HomeMy WebLinkAboutAgenda Report - February 6, 1991 (107)I
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CIW OF LODI COUNCIL COMMUNICATION
Ate. TITLE: Audited Financial Statements for Fiscal Year Ended June 30, 1990
Kr TING DATE: February 6, 1991
PREPAP.ED BY: Finance Director
RDOOM MED ACTION: That the City Council accept for filing the following
documents connected with the audit of the Financial
Statements of the City of Lodi as of and for the year ended
June 30, 1990.
BACKGF40 ID DEMI* A.TICN: Attached are the following do=cents related, to the
1989-90 annual audit:
• Exhibit A--Ccmnents and Recamnendaticns (Management Letter)
• Exhibit B --Finance Director's Comments (Management Letter)
• Exhibit C --"Report on Investment Policy"
• Exhibit D—"Single Audit Report"
• Exhibit E ---"Report on Internal Control Structure"
• Exhibit F --"General Purpose Financial Statements"
FUNDING: None Required
Robert H. Holm
Finance Director
RHH:ss
Attachments
APPR0YED77 lNe4/ • `-` '
THOMAS A. PETERSON
City Manager
COCCM/TX'I'F. 06S/CC. DIR
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Peat Marwick iarwick EXHIBIT A
Caroted Public Accountants
2495 Natomas Park Drive Telephone 916 925 6000 TeWcopier 916 641 3199
Sacramento. CA 95833 2936
January 7, 1991
The Honorable Members City Council
City of Lodi, California:
We have audited the general purpose financial statements of The City of Lodi for the year ended
June 30, 1990, and have issued our report ther_on dated November 2, 1990. In planning and
performing our audit of the general purpose financial statements of the City of Lodi, California we
considered its internal control structure in order to determine our auditing procedures for the
purpose of expressing our opinion on the general purpose financial statements and not to provide
assurance on the internal control structure. We have not considered the internal control structure
since the date of our report.
During our audit we noted certain matters involving the internal control structure and other
operational matters that are presented for your consideration. These comments and
recommendations, all of which have been discussed with the appropriate members of management,
are intended to improve the internal control structure or result in other operating efficiencies, are
summarized as follows:
Detailed Property Records
Adequate support for fixed assets does not currently exist. To improve conal over City assets,
detailed property records should be established. Specifically, property records should include the
following data:
• Description and unit number assigned;
• Location of property unit;
• Cost, voucher number, and vendor nsme;
• Condition - nese or used;
• Dau platxd in service;
• Useful life;
• Depreciation method;
• Depreciation provision for each year. and
• Date retired, sold or traded.
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Peat Marwick
This could be accomplished by performing a physical inventory of all fixed assets, and then
recording the above recommended information. Additionally, the City should implement a method
for the valuation of these assets. We recommend the City consider the use of an appraiser, as
appropriate, to arrive at a reasonable valuation of the fixed assets inventoried. The City could
perform the valuation process over several years in order to spread the cat of the valuation project
over tithe.
Fixed Asset Disposals
At present, the City, despite the size and dispersion of its facilities, does not have a formal
procedure to ensure that disposals of fixed assets, whether by destruction, sale, scrapping, or
trade-in, are reported to the accounting department. Without such a procedure, the likelihood of an
unrecorded disposal, even a sale with diversion of the related proceeds, increases.
We recommend that a formal polity to ensure the reporting of fixed asset disposals be adopted and
include: (1) the necessary level of approval based on the value of the asset and (2) reporting to the
finance department on a timely basis. A simple standardized form could be developed to provide
adequate accounting documentation and to provide evidence of adherence to City policy.
Review of Internal Accounting Controls over Purchases
During our compliance testing of the disbursement cycle, we noted that in 15 instances (out of 30
sample items) where vendor packets did not contain purchase orders. We also noted that purchase
orders were sometimes prepared after the purchase was made. To enhance internal accounting
controls over purchase activities, we recommend that all purchases be required to have a properly
approved purchase order prior to the purchase transaction and that a copy of the purchase order be
maintained in the individual vendor packet. To help implement this policy, we recommend the
accounts payable department not accept a request for payment unless the vendor packet includes an
approved purchase order. This will minimize occurrences of unauthorized or unapproved
purchases.
Documentation of Control Over Purchases
When invoices are received, the unit price on the invoice is compared to the unit price per the
purchase order and any discrepancies are investigated. If the vendor is incorrect, the invoice is
changed accordingly. This is an effective control procedure, however, it is not documented by the
person snaking this comparison. To establish accountability for the review process, invoices
should be initialed to signify agreement with the approved unit price per the purchase order. This
will provide the check signer assurance that payment is trade at the unit price agreed to at the time
the order was placed
Peat Marwick
We were asked by the City to perform compliance test -work on the City's investment policy. This
policy includes a list of investment instruments which are allowable under current legislation of the
State of California (Government Code Section 53600 et seq.). We noted investments in stock is
not a part of this list. During our test -work, we noted the City library's investment portfolio
contained common stock valued at $139,073 at a cost of $57,085 as of June 30. 1990. The City
Iibrary obtained this stock through bequests, stock dividends, and dividend reinvestment
programs. The dividend reinvestment program is, in effect, the acquisition of stock. To ensure
compliance with the City's investment policy and State of California current legislation, we suggest
that management assess the need to sell this stock .
Operations Letter
Additional suggestions of an operational nature were presented to management under a
separate letter also dated January 7, 1991.
This report is intended solely for the information and use of the City Council, management, and
others within the organization.
Very truly yours,
k/o µ c, -�—
IDMBIT B
MEMORANDUM
TO: namas A. Peterson, City Manager
FROM: Robert H. Holm, Finance Director
DATE: January 28, 1991
SUBJECT: Comments on Auditors' Management Letter
As stated in my comets on last year's audit report, the auditors have
indicated there are no material weaknesses in our internal control
procedures. However, they do have suggestions for improving our internal
controls, and I would like to add our responses to their suggestions.
Fixed Assets
The audltors have again reccmiended detailed fixed asset records be
established, and that the City consider the use of an appraiser to
determine a reasonable value of fixed assets. My coments last year
indicated this is a cost item in the area of $50,000 to $60,000 for
appraisal services. The appraisal would cover all buildings and contents,
electrical underground and overhead transmission systems, water mains,
sewer lines, etc.
We have had this comment each year for the past fifteen years, and, since
it hasn't affected our bond rating, I cannot give it the highest priority
rating considering the City's financing difficulties.
We presently have a manual system for office equipment, vehicles, etc., and
we are looking at software to purchase to autcmate those property records.
As soon as we can find the right software to run on the City's mainframe,
we will have it installed (hopefully, this fiscal year).
Fixed Asset Disposals
The auditors have stated that we do not have a formal procedure to dispose
of fixed assets. This is only partially correct, as the Lodi Municipal
Code (Eric), section 2.12.120 specifically addresses the sale of personal
property. We may not have a specific form designed, however, all
Department Heads send us memorandums on disposal of surplus property, ar.d
we forward these to the City Manager for approval.
Other Matters—Investments in Corvorate Stocks
The auditors' caRnent on this item is the same as last year's. In my
contact with the City Librarian last year, he indicated that unless the
City Council direct the Library Hoard of Trustees to sell the stock, they
were going to continue to hold on to the stock and receive stock dividends
as a reinvestment. As City Treasurer, I an not allowed, under int
code, to invest in corporate stock. Since I did not purchase the stock, I,
therefore, do not list the stock as part of my investment report to the
City Council. To me, it is a technicality as to the reinvestment cf
dividends into additional stock that the auditors are expressing a
comment. The City Council may want to direct the Library Board of Trustees
to sell the stock and not have the auditors' Ghent reappear next year.
Robert H. Holm
Finance Director/Treasurer
RHH;_s
A NjG1-SLTR/TXTF.06S/AUDIT.DR
Metmrandum - 2 - January 28, 1991
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Internal Accounting Controls—Purchasing
x
The auditors indicated that we have been paying invoices that do not have
purchase orders, and, also, that purchase orders are issued after purchases
are made. I want to paint out that while we may be paying invoices that do
not have purchase orders, these invoices are approved by each department to
sensure
that prices are correct and materials are received prior to payment
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being made.
It is aur goal to centralize all of the City's purchase functions to make
sure the provisions of the LMC are being followed and that the proper
materials with the best prices are obtained. We will continue to make our
best effort to centralize all of the City's purchase functions provided we
have cooperation from all departments and our staffing level allows it.
4
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Documentation of Control over Purchases
°
The auditors have suggested that our staff initial changes on invoices when
corrections are made. We will ccmply with this request.
Other Matters—Investments in Corvorate Stocks
The auditors' caRnent on this item is the same as last year's. In my
contact with the City Librarian last year, he indicated that unless the
City Council direct the Library Hoard of Trustees to sell the stock, they
were going to continue to hold on to the stock and receive stock dividends
as a reinvestment. As City Treasurer, I an not allowed, under int
code, to invest in corporate stock. Since I did not purchase the stock, I,
therefore, do not list the stock as part of my investment report to the
City Council. To me, it is a technicality as to the reinvestment cf
dividends into additional stock that the auditors are expressing a
comment. The City Council may want to direct the Library Board of Trustees
to sell the stock and not have the auditors' Ghent reappear next year.
Robert H. Holm
Finance Director/Treasurer
RHH;_s
A NjG1-SLTR/TXTF.06S/AUDIT.DR
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Peat Marwick
EXHIBIT D
Certified Public Accountants
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KPA4G Peat Marwick
CITY OF LODI, CALIFORNIA
Single Audit Reports
Year Ended June 30, 1990
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CITY OF LODI, CALIFORNIA
Single Audit Reports
Year Ended June 30, 1990
Table of Contents
AI
Page
Independent Auditors' Report on Internal Control Structure
1 - 2
Independent Auditors' Report on Compliance at the General
Purpose Financial Statement Level
3
Independent Auditors' Report on Supplementary Information -
Schedule of Federal Financial Assistance
4
Schedule of Federal Financial Assistance
5
Notes to Schedule of Federal Financial Assistance
6
Independent Auditors' Report on Internal Controls (Accounting
and Administrative) based on a study and evaluation made as
a part of an audit of the general purpose financial statements
and the additional tests required by the Single Audit Act
7 - 9
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Nonmajor Federal Financial
Assistance Programs
10
Schedule of Findings and Questioned Costs
11
Certified Public Accountants
,,,� 2495 Natornas Park Drive
Sacramento, CA 95833 2936
0
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE
The Honorable Members of City Council
The City of Lodi, California
Lodi, California:
We have audited the general purpose financial statements of The City of Lodi,
California as of and for the year ended June 30, 1990, and have issued our
report thereon dated November 2, 1990, which was qualified because adequate
historical cost records of general and proprietary fund fixed assets and
proprietary fund contributed capital were not available for audit and as such,
we were unable to satisfy ourselves with respect to these accounts.
We conducted our audit in accordance with generally accepted auditing
standards and 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 general purpose
financial statements are free of material misstatement.
In planning and performing our audit of the general purpose financial
statements of The City of Lodi, California for the year ended June 30, 1990,
we considered its internal control structure in order to determine our
auditing procedures for the purpose of expressing our opinion on the general
purpose financial statements and not to provide assurance on the internal
control structure.
The management of The City, of Lodi, California is responsible for establishing
and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess
the expected benefits and related costs of internal control structure policies
and procedures. The objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of general purpose financial
statements in accordance with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may nevertheless occur and not be detected. Also, projection
of any evaluation of the structure to future periods is subject to the risk
that procedures may become inadequate because of changes in conditions or that
the effectiveness of the design and operation of policies and procedures may
deteriorate.
For the purpose of this report, we have classified the significant internal
control structure polices and procedures in one category, the disbursement
cycle.
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For the internal control structure category identified above, we obtained an
understanding of the design of relevant policies and procedures and whether
they have been placed in operation, and we assessed the control risk.
�! Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a reportable condition in which
the design or operation of one or more of the specific internal control
structure elements does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their assigned
functions. We noted no matters involving the internal control structure and
its operation that we consider to be material weaknesses as defined above.
However, we noted certain matters involving the internal control structu•:e and
its operation that we have reported to the management and City Council of the
City of Lodi, California, in separate letters dated November 2, 1990.
This report is intended for the information of the City Council, management,
and the U.S. Department of Sousing and Urban Development. This restriction is
not intended to limit the distribution of this report, which is a matter of
public record. �'PA147 PXd
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November 2, 1990
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Peat Marwicl
Certified Public Accountants
a!► 2495 Natomas Park Drive
Sacramento. CA 95833 2936
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
AT THE GENERAL PURPOSE FINANCIAL STATEMENT LEVEL
The Honorable Members of City Council
City of Lodi, California:
W.
We have audited the general purpose financial statements of the City of Lodi,
California as of and for the year ended June 30, 1990, and have issued our
report thereon dated November 2, 1990, which was qualified because adequate
historical cost records of general and proprietary fund fixed assets and
proprietary fund contributed capital were not available for audit and as such,
i:k we were unable to satisfy ourselves with respect to these accounts.
We conducted our audit in accordance with generally accepted auditing
standards and Governmental 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 general
purpose financial statements are free of material misstatement.
Compliance with laws, regulations, contracts, and grants applicable to the
City of Lodi, California is the responsibility of the City of Lodi,
California's management. As part of obtaining reasonable assurance about
whether the general purpose financial statements are free of material
misstatement, we performed tests of the City of Lodi, California's compliance
with certain provisions of laws, regulations, contracts, and grants. However,
our objective was not to provide an opinion on overall compliance with such
provision. Accordingly, we do not express such an opinion.
The results of our tests indicate that, with respect to the items tested, the
City of Lodi, California complied, in all material respects, with the
provision referred to in the preceding paragraph. With respect to items not
tested, nothing came to our attention that caused us to believe that The City
of Lodi, California had not complied, in all material respects, with those
provisions.
This report is intended for the information of t..e City Council, management
and the U.S. Department of Housing and Urban Development. This restriction is
not intended to limit the distribution of this report, which is a matter of
public record. K -PW, P4 &-,"L
November 2, 1990
3
Peat Marwick
Certified Public Accountants
A 2495 Natomas Park Drive
Sacramento. CA 95833 2936
INDEPENDENT AUDITORS' REPORT
,A ON SUPPLEMENTARY INFOP.MATION
SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE
The Honorable Members of City Council
i► City of Lodi, California:
We have audited the general purpose financial statements of the City of Lodi,
California for the year ended June 30, 1990, and have issued our report
thereon dated November 2, 1990, which was qualified because adequate
historical cost records of general and proprietary fund fixed assets and
proprietary fund contributed capital were not available for audit and as such,
we were unable to satisfy ourselves with respect to these accounts. These
general purpose financial statements are the responsibility of the management
of the City. Our responsibility is to express an opinion on these general
purpose financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and 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 ass.,rance about whether the general purpose
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the general purpose financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
Our audit was made for the purpose of forming an opinion on the general
purpose financial statements of the City of Lodi, California, taken as a
whole. The accompanying schedule of federal financial assistance is presented
for purposes of additional analysis and is not a required part of the general
purpose financial statements. The information in that schedule has been
subjected to the auditing procedures applied in the audit of the general
purpose financial statements and, in our opinion, is fairly presented in all
material respects in relation to the general purpose financial statements
taken as a whcle.
November
2, 1990
4
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CITY OF LODI, CALIFORNIA
Schedule of Federal Financial Assistance
a► Year Ended June 30, 1990
See accompanying notes to schedule of federal financial assistance.
5
Federal CFDA
or Grantor's
Pass -Through
Federal Grantor Program Title
Number
Revenues
Expenditures
U.S. Department of Housing and
Urban Development: (Pass-through
County of San Joaquin):
Community Development Block Grants:
1989-1990 Program Year
14.219
$ 58,759
60,465
1988-1989 Program Year
14.219
33,820
33,820
1987-1988 Program Year
14.219
136,002
136,002
1985-1987 Program Year
14.219
49,441
49,441
278,022
279,728
U.S. Department of Transportation
(Pass-through State Office of
Criminal Justice Planning:
Federal Urban Aid
20.205
-
4,167
U.S. Treasury Department:
Federal Revenue Sharing
21.300
-
136,972
U.S. Department of Justice
(Pass-through State Office
of Criminal Justice Planning):
Drug Suppression Program
25,172
44,804
Total Federal Financial Assistance
$ 303�L94
4b5f71
See accompanying notes to schedule of federal financial assistance.
5
T
CITY OF
LODI, CALIFORNIA
Schedule of Federal Financial Assistance
Year Ended June 30, 1990
Oft
Federal CFDA
or Grantor's
Pass -Through
Federal Grantor Program Title
Number
Revenues
Expenditures
U.S. Department of Housing and
Urban Development: (Pass-through
County of San Joaquin):
•1
Community Development Block Grants:
1989-1990 Program Year
14.219
$ 58,759
60,465
1988-1989 Program Year
14.219
33,820
33,820
1987-1988 Program Year
14.219
136,002
136,002
1985-1987 Program Year
14.219
49,441
49,441
278,022
279,728
U.S. Department of Transportation
(Pass-through State Office of
Criminal Justice Planning:
Federal Urban Aid
20.205
-
4,167
U.S. Treasury Department:
Federal Revenue Sharing
21.300
-
136,972
U.S. Department of Justice
(Pass-through State Office
of Criminal Justice Planning):
Drug Suppression Program
25,172
44,04
Total Federal Financial Assistance
$
465.b71
See accompanying notes to schedule of federal financial assistance.
5
CITY OF LODI, CALIFORNIA
Notes to Schedule of Federal Financial Assistance
.� June 30, 1490
(1) General
The accompanying Schedule of Federal Financial Assistance presents the
activity of all federal financial assistance programs of the City of Lodi,
California. The City of Lodi reporting entity is defined in note 1 to the
City's general purpose financial statements. Federal financial assistance
is received directly from federal agencies and through other government
agencies.
7
(2) Basis of Accounting — Grant Programs
The Schedule of Federal Financial Assistance has been prepared on the
modified accrual basis of accounting which is described in note 1 to the
City's general purpose financial statements.
(3) Relationship to General Purpose Financial Statements
Federal financial assistance revenues are reported in the City's general
purpose financial statements as follows:
Intergovernmental Revenue
General Fund $ 25,172
Special Revenue Fund 278,022
Total $ 3 4
Total Federal assistance revenues do not agree with expenditures reported
on the Schedule of Federal Financial Assistance due to the timing of the
submission of claims for reimbursement of expenditures.
(4) Relationship to Federal Financial Reports
Amcunts reported in the accompanying schedule agree with the amounts
reported in the related federal financial reports.
M
Certified Public Accountants
011 2495 Natomas Park Drive
Sacramento, CA 95333 2936
INDEPENDENT AUDITORS' REPORT
ON INTERNAL CONTROLS (ACCOUNTING AND ADMINISTRATIVE)
BASED ON A STUDY AND EVALUATION MADE AS A PART OF AN
AUDIT OF THE GENERAL PURPOSE FINANCIAL STATEMENTS AND
THE ADDITIONAL TESTS REQUIRED BY THE SINGLE AUDIT ACT
The Honorable Members of City Council
The City of Lodi, California
Lodi, California:
We have audited the general purpose financial statements of the City of Lodi,
California, as of and for the year ended June 30, 1990, and have issued our
report thereon dated November 2, 1990, which was qualified because adequate
historical cost records of general and proprietary fund fixed assets and
proprietary fund contributed capital were not available for audit and as such,
we were unable to satisfy ourselves with respect to these accounts.
We conducted our audit in accordance with generally accepted auditing
standards; Government Auditing Standards, issued by the Comptroller General of
the United States; and Office of Management and Budget (OMB) Circular A-128,
Audits of State and Local Governments. Those standards and OMB Circular A-128
require that we plan and perform the audit to obtain reasonable assurance
about whether the general purpose financial statements are free of material
misstatement.
In planning and performing our audit of the general purpose financial
statements of the City of Lodi, California, for the year ended June 30, 1990,
we considered its internal control structure in order to determine our
auditing procedures for the purpose of expressing our opinion on the general
purpose financial statements and reporting on federal financial assistance
programs and not to provide assurance on the internal control structure.
During the year ended June 30, 1990, the City of Lodi, California, had no
major federal financial assistance programs and expended 100 percent of its
total federal financial assistance under the City of Lodi, California's
nonmajor federal financial assistance program; Federal Revenue Sharing. As
required by 0"M Circular A-128, our consideration of the internal control
structure included:
(1) Tests of controls to evaluate the effectiveness of the design and
operation of internal control structure policies and procedures that we
considered relevant to preventing or detecting material noncompliance with
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specific requirements, general requirements, and requirements governing
claims for advances and reimbursements and amounts claimed or used for
matching that are applicable to each of the aforementioned nonmajor
financial assistance programs. Our procedures were substantially less in
01 scope than would be necessary to render an opinion on these internal
1 control structure policies and procedures. Accordingly, we do not express
such an opinion.
(2) Obtaining an understanding of (a) the design of internal control structure
policies and procedures that we considered relevant to preventing or
e> detecting material noncompliance with specific requirements, general
requirements, and requirements governing claims for advances and
reimbursements and amounts claimed or used for matching that are
applicable to the City's other nonmajor federal financial assistance
programs and (b) whether they have been placed in operation.
The management of the City of Lodi, California, is responsible for
establishing and maintaining an internal control structure. In fulfilling
this responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control structure
policies and procedures. The objectives of an internal control structure are
to provide management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition, that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of general purpose financial
statements in accordance with generally accepted accounting principles, and
that federal financial assistance programs are managed in compliance with
applicable laws and regulations. Because of inherent limitations in any
internal controls structure, errors, irregularities, or instances of
noncompliance may nevertheless occur and not be detected. Also, projection of
any evaluation of the structure to future periods is subject to the risk that
procedures may become inadequate because of changes in conditions or that the
effectiveness of the design and operation of policies and procedures may
deteriorate.
For the purpose of this report, we have classified the significant internal
control structure policies and procedures in the following categories:
• Accounting Controls
- Expenditures and disbursements
• Administrative Controls
General requirements:
- Political activity;
- Davis -Bacon Act;
- Civil rights;
- Cash management; and
- Federal financial reports.
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Specific Requirements:
- Types of services;
- Reporting; and
- Special requirements.
A -
' For all of the internal control structure categories listed above, we obtained
an understanding of the design of relevant policies and procedures and
determined whether they have been placed in operation, and we assessed control
risk.
We noted no matters involving the internal control structure and its operation
that we consider to be reportable conditions under standards established by
the American Institute of Certified Public Accountants. Reportable conditions
involve matters coming to our attention relating to significant deficiencies
in the design or operation of the internal control structure that, in our
,judgment, could adversely affect the entity's ability to record, process,
summarize, and report financial data consistent with the assertions of
management in the general purpose financial. statements or administer federal
financial assistance programs in accordance with applicable laws and
regulations.
A material weakness is a reportable condition in which the design or operation
of the specific internal control structure elements does not reduce to a
relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the general purpose financial statements
bei.g audited or noncompliance with laws and regulations that would be
material to a federal financial assistance program may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions.
our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
reportable conditions and, accordingly, would not necessarily disclose all
reportable conditions that are also considered to be material weaknesses as
defined above.'
We also noted other matters involving the internal control structure and its
operation that we have reported to the management and the City Council of the
City of Lodi, California, in separate letters dated January 7, 1991.
This report is intended for the information of the City Council, management,
and U.S. Department of Housing and Urban Development. This restriction is not
intended to limit the distribution of this report, which is a matter of public
record.
November 2, 1990
9
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Certified Public Accountants
2495 Nwomas Park Drive
Sacramento. CA 95833 2936
INDEPENDENT AUDITORS' REPORT
ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE
TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS
The Honorable Members of City Council
City of Lodi, California:
In connection with our audit of the 1990 general purpose financial statements
of the City of Lodi, California, and with our study and evaluation of the City
of Lodi, California's internal control systems used to administer federal
financial assistance programs, as required by Office of Management and Budget
Circular A-128, "Audits of State and Local Governments," we selected certain
transactions applicable to certain nonmajor federal financial assistance
programs for the year ended June 30, 1990.
As required by OMB Circular A-128, we have performed auditing procedures to
test compliance with the requirements governing types of services allowed or
unallowed; whether funds were obligated or expended before receipt of an
approved Request for Release of Funds and environmental certification that are
applicable to those transactions. Our procedures were substantially less in
scope than an audit, the objective of which is the expression of an opinion on
the City of Lodi, California's compliance with these requirements.
Accordingly, we do not express an opinion.
With respect to the items tested, the results of those procedures disclosed no
material instances of noncompliance with the requirements listed in the
preceding paragraph. With respect to the items not tested, nothing came to
our attention that caused us to believe that the City of Lodi, California had
not complied, in all material respects, with those requirements. However, the
results of our procedures disclosed immaterial instances of noncompliance with
those requirements, which are described in the accompanying schedule of
findings and questioned costs.
This report is intended for the information of the City Council, management,
and the U.S. Department of Housing and Urban Development. This restriction is
not intended to lirait the distribution of this report, which is a matter of
public record.
November 2, :990
10
k4 —i. M
rk.�vNn M.11 NI -1.1 rrWm
0
G�
0
D
CITY OF LODI, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
U.S. Department of Justice
(Pass-through State Office of Criminal Justice Planning)
Drug Suppression Program
Finding: In our tests of compliance of the City's -administrative controls
over the Drug Suppression Program, we noted that there was nn individual
responsible during the year for monitoring and maintaining compliance with the
regulations imposed on the use of funds received under this federal program.
Recommendation: The City should appoint an individual to monitor compliance
with regulations in order to ensure compliance and avoid the possible loss of
future grant monies.
City's response: On January 1, 1991, the City hired an individual who will be
responsible for monitoring compliance with the conditions of the grants.
ii
Certified Public Accountants
2495 Natomas Park Drive
Sacramento, CA 95833 2936
INDEPENDENT AUDITORS' REPORT ON
THE INTERNAL CONTROL STRUCTURE
The Honorable Members of City Council
The City of Lodi, California
Lodi, California:
EXHIBIT E
We have audited the general purpose financial statements of The City of Lodi, California as
of and for the year ended June 30, 1990, and have issued our report thereon dated
November 2, 1990.
We conducted our audit in accordance with generally accepted auditing standards and
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 general purpose financial statements are free of material misstatement.
In planning and performing our audit of the general purpose financial statements of The
City of Lodi, California for the year ended June 30, 1990, we considered its internal
control structure in order to determine our auditing procedures for the purpose of
expressing our opinion on the general purpose financial statements and not to provide
assurance on the internal control structure.
The management of The City of Lodi, California is responsible for establishing and
maintaining an internal control structure. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and related costs of
internal control structure policies and procedures. The objectives of an internal control
structure are to provide management with reasonable, but not absolute, assurance that
assets are safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and recorded
properly to permit the preparation of general purpose financial statements in accordance
with generally accepted accounting principles. Because of inherent limitations in any
internal control structure, errors or irregularities may nevertheless occur and not be
detected. Also, projection of any evaluation of the structure to future periods is subject to
the risk that procedures n -ay become inadequate because of changes in conditions or that
the effectiveness of the design and operation of policies and procedures may deteriorate.
For the purpose of this report, we have classified the significant internal control structure
policies and procedures in the following category: expenditures and disbursements cycle.
For the internal control structure category listed above, we obtained an understanding of the
design of relevant policies and procedures and whether they have been placed in operation,
and we assessed control risk.
1�.1�^.Si. frr�• :�
MW Peat Marwick
Our consideration of the internal control structure would not necessarily disclose all matters
in the internal control structure that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A material weakness
is a reportable condition in which the design or operation of one or more of the specific
internal control structure elements does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions. We noted no
matters involving the internal control structure and its operation that we consider to be
material weaknesses as defined above.
However, we noted certain matters involving the internal control structure and its operation
that we have reported to the management of The City of Lodi, California in a separate letter
dated November 2, 1990.
This report is intended for the information of the City Council, management, and the U.S.
Department of Housing and Urban Development. This restriction is not intended to limit
the distribution of this report, which is a matter of public record.
NNER- ' l�
November 2, 1990
M-AV60 Peat Marwick
EXHIBIT C
Certified Public Accountants
2495 Nalomas Park Drive
Sacramento. CA 95833 293E
The Honorable Members of City Council
City of Lodi, California:
We have applied certain agreed-upon procedures enumerated below with respect to the
Statement of Investment Policy adopted by the Council Resolution 90-146. Our review was
made solely to assist you in evaluating compliance with that policy. It is understood that this
report is solely for your information and is not to be referred to or distributed for any purpose
to anyone who is not a member of the City Council or management of the City of Lodi,
California. Our procedures and findings are summarized as follows:
I . We confirmed the City's investments as of June 30, 1992 We noted no unreconcilable
differences between the confirmed investment balances at June 30, 1990 and the
recorded general ledger investment balances at June 30, 1990.
We read management's compliance with the Statement of Investment Policy. The City
was not in compliance with the Statement of Investment Policy as to allowable
investment instruments as the City Library's investment portfolio included common
stock valued at $139,073 with a cost of basis of $57,085 at June 30, 1990. The library
obtained this stock through bequests, stock dividends, and dividend reinvestment
programs. The dividend reinvestment program is, in effect, the acquisition of stock..
The investment policy does not identify stock as an allowable investment.
Because the above procedures do not constitute an audit conducted in accordance with
generally accepted auditing standards, we do not express an opinion on any of the items
referred to above. In connection with the procedures referred to above, no matters came to our
attention that caused us to believe that City management did not comply with the Statement of
Investment Policy adopted by Council Resolution 90-146, except as noted above. Had we
performed additional procedures or had we conducted an audit of the Statement of Investment
Policy in accordance with generally accepted auditing standards, matters might have come to
our attention that would have been reported to you. This report relates only to the items
specified above and does not extend to any financial statements of the City of Lodi, California,
taken as a whole.
November 2, 1990
.fes
KP . Peat Marwick EXHIBIT A
Certified Public Accountants
2495 Natomas Park Drive Telephone 916 925 6000 Telecopier 916 F-41 3199
Sacramento. CA 95833 2936
January 7, 1991
The Honorable Members City Council
City of Lodi, California:
We have audited the general purpose financial statements of The City of Lodi for the year ended
June 30, 1990, and have issued our report thereon dated November 2, 1990. In planning and
performing our audit of the general purpose financial statements of the City of Lodi, California we
considered its internal control structure in order'to determine our auditing procedures for the
purpose of expressing our opinion on the general purpose financial statements and not to provide
assurance on the internal control structure. We have not considered the internal control structure
since the date of our report
During our audit we noted certain matters involving the internal control structure and other
operztional matters that are presented for your consideration. These comments and
recommendations, all of which have been discussed with the appropriate members of management,
are intended to improve the internal control structure or result in other operating efficiencies, are
summarized as follows:
Detailed Property Records
Adequate support for fixed assets does not currently exist To improve control over City assets,
detailed property records should be established. Specifically, property records should include the
following data:
• Description and unit number assigned;
' Location of prcpetty unit;
• Cost. voucher number, and vendor name;
• Condition - new or used;
• Date pbced in service;
• Useful life;
• Depreciation mrthod;
•
Depreciation provision for each year, and
• Dau retired, sold or traded
F— W
MrMw Peat Manvick
This could be accomplished by performing a physical inventory of all fixed assets, and then
recording the above recommended information. Additionally, the City should implement a method
for the valuation of these assets. We recommend the City consider the use of an appraiser, as
appropriate. to arrive at a reasonable val;ation of the fixed assets inventoried. The City could
perform the valuation process over several years in order to spread the cost of the valuation project
over time.
Fixed Asset Disposals
At present, the City, despite the size and dispersion of its facilities, does not have a formal
procedure to ensure that disposals of fixed assets, whether by destruction, sale, scrapping, or
trade-in, ate reported to the accounting department. Without such a procedure, the likelihood of an
unrecorded disposal, even a sale with diversion of the related proceeds, increases.
We recommend that a formal policy to ensure the reporting of fixed asset disposals be adopted and
include: (I) the necessary level of approval based on the value of the asset and (2) reporting to the
finance department on a timely basis. A simple standardized form could be developed to provide
adequate accounting documentation and to provide evidence of adherence to City policy.
Review of Internal Accounting Controls over Purchases
During our compliance testing of the disbursement cycle, we noted that in 15 instances (out of 30
sample items) where vendor packets did not contain purchase orders. We also noted that purchase
orders were sometimes prepared after the purchase was made. To enhance internal accounting
controls over purchase activities, we recommend that all purchases be required to have a properly
approved purchase order prior to the purchase transaction and that a copy of the purchase order be
maintained in the individual vendor packet. To help implement this policy, we recommend the
accounts payable department not accept a request for payment unless the vendor packet includes an
approved purchase order. This will minimize occurrences of unauthorized or unapproved
purchases.
Documentation of Control Over Purchases
When invoices are received, the unit price on the invoice is compared to the unit price per the
purchase order and any discrepancies are investigated. If the vendor is incorrect, the invoice is
changed accordingly. This is an effective control procedure, however, it is not documented by the
person making this comparison. To establish accountabiliy for the review process, invoices
should be initialed to signify agreement with the approved unit price per the purchase order. This
will provide the check signer assurance that payment is made at the unit price agreed to at the time
the order was placed.
NPIPPPeat Marwick
OTHER MATTER
We were asked by the City to perform compliance test -work on the City's investment policy. This
policy includes s list of investment instruments which are allowable under current Iegislation of the
State of California (Government Code Section 53600 et seq.). We noted investments in stock is
not a part of this list. During our test -work, we noted the City library's investment portfolio
contained common stock valued at $139,073 at a cost of $57,085 as of June 30, 1990. The City
library obtained this stock through bequests, stock dividends, and dividend reinvestment
programs. The dividend reinvestment program is. in effect, the acquisition of stock. To ensure
compliance with the City's investment policy and State of California current legislation, we suggest
that management assess the need to sell this stock.
Operations Letter
Additional suggestions of an operational nature were presented to management under a
separate letter also dated January 7, 1991.
i i •
This report is intended solely for the information and use of the City Council, management, and
others within the organization.
Very truly yours,
o",
MEMORANDUM
TO: Thomas A. Peterson, City Manager
FROM: Robert H. Holm, Finance Director
D I'E: January 28, 1991
SUBJECT: Camments on Auditors' Management Letter
As stated in my oc ments on last year's audit report, the auditors have
indicated there are no material weaknesses in our internal control
procedures. However, they do have suggestions for improving our internal
controls, and I would like to add our responses to their suggestions.
Fixed Assets
The auditors have again recarmended detailed fixed asset records be
established, and that the City consider the use of an appraiser to
determine a reasonable value of fixed assets. My comments last year
indicated this is a cost item in the area of $50,000 to $60,000 for
appraisal services. The appraisal would cover all buildings and contents,
electrical underground and overhead transmission systems, water mains,
sewer lines, etc.
we have had this comment each year for the past fifteen years, and, since
it hasn't affected our bond rating, I cannot give it the highest priority
rating considering the City's financing difficulties.
We presently have a manual system for office equiprent, vehicles, etc., and
we are looking at software to purchase to autanate those property records.
As soon as we can find the right softwares to run on the City's mainframe,
we will have it installed (hopefully, this fiscal year).
Fixed Asset Disposals
The auditors have stated that we do not have a formal procedure to dispose
of fixed assets. This is only partially correct, as the Lodi ft micipa?
Code (IMC), section 2.12.120 specifically addresses the sale of personal
property. we my not have a specific form designed, however, all
Department Heads send us memorandums on disposal of surplus property, and
we forward these to the City Manager for approval.
-M morandum - 2 - January 26, 1991
Internal Accounting Controls—Purchasing
The auditors indicated that we have been paying invoices that do riot have
purchase orders, and, also, that purchase orders are issued after purchases
are made. I want to point out that while we may be paying invoices that do
not have purchase orders, these invoices are appra,,ed by each depa-rtment to
ensure that prices are correct and materials are received prior to payment
being made.
It is our goal to centralize all of the City's purchase functions to make
sure the provisions of the INC are being followed and that the proper
materials with the best prices are obtained. We will continue to make our
best effort to centralize all of the ;.ity's purchase functions provided we
have cooperation frau all departments and our staffing level allows it.
Documentation of Control over Purchases
tors ve suggested .at our staff initial changes on invoices when
corrections are made. We will comply with this request.
Other Matters ---In estenants in Corporate Stocks
The aui tartars comment on s item is the same as last year's. In my
contact with the Cit -r Librarian last year, he indicated that unless the
City Council direct iho Librarl Board of Trustees to sell the stock, they
were going to continue to hold on to the stock and receive stock dividends
as a reinvestment. As City Treasurer, I am not allowed, under government
code, to invest in corporate stock. Since I did not purchase the stock, I,
therefore, do not list the stock as part of my investment report to the
City Council. To me, it is a technicality as to the reinvestment of
dividends into additional stock that the auditors are expressing a
comment. The City Council may want to direct the Library Board of Trustees
to sell the stock and not have the auditors' content reappear next year.
Robert H. Ho
Finance Director/Treasurer
IM: SS
A MC=LTR/TYT-F.06S/AL'DIT.DF.
Peat Marwick
EXHIBIT F
Certified Public Accountants
4
II
4
KPMG -Peat Marwick
4
:1)
CITY OF LODI
General Purpose Financial Statements
and Supplementary Information
Year Ended June 30, 1990
(With Independent Auditors' Report Thereon)
.✓
3
CITY OF LODI
General Purpose Financial Statements
and Supplementary Information
' Year Ended June 30, 1990
Table of Contents
Page
Independent Auditors' Report
I - 2
Combined Balance Sheet - All Fund Types and Account Groups
3 - 4
Combined Statement of Revenues, Expenditures and Changes
in Fund Balances - All Governmental Fund Types and
Expendable Trust Funds
5
Combined Statement of Revenues, Expenditures and Changes
' in Fund Balances - Budget and Actual - General and
Special Revenue Funds
6
Combined Statement of Revenues, Expenses and Changes in
Retained Earnings - All Proprietary Fund Types
7
Combined Statement of Changes in Financial Position - All
Proprietary Fund Types
8 - 9
Notes to General Purposr. Financial Statements
10 - 28
Additional information:
Enterprise Funds:
Combining Balance Sheet
29
Combining Statement of Revenues, Expenses and Changes
in Retained Earnings
30
Combining Statement of Changes in Financial Position
31
)MVP Peat Marwick
Certified Public Accountants
/1 2495 Natomas Park Drive
Sacrament,), CA 95833 2936
7
Independent Auditors' Report
The Honorable Members of City Council
City of Lodi, California:
We have audited the general purpose financial statements of the City of Lodi,
California, as of and for the year ended June 30, 1990, as listed in the
accompanying table of contents. These general purpose financial statements
are the responsibility of the City's management. Our responsibility is to
express an opinion nn these general purpose financial statements based on our
audit.
1
1 Except as discussed in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the general purpose financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the general purpose financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
The City does not maintain complete historical cost records of its general and
proprietary fund fixed assets and proprietary find contributed capital.
Accordingly, are were unable to satisfy ourselves with respect to fixed asset
balances of $15,842,572 and $28,947,775 in the general fixed asset account
group and the proprietary funds, respectively, depreciation expense of
$1,706,871 in the proprietary funds, and unrecorded contributed capital.
In our opinion, except for the effects of such adjustments. if any, as might
have been determined to be necessary had we been able to audit adequate fixed
assets records and proprietary contributed capital records as disco ;ed in the
preceding paragraph, the general purpose financial statements referred to
above present fairly, in all material respects, the financial position of the
City of Lcdi, California, at June 30, 1990, and the results of its operations
and the changes in financial position of its proprietary fund types for the
year then ended in conformity with generally accepted accounting principles.
-I-
�x1
(Continued)
J
MW
Peat Marwick
Our audit was made for the purpose of forming an opinion on the general
purpose financial statements taken as a whole. The combining financial
statements listed in the accompanying table of contents are presented for
purposes of additional analysis and are not a required part of the general
purpose financial statements of the City of Lodi, California. Such
information has been subjected to the auditing procedures applied in the audit
of the general purpose financial statements and, in our opinion, except for
the effects of such adjustments, if any, as might have been determined to be
necessary had we been able to audit adequate fixed assets records and
proprietary contributed capital records as discussed in the second preceding
paragraph, is fairly stated in all material respects in relation to the
general purpose financial statements taken as a whole.
OW,
November 2, 1990
-2-
CITY OF LODI
Combined Balance Sheet - All Fund Types and Account Groups
June 30, 1990
Assets
Cash and investments (note 3)
Restricted assets (note 3)
Receivables (net of allowances for
uncollectibles);
Accounts
Property taxes (note 4)
Special assessments
Interest
Due from other funds or governmental
agencies (notes 5 and 7)
Inventory
Other assets
Fixed assets
Amount to be provided for retirement
of general long-term debt obligations
Total assets
-3-
Fiduciary
Governmental Fund Tinea Proprietary Fund Types Fund Type
I
Special Debt Capital Internal Trust and
General Revenue Service Pro ects Enterprise Service Agency
$ 2,533,329 1,349,510 49,516 4,701,330 15,324,340 1,739,706 6,959,771
- - 203,000 - 7,842,425 - -
331,189
29,388 -
272,956 2,289,864 43
341,186
- 369
- 18,963 -
38,756
27,520 70
3,187 344,384 29,046
394,382
286,385 295,000
427,600 1,378,792 -
93,978
- -
- 1,574,154 -
34,570
- -
- 10,449 115,143
-
- -
- 28,947,775 -
3 3.9LZ+324
1.69 .8 i 548,648
5,4� ii'7� 1.x83.938
Account Groups
General General
Fixed Long -Term Total
.Assets Debt Memorandum Only)
258,648 - -
295,000 - -
9,114 - -
15,842,572 -
- 4,632,695
1.522.533 1`�.842�512 4 �
... ... .. ... ..:. .. ..r.,,. _, .. .. •. ....rt. ._p.. rny...-� ..y}1 K,f'.•.FY. .r .
32,657,512
8,045,425
3,182,088
360,518
295,000
502,770
2,782,159
1,668,132
160,162
44,790,347
4,632,695
99.076.808
(Continued)
CITY OF LODI
Combined Balance Sbeet - All Fund Types and Account Groups - Continued
June 30. 1990
Liabilities and Fund Equity
Liabilities:
Accounts payable and other liabilities
Accrued salaries and wages
Accrued interest
Due to other funds (note 7)
Accrued compensated absences (note 6)
Deferred compensation payable (note 11)
Deferred revenue
Self-insurance reserve
Capitalized lease obligations (note 6)
Certificates of participation payable,
net of discount (note 6)
Bonds payable, net of discount (note 6)
Total liabilities
Fund equity:
Investment in general fixed assets
Retained earnings
Fund balance:
Reserved for encumbrances
Unreserved - designated
Unreserved
Total fund equity
Contingent liabilities (note IL)
Total liabilities and fund equity
�#�f126
�'� ' R✓S"�`1-Lf'.,'t�idA 7' g t'4'+jf7R4 {Yyr.<. 2':'�„I °�a� 7�� d_., i !' �� ., :�.-
Fiduciary
Governmental Fund Types Proprietary Fund Types Fund ly Account Groups
General General
Special Debt Capital Internal Trust and Fixed Jong -Term Total
General Revenue Service Projects Enterprise Service Agency Aasets Debt Memorandum Onl
$ 401,308 198,539 - 74,708 2,536,469 17,144 813,475 - -
203,875 9,839 - 1,282 48,402 - - - -
- - - - 360,529 - - - -
- 68,500 - 612,800 1,125,092 - 295,000 - -
998,962 - - - 641,089 - - - 2,184,066
- - - - - - 6,413,887 - -
392,467 - 295,000 - - - - - -
- - - - - 1,747,318 - - -
- - - 371,207
8,834,348 - - - -
- - - - 2,0771422
1,996,612 276,878 295,000 688,790 13,545,929 1,764,462 1-y522,362 4,632,695
- - - - - - - 15,842,572 -
- - - - 44,185,217 119,477 - - -
82,144 515,164 - 208,996 - - - - -
495,563 900,771 253,648 4,507,288 - - 170 -
1,243,070 - - - _ _ _ -
1,820,777 1,415,935 253,648 4,716,284 44,185,217 119,477 170 15,842,572
$3.8j x,389 1,692.813 548.648 5.405.074 57,731.146 1.583.939 jr 522.532 15,842.572 4.6j2.695
See accompanying notes to general purpose financial statements.
.4-
4,041,643
263,398
360,529
2,101,392
3,824,117
6,413,887
687,467
1,747,318
371,207
8,834,348
2,077,422
30,722,728
15,842,572
44,304,694
806,304
6,157,440
1.243.070
68,354,080
C
CITY OF LODI
Combined Statement of Reveaues. Expenditures and Changes in Fund Balances
All Governmental Fund Types and Expendable Trust Funds
Year Ended June 30, 1990
Revenues:
Taxes
Licenses and permits
Intergovernmental revenues
Charges for services
Fines, forfeits and penalties
Interest and rental income
Miscellaneous revenue
Total revenue
Expenditures:
Current:
General government
Public protection
Public works
Sanitation
Library
Parks and recreation
Capital outlay
Debt service:
Interest and fiscal charges
Principal payments
Total expenditures
Deficiency of revenues under
expenditures
Other financing sources:
Operating transfers in (note 8)
Operating transfers out (note 8)
Total other financing sources
Excess (deficiency) of revenues and
other financing sources over
expenditures and other financing uses
Fund balance, as restated, June 30, 1989
(note 12)
Fund balance, June 30, 1990
19,139,586 2,377,005 398,728 1,650,858 2,198,151 25,764,328
(1,388,256) (15,571) (259,160) (662,708) (1,912,195) (4,237,890)
1,621,191 27,104 266,314 1,364,735 2,500 3,281,844
131,841 - - 131,845
1,489,346 27,104 266,314 1,364,735 2,500 3,149,999
101,090 11,533 7,154 702,027 (1,909,695) (1,087,891)
1.719,687 1,404,402 246,494 4,014,257 1,909,865 9,294,705
$ 1,24,777 1,415.935 I53•G4g 4,716,284 ,- 1708-20681:
See accompanying notes to general purpose financial statements.
-5-
fiduciary
Governmental
Bund Types
Fuad Type
Special
Debt
Capital
Bxpendable
Totals
General
Revenue
Service
Pro acts
Trust
(Memorandum Only)
$ 9,697,050
663,202
49,135
-
-
10,409,387
460,123
-
-
-
-
460,123
2,051,550
1,467,715
82,780
382,032
-
3,984,077
3,927,276
39,313
-
-
-
3,966,589
281,877
-
-
-
-
281,877
790,242
134,020
3,050
511,832
50,599
1,489,743
543,212
57,184
4,603
94,286
235,357
934,642
17,751,330
2,361,434
139,568
988,150
285,956
21,526,438
2,430,281
1,408,324
-
-
-
3,838,605
7,956,335
-
-
-
-
7,956,335
2,424,164
859,999
-
-
-
3,284,163
3,384,503
-
-
-
-
3,384,503
788,167
-
-
-
-
788,167
2,156,136
108,682
-
-
-
2,264,918
-
-
-
1,650,858
2,198,151
3,849,009
-
-
123,728
-
-
123,728
-
-
275,000
-
-
275,000
19,139,586 2,377,005 398,728 1,650,858 2,198,151 25,764,328
(1,388,256) (15,571) (259,160) (662,708) (1,912,195) (4,237,890)
1,621,191 27,104 266,314 1,364,735 2,500 3,281,844
131,841 - - 131,845
1,489,346 27,104 266,314 1,364,735 2,500 3,149,999
101,090 11,533 7,154 702,027 (1,909,695) (1,087,891)
1.719,687 1,404,402 246,494 4,014,257 1,909,865 9,294,705
$ 1,24,777 1,415.935 I53•G4g 4,716,284 ,- 1708-20681:
See accompanying notes to general purpose financial statements.
-5-
CITY OF LODI
Combined Statement of Revenues, Expenditures and Changes in Fund Balances
Budget and Actual - General and Special Revenue Funds
Year Ended June 30, 1990
See accompanying notes to general purpose financial statements.
-6-
General Fund
Special
Revenue Funds
Total
(Memorandum Only)
Variance
Variance
Variance
Revised
Favorable
Revised
Favorable
Revised
Favorable
Budget
Actual
(Unfavorable)
Budget I
Actual
(Unfavorable)
Budget
Actual
(Unfavorable)
Revenues:
Taxes
$ 9,502,430
9,697,050
L94,620
649,710
663,202
13,49E
10,152,140
10,360,252
208,iL2
Licenses and permits
407,835
460,123
52,288
-
-
-
407,835
460,123
52,288
Intergovernmental revenues
2,047,110
2,051,550
4,440
1,439,150
1,467,715
28,565
3,486,260
3,519,265
33,005
Charges for services
3,828,700
3,927,276
98,576
40,000
39,313
(687)
3,868,700
3,966,589
97,889
Fines, forfeits and penalties
306,000
281,877
(24,123)
-
-
-
306,000
281,877
(24,123)
Interest and rental income
698,755
790,242
91,487
83,480
134,020
50,540
782,235
924,262
142,027
Miscellaneous revenue
448,300
543,212
94,912
6,000
57,184
51,184
454,300
600,396
146,096
Total revenue
17,239,130
17,751,330
512,200
2,218,340
2,361,434
143,094
19,457,470
20,112,764
655,294
Expenditures:
Current:
General government
2,418,855
2,430,281
(11,426)
21576,053
1,408,324
1,167,729
4,994,908
3,838,605
1,156,303
Public protection
7,589,255
7,956,335
(367,080)
-
-
-
7,589,255
7,956,335
(367,080)
Public works
2,464,531
21424,164
40,367
2,561,121
859,999
1,701,122
5,025,652
3,284,163
1,741,489
Sanitation
3,342,110
3,384,503
(42,393)
-
-
-
3,342,110
3,384,503
(42,393)
Library
1,280,130
788,167
491,963
-
-
-
1,280,130
788,167
491,963
Parks and recreation
2,168,331
2,156,136
12,195
261,310
108,682
152,628
2,429,641
2,264,818
164,823
Total expenditures
19,263,212
19,139,586
123,626
5,398,484
2,377,005
3,021,479
24,661,696
21,516,591
3,145,105
Excess (deficiency) of revenues over
(under) expenditures
(2,024,082)
(1,388,256)
635,826
(3,180,144)
(15,571)
3,164,573
(5,204,226)
(1,403,827)
3,800,399
Other financing sources (uses):
Operating transfers in
1,769,859
1,621,191
(148,668)
21,436
27,104
5,668
1,791,295
1,648,295
(143,000)
Operating transfers out
145,000
131,845
13,155
-
- !
145,000
131,845
( 13,155)
Total other financing sources (uses)
1,624,859
1,489,346
(135,513)
21.436
27,104
5,668
1,646,295
1,516,450
(129,845)
Excess (deficiency) of revenues and
other financing sources over
expenditures and other financing uses
(399,223)
101,090
500,313
(3,158,708)
11,533
3,170,241
(3,557,931)
112,623
3,670,554
Fund balances, June 30, 1989
1,719,687
1,719,687
_ -
1,404,402
1,404,402
-
3,124,089
3,124,089
-
Fund balances, June 30, 1990
$ 1,320.464
L 820.777
500.313
(1.754.306)
1.415.935
3.170.241
W 3 842)
3.236.712
6j0 55
See accompanying notes to general purpose financial statements.
-6-
CITY OF LODI
Combined Statement of Revenues, Expenses
and Changes in Retained Earnings
All Proprietary Fund Types
Year Ended June 30, 1990
Proprietary Fund Types
Internal Total
Enterprise Service (Memorandum Only)
Operating revenues:
Charges for services
$ 32,451,493
59,558
32,511,051
Operating expenses:
Persona_ services
3,085,491
311,003
3,396,494
Supplies, materials, and
services
2,813,532
1,166,301
3,979,833
Utilities and communications
21,868,452
140
21,868.592
Depreciation
1,706,871
-
1,706,871
Benefit payments
256,062
386,382
642,444
Total operating expenses
29,730,408
1,863,826
31,594,234
Operating income (loss)
2,721,085
(1,804,268)
916,817
Nonoperating revenues (expenses):
Sewer bond taxes
189,142
-
189,142
Interest revenue
2,364,571
138,847
2,503,418
Rent
202,635
-
202,635
Other
381,643
1,184,157
1,565,800
Interest expense
(768,647)
-
(768,647)
Total nonoperating
revenues
2,369,344
1,323,004
3,692.348
Income (loss) before operating
transfers
5,090,429
(481,264)
4,609,165
Operating transfers in (note 8)
-
292,095
292,095
Operating transfers out (note 8)
(3,446,698)
-
(3,446,698)
Total operating transfers
(3,446,698)
292,095
(3,154,603)
Net income (loss)
1,643,731
(189,169)
1,454,562
Retained earnings, June 30, 1989
42,541,486
308,646
42,850,132
Retained earnings, June 30, 1990
3 44.1$S_,?17
119.477
44 i 04
See accompanying notes to general
purpose financial statements.
-7-
CITY OF LODI
Combined Statement of Changes in Financi.^_1 Position
All Proprietary Fund Types
Year Ended June 30, 1990
(Continues:)
Internal
Total
Enterprise
Servide
(Memorandum Only)
Sources of working capital:
Operations:
Net income (loss)
$ 1,643,731
(189,169)
1,454,562
Items not requiring working
capital - depreciation and
amortization
12723,736
-
1,723,736
Total sources of working
capital
3,367,467
(189,169)
3,178,2°8
Uses of working capital:
Acquisition of fixed assets, net
6,567,967
-
6,567,967
Decrease of long-term debt
100,000
- _
100,000
Total uses of working
capital
6,667,967
-
6,667,967
Net decrease in
working capital
$(3.300.500)
(ia�)
(3.489.664)
(Continues:)
CITY OF LODI
Combined Statement of Changes in Financial Position - Continued
All Proprietary Fund Types
1E
Fi
See accompanying notes to general purpose financial statements.
-9-
a
Internal
Total
Enterprise
Service
(Memorandum Only)
Elements of net decrease in
working capital:
Cash and investments
$(1,551,547)
(54,591)
(1,606,138)
Restricted assets
(603,525)
-
(603,925)
Accounts receivable, net
247,716
43
247,759
Property taxes receivable
(28,816)
-
(28,816)
Interest receivable
86,574
10,422
96,996
Due from other funds or
government agencies
345,459
-
345,459
Inventory
106,823
-
106,823
Other assets
(7,347)
115,143
107,796
Accounts payable and accrued
liabilities
(1,694,521)
46,278
(1,648,243)
Accrued salaries and wages
(9,447)
-
(9,447)
Accrued compensated absences
(98,744)
-
(98,744)
Accrued interest
(4,987)
-
(4,987)
Due to other funds
(87,738)
-
(87,738)
Accrued self insurance claims
-
(306,464)
(306,46
Net decrease in
working capital
s(LIQ3 =)
(18 •169)
(3.489.669)
1E
Fi
See accompanying notes to general purpose financial statements.
-9-
a
a
CITY OF LODI
Notes to General Purpose Financial Statements
June 30, 1990
(1) Summary of Significant Accounting Policies
The City of Lodi (City) was incorporated December b, 1906, as a municipal
corporation under the general laws of the State of California. The City
operates under the Council -Manager form of government and provides the
following services as authorized by its charter: general government,
public works, public protection, sanitation, library, and parks and
recreation.
The accounting policies of the City of Lodi conform to generally accepted
accounting principles as applicable to governmental units. The following
is a summary of the more significant policies:
(a) Reporting Entity
The City's financial statements include the operations of all
organizations for which the City Council exercises oversight
responsibility. Oversight responsibility is demonstrated by financial
interdependency, selection of governing authority, designation of
management, ability to significantly influence operations, and
accountability for fiscal matters.
Based on the aforementioned oversight criteria, the Lodi Public
Improvement Corporation (LPIC) is included in the Enterprise Funds as the
City has oversight responsibility for this entity.
(b) Basis of Presentation - Fund Accounting
The operations of the City are recorded in the following fund types and
account groups:
Governmental Fund Types
Governmental Funds are those through which most governmental functions
of the City are financed. The acquisition, use, and balances of the
City's expendable financial resources and the related liabilities
(except those accounted for in proprietary funds) are accounted for
-10-
(Continued)
CITY OF iODI
Notes to General Purpose Financial Statements
through governmental funds. The measurement focus is upon determination
of charges in financial position, rather than upon net income
determination. The following are the City's governmental fund types:
• General Fund- The General Fund is the general operating fund of the
City. It is used to account for all financial resources except those
required to be accounted for in another fund.
• Special Revenue Funds - Special Revenue Funds are used to account for
the proceeds of specific revenue sources (other than special
assessments, or major capital projects) that are legally restricted
to expenditures for specified purposes.
• Debt Service Fund - Debt Service Fund is used to account for the
accumulation of resources for, and the payment of, general long-term
debt principal, interest, and related costs.
• Capital Proiects Fund - Capital Projects Fund is used to account for
financial resources to be used for the acquisition or onstruction of
major capital facilities (other than those financed by proprietary
funds and trust funds).
Proprietary Fund Types
Proprietary Funds are used to account for the City's on-going
organizations and activities which are similar to those often found in
tie private sector. The measurement focus is upon determination of net
income. The following are the City's proprietary fund types:
• Enterprise Funds - Enterprise Funds are used to account for
operations (a) that are financed and operated in a manner similar to
private business enterprises - where the intent is that the costs
(expenses, including depreciation) of providing goods or services are
recorded primarily through user charges; or (b) where the governing
body has decided that periodic determination of net income is
appropriate.
• Internal Service Funds - Internal Service Funds are used to account
for the financing of goods or services provided by one department or
agency to other departments or agencies of the City, or to other
governmental units, on a cost -reimbursement basis.
(Continued)
CITY OF LODI
Notes to General Purpose Financial Statements
Fiduciary Fund Type
Fiduciary Funds are used to account for assets held by the City in a
trustee capacity or as an agent for individuals, private organizations,
other governmental units, and/or other funds.
• Agency Funds - Agency funds are used principally to account for
collection of special assessments and payment of related bond
principal and interest. Agency funds are custodial in nature and do
not involve measurement of results of operations.
• Expendable Trust Fund - Expendable Trust Fund is used principally to
account for funds held by the governmental unit in a trustee capacity
for individuals, private organizations, other governmental units,
and/or other funds.
Account Groups
Account groups are used to establish accounting control and accountability
for the City's general fixed assets and general long-term debt. The
following are the City's account groups:
• General Fixed Assets Account Group - This group of accounts is
established to account for fixed assets of the City, other than those
accounted for in the proprietary funds.
• General Long -Term Debt Account Group - This group of accounts is
established to account for all long-term obligations of the City
except those accounted for in the proprietary funds.
(c) Basis of Accounting
Governmental funds and Fiduciary fund types use the modified accrual basis
of accounting. Under this basis of accounting, revenues are recorded when
they become both measurable and available to pay liabilities of the
current period. Revenues not considered available are recorded as
deferred revenues. Expenditures are recorded when the liability is
incurred, except for (1) interest on general long-term obligations which
is recorded when due, and (2) the noncurrent portion of accrued vacation
and sick leave, which is recorded in the general long-term debt account
group.
(Continued)
-12-
CITY OF LODI
Notes to General Purpose Financial Statements
In applying the susceptible to accrual concept to intergovernmental
revenues, the legal and contractual requirements of the numerous
individual programs are used as guidance. There are, however, essentially
two types of revenues. In one, monies must be expended on the specific
purpose or project before any amounts will be paid to the City; therefore,
revenues are recognized based upon the expenditures recorded. In the
other, monies are virtually unrestricted as to purpose of expenditure and
are usually revocable only for failure to comply with prescribed
compliance requirements. These resources are reflected as revenues at the
time of receipt or earlier if the susceptible to accrual criteria are met.
Property taxes are recognized as revenue in the year for which taxes have
been levied, provided they are collected within 60 days after year-erd.
Licenses and permits, charges for services, fines and forfeitures, and
miscellaneous revenues (except investment earnings) are recorded as
revenues when received in cash because they are generally not measurable
until actually received. Investment earnings are recorded as earned since
they are measurable and available.
The accrual basis of accounting is used by the proprietary funds.
Unbilled service revenue is accrued in proprietary funds.
(d) Encumbrances
Encumbrance accounting, under which purchase orders, contracts, and other
commitments for the expenditure of funds are recorded to reserve that
portion of the applicable appropriation, is employed in the governmental
funds. Open encumbrances are reported as reservations of fund balances
since the commitments will be honored through subsequent years' budget
appropriations. Encumbrances do not constitute expenditures or
liabilities.
(e) Cash and Investments
Cash for most funds is pooled, and interest income from pooled investments
is allocated tc 'he v-rious funds based on month-end balances. Available
cash is invested in certificates of deposit, bankers acceptances,
commercial paper, discount notes, repurchase agreements and savings
accounts. Investments are stated at cost or amortized cost, which
approximates market.
(Continued)
-13-
CITY OF LODI
Notes to General Purpose Financial Statements
(f) Inventory
Inventory is valued at the lower of cost (weighted -average method) or
market. The cost of inventory is recorded as an expenditure/expense at
the time individual inventory items are consumed (consumption method).
(g) General Fixed Assets
General Fixed assets have been acquired for general governmental
purposes. Assets purchased are recorded as expenditures in the
governmental funds and capitalized at cost in the general fixed assets
account group. Capital leases for buildings, improvements, and equipment
are recorded in the general fixed assets account group, and the capital
lease obligation payable is recorded in the general long-term debt account
group. Contributed fixed assets are recorded in the general fixed assets
account group at estimated fair market value at the time received.
Certain improvements such as roads, bridges, curbs and gutters, streets
and sidewalks, drain systems, and lighting systems are not capitalized.
Such assets normally are immovable and of value only to the City.
Therefore, the purpose of stewardship for capital expenditures is
satisfied without recording these assets.
No depreciation has been provided on general fixed assets, nor has
interest been capitalized.
(b) Fixed Assets - Enterprise Fund
Fixed assets owned by the enterprise funds are stated at cost or estimated
fair market value at the time received, if donated.
Depreciation has been provided over the estimated useful lives using the
straight-line method. The estimated useful lives are as follows:
Buildings
Improvements
Machinery and equipment
Utility plant
-�4-
Years
15 - 20
3 - 5
2 - 20
30
(Continued)
CITY OF LODI
Notes to General Purpose Financial Statements
(i) Compensated Absences/Vacation and Sick Leave
Noncurrent accumulated vacation and vested sick leave benefits for
governmental funds are recorded in the General Long -Term Debt Account
Group as a liability and also as an anount to be provided by future
operations. The amount to be provided by future operations represents the
total amount that would be required to be provided from the general
operating revenues of the City if all the benefits were to be paid. The
current portion, the amount expected to be paid in the next 12 months, is
recorded as a liability of the responsible fund type.
J Enterprise funds record compensated absences/vacation and sick leave as an
expense and liability when earned.
(j) Self -Insurance
The City is self --insured for general liability, automobile liability, and
workers' compensation. The operating funds are charged premiums by the
City's self-insurance funds, which are accounted for as internal service
funds. The accrued liability for estimated claims represents an estimate
of the eventual loss on claims arising prior to year-end including claims
incurred and not yet reported.
1
1 (k) Total Columns
The total columns labeled "memorandum only" data are the aggregate of the
fund types and account groups and are presented only to facilitate
financial analysis. No consolidating or other elimination entries were
made in arriving at the totals, thus, they do not represent consolidated
information.
(2) Budgetary Data
The City Council follows these procedures in establishing the budgetary
data reflected in the accompanying financial statements:
0 On or prior to the first regular Council meeting in June of each year,
the City Manager submits to the City Council a proposed operating budget
for the fiscal year commencing July 1. The operating budget includes
proposed expenditures and the means of financing them. The budget is
established on an accrual basis.
-15-
J
(Continued)
CITY OF LODI
Notes to General Purpose Financial Statements
• Public hearings are conducted during meetings of the City Council to
obtain citizen comments.
• Prior to July 1, the budget is legally enacted through passage of an
ordinance.
• The City Manager or designee is authorized to transfer certain budgeted
amounts between accounts; however, any revisions that alter the total
appropriations on functional expenditure classifications of any fund
must be approved by the City Council. The combined Statement of
Revenues, Expenditures and Changes in Fund Balance - Budget and Actual -
General and Special Revenue Funds reflect all revisions.
• Appropriations lapse at the close of the fiscal year to the extent that
they have not been expended or encumbered.
(3) Cash and Investments, and Restricted Assets
The City maintains a cash and investment pool that is available for use
by all funds. Each fund's portion of this pool is displayed on the
combined balance sheet as "Cash and Investments."
The City is authorized to invest in securities of the State of
California, U.S. Government, or its agencies; certificates of deposit (or
time deposits) placed with commercial banks and/or savings and loan
associations; negotiable certificates of deposit; banker's acceptances;
commercial paper; local agency investment fund (State pool) demand
deposits; repurchase agreements (collateralized by U.S. Treasury
securities); pass book savings account demand deposits; and other
investments that are, or may become, a legal investment as defined by the
State of California Government Code (with prior approval of the Council).
Repurchase agreements entered into by the City are typically short-term
in nature and structured to return a specified yield.
Generally accepted accounting principles define three categories of
credit risk for securities:
I Securities that are insured or registered, or for which the
securities are held by the City or its agent in the City's name;
II Securities that are uninsured and unregistered and are held by the
broker's or dealer's trust department or agent in the City's name; and
(Continued)
CITY OF LODI
Notes to General Purpose Financial Statements
III Securities that are uninsured and unregistered and 'held by the
broker or dealer, or by its trust department or agent, but not in
the City's name.
The following is a recap of cash
and investments, and restricted
assets
at June 30, 1990:
Cash and investments
$ 32,657,512
Restricted assets
8,045,425
$ t4Q.7e 02.937
The following is a detail summary
of deposits
and investments
at June 30,
1990:
Approximate
Market
Cost
Value
Category
Unrestricted:
Cash and deposits $
465,553
466,000
-
Investments:
- Certificates of deposit
6,600,000
6,600,000
III
Banker's acceptances
5,765,647
5,905,000
III
Government National
Mortgage Association
1,853,396
1,789,000
1
U.S. Treasury Notes
997,703
1,010,000
I
Retirement funds held:
Pooled investments
6,413,887
6,414,000
I1
Total categorized
unrestricted
22,096,186
22,184,000
Local agency investment fund
10,000,000
10,000,000
Mutual funds
504,241
504,000
Various investments
57,085
139,000
I
Total unrestricted
32,657,512
32,827,000
(Continued)
-17-
0
CITY OF LODI
*Dotes to General Purpose Financial Statements
Approximate
Market
Cost Value Category
Restricted•
Sewer funds:
Various investments $ 7,842,425 7,842,425 -
Debt service:
Various deposits and
investments 203,000 203,000 -
Total restricted 8,045,425 8.0
Total cash and
investments, and
restricted assets $ 40.702.937
(b) Property Tax
San Joaquin County is responsible for assessing, collecting and
distributing property taxes in accordance with enabling legislation. The
City's property tax is levied each July 1 on the assessed value listed as
of the prior March 1 for all real and personal property located in the
City. The assessed value at March 1, 1989, upon which the 1990 levy was
based, was $2,050,535,592.
Taxes are due in two equal installments on November 1 and February i
following the levy date, payments are delinquent after 40 and 60 days,
respectively.
Property taxes levied for the year ended June 30, 1990, are recorded as
receivables, net of estimated uncollectibles. The net receivables
collected during the year and expected to be collected by August 30, 1990
are recognized as revenues in the year ended June 30, 1990. Net
receivables estimated to be collectible subsequent to August 30, 1990 are
reflected as deferred revenues.
-18-
(Continued)
CITY OF LODI
Notes to General Purpose Financial Statements
(5) Due from Other Governments
Due from other governments represents amounts due from the State of
California and the federal government as follows:
General Special
Fund Revenue Total
State of California $ 2,035 218,377 220,412
Federal Government - 68,008 68,008
Public Employee Retirement
System 392,347 - 392,347
$ 394.33 = 6$6.761
State of California/Federal Government - These amounts represent
expenditures made by the City for various grant programs but not reimbursed
prior to .Tune 30, 1990.
Public Employee Retirement System Surplus Account - In November 1987, the
Public Employee Retirement System (PERS) changed the existing method of
handling the surplus assets for employer categories in an overfunded
position (better than 100% funded) with a new Surplus Asset Account
method. This surplus was due largely to the fact that the actuarial assets
have been adjusted to recognize unrealized capital gains and losses
(Note 9).
Under the previous method, the surplus assets for overfunded employer
categories were used to reduce the normal cost rate on a dollar -for -dollar
basis or as an alternative, the surplus was used as an offset to the future
employer normal cost on an amortized basis. Under the new method, if a
miscellaneous or safety category within an employer is found to be in an
overfunded position, the surplus will be transferred to a PERS Surplus
Asset Account. PERS will then determine the employer rate for the
overfunded category independent of the surplus using the same funding
method as used for all employer categories not in an overfunded position.
The employers in an overfunded position may then use the surplus assets to
reduce their employer contributions to the System for the overfunded
category in any manner they wish, and at any time, as long as a surplus
remains in the Surplus Asset Account sufficient to cover the employer
contribution shortage reported to the System.
(Continued)
-19-
CITY OF LODI
Notes to General Purpose Financial Statements
(6) Long -Term Debt and Capitalized Lease Obligations
The following is a summary of debt transactions of the City for the year
ended June 30, 1990:
Y Interest July 1, Retire- June 30,
Rates 1989 Additions menta 1990
General long-term debt
account group:
y
J
Compensated absences - $ 1,995,310 188,756 - 2,184,066
General obligation bonds:
1965 Municipal
improvement bonds:
] Series A 3.50% 1,830,000 - 235,000 1,595,000
Series B 4.50-5.25% 235,000 - 40,000 195,000
2,065,000 - 275,000 1,790,000
Special assessment
district bonds with
governmental commitment:
Lodi Unified
Downtown (net of
$ 7,578 discount)
8.75-9.90% 304,763 - 17,341 287,422
2,369,763 _ - 292,341 2,077,422
Capitalized lease
obligations:
IBM Corporation 7.42% - 85,803 - 85,803
IBM Corporation 7.44X - 141,563 - 141,563
FMC Corporation 7.50% - 79,581 14,111 65,470
FMC Corporation 7.86% 45,766 - 17,893 27,873
Caterpillar 7.50% 64,962 - 14,465 50,497
110,728 306,947 46,469 371,206
9
4 ,L15.801 495.103 { g
Enterprise Funds: 4.63
Certificates of
participation
(net of discount
$408,652)
5.25-7.80% $
(Continued)
-20-
A
J
CITY OF LODI
Notes to General Purpose Financial Statements
Long-term debt payable at June 30, 1990 is comprised of the following
individual issues:
0 1965 Municipal Improvement Bonds - Series A - These bonds were issued
to finance the construction of sewer and drainage facilities plus a
public safety building. The bonds are secured by a pledge of
property tax revenues. Principal is payable annually through
October 1, 1995, with interest.
• 1965 Municipal Improvement Bonds - Series B - These bonds were issued
on May 1, 1969 to finance the construction and completion of storm
drainage improvements for the City of Lodi. The bonds are secured by
a pledge of property tax revenues. The semiannual principal
payments, with interest of 4.50% to 5.25%, are payable on May I and
Yovrmber I through 1994.
• Special Assessment District Bonds with Governmental Commitment - The
City is obligated under the terms of the Lodi United Downtown special
assessment bond indentures, in the absence of any other bidder, to be
the purchaser of property upon which any said special assessments are
levied and are delinquent.
• Certificates of Participation - $9,413.000 certificates of
participation (1988 Wastewater Treatment Plant Expansion Project),
annual principal payments August 1, beginning 1989, in amounts from
$100,000 to $755,000 with final payment due August 1, 2003, interest
increases from 5.25% to 7.80%. payable semiannually on February 1 and
August 1.
The annual principal requirements to amortize all debt outstanding as of
June 30, 1990 are as follows:
Special
General
Year Ending
Obligation
June 30,
Bonds _
1991
$ 290,000
1992
295,000
1993
310,000
1994
325,000
1995
280,000
1996 and
455,000
Thereafter
290,000
480,000
$ 1-799,090
Special
Certificates
Assessment
of
Bonds
Participation
Total
25,000
105,000
420,000
25,000
110,000
430,000
25,000
120.000
455,000
30,000
125,000
480,000
30,000
135,000
445,000
160,000
8,720,000
9,170,000
29_ 5.040
9.315am
��4Q
(Continued)
-21-
CITY OF LODI
Notes to General Purpose Financial Statements
The various indentures maintain significant limitations and restrictions
on annual debt service requirements, maintenance of and flow of monies
through various restricted accounts. The City is in compliance with all
such significant limitations and restrictions.
The present value of future minim= capital lease payments as of ,lune 30,
1990 are as follows:
Fiscal Years
1991 $ 126,219
1992 114,054
1993 88,039
1994 56,813
1995 45,541
Total minimum lease payments 430,666
Less amounts representing interest 59,459
Present value of minimum
capital lease payments $ 371.207
Industrial Develovment Bonds
The City of Lodi has lent its name to the City of Lodi Industrial
Development Authority for the purpose of issuing the following industrial
development bonds: Minton Corporation $5,000,000 Industrial Development
Bonds; and Dart Corporation $8,000,000 industrial Development Bonds.
These bonds are special obligation bonds only, payable solely out of the
bond revenues or other sources of the above companies and are n„t a
pledge of the general credit of the City of Lodi. The City of Lodi is
not obligated for the redemption or administration of these industrial
development bonds.
(7) Due From/To Other Funds
Individual fund interfund receivable and payable balances, excluding due
from governmental agencies (see note 5) by fund type at .Tune 30, 1990,
are as follows:
(Continued)
-22-
M
4
CITY OF LODI
Notes to General Purpose Financial Statements
Fund
Special Revenue Funds
Debt Service Funds
Capital Projects Funds
Enterprise Funds
Trust and Agency Funds
Due From
Other Funds
295,000
427,600
1,378,792
$ 2.101,392
Due To
Other Funds
68,500
612,800
1,125,092
295,000
2.1Q1.392
(8) Operating Transfers
Total operating transfers
by fund type at June 30, 1990, are
as follows:
Operating
Transfer
Fund
In
Out
General Fund
$ 1,621,191
131,845
Special Revenue Funds
27,104
-
Debt Service Funds
266,314
-
Capital Projects Funds
1,364,735
-
Expendable Trust Fund
2,500
-
Agency Funds
4,604
-
Enterprise Funds
-
3,446,698
Internal Service Funds
292,095
-
$ 3.578,543
3.578.543
(9) Defined Benefit Pension Plan
(a) Plan Description
The City contributes to the California Public Employees' Retirement
System (PERS or System), an agent multiple -employer public employee
retirement system that acts as a common investment and administrative
agent for participating public entities within the State of California.
The City's payroll for employees covered by the System for the year ended
Juno 30, 1990 was $11,285,583 which was 84% of the City's total payroll
of $13,430,810.
The System covers essentially all employees, except elected officials and
those employees compensated on an hourly basis who were hired after
May 31, 1966.
-23-
(Continued)
CITY OF LODI
Notes to General Purpose Financial Statements
Safety employees are required to contribute nine percent of their annual
salary to the System. All other employees are required to contribute
seven percent. The City is required to contribute the remaining amounts
necessary to fund the benefits for its members, using the actuarial basis
recommended by the PERS actuaries and actuarial consultants and adopted
by the Board of Administration.
(b) Funding Status and Progress
The amount shown below as the pension benefit obligation is a
standardized disclosure measure of the present value of pension benefits,
adjusted for the effects of projected salary increases and step -rate
benefits, estimated to be payable in the future as a result of employee
service to date. The measure is intended to help users assess the
funding status of the System on a going -concern basis, assess progress
made in accumulating sufficient assets to pay benefits when due, and make
comparisons among employers. The measure is the actuarial present value
of credited projected benefits and is independent of the funding method
used to determine contributions to the System.
The pension benefit obligation was computed as part of an actuarial
valuation performed as of June 30, 1989. Significant actuarial
assumptions used in the valuation include (a) a rate
of return on the
investment of present and future assets of 8.5 percent
a year compounded
annually, (b) projected salary increases of 5 percent
a year compounded
annually, attributable to inflation, (c) additional
projected salary
increases of 2 percent a year, attributable to seniority/merit, and (d)
no postretirement benefit increases.
Total unfunded pension benefit obligation applicable
to the City's
employees was $3,402,834 at June 30, 1990, as follows:
Pension benefit obligation:
Retirees and beneficiaries currently receiving
benefits and terminated employees not yet
receiving benefits
$ 21,738,274
Current employees:
Accumulated employee contributions including
allocated investment earnings
9,057,485
Employer -financed vested
9,230,876
Employer -financed nonvested
625,138
Total pension benefit obligation
40,651,773
Net assets available for benefits, at cost
(market value approximates $43,655,757)
37,248,939
Unfunded pension benefit obligation
$ 3,402,434
(Continued)
-24-
CITY OF LODI
Notes to General Purpose Financial Statements
(c) Actuarially Determined Contribution Requirements and Contribution Made
PERS uses the Entry Age Normal Actuarial Cost Method which is a projected
benefit cost method. That is, it takes into account those benefits that
are expected to be earned in the future as well as those already accrued.
According to this cost method, the normal cost for an employee is the
level amount which would fund the projected benefit if it were paid
annually from date of employment until retirement. PERS uses a
modification of the Entry Age Cost Method in which the employer's total
normal cost is expressed as a level percentage of payroll. PERS also
uses the level percentage of payroll method to amortize any unfunded
actuarial liabilities. The amortization period of the unfunded actuarial
liability ends on June 30, 2000.
The significant actuarial assumptions used to compute the actuarially
determined contribution requirement are the same as those used to compute
the pension benefit obligation, as previously described.
The contribution to the System for 1990 of $2,182,495 was made in
accordance with actuarially determined requirements computed through an
actuarial valuation performed as of June 30, 1989. The contributions
consisted of: (a) $1,896,515 normal cost (16.8 percent of current covered
payroll) and (b) $285,979 amortization of the unfunded actuarial accrued
payroll liability (2.5 percent of current covered payroll). The City
contributed $1,302,836 of this total (11.5 percent of current covered
payroll) and the employees contributed $879,658 (7.8 percent of current
covered payroll).
(d) Trend Information
Trend information gives an indication of the progress made in
accumulating sufficient assets to pay benefits when due. System wide
ten-year trend information may be found in the California Public
Employees Retirement System Annual Reports.
For the year ended June 30, 1990 available assets were sufficient to fund
91.6 percent of the pension benefit obligation. Unfunded pension benefit
obligation represented 30.4 percent of the annual payroll for employees
covered by the PERS for 1990. Showing unfunded pension benefit
obligation as a percentage of annual covered payroll approximately
adjusts for the effects of inflation for analysis purposes. In addition,
for the year ended 1990, the City's contributions to the System, all made
in accordance with actuarially determined requirements, was 12 percent of
annual covered payroll.
(Continued)
-25-
CITY OF LODI
Notes to General Purpose Financial Statements
(10) Segments of Enterprise Activities
There are three services provided by the City which are financed by user
charges - electric, sewer, and water. Selected financial data for those
` three services for the year ended June 30, 1990 are as follows:
Electric Sewer Water Total
Operating revenues $ 27,126,748 2,825,374 2,499,371 32,451,493
Operating expenses:
Depreciation 730,042 707,932 268,897 1,706,871
Other 25,318,241 1,545,376 1,159,920 28,023,537
Operating income 1,078,465 572,066 1,070,554 2,721,085
Nonoperating revenue 2,526,584 1,236,711 1,327,134 5,090,429
Operating transers out (2,736,730) (198,688) (511,280) (3,466,698)
Net income (loss) $ (210.146) 1,038.023 815,854 1,643.731
Additions to fixed
assets $ _3,587.40 2.358.602 621.964 61.967
Net working capital $ 26.258,95 12.489.571 5.437.25], 44,185,217
Total assets $ _4? 31352 22,628.361 6.671.433 .731.146
Certificates of
participation $ - 8,834,348 s .834.348
Total equity $ 26,258,395 12,489,571 jIU,25144,185.217
(11) Contingent Liabilities
Deferred Compensation Plan - The City offers its employees a deferred
compensation plan created in accordance with Internal Revenue Code
Section 457. The Plan, available to all City employees, permits them to
defer a portion of their salary until future years. The deferred
a compensation is not available to employees until termination, retirement,
death, or unforeseeable emergency.
All amounts of compensation deferred under the Plan, all property or
rights are (until paid or made available to the employee or other
beneficiary) solely the property and rights of the City subject only to
the claims of the City's general creditors. Participants' rights under
the Plan are equal to those of general creditors of the City in an amount
equal to the fair market value of the deferred account for each
participant.
(Continued)
-26-
CITY OF LODI
Notes to General Purpose Financial Statements
Self -Insurance - The City is self-insured under its existing general
liability insurance policy for the first $250,000 of claims, per
occurrence, with the California joint powers insurance agency providing
certain liability coverage for the next $750,000, per occurrence and in
the aggregate. Additional coverage is available for claims in excess of
$1,000,000 to $10,000,000 per occurrence and in the aggregate.
The City if self-insured with respect to workers' compensation, medical
benefits, unemployment, and long-term disability for its employees.
Self-insured transactions are accounted for in the Internal Service
Fund. The first plan is administered by an outside agency, the latter
three are administered by the City. Claims payable under the above
policies aggregated $1,747,318 at June 30, 1990. Incurred but not
reported claims have been considered in determining the accrual for the
self-insurance reserve.
The City does not use an actuary to determine liability. Claims payable
are determined from administrators reports and the City's historical data..
Expansion of Sewage Treatment Plant - The City issued certificates of
participation to pay for the expansion of the capacity of its sewage
treatment plant. The City is committed to pay any sewage treatment plant
expansion costs in excess of the cash provided from the issuance of the
certificates of participation. At June 30, 1990, budgeted costs exceeded
cash available from the issuance of the certificates of participation by
approximately $1,541,000.
Litigation - The City of Lodi, California is a defendant in various
lawsuits. The City Attorney estimates that the potential claims against
the City not covered by insurance resulting from such litigation would
not materially affect the financial condition of the City.
Arbitrage Earnings Rebate Liabilit
Arbitrage earnings are defined as income earned on the unexpended tax
exempt bond proceeds in excess of that which would have been earned had
the monies been invested in securities with a yield of the effective rate
of the bond anticipation notes. Arbitrage earnings must be rebated to
the United States Treasury every five years. The Authority recorded an
arbitrage earnings rebate liability of approximately $97,000 as of
4 June 30, 1990. Future arbitrage earnings (losses; can be used to offset
the existing rebate liability. Therefore, a potential exists for the
figure to either increase or decrease prior to the due date of August 1,
1993.
(Continued)
-27-
)
CITY OF LODI
Notes to General Purpose Financial Statements
(12) Restatement of Beginning (June 30, 1989) Fund Balance
In the prior year, the City recorded $100,000 received from the Old Lodi
Unified High School Site Foundation as revenue. This receipt should have
been applied to the outstanding receivable balance. The effect of this
restatement was a $100,000 decrease to the fund balance of the Capital
Projects Fund.
-28-
:.J
See accompanying independent auditors' report.
-29-
J
CITY OF LODI
Enterprise
Funds
Combinic,g Balance Sheet
June 30,
1990
Electric
Sewer
Water
Total
1
Assets
Cash and investments $
9,200,994
4,518,291
1,605,055
15,324,340
Restricted assets
-
7,842,425
-
7,842,425
Receivables (net of allowance
for uncollectibles):
Accounts
1,963,323
158,014
168,527
2,289,864
Property taxes
-
18,963
-
18,963
Interest
189,094
126,244
29,046
344,384
Due from other funds or
governmental agencies
1,378,792
-
-
1,378,792
Inventory
1,316,937
11,489
245,728
1,574,154
Other assets
243
10,152
54
10,449
Fixed assets (net of
accumulated depreciation)
14,381,969
9,942,783
4,623,023
28,947,775
Total assets $
28.431.35
22.628.361
.671.43
5Z.731, 14ti
J
Liabilities
Accounts payable and other
liabilities $
1,754,439
745,990
36,040
2,536,469
Accrued salaries and wages
28,485
10,728
9,189
48,402
Accrued interest
-
360,529
-
360,529
Due to other funds
-
-
1,125,092
1,125,092
Accrued compensated absences
390,033
187,195
53,361
641,089
Certificates of participation
payable, net of discount
-
8,834,348
-
8,834,348
J
Total liabilities
2,172,957
10,135,790
1,234,182
13,545,929
Fund Equity
Retained earnings
26,258,395
12,489,571
5,437,251
44,185,217
Contingent liabilities
_
Total liabilities and
fund equity $
28.431.352L
LJ21,4
.731.146
:.J
See accompanying independent auditors' report.
-29-
J
J
See accompanying independent auditors' report.
-30-
CITY
OF LODI
Enterprise Funds
Combining Statement
of Revenues, Expenses
and
Changes in
Retained Earnings
Year Ended
June 30, 1990
{
Electric
Sever
Water
Total
Operating revenues:
Charges for services $
27,126,748
2,825,374
2,499,371
32,451,493
Operating expenses:
Personal services
1,877,328
754,458
453,705
3,085,491
Supplies, materials and
services
1,985,300
506,087
322,145
2,813,532
Utilities and
communications
21,204,456
280,431
383,565
21,868,452
Depreciation
730,042
707,932
268,897
1,706,871
Benefit payments
251,157
4,400
505
256,062
Total operating
expenses
26,048,283
2,253,308
1,428,817
29,730,408
Operating income
1,078,465
572,066
1,070,554
2,721,085
Nonoperating revenues (expenses):
Sever bond taxes
-
189,142
-
189,142
Interest revenue
1,153,161
1,073,467
137,944
2,364,572
Rent
20,356
130,761
51,517
202,634
Interest expense
-
(768,647)
-
(768,647)
Other
274,602
39,922
67,119
381,643
Total nonoperating
revenues (expenses)
1,448,119
664,645
256,580
2,369,344
Income before operating
transfers
2,526,584
1,236,711
1,327,134
5,090,429
Operating transfers out
(2,736,730)
(198,688)
511,280)
(3,446,698)
Net income (loss)
(210,146)
1,038,023
815,854
1,643,731
Retained earnings,
J,ne 30, 1989
26,468,541
11,451,548
4,621,397
42,541,486
Retained earnings,
June 30, 1990 $
5.437,251
44.185.217
J
See accompanying independent auditors' report.
-30-
E
7
ME
J
CITY OF LODI
Enterprise Funds
Combining Statement of Changes in Financial Position
Year Ended June 30, 1990
Electric
Sewer
Water
Total
Sources of working capital:
Operations:
Net income (loss) $
(210,146)
1,038,023
815,854
1,643,731
Items not requiring
working capital:
Depreciation and
amortization
730,042
724,797
268,897
1,723,736
Total sources of
working capital
519,896
1,762,820
1,084,751
3,178,298
Uses of working capital:
Acquisition of fixed
assets, net
3,587,401
2,358,602
621,964
6,567,967
Decrease of long-term debt
-
100,000
-
100,000
Total uses of
working capital
3,587,401
2,458,602
621,964
6,667,967
Net increase (decrease)
in working capital
$(.Ob7.505)
( 96( 96 5782)46.
2.787
(3.300�.50Q)
Elements of net increase (decrease)
in working capital:
Cash and investments
$(2,642,047)
703,701
386,799
(1,551,547)
Restricted assets
-
(603,925)
-
(603,925)
Accounts receivable, net
252,278
(11,074)
6,512
247,716
Property taxes receivable
-
(28,816)
-
(28,816)
Interest receivable
52,295
20,213
14,066
86,574
Due from other funds or
governmental agencies
345,459
-
-
345,459
Inventory
68,852
3,995
33,976
106,823
Other assets
(402)
(6,998)
53
(7,347)
Accounts payable and
accrued liabilities
(11011,192)
(730,503)
47,174
(1,694,521)
Accrued salaries and wages (6,340)
(2,322)
(785)
(9,447)
Accrued compensated
absences
(126,408)
(39,087)
66,751
(98,744)
Accrued interest
-
(4,987)
-
(4,987)
Due to other funds
_ -
41021
(91,759)
(87,738)
Net increase (decrease)
in working capital
$(j0Q§Z.505)
_695.782)
462.787
(3.300.500)
See accompanying independent
auditors' report.
-31-