Shafter City Council
May 2, 2023

To the Honorable Mayor and Members of the City Council
City of Shafter, California
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 likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. The schedule below summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. The uncorrected misstatements or the matters underlying them could potentially cause future period financial statements to be materially misstated, even though, in our judgment, such uncorrected misstatements are immaterial to the financial statements under audit.

Unadjusted Audit Differences
GASB 31 Adjustment 125,782 $
Cumulative effect (before effect of prior year differences) 125, 782 Effect of unadjusted audit difference - prior year -
Cumulative effect (after effect of prior year differences) 125,7 $ 82 Current Year Over
(Under) Revenues and
Expenditures/Expenses
and Changes in Fund
Balance/Equity
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 April 20, 2023.

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 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.

To the Honorable Mayor and Members of the City Council
City of Shafter, California
Other Audit Findings or Issues
We generally discuss a variety of matters, including the significant events or transactions that occurred during the year, business conditions affecting the City and business plans and strategies that may affect the risks of material misstatements, 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 the management’s discussion and analysis, the budgetary comparison schedules for the general fund and transportation special revenue fund, the schedule of changes in net OPEB liability and related ratio, the schedules of proportionate share of the net pension liability/(asset), the schedules of employer contributions, and the schedule of changes in the total OPEB liability and related ratios 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 combining and individual fund financial statements and schedules, 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 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.

We were not engaged to report on introductory section and statistical 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.

The following new Governmental Accounting Standards Board (GASB) pronouncements were effective for fiscal year 2021-2022 audit:

GASB Statement No. 87, Leases.

GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period.

GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans.

The following GASB pronouncements are effective in the following fiscal years’ audits and should be reviewed for proper implementation by management:

Fiscal year 2023
GASB Statement No. 91, Conduit Debt Obligations.

GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangement.

To the Honorable Mayor and Members of the City Council
City of Shafter, California
GASB Statement No. 96, Subscription-Based Information Technology Arrangements.

Fiscal year 2024
GASB Statement No. 99, Omnibus 2022.

GASB Statement No. 100, Accounting Changes and Error Corrections.

Fiscal year 2025
GASB Statement No. 101, Compensated Absences.

Restriction on Use
This information is intended solely for the use of City Council and management of the City of Shafter and is not intended to be, and should not be, used by anyone other than these specified parties.

Very truly yours,
Sacramento, California

CITY OF SHAFTER CITY OF SHAFTER

ANNUAL COMPREHENSIVE

FINANCIAL REPORT
2021-2022

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87

CITY OF SHAFTER

NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 2022
Note 14: Commitments and Contingencies (Continued)
meantime, the City is continuing to receive the local sales tax revenue from this retailer.

Although management and the City’s attorney believe the City has a strong case, the City has assigned $17,394,397 of General Fund Balance as a loss contingency reserve in case of an adverse outcome.

Note 15: Fund Balance and Net Position
a. Net investment in capital assets
The breakdown for net investment in capital assets for the year ended June 30, 2022 is as follows:

Governmental
Activities
Business-Type
Activities
Capital assets, net of accumulated depreciation $ 50,263,552 $ 45,406,505 Less:

Bonds, notes and finance purchase agreements (206,202) - Net investment in capital assets $ 50,263,552 $ 45,200,303 Note 16: Dissolution of Modified Community Correction Facility (MCCF) In January 2020 the City of Shafter received verbal notification from the California Department of Corrections-Contract Beds Unit (CDCR-CBU) that the California Governor was going to eliminate the Public and Private MCCF program throughout the State of California. The Governor established a phase-out date for the statewide MCCF program as of June 30, 2022. CDCR-CBU sent the City formal notification on July 20, 2020, indicating the official closure date of the Shafter MCCF will be October 31, 2020. The last inmate at the Shafter MCCF was transferred out on October 23, 2020, and all MCCF staff was released on/or before October 30, 2020. Since the closure, the City of Shafter has been conducting winddown proceedings to transfer the assets and liabilities of the MCCF. The MCCF operations are accounted for in three separate funds in the accompanying financial statements: MCCF Building and Equipment Replacement Capital Projects Fund, MCCF Enterprise Fund and the MCCF Inmate Trust Fund Custodial Fund. As of June 30, 2022, all dissolution activities have been completed and the remaining assets and liabilities of the MCCF have been transferred to the City.
88

CITY OF SHAFTER

NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 2022
Note 16: Dissolution of Modified Community Correction Facility (MCCF) (Continued) The net financial statement impact of the closure has been reported as an extraordinary item in the accompanying financial statements.

Note 17: Subsequent Events
The City evaluated subsequent events for recognition and disclosure through April 20, 2023, the date which these financial statements were available to be issued.

Management concluded that no material subsequent events have occurred since June 30, 2022 that required recognition or disclosure in such financial statements.

General Fund
MCCF Capital
Projects Fund
MCCF
Enterprise
Fund
Information
Technology
Internal
Service Fund
Governmental
Activities
MCCF Inmate
Trust
Fiduciary
Cash subsidy for dissolution activities (341,142) $ (153,962) $ 440,355 $ - $ - $ 54,749 $ Forgiveness of due to General Fund (2,178,170) - 2,178,170 - - - Transfer of accounts receivable 8,246 (622) (7,624) - - - Transfer of prepaid costs (1,306) - 1,306 - - -
Transfer of capital assets - - (6,407,891) 13,382 6,394,509 - Transfer of net pension asset - - (110,810) - 110,810 - Transfer of deferred outflow - pension - - (476,455) - 476,455 - Transfer of deferred outflow - OPEB - - (102,888) - 102,888 - Transfer of accounts payable (326) - 171 - 155
Transfer of accrued liabilities (1) - 1 - -
Transfer of net OPEB liability - - 246,228 - (246,228) - Transfer of compensated absences - - 123,370 - (123,370) - Transfer of deferred inflow - pension - - 346,389 - (346,389) - Transfer of deferred inflow - OPEB - - 26,065 - (26,065) - Add Governmental Fund Conversion - - - - (2,653,899) -
Extraordinary Gain/(Loss) (2,512,697) $ (154,584) $ (3,743,613) $ 13,382 $ 3,688,711 $ 54,904 $ Assets and Deferred Outflows
Liabilities and Deferred Inflows
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