AUDITED FINANCIAL STATEMENTS
FOR FISCALYEAR 2021-2022
Item 3.5 Annual Comprehensive Financial Report
Item 9.1 SARA Audited Financial Statements
Item 3.6 Report to Those Charged with Governance
Prepared by the Finance Department
COUNCIL AGENDA: 12/6/2022
Presenters:
Julia H. Cooper, Director
Rick Bruneau, Deputy Director – Accounting
David Bullock, Partner: Macias, Gini & O’Connell LLP
PRESENTATIONOVERVIEW
Item 3.5 Annual Comprehensive Financial Report
Audited Financial Statements Overview
Item 9.1 Successor Agency to the Redevelopment Agency (SARA) Audited Financial Statements Overview
Item 3.6 Report to those Charged with Governance
Independent Auditor’s Report
Accounting Standards Implemented
Audit Results
Management Response
2 AUDITS AND ENGAGEMENTS
City of San José Annual Comprehensive Financial Report (ACFR) GANN Appropriation Limitation – Agreed-Upon Procedures Norman Y. Mineta San José International Airport ACFR and Compliance Reports Successor Agency to the Redevelopment Agency (SARA) Financials San José Clean Energy Financials
San José Convention Center and Cultural Facilities
Bond Funds Financial Statements and Compliance Reports Measure O (2000) – Branch Library Projects
Measure P (2000) – Parks Projects
Measure O (2002) – 911, Fire, Police, Paramedic and Neighborhood Security Act Projects (FINAL CLOSE-OUT AUDIT)
Measure T (2018) – Public Safety and Infrastructure Projects 3 In Progress Multi-Year Engagement
Complete and available on the City Auditor website under External Financial Audits. https://www.sanjoseca.gov/your-government/appointees/city-auditor/external-financial-audits
AUDITS AND ENGAGEMENTS
Library Parcel Tax Measure S (2004)
San José Semi-Annual Investment Program Compliance – Agreed-Upon Procedures South Bay Water Recycling Program
Deferred Compensation Plan
Executive Management and Professional Employees Tier 3 Defined Contribution 401(a) Plan City of San José Voluntary Employee Beneficiary Association (“VEBA”) Plans San José Clean Energy Agreed-Upon Procedures
Bicycle/Pedestrian Facilities Grant
Single Audit (including Airport Compliance)
Implementation Support for Government Accounting Standards Board (“GASB”) 87,Leases Implementation Support for GASB 96, Subscription-Based IT Arrangements 4 In Progress Multi-Year Engagement
Complete and available on the City Auditor website under External Financial Audits. https://www.sanjoseca.gov/your-government/appointees/city-auditor/external-financial-audits ITEM 3.5
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR FISCAL YEAR 2021-2022
5 MAJOR SECTIONS OF ACFR
Introductory Section
Financial Section
Required Supplemental Information (Unaudited)
Supplemental Information
Statistical Section (Unaudited)
6 AUDITED FINANCIAL STATEMENTS
Government-wide Financial Statements
• Statement of Net Position
• Statement of Activities
Fund Financial Statements
• Governmental
Balance Sheet
Statement of Revenues, Expenditures, and Changes in Fund Balances • Proprietary
Statement of Fund Net Position,
Statement of Revenues, Expenses, and Changes in Fund Net Position Statement of Cash Flows
• Fiduciary
Statement of Fiduciary Net Position,
Statement of Changes in Fiduciary Net Position
7 STATEMENTOF NET POSITION
8 STATEMENTOF ACTIVITIES
9 FY 2021 FY 2022 FY 2021 FY 2022 FY 2021 FY 2022
Total Revenues 1,925$ 2,135$ 802$ 952$ 2,727$ 3,087$ Total Expenses and Transfers 2,188 1,994 777 823 2,965 2,817 Change in Net Position (263) 141 25 129 (238) 270 Net Position at beginning of year 2,491 2,228 1,457 1,482 3,948 3,710 Net Position at end of year 2,228$ 2,369$ 1,482$ 1,611$ 3,710$ 3,980$ Activities Activities Totals
Governmental Business-type
UPCOMING GASB PRONOUNCEMENTS
10 GASB No. GASB Title
Implementation in
Fiscal Year Ending
91 Conduit Debt Obligations June 30, 2023
94 Public-Private and Public-Public Partnerships and Availability Payment Arrangements
June 30, 2023
96 Subscription-Based Information T echnology Arrangements June 30, 2023 99 Omnibus 2022 June 30, 2023/24
100 Accounting Changes and Error Corrections June 30, 2024 101 Compensated Absences June 30, 2025
ITEM 9.1
SARA AUDITED FINANCIAL STATEMENTS
FOR FISCAL YEAR 2021-2022
11 STATEMENTOF FIDUCIARY NET POSITION
• Ending net position is negative $1.178 billion; net position will keep improving with the repayment of the outstanding bonds until it reaches $0 when the bonds are fully repaid on 8/1/2035.
12 FY 2021 FY 2022
Assets 135$ 134$ -0.7%
Deferred outflows of resources 30 27 -10.0% Liabilities (1,440) (1,339) -7.0%
Net position held in trust (1,275)$ (1,178)$ -7.6%
(In millions) %
Change
STATEMENTOF CHANGES IN FIDUCIARY NET
POSITION
13 FY 2021 FY 2022
Additions 190$ 190$ 0.0%
Deductions (96) (93) -3.1%
Change in net position 94 97 3.2% Net position, beginning of year (1,369) (1,275) -6.9% Net position, end of year (1,275)$ (1,178)$ -7.6% (In millions) %
Change
ITEM 3.6
EXTERNAL AUDITOR’S REPORT TO THOSE
CHARGED WITH GOVERNANCE
FOR FISCAL YEAR 2021-2022
14 Opinions
Basis of Opinions
Emphasis of Matter
Responsibilities of Management for the Financial
Statements
Auditor’s Responsibilities for the Audit of the Financial Statements
Other Matters
2022 ACFR Highlights
Independent Auditor’s Report
15 GASB Statement No. 87 - Leases
• Establishes a single reporting model for lease accounting based on the foundational principle that leases are financings of the right to use an asset.
• Lessee is required to recognize a lease liability and an intangible right to use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources.
• Adoption resulted in restatement of beginning balances for assets, deferred inflows of resources, and liabilities for those funds and activities with leases.
2022 ACFR Highlights
Accounting Standards Implemented
16 MANAGEMENT RESPONSE
This is the first time in 12 years the City has received a Report to Those Charged with Governance with no new findings and fully corrected prior year findings. Benefited from lower staff turnover.
Planned and executed citywide fiscal year-end close training. Implemented a new ACFR automation software to assist with consistent and transparent mapping of financial data from the City’s Financial Management System to the financial statements.
Formed the Finance Recovery and Grants T eamto provide subject matter expertise and support on a Citywide basis to Departments with grant funding. 17 PRIORYEAR FINDING – STATUS
18 Finding # Title
Material
Weakness
Significant
Deficiency
Control
Deficiency Status
2021-001 Internal Controls Over the
Financial Reporting Process
X Corrected
RECOMMENDATIONS
Acceptance of FY 2021-2022 reports:
Item 3.5 – Annual Comprehensive Financial Report
Item 3.6 – Report to Those Charged with Governance
Item 9.1 – SARA Audited Financial Statements
19 Julia H. Cooper, Director
Rick Bruneau, Deputy Director – Accounting
David Bullock, Partner: Macias, Gini & O’Connell LLP
QUESTIONS