INDEPENDENT AUDITORS’ REPORT
To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the Ro seville Natural Gas F inancing Authority (Authority), a component unit of the City of Roseville, Califor nia, (the “City”) as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Authority’s basic 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 financial position of the Authority, as of June 30, 2023, and the changes in its f inancial position and cash flows 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 and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial State ments section of our report. We are required to be independent of the Authority and to meet our other ethical resp onsibilities, 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 opinions.
Emphasis of Matter
As discussed in Note 1, the fi nancial statements present only the Roseville Natural Gas Financing Authority fund, an enterprise fund of the City, and do not purport to, and do n ot present fairly the financial position of the City, as of June 30, 2023, the change in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting prin ciples generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
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 Authority’s ability to continue as a going concern for twelve months beyond the financial statement date, includin g any currently known information that may raise substantial doubt shortly thereafter.
To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
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 is sue 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 a uditing standards and Government Auditing Standards will always detect a material m isstatement 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 au diting standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skept icism 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 au dit 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 Authority’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and t he 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 Authority’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.
Other Reporting Responsibilities
Management has omitted management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplem ent the basic financial statements. Such missing information, although not a part of the basic financial stateme nts, is required by the Governmental Accounting Standards Board who considers it to be an essential part of fin ancial reporting for placing the basic financial statements in an appropriate operational, economic, o r historical context. Our opinion on the basic financial statements is not affected by this missing information. 2 To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 25, 2024, on our consideration of the Authority’s internal control over the Auth ority‘s financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contra cts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over the Authority’s financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over the Authority’s financial reporting and compliance.
Sacramento, California
April 25, 2024
3 ROSEVILLE NATURAL GAS FINANCING AUTHORITY
Statement of Net Position
June 30, 2023
Assets:
Current:
Restricted investments with fiscal agents 6,443,244$
Total Current Assets 6,443,244
Noncurrent:
Prepaid purchased gas 75,897,820
Derivative instruments - fair value 60,696,996
Total Noncurrent Assets 136,594,816
Total Assets 143,038,060
Liabilities:
Current:
Accounts payable 8,199
Accrued interest payable 1,365,938
Deposits payable 1,941,755
Due to City funds 189,130
Revenue bonds - current 13,155,000
Total Current Liabilities 16,660,022
Noncurrent:
Revenue bonds 62,638,641
Total Noncurrent Liabilities 62,638,641
Total Liabilities 79,298,663
Deferred Inflows of Resources:
Accumulated increase in fair value of hedging derivatives 60,696,996 Total Deferred Inflows of Resources 60,696,996
Net Position:
Restricted for debt service 6,443,244
Unrestricted (3,400,843)
Total Net Position 3,042,401$
See Notes to Financial Statements.
4 ROSEVILLE NATURAL GAS FINANCING AUTHORITY
Statement of Revenues, Expenses
and Changes in Net Position
Year Ended June 30, 2023
Operating Revenues:
Gas supply revenue 30,137,619$
Miscellaneous 46,373
Total Operating Revenues 30,183,992
Operating Expenses:
Natural gas purchases 18,133,391
Administration 7,414
Total Operating Expenses 18,140,805
Operating Income 12,043,187
Nonoperating Revenues (Expenses):
Interest revenue (loss) 2,460,195
Interest, fiscal charges (expense), and amortization (14,819,227) Total Nonoperating
Revenues (Expenses) (12,359,032)
Changes in Net Position (315,845)
Total Net Position - Beginning 3,358,246
Total Net Position - Ending 3,042,401$
See Notes to Financial Statements.
5 ROSEVILLE NATURAL GAS FINANCING AUTHORITY
Statement of Cash Flows
June 30, 2023
Cash Flows from Operating Activities:
Cash received from customers 30,184,001$
Cash paid to suppliers (4,266,894)
Net Cash Provided by Operating Activities 25,917,107
Cash Flows from Non-Capital
Financing Activities:
Transfers from City for short-term borrowings 170,705
Changes in deposits (2,740,000)
Principal paid on noncapital debt (12,520,000)
Interest paid on noncapital debt (15,789,888)
Net Cash Used by
Non-Capital Financing Activities (30,879,183)
Cash Flows from Investing Activities:
Maturity of investments 2,501,881
Interest and dividends 2,460,195
Net Cash Provided by
Investing Activities 4,962,076
Net Increase (Decrease) in Cash
and Cash Equivalents -
Cash and Cash Equivalents at Beginning of Year -
Cash and Cash Equivalents at End of Year -$
Reconciliation of Operating Income to Net Cash
Provided by Operating Activities:
Operating Income 12,043,187$
Adjustments to Reconcile Operating Loss
Net Cash Provided by Operating Activities:
(Increase) decrease in receivables 9
(Increase) decrease in prepaid expense 13,868,414
Increase (decrease) in accounts payable 5,497
Total Adjustments 13,873,920
Net Cash Provided by
Operating Activities 25,917,107$
Non-Cash Investing and Financing Activities:
Change in the fair value of derivatives 3,757,788$
Amortization of bond premium (735,911)
See Notes to Financial Statements.
6 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
6800$5<2)6,*1,),&$17$&&2817,1*32/,&,(6
$ 2UJDQL]DWLRQDQG3XUSRVH
7KH 5RVHYLOOH 1DWXUDO *DV )LQDQFLQJ $XWKRULW\
$XWKRULW\
LV D -RLQW ([HUFLVH 3RZHUV $JHQF\ FUHDWHG RQ
'HFHPEHUIRUWKHSXUSRVHRIDFTXLULQJILQDQFLQJDQGVXSSO\LQJQDWXUDOJDVWRWKH&LW\RI5RVHYLOOH &LW\
7KH PHPEHUV RI WKH $XWKRULW\ DUH WKH &LW\ DQG WKH 6XFFHVVRU $JHQF\ RI WKH IRUPHU &LW\ RI 5RVHYLOOH 5HGHYHORSPHQW$JHQF\
6XFFHVVRU$JHQF\
DILGXFLDU\IXQGRIWK H &LW\7KH&LW\LVJRYHUQHGE\DILYHPHPEHU &LW\ &RXQFLO &LW\ &RXQFLO VHUYHV DV WKH JRYHUQLQJ ERG\ RI WKH $XWKRULW\ DQG RIILFHUV RI WKH $XWKRULW\ DUH HPSOR\HHV RI WKH &LW\ 7KH $XWKRULW\ LV D EOHQGHG FRPSRQHQW XQLW RI WKH &LW\ DV LW KDV VXEVWDQWLYHO\ WKH VDPH JRYHUQLQJERG\DQG DILQDQFLDOEXUGHQEHQHILWUHODWLRQVKLSH[LVWVEHWZHHQWKH&LW\DQGWKHDXWKRULW\
7KH$XWKRULW\LVDQLQWHJUDOSDUWRIWKH&LW\DQGDFFRUGLQJO\ WKHDFFRPSDQ\LQJILQDQFLDOVWDWHPHQWVDUH LQFOXGHG DV D FRPSRQHQW XQLW RI WKH EDVLF ILQDQFLDO VWDWHPHQWV RI WKH &LW\ 7KH DFFRXQWLQJ UHFRUGV RI WKH $XWKRULW\ DUH PDLQWDLQHGE\WKH&LW\
7KHVHILQDQFLDOVWDWHPHQWVSUHVHQWRQO\WKHDFWLYLWLHVRIWKH$XWKRULW\DQGDUHQRWLQWHQGHGWRSUHVHQWWKH ILQDQFLDO SRVLWLRQRIWKH&LW\ RUWKHUHVXOWVRILWVRSHUDWLRQV 7KHILQDQFLDO VWDWHPHQWVRIWKH$XWKRULW\DUH LQFOXGHGDVDQ HQWHUSULVHIXQGLQWKH&LW\¶VILQDQFLDOVWDWHPHQWV
% 0HDVXUHPHQW)RFXVDQG%DVLVRI$FFRXQWLQJ
7KH $XWKRULW\
V EDVLF ILQDQFLDO VWDWHPHQWV DUH SUHSDUHG LQ FRQI RUPLW\ ZLWK DFFRXQWLQJ SULQFLSOHV JHQHUDOO\ DFFHSWHG LQ WKH 8QLWHG 6WDWHV RI $PHULFD 7KH *RYHUQPHQWDO $FFRXQWLQJ 6WDQGDUGV %RDUG LV WKH DFNQRZOHGJHG VWDQGDUG VHWWLQJ ERG\ IRU HVWDEOLVKLQJ DFFRXQWLQJ DQG ILQDQFLDO UHSRUWLQJ VWDQGDUGV IROORZHG E\ JRYHUQPHQWDO HQWLWLHVLQWKH8QLWHG6WDWHVRI$PHULFD
7KH $XWKRULW\ UHSRUWV LWV DFWLYLWLHV LQ DQ HQWHUSULVH IXQG IRUILQDQFLDO VWDWHPHQW SXUSRVHV (QWHUSULVH IXQGV DUH XVHGWRDFFRXQWIRURSHUDWLRQVWKDWDUHILQDQFHGDQGRSHUDWHGLQD PDQQHUVLPLODUWRSULYDWHEXVLQHVVHQWHUSULVHV ZKHUHWKHLQWHQWRI WKHJRYHUQLQJ ERG\LVWKHFRVWVDQG H[SHQVH V LQFOXGLQJ GHSUHFLDWLRQ RISURYLGLQJ JRRGVRU VHUYLFHVWRWKHJHQHUDOSXEOLFWRUHFRYHUWKURXJKXVHUFKDUJHV
7KHDFFUXDOEDVLVRIDFFRXQWLQJLVXVHGZKHUHE\DOODVVHWVGHIHUUHGRXWIORZVLQIORZVRIUHVRXUFHVDQGOLDELOLWLHV RI WKHHQWHUSULVHDUHUHFRUGHGRQLWV6WDWHPHQWRI1HW3RVLWLRQDQGDOOUHYHQXHVDUHUHFRJQL]HGZKHQHDUQHG DQGDOO H[SHQVHVLQFOXGLQJGHSUHFLDWLRQDUHUHFRJQL]HGZKHQLQFXUUHG
7KH$XWKRULW\GLVWLQJXLVKHVRSHUDWLQJUHYHQXHVDQGH[SHQVHVIURPQRQRSHUDWLQJLWHPV2SHUDWLQJUHYHQXHV DQG H[SHQVHV JHQHUDOO\ UHVXOW IURP SURYLGLQJ VHUYLFHV DQG SURGXFLQJ DQG GHOLYHULQJ JRRGV LQ FRQQHFWLRQ ZLWK WKH $XWKRULW\¶V RSHUDWLRQV 7KH SULQFLSDO RSHUDWLQJ UHYHQXH RI WKH $XWKRULW\ LV JDV VXSSO\ UHYHQXH 7KH SULQFLSDO RSHUDWLQJ H[SHQVH RI WKH $XWKRULW\ LV QDWXUDO JDV SXUFKDVHV 1RQRSHUDWLQJ UHYHQXHV DQG H[SHQVHV FRQVLVW RI WKRVHUHYHQXHVDQGH[SHQVHVWKDWDUHUHODWHG WRILQDQFLQJDQGLQYHVWLQJDFWLYLWLHVDQGUHVXOWIURPQRQH[FKDQJH WUDQVDFWLRQV RU DQFLOODU\ DFWLYLWLHV 7KH SULQFLSDO QRQRSHUDWLQJ UHYHQXH LV LQWHUHVW UHYHQXH DQG WKH SULQFLSDO QRQRSHUDWLQJ H[SHQVH LV LQWHUHVW DQG ILVFDO FKDUJHV UHODWHG WR WKH $XWKRULW\¶V RXWVWDQGLQJ ORQJWHUP OLDELOLWLHV :KHQERWKUHVWULFWHGDQGXQUHVWULFWHGUHVRXUFHVDUHDYDLODEOHI RUXVHLWLVWKH$XWKRULW\¶VSROLF\WRXVH UHVWULFWHG UHVRXUFHVILUVW
& &DVKDQG&DVK(TXLYDOHQWV
&DVKDQGLQYHVWPHQWVZLWKRULJLQDOPDWXULWLHVRIWKUHHPRQWKVRUOHVVDUHWUHDWHGDVFDVKDQGHTXLYDOHQWVIRU WKH SXUSRVHRISUHSDULQJWKHVWDWHPHQWRIFDVKIORZV7KH$XWKRULW\¶VSRUWLRQRIWKH&LW\¶VRYHUDOOFDVKDQG LQYHVWPHQW SRROLVWUHDWHGDVFDVKDQGHTXLYDOHQWVVLQFHWKLVDPRXQWLVLQVXEVWDQFHDGHPDQGGHSRVLW 7 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
6800$5<2)6,*1,),&$17$&&2817,1*32/,&,(6
&217,18('
' 'HIHUUHG,QIORZVRI5HVRXUFHV
,Q DGGLWLRQ WR OLDELOLWLHV WKH VWDWHPHQW RI QHW SRVLWLRQ ZLOO VRPHWLPHV UHSRUW D VHSDUDWH VHFWLRQ IRU deferred inflows of resources 7KLV VHSDUDWH ILQDQFLDO VWDWHPHQW HOHPHQW GHIHUUHG LQIORZV R I UHVRXUFHV UHSUHVHQWVDQ DFTXLVLWLRQRIQHWDVVHWVWKDWDSSOLHVWRDIXWXUHSHULRG V
DQGVRZLOOQRWEHUHFRJQL]HGDVDQLQIORZ
RI UHVRXUFHV
UHYHQXH
XQWLOWKDWWLPH7KH$XWKRULW\RQO\KDV RQHLWHPWKDWTXDOLILHVIRUUHSRUWLQJLQWKLVFDWHJRU\ ,WLVWKHDFFXPXODWHGLQFUHDVHLQWKHIDLUYDOXHRIKHGJLQJGHULYDWLYHV$QDFFXPXODWHGLQFUHDVHLQWKHIDLUYDOXH RI KHGJLQJGHULYDWLYHVLVHTXDOWRWKHIDLUYDOXHRIWKHDVVRFLDWH GGHULYDWLYHLQVWUXPHQWVRORQJDVWKHLQVWUXPHQW LV GHHPHGDQHIIHFWLYHKHGJH
( 1HW3RVLWLRQ
1HW3RVLWLRQLVWKHH[FHVVRIDOOWKH$XWKRULW\
VDVVHWVRYHUDOOLWVOLDELOLWLHVDQGGHIHUUHGLQIORZVRIUHVRXUFHV
5HVWULFWHGIRUGHEWVHUYLFHUHSUHVHQWVWKHSRUWLRQRIQHWSRVLWLRQKHOGLQUHVHUYHLQWKHHYHQWRWKHUUHVRXUFHVRI WKH $XWKRULW\DUHQRWDGHTXDWHWRPDNHUHTXLUHGGHEWVHUYLFHVSD\PHQWV
8QUHVWULFWHGGHVFULEHVWKHSRUWLRQRIQHWSRVLWLRQZKLFKLVQRWOHJDOO\RUFRQWUDFWXDOO\UHVWULFWHGDVWRXVH
) )DLU9DOXH0HDVXUHPHQW
7KH $XWKRULW\ FDWHJRUL]HV WKH IDLU YDOXH PHDVXUHPHQWVRI LWV LQYHVWPHQWV EDVHGRQ WKH KLHUDUFK\ HVWDEOLVKHGE\ JHQHUDOO\ DFFHSWHG DFFRXQWLQJ SULQFLSOHV 7KH IDLU YDOXH KLHUDU FK\ ZKLFK KDV WKUHH OHYHOV LV EDVHG RQ WKH YDOXDWLRQ LQSXWV XVHG WR PHDVXUH DQ DVVHW¶V IDLU YDOXH /HYHO LQSXWV DUH TXRWHG SULFHV LQ DFWLYH PDUNHWV IRU LGHQWLFDODVVHWV
/HYHOLQSXWVDUHVLJQLILFDQWRWKHUREVHUYDEOHLQSXWV /HYHOLQSXWVDUHVLJQLILFDQW XQREVHUYDEOH
LQSXWV 7KH $XWKRULW\¶V IRUZDUG SXUFKDVH DJUHHPHQW ZLWK :HOOV )DUJR %DQN LV PHDVXUHG XVLQJ /HYHO LQSXWV ZKLFKUHTXLUHVYHULILFDWLRQIURPDQRXWVLGHSDUW\WRYDOLGDWHWKHYDOXDWLRQ
* 8VHRI(VWLPDWHV
7KH SUHSDUDWLRQ RI ILQDQFLDO VWDWHPHQWV LQ FRQIRUPLW\ ZLWK JHQH UDOO\ DFFHSWHG DFFRXQWLQJ SULQFLSOHV *$$3
UHTXLUHV PDQDJHPHQW WR PDNH HVWLPDWHV DQG DVVXPSWLRQV WKDW DIIH FW WKH UHSRUWHG DPRXQWV RI DVVHWV DQG OLDELOLWLHVDQGGLVFORVXUHRIFRQWLQJHQWDVVHWVDQGOLDELOLWLHVDWWKHGDWHRIWKHILQDQFLDOVWDWHPHQWVDQGWKH UHSRUWHG DPRXQWVRIUHYHQXHVDQGH[SHQVHVGXULQJWKHUHSRUWLQJSHULRG$FWXDOUHVXOWVFRXOGGLIIHUIURPWKRVH HVWLPDWHV
+ 1HZ$FFRXQWLQJ6WDQGDUGV,PSOHPHQWHG
7KHIROORZLQJ*RYHUQPHQW$FFRXQWLQJ6WDQGDUGV%RDUG
*$6%
SURQ RXQFHPHQWVZHUHHIIHFWLYHIRUDQGRUHDUO\
LPSOHPHQWHGIRUWKHILVFDO\HDUHQGHG-XQH
1. GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs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¶V ILQDQFLDOVWDWHPHQWVE\UHTXLULQJDJRYHUQPHQWWRUHSRUWDVXEVFULSWLRQDVVHWDQGVXEVFULSWLRQOLDELOLW\IRUD6%,7$ DQGWRGLVFORVHHVVHQWLDOLQIRUPDWLRQDERXWWKHDUUDQJHPHQW7K HGLVFORVXUHVZLOODOORZXVHUVWRXQGHUVWDQGWKH VFDOH DQG LPSRUWDQW DVSHFWV RI D JRYHUQPHQW¶V 6%,7$ DFWLYLWLHVDQG HYDOXDWH D JRYHUQPHQW¶V REOLJDWLRQV DQG DVVHWVUHVXOWLQJIURP6%,7$V)RUWKH\HDUHQGHG-XQHWKHUHZDVQRHIIHFWRQWKHILQDQFLDOVWDWHPHQWV DVDUHVXOWRIWKHLPSOHPHQWDWLRQRIWKLVVWDQGDUG
8 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
6800$5<2)6,*1,),&$17$&&2817,1*32/,&,(6
&217,18('
2. GASB Statement No. 100, Accounting Changes and Error Corrections
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
127(
&$6+$1',19(670(176
&DVKDQG,QYHVWPHQW&RPSRVLWLRQ
7KH$XWKRULW\LVDSDUWLFLSDQWLQWKH&LW\ZLGHFDVKDQGLQYHVWPHQWSRRO &LW\3RRO
7KH&LW\3RROLVDQ LQYHVWPHQW
SRRO LV QRW UDWHG DQG LV QRW UHJLVWHUHG ZLWK WKH 6HFXULWLHV ([FKDQJH &RPPLVVLRQ 6(&
7KH $VVLVWDQW &LW\
0DQDJHU&KLHI)LQDQFLDO2IILFHUFRQGXFWV&LW\3RRORYHUVLJKW,QYHVWPHQWVLQWKH&LW\3RRODW-XQH DUH VWDWHG DW IDLU YDOXH 7KH &LW\ 3RRO YDOXHV SDUWLFLSDQW VKDUHV RQ DQ DPRUWL]HG FRVW EDVLV GXULQJ WKH \HDU DQG DGMXVWVWRIDLUYDOXHDW\HDUHQG7KHIDLUYDOXHDGMXVWPHQWDW-XQHLQFUHDVHGWKH$XWKRULW\¶V LQYHVWPHQW LQFRPHE\
$VRI-XQH WKH7UXVWHHZDVKROGLQJFDVKDQGLQYHVWPHQ WVWRWDOLQJSXUVXDQWWRWKHWHUPVRI WKH*DV5HYHQXH%RQGV 6HULHV ,QGHQWXUH 7KHVH FDVKDQGLQYHVWPHQWVFRQVLVWHGRI LQYHVWHG PDLQO\LQ)LUVW$PHULFDQ7UHDVXU\2EOLJDWLRQ)XQGDQG&DOLIRUQL D$UELWUDJH0DQDJHPHQW0RQGD\0DUNHW)XQG DQG
LQYHVWHGLQDIRUZDUGSXUFKDVHDJUHHPHQWZLWK :HOOV)DUJR%DQN
7KH$XWKRULW\LVD3DUWLFLSDQWLQ&$03&$03LVDQLQYHVWPHQWS RRORIIHUHGE\WKH&DOLIRUQLD$VVHW0DQDJHPHQW 7UXVW
7UXVW
7KH7UXVWLVDMRLQW SRZHUVDXWKRULW\ FUHDWHGE\WKH 'HFODUDWLRQRI7UXVWDQG HVWDEOLVKHGXQGHUWKH SURYLVLRQVRIWKH&DOLIRUQLD-RLQW([HUFLVHRI3RZHUV$FW &DOL IRUQLD*RYHUQPHQW&RGH6HFWLRQV HWVHT RU WKH $FW
IRU WKH SXUSRVH RI H[HUFLVLQJ WKH FRPPRQ SRZHU RI LWV 3DUWLFLSDQWV WR LQYHVW FHUWDLQ SURFHHGV RI GHEW LVVXHV DQG VXUSOXV IXQGV 7KH 3RRO
V LQYHVWPHQWV DUH OLPLWHG WR LQYHVWPHQWV SHUPLWWHG E\ VXEGLYLVLRQV D
WR
Q
LQFOXVLYHRI6HFWLRQRIWKH&DOLIRUQLD*RYHUQPHQW&RGH
7KH$XWKRULW\UHSRUWVLWVLQYHVWPHQWVLQ&$03DWIDLUYDOXHZKL FKLVWKHVDPHDVWKHYDOXHRIWKHSRRO VKDUH$W -XQHWKHIDLUYDOXHDSSUR[LPDWHGWKH$XWKRULW\ VFRVWDQGWKHVHLQYHVWPHQWVKDGDQDYHUDJHPDWXULW\ RI GD\V
0RQH\ PDUNHW PXWXDO IXQGV DUH DYDLODEOH IRU ZLWKGUDZDO RQ GHPDQG DQG DW -XQH KDG DQ DYHUDJH PDWXULW\RI GD\V
9 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
&$6+$1',19(670(176
&217,18('
$ ,QYHVWPHQWV$XWKRUL]HGE\'HEW$JUHHPHQW
7KH $XWKRULW\ PXVW PDLQWDLQ UHTXLUHG DPRXQWV RI FDVK DQG LQYHVWPHQWV ZLWK D WUXVWHH XQGHU WKH WHUPV RI WKH *DV 5HYHQXH %RQGV 6HULHV ,QGHQWXUH 7KHVH IXQGV DUH XQH[SHQGHG ERQG SURFHHGV RU DUH SOHGJHG DV UHVHUYHV WR EH XVHG LI WKH $XWKRULW\ IDLOV WR PHHW LWV REOLJDWL RQV XQGHU WKHVH GHEW LVVXHV 7KH &DOLIRUQLD *RYHUQPHQW &RGH UHTXLUHV WKHVH IXQGV WR EH LQYHVWHG LQ DFFRUGDQFH ZLWK WKH $XWKRULW\ V RUGLQDQFH ERQG
LQGHQWXUHV RU 6WDWH VWDWXWH 7KH WDEOH EHORZ LGHQWLILHV WKH LQYHVWPHQW W\SHV WKDW DUH DXWKRUL]HG IRU LQYHVWPHQWV KHOGE\ILVFDODJHQWV
0D[LPXP
0DWXULW\
0LQLPXP
&UHGLW4XDOLW\
867UHDVXU\2EOLJDWLRQV <HDUV 1RQH
86$JHQF\6HFXULWLHV <HDUV 1RQH
)RUZDUG'HOLYHU\$JUHHPHQWV 1$ $
/RFDO$JHQF\%RQGV <HDUV 1RQH
5HSXUFKDVH$JUHHPHQWV 'D\V 1RQH
%DQNHUV
$FFHSWDQFHV 'D\V 1RQH
&RPPHUFLDO3DSHU 'D\V $
0HGLXP7HUP1RWHV <HDUV $
&ROODWHUDOL]HG7LPH'HSRVLWV <HDUV 1RQH
1HJRWLDEOH&HUWLILFDWHVRI'HSRVLW <HDUV $
/RFDO$JHQF\,QYHVWPHQW)XQG
/$,)
1$ 1RQH
,QVXUHG6DYLQJ$FFRXQWV 1$ 1RQH
0RQH\0DUNHW0XWXDO)XQGV 1$ 1RQH
6KDUHVLQD&DOLIRUQLD&RPPRQ/DZ7UXVW 1$ 1RQH
,QWHUHVW5 DWH6Z DSV 1$ 1 RQH
6XSUDQDWLRQDOV <HDUV $$
0RUWJDJH3DVV7KURXJK6HFXULWLHV <HDUV $$
&$03 1$ 1RQH
$XWKRUL]HG,QYHVWPHQW7\SH
% )DLU9DOXH0HDVXUHPHQW
,QLQVWDQFHVZKHUHLQSXWVXVHGWRPHDVXUHIDLUYDOXHIDOOLQWRGLIIHUHQWOHYHOVLQWKHDERYHIDLUYDOXHKLHUDUFK\ IDLU YDOXH PHDVXUHPHQWV LQ WKHLU HQWLUHW\ DUH FDWHJRUL]HG EDVHG RQ WKH ORZHVW OHYHO LQSXW WKDW LV VLJQLILFDQW WR WKH YDOXDWLRQ 7KH $XWKRULW\¶V DVVHVVPHQW RI WKH VLJQLILFDQFH RI SDUWLFXODU LQSXWV WR WKHVH IDLU YDOXH PHDVXUHPHQWV UHTXLUHVMXGJPHQWDQGFRQVLGHUVIDFWRUVVSHFLILFWRHDFKDVVHWRUOLDELOLW\
)RUWKHIRUZDUGSXUFKDVHDJUHHPHQWIDLUYDOXHLVHVWLPDWHGE\FRPSDULQJFRQWUDFWSULFHVWRIRUZDUGPDUNHW SULFHV TXRWHGE\WKLUGSDUW\PDUNHWSDUWLFLSDQWVRU SURYLGHGLQUHOHYDQWLQGXVWU\SXEOLFDWLRQV 'HSRVLWVDQG ZLWKGUDZDOV IURP&$03LQYHVWPHQWSRRODUHPDGHRQWKHEDVLVRIDQGQRWIDLUYDOXH
7KH IROORZLQJ WDEOH VXPPDUL]HV WKH LQYHVWPHQWV RI WKH $XWKRULW\ IRU ZKLFK IDLU YDOXHV DUH GHWHUPLQHG RQ D UHFXUULQJEDVLVDVRI-XQH
)DLU9DOXH
4XRWHG3ULFHV,Q
$FWLY H0DUNHWV
IRU,GHQWLFDO
$VVHWV
/HYHO
6LJQLILFDQW
2EVHUY DEOH
,QSXWV
/HYHO
6LJQLILFDQW
8QREVHUY DEOH
,QSXWV
/HY HO
)RUZDUG3XUFKDVH$JUHHPHQW
0RQH\0DUNHW0XWXDO)XQGV
7 RWDO,QY HVWPHQWV
,QY HVWPHQWVDW)DLU9DOXH
10 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
*$66833/<$&48,6,7,21$1'5(6$/(
7KH&LW\RSHUDWHVFHUWDLQHOHFWULFDOJHQHUDWLQJSODQWVZKLFKSURYLGHSRZHUIRUVDOHWRWKHSXEOLFDQGQHHG UHOLDEOH HFRQRPLF VXSSOLHV RI QDWXUDO JDV WR JHQHUDWH WKH QHFHVVDU\ HOHFWULFLW\ ,Q SXUVXLW RI WKDW REMHFWLYH WKH &LW\ DQG 6XFFHVVRU$JHQF\IRUPHGWKH$XWKRULW\IRUWKH SXUSRVHRIDFTXLU LQJILQDQFLQJDQGVXSSO\LQJQDWXUDOJDVWRWKH &LW\6XPPDUL]HGEHORZDUHDJUHHPHQWV HQWHUHGLQWRE\WKH$XWKRULW\WRDFKLHYHLWVSXUSRVH
$ 3UHSDLG3XUFKDVHG*DV$JUHHPHQW
3XUVXDQWWRDQ$JUHHPHQWIRUWKH3XUFKDVHDQG6DOHRI1DWXUDO*DVGDWHG-DQXDU\WKH$XWKRULW\XVHGD SRUWLRQ RI WKH SURFHHGV RI LWV
RI *DV 5HYHQXH %RQGV 6HULHV
WKH %RQGV
WR SUHSD\ 0HUULOO
/\QFK &RPPRGLWLHV ,QF
*DV 6XSSOLHU
IRU D WZHQW\ \HDU VXSSO\ RI QDWXUDO JDV &RPPHQFLQJ -DQXDU\ DQG FRQWLQXLQJ WKURXJK 'HFHPEHU WKH *DV 6XSSOLHU LV REOLJDWHG WR GHOLYHU GDLO\ FRQWUDFW TXDQWLWLHV RI QDWXUDOJDVRQDILUPEDVLVWRWKHGHVLJQDWHGGHOLYHU\SRLQW'DLO\FRQWUDFWTXDQWLWLHVYDU\IURPPRQWKWRPRQWK EXW QRW IURP \HDU WR \HDU 7KLV FRPPLWPHQW WRWDOV 00%WXV PLOOLRQV RI %ULWLVK WKHUPDO XQLWV
SHU \HDU RU
00%WXVIRUWKHWZHQW\\HDUFRQWUDFWSHULRG7KH$XWK RULW\KDVUHFRUGHGD3UHSDLG1DWXUDO*DV DVVHW ZKLFKLVDPRUWL]HGDVGDLO\FRQWUDFWTXDQWLWLHVDUHGHOLYHUHG
7KH DJUHHPHQW SURYLGHV IRU SD\PHQWV WR EH PDGH E\ WKH *DV 6XSSOLHU LI LW IDLOV WR GHOLYHU WKH GDLO\ FRQWUDFW TXDQWLWLHV DQG PD\ EH WHUPLQDWHG E\ WKH $XWKRULW\ LQ WKH HYHQWRI QRQSHUIRUPDQFH E\ WKH *DV 6XSSOLHU 7KH $JUHHPHQW ZLOO DXWRPDWLFDOO\ WHUPLQDWH LI WKHUH LV D WHUPLQDWLRQ RI WKH &RPPRGLW\ 6ZDS 6HH 1RWH '
ZKLFK LV
QRWGXHWRGHIDXOWE\WKH$XWKRULW\RULIWKHUHLVDQHYHQWRI GHIDXOWXQGHUWKHVZDSDJUHHPHQWHQWHUHGLQWRE\ WKH *DV 6XSSOLHU DQG D WKLUG SDUW\ 8SRQ HDUO\ WHUPLQDWLRQ ZKHWKHU GXH WR WKH DERYH RU GXH WR DQ\ RWKHU RSWLRQDO WHUPLQDWLRQHYHQWDVGHILQHGLQWKHDJUHHPHQWWKH*DV6XSSOLHULVUHTXLUHGWRPDNHDWHUPLQDWLRQ SD\PHQWWRWKH $XWKRULW\ WKDW LV H[SHFWHG WR EH VXIILFLHQW WRJHWKHU ZLWK RWKH U DYDLODEOH IXQGV WR UHGHHP WKH %RQGV 7KH *DV 6XSSOLHU
V FRPPLWPHQWV XQGHU WKLV DJUHHPHQW DUH JXDUDQWHHGE\ LWV SDUHQW FRPSDQ\ 0HUULOO /\QFK &R ,QF XQGHU D JXDUDQWHH DJUHHPHQW ZLWK WKH $XWKRULW\ $V RI -XQH SUHSDLG JDV XQGHU WKLV DJUHHPHQW DPRXQWHGWR
% )XQGLQJ$JUHHPHQW
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
LWV SDUHQW FRPSDQ\ 0HUULOO /\QFK &R ,QF XQGHU D JXDUDQWHH DJUHHPHQW ZLWK WKH $XWKRULW\ 7KHUH ZHUH QR DGYDQFHVRXWVWDQGLQJDVRI-XQH
& 6XSSO\$JUHHPHQW
3XUVXDQWWRD1DWXUDO*DV6XSSO\$JUHHPHQWGDWHG)HEUXDU\WKH$XWKRULW\KDVDJUHHGWRVHOOWRWKH&LW\ DWZHQW\ \HDUVXSSO\ RIQDWXUDO JDV 7KLV6XSSO\ $JUHHPHQWLVFRWHUPLQRXVZLWKDQGSURYLGHVIRUWKH GHOLYHU\RI QDWXUDO JDV LQ TXDQWLWLHV ZKLFK DUH PDWFKHG WR WKH 3UHSDLG *DV$JUHHPHQW GLVFXVVHG DERYH )RU HDFK 00%WX GHOLYHUHG
VROG
WRWKH&LW\WKH$XWKRULW\ZLOOUHFHLYHDYDULDEOHUHYHQXHVWUHDPEDVHGRQDILUVWRIWKHPRQWK LQGH[ IRUWKHGHOLYHU\ORFDWLRQ
7KH$JUHHPHQWWHUPLQDWHVXSRQWHUPLQDWLRQRIWKH3UHSDLG*DV$JUHHPHQWRUXSRQWKH&LW\ VIDLOXUHWRPDNH DQ\
UHTXLUHGSD\PHQWZLWKLQWZREXVLQHVVGD\VRIWKHGXHGDWH
11 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
*$66833/<$&48,6,7,21$1'5(6$/(
&217,18('
' &RPPRGLW\6ZDS$JUHHPHQW
,QRUGHUWRKDYHLWVJDVSULFHH[SRVXUHFRQVLVWHQWZLWKSUHYDLOLQJPDUNHWUDWHVWKH$XWKRULW\HQWHUHGLQWRD QDWXUDO JDV&RPPRGLW\6ZDS$JUHHPHQWZLWK-30RUJDQ&KDVH%DQN
&RXQWHUSDUW\
)RUWKHWHUPRIGHOLYHULHV XQGHUWKH
3UHSDLG *DV $JUHHPHQW DQG WKH 6XSSO\ $JUHHPHQW WKH $XWKRULW\ ZLOO SD\ DQ LQGH[ SULFH SHU 00%WX WR WKH &RXQWHUSDUW\DQGWKH&RXQWHUSDUW\ZLOOSD\DIL[HG SULFHWRWKH$XWKRULW\7KHLQGH[SULFHSDLGE\WKH $XWKRULW\LV H[SHFWHGWRDSSUR[LPDWHWKHSULFHSDLGE\WKH&LW\XQGHUWKH6XSSO\$JUHHPHQW
7KH PRQWKO\ TXDQWLW\ DQG WHUP RI WKH &RPPRGLW\ 6ZDS $JUHHPHQW DUH PDWFKHG WR WKRVH RI WKH 6XSSO\ $JUHHPHQW
'HWDLOVRIWKHFRPPRGLW\VZDSDJUHHPHQWDUHGLVFXVVHGLQ1RWH
127(
/21*7(50'(%7
$ &XUUHQW<HDU7UDQVDFWLRQVDQG%DODQFHV
2Q-DQXDU\WKH$XWKRULW\LVVXHG
RI*DV5HYHQXH%RQGV6HULHVWRILQDQFHDOXPS VXPSUHSD\PHQWWRD*DV6XSSOLHU
6HH1RWH$
LQRUGHUWRDFTX LUHDVXSSO\RIQDWXUDOJDVWREHGHOLYHUHGRYHU D SHULRGRI WZHQW\ \HDUV 7KH JDV SXUFKDVHGE\ WKH $XWKRULW\ ZLOO EH VROGWRWKH &LW\ SXUVXDQW WRD 1DWXUDO *DV 6XSSO\$JUHHPHQW
6HH1RWH&
WRSURGXFHUHYHQXHVWREHXVHGIRUGHEWVHUYLFHRQWKH%RQGV
3ULQFLSDO SD\PHQWV DUH GXH DQQXDOO\ FRPPHQFLQJ RQ )HEUXDU\ WKURXJK DQG LQWHUHVW LV SD\DEOH
VHPLDQQXDOO\ RQ )HEUXDU\ DQG $XJXVW FRPPHQFLQJ $XJXVW 7KH FXUUHQW \HDU WUDQVDFWLRQV DQG EDODQFHVUHODWHGWRWKH%RQGVZHUHDVIROORZV
2ULJLQDO,VVXH
$PRXQW
%DODQFHDW
-XQH 5HWLUHPHQWV
%DODQFHDW
-XQH &XUUHQW3RUWLRQ
5HY HQXH%RQGV
ϰ͘ϬϬйͲϱ͘ϬϬй͕ĚƵĞϮͬϭϱͬϮϴ
$GG
ERQGSUHPLXP
7RWDOUHY HQXHERQGV
*DV5HY HQXH%RQGV
$OOUHYHQXHVRIWKH$XWKRULW\DUHSOHGJHGIRUWKHUHSD\PHQWRI WKH%RQGV7KH$XWKRULW\ VULJKWVWLWOHDQG LQWHUHVW
LQ WKH $JUHHPHQWV DUH SOHGJHG DV VHFXULW\ IRU WKH %RQGV $QQXDO GHEW VHUYLFH UHTXLUHPHQWV IRU WKH %RQGV DUH VKRZQEHORZ
3ULQFLSDO ,QWHUHVW 7RWDO
5HFRQFLOLDWLRQRIORQJWHUPGHEW
$GG
ERQGSUHPLXP
1HWORQJWHUPGHEW
<HDU(QGLQJ-XQH
12 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
/21*7(50'(%7
&217,18('
% 2ULJLQDO,VVXH3UHPLXPV
%RQG SUHPLXPV DUH GHIHUUHG DQG DPRUWL]HG RYHU WKH OLIH RI WKH ERQGV XVLQJ WKH VWUDLJKWOLQH PHWKRG %RQGV SD\DEOHDUHUHSRUWHGQHWRIWKHDSSOLFDEOHERQGSUHPLXP
127(
'(5,9$7,9(,167580(176
$ 6XPPDU\RI1RWLRQDO$PRXQWVDQG)DLU9DOXHV
7KH $XWKRULW\ HQWHUV LQWR FRQWUDFWV WR KHGJH LWV SULFH H[SRVXUHV WR QDWXUDO JDV DQG WR SURFXUH HQHUJ\ VXSSOLHV 7KHVH FRQWUDFWV DUH HYDOXDWHG SXUVXDQW WR *$6% 6WDWHPHQW 1R Accounting and Financial Reporting for Derivative InstrumentsWRGHWHUPLQHZKHWKHUWKH\PHHWWKHGHILQLWLRQRIGHULYDWLYHLQVWUXPHQWVDQGLIVR ZKHWKHU WKH\HIIHFWLYHO\KHGJHWKHH[SHFWHGFDVKIORZVDVVRFLDWHGZLWKLQWHUHVWUDWHDQGHQHUJ\H[SRVXUHV
7KH $XWKRULW\ DSSOLHV KHGJH DFFRXQWLQJ IRU GHULYDWLYHV WKDW DUH GHHPHG HIIHFWLYH KHGJHV 8QGHU KHGJH DFFRXQWLQJWKHLQFUHDVH
GHFUHDVH
LQWKHIDLUYDOXHRIDKHGJHLVUHSRUWHGDVDGHIHUUHGFDVKIORZKHGJHRQWKH VWDWHPHQWRIQHWSRVLWLRQ)RUWKHUHSRUWLQJSHULRGDOORIWKH$XWKRULW\ VGHULYDWLYHVPHHWWKHHIIHFWLYHQHVV WHVWV
)RU HQHUJ\ GHULYDWLYHV IDLU YDOXHV DUH HVWLPDWHG XVLQJ /HYHO LQSXWV E\ FRPSDULQJ FRQWUDFW SULFHV WR IRUZDUG PDUNHWSULFHVTXRWHGE\WKLUGSDUW\PDUNHWSDUWLFLSDQWVRUSURYLGHGLQUHOHYDQWLQGXVWU\SXEOLFDWLRQV
7KH IROORZLQJ LV D VXPPDU\ RI WKH IDLU YDOXHV DQG QRWLRQDO DPRXQWV RI GHULYDWLYH LQVWUXPHQWV RXWVWDQGLQJ DV RI -XQH
1RWLRQDO
&ODVVLILFDWLRQ $PRXQW &ODVVLILFDWLRQ $PRXQW
(IIHFWLY H&DVK)ORZ+HGJHV
3D\IL[HG6:$31DWXUDO*DV 'HIHUUHG,QIORZ
'HIHUUHG,QIORZ PP%78 5HFHLYHIL[HG6: $31DWXUDO*DV 'HIHUUHG,QIORZ
'HIHUUHG,QIORZ
PRQWKO\PP%78
)DLU9DOXH-XQH&KDQJHLQ)DLU9DOXH
% 2EMHFWLYHDQG7HUPVRI+HGJLQJ'HULYDWLYH,QVWUXPHQWV
7KH REMHFWLYHV DQG WHUPV RI WKH $XWKRULW\
V KHGJLQJ GHULYDWLYH LQVWUXPHQWV WKDW ZHUH RXWVWDQGLQJ DW -XQH DUHVXPPDUL]HGLQWKHQH[WWDEOH 7KHWDEOHLVDJJUHJDWHGE\WKHFUHGLWUDWLQJVRIWKH $XWKRULW\ V
FRXQWHUSDUWLHV)RUFRXQWHUSDUWLHVKDYLQJPXOWLSOHUDWLQJVWKHUDWLQJLQGLFDWLQJWKHJUHDWHVWGHJUHHRIULVNLV XVHG 2EMHFWLYHVDQGWHUPVRIWKH$XWKRULW\
VKHGJLQJGHULYDWLYHLQVWUXPHQWVWKDWZHUHRXWVWDQGLQJDW-XQHDUH VXPPDUL]HGLQWKHWDEOHEHORZ
1RWLRQDO$PRXQW
(IIHFWLY H
'DWH
0DWXULW\
'DWH 7HUPV &RXQWHUSDUW\
&RXQWHUSDUW\
5DWLQJ
&RPPRGLW\6ZDSV*DV
3UHSD\PHQW\HDU
VXSSO\RI1DWXUDO*DV PP%WX 0HUULOO/\QFK $D +HGJHRQ&DVK)ORZVRQ
SUHSD\PHQWRI\HDU
VXSSO\RI1DWXUDO*DV $D
-30RUJDQ
&KDVH%DQN
1$
7\SHDQG2EMHFWLY H
)URPWR
PP%WX
SHUPRQWK
3D\LQGH[PLQXV
5HFHLYH1*,
3D\1*,3* (
FLW\JDWHSULFH
5HFHLYHSHU
PP%WX
& 5LVNVRI'HULYDWLYH,QVWUXPHQWV
&UHGLWULVN±&UHGLWULVNLVWKHULVNRIORVVGXHWRDFRXQWHUSDUW\GHIDXOW LQJRQLWVREOLJDWLRQV7KH$XWKRULW\VHHNV WR PLQLPL]H FUHGLW ULVN E\ WUDQVDFWLQJ ZLWK FUHGLWZRUWK\ FRXQWH USDUWLHV ,QWHUHVW UDWH VZDS FRXQWHUSDUWLHV DUH HYDOXDWHGDWWKHWLPHRIWUDQVDFWLRQH[HFXWLRQ7KHSURFHGXUHSURKLELWVWKH$XWKRULW\IURPH[HFXWLQJHQHUJ\ KHGJH WUDQVDFWLRQVZLWKFRXQWHUSDUWLHVUDWHGORZHUWKDQ%%%E\6WDQGDUG 3RRU V RU)LWFK UDWLQJVHUYLFHVRU %DDE\
0RRG\
V 6XEVHTXHQW WR HQWHULQJ LQWR WUDQVDFWLRQV WKH FUHGLW UDWLQJV RI RQH RU PRUH FRXQWHUSDUWLHV PD\ 13 526(9,//(1$785$/*$6),1$1&,1*$87+25,7<
1RWHVWRWKH)LQDQFLDO6WDWHPHQWV
<HDU(QGHG-XQH
127(
'(5,9$7,9(,167580(176
&217,18('
GHWHULRUDWH ,I VR WKH $XWKRULW\
V FUHGLW ULVN PDQDJHPHQW SROLFLHV LQFUHDVH WKH DPRXQW RI FROODWHUDO WKDW WKH FRXQWHUSDUW\PXVWSRVWZLWK WKH$XWKRULW\ZKHQ WKHFRXQWHUSDUW\RZHVWKH $XWKRULW\WKHUHE\UHGXFLQJFUHGLW ULVN DVVRFLDWHGZLWKWKHGHFOLQHLQWKHFRXQWHUSDUW\
VFUHGLWZRUWKLQHVV
7HUPLQDWLRQULVN±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
GHULYDWLYHVXSWRWKHIDLUYDOXHDPRXQWV
127(
&200,70(176$1'&217,1*(17/,$%,/,7,(6
7KH $XWKRULW\ LV VXEMHFW WR OLWLJDWLRQ DULVLQJ LQ WKH QRUPDO FRXUVH RI EXVLQHVV ,Q WKH RSLQLRQ RI WKH $XWKRULW\ V
DWWRUQH\WKHUHLVQRSHQGLQJOLWLJDWLRQZKLFKLVOLNHO\WRKDYHDPDWHULDODGYHUVHHIIHFWRQWKHILQDQFLDOSRVLWLRQ RI WKH$XWKRULW\
127(
)8785($&&2817,1*3521281&(0(176
*$6% 6WDWHPHQW 1R
± ,Q $SULO WKH *$6% LVVXHG 6WDWHPHQW 1R
Omnibus 2022 7KH 6WDWHPHQW LV
HIIHFWLYHIRUPXOWLSOHUHSRUWLQJSHULRGVGHSHQGLQJRQWKHUHTXLUHPHQWV7KH$XWKRULW\KDVQRWGHWHUPLQHGWKHHIIHFW RIWKLV6WDWHPHQW
*$6% 6WDWHPHQW 1R ± ,Q -XQH WKH *$6% LVVXHG 6WDWHPHQW 1R Compensated Absences 7KH REMHFWLYH RI WKLV 6WDWHPHQW LV WR EHWWHU PHHW WKH LQIRUPDWLRQ QHHGV RI ILQDQFLDO VWDWHPHQW XVHUV E\ XSGDWLQJ WKH UHFRJQLWLRQ DQG PHDVXUHPHQW JXLGDQFH IRU FRPSHQVDWHG DEVHQFHV7KDW REMHFWLYH LV DFKLHYHG E\ DOLJQLQJ WKH UHFRJQLWLRQ DQG PHDVXUHPHQW JXLGDQFH XQGHU D XQLILHG PRGHO DQG E\ DPHQGLQJ FHUWDLQ SUHYLRXVO\ UHTXLUHG GLVFORVXUHV7KH6WDWHPHQWLVHIIHFWLYHIRUUHSRUWLQJSHULRGVEHJLQQLQJDIWHU'HFHPEHU7KH$XWKRULW\KDV QRWGHWHUPLQHGWKHHIIHFWRIWKLV6WDWHPHQW
14 1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
We have audited, in accordance with the auditing standards gene rally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Roseville Natural Gas Financing Authority (Authority), a component unit of the City of Roseville, Califor nia (the “City”), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements, and have issued our report thereon dated April 25, 2024.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over the Authority’s financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allo w management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely b asis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less s evere than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal contr ol that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and ma terial effect on the financial statements.
However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
15 To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Authority’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Sacramento, California
April 25, 2024
16 1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
June 21, 2024
To the Public Utilities Commission
Environmental Utilities Department
Roseville, California
We have audited the financial statements of the Environmental Utilities Enterprise Funds (the “Funds”), enterprise funds of the City of Roseville, California (the “City”)for the year ended June 30, 2023. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards (and, if applicable, Government Auditing Standards and the Uniform Guidance), as well as certain information related to the planned scope and timing of our audit. We have c ommunicated such information in our letter to you dated July 1, 2023. Professional standards also require that we communicate to you the following information related to our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Funds are described in Note 1 to the financial statements. As described in Note 5 to the financial statements, the City changed accounting policies related to sub scription-based information technology arrangements by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 96, in fiscal year 2022-2023. Accordingly, the cumulative effect of the accou nting change as of the beginning of the year is reported in the Statement of Net Position. We noted no transact ions entered into by the Funds during the year for which there is a lack of authoritative guidance or consensus. A ll significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial stat ements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the Fund’s financial statements were:
Management’s estimates of the net pension liability and net other postemployment benefits liability are based on actuarial valuation estimates. We evaluated the methods, assumptions, and data used to develop the actuarial valuation estimates in determining tha t they are reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and l ikely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. We are pleased to report that no such misstatements were identified during the course of our audit.
To the Public Utilities Commission
Environmental Utilities Department
Roseville, California
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our s atisfaction, that could be sign ificant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter dated June 21, 2024.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Funds’ financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professi onal standards require the con sulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledg e, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Funds’ audi tors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to the required pension and other postemployment benefits schedules, which are required supplementary info rmation (RSI) that supplements t he basic financial statements. Our procedures consisted of inquiries of management regarding the methods of p reparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial s tatements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on the combining statements which acc ompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
Future GASB Pronouncements
The following Government Accounting Standards Board (GASB) pronouncements will be effective for the following fiscal years’ audits and should be reviewed for proper implementation by management:
Fiscal Year 2023-2024
GASB Statement No. 99, Omnibus 2022
Fiscal Year 2024-2025
To the Public Utilities Commission
Environmental Utilities Department
Roseville, California
GASB Statement No. 101, Compensated Absences
Future Projects
Comprehensive Project, Financial Reporting Model
Comprehensive Project, Revenue and Expense Recognition
Major Project, Going Concern Uncertainties and Severe Financial Stress
Major Project, Infrastructure Assets
Practice Issue, Classification of Nonfinancial Assets
Practice Issue, Risks and Uncertainties Disclosures
Pre-Agenda Research Activities, Subsequent Events
Restriction on Use
This information is intended solely for the information and use of Commission and management of the Funds and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Sacramento, California
1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
April 25, 2024
To the Honorable Mayor and Members of the City Council
City of Roseville, California
We have audited the financial statements of the fiduciary net p osition of the Roseville Other Post-Employment Benefit Trust Fund (OPEB Trust) for the year ended June 30, 2023. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, the State Controller’ s Minimum Audit Standards for C alifornia Special Di stricts, and the Uniform Guidance, as well as cert ain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 25, 2024. Professional standards also require that we communicate to you the following information related to our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the OPEB Trust are described in the notes to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the fiscal year ended June 30, 2023.
We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial stat ements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the OPEB Trust’s financial statements were:
Management’s estimates of its net other postemployment benefits (OPEB) liability based on actuarial valuation assumptions. We evaluated the key factors a nd assumptions used to develop the net OPEB liability determining that they are reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and l ikely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. We are pleased to report that no such misstatements were identified during the course of our audit.
To the Honorable Mayor and Members of the City Council
City of Roseville, California
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our s atisfaction, that could be sign ificant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter dated April 25, 2024.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professi onal standards require the con sulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledg e, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the OPEB Trust’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to the schedule of change s in net OPEB liability and related ratios, and the schedule of employer contributions, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during ou r audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
Future GASB Pronouncements
The following Government Accounting Standards Board (GASB) pronouncements will be effective for the following fiscal years’ audits and should be reviewed for proper implementation by management:
Fiscal Year 2023-2024
GASB Statement No. 99, Omnibus 2022.
Fiscal Year 2024-2025
GASB Statement No. 101, Compensated Absences.
Future Projects
Comprehensive Project, Financial Reporting Model.
Comprehensive Project, Revenue and Expense Recognition.
Major Project, Going Concern Uncertainties and Severe Financial Stress.
To the Honorable Mayor and Members of the City Council
City of Roseville, California
Major Project, Infrastructure Assets.
Practice Issue, Classification of Nonfinancial Assets.
Practice Issue, Risks and Uncertainties Disclosures.
Pre-Agenda Research Activities, Subsequent Events.
Restriction on Use
This information is intended solely for the information and use of the City of Roseville, specific to the OPEB Trust, and management and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Sacramento, California
1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
April 25, 2024
To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
We have audited the financial statements of the Natural Gas Financing Authority (Authority) of the City of Roseville, California (the City) for the year ended June 30, 2023. Profess ional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated J uly 1, 2023. Professional standards also require that we communicate to you the following information related to our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Authority are described in notes to the financial statements. No new accounting policies were adopted and the application of existing policies was not change d during the fiscal year ended June 30, 2023. We noted no transactions entered into by the Authority during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial stat ements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and l ikely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. We are pleased to report that no such misstatements were identified during the course of our audit.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be sign ificant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
Management Representations
We have requested certain representations from management that are included in the management representation letter dated April 25, 2024.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Authority’s fi nancial statements or a determin ation of the type of auditor’s opinion that may be expressed on those statements, our professional standards requi re the consulting accountant to check with us to determine that the consultant has all the relevant facts. To ou r knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Authority’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
Future GASB Pronouncements
The following Government Accounting Standards Board (GASB) pronouncements will be effective for the following fiscal years’ audits and should be reviewed for proper implementation by management:
Fiscal Year 2023-2024
GASB Statement No. 99, Omnibus 2022.
Fiscal Year 2024-2025
GASB Statement No. 101, Compensated Absences.
Future Projects
Comprehensive Project, Financial Reporting Model.
Comprehensive Project, Revenue and Expense Recognition.
Major Project, Going Concern Uncertainties and Severe Financial Stress.
Major Project, Infrastructure Assets.
Practice Issue, Classification of Nonfinancial Assets.
Practice Issue, Risks and Uncertainties Disclosures.
Pre-Agenda Research Activities, Subsequent Events.
To the Board of Directors
Roseville Natural Gas Financing Authority
Roseville, California
Restriction on Use
This information is intended sole ly for the information and use of Board of Directors and management of Roseville Natural Gas Financing Authority and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Sacramento, California
1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council
City of Roseville, California
We have audited, in accordance with the auditing standards gene rally accepted in the United States of America and the standards applicable to financial audits contained in G overnment Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Other Post-Employment Benefit Trust (OPEB Trust) of the City of Rose ville, California (the “City”), as of and for the year ended June 30, 2023, and the related notes to the financial st atements, which collectively c omprise the OPEB Trust’s financial statements, and have issued our report thereon dated April 25, 2024.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over the OPEB Trust’s financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s int ernal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allo w management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely b asis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less s evere than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal contr ol that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the OPE B Trust’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
To the Honorable Mayor and Members of the City Council
City of Roseville, California
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the e ffectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s inter nal control and compliance. Acco rdingly, this communication is not suitable for any other purpose.
Sacramento, California
April 25, 2024
COUNCIL COMMUNICATION
CC #:
File #:
Title:
Consent Calendar
Contact:
Meeting Date: 8/7/2024
Item #:
COUNCIL COMMUNICATION
CC #:
3479
File #:
0103 & 0103-04-03 & 0103-12-03
Title:
Library Board and Senior Commission - Unscheduled Vacancy Appointments Contact:
Katrina Six 916-774-5267 [email protected]
Meeting Date: 8/7/2024
Item #: 7.1.
RECOMMENDATION TO COUNCIL
Recommend Council appoint one (1) individual to the Library Board to a term expiring December 31, 2026 from the applications received from: Barbara Fullmer and Vicki Whitlock.
Appoint one (1) individual to the Senior Commission to a term expiring December 31, 2024 from the applications received from: Sheri Kimbro, Shyan Lee, and Hannah Wagner.
BACKGROUND
The resignation of Kim Ryan Unidad and Kathleen Crawford created unscheduled vacancies on the Library Board and the Senior Commission with terms expiring December 31, 2026 and December 31, 2024. Recruitment for all vacancies occurred in July, video interviews of the applicants were conducted by the City Clerk Department. The application, and video interviews are compiled and provided to the City Council for consideration.
FISCAL IMPACT
There is no fiscal impact.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment, or is otherwise not considered a project as defined by CEQA Statute §21065 and CEQA State Guidelines §15060(c)(3) and §15378. The appointment of members to boards or commissions meets the above criteria and is not subject to CEQA. No additional environmental review is required.
CITY COUNCIL STRATEGIC PLAN/OVERARCHING GOALS
Goal B - Support community engagement and advocacy
Respectfully Submitted,
Katrina Six, City Clerk Technician
Carmen Avalos, City Clerk
_____________________________
Dominick Casey, City Manager
COUNCIL COMMUNICATION
CC #:
3477
File #:
0102
Title:
Council Discretionary Funds - CalAsian Foundation
Contact:
Heather Blanco 916-746-1171 [email protected]
Meeting Date: 8/7/2024
Item #: 8.1.
RECOMMENDATION TO COUNCIL
Recommend City Council consider a sponsorship for $500 from Council Discretionary Funds for the CalAsian Foundation for their 2nd annual Pickleball Tournament.
BACKGROUND
The Citizens’ Benefit Fund was established in 1993 with the net proceeds from the sale of the Roseville Hospital. The City Council may, after receiving the recommendation of the Roseville Grants Advisory Commission, annually appropriate up to 90 percent of the annual earnings of the Citizens’ Benefit Fund for the purpose of improving the quality of life for the citizens of the City of Roseville. The City Council, without the recommendation of the Roseville Grants Advisory Commission, may annually appropriate a minor amount up to $15,000 of the annual earnings for the purpose of improving the quality of life in Roseville.
FISCAL IMPACT
There is no fiscal impact to the City’s General Fund. Annually, the Assistant City Manager/Chief Financial Officer allocates $15,000 of the annual earnings on the Citizens’ Benefit Fund per section 4.06.040 in the Municipal Code and includes it in the annual budget along with the Citizens’ Benefit Fund resources available for appropriation each year. These earnings are restricted for the purpose of improving the quality of life for Roseville residents and appropriated by the City Council. The balance remaining in the Council’s Discretionary Funds for FY2024-25 is $18,821.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment, or is otherwise not considered a project as defined by CEQA Statute §21065 and CEQA State Guidelines §15060(c)(3) and §15378. The award of funds meets the above criteria and is not subject to CEQA. No additional environmental review is required.
CITY COUNCIL STRATEGIC PLAN/OVERARCHING GOALS
Goal B - Support community engagement and advocacy
Respectfully Submitted,
Heather Blanco, Executive Assistant
Carmen Avalos, City Clerk
_____________________________
Dominick Casey, City Manager
ATTACHMENTS:
Description
CalAsian Foundation Pickleball Tournament
COUNCIL COMMUNICATION
CC #:
3478
File #:
0500
Title:
Summary of Federal, State, and Local Marijuana and Hemp Laws Contact:
Ryan DeVore 916-774-5362 [email protected]
Travis Cochran 916-774-5325 [email protected]
Meeting Date: 8/7/2024
Item #: 8.2.
RECOMMENDATION TO COUNCIL
To receive a presentation from Deputy City Attorney Travis Cochran and Assistant City Manager Ryan DeVore regarding the history and current status of federal and state laws for marijuana and hemp, what the City of Roseville has done to regulate marijuana, and a loophole in federal law that makes regulation of intoxicating hemp products challenging. A presentation regarding this information was requested by a majority of the City Council during its May 1, 2024 meeting.
BACKGROUND
At the City Council meeting held on May 1, 2024, Council directed staff to present information to the Council regarding marijuana and hemp laws and issues regarding intoxicating hemp.
FISCAL IMPACT
There is no fiscal impact associated with this presentation.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment, or is otherwise not considered a project as defined by CEQA Statute §21065 and CEQA State Guidelines §15060(c)(3) and §15378. A presentation to the City Council meets the above criteria and is not subject to CEQA. No additional environmental review is required.
CITY COUNCIL STRATEGIC PLAN/OVERARCHING GOALS
Goal A – Maintain a safe and healthy community
Goal F – Deliver exceptional City services
Respectfully Submitted,
Travis Cochran, Deputy City Attorney
Ryan DeVore, Assistant City Manager
_____________________________
Dominick Casey, City Manager