City of Alexandria, Virginia
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MEMORANDUM
DATE: NOVEMBER 5, 2014
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: RASHAD M. YOUNG, CITY MANAGER/s/
DOCKET TITLE:
TITLE
Consideration of the Fiscal Year 2014 Comprehensive Annual Financial Report (CAFR).
BODY
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ISSUE: Council consideration is requested of the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2014.
RECOMMENDATION: That City Council receive the Fiscal Year 2014 Comprehensive Annual Financial Report (Attachment 1).
DISCUSSION: Code of Virginia ยง15.2-2511 requires all local governments to have their 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 Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014 can be found on the City's website at <alexandriava.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 received a positive "clean opinion" from its independent certified public accountant, CliftonLarsonAllen, LLP, of its financial statements for the fiscal year ended June 30, 2014 (CAFR, page 19). The auditors found that the City's financial statements "present fairly" the City's financial position and results of operations and that the City has complied with applicable laws and regulations related to federal grants.
The CAFR includes a Management's Discussion and Analysis section that provides an overview of the City's financial performance (CAFR, page 21).
On this entity-wide basis, the City government has recorded $459.5 million in net assets (CAFR, Exhibit I, page 34), including the investment in capital assets of $344.2 million. The City government's net assets increased by $30.7 million in Fiscal Year FY 2014 (CAFR, Exhibit II, page 35).
General Fund revenues in FY 2014 totaled $611.4 million (CAFR, Exhibit IV, page 37). Final General Fund expenditures and transfers totaled $618.4 million, with expenditures totaling $545.0 million and transfers to other City funds totaling $73.4 million (CAFR, Exhibit IV, page 37).
Fund Balance, which includes all spendable and nonspendable resources, was $65.3 million at the end of FY 2014 (CAFR, Exhibit III, page 36). This compares to the Total General Fund Balance of $69.5 million at the end of FY 2013. While Total Fund Balance decreased, the Unassigned Fund Balance increased by over 21 percent ($7.1 million) in FY 2014. With a use of Fund Balance in both FY 2013 and FY 2014, the rating agencies will expect the City to add resources to replenish Fund Balance.
The Spendable Fund Balance of $62.3 million at the conclusion of FY 2014 represents 10.7 percent of General Fund revenues (unassigned fund of balance $41.0 million plus Commitments of $12.7 and Assignments of $8.5 million (page 55)). 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. For FY 2014, this percentage is consistent with the financial guideline of 10.0 percent.
The Unassigned General Fund Balance of $40.0 million at the conclusion of FY 2014 (CAFR, page 9) represents 6.71 percent of General Fund revenues. Unassigned General Fund Balance is the accumulated total of all prior years' actual General Fund revenues in excess of expenditures, less nonspendable balances (such as inventory), and amounts committed or assigned for specific uses (such as operating and capital budgets, self-insurance, other post-employment benefits, ongoing projects, and extraordinary events such as natural disasters or other emergencies). In order to maintain a total fund balance of more than ten percent of revenues, this percentage is higher than the percentage at the end of FY 2013 and exceeds the City's financial policy target of 5.5 percent (and above the floor of 4.0 percent).
Separate financial information for the Potomac Yard Metrorail Station Fund and the Northern Virginia Transportation Authority Fund (NVTA) are provided. The Potomac Yard Fund ended FY 2014 with a $4.8 million fund balance (CAFR, page 128), while the NVTA Fund had a fund balance of $7.2 million. The balances in these funds will be used for Potomac Yard Metrorail and other transportation projects.
The City continues to comply with all debt and fund balance-related financial targets and limits (CAFR, page 10).
Federal grant expenditures of $44.5 million included $6.7 million in ARRA stimulus expenditures. The expenditures are subject to very stringent audit and accounting requirements.
The CAFR cover continues a City practice of showcasing capital projects completed in the fiscal year of the CAFR. This year the project featured is the new Potomac Yard Park, which was dedicated in December 2013. The Potomac Yard Park represents a successful public/private partnership, with funding for the land and park construction coming entirely from development proffers and subsequently conveyed to the City. This linear park added 21 acres to the City's portfolio of open space.
Staff is confident that the City's FY 2014 CAFR will be awarded the Government Finance
Officers Association's Certificate of Achievement for Excellence in Financial Reporting.
The City has received this award for each of the last 36 consecutive years.
Looking to Future CAFR Reporting: GASB has established new reporting requirements for retirement benefits. Prior standards did not require employers to report the overfunded or underfunded status of their retirement benefits. Previously, liabilities were based on annual required contributions, whereas the new standards call for full disclosure of the funded status of fair market value of the funds' assets and liabilities. Furthermore, governments are now required to comply with specified actuarial cost methods. For FY 2014, the requirements for the City are to provide additional footnotes and disclosures to communicate this additional information. Looking forward to FY 2015, there will be additional GASB reporting requirements for governmental pensions on top of this year's changes.
FISCAL IMPACT: None.
ATTACHMENTS:
Attachment 1: FY 2014 Comprehensive Annual Financial Report (CAFR)
STAFF:
Laura Triggs, Deputy City Manager
Kendel Taylor, Acting Director, Finance Department
Michael Stewart, Acting Deputy Director, Finance Department
Berenice Harris, Acting Accounting Division Chief, Finance Department
Carmen Fraser, Acting Supervisor of Financial Reporting, Finance Department