City of Alexandria, Virginia
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MEMORANDUM
DATE: DECEMBER 4, 2024
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
THROUGH: JAMES F. PARAJON, CITY MANAGER
FROM: KENDEL TAYLOR, DIRECTOR OF FINANCE
DOCKET TITLE:
TITLE
Receipt of the Fiscal Year 2024 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, 2024.
RECOMMENDATION: That City Council receive the Fiscal Year 2024 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, 2024, is in the final stages of completion and will be posted on the City's website. 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 City’s Annual Comprehensive Financial Report is in its final stages of review and completion with the auditors. There may be immaterial changes to the final numbers reflected in this memorandum.
The following are highlights of the report:
The City 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, 2024. The auditors are in the final stages of review and the City expects to receive their opinion prior to the City Council meeting on December 10. 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 $60.4 million from $654.6 million to $594.2 million on June 30, 2024 (ACFR, Exhibit I). Significant changes in assets include a $75.7 million increase in Cash and Investments with Fiscal Agents (the City’s bond proceeds) and a significant increase of $82.9 in Land and Construction in Progress, as the City continued to construct significant capital projects including the new Minnie Howard Campus of the Alexandria High School and the Landmark Mall redevelopment project as June 30, 2024. The government-wide activities had an unrestricted net position of $242.1 million as of June 30, 2024, a decrease of $103.8 million from FY 2023 due to increased investments in the capital assets described above. Long-term liabilities due in more than one year increased from $1.1 billion to $1.3 billion, due in large part to the issuance of $246.6 million of general obligation bonds in December 2023. One small item of note is the increase of the Opioid Settlement Receivable from $1.1 million in FY 2023 to $1.9 million. To date, the City’s total award from opioid settlements is $2.6 million to be received over multiple years.
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 available reserves and a culture of long-term planning.
Revenues and Expenditures
General Fund revenues in FY 2025 totaled $870.4 million (ACFR, Exhibit IV). Final General Fund expenditures and transfers totaled $906.6 million, with expenditures alone totaling $757.3 million. (ACFR, Exhibit IV). Including Other Financing Sources (Transfers to the General Fund from other funds) of $15.0 million, the net result is a Net Change in General Fund Fund Balance of $21.2 million. It should be noted that $13.7 million of this amount is a change in the timing treatment of debt service payments. For the past several years, the City has “prepaid” the July 1 debt service payment on June 30 and recorded a reservation of Unspendable fund balance. This year the auditors required that this be treated as an expense in FY 2024. The net impact of this change on Spendable Fund Balance is zero, as only the reservation of Unspendable fund balance was reduced. The City appropriated Commitments and Assignments of Fund Balance during FY 2024, totaling $36.4 million. These appropriations included $17.5 million to balance the FY 2024 Approved Operating Budget, $10.0 million to fund projects in the Capital Improvement and $9.0 million in incomplete projects and encumbrances 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 Spendable fund balance to only $7.5 million.
General Fund Fund Balance
General Fund Fund balance, which includes all General Fund spendable and non-spendable resources, was $202.5 million at the end of FY 2024 (ACFR, Exhibit IV). This compares to the Total General Fund Balance of $223.7 million at the end of FY 2023. 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. Unspendable fund balance decreased by $13.7 million, for the reasons cited in the above paragraph.
The Spendable fund balance of $196.2 million available at the conclusion of FY 2024, which consists of $59.6 million in Committed and Assigned, and $136.6 in Unassigned fund balance, represents 22.6 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 $136.6 million at the conclusion of FY 2024 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 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 2024 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
Attachment 1 contains the Popular Annual Financial Report. A PAFR is a condensed and more user-friendly version of the City’s financial position with graphics and information from the Basic Financial Statements. This document as well as the ACFR are available on the City’s website. The FY 2023 PAFR was awarded the Government Finance Officers Association's Certificate of Achievement for Excellence in Popular Financial Reporting.
FISCAL IMPACT: None beyond that explained in this memorandum.
ATTACHMENT:
1. FY 2024 Popular Annual Financial Report (PAFR)
2. FY 2024 Annual Comprehensive Financial Report (ACFR) - to be attached upon completion
STAFF:
Laura Gates, Deputy Director
Davidia Thompson, Acting Comptroller