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Receive a presentation and accept the following reports for the fiscal year ended June 30, 2018: Solano County Comprehensive Annual Financial Report (CAFR), Report to the Board of Supervisors, Report to Management and the Single Audit Report; and the Report on Applying Agreed-Upon Procedures (AUP, GANN Limit) for the fiscal year ended June 30, 2019
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The Auditor-Controller’s Office (ACO) recommends that the Board of Supervisors receive a presentation and accept the following reports:
1) For the fiscal year ended June 30, 2018:
a) Solano County Comprehensive Annual Financial Report (CAFR);
b) Report to the Board of Supervisors;
c) Report to Management;
d) Single Audit Report; and
2) For the fiscal year ended June 30, 2019:
e) Report on Applying Agreed-Upon Procedures (AUP, GANN Limit)
SUMMARY:
In accordance with Government Code §25250 and pursuant to the contract terms approved by the Board of Supervisors on April 3, 2018, Vavrinek, Trine, Day & Co., L.L.P., CPAs, conducted the audit of the following reports: 1) Comprehensive Annual Financial Report (CAFR); 2) Report to the Board of Supervisors; 3) Report to Management; 4) Single Audit Report (all four reports are for fiscal year ended June 30, 2018); and 5) Report on Applying Agreed-Upon Procedures (AUP, GANN Limit) for the fiscal year ended June 30, 2019.
For the fiscal year ended June 30, 2018, the County received an unmodified opinion (clean opinion) on the CAFR. The Report to the Board of Supervisors did not note any significant or material audit matters. The Single Audit Report on internal controls over financial reporting did not identify any matters. The Single Audit Report on compliance identified one finding discussed below. The AUP, GANN Limit Report noted no exceptions.
The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to Solano County for the fiscal year ended June 30, 2017. The ACO believes the current CAFR continues to meet the Certificate of Achievement Program’s requirements and submitted it to the GFOA to determine its eligibility for another award.
FINANCIAL IMPACT:
The costs associated with preparing the agenda item are nominal and absorbed by the department’s FY2018/19 Adopted Budget.
DISCUSSION:
Comprehensive Annual Financial Report
The ACO prepares the Comprehensive Annual Financial Report (CAFR). The CAFR includes an introductory section, a financial section, and a statistical section.
The introductory section provides general information on the County’s structure, awards received and personnel as well as information useful in assessing the County’s financial condition (pages 1-12).
The financial section (pages 13-144) contains the basic financial statements and required supplementary information as well as the independent auditor’s report. A narrative overview and analysis of the financial activities of the County for the fiscal year ended June 30, 2018 is included in the Management’s Discussion and Analysis (pages 19-31). In addition, the financial section provides information on each individual fund and component unit not reported separately within the basic financial statements.
The statistical section (pages 145-169) provides a broad range of trend data covering key financial indicators from the past 10 years. It also contains demographic and miscellaneous data useful in assessing the County’s financial condition.
Basic financial statements are defined as government-wide financial statements (pages 35-37), fund financial statements (pages 38-46), and notes to the financial statements (pages 47-101). Areas of particular interest include the detailed note disclosures on cash and investments (pages 63-70), long-term obligations (pages 79-83), fund balance classifications (page 85), employee retirement plans (pages 86-94), and Post Employment Health Care Benefits (pages 94-97).
The focus of the government-wide financial statements is to report the extent to which the government has met its operating objectives, using all resources available for that purpose. The focus of the fund financial statements is to demonstrate the government’s actions in the current period have complied with the public decisions in raising and spending the public funds within the budgetary cycle.
The required supplementary information presents the schedules of changes in net pension liability and related ratios for the defined benefit pension plans (pages 105-106) and schedules of changes in net OPEB liability and related ratios for the OPEB plan (page 107). Also, this section presents the County’s budgetary comparison schedules for the General Fund (page 108) and all major special revenue funds (pages 109-110). The combining statements in connection with non-major governmental and internal service funds are presented immediately following the required supplementary information (pages 113-144).
The County’s unfunded pension liability and pension activities are presented in the County’s government-wide financial statements, note disclosures and supplementary schedules in accordance with the Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting of Pensions - an amendment of GASB Statement No. 27.
The County’s Net Pension Liability of $531,876,485 ($395,164,636 for the Miscellaneous Plan and $136,711,849 for the Safety Plan, excluding the Courts and Fair) is presented in the Statement of Net Position (page 35). This is a net increase of $60,021,010 over prior year’s net pension liability of $471,855,475. Additional detail and pension information is disclosed in the pension footnote (pages 86-94).
In Fiscal Year (FY) 2017/18, the County adopted Government Accounting Standard Boards (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. Accordingly, the County’s unfunded other postemployment benefits (OPEB) liability and OPEB activities are presented in the County’s government-wide financial statements, note disclosures and supplementary schedules.
The County’s Net OPEB Liability of $22,888,955 is presented in the Statement of Net Position (page 35). This amount is a net increase of $18,951,016 over prior year’s net OPEB obligation of $3,937,939 ($3,931,884 governmental activities and $6,055 business-type activities, included as part of the County’s other long-term obligations reported in the Statement of Net Position and disclosed in the Long-Term Obligations notes to the financial statements). Additional detail and OPEB information is disclosed in the OPEB footnote (pages 94-97).
Report to the Board of Supervisors
The Report to the Board of Supervisors communicates any significant audit matters and other information containing audited financial statements. There were no significant material audit matters reported.
Report to Management
The Report to Management communicates weaknesses in internal controls and related matters identified in the audit that warrant communication to management but are not material weaknesses in internal controls. The report identified the following instances that warrant communication to management:
1) Removing active directory accounts for terminated employees - Department of Information Technology (repeat finding)
2) Segregation of Duties; Fairfield Health Clinic Cash Receipts - Department of Health & Social Services
3) Authorizing Employee Status Changes/Action - Department of Human Resources
4) Authorizing Timesheets - Payroll Division of the Office of the Auditor-Controller
Single Audit Report
The Single Audit Report is comprised of:
1) Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements performed in accordance with Government Auditing Standards. The report did not identify any matters. The County received an unmodified opinion (clean opinion) for this report.
2) Independent Auditors’ Report on Compliance for each major Federal program; Internal Control over Compliance; and the Schedule of Expenditures of Federal Awards (SEFA) required by the Uniform Guidance. The County received an unmodified opinion (clean opinion) for this report. The report did not identify any deficiencies in internal control over compliance that are considered to be material weaknesses or that would have modified each major program as reported; however the auditing procedures disclosed one instance of non-compliance required to be reported and described in the schedule of findings:
a. Medical Assistance Program, Medicaid Cluster - the County did not complete timely redeterminations of eligibility requirements for the program. The affected department has implemented corrective actions strengthening its procedures to improve timeliness.
Report on Applying Agreed-Upon Procedures (GANN Limit)
The Report on Applying Agreed-Upon Procedures (AUP, GANN Limit) communicates the procedures performed on the County's computation of the Gann Appropriations Limit for the fiscal year ending June 30, 2019. The report noted no exceptions.
The preparation of these reports would not have been possible without the dedication of the Auditor-Controller’s staff. The ACO would like to specifically recognize Adrienne Clark, Jennifer Laron, Debbie Pierce and Ernestine Villanueva for their commitment and hard work. Credit must also be given to the County Administrator and the Board of Supervisors for their support in maintaining the highest standards of professionalism in the management of the County’s finances. In addition, the ACO also like to thank other County departments for their cooperation and outstanding support in the preparation of these reports.
ALTERNATIVES:
The Board could elect not to accept the audit reports as presented; however, this alternative is not consistent with sound public policy and is therefore not recommended.
OTHER AGENCY INVOLVEMENT:
The ACO was the liaison between the external auditors, Vavrinek, Trine, Day & Co., L.L.P., and other County departments, including the Workforce Development Board. As the liaison, the ACO coordinated test work and meetings with County departments, facilitated access to financial system (OneSolution) reports and supporting documentation, etc. Prior to the final issuance of the various reports, the ACO invited staff from the County Administrator’s Office, the Grand Jury, and County departments to meet with Vavrinek, Trine, Day & Co., L.L.P., to review and discuss the contents of the various audit reports.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION