Air Quality Improvement
Special Revenue Fund
of the City of Santa Clarita
Santa Clarita, California
Financial Statements
and Independent Auditors’ Reports
For the Year Ended June 30, 2022
Air Quality Improvement Special Revenue Fund
of the City of Santa Clarita
For the Year Ended June 30, 2022
Table of Contents
Page
Independent Auditors’ Reports:
Report on the Audit of the Financial Statements ............................................................................................... 1 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 ................................................................... 5 Report on Compliance for Air Quality Improvement Special Revenue Fund; and Report on Internal Control Over Compliance ................................................................... 7 Financial Statements:
Balance Sheet ........................................................................................................................................................ 13 Statement of Revenue, Expenditures, and Change in Fund Balance .................................................................... 14 Notes to the Basic Financial Statements ............................................................................................................... 15 Supplementary Information:
Schedule of Revenues, Expenditures, and Change in Fund Balance – Budget and Actual .................................. 21
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200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the Air Quality Improvement Special Revenue Fund (the “Fund”) of the City of Santa Clarita, California (the “City ”) as of and for the year ended June 30, 2022, and the related notes to the financial statements, as listed in the table of contents.
In our opinion, the accompanying financial statements referre d to above present fairly, in all material respects, the financial position of the Air Quality Improvement Special Revenue Fund of the City as of June 30, 2022, and the change in financial position for the year then ended in accordance with accounting prin ciples generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accept ed in the United States of America (“GAAS”), and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States ( “Government Auditing Standards” ). Our responsibilities under those standards are further described in the Auditor's Responsib ilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As discussed in Note 1, the financial statements present only the Fund and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2022, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles 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 these financial statements in accordance with accounting principles generally accepted in the United Stat es 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.
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
2 Auditors’ Responsibility for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whet her the financial statements as a whole are free from material misstatement, whether due to fraud or error, a nd to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, fo rgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
exercise professional judgment and maintain professional skepticism throughout the audit.
identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpo se of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
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 cont rol-related matters that we identified during the audit.
Supplementary Information
Our audit was conducted for the purpose of forming opinion on the Fund ‘s financial statements. The Schedule of Revenues, Expenditures, and Change in Fund Balance - Budget and Actual are presented for purposes of additional analysis and are not a required part of the financial statem ents. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures a pplied in the audit of the financial statements and certain additional procedures, including comp aring and reconciling such in formation directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additi onal procedures in accordance w ith GAAS. In our opinion, the Schedule of Revenues, Expenditures, and Change in Fund Balance - Budget and Actual is fairly stated, in all material respects, in relation to the financial statements as a whole.
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our repor t dated December 21, 2022, on our consideration of the City’s internal control financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control ove r financial reporting and compliance and the results of that testing, and not to provide an opinion on effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral pa rt of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
Santa Ana, California
December 21, 2022
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200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
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
Independent Auditors’ Report
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to fina ncial audits contained in Government Auditing Standards issued by the Comptroller General of the United States ( “Government Auditing Standards” ), the financial statements of the Air Quality Improvement Special Revenue Fund of the City of Santa Clar ita, California (the “City”), as of and for the year ended June 30, 2022, and the related notes to the financial statements, and have issued our report thereon dated December 21, 2022.
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 Air Quality Improvement Special Revenue F und’s financial reporting (“internal control”) as a basis for designing audit procedures that are appropriate in the circumstances fo r the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City’s internal control.
Accordingly, we do not express an opinion on the effectiveness of City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assi gned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combinati on of deficiencies, in internal control, such that there is a reasonabl e possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited pur pose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control 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 may exist that have not been identified.
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
6 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whethe r the Air Quality Improvement Special Revenue Fund's financial statements are free from material misstatement, we performed tests of its compli ance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with whic h 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. Th e results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
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 entity'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 entity's internal control and compliance. A ccordingly, this communication is not suitable for any other purpose.
Santa Ana, California
December 21, 2022
200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
REPORT ON COMPLI
ANCE FOR AIR QUALITY IMPROVEMENT SPECIAL REVENUE FUND;
AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Independent Auditors’ Report
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
Report on Compliance for the Air Quality Improvement Special Revenue Fund Opinion on Compliance
We have audited the City of Santa Clar ita, California’s (the “City”) compliance with the type of compliance requirements described in the Assembly Bill 2766, Chap ter 1705 (44220 thro ugh 44247) (“AB 2766”) for the year ended June 30, 2022.
In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that are applicable to Air Quality Improvement Special Revenue Fund for the year ended June 30, 2022.
Basis for Opinion
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (“GAAS”); the standards appli cable to financial audits contained in Government Auditing Standards (“Government Auditing Standards” ) issued by the Comptroller General of the United States; and AB 2766. Our responsibilities under those standards and AB 2766 are further described in the Auditors’ Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our other ethi cal responsibilities, in accordance with 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 opinion. Our a udit does not provide a legal determination of the City's compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over complia nce with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City's government programs.
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
8 Auditors’ Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City's compliance based on our audit. Reasonable assurance is a hi gh level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards , and AB 2766 will always detect material noncompliance when it exists. The risk of not det ecting material noncompliance resulting from fraud is higher than for that resulting from erro r, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a subs tantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City's compliance with the requirements of the government program as a whole.
In performing an audit in accordance with GAAS, Government Auditing Standards, and the AB 2766, we:
exercise professional judgment and maintain professional skepticism throughout the audit. identify and assess the risks of material noncompliance, 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 City's compliance with the compliance requirements referred to abo ve and performing
such other procedures as we considered necessary in the circumstances. obtain an understanding of the City's internal control ove r compliance relevant to the audit in order to design audit procedures that are appropriate
in the circumstan ces and to test and report on internal control over compliance in accordance with AB 2766, but
not for the purpose of expressing an opinion on th e
effectivenes
s of the City's internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficienci es and material weaknesses in internal control over compliance that we identified during the audit.
Report on Internal Control Over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal c ourse of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over co mpliance that is less severe th an a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over complia nce was for the limited purpose described in the “ Auditors’ Responsibilities for the Audit of Compliance ” section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or signi ficant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that have not been identified.
To the Honorable Mayor and the Members of the City Council of the City of Santa Clarita
Santa Clarita, California
9 Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the AB 2766. Accordingly, this report is not suitable for any other purpose.
Santa Ana, California
December 21, 2022
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FINANCIAL STATEMENTS
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12 ASSETS
Cash and investments 226,637$
Interest receivable 417
Due from South Coast Air Quality Management District 72,874 Total assets 299,928$
LIABILITIES AND FUND BALANCE
Liabilities:
Accounts payable and accrued liabilities 14,406
Total liabilities 14,406
Fund Balance:
Restricted 285,522
Total fund balance 285,522
Total liabilities and fund balance 299,928$
June 30, 2022
Balance Sheet
Air Quality Improvement Special Revenue Fund
of the City of Santa Clarita
13 Revenues:
Assembly Bill 2766 revenues 286,347$
Investment income (loss) (4,021)
Total revenues 282,326
Expenditures:
Current:
Administrative 6,431
Air quality improvement program 168,751
Total expenditures 175,182
Excess of revenues over expenditures 107,144
Net change in fund balance 107,144
Fund Balance:
Beginning of year 178,378
End of year 285,522$
Air Quality Improvement Special Revenue Fund
Statements of Revenues, Expenditures, and Change in Fund Balance For the Year Ended June 30, 2022
of the City of Santa Clarita
14 Air Quality Improvement Special Revenue Fund
of the City of Santa Clarita
Notes to the Financial Statements
For the Year Ended June 30, 2022
15 Note 1 – Financial Reporting Entity and Summary of Significant Accounting Policies
A. Financial Reporting Entity
The financial statements of the Air Quality Improvement Special Revenue Fund (the “Fund”) of the City of Santa Clarita, California (the “City”) are prepared in accord ance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Gove rnmental Accounting Standards Board (“GASB”) is the acknowledged standard-setti ng body for establishing accounting and fina ncial reporting standards followed by governmental entities in the United States. The financial statements were prepared from only the accounts of the Fund. Accordingly, the financial statements do not pur port to, and do not, present fairly the financial position of the City and changes in financial position thereof.
B. Fund Accounting
The accounts of the City are organized on the basis of f unds, each of which is considered a separate accounting entity with a self-balancing set of accounts. Monies received under Assembly Bill 2766 (“AB 2766”) are recorded in the Fund. AB 2766 authorizes the South Coast Air Quality Management District (the “SCAQMD”) to impose an annual vehicle registration fee and to distribute a portion of the collected revenues to all local jurisdictions within the South Coast Air Basin. These revenues are to be u sed solely to reduce air po llution from motor vehicles by implementing new programs and studies necessary for the implementation of the California Clean Air Act.
C. Financial Statements Presentation, Basis of Accounting and Measurement Focus
The fund financial statements include a Balance Sheet an d a Statement of Revenues, Expenditures and Change in fund balance. Special Revenue Fund is accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Acco rdingly, only current assets and current liabilities are included on the balance sheet. The statement of revenu es, expenditures, and changes in fund balance present increases (revenues and other financing sources) and d ecreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.
Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period.
The primary revenue sources are revenues associated with AB 2766 and interest revenue, which are measurable and considered to be available if they are collected within 90 days of the end of the current fiscal period.
The Fund recognizes assets of non-exchange transactions in the period when the underlying transaction occurs when all eligibility requirements are met. Non-exchange transactions occu r when one government provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. The AB 2766 revenue is an example of a non-exchange transaction.
Expenditures are recorded in the accounting period in which the related fund liability is incurred.
Air Quality Improvement Special Revenue Fund
of the City of Santa Clarita
Notes to the Financial Statements (Continued)
For the Year Ended June 30, 2022
16 Note 1 – Organization and Summary of Significant Accounting Policies (Continued)
D. Cash and Investments
The Fund’s cash balance was pooled with various other City funds for deposit and investment purposes. The City’s Treasurer is responsible for the cash management of th e Fund’s cash balance, which pools available cash for investment purposes. The cash and cash equivalents are considered to be cash on hand, demand deposits, and short- term investments with original maturity of three months or less from the date of acquisition. Each City fund owns a share of pooled cash and investments, which are separ ately maintained, and interest income was apportioned based on its average month-end cash balances to the total of the pooled cash and investments.
E. Fund Balance
In the Fund’s financial statements, fund balance is classified as follows:
Restricted - Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed rest rictions by creditors, such as through debt covenants, grantors, contributors, laws or regulations of other gov ernments, as well as restricti ons imposed by law through constitutional provisions or enabling legislation. Expe nditures as they are incurred are applied against these restricted net resources.
F. Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from these estimates and assumptions.
Note 2 – Cash and Investments
The Fund’s share of the City’s pooled cash and investments at June 30, 2022 is $226,637.
Cash is deposited in the City’s internal investment pool, which is reported at the amortized cost. The Fund does not own specifically identifiable securities in the City’s pool. Interest income is allocated based on average cash balances.
Investment policies and associated risk factors applicable to the Fund are those of the City and are included in the City’s basic financial statements. Please refer to the City’s Annual Comprehensive Financial Report for related disclosures for cash and investments.
Note 3 – Due from South Coast Air Quality Management District
The SCAQMD collects revenues from annual vehicle registra tion fees and allocates a percentage of the revenues collected to the City. As of June 30, 2022, the Fund’s due from SCAQMD totaled $72,874.
Air Quality Improvement Special Revenue Fund
of the City of Santa Clarita
Notes to the Financial Statements (Continued)
For the Year Ended June 30, 2022
17 Note 4 – Commitments and Contingencies
The Fund receives monies from the SCAQM D that are subject to review and audit by the SCAQMD. Although such audits could result in disallowed expenditures under term s of the program’s guidelines, it is believed that any repayments resulting from disallowances will not be material. Any identified amounts as a result of these audits would be required to be remitted back to the SCAQMD or having future remittances from the SCAQMD deducted accordingly.
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SUPPLEMENTARY INFORMATION
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20 Variance with
Final Budget
Actual Positive
Original Final Amount s (Negative)
Revenues:
Assembly Bill 2766 revenues 280,957 $ 280,957 $ 286,347 $ 5,390 $ Investment income (loss) 1,941 1,941 (4,021) (5,962) Total revenues 282,898 282,898 282,326 (572) Expenditures:
Current:
Adminstrative 8,801 8,801 6,431 2,370 Air Quality Improvement Program 13,300 190,895 168,751 22,144 Total expenditures 22,101 199,696 175,182 24,514 Net change in fund balance 260,797 $ 83,202 $ 107,144 23,942 $ Fund Balance:
Beginning of year 178,378
End of year 285,522$
Air Quality Improvement Special Revenue Fund
Schedule of Revenues, Expenditures, and Change in Fund Balance - Budget and Actual For the Year Ended June 30, 2022
Budget Amounts
of the City of Santa Clarita
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