City of Alexandria, Virginia
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MEMORANDUM
DATE: NOVEMBER 2, 2021
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: MARK B. JINKS, CITY MANAGER /s/
DOCKET TITLE:
TITLE
Receipt of the Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR).
BODY
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ISSUE: Consideration is requested of the Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2021.
RECOMMENDATION: That City Council receive the Fiscal Year 2021 Annual Comprehensive Financial Report (Attachment).
DISCUSSION: Code of Virginia §15.2-2511 requires all local governments to have their accounting books and records audited by an independent certified public accountant as of June 30 of each year. The Code further requires that the independent certified public accountant present a written report to the local governing body at a public session by the following December 31.
The City's Annual Comprehensive Financial Report (ACFR) for the fiscal year ended
June 30, 2021, has been completed and has been posted on the City's website at alexandriva.gov/financialreports <https://www.alexandriva.gov/financialreports>. This report, which follows a format prescribed by the Governmental Accounting Standards Board (GASB), includes a description of the significant financial events of the fiscal year, the City's audited financial statements, and selected financial and demographic information.
The following are highlights of the report:
The City fully expects to again receive a positive "clean opinion" from its independent certified public accountant firm, CliftonLarsonAllen, LLP, of its financial statements for the fiscal year ended June 30, 2021. The auditors are in the final stages of review and the City expects to receive their opinion prior to the City Council meeting on November 9. Such an unmodified opinion, if received, would indicate that the auditors find the City's financial statements to fairly present the City’s financial position and results of operations and that the City complied with applicable laws and regulations related to federal grants. The ACFR includes a Management's Discussion and Analysis section that provides an overview of the City's financial performance. It should be noted that the City’s total Net Position, excluding component units, on a government wide basis, increased approximately $31.2 million from $584.4 million to $615.6 million on June 30, 2021, indicating improvement in the City’s overall financial health. This change in Net Position also reflects changes in current pension fund assets and net pension liability calculations. The government-wide activities had an unrestricted net position of $151.6 million as of June 30, 2021, an increase of $50.8 million from FY 2020 and the General Fund, on a current financial resource basis, reported revenues and other financing sources in excess of expenditures and other financing uses by $23.7 million.
Over the last several years, the City has maintained its fiscal strength as the result of the City Council's adoption of, and staff’s subsequent adherence to, the series of financial policies aimed at (1) limiting debt and annual debt service requirements and (2) maintaining an appropriate General Fund balance to retain the City’s AAA/Aaa bond ratings and to keep the City on firm financial footing. The City has also maintained superior debt ratios by using substantial “pay-as-you-go” financing for many of its capital projects. The General Fund contributed $38.7 million in “pay-as-you-go” financing of capital projects in FY 2021, representing 5.3 percent of all General Fund expenditures. The City implemented GASB Statements No. 84, “Fiduciary Activities,” and No. 90, “Majority Equity Interests - an amendment of GASB Statements No. 14 and No. 61” during FY 2021.
Revenues and Expenditures
General Fund revenues in FY 2021 totaled $748.8 million (ACFR, Exhibit IV, page 42). Final General Fund expenditures and transfers, excluding bond refunding, totaled $734.7 million, with expenditures alone totaling $614.3 million. (ACFR, Exhibit IV, page 42). Including Other Financing Sources (Transfers to the General Fund from other funds) of $9.2 million, the net result is an increase in Spendable General Fund Balance of $23.7 million, primarily due to the City’s selective freeze on hiring and pay, higher tax revenues than budgeted, as well as savings generated by jurisdictional operating contributions to the Washington Metropolitan Area Transit Authority (WMATA) being lower due to substantial pandemic-related federal funds that WMATA received.
General Fund Fund Balance
General Fund fund balance, which includes all General Fund spendable and non-spendable resources, was $176.6 million at the end of FY 2021 (ACFR, Exhibit III, page 41). This compares to the Total General Fund Balance of $152.8 million at the end of FY 2020. Total Fund Balance (including an increase of $0.2 million reserve for inventory) increased by $23.7 million, for the reasons cited in the above paragraph. These accumulated resources have been assigned to enable the capital program and operating budgets in future fiscal years, including significant pay initiatives which were eliminated from the FY 2021 budget due to revenue uncertainty during the early months of the pandemic, as well as departmental incomplete projects and future transit costs.
The Spendable fund balance of $169.4 million available at the conclusion of FY 2021, which consists of $75.2 million in Committed and Assigned, and $94.2 in Unassigned fund balance, represents 22.6 percent of General Fund revenues (ACFR, page 61). Spendable Fund Balance is the portion of accumulated total of all prior years' actual General Fund revenues in excess of expenditures that is available for appropriation by City Council.
The Unassigned General Fund Balance of $94.2 million at the conclusion of FY 2021 is the accumulated total of all prior years’ actual General Fund revenues in excess of expenditures, less non-spendable balances (such as inventory), and amounts committed or assigned for specific uses (such as operating and capital budgets, self-insurance, ongoing projects, and extraordinary events such as natural disasters or other emergencies).
Separate financial information for the Potomac Yard Metrorail Station Fund and the Northern Virginia Transportation Authority (NVTA) Fund are provided in the ACFR. The Potomac Yard Fund ended FY 2021 with a $29.9 million fund balance, while the NVTA Fund had a fund balance of $4.6 million (ACFR, page 62). The balances in these funds will be used for the Potomac Yard Metrorail Station project and NVTA-funded transportation projects. The City continues to comply with all debt and fund balance-related financial targets and limits (ACFR, page 12).
Single Audit
The City’s federal funded programs are reported on the Schedule of Expenditures of Federal Awards (SEFA) and are subject to be audited in accordance with the Single Audit Act. Federal pandemic relief funds including those from the CARES Act and American Rescue Plan Act (ARPA) are considered federal awards and are subject to be audited in accordance with the Single Audit Act if the expenditures exceed a materiality threshold; the City’s FY 2021 expenditures supported by CARES and ARPA funding met the threshold, and therefore, are included in the Single Audit.
At this time, the supplemental guidance from the federal Office of Management and Budget (OMB) has not been issued to provide the external auditors with the methodology for auditing several of the City’s federal awards such as CARES and ARPA. As such, the City’s SEFA and Single Audit of federal programs will be completed when the federal guidance is available.
ACFR
To comply with GFOA guidelines, the ACFR also includes statistical and indicator sections. These sections provide key information regarding the state of the City. Staff is confident that the City's FY 2021 ACFR will be awarded the Government Finance Officers Association's Certificate of Achievement for Excellence in Financial Reporting. The City has received this award for more than 40 years.
The title of the report changed this year from Comprehensive Annual Financial Report to Annual Comprehensive Financial Report. GASB found that the common pronunciation of the acronym for the previous title of Comprehensive Annual Financial reports sounds like a profoundly objectionable racial slur for some communities.
FISCAL IMPACT: None beyond that explained in this memorandum.
ATTACHMENT: FY 2021 Annual Comprehensive Financial Report (ACFR)
STAFF:
Laura B. Triggs, Deputy City Manager
Kendel Taylor, Director, Finance Department
Ian Greaves, Comptroller
Evan Davis, Division Chief, Administrative Services