HomeMy WebLinkAbout02-02-2016 Item 07 Acceptance of the Comprehensive Annual Financial Report, Single Audit Report & Annual Audit of Transportation Development Act Funds 2014-15Council Agenda Report
Meeting Date: 2/2/2016
FROM: Derek Johnson, Assistant City Manager/Interim Finance Director
Prepared By: Vilma Warner, Finance Operation Manager
SUBJECT: ACCEPTANCE OF THE COMPREHENSIVE ANNUAL FINANCIAL
REPORT, SINGLE AUDIT REPORT, AND ANNUAL AUDIT OF
TRANSPORTATION DEVELOPMENT ACT FUNDS FOR 2014-15
RECOMMENDATION
Accept the Comprehensive Annual Financial Report, Single Audit Report, and annual audit of
the Transportation Development Act Funds for Fiscal Year 2104-15.
DISCUSSION
The accompanying Comprehensive Annual Financial Report (CAFR) has been prepared as required
by the City's Charter and applicable State laws requiring financial reporting. The CAFR provides a
final and audited representation of the City's financial condition across all funds for the fiscal year
that ended June 30, 2015. The CAFR was published on the City's website on December 29, 2015,
as required by City' policies and hard copies were provided to the City Council in January 2016.
As required by the City Charter, the financial statements have been audited by independent certified
public accountants Glenn Burdette. The objective of a financial audit is to provide users of the
financial reports with reasonable assurance from an independent source that the reports are reliable.
The auditor issued the financial statements with an unqualified opinion which means that they are
presented fairly and in conformity with generally accepted accounting principles (see pages 1-3 of
the CAFR).
The accompanying Single Audit Report, which is also prepared by Glenn Burdette, provides
information about the City's expenditure of federal awards for the period ended June 30, 2015.
The Transportation Development Act annual audit was prepared by the same independent
certified public accounting firm and provides information on the City's compliance with statutes,
riles and regulations of the Transportation Development Act (TDA), the California Code of
Relations, and instructions and resolutions of San Luis Obispo Council of Government for the
period ended on June 30, 2015. This report did not reflect any negative findings regarding the
City's administration of the TDA monies.
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In the 2014-15 fiscal year the City adopted two new Governmental Accounting Standards Board
(GASB) statements of financial accounting standards related to pension activities.
• Statement No. 68, "Accounting and Financial Reporting for Pensions—an amendment of
GASB Statement No. 27," and
Statement No. 71, "Pension Transition for Contributions Made Subsequent to the
Measurement Date—an amendment of GASB Statement No. 68".
GASB Statement No. 68 establishes standards of accounting and financial reporting, but not
funding or budgetary standards, for the City's defined benefit pension plans. This Statement
replaces the requirements of prior GASB statements impacting accounting and disclosure of
pensions.
The significant impact to the City of implementing GASB Statement No. 68 is the reporting of
the City's unfunded pension liability on the full accrual basis of accounting in the government -
wide financial statements. There are also new note disclosure requirements and supplementary
schedules required by the Statement. The measurement date for the pension liabilities is as of
June 30, 2014. This date reflects a one-year lag in the release of actuaries from Ca1PERS and
was used so that these financial statements could be issued in a timely manner. Activity (i.e.
contributions made by the City) occurring during 2014-15 fiscal year are reported as deferred
outflows of resources in accordance with Statement No. 71.
With the application of GASB Statement No 68, the City restated the 2013-14 fiscal year
beginning net position for both governmental and business -type activities. Therefore, the
Summary of Changes in Net Position shows a decrease in net position to $99.3 million as of the
end of FY 14-15, compared to $182.6 million in FY 13-14 for Governmental Activities. This is
due to the reporting requirement of unfunded liability in the amount of $99.1 million, which
negatively impacts the net financial position.
The City's net position not accounting for unfunded liability, increased to $15.8 million in FY
14-15 compared to $8.9 million in FY 13-14 for Governmental Activities. For Business -Type
Activities, the City's net financial position, not accounting for unfunded liability, increased by
$13.8 million in FY 14-15 as compared to $8.6 million in the previous year. The net position for
Business -Type Activities shows a decrease in the amount of $19.5 million due to GASB 68
reporting requirements. The Transmittal Memorandum and the Management Discussion and
Analysis in the CAFR provide a more detailed discussion concerning GASB Statement No. 68.
A representative from Glenn Burdette, the City's independent certified public accountants firm, will
attend the February 2, 2016 Council meeting to present the results of the audits and to respond to
any questions the Council may have relating to these audits.
Financial Results Highlighted in the CAFR
Within the CAFR, the Transmittal Memorandum and Management's Discussion and Analysis
provide a comprehensive analysis of the City's financial position as of June 30, 2015, as well as
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summaries of significant City fiscal policies, practices and financial results. Key variances from
projected ending balances for 2014-15 are also highlighted in the Ti-crrasnriiial Menror•ar7damm.
Financial results for the year compare favorably with budget estimates in virtually all areas of the
City's operations. For the General Fund, financial results for the year were better than final
estimates for revenues by $2.5 million, or 4%. Expenditures were $3.6 million or 7%, below
final estimates.
Changes in
2014-15
2014-15
Variance
Amount
%
General Fund Balance
Estimated
Actual
Fund balance, beginning of year
20,797,590
20,819,384
21,794
Revenues
$ 62,071,072
$ 64,615,546
$ 2,544,474
4%
Expenditures
56,084,979
52,434,653
3,650,326
7%
Other sources (uses)
(9,170,192)
(8,433,470)
736,722
-8%
Excess of revenues and sources
over (under) expenditures & uses
(3,184,099)
3,747,423
6,931,522
Prior Year restatement
0
0
Fund balance, end of year
$ 17,613,491 $ 24,5661807 $ 6,953,316
Less:
Nonspendable (60,181)
Restricted/Committed (6,874,085)
Assigned (12,432,556)
Unassigned Fund Balance, end of year $ 5,199,985
Key revenue source estimates including Sales Tax, Transient Occupancy Tax (TOT) and
subventions and grants were updated at the Financial Plan supplement (June 2014) and at mid-
year (February 2015), resulting in an increase in overall budgeted revenues of almost $3.0
million or 5.0% over the original budget estimate.
The favorable variances in revenues and expenditures resulted in total General Fund Balance of
$24.6 million and unassigned balance of $5.2 million. Per City Council direction and in
conjunction with adopted Council policies; staff will provide a recommendation for the use of
any fund balance in excess of the 20% reserve not budgeted with the 2015-16 laid -year budget
review on February 16, 2016. Staff will make recommendations in light of the five year general
fund forecast and analysis of potential unfunded liabilities based on adopted City Council policy.
CAFR Organization
In accordance with generally accepted accounting principles for state and local governments, the
City's CAFR is organized into three major sections: Introduction, Financial Reports and Statistical
Tables. The following is a brief summary of the contents of each of these sections.
Introduction. The Transmittal Memorandum and other information of general interest are
presented in this section, including: directory of officials, advisory bodies, and organization chart.
Financial Reports. This section includes the City's primary financial statements in five major
parts:
1. Auditors' opinion regarding the financial statements.
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2. Management's discussion and analysis providing a narrative overview of City-wide finances
3 The basic financial statements presenting the government -wide results combining the activities
of the major funds (General, Capital Outlay and all Enterprise Funds) into governmental and
business -type categories; the fund financial statements; and the notes to the financial statements.
4. Required supplementary information presenting the General Fund actual results with both the
original and final adjusted budgets.
5. Other supplemental schedules and financial statements providing financial information for each
of the City's non -major governmental and agency funds. This includes a financial schedule
presenting the Half Percent Sale Tax Measure revenues and uses in 2014-15.
Statistical Tables. This section provides demographic and financial tables showing current and
historical trend information for the City and is organized into six major parts:
1. Statistical overview. General information about the San Luis Obispo community.
2. General financial trends. Ten-year summary information on net assets, governmental
revenues and expenditures and fund balances.
Revenue capacity. Ten-year summary information on property and sales tax trends.
4. Debt capacity. Ten-year summary information on debt service requirements.
Economic and demographic trends. Ten-year summaries of taxable sales, building
pen -nits and valuations, housing, population and other demographic trends.
6. Operating information. Ten-year trend information on operating indicators by function.
Recognition for Excellence in Financial Reporting
Beginning in fiscal year 1983-84, all of the City's CAFRs have been awarded the certificate of
achievement for excellence in financial reporting from the Government Finance Officers
Association of the United States and Canada (GFOA). This is a prestigious national award
recognizing the City's use of the highest standards in preparing our annual financial report. The
City received the award for its 2013-14 CAFR and has submitted the award application for the
2014-2015 CAFR.
Additional Reporting
The Federal Single Audit Act requires agencies expending $500,000 or more of Federal assistance
funding to undergo organization -wide audits of their internal controls. Accordingly, the
accompanying Single Audit Report provides a Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters. In the findings section of this report a material weakness
was reported, the City was recording excess development service fee revenue and transit TDA grant
revenues as unearned revenue instead of revenue when received.
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The development service fee revenue should have been recorded at the point the fee became
nonrefundable in accordance with GASB Statement No. 33. The transit TDA grant revenue should
have been recorded as revenue when all applicable eligibility requirements were met. As a result a
prior year restatement of $502,205 was recorded in the General fund and $1,050,746 in the Transit
fund respectively to reduce the unearned liability and increase fund balance. These corrections
positively impact the fund balances for these funds.
Management agrees with this finding. In prior years management decided to record development
service fee revenue as deferred under the definition of deferred revenue which states "payments or
unearned revenue should be recorded as a liability until the services have been rendered or products
have been delivered". In the case of the development service fee revenue, when monies are
collected the services have yet to be rendered. The uniqueness of these revenues is that they are
nonrefundable and should be recognized when received. Staff has coordinated with both Public
Works and Community Development to properly account for these revenues and process them in a
manner that is transparent and consistent with Generally Accepted Accounting Principles (GAAP).
FISCAL IMPACT
There is no fiscal impact associated with accepting and filing the Comprehensive Annual
Financial Report, Single Audit Report, and annual audit of the Transportation Development Act
Funds for fiscal year 2014-15.
ALTERNATIVES
The City Council could decide to revise or not accept the Comprehensive Annual Financial
Report, Single Audit Report, and annual audit of the Transportation Development Act Funds for
fiscal year 2104-15. This is not recommended as the reports have been prepared in conformance
with a variety of accounting and other reporting requirements and represent the professional
evaluation and analysis by the City's independent auditors. They have rendered an unqualified
opinion meaning that which means that they are presented fairly and in conformity with generally
accepted accounting principles.
Attachments:
a - TDA Funds Audit Report for 2014-15City of SLO TDA Funds Final FS 6-30-15
b - Single Audit Report for 2014-15
Council Reading File - City of SLO Comprehensive Annual Financial Report (CAFR) FY -
2014 -15
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City of San Luis QbispoF California
Transportation Develioprpnent Act Funds
Report and S
Financial tatements
Year Ended June 30, 2015 and 2014
Table of Contents
Transit Fund
Page
Independent Auditors Report 5-6
Statements of Fund Net Position –June 30, 2015 and 2014 7
Statements of Revenues, Expenses and Changes in Fund Net Position —
Years Ended June 30, 2015 and 2014 8
Statements of Cash Flows –Years Ended Jun. 30, 2015 and 2014 9-10
Notes to Financial Statements 11-18
Transportation Development Act (TDA) Fund
Independent Auditors Report on Transportation Development Act Compliance
Bond
and State Bond Compliance 21-22
Independent Auditors Report 23-24
Balance Sheets – J— 30, 2015 and 2014 25
Statements aF Revenues, Other Uses and Changes in Fund Balance —
Years Ended June 30, 2015 and 2014 26
Notes to Financial Statements 27-29
Independent Auditors' Report on Transportation Development Act Compliance 30-31
TDA Fund Supplementary Information
Schedule of Revenues and other Uses — Budget and Actual —
Years Ended June 30, 2015 and 2014 32
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Y®ars Enclacl Jur,® 30, 2015 ar,.i 2014
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0 GLEN N BURDETTE
CERTIFIED PUBLIC A C C O U N T A N T S
Independent Auditors' Report
The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments
San Luis Obispo, California
Report on the Financial Statements
We have audited the accompanying financial statements of the Transit Fund of the City of San Luis Obispo, California,
as of June 30, 2015 and 2014, and the related notes to the financial statements, as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes 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.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits
in accordance with 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.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
statements 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 entity's internal control. Accordingly, we do not express such an
opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
GLENN BURDETTEXOM
5
SAN LUIS OBISPO
1150 Palm Street
San Luis Obispo, CA 93401
p 805 544 1441
f BOS S44 4351
PASO ROBLES
102 South Vine Street, Ste. A
Paso Robles, CA 93446
p 805 237 3995
f BOS 239 9332
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SANTA MARIA
2222 South Broadway, Ste. A
Santa Maria, CA 93454
p 805 922 4010
f 805 n r p t *" "
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The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments
Page 2
Opinions
in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of the Transit Fund of the City of San Luis Obispo, California, as of June 30, 2015 and 2014, and the changes in financial
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position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted
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in the United States of America.
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Change In Accounting Principle
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As discussed in Note 9 to the financial statements, in 2015 the City adopted new accounting guidance, GASB Statement
No. 68, Accounting and Financial Reporting for Pensions — An Amendment of GASB Statement No. 27 and GASB
Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date —An Amendment
of GASB Statement No. 68. Our opinion is not modified with respect to this matter.
Emphasis of Matter
As discussed in Note 1, the financial statements present only the Transit Fund of the City of San Luis Obispo, California
and do not purport to, and do not, present fairly the financial position of the City of San Luis Obispo, California, as of
June 30, 2015 and 2014, the changes in its financial position, or, where applicable, its cash flows for the years then
ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not
modified with respect to this matter.
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Glenn Burdette Attest Corporation
San Luis Obispo, California
December 17, 2015
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City of San Luis Obispo, California
Transit Fund
Statements of Fund Nat Position
June 30, 2015 and 2014
Assets
Current assets:
Cash and cash equivalents
Investments
Accounts receivable
Interest receivable
Due from other governments
Total current assets
Capital asserts:
Bull dings and Improvements
Transit operating equipment
Construction in progress
Total capital assets
Less accumulated depreciation
Total capital assets, net of accumulated depreciation
Total assets
Deferred Outflows of Resources
Deferred pensions
Liabilities
Current liabilities:
Accounts payable
Accrued salaries and compensated absences
Unearned revenue
Total current liabilities
Nonaurre,nt liabilities:
Compensated absences, net of current portion
Net pension liability
Total noncurrent liabilities
Total liabilities
Dafarrad Inflows of Resources
Deferred pensions
Nat Position
Net Investment In capita, assets
Unrestricted
Total net position
The accompanying notes are an Integral part of these financial statements.
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2015 2014
5,016,142 5,016,142
7,633,780 7,618,590
(5,842,773) (4,954,829)
10,220.062
42,732
239,831 370,075
22,937 9,866
54,561
262,768 434,502
4,844 2,000
532,344
537,188 2,000
51,886
6,867,187 7,718,941
2,229,578 2,064,619
$ 9,096,765 $ 9,783,560
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$ 487,957
$ 30,762
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1,439,683
696,682
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170
4,657
Q,
3,356
1,748
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1,107,522
1,767,272
3,038,688
2,501,121
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5,016,142 5,016,142
7,633,780 7,618,590
(5,842,773) (4,954,829)
10,220.062
42,732
239,831 370,075
22,937 9,866
54,561
262,768 434,502
4,844 2,000
532,344
537,188 2,000
51,886
6,867,187 7,718,941
2,229,578 2,064,619
$ 9,096,765 $ 9,783,560
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City of San Luis Obispo, California
Transit Fund
Statements of Revenues, Expenses and Changes in Fund Net Position
Year. Ended June 30, 2015 and 2014
Operating revenues:
Passenger fares
Special transit fares
Total operating revenues
Operating ezpenses:
Purchased transportation
Other transportation services
Fuel and lubrlcants
Other materials and supplies
Salaries and wages
Fringe benefits
General and administrative
Depreciation
Total operating expenses
Operating loss
Nonoperating revenues and expenses.
Transportation Devel op ment Act operating grants
Transportation Development Act capital grants
Federal Transit Administration operatl ng grants
Federal Transit Administration capital and planning grants
State EMA grant
Interest
Other nonoperating revenues (expenses)
Total nonoperating revenues and expenses
Loss before transfers
Transportation Development Act capital contributions
Transfers
Change In net position
Nei position - beginning of year
Prior Year R—taten,ent
Net assets - beginning of year, as rastatedl
Net position -end of year
The accompanying notes are an integral part ofthase financial statements,
0
2015 2014
$ 234,217 $ 260,965
415,197 403,104
649,414 664,069
1,842,760
390,771
335,970
31,673
146,230
68,104
290,742
3,994,194
1,786,959
386,286
434,031
55,931
136,198
54,155
320,400
4,059,138
(3,344,780) (3,395,069)
2,014,541
1,815,413
60,063
82,400
1,134,111
1,263,352
58,663
36,861
(129,366)
45,498
7,613
6,129
486
24,516
(188,029)
(120,900)
60,063
(1,400)
58,663
(129,366)
(120,900)
9,783,560
9,556,239
(557,429)
348,221
$ 9,096,765 $ 9,783,560
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City of San Luis Obispo, California
Transit Fund
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Statements of flash Flows
Years Ended June 30, 2015 and 2014
Cash fiows from investing activities.
Interest on investments 6,005 5,120
Net cash provided by investing activities 6,005 5,120
Net increase (decrease) in cash and cash equivalents and investments 1,200,196 (297,256)
Cash and cash equivalents and investments beginning fyear 727,444 1,024,700
Clash and cash equivalents and investments - end of year $ 1,927,640 $ 727,444
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The accompanying notes are an integral part of these financial statements,
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2015
2014
Cash flows from operating activities.
Cash received from customers
$ 1,259,090
$ 926,147
Cash payments to for goods and services
(2,731,418)
(3,221,432)
LL.Cash
/suppliers
payments to General Fund for interfund services
(290,742)
(320,40p0)
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Cash payments to employees for services
(214,350)
(190,487)
Other nonoperating cash receipts
486
24,516
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Net cash Used in operating activities
(1,976,934)
(2,781,656)
to
Cash flows from noncapital financing activities.
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Operating grants received
3,148,652
2,458,640
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Transfers
(1,400)
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Net cash provided by noncapital financing activities
3,147,252
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2,458,640
Cash !Iowa f- capital and related financing activities.
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Capital grants received
60,063
82,359
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Acquisition and construction ofcapital assets
(36,190)
(61,719)
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Net cash provided by capital and related financing activities
23,873
20,640
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Cash fiows from investing activities.
Interest on investments 6,005 5,120
Net cash provided by investing activities 6,005 5,120
Net increase (decrease) in cash and cash equivalents and investments 1,200,196 (297,256)
Cash and cash equivalents and investments beginning fyear 727,444 1,024,700
Clash and cash equivalents and investments - end of year $ 1,927,640 $ 727,444
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The accompanying notes are an integral part of these financial statements,
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City of San Luis Obispo, California
Transit Fund
Statements of Cash Flows, Continued
Year. Ended June 30, 2015 and 2014
2015 2014
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Reconciliation of operating loss to net cash used in op®rating activltles.
Operating loss
$ (3,344,780)
$ (3,395,069)
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Adjustments to reconcile operating loss to net cash used In operating activities.
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I leprer.latinn
887,944
885,178
•-
Other revenues and expenses
486
24,516
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Changes In operating assets, deferred outflows, liabilities, and deferred inflows.
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Accounts receivable
p
4,407
(4,629)
In
Due from other governments
659,750
(477,000)
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Accounts payable
(130,244)
(558,225)
f?
Unearned revenue
(54,561)
743,707
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Accrued salaries and compensated absences
15,915
(134)
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Deferred pensions and net pension liability
(15,931)
Net cash used in operating activities
$ (1,976,934)
$ (2,781,656)
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Reconclllation oT cash and cash aquivalanta and investments to the statem ant
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offund not position,
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Cash and cash equivalents
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$ 407,957
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$ 30,762
Investments
1,439,683
696,682
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Total cash and cash equivalents and investments 5 1,927,640 $ 727,444
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The accompanying notes are an integral part ofthese financial statements.
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City of San Luis Obispo, California
Transit Fund
Notes to Financial Statarn_nts
June 30, 2015 and 2014
Note 1: The Reporting Entity
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The City of San Luis Obispo (the City) operates a Fixed route public transportation system within the City limits and 62
to the California Polytechnic State University (Cal Poly). Vehicle operations and vehicle maintenance are provided V
under contract by a private transportation company. I Vonvehicle-related support and administrative services are
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provided by City staff. N
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The Transit Fund (the Fund) is an enterprise fund ofthe City created by resolution ofthe City Council to account For
the revenues received pursuant to the Transportation Development Act (TDA), Federal Transit Authority (FTA) and
the revenues received from the transit operations described above. Such revenues are allocated under specific
statutes and are legally restricted to finance expenditures made for transit operations, the development of public
transportation systems and transportation planning. When both restricted and unrestricted resources are available
forthe same purpose, it is the City's policy to use restricted funds first.
Not® 2: Summary of Significant /accounting Policies
Measurement Focus, Basis of Accounting and Basis of Prasantation
The Fund's financial Revenues
are reported using the economic resources measurement focus and the accrual
basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred regardless
ofthe timing of related cash flows. The Fund distinguishes operating revenues and expenses from nonoperating
items. Operating revenues and expenses generally result from providing services in connection with the Fund s
principal ongoing operations. The principal operating revenues ofthe Fund are charges to customers for transit
services. Operating expenses for the Fund include cost of services, administrative expenses, and depreciation on
capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and
expenses, including non-exchange transactions such as TDA and FTA grants.
Nonexchlaange transactions, in which the Fund receives value without directly giving equal value in return, include
grants. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Eligibility requirements include timing requirements, which specify the fiscal year when the resources are to be used
orthe fiscal year when use is first permitted; matching requirements, in which the Fund must provide local resources
to be used for a specific purpose, and expenditures requirements, in which the resources are provided to the Fund
on a reimbursement basis.
Cash, flash Equivalents and Inv stm nts
Cash and cash equivalents consist ofcash on hand, cash balances in checking and money market accounts and short-
term investments, with an original maturity of three months or less. Investments which are in the City's internal
investment pool are also treated as cash equivalents for the purposes ofthe statement of cash flows.
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City of San Luis Obispo, California
Transit Fund
Notes to Financial Staternants
June 30, 2015 and 2014
Note 2: Summary or Significant Accounting Policies (Continued)
Amounts Due from Other Governments
Generally, amounts due from other governments are recorder) as revenues when earned. 11--, -, when the use
offunds is the prime factor for determining eligibility for grants, revenue is accrued when the related expenses have
been made on an approved grant.
Capital Aes®ta
Capitnl assets are recorded at cost and deproclated using thw straigit-flno method over tholr aatiMated useful 11VOt.,
ranging from rJ to 20 years.
Net Pension Liability, Deferred Outflows and Deferred Inflows
The City recognizes a net pension liability, which represents the City's proportionate share ofthe excess ofthe total
pension liability over the fiduciary net position of the pension reflected in the actuarial reports provided by the
California Public Employees Retirement System (CaIPERS) plans Plans). The City has allocated a proportionate share
of the net pension liability, deferred outflows, deferred inflows and pension expense to the Transit Fund. The net
pension liability is measured as ofthe City's prior fiscal year-end. Changes in the net pension liability are recorded,
in the period incurred, as pension expense or as deferred inflows of resources or deferred outflows of resources
depending on the nature ofthe change. The changes in the net pension liability that are recorded as deferred inflows
Of resources or deferred outflows of resources that arise from changes in actuarial assumptions or other inputs and
differences between expected or actual experience) are amortized over the weighted average remaining service lire
of all participants in the respective pension plan and are recorded as a component of pension expense beginning
with the period in which they are incurred.
For purposes of measuring the net pension liability and deferred outflows inflows of resources related to pensions,
and pension expense, information about the fiduciary net position of the City's CaIPERS Plans and additions
to/deductions from the Plans fiduciary net position have been determined on the same basis as they are reported
by CaIPERS. Forthis purpose, benefit payments (including refunds of employee contributions) are recognized when
due and payable in accordance with the benefit terms. Investments are reported at fair value. Projected earnings
on pension investments are recognized as a component of pension expense.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from those estimates,
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City of San Luis Obispo, California
Transit Fund
Notes to Financial Statements
Jung 30, 2015 and 2014
Nate 2: Summary of Significant Accounting Policies (Continued)
Subsequent Events
Events subsequentto June 30, 2015 have been evaluated through December 17, 201 5,which is the date the financial
statements were available to be issued. Management did not identify subsequent events that required disclosure.
Note, 3: Cash and Cash Equivalents and Investments
At Jun. 30, 2015 and 2014, cash and cash equivalents consisted ofthe following.
De posit:
Cash in bank
Custodial Credit Riek — Deposits
2015 2014
$ 487,957 $ 30,762
Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it, Cash
balances held in banks are insured up to $250,000 by the Federal Depository Insurance Corporation. For custodial
credit risk associated with deposits, the City follows California Government Lode, which requires California financial
institutions to secure the City's deposits by pledging government securities as collateral. The
he market value of the
pledged securities must equal 110% ofthe City's deposits. California law also allows Financial institutions to secure
the City's deposits by pledging first trust deed mortgage notes equal to 150% ofthe City's deposits. All deposits hold
by financial institutions are Fully insured or collateralized with securities, held by the pledging Financial institutions
trust departments in the City's name.
At June 30, 2015 and 2014, investments consisted ofthe following.
Pooled Investment Funds:
Local Agency Investment Fund (LAIF)
2015 2014
$ 1,439,683 $ 696,682
The City follows the practice of pooling cash and investments for all funds under its direct daily control. Funds held
by outside fiscal agents under provisions of bond indentures are maintained separately.
Interest earned on pooled cash and investments is allocated quarterly to the various funds based on the respective
funds average quarterly cash balance. Interest earned from cash and investments with fiscal agents is credited
directly to such funds.
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City or San Luis Obispo, California
Transit Fund
Notes to Financial Stat®mgnts
Jung 30, 2015 and 2014
Note 3: Cash and Cash Eqluivalgnts and In„g=trn-nts (Continued)
Interest Rate Risk
This Is t.ho risk that the market value of securities In the portfolio will Fall clue Lo uliancyes in ger—al interest i ales. In
accordance with its policies in the Investment Management Plan, the City mitigates interest rate risk by.
a Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing
operations, thereby avoiding the need to sell securities on the open market before maturity.
■ Investing operating funds primarily in shorter -term securities.
The City's investment policy also includes portfolio maturity targets. A minimum of 200 0 of the portfolio will be
invested in securities maturing in one year or less. Up to 80% of the portfolio can be invested in securities with a
maturity over one year, with no more than 10% ofthe portfolio invested in securities with a maturity over five years.
Credit Risk
This is the risk of loss due to the failure of the security issuer or backer. The City's policies to mitigate credit risk
include.
Limiting investments tothe safesttypes ofsecurities.The California Government Code limitsthe investment
vehicles available to local agencies. The credit risk of these securities is measured by the assignment of a
rating by a nationally recognized statistical rating organization.
• Pre-qualifyingthe financial institutions, broker dealers, intermediaries and advisors with which the City will
do business.
Concentration c,f Credit Risk
The City s policies contained In the Investment Management Plan provide guidelines (by type of investment that
limits either the dollar amount, the percent ofthe portfolio or the maturity term) for diversifying the investment
portfolio so that potential losses on individual securities will be minimized.
The Clty s Investment Management Plan outlines the following criteria related to portfolio diversification.
■ No more than 5% ofthe City's portfol,o (exclusive of government agency Issues or LAIF) shall be placed with
any financial institution.
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City of San Luis Obispo, California
Transit Fund
Notes to Financial Statements
June 30, 2015 and 2014
Note 3. flash and flash Equivalents and Investments (C.ntinued)
s No more than 25% of the City's portfolio shall be invested in collateralized certificates of deposit issued by
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financial institutions.
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Capital assets not being depreciated.
r Cby the City shall not constitute more than15%
Certificates of deposit (negotiable and collateralized)
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placed
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of the total assets of the institution, and negotiable certificates of deposit will only be placed with
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Capital assets being depreciated.
institutions with total assets in excess of $200 million and that maintain a ratio of equity to total assets of
Buildings and Improvements
O
at least 5%. i
Additional flash and In—st—t Disclosures
See the City of Jan Luis Obispo June 30, 2015 Comprehensive Annual Financial Report for additional cash and
investment disclosures.
Not® 4: Due from Other Governments
At June 30, 1015 and 2014, the amounts due from other governments were as follows.
2015 2014
Federal Transit Administration - capital and operating grants $ 1,107,522 $ 1,292,819
San Luis Obispo County of Governments - TDA 4th Quarter 474,453
$ 1,107,522 $ 1,767,272
Note 5. Capital Assets
Capital assets activity for the fiscal year ended June 30, 2015, was as follows.
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Balance
Balance
June 30, 2014
Adam,- Deletions
June 30, 2015
Capital assets not being depreciated.
Construction In progress
p
$ 39,038
$ 21,000 $
$ 60,038
Capital assets being depreciated.
Buildings and Improvements
5,016,142
5,016,142
Transit operating equipment
7,618,590
15,190
7,633,780
Total capital assets being depreciated
12,634,732
15,190 _
12,649,922
Less accumulated depreciation
(4,954,829)
(887,944)
(5,842,773)
Total capital assets, net ofaccumulated depreciation
$ 7,718,941
$ (851,754) $ -
$ 6,867,187
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City of San Luis Obispo, California
Transit Fund
Notes to Financial Statements
Jung 30, 2015 and 2014
Nota 5: Capital Assets (Continued)
Capital assets activity For the fiscal year ended June 30, 2014, was as follows,
Capital assets not being depreciated.
Construction in progress
Capital assets being depreciated
Balance
June 30, 2013
$ 36,348
7.a
Additions and Deletions and Balance
Transfore Transfers Jun. 30, 2014
$ 17,018 $ (14,328) $ 39,038
Buildings and improvements
5,016,142
5,016,142
Transit operating equipment
8,308,276
59,063
(748,749)
7,618,590
Total capital assets being depreciated
13,324,418
59,063
(748,749)
12,634,732
Less accumulated depreciation
(4,818,400)
(885,178)
748,749
(4,954,829)
Total capital assets, net ofaccumulated depreciation
$ 8,542,366
$ (809,097)
$ (14,328)
$ 7,718,941
Note 6: Intergovernmental Allocations
The City has been allocated the following funds from the State Transit Assistance Fund (STAF) and Local
Transportation Fund (LTF) for the years ended June 30, 2015 and 2014. The amounts have been used for both
operating expenses and capital assets.
Applicable
Au -ting TDA Statute
A.-_ici. Sactl�n
LTF 4.0 99260
STAF 6.5 99313
STAF 6.5 99314
Amou n t
2015 2014
$ 1,837,504 $ 1,715,515
142,833 143,574
Total Transportation Development Act revenue $ 2,014,541 $ 1,897,813
The City also directly allocated for the years ended June 30, 2015 and 2014, $744,023 and $676,192, respectively of
LTF Article 4.0, Section 99260 funds to San Luis Obispo Regional Transit Authority (SLORTA), which are not shown in
the accompanying financial statements.
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City of San Luis Obispo, California
Transit Fund
Notes to Financial Statements
June 30, 2015 and 2014
Note 7: Fara Re. anue Ratios
7.a
The City had a fare revenue ratio of 23% for the years ended June 30, 2015..d 2014, computed as follows. Q.'
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2015 2014 U
Operating revenues - fares $ 649,414 $ 664,069 N
(a) Net Operating revenues - fares 649,414 664,069 v
Net operating costs, net of depreciation and vehicle lease costs 3,106,250 3,173,960
Exclude capital expenses under uniform system of accounts
for purposes ofcalculating fare revenue ratios but
treated as operating expenses for financial statements (234,615) (228,805)
(b) Adjusted operating costs for purposes ofcalculating fare revenue ratios $ 2,871,635 $ 2,945,155
(c) Fare revenue ratio [(a) / (b)] 23% 23%
The City Is in compliance with applicable TDA regulations pertaining to acceptable fare revenue ratios which require
a minimum ratio of 20%.
Notl,8: Pensions
The City contributes to the California Public Employees' Retirement System (CaiPERS) for its employees and
participates in an agent -multiple employer plan (Miscellaneous Plan) for its miscellaneous employees. The City has
allocated a proportion of the Miscellaneous Plan that relates to the Fund. The portion of the net pension liability
allocated to the Fund is $532,344. The portion ofthedeferred outflows of resources and deferred inflows of
resources allocated to the Fund are $42,732 and $51,886, respectively. The portion of the pension expense allocated
to the Fund is $15,931 and is shown as a part of total salaries and wages in the current year.
Additional Pension Disclosures
See the City of San Luis Obispo June 30, 2015 Comprehensive Annual Financial Report for additional pension
disclosures as well as required supplementary information.
Note 9: Prior Year Restatements
The City implemented GASB Statement No. 68, Financial Reporting for Pensions — an amendmentof Statement No.
27, and GASB Statement No. 71, Pension Transitions for Contributions Made Subsequent to the Measurement Date
— an amendment of GASB Statement No. 68, for the year ended June 30, 2015. The City has chosen to present prior
year data forthe Fund, but not restate the data forthe prior year because all ofthe Information available to restate
prior year amounts was not readily available. An adjustment of $557,429 to reduce beginning net position has been
made to reflectthe cumulative impact of Implementing these standards.
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City or San Luis Obispo, California
Transit Fund
Notes to Financial Statarnants
Jung 30, 2015 and 2014
Note 9: Prior Ygar Rastats rn,s,nts (Continued)
In the current and prior year, the City recorded excess Transportation Development Act (TDA) revenue as unearned
revenue. The prior year has been restated to properly decrease unearned revenue by $1,050,746, increase
Trnnsportatlon Developmant Act operating grants by $702,525, anal inaruaso net. pusil.iun In the Transit Fund for the
year ended June 30, 2014 by $348,221 for the TDA revenue that should have been recorded in a prior period.
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City of Sari Luis Obispo, California
Transportation Deveiopmant A.t (TDA) Fund
Jun® 30, 2015 antl 2014
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7.a
0 GLENN BURDETTE
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report On
Transportation Development Act Compliance
and State Bond Compliance Q
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The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments 'O
San Luis Obispo, California M
We have audited the financial statements of the Transit Fund of the City of San Luis Obispo as of and for the years ended
June 30, 2015 and 2014, and have issued our report thereon, dated December 17, 2015.
Management's Responsibility
Management is responsible for the compliance with the applicable statutes, rules and regulations of the Transportation
Development Act (TDA), the California Code of Regulations (CCR) and the allocation instructions and resolutions of San
Luis Obispo Council of Governments as required by Section 6662 of the CCR.
Auditors' Responsibility
Our responsibility is to express an opinion on compliance with the applicable statutes, rules and regulations referred to
a bove.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the
standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General
of the United States; and the applicable statutes, rules and regulations referred to above. Those standards and the
applicable statutes, rules and regulations referred to above require that we plan and perform the audit to obtain
reasonable assurance about whether noncompliance with the applicable statutes, rules and regulations referred to
above occurred. An audit also includes examining, on a test basis, evidence about the City's compliance with the
applicable statutes, rules and regulations and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a
legal determination of the City's compliance with the applicable statutes, rules and regulations referred to above.
M
In connection with our audit, we performed tests of the City's compliance with applicable statutes, rules and regulations
of the TDA, the CCR, and the allocation instructions and resolutions of San Luis Obispo Council of Governments as E
required by Section 6662 of the CCR. During our audit, we performed to the extent applicable the tasks contained in U
Section 6667 of the CCR. Such audit tests would not necessarily disclose all instances of noncompliance because they a
were based on selective tests of accounting records and related data.
GLENNBUROETTEXOM
21
SAN LUIS OBISPO
1SC !Palm 5t. -net
San Luia Obispo. CA 9340:
p ses 5441441
f HOS 5444351
PASO ROBLES
102 South Cline Street, Ste. A
Faso Robles, CA 93446
p 805 237 399S
j 805 239 9332
SANTA MARIA
222.2 Sot -ah Broadway, Ste_ A
Santa Maria, CA 93454
p 80S 922 4010
! 805
Packet Pg. 63
The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments
Page 2
Opinion
In our opinion, the funds allocated to and received by the Transit Fund of the City of San Luis Obispo, California, pursuant
to the TDA were expended and accounted for in compliance with the applicable statutes, rules and regulations of the LL
TDA, the CCR and the allocation instructions and resolutions of the San Luis Obispo Council of Governments, in all U
material respects, for the year ended June 30, 2015. N
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The purpose of this report over compliance is solely to describe the scope of our testing of compliance and the results ,O
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of that testing based on the applicable statutes, rules and regulations of the TDA, the CCR, and the allocation instructions c
and resolutions of San Luis Obispo Council of Governments as required by Section 6662 of the CCR. Accordingly, this
report is not suitable for any other purpose.
6 IE -m" &ODE ��-(UPVAVc>A)
Glenn Burdette Attest Corporation
San Luis Obispo, California
December 17, 2015
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0 GLEN N BURDE` TE
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report rz
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The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments
San Luis Obispo, California o
Report on the Financial Statements
We have audited the accompanying financial statements of the Transportation Development Act (TDA) Fund of the City
of San Luis Obispo, California, as of June 30, 2015 and 2014, and the related notes to the financial statements, as listed
in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes 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.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits
in accordance with auditing standards generally accepted in the United States of America and the standards applicable
to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial
statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial =
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of li
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, p
I—
the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
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expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we do not express such an
E
opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of r
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significant accounting estimates made by management, as well as evaluating the overall presentation of the financial tom°
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statements.
GLENN BURDETTEXOM
23
SAN LMS OBISPO
1150 Paim'SIreet
San Luis Otzispo, CA 93401
p 805 544 :441
J 80S 5444351
PASO ROBLES
102 South Vine Street, Ste. A
Paso Robles, CA 93446
p 805 237 3995
j 805 239 9332
SANTA MARIA
2222 South Broadway, Ste. A
Santa Maria, CA 93454
p 805 922 4010
f Bos
7.a
The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments
Page 2
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
to
required part of the financial statements. The schedule of revenues and other uses — budget and actual is the04
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Opinions
U
In our opinion, the financial statements referred to above present fairly, In all material respects, the financial position
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of the Transportation Development Act (TDA) Fund of the City of San Luis Obispo, California, as of June 30, 2015 and
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2014, and the changes in financial position and cash flows thereof for the years then ended in accordance with
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accounting principles generally accepted in the United States of America.
c
Emphasis of Matter
As discussed in Note 1, the financial statements present only the TDA Fund of the City of San Luis Obispo, California and
do not purport to, and do not, present fairly the financial position of the City of San Luis Obispo, California, as of June 30,
2015 and 2014, the changes in its financial position, or, where applicable, its cash flows for the years then ended in
accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified
with respect to this matter.
Other Information rn
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the
Transportation Development Act (TDA) Fund of the City of San Luis Obispo, California's basic financial statements. The U
schedule of revenues and other uses — budget and actual is presented for purposes of additional analysis and is not a
to
required part of the financial statements. The schedule of revenues and other uses — budget and actual is the04
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responsibility of management and was derived from and relates directly to the underlying accounting and other records
used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied
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in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling
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such information directly to the underlying accounting and other records used to prepare the basic financial statements
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or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the schedule of revenues and other uses — budget
Q
and actual is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
3
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Glenn Burdette Attest Corporation
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San Luis Obispo, California
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December 17, 2015
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City of San Luis Obispo, California
Transportation De.ua,,op.n®nt A.t (TDA) Fund
Balane® She®t.
Jun. 30, 2015 and 2014
2015 2014
Assts
Total assets $
Liabiliti.s
Total liabilities ,p
The accompanying notes are an integral part oftheso financial statements.
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City of San Luis Obispo, California
Transportation Dauaiopm,ent At (TDA) Fund
Statame,nts of Rau®nuas, Otr,.r Usas and Changas in Fund Baianca
Jun. 30, 2015 and 2014
2014 2015
Revenues - intergovernmental allocations $ 54,808 $ 49,169
Other financing uses - operating transfers to City of
San Los Obispo
Excess of revenues over other financing uses
Fund ba lanae, - beginning of year
Fund ba lano®'and of ye,ar
(54,808) (49,169)
The accompanying notes are an Integral part ofthese financial statements.
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City of San Luis Obispo, California
Transportation Dev®loprnent Act (TDA) Fun.
Notes to Financial Statements
Jun® 30, 2015 and 2014
Nota, 1: Tlhe R®porting Entity E
The Transportation Development Act (TDA) Fund the Fund) of the City of San Luis Obispo, California the City) is a
CM
special revenue fund created by resolution of the City Council to account for the revenues received pursuant to the N
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TDA. Such revenues allocated under specific state statutes are legally restricted to financial expenditures made of
the development and construction of local streets and roads, including pedestrian and bicycle facilities. G
Note 2: Summary of Significant Accounting Policies
Mnesurement Focus and Basis of Accounting
The Funds financial statements are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized when measurable and available. Revenues are
considered to be available when they are collectible within the current period or soon enough thereafter to pay the
liabilities of the current period. For this purpose, the City considers interest and grant revenues earned but not
received as susceptible to accrual under this method. Expenditures are generally recognized at the time liabilities
are incurred.
Fund Equity
The Funds financial statements report fund balance in classifications that comprise a hierarchy based primarily on the
extent to which the City is bound to honor constraints on the specific purpose for which amounts in the funds can be
spent. The Fund does not have a fund balance in the current fiscal year, therefore classification is not necessary.
However, GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, identifies five
components offund balance—nonspendable, restricted, committed, assigned and unassigned.
Nonsponda bin. This component includes amounts that cannot be spent because they are either W not in spendable Li-
form
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form or (b) legally or contractually required to be maintained intact. Q
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Restricted. This component consists of amounts that have constraints placed an them either externally by third -parties }i
(creditors, grantors, contributors, or laws or regulations of other governments) or by law through constitutional
provisions or enabling legislation. Enabling legislation authorizes the City to assess, levy, charge or otherwise mandate
payment of resources from external resource providers) and includes legally enforceable requirements (compelled by a
external parties) that those resources be used only for the specific purposes stipulated in the legislation
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City of San Luis Obispo, California
Transportation Development Act (TDA) Fund
Notes to Financial Statements
June 30, 2015 and 2014
Note 2: Summary of Significant Accounting Policies (Continued)
Committed. This component consists of amounts that can only ho tend for specific purpnsns pursuant to constraints
imposed by minute order authorized by the City Council. Also included in this component are encumbrances which
represent legal and binding obligations for the acquisition of future goods and services. Those committed amounts
established by minute order cannot be used for any other purpose unless the City Council adopts a new minute order so
directing. With respect to encumbered amounts, the City may take steps to cancel the order for goods or services and
thereby terminate the obligation.
Assigned. This component consists of amounts that are constrained bythe City's intentto be used for specific purposes,
but are neither restricted nor committed. The City Manager or Director of Finance are authorized to assign amounts to
a specific purpose, Constraints imposed on the use ofassigned amounts can be removed with no formal Council actions.
Unassigned. This classification represents amounts that have not been restricted, committed or assigned to specific
purposes.
Fund Balance Spending Pelicy
The City follows a practice in which restricted, committed, assigned, and unassigned fund balances are spent when
more than one amount is available for a specific purpose. When both restricted and unrestricted resources are
available for use, it is the City's policy to use restricted resources first, then unrestricted resources (committed,
assigned and unassigned) as they are needed. When unrestricted resources (committed, assigned and unassigned)
are available for use, it is the City s policy to use committed resources first, then assigned, and then unassigned as
they are needed.
Budgets and Budgetary Accounting
The City has received national recognition for its use of a two-year Financial Plan and budgetary process that
emphasizes long-range planning and effective program management. Significant features of the City's two-year
Financial Plan include the integration of Council goal -setting Into the budgetary process and the extensive use of
formal policies and measureable objectives. The Financial Plan includes operating budgets for two years and a
capital improvement plan (CSP) for five years.
Under this multi-year approach, appropriations continue to be made annually, however, the Financial Plan is the
foundation for preparing the budget for the second year. Additionally, unexpended operating appropriations from
the first year may be carried over for specific purposes into the second year with the approval ofthe City Manager.
28
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City of San Luis Obispo, California
Transportation De.,e,opn,ent Ac,t (TDA) Fur,d
Notes to Financia, Statements
June 30, 2015 and 2014
Note 2: Summary of Significant Accounting Policies (Continued)
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect certain reported amounts
and disclosures, Accordingly, actual results could differ from those estimates.
Subsequent Events
Events subsequentto June 30, 2015 have been evaluated throughD... tuber 17, 2015, which Is the date the financial
statements were available to be issued, Management did not identify subsequent events that required disclosure.
Note 3: lntergo rnm®ntal Allocations
For the years ended June 30, 2015 and 2014, the City has boon allocated the following funds from the Local
Transportation Fund. (LTF):
Appiicable
Allocating TDA Statute
Arti.le Section
Ar.,o.nt
2015 2014
3.0 99233.3 $ 54,808 $ 49,169
Note 4: Operating Transfers
The City expends all amounts for alternate transportation projects in its General Fund or Capital Outlay Fund. LTF
monies received by the City are initially deposited in the Fund and subsequently transferred to the General Fund,
where such funds are expended or transferred to the Capital Outlay Fund to be expended on designated
transportation projects.
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CERTIFIED PUBLIC ACCOUNTANTS
7.a
Independent Auditors' Report On
Transportation Development Act Compliance
The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments
San Luis Obispo, California
We have audited the financial statements of Transportation Development Act (TDA) Fund of the City of San Luis
Obispo, California as of and for the years ended June 30, 2015 and 2014, and have issued our report thereon, dated
December 17, 2015.
Management's Responsibility
Management is responsible for the compliance with the applicable statutes, rules and regulations of the
Transportation Development Act (TDA), the California Code of Regulations (CCR) and the allocation instructions and
resolutions of San Luis Obispu Cuundl of Governrrlents as required by Section 6662 of the CCR.
Auditors' Responsibility
Our responsibility is to express an opinion on compliance with the applicable statutes, rules and regulations referred
to above.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America;
the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States; and the applicable statutes, rules and regulations referred to above. Those standards
and the applicable statutes, rules and regulations referred to above require that we plan and perform the audit to
obtain reasonable assurance about whether noncompliance with the applicable statutes, rules and regulations
referred to above occurred. An audit also includes examining, on a test basis, evidence about the City's compliance
with the applicable statutes, rules and regulations and performing such other procedures as we considered
necessary in the circumstances. We believe'thgx our audit provides a reasonable basis for our opinion. Our audit
does not provide a legal determination of the City's compliance with the applicable statutes, rules and regulations
referred to above.
In connection with our audit, we performed tests of the City's compliance with applicable statutes, rules and
regulations of the TDA, the CCR, and the allocation instructions and resolutions of San Luis Obispo Council of
Governments as required by Section 6662 of the CCR.
ci7
SAN LUIS OBISPO PASO ROBLES SANTA MARIA
1150 Palm Street 102 South Vine Street, Ste A 2222 South Broadway, Ste A
San Luis Obispo, CA 93401 Paso Robles, CA 93446 Santa Maria, CA 93454
p 805 544 1441 p 805 237 3995 p 805 922 4010
GLENNBURDETTE.CON f 8055444351 j 8052399332 805 al
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The Honorable City Council of the City of San Luis Obispo, California
and San Luis Obispo Council of Governments
Page 2
During our audit, we performed to the extent applicable the tasks contained in Section 6667 of the CCR. Such audit
tests would not necessarily disclose all instances of noncompliance because they were based on selective tests of 2
accounting records and related data, a
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Opinion
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In our opinion, the funds allocated to and received by the TDA Fund of the City of San Luis Obispo, California,
pursuant to the TDA were expended and accounted for in compliance with the applicable statutes, rules and
to
regulations of the TDA, the CCR and the allocation instructions and resolutions of San Luis Obispo Council of
0
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Governments, in all material respects, for the year ended June 30, 2015.
The purpose of this report over compliance is solely to describe the scope of our testing of compliance and the
results of that testing based on the applicable statutes, rules and regulations of the TDA, the CCR, and the allocation
instructions and resolutions of San Luis Obispo Council of Governments as required by Section 6662 of the CCR.
Accordingly, this report is not suitable for any other purpose.
6LC-M"'&?%X �c oaPbW, o-0
Glenn Burdette Attest Corporation
San Luis Obispo, California
December 17, 2015
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City of San Luis Obispo, California
Transportation Dev®iupn,—t Act (TDA) Fund
Supplementary lnformation
Sceuihd
cs of RcvGnues and Other Us®s — Budgct and Actual
June 30, 2015 and 2014
Variant® with
Budget Final Budget
I' 2015 Original Finai Actual Positive (Negative)
Revenues - Intergovernmental allocations $ 54,800 $ 54,800 $ 54,808 $ 8
Other financing uses - operating transfers
to Cit„ of San Luis Obispo (54,800) (54,800) (54,808) (8)
Excess of revenues over other financing uses $ $ $ - $
Variance with
Budget Finai Budget
2014 Original Final Actual Poeiti— (Negative)
Revenues - intergovernmental allocations $ 49,100 $ 49,100 $ 49,169 $ 69
Other financing uses - operating transfers
to City of San Luis Obispo (49,100) (49,100) (49,169) (69)
Excess of revenues over other financing uses $ - $ $ - $
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Fedora, Awards
R®ports and Scl'1®duly
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City of $an Luis Obispo, California
Table of Contents
Jure 30, 2015
Page
Ind open d a nt Auditors' Report on Internal Control Over FinancialReportingand on
Comp Ila nce and Other Matters Based on an Audit of FlnanclaI Statements .7
Performed in Accordance With Govern mant Auditing Standards 3-4
Independent Auditors' Report on Compliance for Each Major Program and on
Internal Control Over Compliance Required by OMB Circular A-133 5-7
Schedule or Expendltures of Federal Awards 8
Note to Schedule of Expenditures of Federal Awards 9
Findings and Recommendation. Section
Schedule of Audit Finding. and Que.tioned Cost. and Status of Prior Audit Findings and
Ouestioned Costs 10-12
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0 GLENN BUS E TE
CERTIFIED PUBLIC ACCOUNTANTS
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 GovernmentAudlting Standards
The Honorable City Council of the
City of San Luis Obispo, California
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, the business -type activities, each
major fund, and the aggregate remaining fund information of the City of San Luis Obispo, California (the City) as of and
for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the
City's basic financial statements and have issued our report thereon dated December 17, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal control over
financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for
the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion
on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of
the City's internal control.
Our consideration of internal control 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 were not Identified. However, as
described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal
control over financial reporting 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 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 deficiency described in the
accompanying schedule of audit findings and questioned costs as finding 2015.1 to be a material weakness.
GLENNBURDETTEXOM
SAN LUIS OBISPO
1150 Palm Street
San Luis Obispo, CA 93401
p 805 S441441
f 80S 5444351
PASO ROBLES
102 South Vine Street, Ste, P.
Paso Robles, CA 93446
p 805 237 3995
f 805 239 9332
SANTA MARIA
2222 South Broadway, Ste. A
Santa Maria, CA 93454
p 805 922 4010
f 805 922 4286
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The Honorable City Council of the
City of San Luis Obispo, California
San Luis Obispo, California
Page 2
Asignificant deficiency is a deficiency, or 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.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free of 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 determination of financial
statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our
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audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no Instances of
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noncompliance or other matters that are required to be reported under Government Auditing Standards.
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City of San Luis Obispo's Responses to Findings
The City's responses to the findings Identified in our audit are described in the accompanying schedule of audit
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findings and questioned costs. We did not audit the City's responses and, accordingly, we express no opinion on
14
them.
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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 the 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.
G(,FN CJ[�Kfi'1dw
Glenn Burdette Attest Corporation
San Luis Obispo, California
December 17, 2015
Packet Pg. 79
0 GLENN BURDETTE
CERTIFIED PUIRLIC ACCOUNTANT 5
Independent Auditors' Report on Compliance For
Each Major Program and on Internal Control
Over Compliance Required by OMB Circular A-133
The Honorable City Council of the
City of San Luis Obispo, California
San Luis Obispo, California
Report on Compliance for Each Major Federal Program
We have audited the City of San Luis Obispo, California's (the City) compliance with the types of compliance
requirements described in the OMB CirculorA-133 Compliance Supplement that could have a direct and material
effect on each of the City's major federal programs for the year ended lune 30, 2015. The City's major federal
programs are identified in the summary of auditors' results section of the accompanying schedule of audit findings
and questioned costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable
to each of its major federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on our
audit of the types of compliance requirements referred to above. We conducted our audit of compliance in
accordance with auditing standards generally accepted in the United States of America; the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States;
and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those standards and
OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could have a direct and material
effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's
compliance with those requirements and performing such other procedures as we considered necessary in the
circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program.
However, an audit does not provide a legal determination of the City's compliance.
GLENNBURDETTE.COM
5
SAN LUIS OBISPO
1 t 50 Palm Street
San Luis Ob:spe, CA 9340=
p 875 S441441
f 975 54443`1
PASO ROBLES
102 South Vine Street, Ste A,
Paso Roblcs, CA 93446
p 805 237 339S
f 80S 239 3332
SANTA MARIA
2222 South Broadway, Ste A
Santa Maria, CA 4:3494
p 805922 4610
f SOS92242BG
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The Honorable City Council of the
City of San Luis Obispo, California
San Luis Obispo, California
Page 2
Opinion on Eaoh Major Federal Program
In our opinion, the City, complied, in all material respects, with the types of compliance requirements referred to
above that could have a direct and material effect on each of its major federal programs for the year anded June 30,
2015.
Report on Internal Contrel 0-r Complian.e
Management of the City, is responsible For establishing and maintaining effective internal control over compliance
with the types ofcompliance requirements referred to above.
In planning and performing our audit, we considered the City's internal control over compliance with the
requirements that could have s direct and material effect on a major federal program to determine the auditing
procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each
major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-
133, but not forthe purpose of expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance.
Adeficiency in internal control over compliance exists when the design or operation of a control over compliance does
not allow management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A
material weakness in internal control over compliance Is a deficiency, or a combination of deficiencies, in internal
control over compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A
significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal
control over compliance with a type of compliance requirement of a federal program that is less severe than a
material weakness in internal control over compliance, yet important enough to merit attention by those charged with
governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of
this section and was not designed to identify all deficiencies in internal control over compliance that might be material
weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that
we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Report on Sohedule of Expendatures of Federal Awards Required by OMB Circular A-133
We have audited the financial statements of the governmental activities, the business -type activities, each major fund,
and the aggregate remaining fund information of the City, as of and for the year ended June 30, 2015, and the related
notes to the financial statements, which collectively comprise the City's basic financial statements. We issued our
report thereon dated December 17, 2015, which contained unmodified opinions on those financial statements. Our
audit was conducted for the purpose of forming opinions on the basic financial statements. The accompanying
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The Honorable City Council of the
City of San Luis Obispo, California
San Luis Obispo, California
Page 3
schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB
Circular A-133 and is not a required part of the basic financial statements. Such information is the responsibility of
management and was derived from and relates directly to the underlying accounting and other records used to
prepare the financial statements or to the financial statements themselves, and'additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion, the schedule of
expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a
whole.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal
control over compliance and the results of that testing based on the requirements of OMB Circular A-133.
Accordingly, this report is not suitable for any other purpose.
cbe
GLPW I
Glenn Burdette Attest Corporation
San Luis Obispo, California
December 17, 2015
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City of Jan Luis 0i i. , California
Sct—juia of Expandituras of Fotlarai Awards
Year Enda, Ju— 30, 2015
FadaraiGrantor/ Federal Pae. -Through
Pass -Through Grantor/ CFDA Grantor'. Fadaral
Program Tme, Number N --bar Expenditure.
M;or Program..
U.J. Department of Transportation 7
Urban Mass Transportation -
Section 9 Capital and Operating
A...tance Formula Grant. 20.507 N/A $ 1,107,522
See independent auditors report.
See the accompanying nota to schedule.
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Total Major Programs
1,107,522
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Non -Major Programs:
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U.S. Department of Transportation
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Passed through the State of California
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Highway and Bridges Rehabilitation
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and Replacement Program 20.205
N/A
145539
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U.S. Department of Justice
Edward Byrne Memoria Justice Assistance Grant Program 16.804
N/A
10,355
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U.S. Department of Housing and Urban Development
Passed through the County of San Luis Obispo
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Community Development Bio.k Grant 14.218
N/A
214,791
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U.S. Office of Emergency Services
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Assistance to Firefighters Grant 97.044
N/A
15,617
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386,302
Tota, Expanditure, ofFederai Award.
$ 1,493,824
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See the accompanying nota to schedule.
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City of Jan Luis Obispo, California
Note to Schedule of Expenditures of federal Awards
Year Ended Jure 30, 2015
Note 1: Basis of Presentation
The purpose of the c.—Ponying schhedule of expn nditu rnn of fod-1 award. (the schedule) is to present a summary
of those activities of the City of SanLuis Obispo, California (the City) for the year ended June 30, 2015, which have
[
been financed by federal awards. For purposes of the schedule, federal awards include all federal contracts and
grants received directly from the federal government and sub -awards from nonfederal organizations made under
federally sponsored agreements. Because the schedule presents only a selected portion of the activities of the City, it
is not intended to and does not present eitherthe financial position or changes in net assets of the City.
The information in the accompanying schedule is presented in accordance with the requirement. of OMB Circular
A-133, Audits of States, Local Governments, and Non -Profit Organizations. Therefore, some amounts presented in this
schedu la may differ from amounts presented in the basic financial sta to—ants. The accounting principles followed by
the City and used in preparing the schedule areas follows:
Expenditures for direct costs are recognized as incurred using the modified accrual basis of accounting and the cost
accounting principles contained In OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments
and Administrative Requirement for Grants and Cooperative Agreements to State and La.al Government. (OMB
Common Rule). Under those cost principles, certain types of expenditures are not allowable or are limited as to
reimbursement. Additionally, expenditures include a portion of costs associated with general City activities (indirect
costs) which are allocated to federal awards under negotiated formulas commonly referred to as indirect cost rates.
9
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City of San Luis Obispo, (California
Soh.dul. of Audit Findings and Questioned Costs
and Status of Prior Y.ar Findings and Qu®scion.d Coats
Y.ar End.d Jun. 30, 2015
Section I: Summary of Auditors' R®sults
Fin.n..el St.t.—..t.
(a) Type of and ito rs' report issu ad on financial statements: Unqualified.
(b) �nternal control over financial rap. mi ng:
a Material waaknass(as) identified: Yes. See Finding 2015.1.
a Significant deficiencies identified not considered to be material weaknesses: Nen. reported.
(c) N.noomplianoe material to financial statements noted: No.
F.deral Awards ,
(d) Internal control over major programs:
M Material weaknesses) identified: No.
Significant deficiencies identified not considered to be material weaknesses. Non. reported.
(a) Type of auditors report issued on compliance for major programs. Unqualified.
(f) Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section .510(.). No..
(g) Doll—threshold used to distinguish between Type A and Type B programs. $300,000.
(h) Major Programs:
a Federal Transit Formula Grants (CFDA Number 20.507)
(i) Auditee qualified as low-risk audita: Ne.
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Sch®dui® of Audit Findings and Questioned Costs
and Status of Prior Year Findings and Quasti onad Costs
Yaar Ended Juna 30, 2015
Pages 2
Section 1l: /Findings Reiating /to the Finanoial Statements which are Required to be rtaportad in
Accordance with Government Auditing Standards
Finding 2015.1: Improper Classification of Revenue — Material Weakness
Criteria: GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, states that
governments should recognize a receivable in connection with an imposed nonexchange revenue as soon as they
obtain an enforceable legal claim to the resources. Impact or developer fees meet the definition of an imposed
nonexchange revenu , a nal revenue is recognized at the point the fees become nonrefundable. In addition, voluntary
nonexchange transactions, such as grants, are recorded as revenue when all applicable eligibility requirements are '
met.
Condition: The City was recording excess development service fee revenues and transit TDA grant revenues as
unearned revenue instead of revenue when received. The development service fee revenues should have been
recorded at the point the fee became nonrefundable in accordance with GASB State -ant No. 33. The transit TDA
grant revenue should have been recorded as revenue when all applicable eligibility requirements were met.
Effect: A prior year restatement of $502,205 and $1,050,746 was recorded in the General Fund and Transit Fund,
respectively, to reduce the unearned revenue liability and increase net position. In addition, an audit adjustment was
required in the General Fund to record $1,443,420 of development service revenues as current year revenues rather
than unearned revenue.
Recommendation: We recommend that the City record all development service fee revenue and transit TDA grant
revenue as revenue when received and at the point the fee becomes nonrefundable or the grant eligibility
requirements have been met in accordance with GASB Statement No, 33. We also recommend that the City tracks
any unspent development service and grant revenue that is restricted for specific programs and record the remaining
balance in restrict net position. As the related project costs are incurred, the restricted net position would be
reduced.
City Response. Management agrees with this finding. In prior years, management decided to record development
services fee revenue as deferred revenue under the definition of deferred revenue which states „payments or
unearned revenue should be recorded as a liability until the services have been rendered or products have been
delivered. In the case of the development services fee revenue, when monies are collected the services have yet to
be rendered. The uniqueness of these revenues are that they are nonrefundable and should be recognized when
received.
11
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City c,f San Larn
Luis Obispo, 4lifcia
Schedule of Audit Findings and Questioned Costs
and Status of Prior Year Findings and Qu®.tion.,, Costs
Year Ended Jun. 30, 2015
Page 3
Management has followed the Auditors recommendation and revenues have been recorded In the corresponding
years, including proper classification of TDA revenues within the Transit Fund. In addition, designations in fund
balance have been created for this purposes.
S.ction III: Findings and Question.d Costs for F.darei Awards
None.
S.ation IV: Statue of Prior Year Findings and Questional Costa - 2014/15
Finding 2014-01: Capital Assets Material Weakness)
Finding: During audittestwork, it was noted that there were differences between the City's capital assets tracking
system and governmental activity type capital assets recorded at the government -wide financial statement level. This
resulted In a prloryear restatement to reduce capital assets and not position related to disposals from prior years that
had boon properly recorded in the capital asset tracking system but not recorded at the government -wide financial
statement level.
Recommendation, We recommended that in addition to the regular reconciliation process performed for Proprietary
fund types, the City perform a review of governmental activity type capital assets and reconcile to the balances
recorded at the government -wide financial statement level.
Status. Implemented
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City of SLO
New Pension Accounting and Reporting Summary
•GASB issued a statement several years ago, GASB Statement 68, and
followed with an amendment in GASB Statement 71, that changed
accounting and reporting for pension benefits.
•June 30, 2015 is the first year of implementation.
•It has affected all government agencies in the U.S. that participate in a
defined benefit pension plan.
•The City’s contributes to the California Public Employees’ Retirement
System (CalPERS) for it’s Safety and Miscellaneous Plans.
CREATIVE. INNOVATIVE. FORWARD THINKING.
Overview
CREATIVE. INNOVATIVE. FORWARD THINKING.
Summary of Changes
Pre -GASB 68 Post -GASB 68
•Long-term liability was
recorded in the footnotes only.
•Pension expense equaled the
annual required contribution –
what was paid.
•New calculation of long-term
liability, called Net Pension
Liability, is recorded in the
Statement of Net Position, see
page 19.
•Pension expense is now
calculated based on accrual
accounting, so it will vary
compared to what was paid.
CREATIVE. INNOVATIVE. FORWARD THINKING.
Summary of Changes – Continued
•Deferred outflows and inflows are a new requirement and will accumulate and smooth the fluctuations resulting from differences in actuarial projections, changes in assumptions, and differences between projected and actual earnings on plan investments.
•Footnotes have been expanded and present information on all of
the City’s plans including the net pension liability, fiduciary net
position of investments and all actuarial required information for
each plan. Footnotes can be found on pages 63 through 75.
CREATIVE. INNOVATIVE. FORWARD THINKING.
The Bottom Line
•Though your pension numbers may seem different under
the new requirement, the current financial situation of
your retirement plan has not changed.
•The net pension liability is not new, it is now being
reported on the Statement of Net Position which has
reduced the unrestricted net position.
•The City will continue to pay it’s annual required
contribution in the same manner it always has.
CREATIVE. INNOVATIVE. FORWARD THINKING.
Statement of Net Pension – Excerpt
*From CAFR Page 19
CREATIVE. INNOVATIVE. FORWARD THINKING.
Pension Plans Footnote – Excerpt
*From CAFR Page 63