CC SR 20250318 E - FY2023-24 ACFR
CITY COUNCIL MEETING DATE: 03/18/2025
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA TITLE:
Consideration to receive the F iscal Year 2023-24 Annual Comprehensive Financial
Report (ACFR) of the City of Rancho Palos Verdes.
RECOMMENDED COUNCIL ACTION:
(1) Receive and file the FY 2023-24 ACFR of the City of Rancho Palos Verdes;
(2) Receive and file the FY 2023-24 Statements on Auditing Standards (SAS 114
Letter) from Independent Auditors to those Charged with Governance; and,
(3) Receive and file the FY 2023-24 Independent Auditors’ Report on Internal Control
over Financial Reporting, Compliance, and other Matters in accordance with
Government Audit Standards (GAS Letter).
FISCAL IMPACT: N/A
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Vina Ramos, Director of Finance VR
REVIEWED BY: same as above
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. FY 2023-24 ACFR; FY 2023-24 JPIA Financial Statement
B. FY 2023-24 SAS 114 Letter from Independent Auditors to Those Charged
with Governance (page B-1)
C. FY 2023-24 GAS Letter from Independent Auditors on Internal Control and
Compliance (page C-1)
BACKGROUND:
The ACFR provides a narrative overview and analysis of the City’s financial activities for
the fiscal year that ended on June 30, 202 4. It is prepared in conformity with Generally
Accepted Accounting Principles (GAAP) and Governmental Accounting Board (GASB)
requirements. In accordance with GASB’s standards, invoices for the fiscal year must be
paid and current revenues (taxes) recorded no later than August, which is 60 days after
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the year-end. Subsequently, the year-end process is completed by the staff, and financial
reports are prepared by October.
On November 2024, in accordance with state statutes, the City’s financials were audited
by CliftonLarsonAllen LLP (CLA), an independent firm of certified public accountants. The
goal of the independent audit was to provide reasonable assurance that the City’s
financial statements for FY 2023-24 were free of material misstatement.
On February 14, 2025, CLA completed the audit with no audit findings, confirming that
the City's financial statements are fairly presented in accordance with GAAP and are free
of material misstatement.
Pursuant to the City Council Policy No. 44, the Audit Committee is established as a
subcommittee of the City Council, consisting of two members appointed by the City
Council. On March 10, 2025, CLA's principal partner, Daphnie Munoz, held a meeting to
report on the audit results with the subcommittee, consisting of Mayor Bradley and
Councilmember Lewis.
It is important to note that the majority of the landslide -related expenditures ($35.1M in
FY 2024-25) were incurred in FY 2024-25. Therefore, the financial impact of the
emergency response and mitigation efforts for the Portuguese Bend Landslide Complex
will be reflected in next year’s ACFR.
DISCUSSION:
The following discussion provides the following summary of the ACFR and final audited
results for FY 2023-24:
• ACFR Overview of Sections
• Financial Highlights
• General Fund Balance Results
• Additional Information: Single Audit, Pension, GFOA Award
ACFR Overview
The City’s ACFR includes the following major sections and information:
Introductory Section
Letter of
Transmittal
Financial Section
Independent
Auditors’
Report
Management’s Discussion &
Analysis
Analytical
overview of
the City’s
financials
Basic Financial
Statements
Information
on City’s
finances
July 1, 2023
-June 30,
2024
Statistical
Historical
financial
trends
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Financial Highlights
The City’s government-wide financial statements are designed to provide readers with a
broad overview of the City’s finances. The financial statements combine the
Governmental Activities for the purpose of presenting an overall picture of the financial
position and results of operations of the government. The Governmental Activities are the
City’s General Fund, Capital Improvement Fund, and Special Revenue Funds.
The following are FY 2023-24 financial highlights (page 5 of the ACFR):
• The assets and deferred outflows of resources of the City of Rancho Palos Verdes
exceeded its liabilities and deferred inflows of resources at the close of the Fiscal Year
ended June 30, 2024, by $238.5 million (Net Position). Of this amount, $61.6 million
(Unrestricted Net Position) may be used to meet the City’s ongoing obligations to its
citizens and creditors. The remaining amount is invested in capital assets or is
otherwise restricted, and therefore not available to meet the City’s obligations.
• The City’s total Net Position increased by $2.9 million from the prior year from the
Governmental Activities mainly driven by growth in property tax revenue, stable other
tax sources, increased investment earnings, and stable expenditures in general fund.
• As of June 30, 2024, the City’s Governmental Funds reported combined ending Fund
Balances of $87.9 million, an increase of $2.2 million in comparison with the prior year.
This growth from $51.8 million to $53.4 million in revenues was attributed to the
continued increase in property tax revenue, stable growth in other tax sources, and a
favorable return on investment earnings. While revenues continued to grow,
expenditures remained at approximately $51 million, primarily due to lower -than-
expected expenditures resulting from citywide staff vacancies.
• At the end of the current fiscal year, the General Fund reported an increase in fund
balance in the amount of $3.9 million or 11%. This growth was primarily driven by a
$1.7 million increase in investment earnings. Additionally, transfers out decreased by
$2.2 million compared to the prior year, largely due to the previous year's additional
transfers to the Capital Infrastructure Program (CIP) Fund for capital projects.
• As of June 30, 2024, the unrestricted fund balance of $35.5 million exceeds the
minimum requirement of $15,593,289 (50% of $31,186,577 in General Fund annual
operating expenditures).
Furthermore, the Statement of Net Position (page 20 of the ACFR) presents the City’s
investments in capital assets, restricted funds, and unrestricted funds. Of the $238.5
million of Net Position, $147.5 million or 62% is invested in capital assets (e.g. Land,
Infrastructure, Buildings, and Equipment). Approximately $27.7 million is restricted for
approved carryover projects in the Capital Improvement Fund and Special Revenue
Funds, and almost $1.8 million is restricted for the Improvement Authority, Subreg ion
One, and Natural Communities Conservation Plan /Habitat Conservation Plan
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(NCCP/HCP). The remaining $61.6 million is unrestricted, which may be used to meet
the City’s ongoing obligations to its citizens and creditors. Table 1 on the next page is a
summary of the City’s Net Position.
Table 1: Summary of Net Position
Additional details on the City’s Statement of Net Position are on page 20 and pages 55-
56 of the ACFR (Attachment A).
General Fund Balance Results
The General Fund is the chief operating fund of the City. At the end of the fiscal year, the
unassigned fund balance of the General Fund is $35.5 million, while total Fund Balance
reached $38 million. As a measure of the General Fund’s liquidity, it may be useful to
compare both unassigned fund balance and total fund balance to total fund uses
(expenditures and transfers out). Unassigned fund balance represents 98% of total
General Fund uses, while total fund balance represents 96% of the same amount.
As illustrated in Table 2 on the next page, the City’s General Fund balance of $38 million
increased by almost $3.9 million or 11% from the prior year’s balance of $34.1 million.
The increase is due to the higher inflow of revenues and expenditures ending the year
lower than anticipated.
CONTINUED NEXT PAGE
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Table 2: General Fund Results FY 2023-24 vs. FY 2024-25
The financial year-end detailed report was previously submitted to the City Council on
January 21, 2025. Compared to the report presented at that meeting, the audited fund
balance is lower by $0.4 million. This change is mainly due to the final entries related to
GASB Statement No. 96, Subscription-based Information Technology (SBITAs).
ADDITIONAL INFORMATION:
GASB 68 (Pension)
In June 2015, GASB approved Statement No. 68 with the objective to improve accounting
and financial reporting by the state and local governments with respect to pensions. State
and local agencies are required to recognize applicable pension amounts as a liability in
their financial statements (Balance Sheet) and also provide extensive footnote
disclosures and additional supplementary schedules related to their pension plan.
The City’s net pension liability for the Miscellaneous Plan is measured as the
proportionate share of the net pension liability of the CalPERS cost sharing pool. As of
June 30, 2023, the City reported a liability of $16.4 million for its proportionate share of
the net pension liability, an increase of $1.2 (7%) million from the previous year’s liability
of $15.2 million. This increase was expected due as part of the 21.3% net return of
FY 2022-23
Actuals
(Final)
FY 2023-24
Actuals
(Final)
Change
($)
Change
(%)
Revenues 38,731,189 39,950,773 1,219,584 3%
Less: Operating Expenditures (29,042,690) (31,186,577) 2,143,887 7%
Excess of Revenues Over Expenditures $9,688,499 $8,764,196 ($924,303) -10%
Other Financing Sources
Transfers In 300,000 270,000 (30,000) -10%
Transfers Out*(7,301,122) (5,121,120) (2,180,002) -30%
Lease Proceeds 43,899 0 (43,899)100%
Net Change in Fund Balance $2,731,276 $3,913,076 $1,181,800 43%
Fund Balance - Beginning of Year 31,363,608 34,094,884 2,731,276 9%
Ending Fund Balance*$34,094,884 $38,007,960 $3,913,076 11%
*Transfers Out Includes: City Council's approved prior year's surplus transfers of $1.2 million from General Fund to CIP Fund
* In accordance with GASB, the Employee Pension Service Fund of $1.04M is combined with the General Fund
for fund balance reporting purposes
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investments that CalPERS experienced in June 2021, along with assumptions including
discount rate, amortization, inflation, proportionate share of aggregate employer
contributions, mortality rate, and post-retirement benefits.
Additional detailed information on City’s Pension Liability is on pages 58-61 and pages
68-69 of the ACFR (Attachment A).
Employee Pension Service Fund (Fund 682)
On February 2, 2021, the City Council approved the CalPERS Pension Plan Guidelines
which provides a financial plan to address the City’s outstanding pension liability and
CalPERS’ continuous change in valuation methodology. Based on the City Council’s
discretion, the goal is to transfer funds to the Employee Pension Service Fund (EPSF) of
at least 10%, but no more than 25%, of the annual General Fund positive variance
(revenues minus expenditures, including transfers). As a result, the accumulated funds in
the EPSF would relieve the General Fund of payment of more than $900,000 of the City’s
Unfunded Accrued Liability (UAL).
In accordance with the pension guidelines for transparency, during the fiscal year, Staff
maintains the separate tracking of the fund’s financial transactions in the EPSF, Fund
682. At the end of FY 2023-24, the EPSF’s fund balance is $1.04 million. In accordance
with GASB’s requirements for ACFR presentation, this amount is included in the General
Fund’s fund balance of $38 million, as part of the year-end closing process.
GFOA Award
On February 14, 2025 Staff submitted the application to the Government Finance Officers
Association (GFOA) for the Certificate of Achievement for Excellence in Finance
Reporting. In order to be awarded a Certificate of Achievement, a government must
publish an easily readable and efficiently organized A CFR. This report must satisfy both
generally accepted accounting principles and applicable legal requirements . If awarded,
it will be the City’s 31st consecutive year to receive the award.
CONCLUSION:
On February 14, 2025, CLA issued the City’s financial audit report for FY 2023-24,
confirming that no audit findings were identified and that the City’s financial statements
were free of material misstatement.
Additionally, the auditors are required to issue a communication letter for all financial
audits (Attachment B - SAS 114 Letter) and a report on internal controls over financial
reporting and on compliance based on the audit in accordance with GAS (Attachment C
- GAS Letter). In accordance with the American Institute of Certified Public Accountants,
the SAS 114 Letter is a required communication letter to those charged with governance
(City Council) which reports any findings (if applicable), disagreements with management,
and adjustments. The GAS Letter’s purpose is to report any material weaknesses or
significant deficiencies identified during the course of the audit. As stated in the report s,
CLA did not identify any audit findings or deficiencies in the City’s internal control.
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As such, Staff recommends that the City Council receive the City’s FY 202 3-24 ACFR
and City’s financial audit reports.
The ACFR book is now online on the City’s Transparency webpage at:
https://www.rpvca.gov/ArchiveCenter/ViewFile/Item/3575
ALTERNATIVES:
In addition to the Staff recommendation s, the following alternative actions is available for
the City Council’s consideration:
1. Take other action, as deemed appropriate.
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CLAconnect.com
City Council Members
City of Rancho Palos Verdes
Rancho Palos Verdes, California
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of City of Rancho Palos Verdes as of and for the year ended
June 30, 2024, and have issued our report thereon dated February 14, 2025. We have previously
communicated to you information about our responsibilities under auditing standards generally accepted
in the United States of America and Government Auditing Standards, as well as certain information
related to the planned scope and timing of our audit in our statement of work dated July 18, 2024.
Professional standards also require that we communicate to you the following information related to our
audit.
Significant audit findings or issues
Qualitative aspects of accounting practices
Accounting policies
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by City of Rancho Palos Verdes are described in Note 1 to the financial
statements.
No new accounting policies were adopted and the application of existing policies was not changed during
2023-2024.
We noted no transactions entered into by the entity during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in
the proper period.
Accounting estimates
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management’s knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their significance
to the financial statements and because of the possibility that future events affecting them may differ
significantly from those expected. The most sensitive estimate affecting the financial statements was:
The annual required contributions, pension expense, net pension liability and corresponding
deferred outflows of resources and deferred inflows of resources for the City’s public defined
benefit plans are based on actuarial valuations provided by CalPERS and by a third-party actuary.
We evaluated the key factors and assumptions used to develop the allowance in determining that it is
reasonable in relation to the financial statements taken as a whole.
B-1
City Council Members
City of Rancho Palos Verdes
Page 2
Financial statement disclosures
Certain financial statement disclosures are particularly sensitive because of their significance to financial
statement users. The most sensitive disclosure affecting the financial statements was:
The disclosure of the retirement commitments reported in Note 9 to the financial statements.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties encountered in performing the audit
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
Uncorrected misstatements
Professional standards require us to accumulate all misstatements identified during the audit, other than
those that are clearly trivial, and communicate them to the appropriate level of management.
Management did not identify and we did not notify them of any uncorrected financial statement
misstatements.
Professional standards require us to accumulate all misstatements identified during the audit, other than
those that are clearly trivial, and communicate them to the appropriate level of management.
Management has corrected all such misstatements.
Corrected misstatements
None of the misstatements detected as a result of audit procedures and corrected by management were
material, either individually or in the aggregate, to the financial statements taken as a whole.
Disagreements with management
For purposes of this communication, a disagreement with management is a disagreement on a financial
accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be
significant to the financial statements or the auditors’ report. No such disagreements arose during our
audit.
Management representations
We have requested certain representations from management that are included in the management
representation letter dated February 14, 2025.
Management consultations with other independent accountants
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application
of an accounting principle to the entity’s financial statements or a determination of the type of auditors’
opinion that may be expressed on those statements, our professional standards require the consulting
accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge,
there were no such consultations with other accountants.
B-2
City Council Members
City of Rancho Palos Verdes
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Required supplementary information
With respect to the required supplementary information (RSI) accompanying the financial statements, we
made certain inquiries of management about the methods of preparing the RSI, including whether the
RSI has been measured and presented in accordance with prescribed guidelines, whether the methods
of measurement and preparation have been changed from the prior period and the reasons for any such
changes, and whether there were any significant assumptions or interpretations underlying the
measurement or presentation of the RSI. We compared the RSI for consistency with management’s
responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during
the audit of the basic financial statements. Because these limited procedures do not provide sufficient
evidence, we did not express an opinion or provide any assurance on the RSI.
Supplementary information in relation to the financial statements as a whole
With respect to the combining and individual other fund financial statements and schedules (collectively,
the supplementary information) accompanying the financial statements, on which we were engaged to
report in relation to the financial statements as a whole, we made certain inquiries of management and
evaluated the form, content, and methods of preparing the information to determine that the information
complies with accounting principles generally accepted in the United States of America, the method of
preparing it has not changed from the prior period or the reasons for such changes, and the information
is appropriate and complete in relation to our audit of the financial statements. We compared and
reconciled the supplementary information to the underlying accounting records used to prepare the
financial statements or to the financial statements themselves. We have issued our report thereon dated
February 14, 2025.
Other information included in annual reports
Other information (financial or nonfinancial information other than the financial statements and our
auditors’ report thereon) is being included in your annual report and is comprised of introductory and
statistical sections. Our responsibility for other information included in your annual report does not extend
beyond the financial information identified in our opinion on the financial statements. We have no
responsibility for determining whether such other information is properly stated and do not have an
obligation to perform any procedures to corroborate other information contained in your annual report.
We are required by professional standards to read the other information included in your annual report
and consider whether a material inconsistency exists between the other information and the financial
statements because the credibility of the financial statements and our auditors’ report thereon may be
undermined by material inconsistencies between the audited financial statements and other information.
If, based on the work performed, we conclude that an uncorrected material misstatement of the other
information exists, we are required to describe it in our report. Our auditors’ report on the financial
statements includes a separate section, “Other Information,” which states we do not express an opinion
or any form of assurance on the other information included in the annual report. We did not identify any
material inconsistencies between the other information and the audited financial statements. We
identified material inconsistencies, but management refused to make the necessary revision to the
financial statements and/or the other information. We have modified our opinion. We withheld our
auditors’ report.
B-3
City Council Members
City of Rancho Palos Verdes
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This communication is intended solely for the information and use of the [Identify the body or individual(s)
charged with governance] and management of City of Rancho Palos Verdes and is not intended to be,
and should not be, used by anyone other than these specified parties.
CliftonLarsonAllen LLP
Irvine, California
February 14, 2025
B-4
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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
City Council Members
City of Rancho Palos Verdes
Rancho Palos Verdes, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, each major fund, and the aggregate remaining fund information of City of Rancho Palos
Verdes, as of and for the year ended June 30, 2024, and the related notes to the financial statements,
which collectively comprise the City of Rancho Palos Verdes’s basic financial statements, and have
issued our report thereon dated February 14, 2025.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered City of Rancho Palos
Verdes’s internal control over financial reporting (internal control) as a basis for designing audit
procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the
financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of
Rancho Palos Verdes’s internal control. Accordingly, we do not express an opinion on the effectiveness
of City of Rancho Palos Verdes’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by those charged
with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses or significant deficiencies may exist that were not identified.
C-1
City Council Members
City of Rancho Palos Verdes
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Rancho Palos Verdes’s financial
statements are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have
a direct and material effect on the financial statements. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordingly, we do not express such an
opinion. The results of our tests disclosed no instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards.
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
entity’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the entity’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
CliftonLarsonAllen LLP
Irvine, California
February 14, 2025
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