The La Cañada Flintridge City Council held a special joint meeting with the LCF Public Improvement Corporation and the LCF Local Financing Authority to review the city’s annual financial report, which covered a 12-month period ending June 30, 2023, and received a clean audit.
An annual comprehensive financial report for the fiscal year 2022-23 was conducted by the city’s auditing firm, Clifton Larson Allen LLP.
The financial consultancy firm analyzed the report for the city of La Cañada Flintridge, the La Cañada Flintridge Public Improvement Corporation and the La Cañada Local Financing Authority as one combined entity.
Although part of the city, the corporation and financing authority are legally separate entities, the LCF City Council acts as the governing body for both and is accountable for fiscal matters.
“Fiscal dependency was considered on the basis of budget adoption, taxing authority, and funding. The Corporation and LFA are, in substance, part of the city’s operations and so its financial data is blended in the accompanying financial statements in the government-wide financial statements,” according to the financial report.
Both Director of Finance Alex Kung and City Manager Dan Jordan presented a report and overall findings to the Council.
Kung told the Council that the Clifton Larson Allen group issued a clean audit to the city.
“I’m happy to report that our auditors have issued an unmodified opinion, and that’s basically known as a clean audit,” said Kung. “A clean audit basically means that we’ve been following the general accounting principles, [and] also the government accounting principles.”
Additionally, auditors said that financial numbers presented in the report are presented accurately and fairly.
There was one finding, however, regarding some outstanding city deposits in the report.
“During our review of deposits, we noted some old, outstanding balances that require city investigation to determine if amounts should be recognized as revenue or refunded,” read the financial report. “We also noted some negative deposit balances that require investigation as to whether these amounts can be collected or should be written off.”
Kung said that the city is aware of the matter and continues to address all the deposits by updating policies and procedures, identifying deposits that can be refunded and adding deadlines to quickly address the deposits.
As of June 30, 2023, there were about $1.02 million in active deposits that could not be refunded, according to the financial report. The city has also identified $596,096 in deposits that can be refunded or forfeited, and of that amount, $314,489 has been refunded as of Dec. 31. The remaining balance is under review.
“So, we’ve been working diligently to kind of pull these off as soon as possible,” said Kung.
The city has also continued to look over internal controls and make improvements.
Traditionally, the city develops new policies and procedures to make sure financial systems are running smoothly. Recently, Kung said that the city has a new cash sharing system that they are implementing this fiscal year, 2023-24.
“And ultimately, the goal is to increase productivity in the city and in the finance department, and then ultimately provide better customer service to both our residents and to our businesses,” said Kung. “So, we’re always looking for ways that we can streamline processes, but also maintaining our separation of duties and our internal controls.”
Kung also shared that the city was awarded the Government Finance Officers Association Certificate of Achievement for excellence in financial reporting, which the city has continued to receive annually after it was first received in 2000-01.
“This is because of the hard work of staff,” said Kung. “And this year, we had an opportunity to add an additional accountant and that has been the world difference for us.”
Mayor Rick Gunter commended the staff and the city’s 29 full-time employees for their efforts and hard work.
“I continue to be impressed that as a small town, which really values the contract city model, that we are being very efficient,” said Gunter. “We’re constantly trying new things. We’re constantly innovating how to be more efficient with what we have. And then with what we do have we can do a lot, and so I just want to compliment the team.”
Jordan took over the last portion of the presentation which reviewed financial highlights.
He went over general fund reserves, which consist of the spendable, unrestricted portion of fund balance in the general fund.
Assigned funds are also included in the general fund reserves, which are funds used for a specific purpose. Some examples of assigned funds that the city uses include joint use projects, a tree fund and a disaster reserve.
Unassigned funds total $10.4 million for the city. According to the financial report, the fund balance of this category has decreased by about $2.33 million, or 18.3%, over the fiscal year 2021-22.
As of June 30, 2023, the city’s total general fund balance was about $15.1 million, down from $17.1 million in 2021-22.
Jordan said the decrease is entirely based on a large transfer from the general fund to the capital projects fund to pay for the Foothill dip project.
“That single project, which is getting prepared to start construction, was $3.5 million alone,” said Jordan. “Every year, the city transfers out of its general fund roughly $2 to $3 million a year for our capital projects.”
Keeping up reserves is essential for funding capital projects, said Jordan.
“Over the last several years, the only times we’ve had a drop in reserves is when we have had these years of very large transfers, the one back in 2016-17 was actually to purchase [City Hall], and that was last time there was a couple of million-dollar hits on our reserves,” said Jordan.
Jordan also shared the ratio of the city’s end reserves to the annual general fund expenditures for the same fiscal year.
“Our reserves ended in $15.1 million and our general fund expenditures before transfers was about $16.9 million, and that ratio together is .89 — that’s what our metric is and it is well within the city council’s policy target range,” said Jordan.
Comparing the same metric to other contract cities, like Duarte, Temple City and Calabasas, the city’s reserves are on the lower side, but that is due to other cities having a stronger retail and tax base. The city’s metric is still strong and competitive to others, Jordan said.
“This is actually super helpful for us and for the residents to really understand our budgeting process and why we do what we do,” said Gunter. “In comparison to the other cities, it was particularly helpful in looking at how a single year can make a big difference, but when you pull it out over the course of five or eight years, we’ve consistently performed the same and making really excellent use of the resources available to us.”
To view the full financial report, visit cityoflcf.org/city-clerk/
agenda-minutes/, go to the City Council tab and the Feb. 20 regular City Council meeting agenda.
First published in the February 29 print issue of the Outlook Valley Sun.
