That the City Council, City Agencies and City Authorities:

A. Receive and file the audited Fiscal Year 2021-2022 Annual Comprehensive Financial Report (ACFR) for the City of La Habra; and,

B. Receive and file the audited Fiscal Year 2021-2022 Single Audit Report

Each year staff in the City's Finance Department prepares the City’s Annual Comprehensive Financial Report (ACFR) detailing the financial position and results of operations of the City’s General Fund and its related entities. The ACFR is prepared in accordance with Generally Accepted Accounting Principles (GAAP) and guidelines developed by the Governmental Accounting Standards Board (GASB). At the conclusion of the Fiscal Year 2021-2022 independent financial audit, there were no adverse audit findings made with respect to the City's financial statements.

In summary, the City’s major operating funds ended Fiscal Year 2021-2022 in a positive financial condition. The City’s practice of conservative revenue projections combined with closely controlled expenditures helped maintain or grow most fund balances. As discussed in the ACFR (Attachment 1) and shown in the summary tables below, the City’s funds are in good fiscal position, with sufficient fund balance, fund equity, and cash to cover expected short-term operational needs and provide modest reserves.  The following tables summarize the changes to fund balance for all major operating funds, and provide a summary of the General Fund’s budget performance for Fiscal Year 2021-2022. 



In most cases, fund balances/net position for the City’s major funds grew or remained level over the past fiscal year.  The General Fund ended the year with $5,947,109 of revenues over expenditures primarily due to several factors such as continued growth in property taxes, a one-time payment collected from the Successor Agency on interagency loan repayment, as well as from expenditure savings due to a number of vacant budgeted positions. These and other factors allowed for sufficient net General Fund resources to fund a total of $3,516,013 in transfers to various internal service and special purpose reserves. The General Fund also transferred $2,980,512 assigned fund balance to the Capital Projects Fund for the purchase of properties, resulting in a total transfer out of $6,496,525.

The net position for the RDA Successor Fund is negative due to outstanding long-term obligations such as tax allocation bonds and loans. These obligations will be repaid primarily through the Recognized Obligation Payment Schedule (ROPS) process administered by the State of California Department of Finance.
  The following table illustrates the General Fund budget performance. Total revenues outperformed the budget by $4,772,182 primarily due to the continued strength of the local economy resulting in tax revenues exceeding estimates. Total expenditures exceeded the adopted budget by $1,018,954 primarily due to an outstanding loan and lease being paid off early from the available year-end surplus. In addition, as previously authorized by the City Council, the City issued pension obligation bonds to pay off unfunded CalPERS pension liabilities in January 2022. This resulted in the receipt of $66.9 million in bond proceeds that were then reported as part of the City's amended General Fund departmental budgets, and an offsetting one-time expenditure of $66.9 million from those budgets to pay off accrued unfunded pension liabilities. According to the GASB accounting standards, the unfunded pension liability payment is considered to be a current year expenditure and is to be allocated to departmental budgets based on their proportional allocation of pension liabilities. These one-time expenditures were then offset by the bond proceeds, which was reported as issuance of debt in Table 2 below. For this reason, departmental "Final Budget" amounts were inflated on a one-time basis to record the bond proceeds and subsequent payoff of pension liabilities.


 

The following two graphs illustrate the General Fund information found in Table 2. Property tax remains the single largest source of General Fund revenues, representing 37.8% of total General Fund revenues, followed by sales and use tax at 26.2% and transaction and use tax at 13.7%.


As shown in the next graph, Public Safety (Police and Fire/Ambulance) represents the largest budgeted expense for the General Fund, accounting for approximately almost three-quarters of all General Fund expenditures. 

There is no fiscal impact associated with receiving and filing the City’s ACFR (Attachment 1) and the Single Audit Report (Attachment 2).