HomeMy WebLinkAboutItem 6 - Attachment A - FY 2022-23 Financial StatementsWhale Rock Commission
Financial Statements
For the Fiscal Years ended June 30, 2023 and 2022
Whale Rock Commission
Fiscal Years Ended June 30, 2023 and 2022
Table of Contents
1-3
5-13
19
20
23
24
25
26
27
28
29-32
35
36
37-38
39-40
Independent Auditor's Report
Management’s Discussion and Analysis
Basic Financial Statements
Government-wide Financial Statements:
Statements of Net Position - June 30, 2023 and 2022
Statements of Activities - Fiscal Years Ended June 30, 2023 and 2022
Fund Financial Statements
Balance Sheets - June 30, 2023 and 2022
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position - June 30, 2023
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position - June 30, 2022
Statements of Revenues, Expenditures, and Changes in Fund Balance - Fiscal Years Ended
June 30, 2023 and 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance
of Governmental Funds to the Statement of Activities - June 30, 2023
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance
of Governmental Funds to the Statement of Activities - June 30, 2022
Notes to the Financial Statements
Required Supplementary Information
Budgetary Comparison Schedule - Fiscal Year Ended June 30, 2023
Notes to Required Supplementary Information
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
Schedule o f Findings and Responses
Status of Prior Year Findings – 2021/2022 41-43
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INDEPENDENT AUDITOR’S REPORT
To the Members
of the Whale Rock Commission
San Luis Obispo, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the governmental activities and general fund of the Whale
Rock Commission (Commission), as of and for the years ended June 30, 2023 and June 30, 2022, and the related notes
to the financial statements, which collectively comprise the Commission’s basic financial statements as listed in the
table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial
position of the governmental activities and general fund information of the Commission, as of June 30, 2023, and the
respective changes in financial position for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America
(GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be
independent of the Commission and to meet our other ethical responsibilities, in accordance with the relevant ethical
requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements
The Commission’s management is responsible for the preparation and fair presentation of the financial statements in
accordance with accounting principles generally accepted in the United States of America, and for the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the Commission’s ability to continue as a going concern
for twelve months beyond the financial statement date, including any currently known information that may raise
substantial doubt shortly thereafter.
To the Members
of the Whale Rock Commission
San Luis Obispo, California
Page 2
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an
audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are
considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the
judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
x Exercise professional judgment and maintain professional skepticism throughout the audit.
x Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
and design and perform audit procedures responsive to those risks. Such procedures include examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements.
x Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Commission’s internal control. Accordingly, no such opinion is expressed.
x Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluate the overall presentation of the financial statements.
x Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise
substantial doubt about the Commission’s ability to continue as a going concern for a reasonable period of
time.
We are required to communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified
during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion
and analysis and budgetary comparison information on pages 5-13 and 35 be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain
limited procedures to the required supplementary information in accordance with auditing standards generally accepted
in the United States of America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management’s responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
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To the Members
of the Whale Rock Commission
San Luis Obispo, California
Page 3
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards , we have also issued our report dated March 11, 2024 on our
consideration of the Commission’s internal control over financial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is
solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of
that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on
compliance.That report is an integral part of an audit performed in accordance with Government Auditing Standards in
considering the Commission’s internal control over financial reporting and compliance.
Badawi & Associates, CPAs
Berkeley, California
March 11, 2024
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Management’s Discussion & Analysis
This section provides a narrative overview and analysis of the financial activities of the Whale Rock Commission for the
fiscal years ended June 30, 2023 and 2022. It should be read in conjunction with the accompanying basic financial
statements.
Overview of the Financial Statements
The financial statements are presented in accordance with Governmental Accounting Standards Board Statement No. 34.
The basic financial statements are comprosed of three components:
1. Government-wide financial statements
2. Fund financial statements and
3. Notes to the financial statements.
Government-Wide Financial Statements
This set of statements is designed to provide readers with a broad overview of the Commission’s finances, in a manner
similar to a private-sector business.
The Statement of Net Position presents information on all the Commission’s assets and liabilities, with the differnce reported
as net position. Over time, increases or decreases in net position may serve as an indicator of whether the finacial position
of the Commission is improving or declining.
The Statement of Activities presents information showing how the Commission’s net position changed during the most
recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs.
Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal
periods.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific
activites or objectives. The Commission, like other state and local governments, uses fund accounting to ensure and
demonstrate compliance with finance-related legal requirements. However, unlike the government-wide financial
statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well
as on balances of spendable resources available at the end of the fiscal year. Such information reflects financial resources
available in the near future to finance the Whale Rock Fund . All of the activities of the Commission are accounted for in
one fund.
Whale Rock Commission
The Whale Rock Fiduciary (Custodial) fund is used to account for the Commission’s ongoing operating activities.
Ownership in the Reservoir is as follows: 55.05%, City of San Luis Obispo; 33.71%, California Polytechnic State
University; and 11.24%, California Men’s Colony. The City’s share of the Commission’s expenses is recorded as
expenses of the Water Fund. All receipts and disbursement of the Commission are included in the fiduciary fund.
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Management’s Discussion & Analysis
Financial Highlights
The following outlines financial highlights for the year:
x The assets of the Commission exceeded its liabilities at June 30, 2022 by $5.9 million (net position). The
Commission’s unrestricted net position increased by $712,000 compared with 2021-22.
x Total assets increased by $715,000 or 14% to just under $6.0 million. This reflects an increase in cash and
receivables offset by steady increases in accumulated depreciation of capital assets. Total liabilities also increased
by $3,000 or 3% to $118,000. The changes are reflected in vendors payable, accrued salaries and other accrued
liabilities at year end.
x Total revenue, comprised of charges for services, other revenues, and use of money and property amounted to $2.3
million for FY 2022-23 which represents a slight decrease of $18,000 or 1% from the prior year. The total charges
for services increased by $406,000 or 37% from the prior year. Other revenues which include capital contributions
totaled $816,500 which represents a decrease of $593,000 or 42% from the prior year. This decrease in capital
contributions was a result of lower captial activty budgeted for the fiscal year. In contrast, use of money and
property, which reflects the funds allocation of investment earnings, amounted to $61,000 for the fiscal year
compared to a loss of $107,000 in the prior fiscal year.
x Water distribution revenues increased from the prior year by $228,000 from $144,000 in FY 2021-22 to nearly
$372,000 in the current year. This increase was primarily due to the impact of the Naciemento pipeline being down
for repairs and thus leading to higher demand from the Whale Rock Reservoir in the current fiscal year.
x Total expenses of $1.7 million were higher in FY 2022-23 from the prior year by $332,000, which represents an
increase of 25%. This increase was primarily caused by increases in operational costs as well as small capital project
related costs. In FY 2022-23, operational costs were $229,000 greater than FY 2021-22, while general government
costs were $4,000 greater than in the prior year. Depreciation remained consistent with the prior year.
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Management’s Discussion & Analysis
Operational Highlights
The following are the operational highlights for the fiscal year:
Whale Rock Reservoir Spill
On March 12, 2023, Whale Rock Reservoir filled and
began to release water over the spillway. The reservoir
continued to release water through June. In the first
three months of 2023, the Reservoir added over 10,000
acre-feet of water, or approximately 25% of its total
volume, to reach maximum water storage. This was
the thirteenth time that Whale Rock Reservoir has
spilled since construction, with the last spill occurring
in 2006.
Drainage Work at Whale Rock
The significant rainfall that filled the reservoir also transported sediment,
plugging a drainage near the dam. While drainage issues were not occurring in
an area that impacted dam safety or stability, staff utilized an excavator to dig
out plugged drains that were allowing water to flow near the underground
structure that houses Whale Rock’s water meter. Staff’s work removed many
years of accumulated sediment and vegetation that had plugged the drainage
area. Flow was restored, and staff will monitor the condition of the drainage to
prevent sediment build-up in the future.
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Management’s Discussion & Analysis
Exposed Whale Rock Pipeline
The heavy rains caused erosion and exposed approximately eight feet of the Whale Rock pipeline near Chorro
Park. Staff installed vinyl, sandbags, and straw wattles to keep the erosion from expanding in the continued rains.
During the summer of 2023, Souza Construction backfilled and graded the area to reduce further erosion. The
area was hydroseeded to promote plant growth and stabilize the soil. Recently, staff have added small amounts of
material to fill small sinkholes that have developed since the area was backfilled. The Hydro-seed is growing
well, and the site will be monitored for additional erosion repairs in the future.
Stilling Basin Drain Clean and Inspect
Whale Rock Reservoir’s stilling basin is designed to absorb energy from water traveling down the spillway. This
stilling basin produces nonturbulent water flows that will not undermine the spillway structure as water is released
down the spillway. Whale Rock staff have been directed to perform a condition assessment inspection of the
stilling basin that will identify any defects and provide recommendations to address any defects. The stilling basin
environment may house red-legged frogs, tidewater gobies, or steelhead and requires various permits to allow the
work to occur. During this year, staff worked with environmental consultants to apply for the required permits.
The permits have been issued and the condition assessment inspections should take place during 2024.
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Management’s Discussion & Analysis
Mowing the Dam
State regulations require that the Whale Rock team mow the
dam face so that the dam’s surface can be clearly observed
and monitored for unusual conditions. Vegetation reduction
also encourages birds of prey to remove rodents that can have
negative impacts on the dam. Whale Rock’s wheeled tractor
is not suited to work safely on the high angles of the dam
face. Staff rented a tracked machine to complete the annual
mowing of the dam face. Mowing the high-angle areas of the
dam was completed in approximately two working days.
Spillway Underdrain Repairs
Spillway underdrains are designed to catch the water that
may get below the spillway’s concrete structure and return
the water to the spillway, preventing the concrete spillway
from erosion. The spillway underdrain repair project was
awarded in June of 2023. The spillway underdrain repairs
were constructed over a two-month period during the fall of
2023. The completion of this project restored the spillway
underdrain system to the original design specifications.
9
Management’s Discussion & Analysis
Pump Station A Maintenance
Staff removed and replaced three electric motors that had failed over the spring while pumping water. The
motors were rebuilt and put back in service. A check valve inside the pump station malfunctioned, and repair
parts were unavailable. Staff purchased and installed a new check valve to return the pump to service. Staff
lowered the sump pump in the underground valve vault to keep water from damaging electronic instruments
located in the vault. A steel inlet pipe failed and was later repaired by a welding contractor. Staff worked with a
welding contractor to repair the inlet piping, backfill the area, and apply a protective epoxy to protect the steel
inlet pipe.
The Notes to the Financial Statements provide additional information that is essential to the reader for a full understanding
of the data provided in the Commission’s financial statements.
10
Management’s Discussion & Analysis
Financial Analyisis
Net position may serve, over time, as an indicator of a government’s financial position. As noted above, assets exceeded
liabilities by $5.9 million at June 30, 2023.
At the end of the current fiscal year, the Commission continues to report a positive net position.
Information about changes in net position resulting from operations is summarized below:
11
Management’s Discussion & Analysis
Commission Contributions
Members contribute for both operating and maintenance activities as well as capital improvement projects (CIP) which
may also include contributions toward the CIP reserve. Total contributions by member are show below.
Budgetary Highlights
A budgetary comparison schedule for the year ended June 30, 2023 is presented as part of the required supplementary
information. The following summarizes the original and final budget compared with actual results for 2022-23. The variance
column reflects the differences between the actual amounts realized and the final budget amounts. While revenues came in
above budget, expenditures came in significantly under due to budgeted project activity that did not happen during the year.
12
Management’s Discussion & Analysis
Capital Assets
Capital assets, including infrastructure, are those assets that are used in the performance of the Commission’s functions and
reservoir. As of June 30, 2023, the Commission’s capital assets decreased by $63,000 from $790,000 in the prior year to
$726,000 (net of accumulated depreciation). This decrease was due to depreciation on assets as there were no significant
additions in the current year.
More information on the Commission’s capital assets can be found in Note 3 of these financial statements.
Request for Additional Information
This finacial report is designed to provide a general overview of the Commision’s finances for all those with an interest in
the finances. Questions concerning any of the information provided in this report or requests for additional financial
information should be addressed to the City of San Luis Obispo, Department of Finance, 990 Palm Street, San Luis Obispo,
California, 93401.
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BASIC FINANCIAL STATEMENTS
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GOVERNMENT-WIDE FINANCIAL STATEMENTS
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2023 2022
ASSETS
Cash and investments 5,003,065$ 4,443,600$
Accrued interest receivable 16,382 8,433
Accounts receivables 227,594 16,549
Capital assets, net of accummlated depreciation 726,355 789,639
Total assets 5,973,396 5,258,221
LIABILITIES
Accounts payable 38,036 48,122
Accrued salaries 13,568 10,631
Other liabilities 66,343 56,086
Total liabilities 117,947 114,839
Net Position
Net investment in capital assets 726,355 789,639
Unrestricted 5,129,094 4,353,743
Total Net Position 5,855,449$ 5,143,382$
Whale Rock Commission
Statements of Net Position
June 30, 2023 and 2022
The accompanying notes are an integral part of these financial statements.
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2023 2022
Expenses
Reservoir operations 1,233,371$ 1,004,354$
General government 190,501 186,697
Capital projects 176,959 77,602
Depreciation 63,284 63,458
Total expenses 1,664,115 1,332,111
Program Revenues
Charges for services:
Basic operating charges 1,126,924 949,126
Water distribution 371,996 143,701
Total program revenues 1,498,920 1,092,827
Net expense and program revenues (165,195) (239,284)
General Revenues and Transfers
Use of money and property 60,750 (107,365)
CIP Contributions 810,312 1,401,424
Other revenues 6,200 7,772
Total general revenues and transfers 877,262 1,301,831
Increase in Net Position 712,067 1,062,547
Net Position - beginning of year 5,143,382 4,080,525
Prior year restatement - 310
Net position,beginning of year, as restated 5,143,382 4,080,835
Net Position - end of year 5,855,449$ 5,143,382$
Whale Rock Commission
Statements of Activities
For the Years Ended June 30, 2023 and 2022
The accompanying notes are an integral part of these financial statements.
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FUND FINANCIAL STATEMENTS
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803--807--809
2023
Assets
Cash and investments 5,003,065$ 4,443,600$
Accrued interest receivable 16,382 8,433
Accounts receivables 227,594 16,549
Total assets 5,247,041 4,468,582
Liabilities and Fund Balance
Liabilities
Accounts payable 38,036 48,122
Accrued salaries 13,568 10,631
Other liabilities 66,343 56,086
Total liabilities 117,947 114,839
Fund Balance
Assigned for reservoir operations 284,774 238,210
Assigned for CIP 3,546,334 2,912,981
Unassigned 1,297,986 1,202,552
Total fund balance 5,129,094 4,353,743
Total Liabilities and Fund balance 5,247,041$ 4,468,582$
2022
Whale Rock Commission
Balance Sheets
June 30, 2023 and 2022
The accompanying notes are an integral part of these financial statements.
23
2023
Total Fund Balances - governmental funds 5,129,094$
Capital assets at estimated historical cost 1,875,846$
Accumulated depreciation (1,149,491)
726,355
Total net position - governmental activities 5,855,449$
Capital assets used in governmental activities are not financial resources and therefore are not
reported in the fund.
Whale Rock Commission
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
For the years ended June 30, 2023
The accompanying notes are an integral part of these financial statements.
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2022
Total Fund Balances - governmental funds 4,353,743$
Capital assets at estimated historical cost 1,876,264$
Accumulated depreciation (1,086,625)
789,639
Total net position - governmental activities 5,143,382$
Capital assets used in governmental activities are not financial resources and therefore are not
reported in the fund.
Whale Rock Commission
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
For the years ended June 30, 2022
The accompanying notes are an integral part of these financial statements.
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2023 2022
REVENUES:
Use of money and property 60,750$ (107,365)$
CIP Contributions 810,312 1,401,424
Other revenue 6,200 7,772
Services:
Basic operating charges 1,126,924 949,126
Water distribution 371,996 143,701
Total services 1,498,920 1,092,827
Total revenues 2,376,182 2,394,658
EXPENDITURES:
Current:
Reservoir operations 1,233,371 1,004,354
General government 190,501 186,697
Capital projects 176,959 76,025
Total curent expenditures 1,600,831 1,267,076
Total expenditures 1,600,831 1,267,076
Excess of revenues over expenditures 775,351 1,127,582
FUND BALANCES:
Beginning of year, as restated 4,353,743 3,226,161
End of year 5,129,094$ 4,353,743$
Whale Rock Commission
Statements of Revenues, Expenditures and Changes in Fund Balances
For the years ended June 30, 2023 and 2022
803--807--809
The accompanying notes are an integral part of these financial statements.
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2023
Total excess of revenues over expenditures - governmental funds 775,351$
Depreciation expense (63,284)$
(63,284)
Total increase in net position - governmental activities 712,067$
Capital outlay net of depreciation expenses and disposal
Whale Rock Commission
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities
For the years ended June 30, 2023
The accompanying notes are an integral part of these financial statements.
27
2022
Total excess of revenues over expenditures - governmental funds 1,127,582$
Construction in progress deletion (1,577)$
Depreciation expense (63,458)
(65,035)
Total increase in net position - governmental activities 1,062,547$
Capital outlay net of depreciation expenses and disposal
Whale Rock Commission
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities
For the years ended June 30, 2022
The accompanying notes are an integral part of these financial statements.
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Whale Rock Commission
Notes to Financial Statements
June 30, 2023 and 2022
Note 1:Summary of Significant Accounting Policies
Description of the Reporting Entity
The Whale Rock Commission (Commission) was established as a joint venture on December 12, 1960 to oversee, in a
fiduciary capacity, the operations and routine maintenance of the Whale Rock Reservoir (Reservoir). The Commission
is composed of six voting members and two non-voting members. Three voting members are appointed by the City of
San Luis Obispo (City); one by the California Polytechnic State University; one by the California Men's Colony; and
one by the Director of Finance, State of California. The two non-voting members are position appointments: the Director
of Water Resources, State of California; and the Water Superintendent, City of San Luis Obispo. The Commission is
authorized to establish policies for the operation of the Reservoir, to contract for the sale of excess water, and to approve
its annual budget.
The City, in accordance with established policies of the Commission, operates and maintains the Reservoir; prepares
and recommends the annual budget; and maintains the fiscal records and moneys of the Commission. Ownership in the
Reservoir is as follows: 55.05%, City of San Luis Obispo; 33.71%, California Polytechnic State University; and 11.24%,
California Men's Colony.
Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report
information on all of the activities of the Commission.
The statement of activities demonstrates the degree to which the direct expenses are offset by program revenues. Direct
expenses are those that are clearly identifiable with a specific function or segment. Program revenues include
1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided
by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment.
Separate fund financial statements are also provided.
Measurement Focus, Basis of Accounting and Basis of Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the accrual
basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred,
regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility
requirements imposed by the provider have been met.
Fund financial statements are reported using the current financial resources measurement focus and the modified accrual
basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered
to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. For this purpose, the Commission considers revenues to be available if they are collected within 60 days
of the end of the current fiscal period. The Commission considers interest earned but not received and billings to
participating agencies earned but not received as susceptible to accrual. Expenditures generally are recorded when a
liability is incurred, as under accrual accounting. The focus of financial measurement is upon available resources rather
than net income determination.
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Whale Rock Commission
Notes to Financial Statements
June 30, 2023 and 2022
Note 1: Summary of Significant Accounting Policies (Continued)
The accounting policies of the Commission conform to generally accepted accounting principles. The accounts of the
Commission are presented in the fund financial statements as a Governmental Fund. As the City maintains the accounting
records and moneys of the Commission in a fiduciary capacity, the Commission's operating activities are accounted for
in a separate fiduciary fund type (Custodial Fund) in the City's Annual Comprehensive Financial Report (ACFR). The
operations of the fund are accounted for with a set of self-balancing accounts that comprise the Commission's assets,
liabilities, fund equity, revenues, and expenditures. Commission resources are allocated to, and accounted for, as assets
of the fund and equity to the participating agencies.
Budgets and Budgetary Accounting
As provided under the Whale Rock Agreement, the Commission has the sole responsibility for the adoption of the budget
and may amend or supplement the budget at any time after its adoption. The budget is legally adopted prior to the
commencement of the fiscal year and is prepared in accordance with generally accepted accounting principles. The
Director of Finance of the City has the authority to make or approve administrative adjustments to the budget as long as
those changes will not have a significant policy impact nor affect budgeted year- end fund balances. Appropriations
lapse at year-end unless such amounts are encumbered and reappropriated in the next fiscal year.
Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets are reported as part of the Commission.
Capital assets are defined by the Commission as assets with an initial, individual cost of more than $25,000 and an
estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if
purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of assets or materially
extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are
constructed. The Commission does not have any intangible assets. Detailed information on the Commission’s capital
assets can be found in Note 3.
City of San Luis Obispo Services
Because the City accounts for the activities of the Commission, other services such as workforce and risk management
are also provided by the City. The City’s ACFR fully discusses pooled and self-insurance and how the City manages the
risk of the Commission.
New Pronouncements
In 2023, the Commission adopted new accounting standards in order to conform to the following Governmental
Accounting Standards Board Statements:
¾GASB Statement 91, Conduit Debt Obligations – The objective of this statement is to provide a single method
of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1)
commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related
note disclosures. The requirements of this statement did not apply to the Commission for the current fiscal year.
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Whale Rock Commission
Notes to Financial Statements
June 30, 2023 and 2022
Note 1: Summary of Significant Accounting Policies (Continued)
New Pronouncements (Continued)
¾GASB Statement 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements –
The objective of this Statement is to improve financial reporting by addressing issues related to public-private
and public-public partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement in which
a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide
public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or
other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction.
The requirements of this statement did not apply to the Commission for the current fiscal year.
¾GASB Statement No. 96, Subscription-Based Information Technology Arrangements – The objective of this
statement is to provide guidance on the accounting and financial reporting for subscription-based information
technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a
SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a
corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription
payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA.
The requirements of this statement did not apply to the Commission for the current fiscal year.
Note 2:Cash and Investments
The Commission's cash and investments are pooled with those of the City. As provided for by the California Government
Code, the cash balances of substantially all funds held by the City are pooled and invested by the City Treasurer for the
purpose of increasing interest earnings through investment activities. The Commission's share of the aggregate pooled
cash and investments are recorded at fair value and included in the accompanying balance sheet under the financial
statement caption cash and investments. Interest earned on pooled investments is allocated quarterly to the Commission
based upon the Commission's average cash balance during the allocation period. Refer to Note 2 of the Notes to the
Financial Statements of the City of San Luis Obispo as contained in the City's ACFR for further discussion of the nature
of the City's pooled cash and investments and all related fair value disclosures.
Note 3:Capital Assets
Governmental Accounting Standards Board (GASB) standards require that the Commission report in the government-
wide statements the value of all capital assets net of accumulated depreciation, including infrastructure assets, in
accordance with U.S. Generally Accepted Accounting Principles (GAAP). Infrastructure assets are defined as long- lived
capital assets that are stationary in nature and normally can be preserved for a significantly greater number of years than
most capital assets.
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Whale Rock Commission
Notes to Financial Statements
June 30, 2023 and 2022
Note 3:Capital Assets (Continued)
The minimum requirement for compliance with GASB standards is to provide infrastructure valuations for all assets
constructed, acquired, or placed into service on or after July 1, 1980. Relevant assets for the Commission were valued
at one of two dates: 1) the original date of construction, if available, or 2) the incorporation date of the Commission.
Each asset was reviewed to determine the adequacy of the data to value to asset prior to July 1, 1980 using historical
cost or estimated historical cost.
Capital assets activity for the fiscal year ended June 30, 2023 was as follows:
Capital assets activity for the fiscal year ended June 30, 2022 was as follows:
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REQUIRED SUPPLEMENTARY INFORMATION
33
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Variance
Positive
Original Budget Final Budget Actual (Negative)
Revenues
Use of money and property 1,000$ 1,000$ 60,750$ 59,750$
CIP Contributions 810,311 810,311 810,312 1
Other revenues 6,000 6,000 6,200 200
Services:
Basic operating charges 1,126,924 1,126,924 1,126,924 -
Water distribution 365,400 365,400 371,996 6,596
Total services 1,492,324 1,492,324 1,498,920 6,596
Total Revenues 2,309,635 2,309,635 2,376,182 66,547
Expenditures
Current:
Reservoir operations 1,490,177 1,330,219 1,233,371 96,848
General government 274,372 190,488 190,501 (13)
Capital projects 194,167 1,762,679 176,959 1,585,720
Total Expenditures 1,958,716 3,283,386 1,600,831 1,682,555
Excess (Deficiency) of Revenues and Other
Sources Over (Under) Expenditures and
Other Uses 350,919 (973,751) 775,351 1,749,102
Commission Equity - beginning of year 4,353,743 4,353,743 4,353,743 -
Commission Equity - end of year 4,704,662$ 3,379,992$ 5,129,094$ 1,749,102$
Whale Rock Commission
Budgetary Comparison Schedule
Fiscal Year Ended June 30, 2023
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Budgetary Comparison Schedule
Whale Rock Commission
Notes to Required Supplementary Information
June 30, 2023
1. The budget is prepared using the modified accrual basis of accounting consistent with U.S.
generally accepted accounting principles.
2. Outstanding encumbrances from the prior fiscal year are not reflected in the original budget
column but are included in the final budget amounts.
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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
Independent Auditor’s Report
To Members of the Whale Rock Commission
San Luis Obispo, 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 and general fund information of
the Whale Rock Commission (Commission), as of and for the year ended June 30, 2023, and the related notes to the
financial statements, which collectively comprise the Commission’s basic financial statements and have issued our
report thereon dated March 11, 2024.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Commission’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 the Commission’s internal control. Accordingly, we do not express an
opinion on the effectiveness of the Commission’s internal control.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been
identified. However, as described in the accompanying schedule of findings and responses, we did identify certain
deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.
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. We consider the deficiencies described in the
accompanying schedule of findings and responses as item 2023-001 to be material weaknesses.
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. We consider the
deficiencies described in the accompanying schedule of findings and responses as item 2023-002 to be significant
deficiency.
To the Members of the Whale Rock Commission
San Luis Obispo, California
Page 2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Commission’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.
Whale Rock Commission’s Response to Findings
The Commission’s response to the findings identified in our audit is described in the accompanying schedule of
findings. Commission’s response was not subjected to the auditing procedures applied in the audit of the financial
statements and, accordingly, we express no opinion on it.
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.
Badawi & Associates, CPAs
Berkeley, California
March 11, 2024
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Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2023
Section I – Current Year Findings
A. Financial Statement Audit Finding
2023-001 Journal Entries Posting (Material Weakness)
Criteria: The access to post journal entries in the general ledger should be restricted. Journal entries should be
independently prepared, reviewed before being posted to the general ledger.
Condition: During the review of the City’s journal entry approval matrix and JE testing, we noted the posting from the
subledger to GL do not require approvals at the general ledger level nor at the subledger level. Considering the number
of employees who can post entries through subledger without review and the fact that corrections to payroll, payable,
revenue/receivables, cash management, capital assets all can be posted through subledger and do not require approval,
it increased the risk of unauthorized or incorrect journals get posted into general ledger.
Cause: The City didn’t have control in place to ensure all journal entries are properly reviewed before posting.
Effect:. Journal entries recorded in the City’s accounting system may be inaccurate, unapproved, or unsupported.
Recommendation: We recommend that the City limit the number of employees who can post journal entries in the
subledger and general ledger, and implement system control to ensure all journal entries are reviewed before posting.
Management’s response:
City management concurs with the recommendation and will continue to work with our internal IT team as well as
consultants, to explore how the Oracle ERP system’s workflows can be adjusted to include an approval process for
posting adjusting entries, which are currently system generated and automatically posted. Approvals for manually
generated journal entries were implemented during the prior year and continue to be in place.
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Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2023
Section I – Current Year Findings, continued
A. Financial Statement Audit Finding, continued
2023-002 Payroll Module Implementation (Significant Deficiency)
Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal
control system over payroll requires timely and accurate payroll processing.
Condition: During the performance of the audit, we noted that –
x The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually
track the payroll in a spreadsheet and correct the error as it occurs since the implementation.
x The configuration of payroll journal entries posting was implemented incorrectly which caused the variance
between the bank record and the City’s general ledger.
Cause: The Oracle payroll module has not been implemented correctly.
Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed.
Recommendation: We recommend the City to work with the third-party vendor to correct the implementation of
payroll module.
Management’s Response:
City Management concurs with the finding and the City has recently entered into a contract with a consultant to assist
with the reconfiguration of the payroll module to correct the overtime calculations and has completed substantial
progress in identifying and testing solutions. This work is expected to resolve the issue upon completion and will
eliminate the current practice involving manual correction of overtime rates. It is anticipated that this reconfiguration
work will be complete during the 2023-24 fiscal year.
40
Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2023
Section II – Prior Year Findings
A. Financial Statement Audit Finding
2022-001 Journal Entries Posting (Material Weakness)
Criteria: The access to post journal entries in the general ledger should be restricted. Journal entries should be
independently prepared, reviewed before being posted to the general ledger.
Condition: During the review of the City’s journal entry approval matrix and JE testing, we noted the posting from the
subledger to GL do not require approvals at the general ledger level nor at the subledger level. Considering the number
of employees who can post entries through subledger without review and the fact that corrections to payroll, payable,
revenue/receivables, cash management, capital assets all can be posted through subledger and do not require approval,
it increased the risk of unauthorized or incorrect journals get posted into general ledger.
Cause: The City didn’t have control in place to ensure all journal entries are properly reviewed before posting.
Effect:. Journal entries recorded in the City’s accounting system may be inaccurate, unapproved, or unsupported.
Recommendation: We recommend that the City limit the number of employees who can post journal entries in the
subledger and general ledger, and implement system control to ensure all journal entries are reviewed before posting.
Status:See current year finding 2023-001.
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Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2023
Section II – Prior Year Findings, continued
A. Financial Statement Audit Finding, continued
2022-002 Payroll Module Implementation (Significant Deficiency)
Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal
control system over payroll requires timely and accurate payroll processing.
Condition: During the performance of the audit, we noted that –
x The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually
track the payroll in a spreadsheet and correct the error as it occurs since the implementation.
x The configuration of payroll journal entries posting was implemented incorrectly which caused the variance
between the bank record and the City’s general ledger.
Cause: The Oracle payroll module has not been implemented correctly.
Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed.
Recommendation: We recommend the City to work with the third-party vendor to correct the implementation of
payroll module.
Status: See current year finding 2023-002.
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