2511 Garden Road 379 West Market Street
Suite A180 Salinas, CA 93901
Monterey, CA 93940 831-424-2737
831-373-3337 Fax 831-424-7936
Fax 831-373-3437
Gerald Ray, CPA | Patricia Kaufman, CPA, CGMA | Smriti Shrestha, CPA
Daniel McGilloway Jr, CPA | Sarita Shannon, CPA | Sukhdev Singh, CPA | Whitney Ernest, CPA | Laura Armbruster, CPA | Rose Maxwell, CPA | Eleonora Garra, CPA
May XX, 2022
City Council of
City of Salinas
200 Lincoln Ave.
Salinas, California 93901
We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Salinas (City) for the year ended June 30, 2021. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and 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 March 27, 2020. 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 City are described in Note 1 to the financial statements. No new accounting policies were adopted, and the application o f existing policies was not changed during 2021. 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 statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounti ng 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 City’s financial statements were:
Management’s estimate of the fair value of financial instruments is based on fair value of investments where market quotations are readily available. Fair value is defined as the amount the City could reasonably expect to rec eive for an investment in a current sale between a willing buyer and seller and is generally measured by quoted market prices.
Management’s estimate of the depreciable lives of property and equipment is based on historical experience with similar capital a sset types. Amortization of assets acquired under capital leases are based on the shorter of the lease term or the estimated useful life of the asset.
2 Management’s estimate of the allowance for loans receivables is based on the contingent nature of the repayment schedules for each loan.
Management’s estimate of the Net Pension Liability and related deferred outflows and inflows is based on actuarial valuations determined in accordance with the parameters of GASB Statement Nos. 68 and 71.
Management’s estimate of the Net OPEB Liability and related deferred outflows and inflows is based on actuarial valuations determined in accordance with the parameters of GASB Statement No. 75.
Management’s estimate of the accrued compensation is based on the agreement be tween the City and the respective employees’ collective bargaining group.
Management’s estimate of the self -insurance is based on the claim manager’s estimate of probable losses plus an amount estimated for incurred but not reported claims that is based upon historical experience.
We evaluated the key factors and assumptions used to develop these estimate s in determining that they are reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were:
The disclosure of Stewardship Compliance and Accountability/Deficit Fund Equity in Note 2 to the fin ancial statements. This note describes the City’s budgeting method and funds with deficit net positions.
The disclosure of Retirement Programs in Note 14 to the financial statements. This note was developed with the GASB 68 Accounting Valuation Reports as of the applicable measurement date.
The disclosure of Retirement Programs in Note 15 to the financial statements. This note was developed with the GASB 75 Accounting Valuation Reports as of the applicable measurement date.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management . Expanded time commitment was required in performing and completing our audit due to unanticipated delays in obtaining management prepared schedules.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and c ommunicate them to the appropriate level of management. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the fina ncial statements taken as a whole. The attached material misstatements detected as a result of audit procedures were corrected by management.
3 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 significant 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 May XX, 2022.
Management Consultations with Other Independent Accountants In some cases, manag ement 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 professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our 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 City’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 Management’s Discussion and Analysis, Budgetary Policy and Control, Budgetary Comparison Schedules, Claims Development for Internal Service Funds, Agent Multiple -Employer Defined Benefit Plan Schedules, Cost Sharing Multiple- Employer Defined Benefit Plan Schedules, Single Employer Defined Benefit Plan Schedules, and OPEB Plan Schedules , 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 our 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.
We were engaged to report on the Schedule of Expenditures of Federal Awards which is included in the City’s single audit report. We were als o engaged to report on the Combining Statements for Non -Major Governmental Funds, Combining Statements for Internal Service Funds, Combining Statements for Fiduciary Funds, and Combining Statement for General, Measure E, and Measure G , which accompany 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 accounti ng 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
4 reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
We were not engaged to report on the introductory section , which accompany the financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Restriction on Use
This information is intended solely for the information and use of the City Council and management of the City of Salinas and is not intended to be, and should not be, used by anyone other than these specified parties.
McGilloway, Ray, Brown & Kaufman
Salinas, California
Account Description Debit Credit
1000.00.0000-70.2060 Taxes YE Accruals Utility Users 718,795.00 1000-12.1100 Receivables Taxes 718,795.00
Total 718,795.00 718,795.00
5203-12.1110 Accounts Receivable Totals 279,490.00
5203-29.1050 Deferred Inflows Unavailable Revenue 279,490.00 Total 279,490.00 279,490.00
5203.00.0000-55.5063 Intergovernmental Construction Assistance Others 270,091.00 5203.00.0000-54.8050 Use of money and property Rental Income 270,091.00 Total 270,091.00 270,091.00
2930-12.2010 Receivables Loans & Notes 884,128.00
2951-12.2010 Receivables Loans & Notes 605,204.00
2930-12.2020 Receivables Allowance for Uncollectible 884,128.00 2951-12.2020 Receivables Allowance for Uncollectible 605,204.00 Total 1,489,332.00 1,489,332.00
3911.00.0000-75.4530 Intergovernmental American Rescue Plan Act 25,783,657.00 3911-28.6000 Deferred Revenue 25,783,657.00
Total 25,783,657.00 25,783,657.00
7103-13.2000 Other Funds Totals 16,831,462.00
7103.14.1247-77.1010 Other Revenue YE Accruals Workers Comp Premiums 16,831,462.00 Total 16,831,462.00 16,831,462.00
Adjusting Journal Entries JE # 5
To correct intergovernmental revenues that did not meet eligibility requirements and were not adjusted during the financial statement close
Adjusting Journal Entries JE # 6
To correct accrual for funding of deficit fund balance in Workers Comp balance that was not recorded during the financial statement close
City of Salinas
Audit Journal Entries
Fiscal Year Ended June 30, 2021
Adjusting Journal Entries
To remove July receivable for UUT accrued at 06/30/2021 Adjusting Journal Entries JE # 1
Adjusting Journal Entries JE # 2
To record receivable for 2021 solar lease collected after availability period Adjusting Journal Entries JE # 3
To reclass lease revenue recorded under intergovernmental revenue To correct loan receivable balances for HOME at 06/30/2021 Adjusting Journal Entries JE # 4
Account Description Debit Credit
City of Salinas
Audit Journal Entries
Fiscal Year Ended June 30, 2021
1100.60.6009-66.5810 Computer Equipment Totals 16,668.00 1100.60.6013-63.6010 Outside Services Other Outside Services 259,830.00 1200.40.4130-63.4100 Outside Services Maint & Repairs - Bldg & Grounds 743,361.00 1200.45.4505-66.5800 Capital Outlays Computer Software 69,996.00 4106.00.0000-90.1200 Transfers In Measure G 813,357.00
4110.00.0000-90.1100 Transfers In Measure E 276,498.00
1100.00.0000-95.4110 Transfers Out 2018 Leas e-El Gabilan Library 276,498.00 1200.00.0000-95.4106 Transfers Out 2018 Lease - Public Safety Bldg 813,357.00 4106.80.8004-63.4100 Outside Services Maint & Repairs - Bldg & Grounds 743,361.00 4106.80.8004-66.3000 Capital Outlays Building Improvements 69,996.00 4110.80.8004-63.4100 Outside Services Maint & Repairs - Bldg & Grounds 259,830.00 4110.80.8004-66.3000 Capital Outlays Building Improvements 16,668.00 Total 2,179,710.00 2,179,710.00
3186-13.1100 Due from Federal Govt 203,485.00
3186.30.7417-75.5511 Intergovernmental Other Federal Grant YE Accrual 203,485.00 Total 203,485.00 203,485.00
2942-13.1200 Due from State 468,475.00
3157-13.1200 Due from State 14,257.00
2942-13.1000 Due from Other Agencies 468,475.00
3157-13.1000 Due from Other Agencies 14,257.00
Total 482,732.00 482,732.00
Adjusting Journal Entries JE # 7
To reclass non-debt service expenditures to funding source recorded at debt service funds To record federal grant revenue that was not accrued
Adjusting Journal Entries JE # 9
To record reclass entry for due from other agencies provided after audit start Adjusting Journal Entries JE # 8
Account Description Debit Credit
City of Salinas
Audit Journal Entries
Fiscal Year Ended June 30, 2021
6301-12.3015 Receivables Deferred Charges 14,469.00
6301-19.0000 Deferred Outflows 8,770.00
6301.80.8007-65.3000 Debt Service Paying Agent Fees 804.00 6301.80.8007-85.2000 Debt Service YE Accruals Bond-Interest 73,634.00 6301.80.8007-85.2000 Debt Service YE Accruals Bond-Interest 516.00 6302-12.3015 Receivables Deferred Charges 6,206.00
6302-19.0000 Deferred Outflows 2,830.00
6302.80.8006-65.3000 Debt Service Paying Agent Fees 742.00 6302.80.8006-85.1000 Debt Service YE Accruals Bond-Principal 354,623.00 6302.80.8006-85.2000 Debt Service YE Accruals Bond-Interest 74,500.00 6302.80.8006-85.2000 Debt Service YE Accruals Bond-Interest 354.00 6400-19.0000 Deferred Outflows Deferred Outflows 812,890.00 6400.50.5442-76.8040 Charges for Services YE Accruals Bond Premium/Monitoring Fees 95,646.00 6400.50.5442-80.2000 Depreciation and Amortizatio n YE Accruals Amortization 173,474.00 6400.50.5442-85.2000 Debt Service YE Accruals Bond-Interest 275,499.00 6400.50.5442-85.2000 Debt Service YE Accruals Bond-Interest 101,611.00 6301-12.3015 Receivables Deferred Charges 71,316.00
6301-19.0000 Deferred Outflows 516.00
6301.80.8007-65.3010 Debt Service Cost of Issuance 15,273.00 6301.80.8007-65.3040 Debt Service Refunding Debt - Future Interest 8,770.00 6301.80.8007-80.2000 Depreciation and Amortizatio n YE Accruals Amortization 2,318.00 6302-12.3015 Receivables Deferred Charges 46,888.00
6302-19.0000 Deferred Outflows 354.00
6302.80.8006-65.3010 Debt Service Cost of Issuance 6,948.00 6302.80.8006-65.3040 Debt Service Refunding Debt - Future Interest 37,191.00 6302.80.8006-76.8040 Charges for Services YE Accruals Bond Premium/Monitoring Fees 272,085.00 6302.80.8006-80.2000 Depreciation and Amortizatio n YE Accruals Amortization 75,789.00 6400-12.3015 Receivables Deferred Charges 215,021.00
6400-19.0000 Deferred Outflows Deferred Outflows 101,611.00 6400.50.5442-65.3040 Debt Service Refunding Debt - Future Interest 1,142,488.00 Total 1,996,568.00 1,996,568.00
4109.80.8004-58.8013 Other Financing Sources Bond Proceeds 4,906,289.00 4109.80.8004-65.1000 Debt Service Bond-Principal 4,845,000.00 4109.80.8004-65.2000 Debt Service Bond-Interest 61,289.00 Total 4,906,289.00 4,906,289.00
Cash Pooled Cash and Investment Fund 10,223,087.00
Fund Balance Fund Balance 2,408,002.00
Other Revenues 590,568.00
Intergovernmental Inter Agency Transfers 10,248,521.00
Use of money and property Investment Earnings 353,524.00 Outside Services 86,660.00
Salaries & Benefits Pension Trust - Withdrawals 3,290,868.00 Total 13,600,615.00 13,600,615.00
Total Adjusting Journal Entries 68,742,226.00 68,742,226.00 Adjusting Journal Entries JE # 12
To include NYL not included with Pension Trust Funds
To correct deferred outflows & Inflows for (Gain)/Loss on debt refundings Adjusting Journal Entries JE # 11
To correct SVSWA refunding recorded twice in debt service funds Adjusting Journal Entries JE # 10
ALG (2/17) 1
Governmental Unit:
Completed by: Date:
Opinion Unit:
Total
Assets/
Deferred
Outflow of
Resources
Total
Liabilities/D
eferred
Inflow of
Resources
Working
Cap.
Fund
Balance/Net
Position
Revenues/
Other
Financing
Sources
Expen. /
Other
Financing
Uses
Change in
Fund
Balance/
Net
Position
CIP expenses
understated in current
year F G-03 -214,772 214,772
Investments with LAIF
were overstated at year
end F A-9.03 720,322 720,322
Business-typ
e - - - - - (40,273) - Total 720,322 0 0 0 720,322 -255,045 214,772
-205,474
720,322 0 0 205,474 720,322 -255,045 214,772
00 0
720,322 0 0 205,474 720,322 -255,045 214,772
710,255,770 509,133,001 201,122,769 207,668,446 192,346,972 15,321,474
0.10% 0.00% 0.00% 0.10% 0.35% -0.13% 1.40%
0.10% 0.00% 0.00% 0.10% 0.35% -0.13% 1.40%
JAB 4/27/22
ALG-CX-12.2: Audit Difference Evaluation For
m
City of Salinas Financial Statement Date: 06/30/21
Government Wide A Listing of Known Audit Differences Over: 60,000 Instructions: This form may be used to accumulate audit differences (AD) greater than the amount considered trivial (documented at Step 5 of ALG-CX-2.1). This form should not include normal closing entries. At the end of the audit, evaluate all uncorrected audit differences, individually and in the aggregate, in the context of individual opinion units and conclude on whether they materially misstate the financial statements of an opinion unit taken as a whole. Thus, a separate "Audit Difference Evaluation Form" should be prepared for each opinion unit. Before evaluating the effect of uncorrected misstatements, reassess whether materiality is still appropriate based on the entity's actual financial results. The notes following the table provide explanations and a listing of qualitative considerations in evaluating materiality. The form allows for quantifying the effect of misstatements, using both the rollover and iron curtain methods, as appropriate. You need to be familiar with the guidance in section 1010 before completing this form.
Description (Nature) of
Audit Difference (AD)
Factual (F),
Judgmental (J),
or Projected (P) Cause
Work-
paper Ref.
Financial Statement Effect—Amount of Over- (Under-) statement of:
Management did not
capitalize expenses
incurred in prior fical
year and reduced
expenses in the current
year to catch up with
prior year error.
Less audit adjustments subsequently booked
Net unadjusted AD—current year (iron curtain method)
Effect of unadjusted AD—prior years
Combined current year and prior year AD (rollover method) Financial statement caption totals
Current year AD as % of F/S captions (iron curtain method) Current and prior year AD as % of F/S captions (rollover method) Incorrect FV factor was
used to value LAIF at
Year End
ALG-CX-12.2
ALG (2/17) 1
Governmental Unit:
Completed by: Date:
Opinion Unit:
Total
Assets/
Deferred
Outflow of
Resources
Total
Liabilities/D
eferred
Inflow of
Resources
Working
Cap.
Fund
Balance/Net
Position
Revenues/
Other
Financing
Sources
Expend. /
Other
Financing
Uses
Change in
Fund
Balance/
Net
Position
Airport CIP expenses
understated in current
year F -11,076
Industrial Waste CIP
expenses understated in
current year F -29,197
Total 0 0 0 0 0 -40,273 0
0 0 0 0 0 -40,273 0
-103,487
0 0 0 -103,487 0 -40,273 0
19,553,020 1,007,768 18,486,940 2,475,261 2,270,492 204,769
0.00% 0.00% 0.00% 0.00% 0.00% -1.77% 0.00%
0.00% 0.00% 0.00% -0.56% 0.00% -1.77% 0.00%
JAB 1/25/21
ALG-CX-12.2: Audit Difference Evaluation For
m
City of Salinas Financial Statement Date: 06/30/21
Enterprise Funds A Listing of Known Audit Differences Over: $1,150 Airport $4,050 Industrial Waste
Instructions: This form may be used to accumulate audit differences (AD) greater than the amount considered trivial (documented at Step 5 of ALG-CX-2.1). This form should not include normal closing entries. At the end of the audit, evaluate all uncorrected audit differences, individually and in the aggregate, in the context of individual opinion units and conclude on whether they materially misstate the financial statements of an opinion unit taken as a whole. Thus, a separate "Audit Difference Evaluation Form" should be prepared for each opinion unit. Before evaluating the effect of uncorrected misstatements, reassess whether materiality is still appropriate based on the entity's actual financial results. The notes following the table provide explanations and a listing of qualitative considerations in evaluating materiality. The form allows for quantifying the effect of misstatements, using both the rollover and iron curtain methods, as appropriate. You need to be familiar with the guidance in section 1010 before completing this form.
Description (Nature) of
Audit Difference (AD)
Factual (F),
Judgmental (J),
or Projected (P) Cause
Work-
paper Ref.
Financial Statement Effect—Amount of Over- (Under-) statement of:
Management did not
capitalize expenses
incurred in prior fical
year and reduced
expenses in the current
year to catch up with
prior year error.
Management did not
capitalize expenses
incurred in prior fical
year and reduced
expenses in the current
year to catch up with
prior year error.
Less audit adjustments subsequently booked
Net unadjusted AD—current year (iron curtain method)
Effect of unadjusted AD—prior years
Combined current year and prior year AD (rollover method) Financial statement caption totals
Current year AD as % of F/S captions (iron curtain method) Current and prior year AD as % of F/S captions (rollover method) ALG-CX-12.2