HomeMy WebLinkAbout08. City Annual Financial Report
AGENDA MEMO
DATE: March 22, 2011
TO:
Mayor and Members of the City Council
FROM:
Office of the City Manager
By: John Michicoff, Director of Finance
SUBJECT: Comprehensive Annual Financial Report
for the fiscal year ended June 30, 2010
RECOMMENDATION
That the City Council of the City of Downey receive and file the Comprehensive Annual
Financial Report (CAFR) for the fiscal year ended June 30, 2010.
DISCUSSION
Attached is the June 30, 2010 CAFR which is officially transmitted herewith to the City
Council. The CAFR is an extensive report summarizing the financial activities of the
City that occurred from July 1, 2009 through June 30, 2010.
The CAFR is divided into three sections: Introductory, Financial and Statistical. The
Introductory section contains a Letter of Transmittal. For the average reader, this is
probably the easiest part of the report to understand. This letter includes a brief
overview of the City's accomplishments for the fiscal year, objectives for the upcoming
years and how the City controls its finances.
The Financial section contains the opinion issued by the City’s independent auditors.
As in past years, the CAFR received a “clean” opinion meaning that there are no
material irregularities in the operation of the City or in the presentation of the financial
activities. Specific financial information is in the Management's Discussion and Analysis
found on pages 3-15. This narrative discusses the basic financial operations of the City
in a more detailed manner than is found in the Letter of Transmittal. The third major
component in this section is the actual financial statements themselves.
With the financial statement now presented in a more “business-like” fashion, the
Statement of Activities (pages 18 and 19) shows revenues and expenses on a program
(or departmental) type basis. This basis indicates that primary duties of the City (i.e.,
general administration, public safety, community services to name a few) are primarily
funded by taxes while business-type activities (water, golf course and transit) are still
more reliant on charges for services.
The final Statistical section presents data useful in analyzing the City’s financial and
operational history for comparative purposes. Most of the charts cover a ten year
period depending on the objective. Some of the statistics tracked include financial
trends, revenue capacity, and debt capacity which are useful for evaluating the City’s
financial stability. Additional statistics include operating indicators.
CITY OF DOWNEY, CALIFORNIA
Comprehensive Annual Financial Report
Page No. 2
The Government Finance Officers Association of the United States and Canada
(GFOA) sponsors an awards program in financial reporting. The purpose of the award
is to recognize Cities which prepare a CAFR that is easily readable, efficiently organized
and reflects a high level of quality in the report and underlying accounting systems. The
City had submitted the June 30, 2009 CAFR for recognition and received an award of
excellence.
GENERAL FUND OVERVIEW
Since the financial statement is presented in a “business-like” fashion, details in the
individual funds are confusing. Most of the significant day-to-day City operations are
tracked in the General Fund and, therefore, the balance of the report will focus on this
fund’s activities which are not easily extracted from the statements.
The General Fund records the cost of services enjoyed by the citizens of Downey and
the revenue to support those services. City services such as public safety (police and
fire), community events (i.e., library, senior services, park programs, after school
programs, aquatics), public building and highway maintenance, building, planning and
overall city administration are cost centers tracked in this fund.
Last June, staff discussed how the continuing sluggish economy was depleting city
revenues, especially sales tax. The financial report confirms staff’s discussion. Due to
the loss of new car dealers in years past plus the drop in consumer spending, the city’s
sales tax revenue was down from a budgeted $15.2 million to an actual $12 million
($3.2 million or 21% decrease). In addition, several other revenue sources decreased
including construction related revenues (building and permits fees) and fines and
forfeiture revenues. In total, actual 2009-10 revenues and other funding sources were
$66.1 million and expenditures and other funding uses were $67.1 million.
As revenues continued to drop, city management responded by maintaining the hiring
freeze for non-critical positions, deferring equipment purchases and implementing
several other cost cutting measures.Since the 2009-10 approved budget projected a
$2.7 million deficit, (usage of funds exceeded sources of funds) these operational
modifications limited the General Fund deficit to $1 million. The $1.6 million deficit
reflected on page 24 of the CAFR is a combined loss of the General Fund and other
funds dependant on the General Fund as its main source of revenues.
At the beginning of the 2010-11 fiscal year, a combined $38 million in unrestricted
reserves were available to the General Fund. This amount may decrease to
approximately $27 million due to the current year financial needs of the General Fund,
Water Fund and other funds requiring financial assistance.
FISCAL IMPACT
None to receive and file the Comprehensive Annual Financial Audit (CAFR).
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