City of Alexandria, Virginia
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MEMORANDUM
DATE: NOVEMBER 21, 2023
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
THROUGH: JAMES F. PARAJON, CITY MANAGER /s/
FROM: KENDEL TAYLOR, INTERIM DEPUTY CITY MANAGER
DOCKET TITLE:
TITLE
Receipt of the Fiscal Year 2023 Annual Comprehensive Financial Report.
BODY
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ISSUE: Consideration is requested of the Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2023.
RECOMMENDATION: That City Council receive the Fiscal Year 2023 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, 2023, is in the final stages of completion and will be 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:
Once again, the City fully expects to receive a "clean opinion" from its independent certified public accountant firm, CliftonLarsonAllen, LLP, of its financial statements for the fiscal year ended June 30, 2023. 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 28. 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, decreased approximately $1.1 million from $655.7 million to $654.6 million on June 30, 2023, indicating that the City’s economic health and condition is nearly unchanged from last year. Significant changes in assets include a $144 million reduction in Cash and Investments with Fiscal Agents (the City’s bond proceeds) and a significant increase in Land and Construction in Progress, as the City purchased land for the Landmark Redevelopment project and made considerable progress on the Douglas MacArthur Elementary School and the new High School Capacity project as of June 30, 2023. The government-wide activities had an unrestricted net position of $331.7 million as of June 30, 2023, an increase of $44.3 million from FY 2022 due to increased investments in the capital assets described above.
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. Both rating agencies recently reaffirmed the City’s bond ratings, noting …. 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 $67.9 million in “pay-as-you-go” financing of capital projects in FY 2023, representing 7.9 percent of all General Fund expenditures.
Revenues and Expenditures
General Fund revenues in FY 2023 totaled $857.6 million (ACFR, Exhibit IV). Final General Fund expenditures and transfers totaled $859.6 million, with expenditures alone totaling $699.8 million. (ACFR, Exhibit IV). Including Other Financing Sources (Transfers to the General Fund from other funds) of $14.2 million, the net result is a Net Change in General Fund Fund Balance of $2.0 million. The City appropriated Commitments and Assignments of Fund Balance during FY 2023, totaling $65.3 million. These appropriations included $8.1 million to balance the FY 2023 Approved Operating Budget, $31.7 million to fund projects in the Capital Improvement and $25.5 million in incomplete projects from the prior year. Vacancies savings, revenues that performed higher than anticipated and other savings generated sufficient surpluses across the organization to reduce the necessary use of fund balance to only $2.0 million
General Fund Fund Balance
General Fund Fund balance, which includes all General Fund spendable and non-spendable resources, was $223.7 million at the end of FY 2023 (ACFR, Exhibit III). This compares to the Total General Fund Balance of $225.1 million at the end of FY 2022. Total Fund Balance (including an increase of $0.6 million in the reserve for inventory) decreased by $1.4 million, for the reasons cited in the above paragraph. These accumulated resources have been assigned to fund the capital program and operating budgets in future fiscal years, as well as departmental incomplete projects and future transit costs.
The Spendable fund balance of $203.7 million available at the conclusion of FY 2023, which consists of $72.9 million in Committed and Assigned, and $130.7 in Unassigned fund balance, represents 24 percent of General Fund revenues. 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 $130.7 million at the conclusion of FY 2023 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).
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 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 Single Audit will be completed in accordance with the March 31, 2024 deadline.
ACFR
To comply with GFOA guidelines, the ACFR includes statistical and indicator sections. These sections provide key information regarding the state of the City. Staff is confident that the City's FY 2023 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.
PAFR
This year the City has prepared the first ever Popular Annual Financial Report (Attachment 2). Where an Annual Comprehensive Financial Report (ACFR) provides a comprehensive overview of the government’s financial position and activities, including audited financial statements, statistical data, and other information prepared according to Generally Accepted Accounting Principles, a PAFR is a condensed and more user-friendly version with select information and graphics.
FISCAL IMPACT: None beyond that explained in this memorandum.
ATTACHMENTS:
1. FY 2023 Annual Comprehensive Financial Report
2. FY 2023 Popular Annual Financial Report
STAFF:
Ian Greaves, Comptroller