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Home My WebLink About111720-07.1 ADMINISTRATIVE STAFF REPORT 7.1 TO: Mayor and Town Council November 17, 2020 SUBJECT: Resolution No. 78-2020, accepting the Fiscal Year 2019/20 Audited Comprehensive Annual Financial Report for the Town of Danville BACKGROUND The Pun Group, LLP, has completed its examination of the financial statements for the Town of Danville and have approved the draft financial reports, including unqualified opinions, as to their accuracy. The draft audit is attached to this report and the Council is now being asked to accept the FY 2019/20 Comprehensive Annual Financial Report (CAFR). FORMAT OF TOWN’S FINANCIAL REPORT The CAFR is presented in compliance with Government Accounting Standards Board (GASB) Statement 31, Statement 34, Statement 40, Statement 44 and Statement 54. The CAFR is composed of three sections: Introductory, Financial and Statistical. The Introductory Section familiarizes the reader with the Town and includes the Transmittal Letter, the Town’s organizational chart and a directory of public officials. The Financial Section includes the Independent Auditor’s Report, Management’s Discussion and Analysis, Basic Financial Statements, Notes to the Basic Financial Statements, Required Supplementary Information (unaudited) and Supplemental Information. GASB 34 presents financial information from two perspectives. The first perspective, the Government-Wide Financial Statements, located at the beginning of the Financial Section, groups the Town’s funds into major and non-major funds and presents them in this condensed format. The value of the Town’s long-term debt and the Town’s infrastructure, net of depreciation, is included in the Government-Wide Statement of Net Assets and the Statement of Activities and Changes in Net Assets. The second perspective, the Fund Financial Statements, includes the Governmental Funds Balance Sheet and the Statement of Revenues, Expenditures and Changes in Fund Balance, but omits long-term debt and the value of infrastructure. Reconciliation of the Government- Wide Financial Statements and the Fund Financial Statements are presented after each of the Fund Financial Statements. Audited Comprehensive Annual Financial Report FY 2019/20 2 November 17, 2020 Based on GASB criteria, the Town’s major funds are the General Fund and the Capital Improvement Project Fund. The Town has chosen to present the Lighting and Landscape Special Revenue Fund and Regional Traffic Impact Fees Special Revenue Fund as major funds. The Statistical Section schedules are designed to show trends in five areas: financial, revenue capacity, debt capacity, demographic and economic information and operating information. Highlights of the Town’s accomplishments and fiscal activities are presented in the Transmittal Letter and Management Discussion and Analysis. ECONOMIC CONDITION OF DANVILLE’S GENERAL FUND General Fund The General Fund realized a net decrease in fund balance of $693,663 (year over year 2018/19 to 2019/20). Revenues exceeded expenditures by $7,193,320 with net operating transfers to other funds of $11,459,475. Actual revenues exceeded final budgeted revenues by $1,638,472 (this includes a $714,200 adjustment for unrealized market value reported per GASB 31 requirements). General Fund expenditures were below budget by $2,874,788 with cost savings in all departments. These savings were significantly affected by fourth quarter expenditure reductions Note 10 of the Notes to Basic Financial Statements details the reserves and designations against the June 30, 2020 Fund Balance. The recommended designated reserves, described in detail below, were reviewed by the Town Council Finance Committee on October 20, 2020, and require approval and appropriation by the full Town Council. TOWN FUND BALANCE Total reserves and designations amount to $21,968,107 (Table 1), a decrease of $504,738 from prior year reserves and designations of $22,472,845. It is recommended that the Town Council approve the following adjustments to fund balance reserves, which are reflected in the FY 2019/10 CAFR. Contingency Fund A transfer of $250,000 is recommended from Unreserved/Undesignated to the Contingency Fund. Audited Comprehensive Annual Financial Report FY 2019/20 3 November 17, 2020 Capital Improvement Projects Fund A transfer of $250,000 is recommended from Unreserved/Undesignated to the Capital Improvement Projects Fund to replace funds previously appropriated to fund the Forward Focus COVID-19 Business Grant Program. COVID Reserve Fund A transfer of $3,392,641 is recommended from Unreserved/Undesignated to the COVID Reserve Fund to assist with potential shortfall of FY 20-21 revenues or expenditures due to the COVID-19 Pandemic. Other Reserves Against Fund Balance In addition to the above-designated reserves that require Town Council action to implement, the following reserves/designations are reflected in the CAFR. A number of these are carried over from prior fiscal years and are statutorily restricted. Table 1 General Fund Balance Analysis As of June 30, 2020 Total pre-audit Fund Balance at 6/30/20 $ 26,574,948 Adjusted for unrealized market value reported per GASB 31 $ (714,200) Fund Balance without unrealized market value $ 25,860,748 Less Reserves/Designations against Fund Balance for: Operating Reserve $ 12,309,768 Receivable from former CDA $ 6,159,401 Compensated Absences/Personnel $ 1,195,339 Reserved for Debt Service $ 815,484 Contingency $ 516,446 Encumbrances $ 443,012 115 Hartz Avenue – proceeds from rent $ 108,745 500 La Gonda Way – proceeds from rent $ 409,912 Reward Fund $ 10,000 Total Reserves/Designations against Fund Balance $ 21,968,107 Current Unreserved/Undesignated Fund Balance at 6/30/19 $ 3,892,641 Recommended Fund Balance Options: Increase Contingency Fund $ (250,000) Capital Improvement Program – General Purpose $ (250,000) Audited Comprehensive Annual Financial Report FY 2019/20 4 November 17, 2020 COVID Reserve $ (3,392,641) When the operating transfers are combined with the above reserves and the designations requiring Town Council action, the entire excess of revenues and other sources over expenditures and other uses in the General Fund for the 2019/20 fiscal year will have been designated for specific purposes. PUBLIC CONTACT Posting of the meeting agenda for the Town Council meeting on November 17, 2020, as well as the Finance Committee meeting on October 20, 2020 and the Study Session on November 10, 2020, serves as notice to the general public. FISCAL IMPACT Approval of the recommendations made in this report will increase the Fiscal Year 2019/20 net designations in the General Fund by $3,892,641. RECOMMENDATION Adopt Resolution No. 78-2020, accepting the Fiscal Year 2019/20 Audited Comprehensive Annual Financial Report for the Town of Danville. Prepared by: Lani Ha Finance Manager/Treasurer Reviewed by: Joseph A. Calabrigo Town Manager Attachments: A - Resolution No. 78-2020 B - Fiscal Year 2019/20 Comprehensive Annual Financial Report for the Town of Danville (Copies were distributed to the Town Council, Town Manager and City Clerk. Copies are available upon request at the City Clerk’s office.) RESOLUTION NO. 78-2020 ACCEPTING THE FISCAL YEAR 2019/20 AUDITED COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE TOWN OF DANVILLE WHEREAS, the Town of Danville’s independent auditor has completed its annual examination of the Town’s financial statements and has issued a draft report with an unqualified opinion as to their accuracy; and WHEREAS, the audited financial statements have been combined with introductory and statistical information into the Town’s Comprehensive Annual Financial Report; and WHEREAS, the Town Council has reviewed the draft Comprehensive Annual Financial Report; now, therefore, be it RESOLVED, that the Danville Town Council accepts and approves the Fiscal Year 2019/20 audited Comprehensive Annual Financial Report as presented; and, be it further RESOLVED, that the following amount be transferred to the Contingency Fund: $ 250,000 for Contingency Fund RESOLVED, that the following amount be transferred to the Capital Improvement Projects Fund: $ 250,000 for CIP Capital Improvement Projects Fund RESOLVED, that the following amount be transferred to the COVID Reserve Fund $ 3,392,641 for COVID Reserve Fund APPROVED by the Danville Town Council at a regular meeting held on November 17, 2020, by the following vote: AYES: NOES: ABSTAINED: ABSENT: MAYOR APPROVED AS TO FORM: ATTEST: CITY ATTORNEY CITY CLERK DocuSign Envelope ID: 973023A9-32B5-4293-824A-FDAA02EC910E ATTACHMENT A CAFR Booklet will be available before Tuesday, November 17, 2020.