To: Sonoma County Board of Supervisors, Board of Directors of the Sonoma County Water Agency, Board of Commissioners of the Community Development Commission
Department or Agency Name(s): Auditor-Controller-Treasurer-Tax Collector and County Administrator’s Office
Staff Name and Phone Number: Jennifer Calderon 707-565-3289, Peter Bruland 707-565-3086
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
County of Sonoma’s Annual Audited Financial Reports and Post Audit Budget Adjustments for the Fiscal Year Ended June 30, 2022
End
Recommended Action:
Recommended action
A) Accept the County of Sonoma Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2022.
B) Accept the Single Audit Reports for the year ended June 30, 2022, for the County of Sonoma, Sonoma County Water Agency, Sonoma County Transit, Sonoma County Community Development Commission, and the Russian River County Sanitation District.
C) Accept the Sonoma County Employees’ Retirement Association Schedule of Employer Allocations and Schedule of Pension Amounts by Employer for Employer Reporting as of June 30, 2022.
D) Accept the County of Sonoma Other Postemployment Benefit Plan Schedule of Employer Allocations and Schedule of Other Postemployment Benefit Plan Amounts by Employer for Employer Reporting as of June 30, 2022.
E) Accept the Independent Accountant’s Report on Applying Agreed-Upon Procedures for the Year Ended June 30, 2022 Measure M County of Sonoma, California.
F) Ratify the Fiscal Year 2021-22 Post Audit Budget Adjustments required to close books in compliance with Generally Accepted Accounting Principles.
end
Executive Summary:
Each year, County and local entity staff compile financial reports that are then audited by external independent auditors. Together, these reports provide detailed information about the financial condition of the County and component units including Sonoma County Water Agency and Sonoma County Community Development Commission. Additionally, the reports confirm compliance with federal grant requirements and that internal control over compliance and financial reporting is effectively maintained.
With this item, staff recommends the Board accept the completed financial reports, which for transparency purposes, identifies a summary of the Fiscal Year 2021-22 Post Audit Budget Adjustments required for financial statement compliance with Generally Accepted Accounting Principles.
Discussion:
This item presents summary information and highlights of the County of Sonoma’s Annual Comprehensive Financial Report (ACFR) for the Fiscal Year ended June 30, 2022. The ACFR was prepared by the Auditor-Controller-Treasurer-Tax Collector (ACTTC) and presents the County’s financial activities and balances for the year. The ACFR was audited by Eide Bailly, LLP, an independent auditor, and includes an opinion stating internal controls were considered in the audit and the financial statements are fairly presented.
Additionally, the ACFR provides information useful to County management and the public about the overall financial health of the County. This information includes:
• Introductory information that offers a background on the structure of the County, the environment in which the County operates, and the types of services it provides;
• Directory of elected and appointed County officials as well as an organizational chart outlining reporting relationships;
• Management’s discussion and analysis which provides an objective and easily readable analysis of the County’s financial activities;
• Consolidated financial statements showing the financial condition and activities of the County;
• Financial information on individual major and non-major funds of the County;
• Summary of significant accounting policies;
• Detailed notes that present information on the County’s cash and investments, receivables, interfund transactions, capital assets, payables leases, long-term liabilities, fund balance, employee retirement plans, other postemployment benefits (OPEB), risk management, commitments, and contingencies; and
• Statistical data that offers multi-year trend information along with relevant economic and demographic information.
The Independent Auditor’s Report expresses an unmodified opinion indicating the County’s financial statements in the ACFR “present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County, as of June 30, 2022.”
The County has received the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting award continuously since 1992 and the ACFR for the Fiscal Year Ended June 30, 2022, has been submitted to the GFOA award program. The ACFR can be accessed on the Sonoma County Auditor-Controller-Treasurer-Tax Collector website at: <https://sonomacounty.ca.gov/administrative-support-and-fiscal-services/auditor-controller-treasurer-tax-collector/divisions/general-accounting/financial-reports>.
Financial Highlights from ACFR
Government-wide highlights:
• The County’s government-wide net position was $2.0 billion on June 30, 2022, an increase of $280.1 million from prior year. The change is primarily due to an increase in net investment in capital assets, increased fund positions in Health, Public Protection, and Public Assistance areas, and decreases in OPEB and pension liabilities from investment performance.
• The County’s government-wide net position included $1.6 billion in net investment in capital assets, $446.7 million in restricted net position and a $48.0 million deficit in unrestricted net position. The deficit is primarily the result of the County’s liabilities related to pension and other postemployment benefits (OPEB).
Governmental fund highlights:
• The County’s governmental funds reported combined ending fund balance of $869.7 million, an increase of $84.9 million over the prior year. Spendable (available for budgeting) amounts include restricted, committed, assigned, and unassigned fund balances and total 98.5% of ending fund balance. Of the total ending fund balance, $435.0 million is restricted by law or externally imposed requirements, $34.6 million is committed for specific purposes, $319.6 million is assigned to specific purposes determined by the Board of Supervisors, $67.3 million is unassigned which includes $55.7 million in Reserves, and $13.2 million is non-spendable.
• The General Fund unassigned June 30, 2022 fund balance was $67.3 million, or 12.4% of total General Fund expenditures. The General Fund as described by the ACFR is broader than is generally described in budgeting and includes funds that are limited primarily by Board policy rather than external constraints, such as the PG&E settlement fund related to the 2017 Wildfires. In some cases, funds that have been earmarked by the Board will appear as unassigned. The unassigned fund balance in fund 10005, which is considered the General Fund for budgeting purposes, was $12.8 million as of June 30, 2022, as described in the year-end report that went to the Board in October 2022.
Additional information and analysis on the financial highlights are available within the ACFR for the fiscal year ended June 30, 2022, on file with the Clerk of the Board and is also available online at County of Sonoma website.
In addition to the County’s ACFR, the ACTTC has placed on file with the Clerk (and also available online at County of Sonoma website) of the Board:
• Audited financial statements for 15 entities which represent individual funds or component units of the County
• Audited Sonoma County Employees’ Retirement Association Schedule of Employer Allocations and Schedule of Pension Amounts by Employer
• Audited County of Sonoma Other Postemployment Benefit Plan Schedule of Employer Allocations and Schedule of Other Postemployment Benefit Plan Amounts by Employer
• Independent Accountant’s Report on Applying Agreed-Upon Procedures For Measure M County of Sonoma, California
These separate financial statements are compiled by County/entity staff and audited by independent auditors separate from the County’s ACFR audit. Relevant information contained in these separate audited financial statements is included in the County’s ACFR, as the ACFR presents financial information for the entire County.
Single Audit Reports:
The objective of a Single Audit, also known as a Federal Awards Report or Schedule of Expenditures of Federal Awards, is to determine compliance with the requirements of federal grants received. The County receives a significant amount of assistance from the federal government. Entities that expend $750,000 or more of federal assistance are required to undergo a Single Audit in accordance with federal award audit requirements. The Single Audit Report is compiled annually by County/entity staff and audited by an independent auditor.
The County’s Single Audit Report can be accessed on the Sonoma County Auditor-Controller-Treasurer-Tax Collector website at: https://sonomacounty.ca.gov/administrative-support-and-fiscal-services/auditor-controller-treasurer-tax-collector/divisions/general-accounting/financial-reports
Other Audited Financial Statements for County Entities:
Several County entities issue annual financial statements that are independently audited and separate from the ACFR. These entities are either classified as component units of the County, major funds, or separately audited funds of the County, and include but are not limited to the Sonoma County Water Agency, Community Development Commission, Agricultural and Open Space District, Refuse Enterprise Fund, Sonoma County Transit, Salmon Creek Water County Service Area and several sanitation districts.
Sonoma County ACFR and Single Audit - Audit Recommendations and Findings:
Please refer to Attachment C for audit findings and recommendations.
Fiscal Year 2021-22 Post Audit Budget Adjustments:
Fiscal Year 2021-22 Post Audit Budget Adjustments enclosed as Attachment A represent $17.65 million in adjustment to uses and $16.62 million in adjustments to sources resulting in approximately $1 million net cost primarily associated with Chanate Property. Other notable adjustments are:
• Transfer appropriations between various expenditures and revenue accounts among different funds for implementing new lease accounting standard, GASB 87. Net revenue impact $146,887. Under GASB 87, the County will no longer record leases as capital or operating. GASB 87 requires lessees to record a liability and a corresponding intangible asset. Lessors are required to record a lease receivable and a deferred inflow of resources for the receivable.
• Transfer appropriations between funds in operating transfers for sale of Chanate property with no effect on General Fund net cost.
• Increase unanticipated expenditure budget for General Fund and Department of Health related to sale of Chanate property, net cost impact $976,074.
• Transfer appropriations under CDC funds to cover Joe Rodota Trail/Los Guilicos expenses, with no net cost effect.
• Transfer appropriations between expenditure accounts under CDC funds for GASB 87 implementation, with no net cost effect.
• Transfer expenditure budgets under Sonoma County Public Infrastructure-Refuse Integrated Waste Administration for writing-off Construction-In-Progress project taken over by Republic Services, with no net cost effect.
• General Funds - transfer appropriations between Contributions and Other Financing Uses for correcting various expenditure entries, with no net cost effect.
• Transfer appropriations from 2020 LNU Fire Disaster Funds to 2020 Covid-19 Disaster Funds to properly record expenditure adjustments, with no net cost effect.
• General Funds - increase appropriations for recording unanticipated write-off of SCEIP set-up cost. Net cost impact $200,500.
These adjustments were necessary to report financial information in accordance with Generally Accepted Accounting Principles (GAAP) and recorded under authority delegated to the County Administrator and ACTTC to close the County’s books in accordance with GAAP and as authorized by the FY 2021-22 Board Resolution Adopting the Budget.
Post Audit Budget Adjustments for the prior fiscal year ending on June 30, 2022, were completed under the Board’s FY 2022-23 Budget Adoption resolution authority. Staff is presenting them in this item for ratification.
Strategic Plan:
N/A
Prior Board Actions:
09/13/2022: the Board accepted the Sonoma Annual Audit Reports and Fiscal Year budgetary adjustments for Fiscal Year 2020-21.
6/17/2022: FY 2022-23 Budget Adoption Resolution 22-0249
Fiscal Summary
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FY 22-23 Adopted |
FY23-24 Projected |
FY 24-25 Projected |
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Narrative Explanation of Fiscal Impacts:
No fiscal impacts for the current and/or future fiscal years. Impacts are associated with FY 2021-22.
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Narrative Explanation of Staffing Impacts (If Required):
N/A
Attachments:
Attachment A: Fiscal Year 2021-22 Post Audit Budget Adjustments
Attachment B: List of External Auditors by Entity
Attachment C: Sonoma County ACFR and Single Audit - Audit Recommendations and Findings
Related Items “On File” with the Clerk of the Board:
Fiscal Year Ended June 30, 2022 Annual Audited Financial Reports for:
1. County of Sonoma ACFR
2. County of Sonoma, Human Services Department California Department of Education Child Development Program
3. County of Sonoma Local Transportation Fund
4. Occidental County Sanitation District
5. Russian River County Sanitation District (includes Single Audit Report)
6. Salmon Creek Water County Service Area
7. Sonoma County Agricultural and Open Space District including as separate attachments:
• Sonoma County Agricultural and Open Space District Memorandum on Internal Control and Required Communications
• Sonoma County Open Space Fiscal Oversight Commission Eighth Annual Report
• Sonoma County Measure F Government Code Section 50075.3 Reporting
8. Sonoma County Airport Enterprise Fund (Includes Schedule of Passenger Facility Charges)
9. Sonoma County Community Development Commission (includes Single Audit Report)
10. Sonoma County Energy Independence Program Enterprise Fund
11. Sonoma County Fair and Exposition, Inc. (for year ended December 31, 2021)
12. Sonoma County Refuse Enterprise Fund
13. Sonoma County Transit (includes Single Audit Report)
14. Sonoma County Water Agency ACFR
15. Sonoma Valley County Sanitation District
16. South Park County Sanitation District
Other Documents:
17. County of Sonoma Single Audit Report
18. Sonoma County Water Agency Schedule of Expenditures of Federal Awards and Auditor’s Report
19. Sonoma County Employees’ Retirement Association Employer Allocations and Schedule of Pension Amounts by Employer
20. County of Sonoma Other Postemployment Benefit Plan Schedule of Employer Allocations and Schedule of Other Postemployment Benefit Plan Amounts by Employer
21. Applying Agreed-Upon Procedures For the Year Ended June 30, 2022 Measure M County of Sonoma, California