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| CITY COUNCIL AGENDA ITEM NO. 14
Meeting Date: February 11, 2003
Subject/Title: Approve the Filing of the Comprehensive Annual Financial Report for Fiscal Year 2001/02 as prepared in accordance with GASB Statement 34
Submitted by: Pamela Ehler, Director of Finance and Information Services
Approved by: John Stevenson, City Manager
Approve the filing of the 2001/02 Comprehensive Annual Financial Report (CAFR) as prepared by the Finance Department and examined by the independent accounting firm of Vavrinek, Trine, Day & Co., LLP, in accordance with GASB Statement 34.
The audit firm of Vavrinek, Trine, Day & Co., LLP has completed its review and examination of the City’s financial transactions and statements for the year ended June 30, 2002. The actual audit process was completed in October 2002. The audit was conducted in accordance with generally accepted auditing standards. It is the opinion of the auditors that the financial statements fairly represent the financial position of the City as of June 30, 2002, and that the statements were prepared in conformity with generally accepted accounting principles. The Finance Department provided significant support with the year-end closing, the coordination of the audit process, and the preparation of the Comprehensive Annual Financial Report (CAFR).
The Finance Department incorporates the financial statements into a Comprehensive Annual Financial Report (CAFR), the purpose of which is to present an easily readable and organized report of the financial transactions of the City. A CAFR provides the many users of government financial statements with a wide variety of information needed to help them evaluate the financial condition of the City.
This is the second year that the City has prepared a Comprehensive Annual Financial Report (CAFR), but it is the first year using the new Governmental Accounting Standards Board (GASB) Statement 34 model.
A New Financial Reporting Model
The City of Brentwood has taken a leadership role in implementing GASB 34. This early implementation will enable the City Council and residents to become more aware of the benefits and information contained in the new financial model. This new format is a significant change in the way governments present financial information.
In June 1999, the Governmental Accounting Standards Board (GASB) – which sets “generally accepted accounting principles” for all state and local governments – adopted sweeping changes in financial reporting.
Known as Statement No. 34: Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, Statement No. 34 represents a fundamental revision of the current financial reporting model, which has been in place since 1979. While there are a number of significant changes the major ones are:
Government-Wide Statements – These are consolidated financial statements for all of the City’s operations on a full accrual basis of accounting. The statements reflect the economic resources measurement focus using the accrual basis of accounting (the method under which revenues are recorded when they are earned - regardless of when cash is received - and expenditures are recorded when goods or services are received – regardless if disbursements are actually made at that time). They will not be presented on a fund basis; instead, fiscal operations will be organized into two major activities: governmental and business-type.
These statements will have a “net asset” focus, and include a number of interfund eliminations such as fiduciary funds.
Focus on “Net Assets” for Governmental Activities – Pre-GASB 34 reporting for governmental activities focused on near-term inflows, outflows and balances of spendable financial resources. The new financial reporting model also provides this short-term focus in the governmental fund financial statements but also places greater focus on the “net assets” of the organization.
Fund Statements – In meeting stewardship and accountability concerns, there is another set of financial statements presented on a fund basis – but not using the same basis of accounting as the government-wide statements.
There is significant differences between these two financial statements and a reconciliation between the two is required and has been included.
Focus on Major Funds – In the “fund section” of the report, the statements focus on major individual funds rather than on fund types.
Management’s Discussion and Analysis (MD & A) - Provides “financial highlights” and interprets the financial reports by analyzing trends and by explaining changes, fluctuations and variances in the financial data.
Budget Reporting – Comparisons of “budget-to-actual” results for the governmental funds require supplementary information (RSI). The original and final budget being presented and an explanation as to why there was the need for the amendments is new with the GASB 34 model.
This report, for the first time, will be able to give the readers an analysis of the government’s financial performance for the year. This analysis should provide users with the information they need to help them assess whether the City’s financial position has improved or deteriorated as a result of the year’s operations.
In short, the new annual reports will give officials a new and more comprehensive way to demonstrate their stewardship in the long term in addition to the way they currently demonstrate in the short term and through the budgetary process.
The Government Finance Officers Association (GFOA) offers a recognition program for public entities to determine whether the City conforms to the highest level of financial reporting standards. If a city qualifies, a Certificate of Achievement is awarded for a period of one year. The Certificate of Achievement for Excellence in Financial Reporting has been awarded to the City of Brentwood’s 2000/01 CAFR. The City believes that this report also conforms to the Certificate of Achievement program requirements and is submitting it to the GFOA to determine its eligibility. In addition, the California Society of Municipal Finance Officers (CSMFO) has a Certificate of Award Program for Outstanding Financial Reporting for statewide recognition that we will be applying to as well.
Producing a Comprehensive Annual Financial Report (CAFR) provides confirmation that the City operates at the highest level of financial reporting standards, which can improve the City’s future Bond ratings with the debt investment community.
A great deal of effort and attention to detail has gone into the preparation of this document, representing many hours of work by staff members throughout the organization. Special recognition should be given to the Finance Department staff, their efforts made it possible to improve the quality of the information being reported to the citizens, the City Council, and other users.
Complete financial information as of June 30, 2002 is contained in the CAFR.
Key information from the CAFR are the General Fund and the City’s net assets. The City’s General Fund balance is $8,960,546 as of June 30, 2002. This represents an increase of $5,087,540. $4,000,000 of this increase is due to the balance of the General Obligation Bonds issued for the new Police Station. The bond funds will be used to complete the Police Station within two years.
Net assets for the City’s governmental activities are $183,594,706 and for the business type activities they are $96,961,694. This represents an increase of $34,791,171 from the previous year.
Since it is a completely different financial model, implementation of a CAFR in conformance with GASB Statement 34 has been very expensive. Auditing fees and the Maximus study of infrastructure valuations have been costly, approximately $13,550 over last year. Because there are fiduciary and accountability concerns, as well as educational training, the Finance Department took a leadership role in understanding the ramifications and complexities of Statement 34. In addition, the department created, prepared and published the document in-house, saving the City an estimated $20,000 overall.
APPROVE THE FILING OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR FISCAL YEAR 2001/02 AS PREPARED BY THE FINANCE DEPARTMENT AND EXAMINED BY THE INDEPENDENT ACCOUNTING FIRM OF VAVRINEK, TRINE, DAY & Co., LLP, IN ACCORDANCE WITH GASB STATEMENT 34.
WHEREAS, the audit firm of Vavrinek, Trine, Day & Co., LLP has completed its review and examination of the City’s financial transactions and statements for the year ended June 30, 2002;
WHEREAS, the audit was conducted in accordance with generally accepted auditing standards and it is the opinion of the auditors that the financial statements fairly represent the financial position of the City as of June 30, 2002;
WHEREAS, The Finance Department incorporates the financial statements into a Comprehensive Annual Financial Report (CAFR), the purpose of which is to present an easily readable and organized report of the financial transactions of the City.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Brentwood approves the filing of the Comprehensive Annual Financial Report (CAFR) for the fiscal year 2001/02.
PASSED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 11th day of February 2003, by the following vote:
Karen Diaz, CMC
City of Brentwood City Council
150 City Park Way
Brentwood, CA 94513
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