City Council Agenda Report
Meeting Date: October 17, 2023
From: Scott Williams, Director of Finance
Department: Finance
Submitted by: Jessica Alcaraz, Financial Services Administrator Subject
Audited Financial Reports
Recommendation
A. Receive and file the Fiscal Year 2021-22 Annual Financial Statements; and B. Extend submittal of the Fiscal Year 2022-23 Final Audit and Report to Council to January 16, 2024.
Background
Audits are to be performed in accordance with the standards set forth for the financial audits by the Governmental Accounting Standards Board (GASB), in the General Accounting Office (GOA). In addition, Article VIII, Chapter 8.11 of the City Charter requires City Council to appoint a California certified public accounting firm to provide an independent, annual audit of all City accounts, including the accounts of all departments, officers and employees who receive, handle or disburse public funds. The Charter also requires the final audit to be submitted to Council 120 days after the end of the fiscal year.
Following a competitive Request for Proposal (RFP) process, on May 5, 2020 Council awarded White Nelson Diehl Evans LLP, now CliftonLarsonAllen LLP (CLA), a three-year professional services agreement for professional auditing services. Fiscal Year (FY) 2021-22 was the last audit year where CLA was to provide auditing services and production of the audited financial statements. In the months after the close of the FY 2021-22 financial statements, staff worked with CLA on providing the requisite information for the firm to initiate and conduct the audit. The audit process can be lengthy as in addition to verifying and analyzing financial data, the audit firm also reviews relevant City policies and procedures, and conducts interviews with management staff and Council. While industry best practice for the completion of an audit is 18 months after a budget is adopted, a combination of circumstances throughout the audit process, including implementation of a new GASB pronouncement, audit questions pertaining to the purchase of MGS, and staffing changes/challenges at CLA, resulted in a significant and atypical delay in the completion of the FY 2021-22 audit. With the audit now complete, staff is submitting the Fiscal Year 2021-22 Annual Financial Statements to Council as required by the City’s Charter.
As noted above, Article VIII, Chapter 8.11 of the City Charter requires the final audit to be submitted to Council within 120 days after the end of the fiscal year. With the City’s fiscal year ending on June 30, audited financial statements would need to be submitted to Council by late October 2023. However, 120 days after the end of the fiscal year (June 30) is not feasible as it can take several months to receive all documents from outside contractors and vendors to accrue all expenditures related to the prior year, finalize journal entries, reconciliations and for the auditors to complete their audit and produce the final audited financial reports. Additionally, industry best practice is 18 months after a budget is adopted, which places finalization of the audited financials by end of the calendar year and presentation to Council soon after. As such, staff is seeking an extension for submission of the final audit and report to Council for Fiscal Year 2022-23 Annual Financial Statements to January 16, 2024, anticipated to be the first Council Meeting of 2024. Staff is currently working with the City’s new audit firm, The Pun Group LLP, on the FY 2022-23 audit and is confident the audit will be completed in advance of the January 16 date. Pursuant to Article VIII, Chapter 8.11 of the City Charter, the City Council may extend the deadline for submission of audited financial statements beyond 120 days after the end of the fiscal year.
Fiscal Impact
There is no fiscal impact associated with this report.
Attachments
1. 2022 Audited City-wide Financial Statements
2. 2022 Audited VPU Financial Statements
3. 2022 Audited Electric Financial Statements
4. 2022 Audited Water Financial Statements