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ACCEPTANCE OF AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2017
RESOLUTION NO. 2018-001 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING AMENDMENTS TO THE FISCAL YEAR 2016/2017 BUDGET TO ADJUST FOR VARIANCES AND APPROPRIATING FUNDS THEREFOR (4/5 VOTE REQUIRED)
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RECOMMENDED ACTION
Recommended Action
Council accept the report and adopt the resolution.
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SUMMARY
Presented for City Council information and acceptance are the Audited Financial Statements for the fiscal year ended June 30, 2017, as prepared by the independent audit firm of Lance Soll & Lunghard LLP. The audit report submitted for the City has received an unqualified (clean) opinion from the independent audit firm.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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Environmental Determination
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION RECOMMENDATION
Not applicable.
DISCUSSION
Pursuant to the City Charter Section 1017, an annual audit is performed of the City's financial records by an independent accounting firm. The report is included as an attachment. The firm of Lance Soll & Lunghard, LLP has examined the general purpose financial statements of the City of Chula Vista and has issued their opinion that those statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2017 and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The unassigned fund balance for the City’s General Fund (Fund 100) totaled $19.8 million as of June 30, 2017. This amount reflects 12.8% in unassigned fund balance (operating reserves) of fiscal year 2016-17 actual expenditures of $154.6 million, which includes transfers out. The unassigned fund balance increased from $17.9 million to $19.8 million when compared to June 30, 2016, representing an increase of $1.9 million.
In addition to the unassigned fund balance, the General Fund ended fiscal year 2016-17 with $3.6 million in the Economic Contingency Reserve - there is no change from the prior fiscal year. This reserve was established by the City Council in fiscal year 2009 with the approval of the updated General Fund Reserve Policy. The Economic Contingency Reserve has been funded through one-time revenues and/or expenditure savings. The reserve policy sets a reserve goal of 5% for the Economic Contingency Reserve. The General Fund ended fiscal year 2016-17 with approximately 2.3% in the Economic Contingency Reserve.
In order to form a basis for their opinion, Lance Soll & Lunghard LLP, evaluated the internal control procedures of the City and found no reportable conditions. This was Lance Soll & Lunghard LLP’s fourth year serving as the City’s independent auditors. The City previously contracted with Pun & McGeady, LLC. After five years of contracting with this firm, the City issued an RFP, and awarded the contract to Lance Soll & Lunghard LLP. Conducting an RFP for audit services every five years is a Governmental Finance Officers Association Best Practice.
The City’s Consolidated Annual Financial Report (CAFR), is provided as Attachment 1 of this report.
Budget Amendments - as part of the final review of the fiscal year 2016-17 budget, staff made accounting entries that require budget amendments. The budget amendments impact several funds; these changes addressed a change in posting actual revenues and expenditures related to debt refunding, a year end journal to distribute staff time, bank charges, and consultant services related to cash management, and the recognition of additional sales tax revenues. The actual fund impact related to these changes are reflected in the CAFR and the proposed budget amendments will address any budget overages.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the 500-foot rule found in California Code of Regulations Title 2, section 18702.2(a)(11), is not applicable to this decision for purposes of determining a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware, and has not been informed by any City Councilmember, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. This action supports the Operational Excellence goal by communicating the City’s financial position for the fiscal year ending June 30, 2017 in an open and transparent manner. This transparency supports City Initiative 1.3.1. - “Foster public trust through an open and ethical government.”
CURRENT YEAR FISCAL IMPACT
There is no fiscal impact as a result of accepting the Fiscal Year 2016-17 Comprehensive Annual Financial Report.
Approval of the resolution will result in the following budget amendments/appropriations. The net fiscal impact on the individual funds is also reflected on the table below.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact as result of this action.
ATTACHMENTS
1. Fiscal Year 2016/17 Comprehensive Annual Financial Report
Staff Contact: David Bilby, MSBA, CPFO, Finance Director/Treasurer