Agenda Item No. 10
CITY OF YUCAIPA
AGENDA REPORT
TO: Honorable Mayor and City Council
FROM: Ray
F-mond A. Casey, City Manager / Treasurer
dAndrew Hamilton, Director of Finance
FOR: ,City Council Meeting of April 25, 2022
2 SUBJECT: Audit Report for Fiscal Year Ended June 30, 2021 RECOMMENDATION:
That City Council receive and file the audit reports for the year ended June 30, 2021.
DISCUSSION:
The City's independent auditors, Van Lant and Fankhanel, LLP (VLF) have completed all necessary field work and other tasks in order to issue an opinion on the financial statements for the City of Yucaipa for the fiscal year ending June 30, 2021. The general-purpose financial statements were prepared in accordance with generally accepted accounting principles established by the Governmental Accounting Standards Board (GASB).
Attached to this agenda report is the Annual Comprehensive Financial Report (ACFR) and Supplemental Information for the City of Yucaipa, as well as the auditor's report on the Appropriations Limit. The auditors have concluded for the ACFR that there was a reasonable basis for rendering an unmodified (clean) opinion and that the statements were fairly presented in accordance with generally accepted accounting principles.
General Fund
In Fiscal Year 2018-2019, the General Fund and the Fire Services Fund, while maintained separately throughout the year, were combined for presentation in the ACFR. This was to be able to demonstrate an accurate total General Fund balance for State reporting purposes. Since the time that the City assumed responsibility for fire services from the County of San Bernardino in July 1999, property taxes related to the assumption were accounted for in a separate Fire Services fund in order to track fire costs separately. The City will continue to track the Fire Services in its own fund with its own budget throughout the year but will continue to consolidate with the General Fund for reporting purposes. The General Fund balance related to Fire Services is reported as a committed fund balance of the General Fund in the ACFR. -177-
City Council Meeting of April 25, 2022
Audit Report for Fiscal Year Ended 6/30/2021
The General Fund is the chief operating fund of the City. In Fiscal Year 2020-2021, the financial impact of General Fund activity resulted in a net decrease to the Total General Fund Balance in the amount of $2,581,620. This decrease was primarily the result of a transfer of approximately $6.1 million from the General Fund to the Facilities Construction Capital Project Fund to fund future capital projects.
The total fund balance of the General Fund on June 30, 2021 is $52,371,876. Of this amount, $9,676,305 is committed for Fire Services. At the end of each fiscal year, the fund balance of the General Fund is classified into five categories pursuant to GASB Statement No. 54. The fund balance components include a hierarchy of spendable classifications to make the statements understandable to the reader, relative to sources of income and the authority by which those sources of income are expended and encumbered. Detail of the amounts of these classifications can be found in the notes to the financial statements under "l3) Fund Balance" (see page 49 of the ACFR).
Historically, the City has reported in its Financial Statements interfund advances from the General Fund to capital project funds for short-term borrowings to cover deficit cash balances as well as for cash flow to cover operations. This practice has allowed the City to proceed with the construction of certain capital projects while the funding often follows as reimbursements. The interfund balances were also the result of the City's General Fund advancing funds to finance certain construction improvements over time, including the Live Oak/Oak Glen Road Interchange, City Hall, the Community Park, the Police Station, and the Yucaipa Performing Arts Center. The Fire Services committed fund balance also includes interfund balances relative to advances made to finance the construction of Fire Station No. 3. These balances are expected to be repaid with future revenues, primarily development impact fees. As of June 30, 2021, the outstanding balance of funds advanced from the General Fund to capital project funds for the construction of these capital projects is $24.8 million (including short term loans for approved grant/partnership funded projects). This represents a decrease in the amount of approximately $2.1 million from the prior year. This amount is identified in the Non -spendable classification of fund balance.
As part of the City's Fiscal Year 2020-2021 ACFR, an "Other Matter" which is not deemed a deficiency but warrants the attention of the City Council was reported in the auditor's report on internal control. A summary of the findings and management's responses is as follows:
1. General Fund Advances — As noted in prior years, the General Fund has advanced over $22 million to various development impact fee (DIF) funds for projects in previous years including the City's YPAC, police station, park facilities, etc. It should be noted, approximately $4 million in advances to the DIF funds were repaid in fiscal year 2021.
The advances have resulted in significant nonspendable fund balance in the General Fund. It should also be noted, the City has committed to the repayment of DIF funds to the General Fund, through formal interfund loan agreements, over a period of many years into the future
Management's Response - Overall DIF loan repayments are regularly evaluated by the City on a periodic basis. City staff also ensures that the City complies with interfund loan agreements -178-
City Council Meeting of April 25, 2022
Audit Report for Fiscal Year Ended 6/30/2021
regarding required DIF loan repayments each year. In addition, the City Council reviews any additional advances of monies to specific DIF funds from the General Fund on a periodic basis.
All documents related to the audit are available at City Hall.
Additionally, all related audit reports are available on the City's website and at City Hall.
FISCAL IMPACT:
There is no fiscal impact.
Attachments — Distributed Under Separate Cover:
1. FY 2020-2021 Annual Comprehensive Financial Report and Supplemental Infonnation
2. Appropriations Limit Report FY 2020-2021
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