Item No. 1.
| MEETING DATE: 05/02/2022 |
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| TO: | HONORABLE MAYOR/CHAIR AND COUNCILMEMBERS/DIRECTORS |
| FROM: | JIM SADRO, CITY MANAGER/EXECUTIVE DIRECTOR By: Mel Shannon, Director of Finance |
| SUBJECT: | RECEIVE AND FILE THE CITY OF LA HABRA FISCAL YEAR 2020-2021 AUDITED FINANCIAL REPORTS |
RECOMMENDATION:
That the City Council, Agency and Authorities:
A. Receive and file the audited Fiscal Year 2020-2021 Annual Comprehensive Financial Report (ACFR) for the City of La Habra; and,
B. Receive and file the audited Fiscal Year 2020-2021 Annual Financial Report for the La Habra Utility Authority.
DISCUSSION:
Each year staff in the City's Finance Department prepares the City’s Annual Comprehensive Financial Report (ACFR) (formerly referred to as Comprehensive Annual Financial Report [CAFR]), which details 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).
In summary, the City’s major operating funds ended Fiscal Year 2020-2021 in a positive financial position. 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 2020-2021.
In summary, the City’s major operating funds ended Fiscal Year 2020-2021 in a positive financial position. 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 2020-2021.
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In most cases, fund balances/net positions for the City’s major funds grew; however, a few funds experienced planned operating reductions over the past fiscal year. The General Fund ended the year with $6,198,107 of revenues over expenditures primarily due to several factors such as continued growth in property taxes, a one-time interagency loan repayment collected from the Successor Agency for outstanding RDA debt, as well as from expenditure savings due to vacant budgeted positions. These and other factors allowed for sufficient net General Fund resources to allow for a transfer of $3,628,341 to the general capital projects fund, as well as various internal service and special revenue funds. The General Fund also received a transfer of $446 from the Capital Projects Fund, resulting in a net transfer of $3,627,895.
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 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.
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The General Fund's revenue performance compared to budget (Table 2) shows $6,587,084 in actual revenues over budgeted amounts. This was primarily due to (1) conservative revenue projections due to the uncertainty of economic impacts on local businesses resulting from the coronavirus pandemic, which proved to be far less severe than predicted; (2) continued strong growth in residential property values; and, (3) stronger than expected growth in sales tax revenues due to increased sales at local retailers and home improvement stores during the pandemic.
The General Fund's actual expenditures exceeded budget by $422,347 or 0.92%, primarily due to the earlier than anticipated suspension of furloughs that had been put in place on full-time employees. Due to the uncertainty of the pandemic on the local economy, the City implemented a furlough program to reduce operating costs as part of several budget balancing measures that were adopted; however, as revenues began to significantly outpace budget expectations, the City Council approved an early suspension of the furlough program in order to bring employees back to work full time.
The following graphs illustrate the General Fund information found in Table 2. Property tax remains the single largest source of General Fund revenues, representing 38.4% of total General Fund revenues, with the combination of sales and use tax with transaction and use tax being the second largest source, representing 37.8% of total General Fund revenues.
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As shown in the next chart, Public Safety (Police and Fire/Ambulance) represents the largest budgeted expense for the General Fund, accounting for approximately two-thirds of General Fund expenditures.
As shown in the next chart, Public Safety (Police and Fire/Ambulance) represents the largest budgeted expense for the General Fund, accounting for approximately two-thirds of General Fund expenditures.
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AUDIT FINDINGS
There were two audit findings with respect to the City’s financial statements, as follows:
1. The independent auditors recommended that the City include the enterprise funds in our allocation to the Other Post-Employment Benefits (OPEB) plan each fiscal year.
2. The independent auditors recommended that the City evaluate the net realizable value of land held for resale and adjust the value of land held for resale to the lesser value of cost or net realizable value.
Finance staff agreed with these findings and implemented the auditors’ recommendations in the final fiscal year 2020-2021 financial statements.
FISCAL IMPACT/SOURCE OF FUNDING:
There is no fiscal impact associated with receiving and filing the City’s ACFR (Attachment 1) and the La Habra Utility Authority Annual Report (Attachment 2).
GENERAL PLAN RELEVANCE:
D 9 Fiscal Strength-Stability