Financial Performance and
Budget Committee
TO: FINANCIAL PERFORMANCE AND DATE: JANUARY 10, 2024
BUDGET COMMITTEE MEMBERS
FROM: FINANCE DEPARTMENT WARD: ALL SUBJECT: ANNUAL AUDIT REPORTS FROM EXTERNAL INDEPENDENT AUDITOR, LANCE, SOLL & LUNGHARD, LLP ON CITY OF RIVERSIDE FINANCIAL RESULTS FOR FISCAL YEAR 2022/23 ISSUES:
Receive the annual audit reports from external independent auditor, Lance, Soll & Lunghard, LLP on the City of Riverside financial results for Fiscal Year 2022/23.
RECOMMENDATIONS:
That the Financial Performance and Budget Committee recommend that the City Council receive, provide input on and forward to the City Council the annual financial audit reports for Fiscal Year 2022/23.
BACKGROUND:
On April 10, 2019, the Finance Committee conducted interviews for the appointment of a new independent external auditor. The Committee interviewed the top two (2) accounting firms, Vavrinek, Trine, Day & Co., LLP (VTD) and Lance, Soll & Lunghard, LLP (LSL), identified through a formal Request for Proposal process. Following interviews and discussion, the Committee recommended that the City Council appoint Lance, Soll & Lunghard, LLP to serve as the City’s independent auditors in accordance with its annual audit requirements for a five-year period, subject to annual reappointments, beginning with the fiscal year ending June 30, 2019.
On June 4, 2019, City Council awarded a Professional Consultant Services Agreement for Certified Public Accountant Services to Lance, Soll & Lunghard, LLP to serve as the City’s independent auditor for a five-year term, subject to annual renewals and appointed Lance, Soll & Lunghard, LLP as the City’s independent external auditor for a five-year term, subject to annual renewals.
DISCUSSION:
The City’s external independent auditor Lance, Soll & Lunghard, LLP has completed the annual audit of the City’s financial statements and other financial reports subject to audit, as follows:
1. Annual Comprehensive Financial Report (ACFR)
2. Electric and Water Financial Reports
3. Successor Agency Financial Report
4. Riverside Public Financing Authority Financial Report
5. Single Audit Report on Federal Awards
6. Air Quality Management District Report
7. Appropriations Limit (Gann) Calculation Agreed-Upon Procedures.
The auditors provided an unmodified, or clean, opinion that the City’s financial statements are presented fairly and in conformity with generally accepted accounting principles. This clean audit opinion supports the fact that the City observed compliance with generally accepted accounting principles and statutory requirements. As part of the financial audit, the auditors provided a management letter and there were no misstatements detected as a result of the audit procedures and corrected by management which were material, either individually or in the aggregate, to the financial statements taken as a whole. This is a remarkable achievement given the size and complexity of the City.
The City’s financial statements are distributed to the City Council, federal and state government agencies per contract requirements, bond holders, and rating and financial institutions, and are made available in libraries for interested citizens.
For the seventh time, the City has produced a Popular Annual Financial Report (PAFR). The Government Finance Officers Association (GFOA) established the PAFR in 1991 to encourage and assist state and local governments to extract information from their ACFR to produce high quality popular annual financial reports specifically designed to be readily accessible and easily understandable to the general public and other interested parties without a background in public finance and who may be overwhelmed by the volume of information in the traditional ACFR.
The City is pending the award from GFOA for the 2021-2022 submission of the PAFR. The City expects to receive this award for the sixth time once received and reviewed by the GFOA. The current report continues to meet the Award for Outstanding Achievement in Popular Financial Reporting program requirements and is being submitted to GFOA to determine its eligibility for another certificate.
For the current Fiscal Year 2022/23 financial statements, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Arrangements, essentially eliminating the concept of off-balance sheet payments for applicable software and requiring organizations to recognize an intangible asset and corresponding liability on the balance sheet. The City reviewed over 270 information technology subscription agreements for various software to determine applicability to GASB 96. The City identified 23 subscription-based information technology arrangements applicable to GASB 96.
Lance, Soll & Lunghard, LLP has completed its fifth and final year of a five-year contract, consistent with the City’s charter which allows the City’s independent auditor to serve for no more than five years before mandatory rotation is required. This practice is consistent with industry best practices as promulgated by the national organization of municipal financial professionals, the GFOA. The Finance Department is currently reviewing proposals from external audit firms to establish a new five-year agreement.
Lance, Soll & Lunghard, LLP will provide the attached presentation of required communication with the Financial Performance and Budget Committee and answer any questions.
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority 5 – High Performing Government and Goal No. 5.2, Utilize technology, data, and process improvement strategies to increase efficiencies, guide decision making, and ensure services are accessible and distributed equitably throughout all geographic areas of the City.
The item aligns with each of the five Cross-Cutting Threads as follows:
Community Trust – The attached financial reports and related audits of the City and closely related agencies demonstrate the City's dedication to openness, accountability, and the well-being of its diverse populations, fostering confidence in governance and decision processes.
Equity – By providing open and inclusive access to financial information, the City promotes transparency and ensures that all community members have equal opportunities to engage with and understand the financial aspects of community progress.
Fiscal Responsibility – The financial reports and associated audits provide transparency, accountability, and a comprehensive overview of the City's and closely related agencies' current financial situation, allowing stakeholders to assess the organization's financial health, adherence to budgetary controls, and effective management of resources.
Innovation – The audit process and compilation of financial reports leverage innovative software solutions, fostering an efficient and streamlined fiscal year-end process and audit of City finances. Moreover, these technological tools enhance the precision and accessibility of financial data, ensuring a robust foundation for transparent and reliable reporting.
Sustainability & Resiliency – The financial reports and external audits demonstrate that City funds are managed in a way that meets present needs without compromising the ability to adapt and grow in the face of future challenges. Through transparent financial planning and reporting, the City safeguards its ability to persevere during both favorable and challenging times, promoting a sustainable and resilient financial framework for the benefit of current and future generations.
FISCAL IMPACT:
There is no fiscal impact associated with this report. Funding for future fiscal years will be included in the department’s budget submissions for those fiscal years to be presented to the City Council for approval.
Prepared by: Nancy Garcia, Controller
Approved by: Kristie Thomas, Finance Director/Assistant Chief Financial Officer Certified as to
availability of funds: Kristie Thomas, Finance Director/Assistant Chief Financial Officer Approved by: Edward Enriquez, Assistant City Manager/Chief Financial Officer/Treasurer
Approved as to form: Phaedra A. Norton, City Attorney
Attachments:
Annual Comprehensive Financial Report (ACFR)
Electric and Water Financial Reports
Successor Agency Financial Report
Riverside Public Financing Authority Financial Report
Single Audit Report on Federal Awards
Air Quality Management District Report
Appropriations Limit (Gann) Calculation Agreed-Upon Procedures Report Independent Auditors’ Report on Internal Control over Financial Reporting Required Auditor Communication Letter
Popular Annual Financial Report (PAFR)
Presentation – Lance, Soll & Lunghard, LLP
Presentation – Finance Department
Annual Audit Reports ● Page 3