San Diego Audit Committee Meeting – January 11, 2016: FY2015 CAFR Review
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San Diego Audit Committee Meeting – January 11, 2016
The Audit Committee of the City of San Diego held its first meeting of 2016 on January 11, 2016, at 5:00 PM UTC. The primary agenda item was the review and acceptance of the Fiscal Year 2015 Comprehensive Annual Financial Report (CAFR). The meeting included presentations from the City Comptroller’s Office and the external auditor (MGO), followed by detailed questions from committee members. The committee unanimously approved the report.
New Committee Member Introduction
- The committee welcomed new member Alan Spencer, who replaces Ms. Schreiner. Mr. Spencer introduced himself, noting his experience with government auditing standards.
Discussion Items
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Presentation of FY2015 CAFR:
- Rolando Charvel (City Comptroller) reported that the city received an unmodified (clean) opinion on the CAFR, prepared in accordance with Generally Accepted Accounting Principles (GAAP). The CAFR includes an introductory section with a letter of transmittal and the FY2014 GFOA Certificate of Excellence in Financial Reporting.
- Scott Clark (Deputy Director, Office of the City Comptroller) outlined the three sections of the CAFR (introductory, financial, statistical) and summarized key financial results: total revenues of $3.29 billion, expenditures of $2.44 billion, and an increase in net position of $849 million (net of a $185 million current-year impact from implementing GASB 68). Implementation of GASB 68 required a restatement of beginning net position by approximately $1.7 billion. The general fund’s fund balance increased by $27.7 million to $47.4 million, primarily due to reserves for Danisa obligations. The city met its emergency and stability reserve policy for FY2015.
- Kevin Starkey (MGO, external auditor) confirmed the unqualified opinion and highlighted an emphasis-of-matter paragraph for GASB 68 implementation. The audit found no material weaknesses or significant deficiencies in internal control over financial reporting. Auditors proposed adjustments (e.g., a $15 million double-counting of a liability) which were recorded; no uncorrected misstatements remained.
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Committee Questions and Discussion:
- Committee member Tom Hebrink asked about subsequent events cutoff (December 8, 2015, the opinion date). He inquired about potential material subsequent events related to the Chargers’ departure and the PERB ruling. City CFO Mary Lewis responded that any material updates would be included in bond offering documents.
- Hebrink questioned several CAFR details: the increase in the public liability reserve target (from $32.2 million to $47.4 million due to the Danisa settlement); the removal of emphasis-of-matter paragraphs for pensions and OPEB (judgment call by auditor); the dissolution of entities MTDB and SDDPC; the decrease in public safety expenses due to GASB 71 deferrals; the drop in non-major government funds allowance from $171 million to $56 million (write-off of a disallowed redevelopment loan, partially revived by SB 107 later); the change in stormwater contingent liability estimate from $4 billion to $3 billion (due to cost efficiencies and anticipated regulatory changes); and the status of the Point Loma wastewater permit deadline (confirmed met).
- Hebrink noted the absence of the SDCERS funded ratio (now replaced by the plan fiduciary net position as a percentage of total pension liability, 80.35% as reported in required supplementary information).
- Committee member Spencer raised a concern about the location of the Yellow Book report on internal controls and compliance; Kevin Starkey explained it is typically included in the single audit report, not the CAFR, but agreed to improve accessibility.
- Other questions covered the decrease in land assets (reconveyance of Fifth Avenue Landing property related to convention center expansion), potential bond refundings (ballpark, sewer, water bonds in queue), and the treatment of deferred maintenance (disclosed but not recognized as a liability under GAAP).
Key Outcomes
- The committee unanimously approved the FY2015 CAFR (motion by Ricardo Bellini, seconded by Tom Hebrink).
- The next Audit Committee meeting was scheduled for January 20, 2016, at 9:00 AM.
Meeting Transcript
All right. Thank you all for being here. Happy New Year. Looks like we want to get our first meeting of uh twenty sixteen started here, so let's get right to it. Uh, we need to do roll call real quick. And I see we have Councilmember Zapp. Committee member Alan Spencer. Welcome, sir. Committee member Tom Hebrink is here. Ricardo Bellini is here. And of course, we can't forget Mr. Webb. Thank you all for being here today. So that will pass by unanimous consent. With an abstention from Ricardo. And do we have any non-agenda public comment today? I see none. That can take us on to committee member, mayor, independent budget analyst, city attorney, or auditor comments. Any at this point in time? Perfect. Then I just wanted to go over real quickly and introduce Mr. Spencer. Welcome, sir. Um you're gonna be here for four years and replacing Ms. Schreiner. So you've got some very big heels to fill. S she was she was uh uh integral part of this committee, and we we called upon her a lot. So you'll have some big heels to fill. And then uh did you want to say anything, introduce yourself? Uh uh just thank you for uh one one of the things we'll have to turn. There's a big square button there in front of you that should control the mic. Okay. Well, thank you for allowing me to participate on the audit committee. And I just hope I can uh add value with you know the years of experience I have and my knowledge of government auditing standards. So thank you again. I looking forward to adding whatever value I can. Well, if the amount of information you've been asking for us on the next item here is indicative of of how you conduct your business, I'm sure we're in good hands. So welcome aboard. Thank you. And do we have any requests for continuance on any items or issues here since we only have one item today? Probably not. All right. And that's gonna take us right into our discussion agenda for today. That is report from the Comptroller's Department regarding the fiscal 2015 comprehensive annual financial report. Um you'll notice that this year we're gonna try and do things a little bit differently, and we're gonna try and squeeze this all into one meeting instead of two in the entrance of time and efficiency. So bear with us today and uh we'll keep that in mind and hopefully we'll get through this real quick. We'll get the CAFA report started here. Um we'll be hearing from outside auditor. We'll review the management of the outside auditors written responses to the audit committee standard CAFA review questions. And after all of that, we'll turn back to the committee for questions and comments, and then uh we'll get this thing right on the road.
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