan.
The City contribution for, and interest forfeited by, employees who leave employment before six years of service are redistributed to all participants based on salary and vesting levels.
G. Participant Notes Receivable
The Plan provides for loans to participants which are secured by their vested account balances and can be no greater than the lesser of 50% of the participant’s vested account balance or $50,000. The loans are secured by the balance in the participant’s account and bear interest at rates which are commensurate with local prevailing rates as determined by the Plan administrator. Principal and interest are paid ratably through payroll deductions.
H. Expenses
Plan administrator charges are paid by the City of Ripon. Investment related expenses are paid from the Plan assets.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Accounting
The financial statements of the Plan are prepared on the accrual basis of accounting.
B. Investment Valuation and Income Recognition
The Plan’s investments are reported at fair value. Securities traded on national exchanges are valued at the last reported sales price. The Plan’s investments are held in trust by Bank of Stockton.
Purchases and sales of securities are recorded on a trade‐date basis. Interest and dividend income are recorded on the accrual basis.
C. Fair Market Value of Financial Instruments
Unless otherwise noted, the carrying value of financial instruments, including investments, receivables and liabilities, approximate fair value due to the short‐term maturities of these instruments.
D. Notes Receivable from Participants
Loans to participants are reported at their unpaid balances plus any accrued but unpaid interest.
E. Payments of Benefits
Benefits are recorded when paid.
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | JUNE 30, 2023 AND 2022 Notes to the Financial Statements
9 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from the estimates.
G. Budgetary Accounting
The Plan does not utilize formal budget procedures and is not required to adopt such procedures by law. Accordingly, budgetary comparison information is not required or presented.
H. Reporting Entity
The Plan, governed by the Retirement Board, is considered an independent entity. Plan management considered all potential component units for inclusion in the reporting entity by applying the criteria set forth in accounting principles generally accepted in the United States of America. The Plan concluded that there were no potential component units which should be included in the reporting entity.
I. Cash and Cash Equivalents
The Plan’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short‐term investments with original maturities of three months or less from the date of acquisition.
NOTE 3 – FAIR VALUE MEASUREMENTS
The Plan’s investments are reported at fair value in the accompanying statements of fiduciary net position – pension trust fund. The methods used to measure fair value may produce an amount that may not be indicative of net realizable value or reflective future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The fair value measurement accounting literature establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority; Level 2 inputs are from other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable and have the lowest priority. The Plan uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, the Plan measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs were used only when Level 1 or Level 2 inputs were not available.
Following is a description of the valuation methodologies used for Level 2 assets measured at fair value. There have been no changes in the methodologies used at June 30, 2023.
Corporate obligations and government securities are valued at fair value. The market approach is used to value these assets which uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets and liabilities, such as a business. 2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | JUNE 30, 2023 AND 2022 Notes to the Financial Statements
10 NOTE 3 – FAIR VALUE MEASUREMENTS (Continued)
Mutual funds and Real Estate Investment Trusts (REITs) are valued at the daily closing prices as reported by the fund.
These funds are required to publish their daily net asset value (NAV) and to transact at the price. NAV is calculated by dividing the value of the net assets of the fund by the total number of outstanding shares of the fund. The mutual funds and REITs held by the Plan are deemed to be actively traded.
The following table set forth, by level within the fair value hierarchy, the Plan’s investments at fair value as of June 30, 2023:
Level 1 Level 2 Level 3 Total
U.S. government securities $ ‐ $ ‐ 1,262,370 $ $ 1,262,370 Mutual funds ‐ 10,027,486 ‐ 10,027,486 Common and preferred stock ‐ 1,120,371 ‐ 1,120,371 Real estate investment trust ‐ 72,494 ‐ 72,494 Total $ 72,494 $ ‐ 12,410,227 $ $ 12,482,721 Assets held at Fair Value
The following table set forth, by level within the fair value hierarchy, the Plan’s investments at fair value as of June 30, 2022:
Level 1 Level 2 Level 3 Total
U.S. government securities $ ‐ $ ‐ 981,712 $ $ 981,712 Corporate obligations ‐ ‐ 654,246 654,246 Mutual funds ‐ 8,413,775 ‐ 8,413,775 Common and preferred stock ‐ 1,108,640 ‐ 1,108,640 Real estate investment trust 274,917 ‐ ‐ 274,917 Total $ 274,917 $ ‐ 11,158,373 $ $ 11,433,290 Assets held at Fair Value
NOTE 4 – INVESTMENTS
The following investments held by the plan were in excess of 5% of the Plan’s net position during the year ended June 30, 2023.
Issuer Investment Type
Reported
Amount
DODGE & COX INCOME FUND Mutual Funds $ 845,036 iShares: S&P 500 INDEX Mutual Funds $ 2,093,945 JP MORGAN BETABUILDERS INTERNATIONAL EQUITY Mutual Funds $ 978,030 2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | JUNE 30, 2023 AND 2022 Notes to the Financial Statements
11 NOTE 4 – INVESTMENTS (Continued)
The following investments held by the plan were in excess of 5% of the Plan’s net position during the year ended June 30, 2022.
Issuer Investment Type
Reported
Amount
iShares: S&P 500 INDEX Mutual Funds 2,135,373 $
iShares Floating Rate Bond ETF Mutual Funds 1,090,253 $ Vanguard Short‐Term Inflation‐Protected
Securities Index Fund U.S. Government Security 979,495 $ Investment income results from each participant’s self‐directed account. Investment income by major asset category is provided in the trustee reports.
NOTE 5 – RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of fiduciary net position – pension trust fund.
NOTE 6 – RELATED PARTY AND PARTY‐IN‐INTEREST TRANSACTIONS The Third‐Party Administrator of the Plan and the Trust holding plan assets provide various services to the Plan and receive compensation and other fees for these services and, therefore, qualify as parties‐in‐interest. Total fees and commissions paid to these parties‐in‐interest totaled $103,899 and $111,615 for the years ended June 30, 2023 and 2022, respectively.
2023.06.30 City of Ripon - Money Purchase Thrift Pension Plan - Financial Statements