Item Number: 22
City Council / Board of Directors
Written Communications
Meeting of: June 18, 2024
Submitted By:
Carmen Cun, Finance Director / City Treasurer
Subject:
Annual Financial Reports for the Fiscal Year Ended June 30, 2023 Recommendation:
That the City Council and Board of Directors approve a motion to receive and file the following:
(1) City of Victorville Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2023,
(2) Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Governmental Auditing Standards for the Fiscal Year ended June 30, 2023,
(3) Victorville Water District Basic Financial Statements for the Fiscal Year ended June 30, 2023, and
(4) Southern California Logistics Airport Authority Basic Financial Statements for the Fiscal Year ended June 30, 2023.
Fiscal Impact:
There is no fiscal impact for this item as it is information only to receive and file.
Strategic Plan Goal:
Annual financial audits and reporting is part of Goal A: Financial Sustainability as these reports are indicators of our past performance and convey valuable information to future planning and forecasting.
Background:
The City's financial statements for the Fiscal Year ended June 30, 2023 were audited by the independent audit firm CliftonLarsonAllen LLP, Certified Public Accountants. The City of Victorville's Audit Committee, which includes Mayor Pro Tem Bob Harriman and Council member Leslie Irving, met on May 9, 2024 to review and discuss the final draft of 3 6
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the City's Annual Comprehensive Financial Report (ACFR) for Fiscal Year ended June 30, 2023.
After discussion, the final version of the ACFR is being presented to the City Council and the Board of Directors for receipt and filing. Also being presented to the City Council and the Board of Directors for receipt and filing are the audited Victorville Water District Basic Financial Statements and the Southern California Logistics Airport Authority Basic Financial Statements for the Fiscal Year ended June 30, 2023. The Victorville Water District and the Southern California Logistics Airport Authority issue separate financial statements since they are considered component units of the City; however, the financial information for these component units is also in the ACFR.
Discussion:
Beginning with period ending on or after December 15, 2020, new standards require the Independent Auditors’ Report to follow a new format and new wording. This includes the opinion section wording as shown in the attached reports. Any qualifying matters are disclosed in the paragraphs directly below the opinion entitled Emphasis of Matter and Other Matters. The American Institute of Certified Public Accountants (AICPA) defines an Unmodified Opinion as “The opinion expressed by the auditor when the auditor concludes that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.” (2021 AICPA Professional Standards AU-C §700.10). The auditors have issued unmodified opinions on all three financial statements for the City, Victorville Water District, and Southern California Logistics Airport Authority, this means they are “clean” audits.
Below are some financial highlights:
•General Fund
For financial reporting purposes, the General Fund is a combination of six funds:
General Fund (fund 100), Measure P (fund 105), Technology (fund 111), Fueling Stations (fund 120), Victor Valley Transportation Center (fund 470), and Sidewalk Assessments (fund 620). For our purposes, in the next paragraphs, we are referring to the General Fund as only those items located in fund 100.
The General Fund is the chief operating fund of the City of Victorville. At the end of Fiscal Year 2022-23, the unassigned fund balance of the General Fund was $56.0 million, while the total fund balance was $59.2 million (page 144 of ACFR).
This is an increase of $11.2 million in total fund balance from Fiscal Year 2022. As a measure of the General Fund’s liquidity, the unassigned fund balance represents
64.0% of the total General Fund expenditures and the total fund balance represents 67.6% of the General Fund expenditures.
The General Fund reserve policy established a target that the unrestricted fund balance represents 17% of the total General Fund expenditures. General Fund revenue increased by $9.3 million during this FY 2022-23 over the prior fiscal year, mainly due to the increase in revenue generated from taxes of $3.8 million and charges for services of $3.5 million.
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General Fund expenditures increased by $14.4 million as compared to the prior fiscal year resulting from public safety, filling personnel vacancies and the Macerich tax sharing payment.
•Measure P
Measure P is a 1% Transactions and Use Tax adopted by the voters of Victorville in November 2020. The tax went into effect April 1, 2021. Revenue received for this transactions tax in Fiscal Year 2023 was $31.3 million. To provide additional information, the breakdown of the “General Fund” amounts including Measure P, is shown in the financial statements in the ACFR on pages 144-147 Per the Public Safety Plan presented to council in May 2020 and the committee formed to review and comment on revenue and expenditures in this fund, expenditures for the year included public safety staffing of additional police, code enforcement, animal control, and fire departments as well as several parks improvements and work on the library redesign of the Green Tree Clubhouse facility. This fund also has a reserve policy matching that of the General Fund at 17%. This fund shows a balance at the end of Fiscal Year 2023 of 436% of the expenditures. •Capital Accomplishments
Several capital projects made major milestones in FY 2023 including the Wellness Center in Old Town Victorville, the Green Tree Extension (recently renamed to the Brian Gengler Overpass), and a 600 foot bridge over the BNSF Railroad. Other special revenue funds such as Measure I, Local Transportation Funds (LTF) and Federal and State Grants have also aided in funding the completion of capital projects.
•Enterprise Funds
The Victorville Municipal Utility Services (VMUS) electric fund continues to expand its services and improve its infrastructure throughout the Southern California Logistics Airport (SCLA). Through purchase energy agreements and planning, its rate structure was sufficient to cover operating expenditures for the current year system for Victorville Municipal Utility Services (VMUS).
With the current rate structure of the Sanitary Sewer Division revenues were sufficient to cover expenditures adding an additional $1.7 million to the fund balance. The current rate structure performed sufficiently to handle the current operating expenditures and allow the fund balance to increase for future capital improvement projects.
The Victorville Water District continued to evaluate and upgrade its infrastructure with several block walls and gates for well sites for increased security and continued the Advanced Metering Infrastructure project to replace meters for better reading and monitoring. Additional projects being worked on as they relate to Reclaimed water activity is a building an additional water tank infrastructure out to the Southern California Logistics Airport and looking kicking off a conceptual study to see what the best options are for future use of reclaimed water. 3 6
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The Southern California Logistics Airport Authority (SCLAA) continued to improve and rehabilitate its infrastructure to allow for additional building leases. Additional capital expenses include various equipment purchases and several building re- roof projects. SCLAA continues to cover annual expenditures with annual revenues received.
As the City’s annual audit process for the Fiscal Year ended June 30, 2023 has been completed and the City’s independent auditor has issued an “Unmodified Opinion” or “Clean” opinion for the reports, staff recommends the Council and Board of Directors receive and file the following reports:
(1) City of Victorville Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2023,
(2) Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Governmental Auditing Standards for the Fiscal Year ended June 30, 2023,
(3) Victorville Water District Basic Financial Statements for the Fiscal Year ended June 30, 2023, and
(4) Southern California Logistics Airport Authority Basic Financial Statements for the Fiscal Year ended June 30, 2023.
Staff remains available for any questions or comments
Attachments: A. City of Victorville ACFR for Fiscal Year ended June 30, 2023.
B. Independent Auditors Report for Fiscal Year ended June 30, 2023.
C. Victorville Water District Basic Financial Statements for Fiscal Year ended June 30, 2023.
D. Southern California Logistics Airport Authority Basic Financial Statements for Fiscal Year ended June 30, 2023.