That the City Council, City Agencies and City Authorities:
A. Receive and file the audited Fiscal Year 2022-2023 Annual Comprehensive Financial Report (ACFR) for the City of La Habra; and,

B. Receive and file the audited Fiscal Year 2022-2023 Single Audit Report.

Each year, City Finance staff prepares the City’s Annual Comprehensive Financial Report (ACFR) detailing the financial position and results of operations for the City’s various municipal funds, including the General Fund, along with the City's associated agencies and authorities. 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 2022-2023 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 2022-2023 in a positive financial condition. The City’s practice of conservative revenue projections combined with closely controlled expenditures helped maintain most fund balances. As discussed in the ACFR (Attachment 1) and shown in the summary tables below, the City’s funds are currently in a stable 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 2022-2023.

In most cases, the fund balances or net positions of the City’s major funds grew or remained level over the past fiscal year. The General Fund ended the fiscal year with $17,380,819 of revenues over expenditures primarily due to a large unanticipated one-time revenue loss offset provided from the American Rescue Plan Act (ARPA) funding, but also due to other factors such as continued growth in property taxes, a one-time receipt collected from the Successor Agency as an interagency loan repayment, as well as some expenditure savings due to a number of vacant budgeted positions. These, and other factors, allowed for sufficient net General Fund resources to make $5,120,492 in transfers to the debt service fund for Pension Obligation Bond (POB) principal and interest payments, and replenish various Internal Service Funds. The General Fund also transferred $8,982,393 assigned fund balance to the Capital Projects Fund for future capital projects, resulting in a total transfer out of $14,102,885. The General Fund received a transfer in of $643,519 from the Civic Improvement Authority for the 1998 Certificates of Participation remaining proceeds. This resulted in a net outgoing transfer of $13,459,366. 

The net position of the Refuse Fund was reduced by $2,196,639 primarily due to the Vista Grande Park Project budget, which resulted in a $1,458,847 funding allocation for the landfill cap remediation as part of that project.  

The net position for the RDA Successor Fund is negative due to outstanding tax allocation bonds. These obligations will be repaid over time through the Recognized Obligation Payment Schedule (ROPS) process administered by the State of California Department of Finance.

Table 2 illustrates the General Fund budget performance: Revenue and Expenditures. Total revenues outperformed the budget by $5,148,227 primarily due to higher economic growth than expected. Total expenditures were less than the budget by $37,317. The Final Budgeted Total Expenditures decreased from $53,481,190 to $43,375,596 to reflect the transfer of $5,648,272 for allowable public safety (fire/ambulance) budgeted contract expenditures to the ARPA Fund.

The following graph illustrates the General Fund information found in Table 2. Property Tax remains the single largest source of General Fund revenues, representing 37.3% of total General Fund revenues, followed by sales and use tax at 24.2% and transaction and use tax (Measure T) at 12.9%.

 

In support of the collaborative regional homeless services efforts of the 13 city North Orange County Service Planning Area (North SPA), the City of La Habra agreed to take on the responsibility as Treasurer for the North SPA. In this role, the City of La Habra is responsible to invoice the participating North SPA cities for their contributions to operate two Navigation Centers, collect those payments, and reimburse the two host cities (Placentia and Buena Park) for the cost of operating the navigation centers in accordance with the terms and conditions of the North SPA Memorandum of Understanding. The City has been providing fiscal reports regarding the financial activities of the North SPA; however, the City's auditor determined that the City should also be reporting the financial activities of the North SPA as part of the City's overall financial statements as a custodial fund. The City is in agreement and a restatement of the beginning net position was made on the fiduciary fund statement to include the North SPA custodial fund. Additional findings included a recommendation to improve the vendor verification and screening process and to allocate a minimum of 75% of WIOA Youth Activity funds to provide services to out of school youth, which staff will implement in Fiscal Year 24-25.
 

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