HomeMy WebLinkAbout07 APPROVE AGREEMENT FOR INDEPENDENT AUDIT SERVICESMEETING DATE: APRIL 5, 2016
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: MATTHEW S. WEST, ACTING FINANCE DIRECTOR
SUBJECT: APPROVE AGREEMENT FOR INDEPENDENT AUDIT SERVICES
SUMMARY:
The City sent Request for Proposals (RFP) to independent certified public accounting firms to
audit its financial statements through the fiscal year ending June 30, 2018, with the option of
auditing its financial statements for each of the two subsequent fiscal years. The Audit
Commission reviewed the RFP's submitted and selected White Nelson Diehl Evans, LLP
(WNDE) as the firm that should complete the auditing services.
RECOMMENDATION:
It is recommended, based on the advisement of the Audit Commission, that the City Council
approve WNDE as the independent certified public accounting firm to audit its financial
statements through the fiscal year ending June 30, 2018, with the option of auditing its financial
statements for each of the two subsequent fiscal years. Staff also requests Council authorize
the City Manager to execute the agreement with WNDE subject to any non -substantive
modifications as may be deemed necessary and/or recommended by the City Attorney.
FISCAL IMPACT:
The fees for the annual audit services are not to exceed $45,400.00 for each of the 2015/2016 and
2016/2017 fiscal years audited. The fees for fiscal year 2017/2018 would be $46,308, an increase
of 2%. If the two subsequent fiscal years are audited the fees for fiscal year 2018/2019 are
$47,234 (2% increase) and for fiscal year 2019/2020 are $48,179 (2% increase). The allocation of
the annual auditing fees is 75% to the General Fund and 25% to the Water Enterprise Fund.
DISCUSSION:
For the past five fiscal years the annual audits were completed by WNDE. It is the City's practice
to solicit proposals every five years, which is consistent with Governmental Accounting Standards
Board (GASB) best practices, to ensure that audit independence and reasonably priced services
are maintained. If the City is satisfied with the current audit firm's work, then that firm may submit a
proposal. Therefore, an RFP was developed and sent to six independent auditing firms: Davis
Farr, LLP; Lance, Soll & Lunghard, LLP (LSL); Macias Gini & O'Connell, LLP; Rogers, Anderson,
Malody & Scott, LLP; Ross R. Bonnie & Associates; White Nelson Diehl Evans, LLP. Of the six
APPROVE AGREEMENT FOR INDEPENDENT AUDIT SERVICES
April 5, 2016
Page 2
firms, Macias Gini & O'Connell, LLP and Ross R. Bonnie & Associates did not submit a proposal.
The four proposals received were forwarded to the Audit Commission. After review of the four
proposals by City staff, two proposals were rejected. Rogers, Anderson, Malody & Scott, LLP
(RAMS) and Davis Farr, LLP did not continue in the process. We contacted two of RAMS recent
government clients, and based on their feedback determined that the firm would not be able to
meet our expectations in preparing the Comprehensive Annual Financial Report (CAFR) in
accordance with our City's timeframe and staffing needs. Davis Farr was not selected, as their first
peer review is in the scheduling process for the summer of 2016. The City's evaluation criteria
require that firms have undergone a recent external quality control review. Firms which do not
meet this basic requirement are eliminated from the process. This is considered an essential
qualification which cannot be overcome by other considerations or credentials. Both of these firms
were notified of the results. The Audit Commission reviewed each of the two remaining proposals
and awarded points to each firm based on predefined qualifications. The cost for services bids
were submitted in sealed envelopes and not opened by the Audit Commission until after the
proposals were discussed at the March 10, 2016 Audit Commission special meeting.
Representatives from WNDE and LSL were present at that meeting to make a presentation and
answer any questions the Commissioners may have had. WNDE was the highest scoring firm.
WNDE is a large regional full service Certified Public Accounting firm that has been in existence for
more than 80 years. It has offices in Irvine, Carlsbad, and Escondido, California. The firm has
devoted a large portion of its practice to providing professional services to governmental agencies
since 1950. In order to achieve the City's objectives while maintaining audit quality and reducing
costs to the City, WNDE put together an entirely new engagement team which will provide a fresh
look during the audits of the City.
The scope of services the firm will complete for the three years ending June 30, 2018 are:
• The annual financial audit of the basic financial statements in accordance with
Governmental Auditing Standards; preparation of the City's Comprehensive Annual
Financial Report (CAFR);
• A management letter containing any comments or recommendations resulting from the
review of the systems of internal controls in connection with the financial audit; a report
communicating information related to the audit to those in charge of governance at the
conclusion of the audit;
• A financial and compliance audit of the Successor Agency to the Tustin Redevelopment
Agency;
APPROVE AGREEMENT FOR INDEPENDENT AUDIT SERVICES
April 5, 2016
Page 3
• A Single Audit of Federal Grants to be performed to meet the requirement of Title 2 U.S.
Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirement for Federal Awards (Uniform Guidance);
• Agreed upon procedures review of the calculation of the City's GANN Appropriations Limit
(GANN), as required by Section 1.5 of the Article X11113 of the California Constitution; and,
• The preparation of the State Controller's Reports for the City of Tustin.
Mahew S. VVest
Actng Finance Director
Attachment: Professional Services Agreement Audit Services
PROFESSIONAL SERVICES AGREEMENT
AUDIT SERVICES
THIS AGREEMENT FOR PROFESSIONAL SERVICES (the "Agreement") is made
and entered into this day of , 2016 by and between the City of Tustin, a
California general law city ("City") and White Nelson Diehl Evans, LLP ("Firm").
RECITALS
A. City requires the services of Firm to perform professional audit services for the
City and related accounts.
B. City circulated the Request for Proposal for annual auditing services attached
hereto as Exhibit A (the "RFP"), and in response Firm submitted to City a Technical Audit
Proposal attached hereto as Exhibit B (the "Proposal") to provide such services to City pursuant
to the terms of this Agreement.
C. Based on its experience, education, training, and reputation, Firm is qualified to
provide the necessary services to City for the project and desires to provide such services.
D. City desires to retain the services of Firm for the project.
NOW, THEREFORE, in consideration of the promises and mutual agreements contained
herein, City agrees to retain and does hereby retain Firm and Firm agrees to provide services to
the City as follows:
1. FIRM SERVICES
1.1 Scope of Services. In compliance with all terms and conditions of this
Agreement, Firm shall provide those services specified in the RFP and the Proposal (hereinafter
referred to as the "Scope of Services"). In the event of any conflict or inconsistency between the
terms contained in the RFP and the Proposal, the terms set forth in the RFP shall govern; and in
the event of any conflict or inconsistency in the terms of the Scope of Services and the terms set
forth in the body of this Agreement, the terms set forth in the body of this Agreement shall
govern.
1.1.1 Additional Services. Additional services beyond those described in the
Scope of Services, and additional compensation for additional services, must be approved in
writing by City in the manner set forth in Section 3.3 ("Changes") of this Agreement.
1.2 Compliance with Law. All services rendered under this Agreement shall be
provided by Firm in accordance with all applicable City, federal, state, and local laws, statutes,
and ordinances and all lawful orders, rules, and regulations promulgated thereunder.
1.3 Licenses and Permits. Firm shall obtain at its sole cost and expense such
licenses, permits, and approvals as may be required by law for the performance of the services
1
required by this Agreement. Firm represents and warrants that it or its employees possess all
professional licenses required to provide the professional services with the Scope of Work.
1.4 Familiarity with Work. By executing this Agreement, Firm warrants that Firm
(a) has thoroughly investigated and considered the work to be performed, (b) has investigated the
site of the work and become fully acquainted with the conditions there existing, (c) has carefully
considered how the work should be performed, and (d) fully understands the facilities,
difficulties and restrictions attending performance of the work differing from those inherent in
the work or as represented by City, Firm shall immediately inform City of such fact and shall not
proceed with any work except at Firm's risk until written instructions are received from the
Contract Officer.
1.5 Care of Work. As a material inducement for City to enter into this Agreement,
Firm represents and warrants that Firm is a provider of first class work and professional services
and that Firm is experienced in performing the Services contemplated herein and, in light of such
status and experience, Firm covenants that it shall follow the highest professional standards in
performing the Services required hereunder. For purposes of this Agreement, the phrase
"highest professional standards" shall mean those standards of practice recognized as high
quality among well-qualified and experienced professionals performing similar work under
similar circumstances. In addition, Firm shall adopt and follow reasonable procedures and
methods during the term of the Agreement to prevent loss or damage to materials, papers, or
other components of the work, and shall be responsible for all such damage until acceptance of
the work by City, except such loss or damages as may be caused solely by City's own wrongful
acts or negligence.
2. TIME FOR COMPLETION
The time for completion of the services to be performed by Firm is an essential condition
of this Agreement. Firm shall prosecute regularly and diligently the work of this Agreement
according to the agreed upon schedule of performance set forth in the Scope of Services. Firm
shall not be accountable for delays in the progress of its work caused by any condition beyond its
control and without the fault or negligence of Firm. Delays shall not entitle Firm to any
additional compensation regardless of the party responsible for the delay.
3. COMPENSATION OF FIRM
3.1 Compensation of Firm. Total compensation for the services hereunder shall not
exceed forty-five thousand four hundred Dollars ($45,400.00) for each of the fiscal years audited
through June 30, 2017 (e.g., 2015/16, and 2016/17) as set forth in the Scope of Work (the
"Maximum Contract Amount"). Total compensation for the 2017/18 audit shall not exceed
forty-six thousand three hundred eight Dollars ($46,308). Total compensation for the 2018/19
audit, if City elects to extend the engagement herein, shall not exceed forty-seven thousand two
hundred thirty-four Dollars ($47,234), and if City again elects to extend the engagement herein,
then total compensation shall not exceed forty-eight thousand one hundred seventy-nine Dollars
($48,179) for the 2019/20 audit (the "Extension Maximum Amounts"). Included within the
compensation are all of Firm's ordinary office and overhead expenses incurred by its agents and
employees, including mileage, meetings with City representatives and incidental costs to perform
2
the stipulated services, including without limitation reproduction costs, telephone expenses, and
transportation expenses. Such expenses are subject to and included within the Maximum
Contract Amount and the Extension Maximum Amounts. The Maximum Contract Amount and
any Extension Maximum Amounts shall also include the attendance of Firm at all Project
meetings reasonably deemed necessary by the City. Firm shall not be entitled to any increase in
the Maximum Contract Amount or any Extension Maximum Amounts for attending these
meetings. Firm hereby acknowledges that it accepts the risk that the services and expenses
identified in the Scope of Work may be more costly and/or time-consuming than Firm
anticipates, that Firm shall not be entitled to additional compensation therefore, and that the
provisions of Section 3.3 shall not be applicable to the services identified in the Scope of Work.
The maximum amount of City's payment obligations under this section are the amounts
specified herein. The services shall be billed to the City at the hourly rate set forth in Exhibit
"B;" however, if the City's maximum payment obligation under the Maximum Contract Amount
or any Extension Maximum Amount is exceeded, Firm shall nevertheless complete the Work
without liability on the City's part for further payment beyond the Maximum Contract Amount
or the applicable Extension Maximum Amount.
3.2 Method of Payment. In any month in which Firm wishes to receive payment,
Firm shall no later than the fifteenth working day of the succeeding month, submit to City in the
form approved by City, an invoice for services satisfactorily completed in the calendar month
preceding the invoice. Payments shall be based on the pricing schedule or hourly rates as set
forth in the schedule of fees in the Scope of Services for authorized services performed. City
shall pay Firm all uncontested sums based on invoices which are approved by City consistent
with this Agreement, within thirty (30) days of receipt of Firm's invoice.
3.3 Changes. In the event of any change or changes in the Scope of Services, or the
performance of services that are outside the Scope of Services, is requested by either party, the
revision to the Scope of Services shall not take effect until approved in writing and approved in
accordance with this Section. Revisions to the Scope of Services shall be made only by
execution of a written amendment to this Agreement, setting forth with particularity all terms of
such amendment, including, but not limited to, any additional fees. City Council approval of an
amendment shall be required for changes resulting in the Maximum Contract Amount being
exceeded by more than ten percent (10%) at any time, or resulting in the Extension Maximum
Amount being exceeded by more than ten percent (10%) in any single Extension year. Changes
not requiring City Council approval may be approved in writing by the Contract Officer.
3.4 Appropriations. The Agreement is subject to and contingent upon funds being
appropriated therefore by the City Council for each fiscal year covered by the Agreement. If
such appropriations are not made, this Agreement shall automatically terminate without penalty
to City.
4. PERFORMANCE SCHEDULE
4.1 Time of Essence. Time is of the essence in the performance of this Agreement.
4.2 Schedule of Performance. All services rendered pursuant to this Agreement
shall be performed pursuant to the agreed-upon schedule of performance set forth in the Scope of
3
Services. The extension of any time period must be approved in writing by the Contract Officer.
If no schedule of performance is set forth in the Scope of Services, then satisfactory completion
of all services shall occur prior to the expiration of the Term, or any extension thereof, set forth
in Section 4.4.
4.3 Force Maieure. The time for performance of services to be rendered pursuant to
this Agreement may be extended because of any delays due to unforeseeable causes beyond the
control and without the fault or negligence of Firm, including, but not limited to, acts of God or a
public enemy, acts of the government, fires, earthquakes, floods, epidemic, quarantine
restrictions, riots, strikes, freight embargoes, and unusually severe weather if Firm shall within
ten (10) days of the commencement of such condition notify the Contract Officer who shall
thereupon ascertain the facts and the extent of any necessary delay, and extend the time for
performing the services for the period of the enforced delay when and if in the Contract Officer's
judgment such delay is justified, and the Contract Officer's determination shall be final and
conclusive upon the parties to this Agreement.
4.4 Term. Unless earlier terminated in accordance with Section 8.5 of this
Agreement, the term of this Agreement shall commence on the effective date of this Agreement,
and all services required under this Agreement shall be completed no later than June 30, 2019 for
the financial statements for fiscal years 2015/16, 2016/17, and 2017/18. City at its sole
discretion shall have the option to extend the engagement for up to two subsequent one-year
terms to include financial statements for fiscal years 2018/19 and 2019/20.
4.4.1 Survival of Expiration/Termination. The following sections of this
Agreement shall survive any expiration or termination of this Agreement: Section 3.4; Section
5.4 (including sections 5.4.1 through 5.4.3); Sections 6.1 (including sections 6.1.1 through 6.1.6)
and 6.2; Section 7.2, 7.3, 7.4 (including sections 7.4.A, 7.4.13, and 7.4.c) and 7.5; Sections 8.1,
8.2, 8.3, 8.4, 8.5, 8.6; Sections 9.1, and 9.2; Sections 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and 10.7.
5. COORDINATION OF WORK
5.1 Representative of Firm. The following principal of Firm is hereby designated to
be the principal and representative of Firm authorized to act in its behalf with respect to the
services and work specified herein and make all decisions in connection therewith: Nitin P. Patel,
Partner. It is expressly understood that the experience, knowledge, education, capability, and
reputation of the foregoing principal is a substantial inducement for City to enter into this
Agreement. Therefore, the foregoing principal shall be responsible during the term of this
Agreement for directing all activities of Firm and devoting sufficient time to personally
supervise the services hereunder. The foregoing principal may not be changed by Firm without
express written approval of the Contract Officer.
5.2 Contract Officer. The Contract Officer shall be the City Manager, or his/her
designee. It shall be the Firm's responsibility to keep the Contract Officer fully informed of the
progress of the performance of the services and Firm shall refer any decisions that must be made
by City to the Contract Officer. Unless otherwise specified herein, any approval of City required
hereunder shall mean the approval of the Contract Officer.
4
5.3 Prohibition Against Subcontracting or Assignment. The experience,
knowledge, education, capability, and reputation of Firm, its principals and employees, were a
substantial inducement for City to enter into this Agreement. Therefore, Firm shall not contract
with any other individual or entity to perform in whole or in part the services required hereunder
without the express written approval of City. In addition, neither this Agreement nor any interest
herein may be assigned or transferred, voluntarily or by operation of law, without the prior
written approval of City.
5.4 Independent Contractor.
5.4.1 The legal relationship between the Parties is that of an independent
contractor, and nothing herein shall be deemed to make Firm a City employee. During the
performance of this Agreement, Firm and its officers, employees, and agents shall act in an
independent capacity and shall not act as City officers or employees. The personnel performing
the Services under this Agreement on behalf of Firm shall at all times be under Firm's exclusive
direction and control. Neither City nor any of its officers, employees, or agents shall have
control over the conduct of Firm or any of its officers, employees, or agents, except as set forth
in this Agreement. Firm, its officers, employees, or agents shall have no voice in the selection,
discharge, supervision, or control of Firm's employees, servants, representatives, or agents, or in
fixing their number, compensation, or hours of service. Firm shall pay all wages, salaries, and
other amounts due its employees in connection with this Agreement and shall be responsible for
all reports and obligations respecting them, including but not limited to social security income
tax withholding, unemployment compensation, workers' compensation, and other similar
matters. City shall not in any way or for any purpose be deemed to be a partner of Firm in its
business or otherwise a joint venturer or a member of any joint enterprise with Firm. Firm shall
not at any time or in any manner represent that it or any of its agents or employees are agents or
employees of City.
5.4.2 Firm shall not incur or have the power to incur any debt, obligation, or
liability against City, nor bind City in any manner.
5.4.3 No City benefits shall be available to Firm, its officers, employees, or agents
in connection with any performance under this Agreement. Except for professional fees paid to
Firm as provided for in this Agreement, City shall not pay salaries, wages or other compensation
to Firm for the performance of Services under this Agreement. City shall not be liable for
compensation or indemnification to Firm, its officers, employees, or agents, for injury or
sickness arising out of performing Services hereunder. If for any reason any court or
governmental agency determines that the City has financial obligations, other than pursuant to
Sections 3.1 and 3.3 herein, of any nature relating to salary, taxes, or benefits of Firm's officers,
employees, servants, representatives, subcontractors, or agents, Firm shall indemnify City for all
such financial obligations.
5.5 Personnel. Firm agrees to assign the individuals named in Exhibit "B" to
perform the services set forth herein. Firm shall not alter the assignment of the personnel
without the prior written approval of the Contract Officer. The City shall have the unrestricted
right to order the removal of any personnel assigned by Firm by providing written notice to Firm.
5
5.6 Conflicts of Interest. Firm covenants that it presently has no interest and shall
not acquire any interest, direct or indirect, which would conflict in any manner or degree with the
performance of the services contemplated by this Agreement. No person having such interest
shall be employed by or associated with Firm.
6. INSURANCE AND INDEMNIFICATION
6.1 Insurance. Firm shall procure and maintain, at its sole cost and expense, in a
form and content satisfactory to City, the insurance described herein for the duration of this
Agreement, including any extension thereof, or as otherwise specified herein, against claims
which may arise from or in connection with the performance of the service hereunder by Firm,
its agents, representatives, or employees. Such insurance shall be kept in full force and effect
during the term of this Agreement and any Extension thereof approved by the City. The
procuring of such insurance and the delivery of policies, certificates, and endorsements
evidencing the same shall not be construed as a limitation of Firm's obligation to defend and
indemnify City, its elected officials, officers, agents, employees, and volunteers.
6.1.1 Minimum Insurance Coverage. Except as otherwise authorized below
for professional liability (errors and omissions) insurance, all insurance provided pursuant to this
Agreement shall be on an occurrence basis. The minimum types and amount of insurance
required hereunder shall be as follows:
A. Errors and Omissions Insurance. Firm shall obtain and maintain in full
force and effect throughout the term of this Agreement and any extensions approved by the City,
professional liability (errors and omissions) insurance coverage in an amount of not less than
Five Million Dollars ($5,000,000.00) per claim or occurrence with an aggregate of Ten Million
Dollars ($10,000,000), in accordance with the provisions of this section.
(1) Firm shall either: (a) certify in writing to the City that Firm is
unaware of any professional liability claims made against Firm and is unaware of any facts
which may lead to such a claim against Firm; or (b) if Firm does not provide the certification
pursuant to (a), Firm shall procure from the professional liability insurer an endorsement
providing that the required limits of the policy shall apply separately to claims arising from
errors and omissions in the provision of services pursuant to this Agreement.
(2) If the policy of insurance is written on a "claims made" basis, the
policy shall be continued in full force and effect at all times during the term of this Agreement,
and for a period of three (3) years from the date of the completion of the Services provided
hereunder, and each such policy term shall cover "prior acts" occurring during all periods during
which services are being provided pursuant to this Agreement. The coverage for prior acts shall
be evidenced by either a new policy evidencing no gap in the prior acts coverage period, or by
obtaining separate extended "tail" coverage with the present or new carrier or other insurance
arrangements providing for complete prior acts coverage, either of which shall be subject to the
written approval by the Contract Officer.
(3) In the event the policy of insurance is written on an "occurrence"
basis, the policy shall continue in full force and effect during the term of this Agreement, or until
6
completion of the Services provided for in this Agreement, whichever is later. In the event of
termination of the policy during this period, new coverage shall immediately be obtained to
ensure coverage during the entire course of performing the Services under the terms of this
Agreement.
B. Workers' Compensation Insurance. Firm shall obtain and maintain, in full
force and effect throughout the term of this Agreement, workers' compensation insurance in at
least the minimum statutory amounts, and in compliance with all other statutory requirements, as
required by the State of California, and Employer Liability Insurance with a limit of no less than
$1,000,000 per accident for bodily injury or disease. Firm agrees to waive and obtain
endorsements from its workers' compensation insurer waiving subrogation rights under its
workers' compensation insurance policy against the City, its council members, officers,
employees, and agents and to require each of its subcontractors, if any, to do likewise under their
workers' compensation insurance policies.
C. Commercial General Liability Insurance. Firm shall obtain and maintain,
in full force and effect throughout the term of this Agreement, a policy of comprehensive general
liability insurance with limits of at least One Million Dollars ($1,000,000.00) per occurrence,
Two Million Dollars ($2,000,000.00) in the general aggregate, and Two Million Dollars
($2,000,000.00) for products and completed operations. Firm shall either: (a) certify in writing
to the City that Firm is unaware of any liability claims made against Firm, and is unaware of any
facts which may lead to such a claim against Firm; or (b) if Firm does not provide the
certification pursuant to (a), Firm shall procure from the commercial general liability insurer an
endorsement providing that the required limits of the policy shall apply separately to occurrences
during the rendition of services pursuant to this Agreement.
D. Business Automobile Insurance. Firm shall obtain and maintain, in full
force and effect throughout the term of this Agreement, a policy of business automobile liability
insurance written on a per occurrence basis with a single limit liability in the amount of One
Million Dollars ($1,000,000.00) bodily injury and property damage. The policy shall include
coverage for owned, non-owned, leased, and hired cars.
6.1.2 Sufficiency of Insurers. Insurance required herein shall be issued by a
licensed company authorized to transact business in the State by the Department of Insurance for
the State of California with a current rating of A-:VII or better (if an admitted carrier), or a
current rating of A:X or better if offered by a non-admitted insurer listed on the State of
California List of Eligible Surplus Lines Insurers (LESLI), by the latest edition of A.M. Best's
Key Rating Guide, except that the City will accept workers' compensation insurance from the
State Compensation Fund.
6.1.3 Endorsement and Verification of Coverage. Prior to commencement of
services hereunder, Firm shall obtain and deliver to City approved insurance endorsements
providing all of the following: (1) insurance coverage shall be primary insurance as respects City
and its respective elected officials, officers, employees, agents, and volunteers; and (2) any
insurance or self-insurance maintained by City and its respective elected officials, officers,
employees, agents, and volunteers shall be in excess of Firm's insurance and shall not contribute
with it; and (3) as to the commercial general liability and automobile liability policy, the City
and its respective elected officials, officers, employees, agents, and volunteers shall be endorsed
as additional insured in accordance with standard ISO additional insured endorsement form
CG2010(1185) or equivalent language (Additional insured endorsements are not required for
Professional Liability or Workers' Compensation policies); and (4) as to Workers'
Compensation Insurance, the insurer waives all rights of subrogation and contribution it may
have against City, its elected officials, officers, employees, agents, and volunteers.
Firm shall furnish City with both original certificates of insurance and all required
endorsements, affecting all of the coverages required by this Agreement. The certificates and
endorsements are to be signed by a person authorized by that insurer to bind coverage on its
behalf. All proof of insurance is to be received and approved by the City before work
commences. City reserves the right to require Firm's insurers to provide complete, certified
copies of the required insurance policies at any time.
Each insurance policy required by this section shall be endorsed to state that coverage
shall not be suspended, voided, cancelled, or modified by either Party, or reduced in coverage or
in limits, except after thirty (30) days prior written notice by First Class U.S. Mail, postage-
prepaid, has been provided to the City. Notwithstanding the foregoing in this subsection, if
coverage is to be suspended, voided, or cancelled because of Firm's failure to pay the insurance
premium, the notice provided to City shall be by ten (10) days prior written notice. An
endorsement indicating that an insurer will "endeavor to" provide City such notice (or similar
words) shall not be a sufficient substitute for the actual notice required herein. If Firm cannot
obtain an endorsement committing the insurer to provide City with the required notice of
termination, then Firm shall provide written evidence establishing to City's satisfaction that 100
percent of the amount of the full premium for the entire period of coverage provided by that
insurer has been pre-paid.
Firm represents and warrants that Firm has confirmed with its insurers the
existence and amounts of the required coverage and confirmed the willingness of each
insurer to provide the required endorsements. If, after executing this Agreement, Firm is
unable to procure one or more required endorsements from its existing insurer(s), Firm shall take
those steps necessary (at Firm's sole cost) to procure the required insurance and endorsements
from other insurers providing the required coverage, if necessary.
6.1.4 Deductibles and Self-Insured Retentions. Any deductibles or self-
insured retentions must be declared to and approved by the City. At the option of the City, either
the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the
City, its elected officials, officers, employees, agents, and volunteers, or, Firm shall procure a
bond guaranteeing payment of the deductible or self-insured retention in the event of any
covered claim.
6.1.5 Separation of Insured; No Special Limitations. All insurance required
by this Section shall contain standard separation of insureds provisions. In addition, such
insurance shall not contain any special limitations on the scope of protection afforded to the City,
its directors, officials, officers, employees, agents, and volunteers.
8
6.1.6 Replacement or Renewal. During any period of time during which
insurance is required to be maintained hereunder, Firm shall provide proof that policies of
insurance required herein expiring or otherwise terminated, cancelled, or non-renewed during the
term of this Agreement have been renewed or replaced with other policies providing at least the
same coverage. Proof that such coverage has been ordered shall be submitted prior to expiration.
Endorsements as required in this Agreement applicable to the renewing or new coverage shall be
provided to City no later than ten (10) days prior to expiration of the lapsing coverage.
6.2 Indemnification. To the fullest extent permitted by law, Firm shall indemnify,
defend (at Firm's sole cost and expense), protect and hold harmless City and its officers, Board
members, member agencies, officials, employees, attorneys, agents and volunteers and all other
public agencies whose approval of the Project is required, (individually "Indemnified Party";
collectively "Indemnified Parties") against any and all liabilities, claims, judgments, arbitration
awards, settlements, costs, demands, orders and penalties (collectively "Claims"), including but
not limited to Claims arising from injuries or death of persons (Firm's employees included) and
damage to property, which Claims, omissions, recklessness, or willful misconduct of Firm, its
agents, employees, or subcontractors, or arise from Firm's negligent, reckless, or willful
performance of or failure to perform any term, provision, covenant, or condition of this
Agreement ("Indemnified Claims"), but Firm's liability for Indemnified Claims shall be reduced
to the extent such Claims arise from the willful misconduct or gross negligence of the City, its
officers, Council Members, officials, and employees.
Firm shall reimburse the Indemnified Parties for any reasonable expenditures, including
reasonable attorneys' fees, expert fees, litigation costs, and expenses that each Indemnified Party
may incur by reason of Indemnified Claims. Upon request by an Indemnified Party, Firm shall
defend with legal counsel reasonably acceptable to the Indemnified Party all Claims, whether or
not Firm is named as a party to the Claim proceeding and prior to a final court determination
whether a Claim is fully or partially an Indemnified Claim. In the event a final judgment,
arbitration award, order, settlement or other final resolution expressly determines that Claims
was not an Indemnified Claim to any extent, then City shall reimburse Firm for the reasonable
costs of defending the Indemnified Parties against such Claims, except City shall not reimburse
Firm for attorneys' fees, expert fees, litigation costs, and expenses that were incurred defending
Firm or any parties other than Indemnified Parties against such claims.
Firm's indemnification obligation hereunder shall survive the expiration or earlier
termination of this Agreement. This Section 6.2 is intended for the benefit of third party
Indemnified Parties not otherwise a party to this Agreement.
7. RECORDS AND REPORTS
7.1 Reports. Firm shall periodically prepare and submit to the Contract Officer such
reports concerning the performance of the services required by this Agreement as the Contract
Officer shall require.
7.2 Records. Firm shall keep such books and records as shall be necessary to
properly perform the services required by this Agreement and enable the Contract Officer to
evaluate the performance of such services. The Contract Officer shall have full and free access
9
to such books and records at all reasonable times, including the right to inspect, copy, audit and
make records and transcripts from such records.
7.3 Ownership of Documents. All reports, information, data and exhibits prepared
or assembled by Firm in connection with the performance of its services pursuant to this
Agreement are confidential to the extent permitted by law, and Firm agrees that they shall not be
made available to any individual or organization without prior written consent of the City. All
final reports and exhibits shall be the property of the City and shall be delivered to the City upon
demand without additional costs or expense to the City. The work papers, notes and drafts of
documents and reports generated by Firm in the process of conducting the audit or preparing the
final reports or final exhibits shall be the work product of Firm, and owned by Firm.
7.4 Release of Documents. Except with the prior written approval of the Contract
Officer, or as otherwise required by final order of a court of competent jurisdiction, all drawings,
specifications, reports, records, documents, and other materials (collectively "Documents")
prepared by Firm in the performance of services under this Agreement shall not be released
publicly or to any individual or entity not expressly authorized by this Agreement to review such
Documents. Firm shall notify City immediately of any request received by Firm to review such
Documents.
A. Permission to disclose information on one occasion or public hearing held by
City relating to this Agreement shall not authorize the Firm to further disclose
such information or disseminate the same on any other occasion.
B. Firm shall not comment publicly to the press or any other media regarding the
Agreement or City's actions on the same, except to City's staff, Firm's own
personnel involved in the performance of this Agreement, at public hearings,
or in response to questions from a Legislative committee.
C. Firm shall not issue any news release or public relations item of any nature,
whatsoever, regarding Work performed or to be performed under this
Agreement without prior review of the contents thereof by City, and receipt of
City's written permission
7.5 Cost Records. Firm shall maintain all books, documents, papers, employee time
sheets, accounting records, and other evidence pertaining to costs incurred while performing
under this Agreement and shall make such materials available at its offices at all reasonable
times during the term of this Agreement and for three (3) years from the date of final payment
for inspection by City and copies thereof shall be promptly furnished to City upon request.
8. ENFORCEMENT OF AGREEMENT
8.1 California Law. This Agreement shall be construed and interpreted both as to
validity and to performance of the parties in accordance with the laws of the State of California.
Legal actions concerning any dispute, claim, or matter arising out of or in relation to this
Agreement shall be instituted in the Superior Court of the County of Orange, State of California,
10
or any other appropriate court in such county, and Firm covenants and agrees to submit to the
personal jurisdiction of such court in the event of such action.
8.2 Waiver. No delay or omission in the exercise of any right or remedy of a non-
defaulting party on any default shall impair such right or remedy or be construed as a waiver.
No consent or approval of City shall be deemed to waive or render unnecessary City's consent to
or approval of any subsequent act of Firm. Any waiver by either party of any default must be in
writing and shall not be a waiver of any other default concerning the same or any other provision
of this Agreement.
8.3 Rights and Remedies are Cumulative. The rights and remedies of the parties
are cumulative and the exercise of one or more of such rights or remedies shall not preclude the
exercise of, at the same or different times, that or any other rights or remedies for the same
default or any other default by the other party.
8.4 Legal Action. In addition to any other rights or remedies, either party may take
legal action, in law or in equity, to cure, correct or remedy any default, to recover injunctive
relief, a declaratory judgment, or any other remedy consistent with the purposes of this
Agreement.
8.5 Termination Prior to Expiration of Term. City reserves the right to terminate
this Agreement at any time, with or without cause, upon thirty (30) days written notice to Firm,
except that where termination is due to the fault of Firm or the continuation of services would
constitute an immediate danger to health, safety, or general welfare, the period of notice shall be
such shorter time as may be determined by the City. Upon receipt of the notice of termination,
Firm shall immediately cease all services hereunder except such as may be specifically approved
by the Contract Officer. Firm shall be entitled to compensation for all services rendered prior to
receipt of the notice of termination.
8.6 Attorney Fees. In the event any dispute between the parties with respect to this
Agreement results in litigation of any non-judicial proceeding, the prevailing party shall be
entitled, in addition to such other relief as may be granted, to recover from the non-prevailing
party all reasonable costs and expenses, including but not limited to reasonable attorney fees,
expert Firm fees, court costs and all fees, costs, and expenses incurred in any appeal or in
collection of any judgment entered in such proceeding. The reasonable amount of attorney fees
hereunder shall be calculated multiplying the actual number of hours reasonably spent by the
attorney(s) for the prevailing party in such proceeding either: (a) the actual hourly rate of the
attorney(s) representing the prevailing party in such proceeding, or (b) Two Hundred Dollars
($200) per hour, whichever is lower. No "lodestar multiplier" shall apply to the calculation of
reasonable attorney's fees or costs hereunder.
9. CITY OFFICERS AND EMPLOYEES; NON-DISCRIMINATION
9.1 Non-Liability of City Officers and Employees. No officer, director, official,
attorney, or employee of City shall be personally liable to the Firm, or any success-in-interest, in
the event of any default or breach by City or for any amount which may become due to the Firm
or its successor, or for breach of any obligation of the terms of this Agreement.
11
9.2 Covenant Against Discrimination. Firm covenants that, by and for itself, its
heirs, executors, assigns, and all persons claiming under or through them, that there shall be no
discrimination or segregation in the performance of or in connection with this Agreement marital
status, disability, sexual orientation, national origin, or ancestry.
10. MISCELLANEOUS PROVISIONS
10.1 Notice. Any notice, demand, request, consent, approval, or communication either
party desires or is required to give to the other party or any other person shall be in writing and
either served personally or sent by pre-paid, first-class mail to the address set forth below. Either
party may change its address by notifying the other party of the change of address in writing.
Notice shall be deemed communicated seventy-two (72) hours from the time of mailing if mailed
as provided in this Section.
To City: City Clerk
ATTN: Erica N. Rabe
300 Centennial Way
Tustin, CA 92780
Email e.� ktustinca.or
To Firm: White Nelson Diehl Evans, LLP
ATTN: Nitin P. Patel, Partner
2875 Michelle Drive, Suite 300
Irvine, CA 92606
Email: 1patel cz)wndecpa.com
10.2 Integrated Agreement. The two Parties to this Agreement hereby agree that this
Agreement constitutes the entire agreement which is made and concluded in duplicate between
the two parties. Both of these Parties, for and in consideration of the payments to be made,
conditions mentioned, and Work to be performed, agree to diligently perform in accordance with
the terms and conditions of this Agreement as evidenced by the signatures below. This
Agreement supersedes all prior negotiations, arrangements, agreements, representations, and
understandings, if any, made by or among the Parties with respect to the subject matter hereof.
10.3 Amendment. This Agreement may be amended at any time by the mutual
consent of the parties by an instrument in writing. Amendments affecting the Scope of Services
or Compensation shall be approved in accordance with Section 3.3 hereinabove.
10.4 Severability. In the event that any one or more of the phrases, sentences, clauses,
paragraphs, or sections contained in this Agreement shall be declared invalid or unenforceable by
valid judgment or decree of a court of competent jurisdiction, such invalidity or unenforceability
shall not affect any of the remaining phrases, sentences, clauses, paragraphs, or sections of this
Agreement, which shall be interpreted to carry out the intent of the parties herein.
10.5 Interpretation. This Agreement shall be construed as a whole according to its
fair language and common meaning to achieve the objectives and purposes of the parties.
Accordingly, any rule of construction of contracts (including without limitation, California Civil
12
Code Section 1654) that ambiguities are to be construed against the drafting party, shall not be
employed in the interpretation of this Agreement. The caption headings of the various sections
and paragraphs of this Agreement are for convenience and identification purposes only and shall
not be deemed to limit, expand, or define the contents of the respective sections or paragraphs.
10.6 Authority. The persons executing this Agreement on behalf of the parties hereto
warrant that they are duly authorized to execute this Agreement on behalf of said parties and that
by so executing this Agreement, the parties hereto are formally bound to the provisions of this
Agreement.
10.7 Counterparts. This Agreement may be executed in counterparts, and when all
parties have so executed the Agreement, such counterparts collectively shall constitute one
agreement binding on all parties hereto, notwithstanding that all parties are not signatories to the
original or the same counterpart. The parties may also deliver executed copies of this
Amendment to each other by facsimile or scanned PDF attachment to email, which
facsimile/email signatures shall be binding.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year above written.
City of Tustin
Date: By:
John Nielsen, Mayor
ATTEST:
Date: By:
Erica N. Rabe, City Clerk
13
APPROVED AS TO FORM:
Date: By:
David E. Kendig, City Attorney
White Nelson Diehl Evans, LLP
Date: By:
Name, Title
By:
Name, Title
14
EXHIBIT "A"
1
CITY OF TUSTIN
REQUEST FOR PROPOSALS
BEGINNING FISCAL YEAR ENDING JUNE 30, 2016
I. INTRODUCTION
A. General Information
The City of Tustin is requesting proposals from qualified firms of Certified Public Accountants
to audit its financial statements through the fiscal year ending June 30, 2018, with the option of
auditing its financial statements for each of the two subsequent fiscal years. These audits are
to be performed in accordance with auditing standards generally accepted in the United States
of America, the standards set forth for financial audits in the current U.S. General Accounting
Office's (GAO) Government Auditing Standards, the provisions of the federal Single Audit Act,
and U.S. Office of Management and Budget (OMB) Circular A-133, Audits of State, Local
Governments, and Non-Profit Organizations, as amended.
There is no expressed or implied obligation for the City of Tustin to reimburse responding firms
for any expenses incurred in preparing proposals in response to this request.
To be considered, seven (7) copies of a proposal must be received by Linda Anicich, Finance
Executive Assistant, at 300 Centennial Way, Tustin, California, 92780, by 5:00 p.m. on
Thursday, February 18, 2016. The City of Tustin reserves the right to reject any or all
proposals submitted. Proposals will be evaluated by the City's Audit Commission. The Audit
Commission consists of five members selected by the City Council, representative of the
citizens and businesses of the community.
During the evaluation process, the Audit Commission and the City of Tustin reserve the right,
where it may serve the City of Tustin's best interest, to request additional information or
clarifications from proposers or to allow corrections of errors or omissions. At the discretion of
the City of Tustin or the Audit Commission, firms submitting proposals may be requested to
make oral presentations as part of the evaluation process.
The City of Tustin reserves the right to retain all proposals submitted and to use any ideas in a
proposal regardless of whether that proposal is selected. Submission of a proposal indicates
acceptance by the firm of the conditions contained in this Request for Proposals, unless clearly
and specifically noted in the proposal submitted and confirmed in the contract between the
City of Tustin and the firm selected.
City of Tustin RFP
Page 1 of 19
It is anticipated the selection of a firm will be completed by March 10, 2016. Following the
notification of the selected firm, it is expected a contract will be executed between both parties
by March 24, 2016.
B. Term of Engagement
A three (3) year contract is contemplated, with an option to extend the contract for two one-
year periods (possible 5-year total), subject to the annual review and recommendation of the
Audit Commission.
C. Subcontracting
If firms submitting proposals are considering subcontracting portions of the engagement, that
fact and the name of the proposed subcontracting firm must be clearly identified in the proposal.
Following award of the audit contract, no subcontracting will be allowed without the express prior
written consent of the City of Tustin.
II. NATURE OF SERVICES REQUIRED
A. General
The City of Tustin is soliciting the services of qualified firms of Certified Public Accountants to
audit its financial statements through the fiscal years ending June 30, 2018, with the option to
audit the City of Tustin's financial statements for each of the two (2) subsequent fiscal years,
subject to the satisfactory negotiation of terms, including a price acceptable to both the City
and the selected firm. These audits are to be performed in accordance with the provisions
contained in this Request for Proposals.
B. Scope of Work to be Performed
The City desires a Comprehensive Annual Financial Report (CAFR) and its component unit
financial statements for the City of Tustin and the Successor Agency to the Tustin Community
Redevelopment Agency to be prepared by the independent auditor and be fully compliant with
GASB 34 for the fiscal year ended June 30, 2016 and each of the subsequent years, June 30,
2017 and 2018 of the auditing firm's contract with the City.
The selected independent auditor will be required to perform the following tasks:
1. The auditor shall perform an audit of all funds of the City. The audit shall be conducted
in accordance with auditing standards generally accepted in the United States of
America and Government Auditing Standards, issued by the Comptroller of the United
States. The City's Comprehensive Annual Financial Report (CAFR) will be prepared
and printed by the auditing firm. The CAFR will be in full compliance with GASB 34.
The auditing firm will render their auditor's report on the basic financial statements
which will include both Government-Wide Financial Statements and Fund Financial
Statements. The auditing firm will also apply limited audit procedures to Management's
Discussion and Analysis (MD&A) and required supplementary information pertaining to
the General Fund and each major fund of the City.
City of Tustin RFP
Page 2 of 19
The auditor is expected to express an opinion on the fair presentation of the financial
statements of the Successor Agency to the Tustin Community Redevelopment Agency
and Report on Compliance with applicable laws, regulations, and administrative
requirements governing its activities. The auditor shall prepare GASB 34 compliant
component unit financial statements for each of the engagements.
2. The auditor shall perform a single audit on the expenditures of federal grants in
accordance with OMB Circular A-133 and render the appropriate audit reports on
Internal Control over Financial Reporting based upon the audit of the City's financial
statements in accordance with Government Auditing Standards and the appropriate
reports on compliance with Requirements Applicable to each Major Program, Internal
Control over Compliance and on the Schedule of Expenditures of Federal Awards in
Accordance with OMB Circular A-133. The single audit report will include appropriate
schedule of expenditures of federal awards, footnotes, findings and questioned costs,
including reportable conditions and material weaknesses, and follow up on prior
findings where required.
3. The auditor shall perform agreed-upon auditing procedures pertaining to the City's
GANN Limit (Appropriations Limit) and render a letter annually to the City regarding
compliance.
4. The auditor shall issue a separate "management letter" that includes recommendations
for improvements in internal control, accounting procedures and other significant
observations that are considered to be non-reportable conditions. Management letter
shall be addressed to the City Manager.
5. The auditor shall prepare and file the Annual State Controller's Report each year by the
due date for both the City and the Successor Agency to the Tustin Community
Redevelopment Agency.
C. Auditing Standards to be Followed
To meet the requirements of this Request for Proposals, the audit shall be performed in
accordance with generally accepted auditing standards as set forth by the American Institute
of Certified Public Accountants, the standards for financial audits set forth in the current U.S.
General Accounting Office's Government Auditing Standards, the provisions of the Single
Audit Act and the provisions of U.S. Office of Management and Budget (OMB) Circular A-133,
Audits of State, Local Governments, and Non-Profit Organizations, as amended.
An opinion on compliance with rules and regulations, as published by the Office of the State
Controller, will also be required.
D. Reports to be issued
Following the completion of the audit of the fiscal year's financial statements, the Auditor shall
issue:
1. A report on the fair presentation of the financial statements in conformity with
generally accepted accounting principles.
City of Tustin RFP
Page 3 of 19
2. A Single Audit Report.
3. A Financial and Compliance Audit of the Successor Agency to the Tustin
Community Redevelopment Agency.
4. An Agreed Upon Procedures Report in connection with annual calculations of
appropriations limit.
In the required report(s) on internal controls, the Auditor shall communicate any reportable
conditions found during the audit. A reportable condition shall be defined as a significant
deficiency in the design or operation of the internal control structure, which could adversely
affect the organization's ability to record, process, summarize, and report financial data
consistent with the assertions of management in the financial statements. Reportable
conditions that are also material weaknesses shall be identified as such in the report.
Non-reportable conditions discovered by the Auditors shall be reported in a separate letter to
management, which shall be referred to in the report(s) on internal controls.
The reports on compliance shall include all instances of significant non-compliance.
Irregularities and Illegal Acts. Auditors shall be required to make an immediate written report
of all irregularities and illegal acts or indications of illegal acts of which they become aware to
the following parties: City Manager, City Attorney, and Audit Commission.
Reporting to the Audit Commission. Auditors shall assure themselves that the City of
Tustin's Audit Commission is informed of each of the following in accordance with
Independence Standards Board (ISB) Standard No. 1:
1. The Auditor's responsibility under generally accepted auditing standards
2. Significant accounting policies
3. Management judgments and accounting estimates
4. Significant audit adjustments
5. Other information in documents containing audited financial statements
6. Disagreements with management
7. Management consultation with other accountants
8. Major issues discussed with management prior to retention
9. Difficulties encountered in performing the audit
E. Special Considerations
1. The City of Tustin will send its Comprehensive Annual Financial Report to the
Government Finance Officers Association of the United States and Canada for review
in its Certificate of Achievement for Excellence in Financial Reporting program. It is
anticipated that the Auditor will not be required to provide special assistance to the
City of Tustin to meet the requirements of that program.
2. The City of Tustin may prepare one or more official statements in connection with the
sale of debt securities which will contain the general purpose financial statements and
City of Tustin RFP
Page 4 of 19
the Auditor's report thereon. The Auditor shall be required, if requested by the fiscal
advisor and/or the underwriter, to issue a "consent and citation of expertise" as the
Auditor and any necessary "comfort letters" at no additional cost to the City.
3. The City of Tustin has determined that the State Controller's Office will function as the
cognizant agency in accordance with the provisions of the Single Audit Act and U.S.
Office of Management and Budget (OMB) Circular A-133.
4. The Single Audit Report is not to be included in the Comprehensive Annual Financial
Report, but is to be issued separately.
5. A list of findings and other weaknesses from the City of Tustin's most recent financial
statement audit are attached to this document (APPENDIX A).
F. Working Paper Retention and Access to Working Papers
All working papers and reports must be retained, at the Auditor's expense, for a minimum of
three (3) years, unless the firm is notified in writing by the City of Tustin of the need to extend
the retention period. The Auditor will be required to make working papers available, upon
request, to the following parties or their designees:
City of Tustin
State Controller's Office
U.S. General Accounting Office (GAO); and
Parties designated by the federal or state governments or by the City of Tustin as part of
an audit quality review process; and
Auditors of entities of which City of Tustin is a sub-recipient of grant funds
Auditors of entities of which the City of Tustin is a component unit
In addition, the firm shall respond to the reasonable inquiries of successor Auditors and allow
successor Auditors to review working papers relating to matters of continuing accounting
significance.
III. DESCRIPTION OF THE GOVERNMENT
A. Background Information
The City of Tustin serves an area of 11.08 square miles with a population of 79,601. The City's
fiscal year begins on July 1 and ends on June 30.
The City of Tustin is a full service City providing Administration, Community Development,
Public Works, Police, and Parks and Recreation services to the community. Fire Protection
services are contracted for with the Orange County Fire Authority.
The City of Tustin has a total annual payroll of $27,000,000 covering 350 full and part-time
employees. The City is organized into departments and agencies. The accounting and
financial reporting functions of the City are centralized.
City of Tustin RFP
Page 5 of 19
More detailed information on the government and its finances can be found in Budget
documents, Official Statements, and Annual Financial Reports.
B. Fund Structure
The City of Tustin uses the following fund types and account groups in its financial reporting.
Number of Number with Legally
Fund Type/Account Group Individual Funds Adopted Annual Budgets
General Fund 17 1
City Capital Fixed Assets 1
Non-Major Governmental Funds
Special Revenue Funds 10 8
Capital Project Funds 6 1
Permanent (established by GASB 34)
Proprietary Funds 4 3
Private-purpose Trust (established by GASB 34) 1
Agency Funds 4
C. Budgetary Basis of Accounting
The City of Tustin prepares its budgets on a basis consistent with generally accepted
accounting principles.
D. Federal, State, and County Financial Assistance
During the fiscal years to be audited, the City of Tustin may receive the following types of
financial assistance.
County Grants: OCTA (Measure M Competitive Grants); RNSP
State Grants: Recycling; SLPP; Prop. 69; AB 109; SLESF
Federal Grants: Community Development Block Grants; U.S. Department of
Justice Grant Programs; Dept. of Transportation (Traffic
Safety/DUI); U.S. Department of Homeland Security EMPG
E. Pension Plans
The City of Tustin is a member of the State of California Public Employees' Retirement
System.
F. Component Units
The City of Tustin is defined, for financial reporting purposes, in conformity with the
Governmental Accounting Standards Board's Codification of Governmental Accounting and
Financial Reporting Standards, Section 2100. Using these criteria, component units are
included in the City of Tustin's Financial Statements.
City of Tustin RFP
Page 6 of 19
The Management of the City of Tustin has identified the Tustin Public Financing Authority as a
component unit for inclusion in the City of Tustin's Financial Statements. A separate
component financial statement is not issued.
In addition, the City of Tustin has a private purpose trust fund, the Successor Agency to the
Tustin Community Redevelopment Agency. This component unit will be audited as part of the
audit of the City's Financial Statements.
G. Joint Ventures
The City of Tustin does participate in joint ventures with other governments.
Name of Name of Other Type of
Joint Venture Participating Governments Services Provided
California Insurance Cities of Brea, Cypress, Insurance Pooling
Pool Authority Irvine, Laguna Beach, and Excess
Insurance
Los Alamitos, Montclair,
Orange, San Clemente,
Westminster, Yorba Linda
Orange County Fire Authority Fire Protection
Services
H. Magnitude of Finance Operations
The Finance Department currently consists of 19 employees. The principal functions
performed and the number of employees assigned to each is as follows:
Function Number of Employees
Finance Director 1 **
Finance Manager 1
PT Finance Manager 1
Admin. Services Manager 1
Customer Svc. Supervisor 1
Senior Accountant 1
Sr. Accounting Specialist 4
Accounting Specialist 2
Water Meter Reader 2
Senior IT Specialist 1
IT Specialist 3
Executive Assistant 1
** Current Finance Director Pamela Arends-King's last day of employment will be Monday,
January 11, 2016. Her replacement is pending City Council action.
City of Tustin RFP
Page 7 of 19
I. Availability of Prior Audit Reports and Management Letters
The City of Tustin's most recent Comprehensive Annual Financial Report (CAFR) and Auditor's
Management Letter for the FY ended June 30, 2015 are included in Appendix A. The 2015
CAFR will be posted on the City's website. Interested proposers who wish to review any prior
year audit reports and management letters should contact Jenny Leisz at 300 Centennial Way,
Tustin, CA, 92780; telephone number (714) 573-3079; e-mail address jleisz tustinca.orq.
IV. TIME REQUIREMENTS
A. Proposal Calendar
Request for Proposals Issued: January 8, 2016
Due Date For Proposals: 5:00 p.m. Thursday, February 18, 2016
B. Notification and Contract Dates
Selected Firm Notified: March 10, 2016
Projected Contract Date: March 24, 2016
C. Date Audit May Commence
The City of Tustin will have all records ready for audit and management personnel available to
meet with the firm's personnel no later than mid-May, 2016.
D. Schedule for the 2016 Fiscal Year Audit
(A similar schedule will be developed for audits of future fiscal years if the City of Tustin
exercises its option for additional audits.)
Each of the following shall be completed by the Auditor no later than the dates indicated.
1. Interim Work
The Auditor shall complete all interim work between May/June, 2016.
2. Detailed Audit Plan
The Auditor shall provide the City of Tustin by June 30, 2016 both a detailed audit
plan and a list of all schedules to be prepared by the City of Tustin.
3. Field Work
The Auditor shall complete all field work by mid-October, 2016.
4. Draft Reports
The Auditor shall have drafts of the audit report(s) and recommendations to
management available for review by the Finance Manager by November 8, 2016.
E. Entrance Conferences, Progress Reporting and Exit Conferences
City of Tustin RFP
Page 8 of 19
(A similar time schedule will be developed for audits of future fiscal years if the City of Tustin
exercises its option for additional audits.)
At a minimum, the following conferences should be held by the dates indicated on the
schedule:
* Entrance conference with all key Finance Department personnel
* week of May 16, 2016
The purpose of this meeting will be to discuss prior audit problems and the interim work to be
performed. This meeting will also be used to establish overall liaison for the audit and to make
arrangements for work space and other needs of the Auditor.
* Progress conference, if necessary, with the Audit Commission and the Finance Manager
* approximately mid-June, 2016
The purpose of this meeting will be to discuss the year-end work to be performed, to
summarize the results of the preliminary review, and to identify the key internal controls or
other matters to be tested.
* Entrance conference with the Finance Manager to commence year-end audit work
* approximately Sept. 12, 2016
* Exit conference with the Finance Manager
* approximately mid-Oct., 2016
The purpose of this meeting will be to summarize the results of the field work and to review
significant findings.
F. Date Final Report is Due
The Finance Department will complete their review of the draft report as expeditiously as
possible. During that period, the Auditor should be available for any meetings that may be
necessary to discuss the audit reports. Once all issues for discussion are resolved, the final
signed report shall be delivered to the Finance Manager. It is anticipated that this process will
be completed and the final report delivered by November 22, 2016. The auditors will present
the final report to the City Council and Audit Commission.
Fifteen (15) copies of each of the final reports shall be delivered to Jenny Leisz, Finance
Manager, at 300 Centennial Way, Tustin, California, 92780.
V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION
City of Tustin RFP
Page 9 of 19
A. Finance Department and Clerical Assistance
The Finance Department staff and responsible management personnel will be available during
the audit to assist the firm by providing information, documentation and explanations. The
preparation of confirmations will be the responsibility of the City of Tustin. In addition, clerical
support will be made available to the Auditor for preparation of routine letters and memoranda.
B. Computer Applications Assistance
I.T. personnel will be available to assist the Auditor in performing the engagement. They will
also be available to provide systems documentation and explanations. The Auditor may be
provided computer time and the use of the City of Tustin's computer hardware and software.
C. Work Area, Telephones, Photocopying and FAX Machines
The City of Tustin will provide the Auditor with reasonable work space, desks and chairs. The
Auditor will also be provided with access to a telephone line, photocopying facilities and FAX
machines.
D. Report Preparation
Report preparation and editing shall be the responsibility of the Auditor.
VI. PROPOSAL REQUIREMENTS
A. General Requirements
1. Inquiries
Inquiries concerning the Request for Proposals and the subject of the Request for Proposals
must be made to:
Jenny Leisz, Finance Manager
300 Centennial Way
Tustin, CA 92780
(714) 573-3079
jleisz tustinca.orq
CONTACT WITH PERSONNEL OF THE CITY OF TUSTIN OTHER THAN JENNY LEISZ,
FINANCE MANAGER, REGARDING THIS REQUEST FOR PROPOSALS MAY BE GROUNDS
FOR ELIMINATION FROM THE SELECTION PROCESS.
2. Submission of Proposals
The following material is required to be received by 5:00 p.m. on Thursday, February 18,
2016 for a proposing firm to be considered.
a. A master copy (so marked) of a Technical Proposal and six (6) copies to include the
following:
City of Tustin RFP
Page 10 of 19
i. Title Page
Title page showing the Request for Proposals' subject; the firm's name; the name,
address and telephone number of a contact person; and the date of the proposal.
ii. Table of Contents
iii. Transmittal Letter
A signed letter of transmittal should briefly state the proposer's understanding of the
work to be done, the commitment to perform the work within the time period, a
statement why the firm believes it to be best qualified to perform the engagement and
a statement that the proposal is a firm and irrevocable offer for 120 days.
iv. Detailed Proposal
The detailed proposal should follow the order set forth in Section VI B of this Request
for Proposals. It should include an executive summary and be limited to a maximum
of 25 pages, single sided, double spaced.
V. Executed copies of Proposer Guarantees and Warranties, attached to this
Request for Proposals (APPENDIX B)
b. The Proposer shall submit an original and six (6) copies of a dollar cost bid in a
separate sealed envelope marked as follows:
SEALED DOLLAR COST BID PROPOSAL FOR CITY OF TUSTIN
FOR PROFESSIONAL AUDITING SERVICES
DATE
c. The Proposer shall submit an original and six (6) copies of the completed technical
proposal, along with the separate sealed dollar cost bid envelope to the following
address:
Jenny Leisz
Finance Manager
300 Centennial Way
Tustin, CA 92780
B. Technical Proposal
1. General Requirements
The purpose of the technical proposal is to demonstrate the qualifications, competence and
capacity of the firms seeking to undertake an independent audit of the City of Tustin in
conformity with the requirements of this Request for Proposals. As such, the substance of
proposals will carry more weight than their form or manner of presentation. The technical
proposal should demonstrate the qualifications of the firm and of the particular staff to be
assigned to this engagement. It should also specify an audit approach that will meet the
Request for Proposals' requirements.
City of Tustin RFP
Page 11 of 19
THERE SHOULD BE NO DOLLAR UNITS OR TOTAL COSTS INCLUDED IN THE
TECHNICAL PROPOSAL DOCUMENT.
2. Independence
The firm should provide an affirmative statement that it is independent of the City of Tustin as
defined by generally accepted auditing standards. The firm also should provide an affirmative
statement that it is independent of all of the component units of the City of Tustin as defined by
those same standards.
The firm should list and describe the firm's (or proposed subcontractor's) professional
relationships involving the City of Tustin or any of its component units for the past five (5)
years, together with a statement explaining why such relationships do not constitute a conflict
of interest relative to performing the proposed audit.
In addition, the firm shall give the City of Tustin written notice of any professional relationships
entered into during the period of this agreement.
3. License to Practice in California
An affirmative statement should be included indicating that the firm and all assigned key
professional staff are properly licensed to practice in California.
4. Firm Qualifications and Experience
The proposal should state the size of the firm, the size of the firm's governmental audit staff,
the location of the office from which the work on this engagement is to be performed, the
number and nature of the professional staff to be employed in this engagement on a full-time
basis, and the number and nature of the staff to be so employed on a part-time basis.
If the proposer is a joint venture or consortium, the qualifications of each firm comprising the
joint venture or consortium should be separately identified and the firm that is to serve as the
principal Auditor should be noted, if applicable.
The firm is also required to submit a copy of the report on its most recent external quality
control review, with a statement whether that quality control review included a review of
specific government engagements.
The firm shall also provide copies of the results of any federal or state desk reviews or field
reviews of its audits during the past three (3) years.
In addition, the firm shall provide information on the circumstances and status of any
disciplinary action taken or pending against the firm during the past three (3) years with state
regulatory bodies or professional organizations.
5. Partner, Supervisory and Staff Qualifications and Experience
City of Tustin RFP
Page 12 of 19
The firm should identify the principal supervisory and management staff, including
engagement partners, managers, other supervisors and specialists, who would be assigned to
the engagement and indicate whether each such person is licensed to practice as a Certified
Public Accountant in California. The firm also should provide information on the government
auditing experience of each person, including information on relevant continuing professional
education for the past three (3) years and membership in professional organizations relevant
to the performance of this audit.
The firm should provide as much information as possible regarding the number, qualifications,
experience and training, including relevant continuing professional education, of the specific
staff to be assigned to this engagement. The firm also should indicate how the quality of staff
over the term of the agreement will be assured.
Engagement partners, managers, other supervisory staff and specialists may be changed if
those personnel leave the firm, are promoted or are assigned to another office. These
personnel may also be changed for other reasons with the express prior written permission of
the City of Tustin. However, in either case, the City of Tustin retains the right to approve or
reject replacements.
Consultants and firm specialists mentioned in response to this Request for Proposals can only
be changed with the express prior written permission of the City of Tustin, which retains the
right to approve or reject replacements.
Other audit personnel may be changed at the discretion of the proposer provided that
replacements have substantially the same or better qualifications or experience.
6. Prior Engagements with the City of Tustin
The firm should list separately all engagements within the last five (5) years, ranked on the
basis of total staff hours, for the City of Tustin by type of engagement (i.e., audit, management
advisory services, other). For each engagement, the firm should indicate the scope of work,
date, engagement partners, total hours, location of the firm's office from which the
engagement was performed, and the name and telephone number of the principal client
contact.
7. Similar Engagements with Other Government Entities
For the firm's office that will be assigned responsibility for the audit, list the most significant
engagements (maximum of 5) performed in the last five (5) years that are similar to the
engagement described in this Request for Proposals. These engagements should be ranked
on the basis of total staff hours.
Indicate the scope of work, date, engagement partners, total hours, and the name and
telephone number of the principal client contact.
8. Specific Audit Approach
The proposal should set forth a work plan, including an explanation of the audit methodology
City of Tustin RFP
Page 13 of 19
to be followed, to perform the services required in Section II of this Request for Proposals. In
developing the work plan, reference should be made to such sources of information as the
City of Tustin's budget and related materials, organizational charts, manuals and programs,
and financial and other management information systems.
Proposers will be required to provide the following information on their audit approach:
a. Proposed segmentation of the engagement
b. Level of staff and number of hours to be assigned to each proposed segment of the
engagement
NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL
c. Sample sizes and the extent to which statistical sampling is to be used in the
engagement
d. Extent of use of ERP software in the engagement
e. Type and extent of analytical procedures to be used in the engagement
f. Approach to be taken to gain and document an understanding of the City of Tustin's
internal control structure
g. Approach to be taken in determining laws and regulations that will be subject to audit
test work
h. Approach to be taken in drawing audit samples for purposes of tests of compliance
9. Identification of Anticipated Potential Audit Problems
The proposal should identify and describe any anticipated potential audit problems, the firm's
approach to resolving these problems and any special assistance that will be requested from
the City of Tustin.
10. Report Format
The proposal should include sample formats for required reports.
NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL
C. Sealed Dollar Cost Bid
1. Total All-inclusive Maximum Price
The sealed dollar cost bid should contain all pricing information relative to performing the audit
engagement as described in this Request for Proposals. The total proposed price to be bid is
City of Tustin RFP
Page 14 of 19
to contain all direct and indirect costs including all out-of-pocket expenses. An escalation
factor may be addressed in the sealed dollar cost bid that will allow for an accurate evaluation
of the total cost for the five (5) year engagement period.
The first page of the sealed dollar cost bid will be a completed APPENDIX B, PROPOSER
GUARANTIES AND WARRANTIES.
The second page of the sealed dollar cost bid will be a completed APPENDIX C, SCHEDULE
OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2016 FINANCIAL
STATEMENTS. This should include a schedule of your fees and expenses, presented in the
format provided in the attachment (APPENDIX C) that supports the total all-inclusive maximum
price, and should include:
• Rates by Partner, Specialist, Supervisory and Staff Level Times / Hours Anticipated for
Each
• Out-of-pocket Expenses Included in the Total All-Inclusive Maximum Price and
Reimbursement Rates
• Proposal for Subsequent Years
2. Rates for Additional Professional Services
If it should become necessary for the City of Tustin to request the Auditor to render any
additional services, then such additional work shall be performed only if set forth in an
addendum to the contract between the City of Tustin and the firm. Any such additional work
agreed to between the City of Tustin and the firm shall be performed at the same rates set
forth in the schedule of fees and expenses included in the sealed dollar cost bid.
3. Manner of Payment
Progress payments will be made on the basis of hours of work completed during the course of
the engagement and out-of-pocket expenses incurred in accordance with the firm's dollar cost
bid proposal. Interim billings shall cover a period of not less than a calendar month.
VII. EVALUATION PROCEDURES
A. Review of Proposals
The Audit Commission will use a point formula during the review process to score proposals.
Each member of the Audit Commission will first score each technical proposal by each of the
criteria described in Section VII C below. The full Audit Commission will then convene to
review and discuss these evaluations and to combine the individual scores to arrive at a
composite technical score for each firm. At this point, firms with an unacceptably low technical
score will be eliminated from further consideration.
After the composite technical score for each firm has been established, the sealed dollar cost
bid will be opened and additional points will be added to the technical score based on the price
bid. The maximum score for price will be assigned to the firm offering the lowest total all-
inclusive maximum price. Appropriate fractional scores will be assigned to other proposers.
B. Evaluation Criteria
City of Tustin RFP
Page 15 of 19
Proposals will be evaluated using three sets of criteria. Firms meeting the mandatory criteria
will have their proposals evaluated and scored for both technical qualifications and price. The
following represents the principal selection criteria which will be considered during the
evaluation process.
1. Mandatory Elements
a. The audit firm is independent and licensed to practice in California.
b. The audit firm's professional personnel have received adequate continuing
professional education within the preceding two years.
C. The firm has no conflict of interest with regard to any other work performed by
the firm for the City of Tustin.
d. The firm submits a copy of its most recent external quality control review report
and the firm has a record of quality audit work.
e. The firm adheres to the instructions in this Request for Proposals on preparing
and submitting the proposal.
2. Technical Qualifications (Maximum Points - 75) Including, but not limited to:
a. Expertise and Experience (Maximum Points - 45)
(1) Such as the firm's past experience and performance on comparable
government engagements.
(2) Such as the quality of the firm's professional personnel to be assigned to
the engagement and the quality of the firm's management support
personnel to be available for technical consultation.
b. Audit Approach (Maximum Points - 30) Including, but not limited to:
(1) Such as adequacy of proposed staffing plan for various segments of the
engagement.
(2) Such as adequacy of sampling techniques.
(3) Such as adequacy of analytical procedures.
3. Price (Maximum Points - 25)
COST WILL NOT BE THE PRIMARY FACTOR IN THE SELECTION OF AN AUDIT FIRM
City of Tustin RFP
Page 16 of 19
APPENDIX A
AUDITORS MANAGEMENT LETTER AND COPY OF MOST RECENT AUDIT REPORT
City of Tustin RFP
Page 17 of 19
WHITE !I i
To the Honorable Mayor and
Members of the City Council
City of Tustin
Tustin, California
We have audited the financial statements of the governmental activities, business-type activity, each
major fund, and aggregate remaining fund information of the City of Tustin (the City) for the year
ended June 30, 2015. Professional standards require that we provide you with information about our
responsibilities under generally accepted auditing standards as well as certain information related to
the planned scope and timing of our audit. We have communicated such information in our
engagement and planning communication letters to you dated June 18, 2015. Professional standards
also require that we communicate to you the following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 to the financial statements. As discussed
in Notes I and 20 to the financial statements, the City has recorded the net pension liability, deferred
outflows of resources, and deferred inflows of resources related to the cost-sharing defined benefit
pension plans due to the adoption of Governmental Accounting Standards Board's (GASB)
Statement No. 68 Accounting and Financial Reporting for Pensions" and Statement No. 71,
"Pension Transition for Contributions Made Subsequent to the Measurement Date, an Amendment of
GASB Statement No. 68". The adoption of these standards required retrospective application resulting
in a $45,364,118 and $2,418,112 reduction of previously reported net position of the governmental
activities and business-type activity, respectively. No other accounting policies were adopted and the
application of other existing polices was not changed during the year ended June 30, 2015. We noted
no transactions entered into by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in
the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management's knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their
significance to the financial statements and because of the possibility that future events affecting them
may differ significantly from those expected.
- 1 -
2875 Michelle Drive,Suite 300,Irvine, CA 92606 •Tel: 714.978.1300• Fax: 714.978.7893
Offices located in Orange and San Diego Counties
Significant Audit Findings (Continued)
Qualitative Aspects of Accounting Practices (Continued)
The most sensitive estimates affecting the City's financial statements are as follows:
a. Management's estimate of the fair market value of investments is based on market
values provided by outside sources.
b. Management's estimate of the value of capital assets (infrastructure assets) is based on
industry standards.
c. The estimated useful lives of capital assets for depreciation purposes are based on
industry standards.
d. The annual required contributions, pension expense, net pension liability and
corresponding deferred outflows of resources and deferred inflows of resources for the
City's public defined benefit plans with Ca1PERS are based on actuarial valuations
provided by CalPERS.
e. The annual required contribution and actuarial accrued liability for the City's Other
Post-Employment Benefit Plan is based on certain actuarial assumptions and methods
prepared by an outside consultant.
f. Management's estimate of the claims payable liabilities related to general liability and
worker's compensation claims are based on estimates by the claims administrators.
We evaluated the key factors and assumptions used to develop these estimates in determining that they
were reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to
financial statement users. The most sensitive disclosures affecting the financial statements were
reported in Note 9 regarding the Ca1PERS defined benefit plans, Note 10 regarding the City's other
post-employment benefit plan, Note 12 regarding the claims payable, Note 18 regarding the recent
changes in legislation affecting California Redevelopment Agencies and Note 20 regarding the
restatement of prior year financial statements.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
- 2 -
Significant Audit Findings (Continued)
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. The following material misstatement, detected as a result of audit procedures, was
corrected by management:
a. Adjustment to capital assets to retire right of way property transferred to another agency.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditors' report. We are pleased to report that no such disagreements arose during the
course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated December 22, 2015.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the City's financial statements or a determination of
the type of auditor's opinion that may be expressed on those statements, our professional standards
require the consulting accountant to check with us to determine that the consultant has all the relevant
facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the City's auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses
were not a condition to our retention.
Other Matters
We applied certain limited procedures to management's discussion and analysis, the safety plan
schedule of proportionate share of the net pension liability and schedule of contributions, the
miscellaneous plan schedule of changes in net pension liability and related ratios and schedule of
contributions, the other post-employment benefit plan schedule of funding progress, and the budgetary
comparison schedule, which are required supplementary information (RSI) that supplements the
financial statements. Our procedures consisted of inquiries of management regarding the methods of
preparing the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements, and other knowledge we obtained during our
audit of the basic financial statements. We did not audit the RSI and do not express an opinion or
provide any assurance on the RSI.
- 3 -
Other Matters (Continued)
We were engaged to report on the combining and individual non-major fund financial statements and
schedules (supplementary information), which accompany the financial statements but are not RSI.
With respect to this supplementary information, we made certain inquiries of management and
evaluated the form, content, and methods of preparing the information to determine that the
information complies with accounting principles generally accepted in the United States of America,
the method of preparing it has not changed from the prior period, and the information is appropriate
and complete in relation to our audit of the financial statements. We compared and reconciled the
supplementary information to the underlying accounting records used to prepare the basic financial
statements or to the basic financial statements themselves.
We were not engaged to report on the introductory section and statistical section, which accompany the
financial statements but are not RSI. We did not audit or perform other procedures on this other
information and we do not express an opinion or provide any assurance on them.
Restriction on Use
This information is intended solely for the use of the City Council and management of the City of
Tustin and is not intended to be, and should not be, used by anyone other than these specified parties.
Irvine, California
December 22, 2015
- 4 -
ice` -�.- �.�'ca'- �- „' '' -••�_�'" '�'�` � -
21 __O
uZ
,
W— o�
=
M
! 4
i
M4,i _
-I 3
TUSTIN LEGACY _
r ,max
Comprehensive
y �
z ,�� �; � "'+, �, .. spa►-�' ,� �� r_ �`` � �
t�11e
Financiai
c c
t-T .b
JLINeport
For the year ended June 30, 2015
Cornerstone O
r -
14(
r
CITY OF TUSTIN, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
WITH REPORT ON AUDIT
BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
FOR THE YEAR ENDED JUNE 30, 2015
Prepared By: Finance Department
CITY OF TUSTIN
TABLE OF CONTENTS
For the year ended June 30, 2015
Page
Number
INTRODUCTORY SECTION:
Elected and Administrative Officials i
Letter of Transmittal iii
Organization Chart vii
GFOA Certificate of Achievement for Excellence in Financial Reporting viii
FINANCIAL SECTION:
Independent Auditors' Report 1
Management's Discussion and Analysis
(Required Supplementary Information -Unaudited) 5
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position 17
Statement of Activities 18
Fund Financial Statements:
Governmental Funds:
Balance Sheet 20
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position 21
Statement of Revenues, Expenditures and Changes in Fund Balances 22
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities 23
Proprietary Fund:
Statement of Net Position 24
Statement of Revenues, Expenses and Changes in Net Position 25
Statement of Cash Flows 26
Fiduciary Funds:
Statement of Fiduciary Net Position 28
Statement of Changes in Fiduciary Net Position 29
Notes to Basic Financial Statements 31
CITY OF TUSTIN
TABLE OF CONTENTS
(CONTINUED)
For the year ended June 30, 2015
Page
Number
REQUIRED SUPPLEMENTARY INFORMATION: 85
Safety Plan:
Schedule of Proportionate Share of the Net Pension Liability 87
Schedule of Contributions 88
Miscellaneous Plan:
Schedule of Changes in the Net Pension Liability and Related Ratios 89
Schedule of Contributions 90
Other Post-Employment Benefit Plan:
Schedule of Funding Progress 91
Budgetary Comparison Schedule:
General Fund 92
Note to Required Supplementary Information 93
SUPPLEMENTARY INFORMATION: 95
Other Governmental Funds: 97
Combining Balance Sheet 98
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 100
Schedules of Revenues, Expenditures and Changes in Fund
Balance - Budget and Actual:
Gas Tax Special Revenue Fund 102
Measure M Special Revenue Fund 103
Park Acquisition and Development Special Revenue Fund 104
Asset Forfeiture Special Revenue Fund 105
Air Quality Special Revenue Fund 106
Supplemental Law Enforcement Special Revenue Fund 107
Housing Authority Special Revenue Fund 108
Special Tax B Special Revenue Fund 109
Agency Funds: 111
Combining Statement of Assets and Liabilities 112
Combining Statement of Changes in Assets and Liabilities 113
CITY OF TUSTIN
TABLE OF CONTENTS
(CONTINUED)
For the year ended June 30, 2015
Page
Number
STATISTICAL SECTION(UNAUDITED): 115
Description of Statistical Section Contents 117
Financial Trends:
Net Position by Component- Last Ten Fiscal Years 118
Changes in Net Position - Expenses and Program Revenues - Last Ten Fiscal Years 120
Changes in Net Position - General Revenues - Last Ten Fiscal Years 122
Fund Balances of Governmental Funds - Last Ten Fiscal Years 124
Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 126
Revenue Capacity:
Assessed Value and Estimated Actual Values of Taxable Property - Last Ten Fiscal Years 128
Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years 130
Principal Property Taxpayers - Current Year and Nine Years Ago 132
Property Tax Levies and Collections - Last Ten Fiscal Years 133
Debt Capacity:
Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 134
Ratio of General Bonded Debt Outstanding - Last Ten Fiscal Years 136
Overlapping Debt Schedule 137
Legal Debt Margin Information - Last Ten Fiscal Years 138
Pledged-Revenue Coverage - Last Ten Fiscal Years 140
Demographic and Economic Information:
Demographic and Economic Statistics - Last Ten Calendar Years 142
Principal Employers - Current Year and Nine Years Ago 143
Operating Information:
Full-Time City Employees by Function - Last Ten Fiscal Years 144
Capital Asset Statistics by Function - Last Ten Fiscal Years 145
Water District Schedules for Revenue Capacity:
Water Consumption by Customer Type - Last Ten Fiscal Years 146
Water Rates - Last Ten Fiscal Years 148
Water Customers - Current Year and Nine Years Ago 149
CITY OF TUSTIN
Elected and Administrative Officials
MAYOR
Charles E. Puckett
CITY COUNCIL
John Nielsen, Mayor Pro Tem
Rebecca Gomez
Al Murray
Dr. Allan Bernstein
AUDIT COMMISSION
Daniel Erickson, Chair
Thomas Stroud, Chair Pro Tem
Robert Ammann
R. Lawrence Friend
Craig Shimomura
CITY MANAGER/CITY CLERK
Jeffrey C. Parker
David E. Kendig Charles Celano
City Attorney Chief of Police
Elizabeth A. Binsack David Wilson
Director, Community Director, Parks and
Development Recreation Services
Pamela Arends-King Douglas S. Stack
Director, Finance/ Director, Public Works/
City Treasurer City Engineer
Derick Yasuda
Director of
Human Resources
- i -
The page left blank intentionally
- ii -
Finance Department TTV S T I N
�
HISTORY
BUIMNG OUR FUTURE
114N0K1NQ QVK PA5T
December 23, 2015
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
CITIZENS OF THE CITY OF TUSTIN
City of Tustin
Tustin, California 92780
The Comprehensive Annual Financial Report (CAFR) of the City of Tustin for the fiscal year ended
June 30, 2015, is hereby submitted. These statements have been prepared in conformity with generally
accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing
standards by an independent public accounting firm of licensed certified public accountants.
The report consists of management's representations concerning the finances of the City of Tustin.
Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation,
including all disclosures, rests with management. To provide a reasonable basis for making these
representations, management has established an internal control framework that is designed both to
protect the government's assets from loss, theft, or misuse and to compile sufficient reliable
information for the preparation of the financial statements in conformity with GAAP. Because the cost
of internal controls should not outweigh their benefits, the City's framework of internal controls has
been designed to provide reasonable rather than absolute assurance that the financial statements will be
free from material misstatement.
As management, we assert that, to the best of our knowledge and belief, the enclosed data is accurate
in all material respects and is reported in a manner designed to present fairly the financial position and
results of operations of the various funds and component units of the City of Tustin. All disclosures
necessary to enable the reader to gain an understanding of the City's financial activities have been
included.
The City of Tustin's financial statements for the year ended June 30, 2015, have been audited by White
Nelson Diehl Evans LLP, an independent public accounting firm of licensed certified public
accountants. The independent auditor concluded, based upon the audit, that there was a reasonable
basis for rendering an unmodified opinion that the City of Tustin's financial statements for the fiscal
year ended June 30, 2015, are fairly presented in conformity with GAAP. The independent auditor's
report is presented as the first component of the financial section of this report.
GAAP requires that management provide a narrative introduction, overview and analysis to
accompany the basic financial statements in the form of Management's Discussion and Analysis
(MD&A). This letter of transmittal is designed to complement the MD&A and should be read in
conjunction with it. The City of Tustin's MD&A can be found immediately following the report of the
independent auditors.
300 Centennial Way,Tustin, CA 92780 a P: (714)573.3060 • F: (714)832-0825 • www.tustinca.org
- iii -
PROFILE OF THE CITY OF TUSTIN
The City of Tustin is located in the central part of Orange County, about forty miles southeast of
Los Angeles and eighty miles north of San Diego, at the intersection of the 5 and 55 Freeways. Tustin
covers over eleven square miles and adjoins the cities of Orange, Santa Ana and Irvine. The State of
California Department of Finance has estimated the City's January 1, 2015 population at 78,347, a 0.02 %
decrease from 2014. While the City is surrounded by much of the County's main industrial employment,
it is essentially a residential community.
The City was incorporated under the General Laws of the State of California in 1927 as the "City of
Tustin". Government was by a five member elected City Council. The Council/Administrator form of
city government was adopted in 1965 and was modified to the Council/Manager form in 1981.
Council members serve staggered, four-year terms, with a two consecutive term limit. The Mayor is
selected by the City Council from among its membership and serves a one-year term. The City
Manager is appointed by the City Council to carry out the policies and direction of the City Council,
oversee the day-to-day operations of the City and appoint department heads.
Tustin is a full service City. The services provided by the City include police, street and park
maintenance, water, recreation, traffic/transportation, public improvements, planning, zoning, and
general administrative services. The City contracts with the Orange County Fire Authority for fire
suppression services. Also included in the City's overall operations are the Tustin Public Financing
Authority and the City of Tustin Housing Authority (Housing Authority). The activities of both
entities are included in these financial statements. Additional information for the Tustin Public
Financing Authority and the Tustin Housing Authority is available in Note 1 of the Notes to Basic
Financial Statements.
The key element of the City's financial management process is the development and approval of the
annual budget. The City Council conducts various open budget workshops as necessary and adopts the
budget at a noticed public meeting. The budget is prepared pursuant to generally accepted accounting
principles (GAAP) and is balanced by fund. The level of appropriations is controlled by the City
Council for each fund. The City Manager is authorized to transfer appropriations within the fund
between the various programs and/or departments. Budgetary control is maintained by a real-time
financial reporting system. Budget to actual comparisons are provided through display or reports and
through budget controls set within the purchasing and accounts payable modules for each individual
governmental fund for which an appropriated annual budget has been adopted. For the General Fund
this comparison is presented on page 92 as part of the required supplementary information and for
nonmajor governmental funds this comparison is presented on pages 102 - 109 as part of the other
supplementary information for the governmental funds. Successor Agency expenses are restricted by
the State of California Department of Finance (DOF) to enforceable obligations. The enforceable
obligations are approved every six months by the DOF through the submission of a Recognized
Obligation Payment Schedule. The Successor Agency is presented as a Private Purpose Trust Fund on
pages 28-29.
- iv -
ECONOMIC OUTLOOK
The State of California maintains a stable economy since the economic downturn. The statewide
unemployment rate has dropped from 7.3% in October 2014 to 5.8% for October 2015, which is 0.8%
higher than the United States unemployment rate of 5.0% for October 2015. The Orange County
unemployment rate has decreased 0.7% from October 2014 to 4.3% for October 2015. The City's
sales tax revenue continues to be the largest revenue source for the General Fund. It is 44% of total
General Fund revenues. Annual sales tax revenue remained the same from fiscal year 2013-2014 to
fiscal year 2014-2015 at $22.2 million. Sales tax revenue for fiscal year 2015-2016 is expected to
increase $2.2 million from prior year primarily due to the last triple flip payment the City will receive
from the State of California for the 25% of the sales tax the State withheld in prior years. Property tax
revenue is the second largest General Fund revenue source (16% of total revenues). Orange County
property values and property sales have increased; therefore, property tax revenue is estimated to
increase $0.4 million from prior year to $8.8 million for fiscal year 2015-2016.
Development at the Marine Corp Air Station Base also referred to as the Legacy continues to move
forward. The City completed its negotiations with Standard Pacific for the development of 375 single
family homes within the Legacy. The land for the development was sold in August 2014 for $56
million. Community Facilities District 14-01 was formed to raise two special taxes in relation to this
development for public services provided such as public safety, parks and street maintenance and to
pay debt service for bonds not to exceed $29 million to be issued to fund backbone infrastructure. The
bonds were issued November 2015. Standard Pacific also contributed $16.9 million to be used for the
construction of backbone infrastructure within the Legacy. Construction of the 375 homes started
spring of 2015.
The City Council continues to take a proactive approach for maintaining the City's healthy financial
position by monitoring revenues and expenses. General Fund Revenues for fiscal year 2015-16 are
estimated to be $4.4 million more than fiscal year 2014-15, primarily due to the increase in sales tax
for the final triple flip payment; increase in property tax revenue and an increase in building permits
and building plan checks due to the continuing development of the Legacy. Expenditures are $3.9
million more than budgeted in fiscal year 2014-15 primarily due to the cost of living salary increase of
4% for all employees and the increase in the fire services contract with the Orange County Fire
Authority of$0.3 million from prior fiscal year. The City expects a $1.1 million surplus for fiscal year
2015-16. City Council will be reviewing the City's financial condition during the mid-year budget
review in February 2016.
ACCOMPLISHMENTS AND FUTURE PROJECTS
Major capital improvement projects completed include the Bocce Ball Court at Pepper Tree Park,
Tustin Ranch Irrigation upgrades/rehabilitation, Red Hill grade separation, Browning
Avenue/Parkview Way pedestrian enhancements, Enderle Center Dr. and Vandenberg intersection
enhancement, Newport Blvd. bicycle trail from Main St. to Irvine Blvd., and Williams Street Storm
drains. Legacy projects completed were the Valencia north loop/Armstrong storm drains, street curbs
and gutters, sidewalks irrigation, traffic signals and utilities; and Armstrong south loop roadway
construction, Armstrong to Tustin Ranch Road.
-v -
The City's capital projects for fiscal year 2015-2016 are budgeted at $82 million. Funding sources for
the capital projects include revenues from gas tax, Community Development Block Grant, water
revenues, Community Facility bond proceeds, Measure M2, Park Development Funds, former
Redevelopment Agency bond proceeds and Water Revenue Bond proceeds. Major capital projects for
fiscal year 2015-2016 include Centennial Park picnic area and entry renovation, Civic Center and
Senior Center alternative power source, annual roadway and public infrastructure maintenance
program. Major Legacy projects include Veterans Sports Park at Tustin Legacy, Victory Park, Peters
Canyon Channel improvements, Moffett Drive extension from Park Avenue to east of Peters Canyon
Channel, Bell Avenue extension from Red Hill Avenue to Armstrong Avenue, Tustin Legacy Linear
Park between Barranca Parkway and Armstrong Avenue, and Aston Street extension between Barranca
parkway and Tustin Legacy Linear Park, and Red Hill Avenue median improvements between
Barranca parkway and north of Valencia Avenue. Water services capital projects for fiscal
year 2015-2016 are the Simon Ranch Reservoir; booster pump station and pipeline replacement; and
drilling and installing the Edinger Well.
AWARDS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to the City of Tustin for its
Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014. This was the twenty-
eighth consecutive year that the government has achieved this prestigious award. In order to be
awarded a Certificate of Achievement, a government must publish an easily readable and efficiently
organized comprehensive annual financial report. This report must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program's
requirements and we are submitting it to GFOA to determine its eligibility for another certificate.
ACKNOWLEDGMENTS
I wish to express my appreciation to the entire Finance Department staff for their contribution to the
department during the year. Their efforts are reflected in this report and in other documents resulting from
the annual audit process. Special thanks are due to Jennifer Leisz, Finance Manager, Sean Tran,
Administrative Services Manager, Alberto Preciado, Senior Accountant, Elizabeth Andrew C.P.A., the
finance staff, and consultant Melissa Shirah, C.P.A. Their significance in preparing the final financial
documents is reflected in the quality of this report.
The Mayor and members of the City Council are to be commended for their interest and support in
conducting the financial operations of the City in a responsible and progressive manner.
Respectfully submitted,
Pam J
Pamela Arends-King
Finance Director/City Treasurer
-vi -
CITIZENS OF LOCAL GOVERNMENT
TUSTIN FY 2014-15
MAYOR SUCCESSOR AGENCY TO THE
CITY CLERKTUSTIN REDEVELOPMENT
CIS,
AGENCY
COUNCIL
CITY CITY ATTORNEY
TREASURER
COORDINATION AND
CITY MANAGER COOPERATION
POLICE DEPUTY CITY PRIVATE
MANAGER UTILITIES
Cable T.V.
Electricity
Natural Gas
Telephone
PUBLIC FINANCE
WORKS CONTRACT
SERVICES
Fire
Refuse
COMMUNITY HUMAN Animal Control
DEVELOPMENT RESOURCES
SPECIAL
DISTRICTS
PARKS & Library
RECREATION Lighting
Sewers
Flood Control
Re-
Assessment
District 95-1
CFD's
- Vll -
All
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Tustin
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 34, 2014
*00,w-4 0.:Poo 0
Executive Director/CEO
- viii -
WHITEwlic cc
!I i
INDEPENDENT AUDITORS' REPORT
Honorable City Council
of the City of Tustin
Tustin, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the
business-type activity, each major fund, and the aggregate remaining fund information of the City of
Tustin (the City), as of and for the year ended June 30, 2015, and the related notes to the basic
financial statements, which collectively comprise the City's basic financial statements as listed in the
table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these basic financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the basic financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the basic financial statements. The procedures selected depend on the auditors'judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the City's
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the City's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
- 1 -
2875 Michelle Drive,Suite 300,Irvine, CA 92606 •Tel: 714.978.1300• Fax: 714.978.7893
Offices located in Orange and San Diego Counties
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business-type activity, each major
fund, and the aggregate remaining fund information of the City of Tustin, as of June 30, 2015, and the
respective changes in financial position and, where applicable, cash flows thereof for the year then
ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Notes 1 and 20 to the financial statements, the City adopted Governmental Accounting
Standards Board's Statement No. 68, `Accounting and Financial Reporting for Pensions" and
Statement No. 71, `Pension Transition for Contributions Made Subsequent to the Measurement Date,
an Amendment of GASB Statement No. 68". The adoption of these standards required retrospective
application resulting in a $45,364,118 and $2,418,112 reduction of previously reported net position, in
the governmental activities and business-type activity, respectively. Our opinion is not modified with
respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis, the safety plan schedule of proportionate share of the pension
liability and the schedule of contributions, the miscellaneous plan schedule of changes in the net
pension liability and related ratios and the schedule of contributions, the other post-employment
benefit plan schedule of funding progress, and the budgetary comparison schedule, identified as
Required Supplementary Information (RSI) in the accompanying table of contents, be presented to
supplement the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the RSI in
accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing
the information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during the audit of the basic financial statements. We do
not express an opinion or provide any assurance on the RSI because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City's basic financial statements. The introductory section, combining and
individual nonmajor fund financial statements (supplementary information), and statistical section are
presented for purposes of additional analysis and are not a required part of the basic financial
statements.
- 2 -
Other Matters (Continued)
Other Information (Continued)
The supplementary information, as listed in the table of contents, is the responsibility of management
and was derived from and relates directly to the underlying accounting and other records used to
prepare the basic financial statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records
used to prepare the basic financial statements or to the basic financial statements themselves, and other
additional procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the supplementary information is fairly stated in all material respects in
relation to the basic financial statements as a whole.
The introductory and statistical sections have not been subjected to the auditing procedures applied in
the audit of the basic financial statements and, accordingly, we do not express an opinion or provide
any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
December 22, 2015, on our consideration of the City's internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements
and other matters. The purpose of that report is to describe the scope of our testing of internal control
over financial reporting and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the City's internal
control over financial reporting and compliance.
Irvine, California
December 22, 2015
- 3 -
The page left blank intentionally
- 4 -
City of Tustin
Management's Discussion and Analysis (Unaudited)
June 30, 2015
As management of the City of Tustin, California (City), we offer readers of the City of Tustin's
financial statements this narrative overview and analysis of the financial activities of the City for the
fiscal year ended June 30, 2015. We encourage readers to consider the information presented here in
conjunction with additional information that we have furnished in our letter of transmittal, which can
be found in the introductory section of this report, and with the City's financial statements.
Financial Highlights
• The assets and deferred outflows of resources of the City exceeded its liabilities and deferred
inflows of resources at June 30, 2015, by $706.4 million (netposition). Net position consists of
$480.9 million invested in capital assets, $72.9 million in restricted net position and
$152.6 million in unrestricted net position.
• The government's total net position increased by $82.2 million during the fiscal year ended
June 30, 2015. The primary reasons for the increase are due to the gain on land held for resale
of $48.1 million for the development of residential housing and the receipt of $16.9 million
from the developer of the residential housing, Standard Pacific, for backbone infrastructure
within the former Marine Corps Air Station known as the Legacy. In addition, bond proceeds
totaling $32 million were transferred from the Successor Agency to the Tustin Community
Redevelopment Agency (SATCRA)to the General Fund.
• As of June 30, 2015, the City's governmental funds reported combined ending fund balances of
$284.8 million, an increase of$100.3 million in comparison with the prior year. The significant
increase in ending fund balances is primarily due to the gain on Land Held for Resale of
$48.1 million; the backbone infrastructure fee of $16.9 million; the decision from the
Department of Finance to allow the City to pay a Due to the SATCRA promissory note of
$21.4 million to be paid over five years, therefore it was reclassified to long-term debt; and the
transfer of bond proceeds of$32 million from the Successor Agency to the Tustin Community
Redevelopment Agency Private Purpose Trust to the General Fund. Approximately
$122.5 million is nonspendable; $40.7 million is restricted; and $37.4 million is assigned.
• The City's long-term liabilities reflect the adoption of Government Accounting Standards
Board (GASB) pronouncement 68, "Accounting and Financial Reporting for Pensions, an
Amendment of GASB Statement No. 27" with the inclusion of Pension Liabilities for
Governmental Activities of $38.1 million and Business-Type Activities of $1.8 million for
fiscal year ending June 30, 2015 and $49.6 million for Governmental Activities and
$2.6 million for Business-Type Activities for fiscal year ending June 30, 2014.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the City's basic financial
statements. The City's basic financial statements consist of three components: 1) government-wide
financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This
report also contains required supplementary and other supplementary information in addition to the
basic financial statements themselves.
- 5 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Government-wide financial statements
The government-wide financial statements are designed to provide readers with a broad overview of
the City's finances, in a manner similar to a private-sector business.
The statement of netposition presents information on all of the City's assets and liabilities and deferred
inflows/outflows of resources, with the difference reported as net position. Over time, increases or
decreases in net position may serve as a useful indicator of whether the financial position of the City is
improving or deteriorating.
The statement of activities presents information showing how the government's net position changed
during the most recent fiscal year. All changes in net position are reported as soon as the underlying
event giving rise to the change occurs, regardless of the timing of related cashflows. Thus, revenues
and expenses are reported in this statement for some items that will only result in cash flows in future
fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Government-wide financial statements distinguish City governmental activities that are principally
supported by taxes and intergovernmental revenues from other business-type activities that are
intended to recover all or a significant portion of their costs through user fees and charges.
Governmental activities of the City, and the Tustin Public Financing Authority, a blended component
unit, include general government, public safety, community services and public works. Business-type
activity of the City is the Water Utility.
The government-wide financial statements can be found immediately following this discussion and
analysis.
Fund financial statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been
segregated for specific activities or objectives. The City, like other state and local governments, uses
fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of
the funds of the City can be divided into three categories: governmental funds, proprietary funds, and
fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and ou�flows of spendable resources, as well as on balances of spendable resources available
at the end of the fiscal year. Such information may be useful in evaluating a government's near-term
financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By
doing so, readers may better understand the long-term impact of the government's near-term financing
decisions. Both the Governmental Funds Balance Sheet and the Governmental Funds Statement of
Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
- 6 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Fund financial statements (Continued)
Governmental funds (continued). The City maintains various individual governmental funds
organized by their type (special revenue, debt service and capital projects funds). Information is
presented separately in the Governmental Funds Balance Sheet and in the Governmental Funds
Statement of Revenues, Expenditures, and Changes in Fund Balances. The General Fund and the
MCAS 2010 Capital Project fund are considered to be major funds. Data from other governmental
funds are combined into a single, aggregated presentation. Individual fund data for each of these
nonmaj or governmental funds is provided in the form of combining statements elsewhere in this report.
The City adopts a bi-annual appropriated budget for its General Fund and the special revenue funds to
demonstrate compliance with the annual budget law. Budgetary comparison schedules have been
provided to demonstrate compliance with this budget requirement elsewhere in this report.
The governmental funds financial statements can be found immediately following the
government-wide financial statements.
Proprietary funds. The City of Tustin maintains one type of proprietary (Enterprise) fund. This
enterprise fund is used to report the same functions presented as business-type activities in the
government-wide financial statements. The City uses an enterprise fund to account for its Water
Utility.
The proprietary fund financial statements can be found immediately following the governmental funds
financial statements.
Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties
outside the government. Fiduciary funds are not reflected in the government-wide financial statement,
because the resources of those funds are not available to support the City's own programs. The City
utilizes a private-purpose trust fund to account for the assets, liabilities and activities of the Successor
Agency. The Successor Agency was created on February 1, 2012 with the dissolution of the Tustin
Community Redevelopment Agency.
The second fiduciary fund is an agency fund which is used to account for the assets of Community
Facility Districts 04-1, 06-1, 07-1 and 13-1. The fiduciary funds financial statements can be found
immediately following the proprietary fund financial statements.
Notes to the basic financial statements
The notes to the basic financial statements provide additional information that is essential to a full
understanding of the data provided in the government-wide and fund financial statements. The notes
to the basic financial statements can be found immediately following the fiduciary funds financial
statements.
Other information
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information which includes a Budgetary Comparison Schedule for the General
Fund and schedules of funding progress for the City's defined benefit pension plan and other
postemployment healthcare benefits plan. Required supplementary information can be found
immediately following the notes to the basic financial statements.
The combining statements referred to earlier in connection with nonmajor governmental funds are
presented for all nonmaj or Special Revenue Funds, nonmaj or Capital Proj ects Funds, and all nonmaj or
Debt Service Funds. These combining and individual fund statements and schedules can be found
immediately following the required supplementary information.
- 7 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Government-wide Financial Analysis
The government-wide financial statements provide long-term and short-term information about the
City's overall financial condition. This analysis addresses the financial statements of the City as a
whole.
The largest portion of the City's net position (68 percent) reflects its investment in capital assets (e.g.,
land, buildings, and improvements other than buildings, equipment, infrastructure, and construction in
progress), less any related outstanding debt that was used to acquire those assets. The City uses these
capital assets to provide services to citizens; consequently, these assets are not available for future
spending. Although the City's investment in its capital assets is reported net of related debt, it should
be noted that the resources needed to repay this debt must be provided from other sources, since the
capital assets themselves cannot be used to liquidate these liabilities.
City of Tustin
Summary of Net Position
As of June 30, 2015
(in millions of dollars)
Business- Total
Governmental Type % Change
Activities Activities Total
2014 2015 2014 2015 2014 2015 2014-2015
Assets:
Current and other assets $245.9 $298.1 $35.0 $38.3 $280.9 $336.4
Capital assets 461.7 456.6 45.9 45.7 507.6 502.3
Total Assets 707.6 754.7 80.9 84.0 788.5 838.7 6.4%
Deferred Outflows of
Resources 4_2 8_6 0_7 0_6 4_9 9_2
Liabilities:
Current liabilities 55.9 12.4 3.4 3.2 59.3 15.6
Non-Current liabilities 63.7 69.7 46.2 44.6 109.9 114.3
Total Liabilities 119.6 82.1 49.6 47.8 169.2 129.9 (23.2%)
Deferred Inflows of
Resources - 10.9 - 0.7 - 11.6
Net Position:
Net investment in capital assets 461.7 456.6 23.7 24.3 485.4 480.9
Restricted 36.7 72.9 - - 36.7 72.9
Unrestricted 93.8 140.8 8.3 11.8 102.1 152.6
Total Net Position J592.2 J670.3 S32.0 S36.1 $624.2 J206.4 13.2%
Governmental activities. Net position of the City's governmental activities increased 13.2% to $670.3
million, of which $456.6 million is invested in capital assets such as equipment, buildings and
infrastructure. Of the remaining total, $72.9 million is restricted to specifically stipulated spending
agreements originated by law, contract or other agreements with external parties. The remaining
$140.8 million is subject to designation for specific purposes as approved by the City Council, and
may be used to meet the City's ongoing obligations.
- 8 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Government-wide Financial Analysis (Continued)
City of Tustin
Summary of Changes in Net Position
For the Year Ended June 30, 2015
(in millions of dollars)
Governmental Business-Type Total
Activities Activities Total % Change
2014 2015 2014 2015 2014 2015 2014-2015
Revenues:
Program revenues:
Charges for services $3.9 $3.8 $18.7 $19.4 $22.6 $23.2
Operating grants & contributions 3.3 3.5 - - 3.3 3.5
Capital grants and contributions 12.2 20.2 - - 12.2 20.2
General revenues:
Taxes 16.3 17.9 - - 16.3 17.9
Sales taxes shared state revenues 22.3 22.3 - - 22.3 22.3
Motor vehicle taxes 6.2 6.4 - - 6.2 6.4
Earnings on investments 0.6 1.1 0.1 0.2 0.7 1.3
Miscellaneous 4.0 7.8 0.4 0.5 4.4 8.3
Gain on sale of assets - 48.1 - - - 48.1
Contribution from Successor
Agency - 32.1 - - - 32.1
Total Revenues 68.8 163.2 19.2 20.1 88.0 183.3 108.3%
Expenses:
General government 14.8 17.1 - - 14.8 17.1
Public safety 28.5 29.9 - - 28.5 29.9
Public works 49.5 34.4 - - 49.5 34.4
Community services 3.5 3.7 - - 3.5 3.7
Water - - 16.1 16.0 16.1 16.0
Total Expenses 96.3 85.1 16.1 16.0 112.4 101.1 (10.1%)
Extraordinary Item:
Forgiveness of interest on
advances 1.4 - - - 1.4 -
Change in net position (26.1) 78.1 3.1 4.1 (23.0) 82.2
Net Position - Beginning 663.7 637.6 31.3 34.4 695.0 672.0
Restatement for Prior Period
Adjustment - 45.4 2.4 47.8
Net Position - Ending $637.6 $670.3 $34.4 36.1 $672.0 $706.4 13.2%
- 9 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Government-wide Financial Analysis (Continued)
In governmental activities, the increase in net position of $78.1 is primarily due to the following
reasons:
• The City received $56 million from Standard Pacific for the sale of 74 acres of Land Held for
Resale within the Legacy area. Standard Pacific is developing a residential neighborhood of
375 homes. The City also received $16.9 million from Standard Pacific for the development of
Legacy backbone infrastructure.
• With the dissolution of the Tustin Community Redevelopment Agency February 1, 2012, the
State Department of Finance (DOF) disallowed the use of unspent bond proceeds. The City
pursed a lawsuit to dispute this disallowance and on August 5, 2014, the DOF issued a letter
approving expenditure of the bond proceeds in accordance with bond covenants. The bond
proceeds of $32.1 million were transferred from the Successor Agency to the Tustin
Community Redevelopment Agency (SATCRDA) to the City effective January 1, 2015 to be
spent on capital projects in the Legacy area per the bond covenants.
• The City implemented GASB 68 which requires the recognition of pension liabilities. The
restatement for prior period adjustment of a negative $45.4 million in fiscal year 2015 is the
adjustment to the government-wide statements for the unfunded pension plan liabilities (see
Note 9).
Overall, governmental revenues increased $94.4 million from prior year. The primary reasons for the
$94.4 million increase in revenues as previously mentioned were the sale of Land Held for Resale to
Standard Pacific for the development of 375 residential homes and the transfer of the unspent bond
proceeds from the SATCRDA to the City. Capital grants and contributions increased $8 million from
fiscal year 2014 primarily due to the $16.9 million the City received from Standard Pacific for the
construction of Legacy backbone infrastructure. Taxes increased $1.6 million from prior year
primarily due to:
• Hotel Bed Tax increased $0.5 million due to the increase in the Hotel Bed Tax rate. The
citizens of Tustin voted in November 2014 to increase the Hotel Bed Tax from 6% to 10%.
The new tax rate became effective January 1, 2015.
• Property tax revenue increased $0.5 million and Property Tax in Liu of Vehicle License Fees
increased $0.2 million due to the increase in property values.
Earnings on investments increased $0.5 million from fiscal year 2014 due to a larger investment
portfolio and longer weighted average portfolio life (days)which resulted in a higher weighted average
investment yield. Due to the gain on sale of the Land Held for Resale to Standard Pacific and the
funds received for the construction of Legacy backbone infrastructure the average balance for the
investment portfolio in fiscal year 2015 was $191 million compared to $162 million in fiscal
year 2014. The weighted average portfolio life (days) was 730 days with a weighted average portfolio
yield of 0.85% in fiscal year 2015. The weighted average portfolio life (days)for fiscal year 2014 was
450 days with a weighted average portfolio yield of 0.56%. Miscellaneous revenue increased
$3.9 million from prior year due to the receipt of$0.7 million for the reimbursement of state mandated
costs from the past few years; the liquidation of a retention of $0.4 million from Sandoval Pipeline
Engineering for failure to complete work in the time allowed for the Tustin Ranch Road extension
project; increase in rental income of $0.4 million from renting space within the Legacy; the
reimbursement of $1.2 million for street maintenance to meet the City's Maintenance of Effort
requirement to receive Measure M sales tax revenue from the Orange County Transportation
Authority; and the sale of 5.7 acres of land held for resale for $0.5 million to the South Orange County
Community College.
- 10 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Government-wide Financial Analysis (Continued)
Governmental expenses decreased $11.2 million from prior year primarily due to the decrease in
Public Works spending on capital projects. Last fiscal year the City recognized the amount due to
Vestar/Kimco for the completion of backbone infrastructure within the Legacy totaling $18.2 million.
The agreement the City had with Vestar/Kimco was that after the projects were complete and Land
Held for Resale was sold within the Legacy, then the City would reimburse Vestar/Kimco the amount
due. The projects were completed towards the later part of fiscal year ending June 30, 2014 and
subsequently the City sold Land Held for Resale in the Legacy to Standard Pacific for the development
of 375 single family homes for $56 million in August 2014. With the proceeds of that sale,
Vestar/Kimco was paid on September 4, 2014.
General Government expenses increased $2.3 million from prior year due to:
• The City paid $0.7 million for a payment to the early retirement incentive program
administered by Public Agency Retirement Services (See Note 7). No payment to the program
was made in prior fiscal year as fiscal year 2014's payment was made in fiscal year 2013.
• The Economic Development Department expenses of$0.7 million were paid out of the General
Fund. The Department had been paid out of the Successor Agency to the Tustin Community
Redevelopment Agency in the prior year, but the State Department of Finance disallowed those
expenses for fiscal year 2015.
• Professional and consulting services for the development of the Legacy increased $1.3 million
from prior year due to the increase in planning and design activity.
Public Safety increased $1.4 million from fiscal year 2014 primarily due to the increase in OPEB costs,
claims and judgements and compensated absences totaling $1.1 million. Community Services
increased $0.2 million from prior year due to the increase in consulting costs in relation to the
development at the Legacy.
Extraordinary item Forgiveness of Interest on Advances decreased $1.4 million from fiscal year ending
June 30, 2014. The City entered into a promissory note December 2008, maturing December 2013
with the former Redevelopment Agency for $18.8 million with an interest rate of 4.25% per annum
compounded semiannually. The Department of Finance (DOF) agreed to lower the interest rate to the
Local Agency Investment Fund interest rate effective at the time the promissory note was issued which
was 2.54%. The DOF agreed to a flat interest rate. The $1.4 million Forgiveness of Interest on
Advances is the difference between the interest accrued and the interest amount DOF agreed would be
due.
Business-Type activities net position increased $4.1 million from prior year. Charges for services
increased $0.7 million from fiscal year 2014 due to the implementation of increase in water rates over
a five year period starting June 2010. The rates are adequate to cover the annual operating costs and
build reserves. Water operation costs decreased $0.1 million primarily because less water was
purchased from the East Orange County Water District due to water conservation. The Restatement
for Prior Period Adjustment of a negative $2.4 million is the recognition of the pension plan unfunded
liability.
Financial Analysis of the Government's Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
- 11 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Financial Analysis of the Government's Funds
The focus of the City's governmental funds is to provide information on near-term inflows, outflows,
and balances of spendable resources. Such information may be useful in assessing the City's financing
requirements.
As of the end of the current fiscal year, the City's governmental funds reported total combined ending
fund balances of $284.8 million, an increase of $100.3 million in comparison with the prior year as
previously stated is primarily due to the sale of Land Held for Resale for residential homes in the
Legacy; the contribution of funds from the developer for construction of backbone infrastructure in the
Legacy; and the transfer of unspent bond proceeds from the former Redevelopment Agency to be spent
on capital projects in the Legacy. Approximately $122.0 million (43.0 %) of this total amount
constitutes nonspendable fund balance. Of the nonspendable amount, $122.0 million is Land Held for
Resale. The remainder of the fund balance consists of $40.7 million in restricted funds, $37.4 million
assigned to capital projects, and $84.3 million in unassigned funds.
The General Fund is the chief operating fund of the City. At the end of the current fiscal year,
unassigned fund balance of the General Fund was $84.3 million, while total fund balance was
$233.4 million. As a measure of the General Fund's liquidity, it may be useful to compare unassigned
fund balance to total fund expenditures. Unassigned fund balance represents 121% of the total General
Fund expenditures.
City of Tustin
Summary of Changes in Fund Balances-General Fund
For the Year Ended June 30,2015
(in millions of dollars)
Total
%Change
2014 2015 2014-2015
Revenues:
Taxes $45.1 $43.7
Charges for services 1.7 1.8
Intergovernmental 0.9 2.6
Fines and forfeitures 0.6 0.8
Licenses and permits 1.3 0.9
Other 3.8 22.4
Gain on sale of land held for resale - 48.1
Total Revenues 53.4 120.3 125.3%
Expenditures:
General government 13.1 16.6
Public safety 28.1 33.0
Public works 5.8 6.3
Community services 2.8 2.9
Capital Outlay 49.7 5.8
Debt service - 5.0
Total Expenses 99.5 69.6 (30.1%)
Excess of Revenues Over
(Under)Expenditures (46.1) 50.7
Other Financing Sources(Uses):
Net transfers 0.9 2.1
Special Item - 21.4
Extraordinary Item:
Forgiveness of interest on advances 1_4
Net Change in Fund Balance 43.8 74.2 269.4%
- 12 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Financial Analysis of the Government's Funds (continued)
Transactions impacting revenues in the General Fund were as follows:
• Property tax revenue totaled $14.9 million reflecting an increase of$0.6 million from prior year
due to the increase in property values.
• Intergovernmental revenue increased $1.7 million from fiscal year 2014 due to the
reimbursement of state mandate costs of $0.7 million from the past few years. The State of
California's Governor ordered that past due state mandate costs should be reimbursed due to
excess state revenues. The City's Community Development Block Grant (CDBG) program's
revenue increased $0.6 million from prior year due to the increase in budgeted funds by the
Federal Government.
• License and Permits decreased $0.4 million due to the decrease in building permits from prior
year. During fiscal year 2014 the Irvine Company's constructed apartments in the Legacy and
St. Anton Legacy LP's constructed apartments including low to moderate income apartments in
the Legacy. Overall building activity was higher in fiscal year 2014.
• Other Revenue increased $18.6 million from prior year primarily due to the $16.9 million the
City received from Standard Pacific for construction of backbone infrastructure in the Legacy.
The City sold 5.7 acres of Land Held for Resale in the Legacy for $0.5 million to the South
Orange County Community College. Rental income increased $0.3 million from prior year due
to the increase in renting space within the Legacy, primarily providing parking areas for the
auto dealerships and renting the hangar located in the Legacy. Reimbursement for cost recovery
increased $1.2 million from prior year for street maintenance to meet the City's Maintenance of
Effort requirement to receive Measure M sales tax revenue from the Orange County
Transportation Authority.
Changes in General Fund expenditures from previous fiscal year, by function, occurred as follows
during the year ended June 30, 2015:
• General Government expenditures increased $3.5 million from prior year. Improvement and
Right of Away expense increased $1.2 million for street and sidewalk maintenance to meet the
Maintenance of Effort requirements to receive the Measure M sales tax from the Orange
County Transportation Authority. Claims paid for workers compensation and liability claims
increased $0.5 from prior year due to increase of settling outstanding claims. As previously
stated, the City paid $0.7 million as a payment to the early retirement incentive program
administered by Public Agency Retirement Services. The City paid the fiscal year 2014's
payment in fiscal year 2013. The Economic Development Department expenses of $0.7
million were paid out of the General Fund because the Department of Finance disallowed that
expense to be paid out of the Successor Agency to the Tustin Community Redevelopment
Agency as was done in fiscal year 2014. Also, professional and consulting services for the
development of the Legacy increased $1.3 million from prior year due to the increase in
planning and design activity.
• Public safety expenditures increased $4.9 million from prior year primarily due to the payment
of the Public Safety Side Fund pension liability of $4.3 million and a $0.5 million increase in
claims paid.
• Public Works expenditures increased $0.5 million due to filling vacant positions and the
increase in contract professional services.
• Capital Outlay decreased $43.9 million primarily due to the decrease in construction projects.
Construction projects completed in fiscal year 2014 included the Tustin Ranch Road extension,
Valencia Avenue extension from Kensington Park Drive to Tustin Ranch Road, the Park
Avenue extension from Legacy Road to the Jamboree Road ramp, and fire station 937; and the
recognition of the amount due to Vestar/Kimco for the completion of backbone infrastructure
totaling approximately $50 million of which the City was responsible for $18.2 million.
- 13 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Financial Analysis of the Government's Funds (continued)
• Net Transfers increased $1.2 million from prior year due to the transfer from Community
Facility District Agency funds of$2.8 million to the General Fund for services provided in the
Special Tax B areas. The services provided are public safety, street, park and landscape
maintenance. The City's net transfer to other government funds and agency funds to eliminate
deficit cash balances was $0.4 million (See Note 4).
As stated previously the Gain on Sale of Land Held for Resale increased $48.1 million from prior
fiscal year due to the sale of Land Held for Resale in the Legacy to Standard Pacific for the
development of 375 residential homes.
The $1.4 million extraordinary item, Forgiveness of Interest on Advances, decreased from fiscal
year 2014. The extraordinary item was a settlement between the City and the DOF regarding a
promissory note of $18.8 million the City entered into with the former Redevelopment Agency in
December 2008 maturing December 2013. The promissory note had an interest rate of 4.25% per
annum compounded semiannually. DOF agreed to lower the interest rate to the Local Agency
Investment fund interest rate effective at the time the promissory note was issued which was 2.54%
and agreed to a flat interest rate. The $1.4 million Forgiveness of Interest on Advances is the
difference of the interest accrued and the interest amount DOF agreed would be due.
The Special Item of$21.4 million is due to a decision from the DOF to allow the City to pay a Due to
the Successor Agency promissory note with the former Redevelopment Agency over a five year
period; therefore it was reclassified to long-term debt (See Note 8). The $5 million debt service
payment was the first payment to the Successor Agency for that long-term debt obligation.
The MCAS 2010 Capital Project Fund's increase in excess of revenues over expenditures of $31.4
million is primarily due, as previously stated, to the DOF allowing the use of unspent bond proceeds
that were outstanding when the former Tustin Community Redevelopment Agency was dissolved
February 1, 2012. The $32.1 million contribution from the Successor Agency will be used for
backbone infrastructure within the Legacy area per the bond covenants.
General Fund Budgetary Highlights
Differences between the General Fund actual revenues and transfers and amended budgeted revenues
and transfers were $4.0 million primarily due to better actual revenues received then projected
primarily for property taxes, investment income, state mandate reimbursements and developer
contributions. The amended budgeted expenditures were $80.5 million, an increase in appropriations
of $8.2 million from the original budgeted expenditures of $72.3 million. The increase in
appropriations was due the expected increase in professional and consulting services for design and
development in the Legacy area. Actual General Fund expenditures were less than the amended
budgeted amount of$80.5 million by $10.9 million due to the decrease in capital project spending and
use of professional and consulting services.
Financial Analysis of the Proprietary Funds
The City has one proprietary fund which is the Water Enterprise Fund. Net position of the Water
Enterprise increased $4.1 million during fiscal year 2015, from $32.0 million as of June 30, 2014, to
$36.1 million as of June 30, 2015. Total revenues for the Water Fund exceeded total expenses by
$4.1 million; however, with the implementation of GASB 68 the Restatement for Prior Period
Adjustment of a negative $2.4 for pension liabilities reduced increase in Net change in position
to $1.7 million.
- 14 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Financial Analysis of the Proprietary Funds (Continued)
Significant activity during the year included the adoption of a water conservation ordinance to
encourage saving water during the drought California has been experiencing. As a result of water
conservation water production costs decreased $0.1 million from prior fiscal year.
Capital Asset and Debt Administration
Capital Assets
The City's investment in capital assets for its governmental and business-type activities as of
June 30, 2015 amounts to $502.4 million, net of accumulated depreciation. This investment in capital
assets includes land, buildings and system improvements, machinery and equipment, park facilities,
roads, highways, and bridges.
City of Tustin
Summary of Changes in Capital Assets
For the Year Ended June 30, 2015
(in millions of dollars)
Governmental Business-Type Total
Activities Activities Total %Change
2014 2015 2014 2015 2014 2015 2014-2015
Land $44.1 $44.1 $1.2 $1.2 $45.3 $45.3
Right of way 44.3 43.8 - - 44.3 43.8
Construction in progress 69.2 57.8 2.4 3.6 71.6 61.4
Buildings and improvements 76.0 76.4 4.8 4.5 80.8 80.9
Machinery and equipment 3.4 3.2 - - 3.4 3.2
Infrastructure 224.7 231.4 - - 224.7 231.4
Property, plant and equipment - - 37.5 36.4 37.5 36.4
Total Capital Assets, Net $461.7 $456.7 $45.9 $45.7 $507.6 $502.4 (1.0%)
The major activity affecting capital assets this year was the decrease in construction in progress due to
the completion of improvements for Valencia Avenue, Kensington Park Drive, Lansdowne Road,
Severyns Road and Armstrong Avenue.
Additional information on the City's capital assets can be found in the notes to the basic financial
statements section of this report(beginning on page 50).
Long-term Debt
At the end of the current fiscal year, the City had total outstanding long-term liabilities of $114.3
million. Of this amount, $42.6 million are secured solely by specified revenue sources such as
property tax increment and water service charges.
- 15 -
CITY OF TUSTIN
Management's Discussion and Analysis (Unaudited)
June 30, 2015
Long-term Debt (Continued)
City of Tustin
Summary of Changes in Long-Term Liabilities
For the Year Ended June 30, 2015
(in millions of dollars)
Governmental Business-Type Total
Activities Activities Total % Change
2014 2015 2014 2015 2014 2015 2014-2015
Bonds payable $- $- $43.4 $42.6 $43.4 $42.6
Due to Successor Agency to
the Tustin Community
Redevelopment Agency - 16.4 - - - 16.4
Claims and judgments 4.3 5.1 - - 4.3 5.1
Postemployment
benefits obligation 4.9 5.7 - - 4.9 5.7
Termination benefits 2.0 1.3 - - 2.0 1.3
Compensated absences 2.9 3.0 0.2 0.2 3.1 3.2
Pension liabilities 49.6 38.2 2.6 1.8 52.2 40.0
Total Outstanding Debt $63.7 $69.7 $46.2 44.6 109.9114.3 4.0%
The City's long-term debt as of June 30, 2014, was restated due to implementation of GASB
Statements 68 and 71 to record the pension liability. Overall, long-term debt increased $4.4 million
from the restated prior year balances mostly due to the reclassification of the amount Due to the
Successor Agency to the Tustin Community Redevelopment Agency ($16.4 million) from current to
long-term liabilities. This was the result of a settlement agreement with the State Department of
Finance. This increase was offset by a decrease of $12.2 million in pension liabilities, comprised of
reductions for the Safety (police) Plans totaling $6.4 million and $5.8 million for the Miscellaneous
(all other)Plans.
Additional information on the City's long-term debt can be found in the notes to the basic financial
statements section of this report starting on page 52.
Next Year's Budget and Rates
The City Council adopted the fiscal year 2015-2016 Budget with total appropriations of$186.1 million
which includes $9 million of capital outlay for the Water Enterprise Fund. The General Fund fiscal
year 2015-2016 estimated revenues are $55.5 million and budgeted appropriations are $54.3 million
resulting in an estimated operating surplus of$1.2 million. The appropriations are $3.9 million higher
than prior year's appropriation. The primary reason for the increase in appropriations is the 4% cost of
living salary increase for all employees. The last cost of living salary increase the employees received
was in 2008. The fire service $0.3 million. All other appropriations are consistent with fiscal
year 2014. There were no fee increases as part of the preparation and adoption of the fiscal
year 2015-16 budget.
Requests for Information
This financial report is designed to provide a general overview of the City's finances for all those with
an interest in the government's finances. Questions concerning any of the information provided in this
report or requests for additional financial information should be addressed to the Finance Director,
City of Tustin, 300 Centennial Way, Tustin, California, 92780.
- 16 -
CITY OF TUSTIN
STATEMENT OF NET POSITION
June 30,2015
Governmental Business-type
Activities Activity Total
ASSETS:
Cash and investments $ 151,529,865 $ 14,767,193 $ 166,297,058
Receivables:
Accounts 4,744,042 2,791,123 7,535,165
Interest 227,839 30,668 258,507
Loans 1,588,866 - 1,588,866
Allowance for uncollectibles (1,238,866) - (1,238,866)
Prepaid items and deposits 431,231 110 431,341
Land held for resale 122,384,169 - 122,384,169
Restricted assets:
Cash and investments 18,455,244 20,673,118 39,128,362
Capital assets:
Not being depreciated 145,713,206 4,728,481 150,441,687
Being depreciated,net 310,935,879 40,984,094 351,919,973
TOTAL ASSETS 754,771,475 83,974,787 838,746,262
DEFERRED OUTFLOWS OF RESOURCES:
Deferred charge on refunding - 418,969 418,969
Deferred amounts on pension plans 8,648,172 195,401 8,843,573
TOTAL DEFERRED OUTFLOWS OF RESOURCES 8,648,172 614,370 9,262,542
LIABILITIES:
Accounts payable and accrued liabilities 7,143,331 2,203,804 9,347,135
Interest payable - 487,792 487,792
Deposits payable 5,371,885 482,855 5,854,740
Noncurrent liabilities:
Due within one year 12,632,869 981,393 13,614,262
Due in more than one year 57,049,754 43,611,267 100,661,021
TOTAL LIABILITIES 82,197,839 47,767,111 129,964,950
DEFERRED INFLOWS OF RESOURCES:
Deferred amounts on pension plans 10,916,161 705,594 11,621,755
NET POSITION:
Net investment in capital assets 456,649,085 24,270,718 480,919,803
Restricted for:
Community services 2,110,077 - 2,110,077
Public safety 452,447 452,447
Public works 70,366,998 - 70,366,998
Unrestricted 140,727,040 11,845,734 152,572,774
TOTAL NET POSITION $ 670,305,647 $ 36,116,452 S 706,422,099
See accompanying notes to basic financial statements.
- 17-
CITY OF TUSTIN
STATEMENT OF ACTIVITIES
For the year ended June 30,2015
Program Revenues
Charges Operating Capital
for Grants and Grants and
Functions/programs Expenses Services Contributions Contributions
Governmental activities:
General government $ 17,121,057 $ 252,074 $ 16,764 $ -
Public safety 29,886,284 1,071,099 222,400 -
Public works 34,435,214 1,564,314 2,184,778 20,115,139
Community services 3,699,059 892,102 1,122,881 129,340
Total governmental activities 85,141,614 3,779,589 3,546,823 20,244,479
Business-type activity:
Water 15,982,078 19,375,359 - -
Total $ 101,123,692 $ 23,154,948 $ 3,546,823 $ 20,244,479
General revenues:
Taxes:
Property
Franchise
Transient occupancy
Business license
Sales taxes shared state revenues
Motor vehicle taxes shared state revenues
Earnings on investments
Gain on sale of land held for resale
Contribution from sucessor agency
Miscellaneous
Total general revenues
Change in net position
NET POSITION AT BEGINNING OF YEAR,
AS RESTATED
NET POSITION AT END OF YEAR
See accompanying notes to basic financial statements.
- 18-
Net(Expense)Revenue and
Changes in Net Position
Governmental Business-type
Activities Activity Total
$ (16,852,219) $ - $ (16,852,219)
(28,592,785) - (28,592,785)
(10,570,983) - (10,570,983)
(1,554,736) - (1,554,736)
(57,570,723) - (57,570,723)
- 3,393,281 3,393,281
(57,570,723) 3,393,281 (54,177,442)
14,552,535 - 14,552,535
1,763,878 - 1,763,878
1,090,675 - 1,090,675
419,148 - 419,148
22,269,896 - 22,269,896
6,380,698 - 6,380,698
1,052,276 249,863 1,302,139
48,136,121 - 48,136,121
32,137,773 - 32,137,773
7,829,149 489,090 8,318,239
135,632,149 738,953 136,371,102
78,061,426 4,132,234 82,193,660
592,244,221 31,984,218 624,228,439
$ 670,305,647 $ 36,116,452 $ 706,422,099
- 19-
CITY OF TUSTIN
BALANCE SHEET
GOVERNMENTAL FUNDS
June 30,2015
MCAS 2010 Other Total
Capital Project Governmental Governmental
General Fund Funds Funds
ASSETS
Cash and investments $ 90,711,343 $ 31,420,596 $ 29,397,926 $ 151,529,865
Restricted cash and investments 16,645,150 - 1,810,094 18,455,244
Receivables:
Accounts 4,050,889 - 693,153 4,744,042
Interest 102,780 28,628 96,431 227,839
Loans 539,133 - 1,049,733 1,588,866
Allowance for uncollectibles (539,133) - (699,733) (1,238,866)
Prepaid items and deposits 429,400 - 1,831 431,231
Land held for resale 122,029,242 - 354,927 122,384,169
TOTAL ASSETS $ 233,968,804 $ 31,449,224 $ 32,704,362 $ 298,122,390
LIABILITIES,DEFERRED INFLOWS
)F RESOURCES AND FUND BALANCE
LIABILITIES:
Accounts payable and accrued liabilities $ 5,828,375 $ 39,565 $ 1,275,391 $ 7,143,331
Deposits payable 4,556,161 - 815,724 5,371,885
TOTAL LIABILITIES 10,384,536 39,565 2,091,115 12,515,216
DEFERRED INFLOWS OF RESOURCES:
Unavailable revenue 197,156 - 623,557 820,713
FUND BALANCES:
Nonspendable 122,458,642 - - 122,458,642
Restricted 16,650,332 - 24,048,818 40,699,150
Assigned - 31,409,659 5,940,872 37,350,531
Unassigned 84,278,138 - - 84,278,138
TOTAL FUND BALANCES 223,387,112 31,409,659 29,989,690 284,786,461
TOTAL LIABILITIES,DEFERRED
INFLOWS OF RESOURCES
AND FUND BALANCES $ 233,968,804 $ 31,449,224 $ 32,704,362 $ 298,122,390
See accompanying notes to basic financial statements.
-20-
CITY OF TUSTIN
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION
June 30,2015
Fund balances-total governmental funds $ 284,786,461
Amounts reported for governmental activities in the Statement of Net Position are
different because:
Capital assets net of depreciation have not been included as financial resources in
governmental funds. 456,649,085
Long-term liabilities applicable to the City's governmental activities are not due and
payable in the current period and accordingly are not reported as fund liabilities.
All liabilities both current and long-term,are reported in the Statement of Net Position.
Balances at June 30,2015 are:
Claims and judgments payable $ (5,148,755)
Compensated absences payable (3,025,019)
Due to Successor Agency (16,404,683)
Post employment benefits obligation (5,694,218)
Termination benefits payable (1,320,852)
Total long-term liabilities (31,593,527)
Pension related debt applicable to the City's governmental activites are not due and
payable in the current period and accordingly are not reported as fund liabilities.
Deferred outflows of resources and deferred inflows of resources related to pensions
are only reported in the Statement of Net Position as the changes in these amounts
effects only the government-wide statements for governmental activities:
Deferred outflows of resources 8,648,172
Deferred inflows of resources (10,916,161)
Pension liability (38,089,096)
(40,357,085)
Other long-term assets are not available to pay for current period expenditures
and,therefore,are reported as unavailable revenue in the governmental
funds balance sheet. 820,713
Net position of governmental activities $ 670,305,647
See accompanying notes to basic financial statements.
-21 -
CITY OF TUSTIN
STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
For the year ended June 30,2015
MCAS 2010 Other Total
Capital Project Governmental Governmental
General Fund Funds Funds
REVENUES:
Taxes $ 43,696,204 $ - $ - $ 43,696,204
Licenses and permits 885,043 - - 885,043
Fines and forfeitures 752,597 - - 752,597
Investment income 716,989 123,075 201,597 1,041,661
Intergovernmental revenue 2,644,657 - 12,387,730 15,032,387
Charges for services 1,849,950 - 20,451 1,870,401
Rental income 938,971 - 174,369 1,113,340
Other revenue 3,743,105 - 2,559,287 6,302,392
Developer contribution 16,934,704 - - 16,934,704
Gain on sale of land held for resale 48,136,121 - - 48,136,121
Contribution from successor agency - 32,137,773 - 32,137,773
TOTAL REVENUES 120,298,341 32,260,848 15,343,434 167,902,623
EXPENDITURES:
Current:
General government 16,628,862 - 939,435 17,568,297
Public safety 32,963,299 - 99,630 33,062,929
Public works 6,347,830 69,427 - 6,417,257
Community services 2,899,151 - 271,596 3,170,747
Capital outlay 5,781,519 781,762 17,236,812 23,800,093
Debt service:
Principal retirement 5,000,000 - - 5,000,000
TOTAL EXPENDITURES 69,620,661 851,189 18,547,473 89,019,323
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES 50,677,680 31,409,659 (3,204,039) 78,883,300
OTHER FINANCING SOURCES(USES):
Transfers in 3,693,381 - 1,572,721 5,266,102
Transfers out (1,572,721) - (3,693,381) (5,266,102)
TOTAL OTHER FINANCING
SOURCES(USES) 2,120,660 - (2,120,660) -
SPECIAL ITEM 21,404,683 - - 21,404,683
NET CHANGE IN FUND BALANCES 74,203,023 31,409,659 (5,324,699) 100,287,983
FUND BALANCES-BEGINNING OF YEAR 149,184,089 - 35,314,389 184,498,478
FUND BALANCES-END OF YEAR $ 223,387,112 $ 31,409,659 $ 29,989,690 $ 284,786,461
See accompanying notes to basic financial statements.
-22-
CITY OF TUSTIN
RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
For the year ended June 30,2015
Net change in fund balances-total governmental funds $ 100,287,983
Amounts reported for governmental activities in the Statement of Activities are different
because:
Governmental funds report capital outlays as expenditures. However,in the Statement
of Activities,the cost of those assets is allocated over their estimated useful lives as
depreciation expense. This is the amount by which capital expenditures and contributions
exceeded depreciation and disposition of capital assets in the current period:
Capital expenditures $ 6,132,843
Disposition of capital assets (515,993)
Depreciation expenses (10,641,088) (5,024,238)
The issuance of long-term debt provides current financial resources to governmental
funds,while the repayment of the principal of long term-debt and changes in other
long-term liabilities affects the current financial resources of governmental funds.
Neither transaction,however,has any effect on net position. This amount is the
net effect of these differences in the treatment of long-term liabilities:
Principal payment $ 5,000,000
Advances from Successor Agency (21,404,683)
Postemployment benefits obligation (724,068)
Claims and judgments payable (870,255)
Compensated absences payable (171,189)
Termination benefits payable 660,426 (17,509,769)
Pension expense reported in the governmental funds includes the annual required
contributions.In the Statement of Activities,pension expense includes the change
in the net pension liability,and related change in pension amounts for deferred
outflows of resources and deferred inflows of resources 5,007,033
Some revenues reported in the Statement of Activities are not considered to be available
to finance current expenditures and therefore are reported as available revenues in
the governmental funds:
Net change in unavailable revenue (4,699,583)
Change in net position of governmental activities $ 78,061,426
See accompanying notes to basic financial statements.
-23-
CITY OF TUSTIN
STATEMENT OF NET POSITION
PROPRIETARY FUND
June 30,2015
Business-type
Activity
Water
Enterprise
ASSETS: Fund
CURRENT ASSETS:
Cash and investments $ 14,767,193
Accounts receivable 2,791,123
Interest receivable 30,668
Prepaid items 110
Restricted cash and investments 20,673,118
TOTAL CURRENT ASSETS 38,262,212
NONCURRENT ASSETS:
Capital assets:
Not being depreciated 4,728,481
Being depreciated,net 40,984,094
TOTAL NONCURRENT ASSETS 45,712,575
TOTAL ASSETS 83,974,787
DEFERRED OUTFLOWS OF RESOURCES:
Deferred charge on refunding 418,969
Deferred amounts on pension plans 195,401
TOTAL DEFERRED OUTFLOWS OF RESOURCES 614,370
LIABILITIES:
CURRENT LIABILITIES:
Accounts payable and accrued liabilities 2,203,804
Deposits payable 482,855
Compensated absences payable 176,606
Termination benefits payable 14,787
Interest payable 487,792
Bonds payable 790,000
TOTAL CURRENT LIABILITIES 4,155,844
LONG-TERM LIABILITIES:
Compensated absences payable 19,622
Termination benefits payable 14,787
Bonds payable 41,743,944
Net pension liability 1,832,914
TOTAL LONG-TERM LIABILITIES 43,611,267
TOTAL LIABILITIES 47,767,111
DEFERRED INFLOWS OF RESOURCES:
Deferred amounts on pension plans 705,594
NET POSITION:
Net investment in capital assets 24,270,718
Unrestricted 11,845,734
TOTAL NET POSITION $ 36,116,452
See accompanying notes to basic financial statements.
-24-
CITY OF TUSTIN
STATEMENT OF REVENUES,EXPENSES AND CHANGES IN NET POSITION
PROPRIETARY FUND
For the year ended June 30,2015
Business-type
Activity
Water
Enterprise
Fund
OPERATING REVENUES:
Charges for services $ 19,375,359
OPERATING EXPENSES:
Personnel services 2,488,663
Purchased water 6,530,965
Maintenance and operation 3,492,020
Depreciation and amortization 1,771,670
TOTAL OPERATING EXPENSES 14,283,318
OPERATING INCOME 5,092,041
NONOPERATING REVENUES(EXPENSES):
Investment income 249,863
Other income 489,091
Interest expense and other fiscal charges (1,695,472)
Loss on sale of assets (3,289)
TOTAL NONOPERATING REVENUES(EXPENSES) (959,807)
CHANGE IN NET POSITION 4,132,234
NET POSITION AT BEGINNING OF YEAR,AS RESTATED 31,984,218
NET POSITION AT END OF YEAR $ 36,116,452
See accompanying notes to basic financial statements.
-25-
CITY OF TUSTIN
STATEMENT OF CASH FLOWS
PROPRIETARY FUND
For the year ended June 30,2015
Business-type
Activity
Water
Enterprise
Fund
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers $ 20,498,194
Payments to suppliers (9,144,412)
Cash paid to other funds for services (1,200,000)
Payments to employees (2,475,112)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,678,670
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Acquisition of capital assets (1,202,202)
Cash paid to other funds for capital assets (454,398)
Principal paid on bonds (770,000)
Interest paid (2,106,162)
NET CASH USED BY CAPITAL
AND RELATED FINANCING ACTIVITIES (4,532,762)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income 260,054
Change in the fair value of investments (24,864)
NET CASH PROVIDED BY
INVESTING ACTIVITIES 235,190
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,381,098
CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR 32,059,213
CASH AND CASH EQUIVALENTS-END OF YEAR $ 35,440,311
CASH AND CASH EQUIVALENTS:
Cash and investments-current assets $ 14,767,193
Cash and investments-restricted assets 20,673,118
TOTAL CASH AND CASH EQUIVALENTS $ 35,440,311
See accompanying notes to basic financial statements. (Continued)
-26-
CITY OF TUSTIN
STATEMENT OF CASH FLOWS
PROPRIETARY FUND
(CONTINUED)
For the year ended June 30,2015
Business-type
Activity
Water
Enterprise
Fund
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Operating income $ 5,092,041
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation and amortization 1,771,670
Other nonoperating income 489,091
Change in assets and liabilities:
(Increase)decrease in accounts receivable 537,595
(Increase)decrease in prepaid items 1,305
(Increase)decrease in deferred ouflows of resources (16,058)
Increase(decrease)in accounts payable and accrued liabilities (246,622)
Increase(decrease)in deposits payable 96,149
Increase(decrease)in compensated absences 27,234
Increase(decrease)in termination benefits payable (14,788)
Increase(decrease)in net pension liability (764,541)
Increase(decrease)in deferred inflows of resources 705,594
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 7,678,670
See accompanying notes to basic financial statements.
-27-
CITY OF TUSTIN
STATEMENT OF FIDUCIARY NET POSITION
June 30,2015
Successor Agency
to the
Tustin Community
Redevelopment Agency
Private Purpose Agency
Trust Fund Funds
ASSETS:
Cash and investments $ 5,304,175 $ 119,268
Restricted cash and investments 6,390,213 12,254,623
Receivables:
Taxes - 72,218
Interest 4,833 -
Due from City of Tustin 16,404,683 -
Prepaid items and deposits 5,471 -
Capital assets,net 1,570,400 -
TOTAL ASSETS 29,679,775 $ 12,446,109
LIABILITIES:
Accounts payable 30,348 $ 980
Interest payable 1,007,695 -
Deposits payable 2,000 -
Due to bondholders - 12,445,129
Long-term liabilities:
Due within one year 7,291,171 -
Due in more than one year 74,614,711 -
TOTAL LIABILITIES 82,945,925 $ 12,446,109
NET POSITION:
Held in trust $ (53,266,150)
See accompanying notes to basic financial statements.
-28-
CITY OF TUSTIN
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
For the year ended June 30,2015
Successor Agency
to the
Tustin Community
Redevelopment Agency
Private Purpose
Trust Fund
ADDITIONS:
Tax revenue $ 6,528,897
Rental income 15,000
Investment income 155,180
TOTAL ADDITIONS 6,699,077
DEDUCTIONS:
Administrative expenses 250,000
Community services 281,648
Interest 3,175,906
Contribution to the City of Tustin 32,137,773
Depreciation and amortization 33,424
TOTAL DEDUCTIONS 35,878,751
CHANGE IN NET POSITION (29,179,674)
NET POSITION-BEGINNING OF YEAR (24,086,476)
NET POSITION-END OF YEAR $ (53,266,150)
See accompanying notes to basic financial statements.
-29-
The page left blank intentionally
- 30 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. The Financial Reporting Entity:
The City of Tustin (City) was incorporated in 1927 as a "General Law" City governed by an
elected five-member city council. As required by accounting principles generally accepted in
the United States of America, these financial statements present the City of Tustin (the primary
government) and its component units. The component units discussed below are included in the
City's reporting entity because of the significance of their operational or financial relationship
with the City. These entities are legally separate from each other. However, the City of Tustin's
elected officials have a continuing full or partial accountability for fiscal matters of the other
entities. The financial reporting entity consists of: (1)the City, (2) organizations for which the
City is financially accountable, and (3) organizations for which the nature and significance of
their relationship with the City are such that exclusion would cause the City's financial
statements to be misleading or incomplete.
An organization is fiscally dependent on the primary government if it is unable to adopt its
budget, levy taxes, or set rates or charges, or issue bonded debt without approval by the
primary government. In a blended presentation, a component unit's balances and transactions
are reported in a manner similar to the balances and transactions of the City. Component units
are presented on a blended basis when the component unit's governing body is substantially the
same as the City's or the component unit provides services almost entirely to the City.
Blended Component Units
The Tustin Public Financing Authority (the Authority) is a joint powers authority organized
pursuant to the State of California Government Code, Section 6500. The Authority exists under
a Joint Exercise of Power Agreement dated May 1, 1995. The members of the City Council
constitute the members of the Board of Directors of the Authority. The Authority is authorized
to borrow money for the purpose of financing the acquisition of bonds, notes, and other
obligations of, or for the purpose of making loans to the City and/or to refinance outstanding
obligations of the City or Assessment Districts of the City.
The City of Tustin Housing Authority (the Housing Authority) was established by the City
Council in 2011, and is responsible for the administration of providing affordable housing in
the City. The Housing Authority is governed by a five-member Board of Directors which
consists of members of the City Council, which designates management and has full
accountability for the Housing Authority's financial affairs. The Housing Authority's financial
transactions are reported in the Special Revenue Funds.
Since the City Council serves as the governing board for these component units and
management of the City has operational responsibility for these component units, all of the
City's component units are considered to be blended component units. Blended component
units, although legally separate entities, are in substance, part of the City's operations and so
data from these units are reported within the funds of the primary government. These
component units do not issue separate component unit financial statements.
- 31 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
b. Government-wide and Fund Financial Statements:
The government-wide financial statements (i.e., the statement of net position and the statement
of activities) report information about the reporting government as a whole, except for its
fiduciary activities. All fiduciary activities are reported only in the fund financial statements.
Governmental activities, which normally are supported by taxes and intergovernmental
revenues, are reported separately from business-type activities, which rely to a significant
extent on fees and charges for support. Likewise, the primary government (including its
blended component units) is reported separately from discretely presented component units for
which the primary government is financially accountable. The City has no discretely presented
component units.
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to
interfund activities, payables and receivables. All internal balances in the statement of net
position have been eliminated except those representing balances between the governmental
activities and the business-type activity, which are presented as internal balances and
eliminated in the total primary government column. In the statement of activities, inter-fund
services have been eliminated; however, those transactions between governmental and
business-type activity have not been eliminated.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment are offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenues include 1) charges to
customers or applicants who purchase, use, or directly benefit from goods, services, or
privileges provided by a given function or segment and 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or segment.
Taxes and other items not properly included among program revenues are reported instead as
general revenues.
The underlying accounting system of the City is organized and operated on the basis of
separate funds, each of which is considered to be a separate accounting entity. The operations
of each fund are accounted for with a separate set of self-balancing accounts that comprise its
assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity,
revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated
to and accounted for in individual funds based upon the purposes for which they are to be spent
and the means by which spending activities are controlled.
- 32 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
b. Government-wide and Fund Financial Statements (Continued):
Separate financial statements for the City's governmental, proprietary, and fiduciary funds are
presented after the government-wide financial statements. These statements display information
about major funds individually and other governmental funds in the aggregate for governmental
funds. Fiduciary fund statements, even though excluded from the government-wide financial
statements, include financial information for private purpose trust funds and agency funds.
c. Measurement Focus, Basis of Accounting and Financial Statement Presentation:
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund and
fiduciary fund (fiduciary funds do not have a measurement focus) financial statements. Under
the economic resources measurement focus, all assets, deferred outflows of resources,
liabilities, and deferred inflows of resources (whether current or noncurrent) associated with
their activity are included on their statements of net position. Operating statements present
increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of
accounting, revenues are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows.
Proprietary funds result from providing services and producing and delivering goods.
Nonexchange transactions, in which the City gives (or receives) value without directly
receiving (or giving) equal value in exchange include taxes, grants, entitlements, and donations.
Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all
the eligibility requirements have been satisfied. Property taxes are recognized as revenue in the
year for which they are levied. Operating revenues are those that result from providing services.
Operating expenses for proprietary funds include the cost of sales and services, administrative
expenses, and depreciation on capital assets. All revenues and expenses not meeting this
definition are reported as nonoperating revenues and expenses.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Under the current financial
resources measurement focus, only current assets and current liabilities are generally included
on their balance sheets. The reported fund balance (net current assets) is considered to be a
measure of "available spendable resources". Governmental fund operating statements present
increases (revenues and other financing sources) and decreases (expenditures and other
financing uses) in net current assets. Accordingly, they are said to present a summary of
sources and uses of"available spendable resources" during a period.
- 33 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued):
Noncurrent portions of long-term receivables due to governmental funds are reported on their
balance sheets in spite of their spending measurement focus.
Under the modified accrual basis of accounting, revenues are considered to be available when
they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. For this purpose, the government considers revenues to be available if they are
collected within 60 days of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, except for principal and interest on long-term liabilities,
claims and judgments, and compensated absences, which are recognized as expenditures to the
extent they have matured. Capital asset acquisitions are reported as expenditures in
governmental funds. Proceeds of long-term liabilities are reported as other financing sources.
Property taxes, franchise taxes, licenses, intergovernmental revenue and interest associated
with the current fiscal period are all considered to be susceptible to accrual and so have been
recognized as revenues of the current fiscal period. All other revenue items are considered to be
measurable and available only when cash is received by the government.
The City's fiduciary funds consist of a private purpose trust fund, which is reported using the
economic resources measurement focus, and the agency funds which have no measurement
focus, but utilize the accrual basis for reporting its assets and liabilities.
All governmental activities, business-type activities and proprietary funds of the City follow
Governmental Accounting Standards Board (GASB)pronouncements.
When both restricted and unrestricted resources are available for use, it is the City's policy to
use restricted resources first, then unrestricted resources as they are needed.
- 34 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued):
Fund Classifications
The funds designated as major funds are determined by a mathematical calculation. The City
reports the following major governmental funds:
The General Fund is the primary operating fund of the City and is used to account for all
revenues and expenditures that are not required to be accounted for in another fund.
The MCAS 2010 Capital Proj ects Fund is used to account for capital proj ect costs at the Marine
Corps Air Station.
The City reports the following major proprietary fund:
The Water Enterprise Fund is used to account for the City's water service operations to
residents and businesses.
The City's fund structure also includes the following fund types:
Governmental Funds
Special Revenue Funds are used to account for the proceeds of specific revenue sources that are
restricted by law or administrative action for a specified purpose.
Capital Projects Funds are used to account for financial resources to be used for the acquisition
or construction of major capital facilities.
Fiduciary Funds
Private Purpose Trust Fund is used to account for the activities of the Successor Agency to the
Tustin Community Redevelopment Agency.
Agency Funds are used to account for assets held by the City in a trustee capacity or as an
agent for individuals, private organizations and other governments. Agency funds are custodial
in nature (assets equal liabilities) and do not involve measurement of results of operations. The
agency funds are used to account for taxes received for special assessments debt for which the
City is not obligated.
- 35 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
d. New Accounting Pronouncements:
Current Year Standards
In fiscal year 2014-2015, the City implemented Governmental Accounting Standards Board
(GASB) Statement No. 68, "Accounting and Financial Reporting for Pensions, an Amendment
of GASB Statement No. 27" and GASB Statement No. 71, "Pension Iransition for
Contributions Made Subsequent to the Measurement Date, an Amendment of GASB Statement
No. 68". These Statements establish standards for measuring and recognizing liabilities,
deferred outflows of resources, deferred inflows of resources, and expenses. For defined
benefit pension plans, these Statements identify the methods and assumptions that should be
used to project benefit payments, discount projected benefit payments to their actuarial present
value, and attribute that present value to periods of employee service. Accounting changes
adopted to conform to the provisions of these statements should be applied retroactively. The
result of the implementation of these standards decreased the net position at July 1, 2014 by
$45,364,118 and $2,418,112, in the governmental activities and business-type activity,
respectively.
GASB Statement No. 69 - "Government Combinations and Disposals of Government
Operations" was required to be implemented in the current fiscal year and did not impact the
City.
Pending Accounting Standards
GASB has issued the following statements which may impact the City's financial reporting
requirements in the future:
• GASB 72 - Fair Value Measurement and Application", effective for periods beginning
after June 15, 2015.
• GASB 73 - "Accounting and Financial Reporting for Pensions and Related Assets That Are
Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of
GASB Statements 67 and 68", effective for periods beginning after June 15, 2015 - except
for those provisions that address employers and governmental nonemployer contributing
entities for pensions that are not within the scope of Statement 68, which are effective for
periods beginning after June 15, 2016.
• GASB 74 - "Financial Reporting for Postemployment Benefit Plans Other Than Pension
Plans", effective for periods beginning after June 15, 2016.
• GASB 75 - `Accounting and Financial Reporting for Postemployment Benefits Other Than
Pensions", effective for periods beginning after June 15, 2017.
• GASB 76 - "The Hierarchy of Generally Accepted Accounting Principles for State and
Local Governments", effective for periods beginning after June 15, 2015.
- 36 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net
Position or Equity:
Cash, Cash Equivalents and Investments
Investments are stated at fair value (the value at which a financial instrument would be
exchanged in a current transaction between willing parties other than a forced or liquidation
sale), except for certain investments which have a remaining life of less than one year when
purchased and investment contracts, which are stated at amortized cost.
The City's proprietary fund participates in the pooling of City-wide cash and investments.
Amounts held in the City pool are available to the fund on demand and are considered to be
cash and cash equivalents for statement of cash flow purposes. Investments not held in the City
pool that are short-term investments with original maturities of three months or less from the
date of acquisition are considered cash and cash equivalents.
Capital Assets
Capital assets (including infrastructure) are recorded at cost where historical records are
available and at an estimated original cost where no historical records exist. Contributed capital
assets are valued at their estimated fair value at the date of contribution. Capital asset purchases
(other than infrastructure) in excess of$10,000 are capitalized if they have an expected useful
life of five years or more. Infrastructure assets with a cost exceeding $150,000 are capitalized.
Capital assets include additions to public domain (infrastructure), certain improvements
including pavement, curb and gutter, sidewalks, traffic control devices, streetlights, sewers,
storm drains, bridges, and right-of-way corridors within the City.
Capital assets used in operations are depreciated over their estimated useful lives using the
straight-line method in the government-wide financial statements and in the fund financial
statements of the enterprise fund. Depreciation is charged as an expense against operations and
accumulated depreciation is reported on the respective statement of net position. The lives used
for depreciation purposes of each capital asset class are:
Buildings 5 - 40 years
Improvements other than buildings 5 - 40 years
Property and plant 5 - 40 years
Machinery and equipment 4 - 10 years
Infrastructure 25 - 75 years
- 37 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net
Position or Equity (Continued):
Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position and the governmental funds balance sheet
will sometimes report a separate section for deferred outflows of resources. This separate
financial statement element, deferred ou�flows of resources, represents a consumption of net
position that applies to future periods and so will not be recognized as an outflow of resources
(expense/expenditure) until that time. The City has three items that qualify for reporting in this
category. The first item is the deferred charge on refunding, net of accumulated amortization,
reported in the government-wide statement of net position and the proprietary fund financial
statements. A deferred charge on refunding results from the difference in the carrying value of
refunded debt and its reacquisition price. This amount is deferred and amortized over the
shorter of the life of the refunded or refunding debt. The second item is the deferred outflow
related to pensions. This amount is equal to employer contributions made after the
measurement date of the net pension liability. The third item is a deferred outflow related to
pensions for the changes in proportion and differences between employer contributions and the
proportionate share of contributions. This amount is amortized over a closed period equal to
the average of the expected remaining services lives of all employees that are provided with
pensions through the Plans determined as of June 30, 2013 (the beginning of the measurement
period ended June 30, 2014), which is 3.8 years.
In addition to liabilities, the statement of net position and the governmental funds balance sheet
will sometimes report a separate section for deferred inflows of resources. This separate
financial statement element, deferred inflows of resources, represents an acquisition of net
position that applies to future periods and will not be recognized as an inflow of resources
(revenue) until that time. The City has two items that qualify for reporting in this category.
The first item, which arises only under a modified accrual basis of accounting is unavailable
revenue, which is reported only in the governmental funds balance sheet. The governmental
funds report unavailable revenues from grants. These amounts are deferred and recognized as
an inflow of resources in the period that the amounts become available. The second item is a
deferred inflow related to pensions resulting from the difference in projected and actual
earnings on investments of the pension plan fiduciary net position. This amount is amortized
over five years.
Land Held for Resale
Land held for resale is carried at the lower of cost or estimated realizable value determined only
upon the execution of a disposition and development agreement.
- 38 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net
Position or Equity (Continued):
Property Taxes
Under California law, property taxes are assessed and collected by the counties up to 1% of
assessed value, plus other increases approved by the voters. The property taxes go into a pool,
and are then allocated to the cities based on complex formulas. The City accrues as revenues
only those taxes which are received within 60 days after year end in the fund financial
statements.
Property Tax Calendar
Property taxes are assessed and collected each fiscal year according to the following property
tax calendar:
Lien date January 1st
Levy period July 1st to June 30th
Levy date On or before 4th Monday in September
Due date November 1st- 1st installment
February 1st- 2"d installment
Collection date December 10th - 1st installment
April 10th - 2"d installment
Interest and penalties are assessed after the collection date.
Compensated Absences
All vested vacation and compensatory leave time is recognized as an expense and as a liability
in the proprietary type fund at the time the liability vests. Governmental fund types recognize
the vested vacation and compensatory time as an expenditure in the current year to the extent it
is paid during the year or is due and payable at year-end. Any additional accrued vacation and
compensatory time relating to governmental funds and amounts relating to the proprietary fund
type are included as long-term liabilities within the statement of net position.
- 39 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net
Position or Equity (Continued):
Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the
City's California Public Employees' Retirement System (CalPERS)plans (Plans) and additions
to/deductions from the Plans' fiduciary net position have been determined on the same basis as
they are reported by CalPERS. For this purpose, benefit payments (including refunds of
employee contributions) are recognized when due and payable in accordance with the benefit
terms. Investments are reported at fair value.
f Use of Estimates:
The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the statement of net position date, and reported amounts of revenues and
expenses during the reporting period. Estimates are used to determine depreciation expense, the
allowance for doubtful accounts and certain liabilities. Actual results may differ from those
estimates.
2. CASH AND INVESTMENTS:
Cash and Investments
Cash and investments as of June 30, 2015 are classified in the accompanying financial statements
as follows:
Statement of Net Position:
Cash and investments $ 166,297,058
Restricted cash and investments 39,128,362
Fiduciary Funds:
Cash and investments 5,423,443
Restricted cash and investments 18,644,836
Total Cash and Investments 229.493.699
- 40 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
2. CASH AND INVESTMENTS (CONTINUED):
Cash and Investments (Continued)
Cash and investments as of June 30, 2015 consist of the following:
Cash on hand $ 9,100
Deposits with financial institutions 6,975,127
Investments 222,509,472
Total Cash and Investments 229.493.699
Investments Authorized by the California Government Code and the City's Investment
Policy
The table below identifies the investment types that are authorized for the City. The table also
identifies certain provisions of the City's investment policy that address interest rate risk and
concentration of credit risk. This table does not address investments of debt proceeds held by fiscal
agents that are governed by the provisions of debt agreements of the City, rather than the general
provisions of the California Government Code or the City's investment policy.
Maximum Maximum
Investment Types Percentage Investment
Authorized by the City's Policy Maturity of Portfolio in One Issuer
Negotiable certificates of deposit None 30% None
Prime quality commercial paper 270 days * 25% None
Government sponsored pools (LAIF, mutual funds) N/A None None
Commercial bank time drafts
(Bankers acceptances) 180 days 25% 30%
Medium-term notes 5 years 15% None
Municipal and state securities None 15% 5%
Federal agency bonds or notes 5 years 75% None
U.S. Treasury securities 5 years None None
Money market funds N/A None None
Repurchase agreements 1 year None None
N/A-Not Applicable
* Average weighted maturity shall not exceed ninety (90) days if commercial paper exceeds
fifteen (15)percent of total portfolio assets.
- 41 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
2. CASH AND INVESTMENTS (CONTINUED):
Investments Authorized by Debt Agreements
Investment of debt proceeds held by bond trustees is governed by provisions of the debt
agreements, rather than the general provisions of the California Government Code or the City's
investment policy. The table below identifies the investment types that are authorized for
investments held by bond trustees. The table also identifies certain provisions of these debt
agreements that address interest rate risk and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Types Maturity of Portfolio in One Issuer
U.S. Treasury Obligations None None None
U.S. Government Sponsored
Agency Securities None None None
Banker's Acceptances 270 days None None
Commercial Paper 180 days None None
Money Market Mutual Funds N/A None None
Investment Contracts 30 years None None
Certificates of Deposit None None None
Corporate Notes None None None
Repurchase Agreements None None None
N/A-Not Applicable
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of
its fair value to changes in market interest rates. One of the ways that the City manages its
exposure to interest rate risk is by purchasing a combination of shorter term and longer term
investments and by timing cash flows from maturities so that a portion of the portfolio is maturing
or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity
needed for operations.
- 42 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
2. CASH AND INVESTMENTS (CONTINUED):
Disclosures Relating to Interest Rate Risk(Continued)
Information about the sensitivity of the fair values of the City's investments (including investments
held by bond trustees) to market interest rate fluctuations is provided by the following table that
shows the distribution of the City's investments by maturity:
Remaining Maturity
12 Months 13 -24 25 -60 Over 60
Investment Type or Less Months Months Months Total
United States Treasury Obligations $ 3,001,641 $ 22,018,823 $ 9,510,077 $ - $ 34,530,541
United States Government
Sponsored Agency Securities:
Federal National Mortgage
Association(FNMA) - - 16,227,854 - 16,227,854
Federal Home Loan Bank(FHLB) - 10,075,630 15,986,873 - 26,062,503
Federal Home Loan Mortgage
Corporation(FHLMC) - 17,509,419 18,182,271 - 35,691,690
Federal Farm Credit Bank(FFCB) - 1,995,798 12,851,213 - 14,847,011
Local Agency Investment Pool(LAIF) 28,124,069 - - - 28,124,069
Orange County Investment Pool 10,410,395 - - - 10,410,395
Negotiable Certificates of Deposit 744,426 2,236,798 9,181,038 - 12,162,262
Medium-term Notes - 9,100,221 9,128,609 - 18,228,830
Municipal Bonds - - 3,986,680 - 3,986,680
Held by Fiscal Agents:
Money Market Mutual Funds 22,237,637 - - - 22,237,637
64.518.168 62.936.689 95.054.615 - $222,509,472
- 43 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
2. CASH AND INVESTMENTS (CONTINUED):
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally recognized
statistical rating organization. Presented below is the minimum rating required by (where
applicable) the California Government Code, the City's investment policy, or debt agreements, and
the Standard and Poor's actual rating as of year end for each investment type.
Total Minimum Exempt
as of Legal from Not
Investment Type June 30,2015 Rating Disclosure AAA AA+ AA Other Rated
U.S.Treasury Obligations $ 34,530,541 N/A $34,530,541 $ $ - $ $ $
U.S.Government Sponsored
Agency Securities:
FNMA 16,227,854 N/A 16,227,854
FHLB 26,062,503 N/A 26,062,503
FHLMC 35,691,690 N/A 35,691,690
FFCB 14,847,011 N/A 14,847,011 -
LocalAgencyInvestmentPool: 28,124,069 N/A - - - - - 28,124,069
Orange County Investment Pool 10,410,395 N/A 10,410,395
Negotiable Certificates
of Deposit 12,162,262 N/A 12,162,262
Medium-termNotes18,228,830 A 2,007,056 7,062,790 9,158,984 -
Municipal Bonds 3,986,680 A - - 3,986,680
Held by Fiscal Agents:
Money Market Mutual Funds 22,237,637 A 22,237,637
Total S 222509 47? ;41 124,2, SIZA22.OiB L-7462.22-0 513,145,664 iiQ 2.6_=
N/A-Not Applicable
The ratings for the"Other" category above are as follows:
Medium-term Notes: Municipal Bonds:
A $ 3,009,377 Aa3 3.986.680
A2 3,115,996
Aa3e 1,001,921
AA- 2,031,690
9,158,984
- 44 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
2. CASH AND INVESTMENTS (CONTINUED):
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any
one issuer beyond that stipulated by the California Government Code. Investments in any one
issuer that represent 5% or more of total City's investments are as follows:
Reported
Issuer Investment Type Amount
Federal National Mortgage Association United States Government
Sponsored Agency Securities $ 16,227,854
Federal Home Loan Bank United States Government
Sponsored Agency Securities 26,062,503
Federal Home Loan Mortgage Corporation United States Government
Sponsored Agency Securities 35,691,690
Federal Farm Credit Bank United States Government
Sponsored Agency Securities 14,847,011
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial
institution, an investor will not be able to recover its deposits or will not be able to recover
collateral securities that are in the possession of an outside party. The custodial credit risk for
investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a
transaction, an investor will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. The California Government Code and the
City's investment policy do not contain legal or policy requirements that would limit the exposure
to custodial credit risk for deposits or investments, other than the following provision for deposits:
The California Government Code requires that a financial institution secures deposits made by
state or local governmental units by pledging securities in an undivided collateral pool held by a
depository regulated under state law (unless so waived by the governmental unit). The market
value of the pledged securities in the collateral pool must equal at least 110% of the total amount
deposited by the public agencies. California law also allows financial institutions to secure City
deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public
deposits.
- 45 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
2. CASH AND INVESTMENTS (CONTINUED):
Custodial Credit Risk (Continued)
As of June 30, 2015, none of the City's deposits with financial institutions in excess of federal
depository insurance limits were held in uncollateralized accounts.
As of June 30, 2015, the City's investments in the following investment types were held by the
same broker-dealer (counterparty)that was used by the City to buy the securities:
Carrying
Investment Type Value
U.S. Treasury Obligations $ 34,530,541
U.S. Government Sponsored
Agency Securities 92,829,058
Medium-term Notes 18,228,830
Municipal Bonds 3,986,680
Negotiable Certificates of Deposit 12,162,262
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated
by the California Government Code under the oversight of the Treasurer of the State of California.
The fair value of the City's investment in this pool is reported in the accompanying financial
statements at amounts based upon the City's pro-rata share of the fair value provided by LAW for
the entire LAW portfolio (in relation to the amortized cost of that portfolio). The balance available
for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an
amortized cost basis.
Investment in County Investment Pool
The Orange County Investment Pool Fund (OCIP) is a pooled investment fund program governed
by the Orange County Board of Supervisors, and is administered by the Orange County Treasurer
and Tax Collector. Investments in OCIP are highly liquid as deposits and withdrawal can be made
at any time without penalty. The City's fair value of its share in the pool is the same value of the
pool shares, which amounted to $10,410,395. Information on OCIP's use of derivative securities
in its investment portfolio and OCIP's and the City's exposure to credit, market, or legal risk is not
available.
- 46 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
3. LOANS RECEIVABLE:
Multi-Family Development Loan: A bridge loan was provided to a senior apartment developer to
assist in the development of 53 affordable rental units. The total outstanding balance as of
June 30, 2015 was $350,000.
Home Improvement Loans: Home improvement loans were provided to low and moderate income
households (rental and ownership). These deferred loans are due upon sale, refinance, or when the
rental units are no longer available as affordable units. Term is 30 years. The total outstanding
balance as of June 30, 2015, was $44,496. An allowance of$44,496 has been recorded to reflect
the amount of the loans not expected to be collectible.
Homebuyer Program Loans: Down payment assistance was provided to qualified first time
homebuyers. The loans provided in the Ambrose Lane Development are due beginning in 2016, or
when the homeowner sells or refinances. The loans provided in the Tustin Grove Development are
due when the homeowner sells or refinances. If the homeowner does not sell or refinance before
July 2015, the loan is forgiven. The total outstanding balance as of June 30, 2015, was $655,237.
An allowance of $655,237 has been recorded to reflect the amount of loans not expected to be
collectible.
Orange County Rescue Mission: On February 10, 2015, the City entered into an agreement with
the Orange County Rescue Mission (OCRM), whereby the City agreed to convey two residential
buildings to the OCRM to be used for housing for homeless veterans. In exchange, the OCRM
executed a promissory note to the City in the amount of $533,000. The note is payable after
30 years with 3% interest. For every year that the OCRM uses the property for homeless veterans
housing, the promissory note and any accrued interest will be forgiven by 1/30th. Should the
OCRM successfully utilize the properties for homeless veterans housing for all 30 years in which
the note is in effect, as stipulated in the deed of trust, it will owe no money to the City. The total
outstanding balance at June 30, 2015, including accrued interest of $6,133 was $539,133. An
allowance of $539,133 has been recorded to reflect the amount of the note not expected to be
collectible.
4. INTERFUND TRANSFERS:
The composition of interfund transfers for the year ended June 30, 2015 is as follows:
Transfers In Transfers Out Amount
General Fund Other Governmental Funds $ 3,693,381
Other Governmental Funds General Fund 1,572,721
5266.102
- 47 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
4. INTERFUND TRANSFERS (CONTINUED):
The transfers during the fiscal year ended June 30, 2015 were for the following purposes:
A transfer from other governmental funds totaling $322,216 was made to reimburse the
General Fund per the adopted budget for fiscal year 2014-15.
A transfer from other governmental funds totaling $537,479 to the General Fund to repay taxes
for amounts transferred to cover negative cash in prior years.
A transfer from other governmental funds totaling $2,833,686 to the General Fund for services
provided in the Special Tax B area.
The General Fund transferred $1,572,721 to other governmental funds to eliminate negative
cash until reimbursement is received from the fiscal agent.
5. LAND TRANSFER FROM THE UNITED STATES GOVERNMENT:
On May 13, 2002, the City entered into an agreement with the United States of America (the
Government) wherein the Government agreed to convey to the City a portion of the former Marine
Corps Air Station Tustin (MCAS Tustin). The transfer is pursuant to the authority provided by
Section 2905(b)4 of the Defense Base Closure and Realignment Act of 1990, as amended, and the
implementing regulations of the Department of Defense to convey surplus property at a closing
installation to the local redevelopment authority at no cost for economic development purposes.
The real properties, consisting of approximately 1,153 acres of land located within the bounds of
the former MCAS Tustin, were conveyed to the City in multiple parcels, by separate conveyances.
Parcel Group I, (consisting of approximately 977 acres), was conveyed to the City on
May 14, 2002. A portion of Parcel Group I (consisting of approximately 23 acres) was conveyed to
the City during fiscal year 2003 and the remainder was conveyed to the City in fiscal year 2004.
Conveyance of Parcel Group II (consisting of a total of 49 acres)was conveyed in September 2006
and May and July 2003. Conveyance of Parcel Group III (consisting of approximately 18 acres)
and Parcel Group IV (consisting of approximately 119 acres) were conveyed in September 2006
and April 2008, respectively. As part of the agreement, the City also received certain personal
property and utilities on the base. The land parcels were recorded at their estimated fair values at
the dates of conveyance.
Subsequent to the conveyance of properties from the Government, the Agreement required the City
to convey approximately 22 acres to Santa Ana Unified School District (SAUSD), 15 acres to
Rancho Santiago Community College District (RSCCD) and 65 acres to South Orange County
Community College District (SOCCCD) subject to certain conditions as detailed in the agreement
with the Government and the terms and conditions of the settlement and release agreements
between the City and SAUSD and the City and the RSCCD.
- 48 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
5. LAND TRANSFER FROM THE UNITED STATES GOVERNMENT: (CONTINUED):
The SAUSD declined the conveyance of the land from the City and instead of receiving the land,
the SAUSD was paid $60,000,000 under an agreement dated December 20, 2002. The City
conveyed the RSCCD parcel during fiscal year 2003. Conveyance of the SOCCCD parcel
happened in fiscal year 2004.
On May 21, 2013, the City Council approved a General Plan Amendment, MCAS Tustin Specific
Plan Amendment, Development Agreement, and Agreement for Exchange of Real Property with
the SOCCCD. The Exchange Agreement delineates the terms and processes associated with the
exchange of the ultimate ownership of approximately 89 acres of land within Planning Area 1 of
Tustin Legacy. The City of Irvine has identified concerns about that project's traffic impacts in
Irvine, and about the traffic analysis of projects in the MCAS Tustin Specific Plan area generally.
In July 2013, the City entered into a settlement agreement with the City of Irvine which allowed
the City to proceed with the Exchange Agreement. The transfer of the parcels occurred
August 2014 and was considered an even exchange.
The City also entered into a separate agreement with the SOCCCD in July 2014 to acquire the
Valencia Parcels, approximately 5 acres of land, for $1,083,220 less a demolition credit of
$500,000.
In August 2014, the City sold 74 acres of the land to a developer for $56,000,000 resulting in a gain
on land held for resale of$48,136,121.
In February 2015, the City entered into an Exchange Agreement with the United States of America
Department of Army. The Exchange Agreement delineates the terms associated with the exchange
of the ultimate ownership of approximately 15 acres of usable land and improvements. The
transfer of the property occurred in April 2015 and was determined to be of equivalent value.
The recorded value of the remaining parcels as of June 30, 2015 was $90,026,647. The value was
based on an assumption that most of the land will be sold in a bulk sale to a single developer and
the remaining property not sold will be park space or conveyed to other governmental agencies.
- 49 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
6. CAPITALASSETS:
A summary of changes in the Governmental Activities capital assets for the year ended
June 30, 2015 is as follows:
Balance at Balance at
July 1,2014 Additions Deletions June 30,2015
Capital assets,not being depreciated:
Land $ 44,140,596 $ - $ - $ 44,140,596
Right of way 44,266,501 - (508,345) 43,758,156
Construction in progress 69,153,498 17,268,882 (28,607,926) 57,814,454
Total capital assets,not
being depreciated 157,560,595 17,268,882 (29,116,271) 145,713,206
Capital assets,being depreciated:
Buildings 71,366,665 - (15,950) 71,350,715
Improvements other than buildings 23,616,810 2,755,483 (237,387) 26,134,906
Machinery and equipment 15,402,132 606,549 (627,252) 15,381,429
Infrastructure 321,639,450 14,109,855 - 335,749,305
Total capital assets,
being depreciated 432,025,057 17,471,887 (880,589) 448,616,355
Less accumulated depreciation for:
Buildings (14,025,763) (1,433,004) 15,950 (15,442,817)
Improvements other than buildings (4,980,436) (849,414) 231,464 (5,598,386)
Machinery and equipment (11,997,525) (845,060) 625,527 (12,217,058)
Infrastructure (96,908,605) (7,513,610) - (104,422,215)
Total accumulated depreciation (127,912,329) (10,641,088) 872,941 (137,680,476)
Total capital assets,
being depreciated,net 304,112,728 6,830,799 (7,648) 310,935,879
Total governmental activities
capital assets,net 461,673,323 24,099.681 (29,123,919) 456,649,085
- 50 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
6. CAPITAL ASSETS (CONTINUED):
Depreciation expense was charged to functions/programs of the governmental activities as follows:
General government $ 214,332
Public safety 330,093
Public works 9,602,805
Community services 493,858
10,641088
A summary of changes in the Business-type Activity capital assets for the year ended
June 30, 2015 is as follows:
Balance at Balance at
July 1,2014 Additions Deletions June 30,2015
Capital assets,not being depreciated
Land $ 1,177,216 $ - $ - $ 1,177,216
Construction in progress 2,464,004 1,087,261 - 3,551,265
Total capital assets,
not being depreciated 3,641,220 1,087,261 - 4,728,481
Capital assets,being depreciated:
Buildings and improvements 9,568,372 - (67,995) 9,500,377
Property,plant and equipment 57,407,957 424,068 (71,216) 57,760,809
Total capital assets,
being depreciated 66,976,329 424,068 (139,211) 67,261,186
Less accumulated depreciation for:
Buildings and improvements (4,756,632) (268,009) 64,707 (4,959,934)
Property,plant and equipment (19,938,772) (1,449,601) 71,215 (21,317,158)
Total accumulated depreciation (24,695,404) (1,717,610) 135,922 (26,277,092)
Total capital assets,being
depreciated,net 42,280,925 (1,293,542) (3,289) 40,984,094
Total business-type activity
capital assets,net 45,922,145 (206 881) (3289) 45,712,575
During the fiscal year ended June 30, 2015, the City capitalized interest of$309,126.
- 51 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
7. LONG-TERM LIABILITIES:
A summary of long-term liability activity for the year ended June 30, 2015 is as follows:
Balance at
July 1,2014
(As Restated- Balance at Due Within
Note 20) Additions Deletions June 30,2015 One Year
Governmental activities:
Due to Successor Agency to
the Tustin Community
Redevelopment Agency(Note 8)$ - $ 21,404,683 $ (5,000,000) $ 16,404,683 $ 4,101,171
Pension liability(Note 9c) 49,610,256 - (11,521,160) 38,089,096 -
Postemployment benefits
obligation(Note 10) 4,970,150 1,142,391 (418,323) 5,694,218 -
Claims and judgments(Note 12) 4,278,500 3,874,920 (3,004,665) 5,148,755 5,148,755
'termination benefits 1,981,278 - (660,426) 1,320,852 660,426
Compensated absences 2,853,830 2,496,825 (2,325,636) 3,025,019 2,722,517
Total governmental
activities long-term
liabilities $ 63,694,014 $ 28,918,819 $ (22,930,210) $ 69,682,623 $ 12,632,869
Business-type activity:
2011 Water
Revenue bonds $ 20,760,000 $ - $ - $ 20,760,000 $ -
Bond premium 274,111 (10,200) 263,911 -
2012 Refunding Water
Revenue bonds 7,490,000 (725,000) 6,765,000 745,000
Bond premium 715,372 (81,757) 633,615 -
2013 Water
Revenue bonds 14,045,000 (45,000) 14,000,000 45,000
Bond premium 115,362 (3,944) 111,418 -
Pension liability(Note 9c) 2,597,455 (764,541) 1,832,914 -
'termination benefits 44,362 - (14,788) 29,574 14,787
Compensated absences 168,994 180,891 (153,657) 196,228 176,606
Total business-type
activity long-term
liabilities 46210.656 1 180,891 (1.798.887) 44.592.660 $ 981,393
- 52 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
7. LONG-TERM LIABILITIES (CONTINUED):
Termination Benefits Payable
In June 2012, the City Council approved the offering of an early retirement incentive program
administered by Public Agency Retirement Services (PARS) to directly reduce General Fund
expenditures while also making is easier to restructure staffing levels and operations in a more
economical and efficient manner. The City offered early retirement incentives to all regular
employees meeting the following criteria: a) Employed by the City in a full-time or part-time
benefited position as of June 5, 2012; and b) 50 years of age with 5 years of City service and
5 years of Ca1PERS service as of October 31, 2012; and c) Resigned from City employment
effective no later than October 31, 2012; and d) Retired under Ca1PERS effective no later than
November 1, 2012. The incentive provided a benefit of 7% of the employee's base salary.
Employees chose one of 14 options on how they would receive the benefit. Thirty-five City
employees accepted the City's offer. The City purchased an annuity through Pacific Life Insurance
Company to fund the plan with 5 annual payments of $675,213. As of June 30, 2015, the
outstanding liability due to fund the plan is $1,350,426, ($1,320,852 reported in the governmental
activities and $29,574 in the business-type activity) with annual payment dates of October 10, 2015
and 2016.
Business-type Activity
2011 Water Revenue Bonds
On May 25, 2011, the Public Financing Authority issued $20,760,000, 2011 Water Revenue
Bonds. The Bonds were issued to finance certain water system improvements. The Bonds are
payable in annual installments ranging from $735,000 to $1,690,000 until maturity on
April 1, 2041. Interest is payable semiannually on April 1 and October 1, with rates ranging from
5.0%to 5.25% per annum.
The City has pledged net revenues received from the operation of the Water Enterprise to repay the
outstanding debt service. The net revenues are the amount of the gross revenues received less the
amount of maintenance and operation costs, which include management, personnel, services,
equipment, repair and other necessary costs of maintaining and operating the Water Enterprise. The
City has covenanted to fix, prescribe, revise and collect rates, fees and charges for the services and
facility furnished by the Water Enterprise during each fiscal year which are sufficient to yield net
revenues, at least equal to 120% of the annual debt service on the bonds. At June 30, 2015, total
interest and principal remaining on the bonds is $40,425,688. During the fiscal year, the total
interest expense incurred was $1,047,625 and net revenues were $6,863,711.
- 53 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
7. LONG-TERM LIABILITIES (CONTINUED):
Business-type Activity (Continued)
2011 Water Revenue Bonds (Continued)
The annual debt service requirements to amortize the bonds are as follows:
Year Ending
June 30, Principal Interest Total
2016 $ - $ 1,047,625 $ 1,047,625
2017 - 1,047,625 1,047,625
2018 - 1,047,625 1,047,625
2019 - 1,047,625 1,047,625
2020 - 1,047,625 1,047,625
2021 - 2025 1,505,000 5,201,375 6,706,375
2026 - 2030 4,470,000 4,429,838 8,899,838
2031 - 2035 5,750,000 3,151,850 8,901,850
2036 - 2040 7,345,000 1,560,000 8,905,000
2041 1,690,000 84,500 1,774,500
20,760,000 19,665,688 40,425,688
Add: Premium 263,911 - 263,911
Totals 21,023,911 19.665.688 $ 40,689.599
2012 Refunding Water Revenue Bonds
On March 27, 2012, the City issued $8,910,000, 2012 Refunding Water Revenue Bonds. The
Bonds were issued to provide funds to defease the 2003 Refunding Water Revenue Bonds and
prepay certain outstanding notes payable incurred to finance improvements to the Water
Enterprise.
The Bonds are payable in annual installments ranging from $710,000 to $960,000 until maturity on
April 1, 2023. Interest is payable semiannually on April 1 and October 1, with rates ranging from
2.0% to 4.0% per annum.
The defeasance resulted in a difference between the reacquisition price and the net carrying amount
of the old debt of$594,664. The difference reported in the accompanying statements as a deferred
outflow of resources, is being charged to interest expense through 2023. The remaining balance at
June 30, 2015 is $418,969.
- 54 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
7. LONG-TERM LIABILITIES (CONTINUED):
Business-type Activity (Continued)
2012 Refunding Water Revenue Bonds (Continued)
The City has pledged net revenues received from the operation of Water Enterprise to repay the
outstanding debt service. The net revenues are the amount of the gross revenues received less the
amount of maintenance and operation costs, which include management, personnel, services,
equipment, repair and other necessary costs of maintaining and operating the Water Enterprise. The
City has covenanted to fix, prescribe, revise and collect rates, fees and charges for the services and
facility furnished by the Water Enterprise during each fiscal year which are sufficient to yield net
revenues, at least equal to 120% of the annual debt service on the bonds. At June 30, 2015, total
interest and principal remaining on the bonds is $7,968,950. During the fiscal year, the total
interest expense incurred was $272,175, principal payments were $725,000, and net revenues were
$6,863,711.
The annual debt service requirements to amortize the bonds are as follows:
Year Ending
June 30, Principal Interest Total
2016 $ 745,000 $ 250,425 $ 995,425
2017 770,000 228,075 998,075
2018 795,000 197,275 992,275
2019 830,000 165,475 995,475
2020 860,000 138,500 998,500
2021 - 2023 2,765,000 224,200 2,989,200
6,765,000 1,203,950 7,968,950
Add: premium 633,615 - 633,615
Totals 7,398,615 1203.950 8.602.565
- 55 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
7. LONG-TERM LIABILITIES (CONTINUED):
Business-type Activity (Continued)
2013 Water Revenue Bonds
On April 1, 2014, the City issued $14,045,000, 2013 Water Revenue Bonds. The Bonds were
issued to finance certain water system improvements. The Bonds are payable in annual installments
ranging from $45,000 to $2,615,000 until maturity on April 1, 2043. Interest is payable
semiannually on April 1 and October 1, with rates ranging from 2.0% to 5.00%per annum.
The City has pledged net revenues received from the operation of Water Enterprise to repay the
outstanding debt service. The net revenues are the amount of the gross revenues received less the
amount of maintenance and operation costs, which include management, personnel, services,
equipment, repair and other necessary costs of maintaining and operating the Water Enterprise. The
City has covenanted to fix, prescribe, revise and collect rates, fees and charges for the services and
facility furnished by the Water Enterprise during each fiscal year which are sufficient to yield net
revenues, at least equal to 120% of the annual debt service on the bonds. At June 30, 2015, total
interest and principal remaining on the bonds is $28,382,350. During the fiscal year, the total
interest expense incurred was $654,020 and net revenues were $6,863,711.
The annual debt service requirements to amortize the bonds are as follows:
Year Ending
June 30, Principal Interest Total
2016 $ 45,000 $ 653,120 $ 698,120
2017 45,000 652,220 697,220
2018 50,000 651,320 701,320
2019 50,000 650,320 700,320
2020 50,000 648,320 698,320
2021 - 2025 820,000 3,194,690 4,014,690
2026 - 2030 1,900,000 2,908,210 4,808,210
2031 - 2035 2,325,000 2,480,006 4,805,006
2036 - 2040 2,930,000 1,876,338 4,806,338
2041 5,785,000 667,806 6,452,806
14,000,000 14,382,350 28,382,350
Add: premium 111,418 - 111,418
Totals 14,111,418 14.382.350 28.493.768
- 56 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
8. DUE TO SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT
AGENCY:
On December 31, 2008, the City entered into a promissory note with the former Redevelopment
Agency in the amount of $18,881,750. The City promised to pay the former Redevelopment
Agency on December 1, 2013, the principal amount of $18,881,750 with interest accrued thereon
from December 30, 2008 to the maturity date at the rate of 4.25% per annum, compounded
semiannually on June 1 and December 1 in each year, commencing June 1, 2009. Effective
February 1, 2012, the former Redevelopment Agency was dissolved and the promissory note was
transferred to the Successor Agency to the Tustin Community Redevelopment Agency. The City
has negotiated with the State Department of Finance (DOF) to allow for the Local Agency
Investment Fund (LAIF) interest rate to be used as the effective interest and to pay the debt off
over four to five years. The DOF agreed to allow the LAIF interest rate at the time the City
entered into the promissory note with the former Redevelopment Agency which was 2.54% and
also agreed to five installment payments with the first payment due within seven days of the City
accepting DOF's offer. With the effective flat interest rate of 2.54% compounded annually the
total amount payable to the Successor Agency to the Tustin Community Redevelopment Agency
was $21,404,683. The City signed the settlement agreement on December 9, 2014, and the first
installment payment totaling $5,000,000 was made within the required time period. The remaining
balance as of June 30, 2015 is $16,404,683 and is payable in four annual installments of
$4,101,171 beginning on or before December 31st, 2015, and again on or before December 31 of
each of the following three years (2016, 2017 and 2018). The balance of$21,404,683 at the time
of settlement was reclassified to long-term debt and was reported as a special item in the general
fund.
9. PENSION PLANS:
a. General Information about the Pension Plans:
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the City's
separate Safety (police) and Miscellaneous (all other) Plans. The Miscellaneous Plan is an
agent multiple-employer defined benefit pension plan, and the Safety Plan is a cost-sharing
multiple employer defined benefit pension plan. Both of these Plans are administered by the
California Public Employees' Retirement System (CalPERS), which acts as a common
investment and administrative agent for its participating member employers. Benefit provisions
under the Plans are established by State statute and City resolution. Ca1PERS issues publicly
available reports that include a full description of the pension plans regarding benefit
provisions, assumptions and membership information that can be found on the Ca1PERS
website.
- 57 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
a. General Information about the Pension Plans (Continued):
Benefits Provided
Ca1PERS provides service retirement and disability benefits, annual cost of living adjustments
and death benefits to plan members, who must be public employees and beneficiaries. Benefits
are based on years of credited service. Members with five years of total service are eligible to
retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty
disability benefits after 5 years of service. The death benefit is one of the following: the Basic
Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The
cost of living adjustments for each plan are applied as specified by the Public Employees'
Retirement Law.
The Plans' provisions and benefits in effect at June 30, 2015, are summarized as follows:
Miscellaneous
Prior to January 1,2012 to On or After
Hire date January 1,2012 December 31,2012 January 1,2013
Benefit formula 2%A55 2%A60 2%A62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payments monthly for life monthly for life monthly for life
Retirement age 50-63 50-63 52-67
Monthly benefits,as a%of
eligible compensation 2% 2% 2%
Required employee contribution rates 7% 7% 6.25%
Required employer contribution rates 11.701% 11.701% 11.701%
Safety
Prior to January 1,2012 to On or After
Hire date January 1,2012 December 31,2012 January 1,2013
Benefit formula 3%A50 2%A50 2.7%A57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payments monthly for life monthly for life monthly for life
Retirement age 50 50-55 50-57
Monthly benefits,as a%of
eligible compensation 3% 2% 2.7%
Required employee contribution rates 9% 9% 11.5%
Required employer contribution rates 27.859% 20.083% 11.500%
- 58 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
a. General Information about the Pension Plans (Continued):
Employees Covered
At June 30, 2015, the following employees were covered by the benefit terms for the
Miscellaneous Plan:
Miscellaneous
Inactive employees or beneficiaries
currently receiving benefits 218
Inactive employees entitled to but
not yet receiving benefits 297
Active employees 172
Total 687
Contributions
Section 20814(c) of the California Public Employees' Retirement Law requires that the
employer contribution rates for all public employers be determined on an annual basis by the
actuary and shall be effective on the July 1 following notice of a change in the rate. Funding
contributions for both Plans are determined annually on an actuarial basis as of June 30 by
CalPERS. The actuarially determined rate is the estimated amount necessary to finance the
costs of benefits earned by employees during the year, with an additional amount to finance any
unfunded accrued liability. The City is required to contribute the difference between the
actuarially determined rate and the contribution rate of employees.
b. Net Pension Liability:
The City's net pension liability for each Plan is measured as the total pension liability, less the
pension plan's fiduciary net position. The net pension liability of each of the Plans is measured
as of June 30, 2014, using an annual actuarial valuation as of June 30, 2013 rolled forward to
June 30, 2014 using standard update procedures. A summary of principal assumptions and
methods used to determine the net pension liability is shown below.
- 59 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
b. Net Pension Liability (Continued):
Actuarial Assumptions
The total pension liabilities in the June 30, 2013 actuarial valuations were determined using the
following actuarial assumptions:
Miscellaneous Safety
Valuation Date June 30, 2013 June 30, 2013
Measurement Date June 30, 2014 June 30, 2014
Actuarial Cost Method Entry-Age Normal Entry-Age Normal
Cost Method Cost Method
Actuarial Assumptions:
Discount Rate 7.50% 7.50%
Inflation 2.75% 2.75%
Payroll Growth 3.00% 3.00%
Projected Salary Increase 3.3%- 14.2%(1) 3.3%- 14.2%(1)
Investment Rate of Return 7.5%(2) 7.5%(2)
Mortality (3) (3)
(1) Depending on age, service and type of employment.
(2) Net of pension plan investment expenses,including inflation.
(3) The probabilities of mortality are derived using Ca1PERS' membership data for all funds. The
mortality table used was developed based on Ca1PERS' specific data. The table includes 20 years
of mortality improvements using Society of Actuaries Scale BB. for more details on this table,
please refer to the 2014 experience study report.
The underlying mortality assumptions and all other actuarial assumptions used in the
June 30, 2013 valuation were based on the results of a January 2014 actuarial experience study
for the period 1997 to 2011. Further details of the Experience Study can found on the Ca1PERS
website.
- 60 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
b. Net Pension Liability (Continued):
Discount Rate
The discount rate used to measure the total pension liability was 7.50% for each Plan. To
determine whether the municipal bond rate should be used in the calculation of a discount rate
for each plan, Ca1PERS stress tested plans that would most likely result in a discount rate that
would be different from the actuarially assumed discount rate. Based on the testing, none of the
tested plans run out of assets. Therefore, the current 7.50% discount rate is adequate and the
use of the municipal bond rate calculation is not necessary. The long term expected discount
rate of 7.50% will be applied to all plans in the Public Employees Retirement Fund (PERF).
The stress test results are presented in a detailed report that can be obtained from the Ca1PERS
website.
According to Paragraph 30 of Statement 68, the long-term discount rate should be determined
without reduction for pension plan administrative expense. The 7.50% investment return
assumption used in this accounting valuation is net of administrative expenses. Administrative
expenses are assumed to be 15 basis points. An investment return excluding administrative
expenses would have been 7.65%. Using this lower discount rate has resulted in a slightly
higher Total Pension Liability and Net Pension Liability. Ca1PERS checked the materiality
threshold for the difference in calculation and did not find it to be a material difference.
Ca1PERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability
Management (ALM) review cycle that is scheduled to be completed in February 2018. Any
changes to the discount rate will require Board action and proper stakeholder outreach. For
these reasons, Ca1PERS expects to continue using a discount rate net of administrative
expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. Ca1PERS
will continue to check the materiality of the difference in calculation until such time a change
in methodology occurs.
The long-term expected rate of return on pension plan investments was determined using a
building-block method in which best-estimate ranges of expected future real rates of return
(expected returns, net of pension plan investment expense and inflation) are developed for each
major asset class.
- 61 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
b. Net Pension Liability (Continued):
Discount Rate (Continued)
In determining the long-term expected rate of return, Ca1PERS took into account both
short-term and long-term market return expectations as well as the expected pension fund cash
flows. Using historical returns of all the funds' asset classes, expected compound (geometric)
returns were calculated over the short-term (first 10 years) and the long-term (11-60 years)
using a building-block approach. Using the expected nominal returns for both short-term and
long-term, the present value of benefits was calculated for each fund. The expected rate of
return was set by calculating the single equivalent expected return that arrived at the same
present value of benefits for cash flows as the one calculated using both short-term and long-
term returns. The expected rate of return was then set equivalent to the single equivalent rate
calculated above and rounded down to the nearest one quarter of one percent.
The table below reflects the long-term expected real rate of return by asset class. The rate of
return was calculated using the capital market assumptions applied to determine the discount
rate and asset allocation. These rates of return are net of administrative expenses.
New Real Return Real Return
Strategic Years Years
Asset Class Allocation 1 - 10 (a) 11+ (b)
Global Equity 47.00% 5.25% 5.71%
Global Fixed Income 19.00% 0.99% 2.43%
Inflation Sensitive 6.00% 0.45% 3.36%
Private Equity 12.00% 6.83% 6.95%
Real Estate 11.00% 4.50% 5.13%
Infrastructure and Forestland 3.00% 4.50% 5.09%
Liquidity 2.00% -0.55% -1.05%
Total 100.00%
(a) An expected inflation of 2.5%used for this period
(b) An expected inflation of 3.0%used for this period
- 62 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
c. Changes in the Net Pension Liability:
The changes in the net pension liability for the Miscellaneous Plan are as follows:
Increase (Decrease)
Total Plan Net Pension
Pension Fiduciary Liability
Liability Net Position (Asset)
Balance at June 30, 2014 $ 89,297,153 $ 69,316,731 $ 19,980,422
Changes in the Year:
Service cost 1,747,494 - 1,747,494
Interest on the total pension liability 6,613,765 - 6,613,765
Differences between actual and
expected experience - - -
Changes in assumptions - - -
Changes in benefit terms - - -
Contribution - employer - 1,379,562 (1,379,562)
Contribution - employee
(paid by employer) - - -
Contribution - employee - 962,617 (962,617)
Net investment income - 11,900,167 (11,900,167)
Administrative expenses - - -
Benefit payments, including refunds
of employee contributions (3,974,724) (3,974,724)
Net Changes 4,386,535 10,267,622 (5,881,087)
Balance at June 30, 2015 $ 93,683,688 $ 79,584,353 $ 14,099,335
- 63 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
c. Changes in the Net Pension Liability (Continued):
As of June 30, 2015, the City reported net pension liabilities for its proportionate shares of the
net pension liability for the Safety Plan as follows:
Proportionate
Share of Net
Pension Liability
Safety $ 25,822,675
The City's net pension liability for each Plan is measured as the proportionate share of the net
pension liability. The net pension liability of each of the Plans is measured as of June 30, 2014,
and the total pension liability for each Plan used to calculate the net pension liability was
determined by an actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using
standard update procedures. The City's proportionate share of the net pension liability was
based on a projection of the City's long-term share of contributions to the pension plans
relative to the projected contributions of all participating employers, actuarially determined.
The City's proportionate share of the net pension liability for the Safety Plan as of
June 30, 2013 and 2014 was as follows:
Safety
Proportion - June 30, 2013 0.67363%
Proportion - June 30, 2014 0.68843%
Change -Increase (Decrease) 0.01480%
- 64 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
c. Changes in the Net Pension Liability (Continued):
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the City for each Plan, calculated using the
discount rate for each Plan, as well as what the City's net pension liability would be if it were
calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher
than the current rate:
Miscellaneous Safety
1%Decrease 6.50% 6.50%
Net Pension Liability $ 26,757,588 $ 41,322,196
Current Discount Rate 7.50% 7.50%
Net Pension Liability $ 14,099,335 $ 25,822,675
1% Increase 8.50% 8.50%
Net Pension Liability $ 3,669,639 $ 13,051,739
Pension Plan Fiduciary Net Position
Detailed information about each pension plan's fiduciary net position is available in the
separately issued Ca1PERS financial reports.
- 65 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
9. PENSION PLANS (CONTINUED):
d. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions:
For the year ended June 30, 2015, the City recognized pension expense of $3,470,634. At
June 30, 2015, the City reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $ 8,552,671 $ -
Differences between actual and expected experience - -
Change in assumptions - -
Change in employer's proportion and differences
between the employer's contributions and the
employer's proportionate share of contributions 290,902
Net differences between projected and actual
earnings on plan investments - (11,621,755)
Total $ 8,843,-)'/3
$8,552,671 reported as deferred outflows of resources related to contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year
ending June 30, 2016. Other amounts reported as deferred outflows of resources and deferred
inflows of resources related to pensions will be recognized as pension expense as follows:
Year
Ending
June 30, Amount
2016 $ (2,801,545)
2017 (2,801,545)
2018 (2,822,324)
2019 (2,905,439)
2020 -
Thereafter -
e. Payable to the Pension Plans:
At June 30, 2015, the City had no outstanding amount of contributions to the pension plans
required for the year ended June 30, 2015.
- 66 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
10. POST-EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED):
Plan Description
The City provides other postemployment benefits (OPEB) to retired employees in the form of a
contribution towards their medical premiums under the PERS health plan, a single-employer
defined benefit plan which provides medical insurance benefits to eligible retirees in accordance
with various labor agreements. Survivor benefits are not provided. The City's OPEB plan does not
issue a separate stand-alone report.
Eligibility
Employees hired prior to July 1, 2011 are eligible for retiree health benefits if they retire from the
City on or after age 50 (unless disabled), with five years of service and are eligible for a PERS
pension and are enrolled in a PERS retiree health plan. Employees hired after June 30, 2011 are
eligible for retiree health benefits if they retire from the City on or after age 50 (unless disabled),
with ten years of service and are eligible for a PERS pension and are enrolled in a PERS retiree
health plan. The benefits are available only to employees who retire from the City. Membership of
the plan consisted of the following at June 30, 2015:
Police
Police General Management Confidential Support Total
Retirees Receiving
Benefits 35 32 28 1 6 102
Eligible Active
Employees 93 88 41 6 43 271
The above table does not reflect current retirees not enrolled in the PERS health plan who may be
eligible to enroll in the plan at a later date.
Funding Policy
The City's current contributions are made on a pay-as-you-go basis. As of July 1, 2011, the City's
monthly contribution rate was $250 for the Confidential, General, and Police Support groups; $350
for the Police and Management group. For the year ended June 30, 2015, the City paid $418,323 in
contributions for postemployment health care benefits. Current active employees are not required
to contribute any portion towards these benefits.
Annual OPEB Cost and Net OPEB Obligation. - The City's annual OPEB cost (expense) is
calculated based on the annual required contribution of the employer (ARC), an amount actuarially
determined. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to
cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) not
to exceed thirty years.
- 67 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
10. POST-EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED):
Funding Policy (Continued)
The City's ARC for the year ended June 30, 2015 was $1,400,220. The following table shows the
components of the City's annual OPEB cost for the year, the amount actually contributed to the
plan, and changes in the City's net OPEB obligation:
Police
Police General Management Confidential Support Total
ARC $ 480,504 $ 450,473 $ 259,022 $ 26,278 $ 183,943 $ 1,400,220
Interest on net
OPEB obligation 59,037 60,334 31,203 13,844 26,155 190,573
Adjustment to ARC (138,910) (141,961) (73,417) (32,574) (61,540) (448,402)
Annual OPEB cost 400,631 368,846 216,808 7,548 148,558 1,142,391
Contributions made (152,182) (96,746) (147,328) (3,117) (18,950) (418,323)
Increase in net
OPEB obligation 248,449 272,100 69,480 4,431 129,608 724,068
Net OPEB obligation,
beginning 1,539,693 1,573,514 813,768 361,054 682,121 4,970,150
Net OPEB obligation,
ending 1.788.142 1.845.614 883248 S 365.485 811.729 5,694218
The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the
net OPEB obligation for 2015 and the two preceding years were as follows:
Fiscal Annual Percentage of Net
Year OPEB Annual OPEB OPEB
Ended Cost Cost Contributed Obligation
6/30/13 $ 1,034,400 35.98% $ 4,277,824
6/30/14 1,107,635 37.50% 4,970,150
6/30/15 1,142,391 36.62% 5,694,218
- 68 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
10. POST-EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED):
Funding Status and Progress
As of June 30, 2013, the most recent valuation date, the actuarial accrued liability for benefits was
$12.05 million, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued
liability (UAAL) of$12.05 million and a funded ratio (actuarial value of assets as a percentage of
the actuarial accrued liability) of 0%. The covered payroll (annual payroll of active employees)was
$20.35 million and the ratio of the UAAL to the covered payroll was 59.2%. Actuarial valuations
of an ongoing plan involve estimates of the value of reported amounts and assumptions about the
probability of occurrence of events far into the future. Examples include assumptions about future
employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded
status of the plan and the annual required contributions of the employer are subject to continual
revision as actual results are compared with past expectations and new estimates are made about
the future. The schedule of funding progress, presented as required supplementary information
following the notes to the financial statements, presents multi-year trend information about whether
the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial
accrued liabilities for the benefits.
Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan
as understood by the employer and the plan members) and include the types of benefits provided at
the time of each valuation and the historical pattern of sharing of benefit costs between employer
and plan members to that point. The actuarial methods and assumptions used include techniques
that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the
actuarial assets, consistent with the long-term perspective of the calculations.
The required contribution for the fiscal year 2015 was determined as part of the June 30, 2013
actuarial valuation. The actuarial cost method used for determining the benefit obligations is the
entry age normal cost method. The actuarial assumptions included a 4.00% investment rate of
return (which is based on assumed long-term investment return on plan assets and on the City's
assets, as appropriate), annual inflation rate of 3%, annual payroll increase of 3.25% and an annual
healthcare cost trend rate with increases that vary by year. The UAAL is being amortized as a level
percentage of projected payroll over a closed period of 30 years.
- 69 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
11. IRS SECTION 457 DEFERRED COMPENSATION PLAN:
In accordance with federal law, all part-time employees must be enrolled in Social Security or
another "qualified" retirement plan. Since the City does not participate in Social Security,
part-time employees are enrolled in the City's IRS Section 457 deferred compensation plan.
Nationwide Retirement Solutions, Inc. acts as the third party administrative services provider for
the defined contribution plan. Employees are required to contribute 5.5% of salary to the deferred
compensation plan every pay period. The City contributes an additional 2% of salary, for a total
contribution of 7.5%. Council established the plan by resolution in fiscal year 2011-2012, and has
the authority to amend contribution requirements. Contributions to the participants account must
equal at least 7.5% of the participant's compensation, or such other minimum amount as required
for the plan to be considered a retirement system under applicable government code and legal
requirements. Total contributions to the plan during fiscal year 2015 were $62,099.
12. SELF-INSURANCE PROGRAM/RISK POOL:
The City uses a combination of insured and self-insured programs to finance its property and
casualty risk. The City is self-insured for worker's compensation, automotive, and general liability
risks. Excess liability coverage for the City's self-insurance retention of$250,000 per occurrence is
provided through a risk sharing pool, the California Insurance Pool Authority (CIPA). The CIPA
provides excess liability coverage above $2,000,000 per occurrence and $40,000,000 annual
aggregate. The City's self-insurance retention limit is $400,000 per occurrence for worker's
compensation claims. Worker's compensation claims which exceed the self-insurance retention are
insured by CIPA up to the California statutory limit for worker's compensation. Property and
employment practices liability risk are financed through insurance contracts and have various
limits and deductibles.
The City is a member of CIPA in order to jointly purchase insurance coverage and to share costs
for professional risk management, claim administration, and group purchasing of insurance
products with ten other Orange County cities. Members may be assessed the difference between
the funds available and the $40,000,000 annual aggregate in proportion to their annual premium.
CIPA uses independent actuaries and underwriters to determine premiums and help set insurance
limits and deductible levels.
The pool is managed by an independent general manager and contracted legal advisers. Two
internal subcommittees are made up of City members to provide direction on underwriting and
claims activities. The Governing Board of CIPA is comprised of one member from each
participating City and is responsible for the selection of the independent general manager, legal
counsel, and electing subcommittee members. The financial statements of the CIPA are available at
the administrative office located at 240 Newport Center Drive, Suite 210, Newport Beach,
California.
- 70 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
12. SELF-INSURANCE PROGRAWRISK POOL (CONTINUED):
The government retains a risk of loss, due to the fact that actual losses may exceed estimated
claims or coverage amounts. Settled claims have not exceeded any of the City's coverage amounts
in any of the last three fiscal years, and there were no reductions in the City's coverage during the
year ended June 30, 2015. At June 30, 2015, estimated claims payable of $5,148,755, which
includes a provision for incurred but not reported claims and loss adjustment expenses, are reported
as a long-term liability.
Changes in the balances of claims liabilities for the years ended June 30, 2014 and 2015, including
a provision for incurred but not reported claims and loss adjustment expenses, were as follows:
Beginning Ending
June 30, Balance Additions Deletions Balance
2014 $ 4,461,082 $ 2,796,114 $ 2,978,696 $ 4,278,500
2015 4,278,500 3,874,920 3,004,665 5,148,755
13. SPECIAL ASSESSMENT DISTRICTS' BONDS:
Special assessment districts exist in various parts of the City to provide improvements to properties
located in those districts. Properties are assessed for the cost of improvements; these assessments
are payable over the term of the debt issued to finance the improvements and must be sufficient to
repay this debt. The bonds listed below were issued pursuant to the Refunding Act of 1984 for the
1915 Improvement Act Bonds and the Improvement Bond Act of 1915 and are the liabilities of the
property owners and are secured by liens against the assessed property. The City Treasurer acts as
an agent for collection of principal and interest payments by the property owners and remittance of
such monies to bondholders.
Neither the faith and credit nor the general taxing power of the City have been pledged to the
payment of the bonds. Therefore, none of the following special assessment bonds have been
included in the accompanying financial statements.
Amount Outstanding
District Bonds of Issue June 30, 2015
Community Facilities District 04-1, 2013 $ 9,350,000 $ 9,110,000
Community Facilities District 06-1, 2007 53,570,000 51,770,000
Community Facilities District 06-1, 2010 1,675,000 1,645,000
Community Facilities District 07-1, 2007 13,680,000 13,370,000
78275,000 75,895,000
- 71 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
13. SPECIAL ASSESSMENT DISTRICTS' BONDS (CONTINUED):
In May 2013, the City issued $9,350,000 of Special Tax Refunding Bonds, Series 2013 to, to
refund in full and defease the City of Tustin Community Facilities District No. 04-1 Special Tax
Bonds, Series 2004. The 2004 series were originally issued to facilitate the new infrastructure
construction on the former MCAS being converted into various public, housing, commercial and
educational uses. The proceeds of the bonds will be used to pay the cost and expense of acquisition
and construction of certain public facilities necessary for the development of the Tustin Legacy
District, fund the reserve account, pay capitalized interest on bonds through September 1, 2032,
and pay costs of issuing the Series 2013 Bonds. Serial current interest bonds will mature from
September 1, 2032 to September 1, 2032. Term current interest bonds will mature on
September 1, 2014, with mandatory sinking payments from September 1, 2030 through
September 1, 2032. Interest maturity rates of the current interest bonds range from 2.00% at
September 1, 2014 to 5.00% at September 1, 2028 - and current term interest bonds are 5.375%
and 5.50% on their respective maturity dates. At June 30, 2015, the amount of the Special Tax
Refunding Bonds, Series 2013 was $9,110,000.
In September 2007, the City issued $53,570,000 of Special Tax Bonds, Series 2007A, to facilitate
the new infrastructure construction on the former MCAS being converted into various public,
housing, commercial and educational uses. The proceeds of the bonds will be used to pay the cost
and expense of acquisition and construction of certain public facilities necessary for the
development of the Tustin Legacy District, fund the reserve account, pay capitalized interest on
bonds through September 1, 2008, and pay costs of issuing the Series 2007A Bonds. Serial current
interest bonds will mature from September 1, 2009 to September 1, 2025. Term current interest
bonds will mature on September 1, 2036, with mandatory sinking payments from
September 1, 2026 through September 1, 2036. Interest maturity rates of the current interest bonds
range from 4% at September 1, 2009 to 5.375% at September 1, 2025 and current term interest
bonds are 6% on their respective maturity dates. At June 30, 2015, the amount of the Special Tax
Bonds, Series 2007A was $51,770,000.
In October 2010, the City issued $1,675,000 of Special Tax Bonds, Series 2010 to, to facilitate the
new infrastructure construction on the former MCAS being converted into various public, housing,
commercial and educational uses. The proceeds of the bonds will be used to pay the cost and
expense of acquisition and construction of certain public facilities necessary for the development of
the Tustin Legacy District, fund the reserve account, and pay costs of issuing the Series 2010
Bonds. Serial current interest bonds will mature from September 1, 2011 to September 1, 2035.
Term current interest bonds will mature on September 1, 2039, with mandatory sinking payments
from September 1, 2036 through September 1, 2039. Interest maturity rates of the current interest
bonds range from 1.5% at September 1, 2011 to 5.625% at September 1, 2035 and current term
interest bonds are 5.75% through their respective maturity dates. At June 30, 2015, the amount of
the Special Tax Bonds, Series 2010 was $1,645,000.
- 72 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
13. SPECIAL ASSESSMENT DISTRICTS' BONDS (CONTINUED):
In September 2007, the City issued $13,680,000 of Special Tax Bonds, Series 2007, to facilitate the
new infrastructure construction on the former MCAS being converted into various public, housing,
commercial and educational uses. The proceeds of the bonds will be used to pay the cost and
expense of acquisition and construction of certain public facilities necessary for the development of
the Tustin Legacy District, fund the reserve account, and pay costs of issuing the Series 2007
Bonds. Serial current interest bonds will mature from September 1, 2009 to September 1, 2025.
Term current interest bonds will mature on September 1, 2037, with mandatory sinking payments
from September 1, 2026 through September 1, 2037. Interest maturity rates of the current interest
bonds range from 4% at September 1, 2009 to 5.65% at September 1, 2025 and current term
interest bonds are 6% through their respective maturity dates. At June 30, 2015, the amount of the
Special Tax Bonds, Series 2007 was $13,370,000.
Neither the general taxing power of the City nor the faith or credit of the PFA or the City have been
pledged to the payment of the bonds. Therefore, the bonds have not been included in the
accompanying financial statements.
14. COMMITMENTS AND CONTINGENCIES:
There are certain legal actions pending against the City which have arisen in the normal course of
operations. In the opinion of management and the City Attorney, the ultimate resolution of such
actions is not expected to have a significant impact, if any, on the financial statements or operations
of the City.
15. GOVERNMENTAL FUND BALANCE CLASSIFICATIONS:
The fund balances reported on the fund statements consist of the following categories:
Nonspendable - This classification includes amounts that cannot be spent because they are either
(a)not in spendable form or(b) legally or contractually required to be maintained intact.
Restricted - This classification includes amounts that can be spent only for specific purposes
stipulated by constitution, external resource providers or through enabling legislation.
Committed - This classification includes amounts that can be used only for the specific purposes
determined by a formal action of the City's highest level of decision-making authority. The City
Council is the highest level of decision-making authority for the City that can, by adoption of an
ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation
imposed by the ordinance remains in place until a similar action is taken (the adoption of another
ordinance)to remove or revise the limitation.
- 73 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
15. GOVERNMENTAL FUND BALANCE CLASSIFICATIONS (CONTINUED):
Assigned - This classification includes amounts that are intended to be used for specific purposes
as indicated by City Council or by persons to whom City Council has delegated the authority to
assign amounts for specific purposes. City Council has not delegated such authority.
Unassigned - This classification includes the residual balance for the City's general fund including
all spendable amounts not contained in other classifications. Negative fund balance in
governmental funds, after determining the fund balance classifications described above, is also
reported as unassigned fund balance.
When an expenditure is incurred for purposes for which both restricted and unrestricted fund
balances are available, the City's policy is to apply restricted fund balance first.
When an expenditure is incurred for purposes for which committed, assigned or unassigned fund
balances are available, the City's policy is to apply committed fund balance first, then assigned
fund balance, and finally unassigned fund balance.
MCAS 2010 Other Total
General Capital Governmental Governmental
Fund Projects Fund Funds Funds
Nonspendable:
Prepaid items $ 429,400 $ - $ - $ 429,400
Land held for resale 122,029,242 - - 122,029,242
Restricted for:
Capital projects (1) 16,650,332 - 21,914,707 38,565,039
Public safety programs - - 452,447 452,447
Housing projects - - 1,681,664 1,681,664
Assigned to:
Capital projects (2) - 31,409,659 5,940,872 37,350,531
Unassigned 84,278,138 - - 84,278,138
Total fund balances 223.387.112 31.409.659 29.989.690 284.786.461
(1) The General Fund balance restricted for capital projects ($16,650,332) is comprised of funds
legally restricted for backbone infrastructure at the Tustin Legacy development. A majority of
the fund balance restricted for capital projects in the other governmental funds ($21,914,707)
includes State gas taxes restricted for allowable street-related purposes and developer fees to
improve City parks.
(2) The MCAS 2010 Capital Projects fund balance assigned to capital projects ($31,409,659)is for
financing development activities within or for the benefit of the MCAS-Tustin redevelopment
project area as indicated by the 2010 MCAS Bond indenture. The other governmental funds
balance assigned to capital projects ($5,940,872) is to be used for specific projects indicated in
the adopted budget.
- 74 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
16. OTHER REQUIRED INDIVIDUAL FUND DISCLOSURES:
Excess of Expenditures over Appropriations:
Variance with
Budget Actual Final Budget
Other Governmental Funds:
Supplemental Law Enforcement
Special Revenue Fund $ 98,500 $ 137,310 $ (38,810)
17. JOINT POWERS AUTHORITY:
Orange County Fire Authority
In January 1995, the City of Tustin entered into a joint powers agreement with the Cities of Buena
Park, Cypress, Dana Point, Irvine, Laguna Hills, Laguna Niguel, Lake Forest, La Palma, Los
Alamitos, Mission Viejo, Placentia, San Clemente, San Juan Capistrano, Seal Beach, Stanton, Villa
Park, and Yorba Linda and the County of Orange (County) to create the Orange County Fire
Authority. The purpose of the Authority is to provide for mutual fire protection, prevention, and
suppression services and related and incidental services including, but not limited to, emergency
medical and transport services, as well as providing facilities and personnel for such services.
The effective date of formation was March 1, 1995. The Authority's governing board consists of
one representative from each City and two from the County. The operations of the Authority are
funded with structural fire fees collected by the County through the property tax roll for the
unincorporated area and on behalf of all member cities except for the Cities of Stanton, Tustin, San
Clemente, Buena Park, Placentia, and Seal Beach. The County pays all structural fees it collects to
the Authority. The Cities of Stanton, Tustin, San Clemente, Buena Park, Placentia, and Seal Beach
are considered "cash contract cities" and, accordingly, make cash contributions based on the
Authority's annual budget.
The financial statements of the Orange County Fire Authority are available at 1 Fire Authority
Road, Irvine, California.
- 75 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
18. RECENT CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT
AGENCIES:
On June 29, 2011, Assembly Bills lx 26 (the "Dissolution Act") and lx 27 were enacted as part of
the fiscal year 2011-12 state budget package.
On June 27, 2012, as part of the fiscal year 2012-13 state budget package, the Legislature passed
and the Governor signed AB 1484, which made technical and substantive amendments to the
Dissolution Act based on experience to-date at the state and local level in implementing the
Dissolution Act.
Under the Dissolution Act, each California redevelopment agency (each a "Dissolved RDA") was
dissolved as of February 1, 2012, and the sponsoring community that formed the Dissolved RDA,
together with the other designated entities, have initiated the process under the Dissolution Act to
unwind the affairs of the Dissolved RDA. A Successor Agency was created for each Dissolved
RDA which is the sponsoring community of the Dissolved RDA unless it elected not to serve as
the Successor Agency. On September 20, 2011, the City elected to serve as the Successor Agency
to the Tustin Community Redevelopment Agency.
The Dissolution Act also created oversight boards which monitor the activities of the successor
agencies. The roles of the successor agencies and oversight boards are to administer the wind down
of each Dissolved RDA which includes making payments due on enforceable obligations,
disposing of the assets (other than housing assets) and remitting the unencumbered balances of the
Dissolved RDAs to the County Auditor-Controller for distribution to the affected taxing entities.
The Dissolution Act allowed the sponsoring community that formed the Dissolved RDA to elect to
assume the housing functions and take over the certain housing assets of the Dissolved RDA. If the
sponsoring community did not elect to become the Successor Housing Agency and assume the
Dissolved RDA's housing functions, such housing functions and all related housing assets were
transferred to the local housing authority in the jurisdiction. AB 1484 modified and provided some
clarifications on the treatment of housing assets under the Dissolution Act. The Tustin Housing
Authority elected on January 17, 2012 to serve as the Housing Successor Agency.
After the date of dissolution, the housing assets, obligations, and activities of the Dissolved RDA
have been transferred and are reported in the Housing Authority Special Revenue Fund in the
financial statements of the City. All other assets, obligations, and activities of the Dissolved RDA
have been transferred and are reported in a fiduciary fund (private-purpose trust fund) in the
financial statements of the City.
The Dissolution Act and AB 1484 also established roles for the County Auditor-Controller (the
"CAC"), the California Department of Finance (the "DOP) and the California State Controller's
office in the dissolution process and the satisfaction of enforceable obligations of the Dissolved
RDAs.
- 76 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
18. RECENT CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT
AGENCIES (CONTINUED):
The County Auditor-Controller was charged with establishing a Redevelopment Property Tax
Trust Fund (the "RPTTF")for each Successor Agency and depositing into the RPTTF for each six-
month period the amount of property taxes that would have been redevelopment property tax
increment had the Dissolved RDA not been dissolved. The deposit in the RPTTF fund is to be used
to pay to the Successor Agency the amounts due on the Successor Agency's enforceable
obligations for the upcoming six-month period.
The Successor Agency is required to prepare a recognized obligation payment schedule (the
"ROPS") approved by the oversight board setting forth the amounts due for each enforceable
obligation during each six month period. The ROPS is submitted to the DOF for approval. The
County Auditor-Controller will make payments to the Successor Agency from the RPTTF fund
based on the ROPS amount approved by the DOF. The ROPS is prepared in advance for the
enforceable obligations due over the next six months.
The process of making RPTTF deposits to be used to pay enforceable obligations of the Dissolved
RDA will continue until all enforceable obligations have been paid in full and all non-housing
assets of the Dissolved RDA have been liquidated.
The State Controller of the State of California was directed to review the propriety of any transfers
of assets between the Dissolved RDA and other public bodies that occurred after January 1, 2011.
If the public body that received such transfers was not contractually committed to a third party for
the expenditure or encumbrance of those assets, the State Controller was required to order the
available assets to be transferred to the public body designated as the successor agency. The State
Controller completed its review on July 31, 2014, and did not identify any unallowable transfers of
assets that occurred during the audit between the former RDA, the City and or other public
agencies.
Management believes, in consultation with legal counsel, that the obligations of the Dissolved
RDA due to the City are valid enforceable obligations payable by the Successor Agency under the
requirements of the Dissolution Act and AB 1484. The amount due to the City and a
corresponding reserve for $25,934,993, are recorded on the City's financial records for
reimbursement for the Newport Avenue Extension Phase 1, pursuant to the Public Works
agreement dated June 2, 1983. The City's position on this issue is not a position of settled law and
there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal
determination may be made at a later date by an appropriate judicial authority that would resolve
this issue unfavorably to the City.
- 77 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
19. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
DISCLOSURES:
The assets and liabilities of the former redevelopment agency were transferred to the Successor
Agency to the Tustin Community Redevelopment Agency on February 1, 2012 as a result of the
dissolution of the former redevelopment agency. The City is acting in a fiduciary capacity for the
assets and liabilities. Disclosures related to these transactions are as follows:
Due from the City of Tustin
On December 31, 2008, the City entered into a promissory note with the former Redevelopment
Agency in the amount of $18,881,750. The City promised to pay the former Redevelopment
Agency on December 1, 2013, the principal amount of $18,881,750 with interest accrued thereon
from December 30, 2008 to the maturity date at the rate of 4.25% per annum, compounded
semiannually on June 1 and December 1 in each year, commencing June 1, 2009. Effective
February 1, 2012, the former Redevelopment Agency was dissolved and the promissory note was
transferred to the Successor Agency to the Tustin Community Redevelopment Agency. The City
has negotiated with the State Department of Finance (DOF) to allow for the Local Agency
Investment Fund (LAIF) interest rate as the effective interest and to pay the debt off over four to
five years. The DOF agreed to allow the LAIF interest rate at the time the City entered into the
promissory note with the former Redevelopment Agency which was 2.54% and also agreed to five
installment payments with the first payment due within seven days of the City accepting DOF's
offer. With the effective flat interest rate of 2.54% compounded annually the total amount payable
to the Successor Agency to the Tustin Community Redevelopment Agency was $21,404,683. The
City signed the settlement agreement on December 9, 2014, and the first installment payment
totaling $5,000,000 was made within the required time period. The remaining balance as of
June 30, 2015 is $16,404,683 and is payable in four annual installments of $4,101,171 beginning
on or before December 31st, 2015, and again on or before December 31 of each of the following
three years (2016, 2017 and 2018).
Contribution to the City of Tustin
As part of the redevelopment dissolution (see Note 18), proceeds from the 2010 MCAS Tax
Allocation Bonds were transferred to the Successor Agency to the Tustin Redevelopment Agency
on February 1, 2012. The California Department of Finance (DOF) initially disallowed use of the
unspent bond proceeds for the project for which the bond proceeds were intended, and the City
pursued a lawsuit to dispute this disallowance. On August 5, 2014, the DOF issued a letter
approving expenditure of the bond proceeds in accordance with bond covenants. Funds totaling
$32,137,773, were transferred to the City effective January 1, 2015, to be spent on capital projects
in the Tustin Legacy area per the bond covenants.
- 78 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
19. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
DISCLOSURES (CONTINUED):
Capital Assets
Balance at Balance at
July_ 1, 2014 Additions Deletions June 30,2015
Capital assets,not being depreciated
Land(1) $ 1,464,000 $ - $ - $ 1,464,000
Capital assets,being depreciated:
Buildings 190,000 - - 190,000
Less accumulated depreciation (79,800) (3,800) - (83,600)
Total capital assets,being
depreciated,net 110,200 (3,800) - 106,400
Successor Agency
capital assets,net 1.574200 (3.800) $ - 1.570.400
Long-Term Liabilities
A summary of long-term liabilities activity for the year ended June 30, 2015 is as follows:
Balance at Balance at Due Within
July 1,2014 Additions Deletions June 30,2015 One Year
Tax allocation bonds $ 69,230,000 $ $ (3,060,000) $ 66,170,000 $ 3,190,000
Unamortized premium 88,900 (3,532) 85,368 -
Unamortizeddiscount (783,793) 29,624 (754,169) -
Note payable to
County Auditor Controller 21.404.683 (5.000.000) 16.404.683 4.101.171
Total long-term liabilities $ 89.939.790 $ $ x.033.908) $ 81905.882 $ 7.291.171
(1) The beginning balance has been increased by $1,345,000 to include land that was previously
reported as land held for resale.
- 79 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
19. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
DISCLOSURES (CONTINUED):
Long-Term Liabilities (Continued)
Tax Allocation Bonds Payable
1998 Town Center Tax Allocation Bonds
On July 1, 1998, the Tustin Community Redevelopment Agency issued $20,805,000 Tax
Allocation Refunding Bonds to refund the Agency's Town Center Area Redevelopment Project
Tax Allocation Refunding Bonds, Series 1987, in aggregate principal amount of $5,145,000 and
the Agency's Town Center Area Redevelopment Project Subordinate Tax Allocation Bonds,
Series 1991 in aggregate principal amount of $12,880,000. As of June 30, 2006, the 1987 and
1991 bonds have been fully redeemed.
Serial bonds are payable in annual installments ranging from $775,000 to $1,315,000 commencing
on December 1, 1998. Interest is payable semiannually on June 1 and December 1, with rates
ranging from 3.5% to 5.0% per annum. The bonds maturing on or after December 1, 2009, are
subject to redemption prior to maturity as a whole or in part, at the option of the Agency, on any
date on or after December 1, 2008 at prices ranging from 100% to 101% of principal. At
June 30, 2015, the 1998 Bonds outstanding balance was $3,120,000.
The annual debt service requirements to amortize the tax allocation bonds are as follows:
Year Ending
June 30, Principal Interest Total
2016 $ 1,525,000 $ 113,888 $ 1,638,888
2017 1,595,000 37,881 1,632,881
Totals 3,120,000 $ 151,769 327L769
- 80 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
19. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
DISCLOSURES (CONTINUED):
Long-Term Liabilities (Continued)
Tax Allocation Bonds Payable (Continued)
2010 Housing Tax Allocation Bonds
On March 1, 2010, the Tustin Community Redevelopment Agency issued $26,170,000 Tax
Allocation Housing Bonds, Series 2010 to refinance low and moderate income housing activities
throughout the geographic boundaries of the City and, in particular, to repay a reimbursement
obligation from the Agency to the City, relating to the City's write down of land for use for
affordable housing purposes. Serial bonds are payable in annual installments ranging from
$550,000 to $1,300,000 commencing on September 1, 2010. Interest is payable semiannually on
March 1 and September 1, with rates ranging from 2% to 5% per annum. At June 30, 2015, the
2010 Housing Bonds outstanding balance was $22,010,000.
The annual debt service requirements to amortize the tax allocation bonds are as follows:
Year Ending
June 30, Principal Interest Total
2016 $ 785,000 $ 1,025,106 $ 1,810,106
2017 815,000 993,106 1,808,106
2018 850,000 959,806 1,809,806
2019 880,000 925,206 1,805,206
2020 920,000 889,206 1,809,206
2021 - 2025 5,190,000 3,831,534 9,021,534
2026 - 2030 5,220,000 2,497,125 7,717,125
2031 - 2035 3,210,000 1,524,663 4,734,663
2036 - 2040 4,140,000 565,688 4,705,688
Totals 22,010,000 13211440 35221440
- 81 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
19. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
DISCLOSURES (CONTINUED):
Long-Term Liabilities (Continued)
Tax Allocation Bonds Payable (Continued)
2010 MCAS Tax Allocation Bonds
On October 27, 2010, the Tustin Community Redevelopment Agency issued $44,170,000 Tax
Allocation Bonds, Series 2010 for the purpose of financing redevelopment activities within or for
the benefit of the Agency's MCAS-Tustin Redevelopment Project Area. The bonds are payable in
annual installments ranging from $640,000 to $12,230,000 commencing on September 1, 2011.
Interest is payable semiannually on March 1 and September 1, with rates ranging from 2.0% to
5.0% per annum. The bonds maturing on or after September 1, 2019, are subject to optional
redemption prior to maturity, as a whole or in part, from any available source of funds, at a
redemption price equal to the principal amount thereof, together with accrued interest to the date
fixed for redemption, without premium. At June 30, 2015, the 2010 MCAS Bonds outstanding
balance was $41,040,000.
The annual debt service requirements to amortize the tax allocation bonds are as follows:
Year Ending
June 30, Principal Interest Total
2016 $ 880,000 $ 1,931,075 $ 2,811,075
2017 905,000 1,904,300 2,809,300
2018 93 5,000 1,872,025 2,807,025
2019 970,000 1,833,925 2,803,925
2020 1,010,000 1,794,325 2,804,325
2021 - 2025 5,705,000 8,296,744 14,001,744
2026 - 2030 7,170,000 6,782,694 13,952,694
2031 - 2035 9,125,000 4,770,375 13,895,375
2036 - 2040 11,650,000 2,185,000 13,835,000
2041 2,690,000 67,250 2,757,250
Totals 41,040,000 31437.713 72.477.713
- 82 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
19. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
DISCLOSURES (CONTINUED):
Long-Term Liabilities (Continued)
Note Payable to County Auditor Controller
As part of the dissolution process AB 1484 required the Successor Agency to have due diligence
reviews of both the low and moderate income housing funds and all other funds to be completed by
October 15, 2012 and January 15, 2013 to compute the funds (cash) which were not needed by the
Successor Agency to be retained to pay for existing enforceable obligations. These funds were to
be remitted to the CAC after the DOF completed its review of the due diligence reviews. The
Successor Agency remitted $14,317,623 to the County Auditor-Controller ("CAC") on
December 18, 2012 for the low and moderate income housing funds due diligence review. The
amount due to the CAC for the Other Funds due diligence review is $28,295,637, of which
$6,418,355 was remitted by the Successor Agency on May 10, 2013. The City negotiated with the
State Department of Finance (DOF) to allow for the Local Agency Investment Fund (LAIF)
interest rate as the effective interest and to pay the debt off over four to five years. The DOF
agreed to allow the LAIF interest rate of 2.54% which was in effect at the time the City entered
into the promissory note with the former Redevelopment Agency and has agreed to installment
payments over four years after the first payment due within seven days of the City accepting
DOF's offer. With the effective flat interest rate of 2.54% compounded annually the total amount
receivable from the City and payable to CAC as of June 30, 2014 was $21,404,683. The City
signed the settlement agreement on December 9, 2014, and the first installment payment totaling
$5,000,000 was made within the required time period. The remaining balance as of June 30, 2015
is $16,404,683 and is payable in four annual installments of $4,101,171 beginning on or before
December 31, 2015, and again on or before December 31s' of each of the following three years
(2016, 2017 and 2018).
20. RESTATEMENTS OF PRIOR YEAR FINANCIAL STATEMENTS:
Restatements of the Government-Wide Financial Statements' net position as of July 1, 2014 are as
follows:
Governmental Business-type
Activities Activity Total
Net position at July 1, 2014,
as originally reported $ 637,608,339 $ 34,402,330 $ 672,010,669
Implementation of GASB Statements
68 and 71 to record pension liability
at beginning of year (45,364,118) (2,418,112) (47,782,230)
Net position at July 1, 2014, as restated 592244.221 31.984.218 624228.439
- 83 -
CITY OF TUSTIN
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2015
20. RESTATEMENTS OF PRIOR YEAR FINANCIAL STATEMENTS (CONTINUED):
Restatement of the Water Enterprise Fund's net position as of July 1, 2014 is as follows:
Net position at July 1, 2014, as originally reported $ 34,402,330
Implementation of GASB Statements 68 and 71
to record pension liability at beginning of year (2,418,112)
Net position at July 1, 2014, as restated 31,984.218
21. SUBSEQUENT EVENTS:
In August 2015, the City entered into a school facilities implementation, funding and migration
agreement, and related site conveyance agreement with the Tustin Unified School District (TUSD)
as well as a joint community facilities agreement with TUSD and Standard Pacific that provides a
framework for development of grades 6-12 schools on the 40-acre designated site, along with the
opening of Heritage Elementary School as a magnet elementary site in the fall of 2016. The
estimated cost to complete the project is $75,117,850. In order to facilitate the implementation
plan, the City will advance funds to the project development with three different approaches. First
the City advanced $4 million in October 2015. Second, the City will deposit an additional $15
million in the project development account by May 2016. Third, the City will have the option to
advance additional funds for the entire project or just certain projects. The City also issued 2014-1
Community Facilities District Special Tax Bonds, Series 2015A, totaling $27,045,000. Of the
$27,045,000, $7,858,391 are available to be spent on school facilities.
In preparing these financial statements, the City has evaluated events and transactions for potential
recognition or disclosure through December 22, 2015, the date the financial statements were
available to be issued.
- 84 -
REQUIRED SUPPLEMENTARY INFORMATION
- 85 -
The page left blank intentionally
- 86 -
CITY OF TUSTIN
SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
SAFETY PLAN
Last Ten Fiscal Years*
2015
Plan's proportion of the net pension liability 0.68843%
Plan's proportionate share of the net pension liability $ 25,822,675
Plan's covered-employee payroll $ 9,640,345
Plan's proportionate share of the net pension liability as
a percentage of covered-employee payroll 267.86%
Plan's fiduciary net position $ 89,890,706
Plan's proportionate share of the fiduciary net position as
a percentage of the Plan's total pension liability 348.11%
Plan's proportionate share of aggregate employer contributions $ 2,544,912
Notes to Schedule:
Benefit Changes:
There were no changes in benefits.
Changes in Assumptions:
There were no changes in assumptions
*-Fiscal year 2015 was the 1st year of implementation,therefore only one year is shown.
-87-
CITY OF TUSTIN
SCHEDULE OF CONTRIBUTIONS
SAFETY PLAN
Last Ten Fiscal Years*
2015
Contractually required contribution(actuarially determined) $ 3,045,919
Contributions in relation to the actuarially determined contributions (3,045,919)
Contribution deficiency(excess) $ -
Covered-employee payroll $ 9,640,345
Contributions as a percentage of covered-employee payroll 31.60%
Notes to Schedule:
Valuation Date 6/30/2013
Methods and Assumptions Used to Determine Contribution Rates:
Single and agent employers Entry age
Amortization method Level percentage of payroll,closed
Remaining amortization period 30 year fixed with 5 year ramp up at beginning and 5 year ramp
down at the end of the amortization period. Changes in liability for
plan amendments,changes in actuarial methodology and assumptions
are amortized over a 20 year period.
Asset valuation method Market
Inflation 2.75%
Salary increases 3.30%to 14.20%depending on age,service and type of employment
Investment rate of return 7.50%,net of pension plan investment expense,including inflation
Retirement age 50 years
Mortality Morality assumptions are based on mortality rates resulting from the
most recent Ca1PERS Experience Study adopted by the Ca1PERS
Board,first used in the June 30, 2009 valuation. For purposes of the
post-retirement mortality rates,those revised rates include 5 years of
projected on-going mortality improvement using Scale BB published
by the Society of Actuaries until June 30, 2010. There is no margin
for future mortality improvement beyond the valuation date.
*-Fiscal year 2015 was the 1st year of implementation,therefore only one year is shown.
-88-
CITY OF TUSTIN
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
MISCELLANEOUS PLAN
Last Ten Fiscal Years*
2015
Total Pension Liability:
Service cost $ 1,747,494
Interest on total pension liability 6,613,765
Differences between expected and actual experience -
Changes in assumptions -
Changes in benefit terms -
Benefit payments,including refunds of employee contributions (3,974,724)
Net Change in Total Pension Liability 4,386,535
Total Pension Liability-Beginning of Year 89,297,153
Total Pension Liability-End of Year(a) $ 93,683,688
Plan Fiduciary Net Position:
Contributions-employer $ 1,379,562
Contributions-employee 962,617
Net investment income 11,900,167
Benefit payments (3,974,724)
Net Change in Plan Fiduciary Net Position 10,267,622
Plan Fiduciary Net Position-Beginning of Year 69,316,731
Plan Fiduciary Net Position-End of Year(b) $ 79,584,353
Net Pension Liability-Ending(a)-(b) $ 14,099,335
Plan fiduciary net position as a percentage of the
total pension liability 84.95%
Covered-employee payroll $ 12,071,666
Net pension liability as percentage of
covered-employee payroll 116.80%
Notes to Schedule:
Benefit Changes:
There were not changes in benefits.
Changes in Assumptions:
There were not changes in assumptions
* Fiscal year 2015 was the 1 st year of implementation;therefore,only one year is shown.
-89-
CITY OF TUSTIN
SCHEDULE OF CONTRIBUTIONS
MISCELLANEOUS PLAN
Last Ten Fiscal Years*
2015
Actuarially determined contribution $ 1,379,562
Contributions in relation to the actuarially determined contributions (1,379,562)
Contribution deficiency(excess) $ -
Covered-employee payroll $ 12,071,666
Contributions as a percentage of covered-employee payroll 11.43%
Notes to Schedule:
Valuation Date 6/30/2013
Methods and Assumptions Used to Determine Contribution Rates:
Single and agent employers Entry age
Amortization method Level percentage of payroll,closed
Remaining amortization period 30 year fixed with 5 year ramp up at beginning and 5 year ramp
down at the end of the amortization period. Changes in liability for
plan amendments,changes in actuarial methodology and assumptions
are amortized over a 20 year period.
Asset valuation method Market
Inflation 2.75%
Salary increases 3.30%to 14.20%depending on age,service and type of employment
Investment rate of return 7.50%,net of pension plan investment expense,including inflation
Retirement age 2.0%at 55 retirement age from 55-67,2%at 62 retirement age 52-67
Mortality Morality assumptions are based on mortality rates resulting from the
2010 Ca1PERS Experience Study adopted by the Ca1PERS Board,
first used in the June 30, 2009 valuation. For purposes of the post-
retirement mortality rates, those revised rates include 5 years of
projected on-going mortality improvement using Scale AA published
by the Society of Actuaries until June 30, 2010. There is no margin
for future mortality improvement beyond the valuation date.
*-Fiscal year 2015 was the 1st year of implementation,therefore only one year is shown.
-90-
CITY OF TUSTIN
SCHEDULE OF FUNDING PROGRESS
For the year ended June 30,2015
OTHER POST-EMPLOYMENT BENEFIT PLAN
Actuarial Actuarial
Value Accrued Unfunded UAAL as a
Actuarial of Assets Liability AAL Funded Covered %of
Valuation (AVA) (AAL) (UAAL) Ratio Payroll Payroll
Date (a) (b) (b)-(a) (a)/(b) (c) [(b)-(a)]/(c)
06/30/09 $ - $ 8,584,000 $ 8,584,000 0.00% $ 23,100,000 37.16%
06/30/11 - 9,801,000 9,801,000 0.00% 21,515,000 45.55%
06/30/13 - 12,047,000 12,047,000 0.00% 20,346,000 59.21%
-91 -
CITY OF TUSTIN
BUDGETARY COMPARISON SCHEDULE
GENERAL FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Taxes $ 43,053,400 $ 43,053,400 $ 43,696,204 $ 642,804
Licenses and permits 921,900 921,900 885,043 (36,857)
Fines and forfeitures 726,000 726,000 752,597 26,597
Investment income 113,000 113,000 716,989 603,989
Intergovernmental 1,439,200 1,439,200 2,644,657 1,205,457
Charges for services 2,165,400 2,165,400 1,849,950 (315,450)
Rental income 767,400 767,400 938,971 171,571
Other revenue 2,577,100 2,577,100 3,743,105 1,166,005
Developer contribution 8,500,000 8,500,000 16,934,704 8,434,704
Gain on sale of land held for resale 56,000,000 56,000,000 48,136,121 (7,863,879)
TOTAL REVENUES 116,263,400 116,263,400 120,298,341 4,034,941
EXPENDITURES:
Current:
General government 19,652,100 26,524,978 16,628,862 9,896,116
Public safety 29,706,800 29,706,800 32,963,299 (3,256,499)
Public works 6,047,400 6,228,869 6,347,830 (118,961)
Community services 3,076,000 3,076,000 2,899,151 176,849
Capital outlay 13,842,600 14,966,725 5,781,519 9,185,206
Debt service:
Principal retirement - - 5,000,000 (5,000,000)
TOTAL EXPENDITURES 72,324,900 80,503,372 69,620,661 10,882,711
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES 43,938,500 35,760,028 50,677,680 14,917,652
OTHER FINANCING SOURCES(USES):
Transfers in 3,591,300 3,706,300 3,693,381 (12,919)
Transfers out (2,720,600) (7,835,600) (1,572,721) 6,262,879
TOTAL OTHER
FINANCING SOURCES(USES) 870,700 (4,129,300) 2,120,660 6,249,960
SPECIAL ITEM - - 21,404,683 21,404,683
NET CHANGE IN FUND BALANCE 44,809,200 31,630,728 74,203,023 42,572,295
FUND BALANCE-BEGINNING OF YEAR 149,184,089 149,184,089 149,184,089 -
FUND BALANCE-END OF YEAR $ 193,993,289 $ 180,814,817 $ 223,387,112 $ 42,572,295
See accompanying note to required supplementary information.
-92-
CITY OF TUSTIN
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2015
1. BUDGETS AND BUDGETARY ACCOUNTING:
The City follows these procedures in establishing the budgets.
(1) The annual budget is adopted by the City Council after the holding of a hearing and provides
for the general operation of the City. The operating budget includes proposed expenditures and
the means of financing them.
(2) The City Council approves total budgeted appropriations and any amendments to
appropriations throughout the year. This "appropriated budget" covers City expenditures in all
governmental funds, except for capital improvement projects carried forward from prior years.
The City Manager is authorized to transfer budgeted amounts between departments. Actual
expenditures may not exceed budgeted appropriations at the fund level. Budget figures used in
the accompanying required supplementary information are the original and final adjusted
amounts.
(3) Formal budgetary integration is employed as a management control device during the year.
Commitments for materials and services, such as purchase orders and contracts, are recorded as
encumbrances to assist in controlling expenditures. Capital projects appropriations are an
automatic supplemental appropriation for the next year. All others lapse unless they are
encumbered at year-end or re-appropriated through the formal budget process. There were no
outstanding encumbrances at year-end.
(4) Annual budgets are adopted for the General and Special Revenue Funds on a basis substantially
consistent with accounting principles generally accepted in the United States of America.
Accordingly, actual revenues and expenditures can be compared with related budgeted amounts
without any significant reconciling items. No budgetary comparisons are presented for the
City's Proprietary Funds as the City is not legally required to adopt budgets for these fund
types. Budgetary comparisons of Capital Projects Funds are primarily "long-term" budgets,
which emphasize capital outlay plans extending over one year. Because of the long-term nature
of these budgets, "annual" budget comparisons are not considered meaningful and accordingly,
no budgetary information is provided.
- 93 -
The page left blank intentionally
- 94 -
SUPPLEMENTARY INFORMATION
- 95 -
The page left blank intentionally
- 96 -
CITY OF TUSTIN
OTHER GOVERNMENTAL FUNDS
June 30, 2015
SPECIAL REVENUE FUNDS
The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are
restricted by law or administrative action for a specific purpose.
Gas Tax - This fund accounts for revenues and expenditures apportioned under the Street and
Highways Code of the State of California. Expenditures may be made for any street-related purpose
allowable under the Code.
Measure M - This fund is used to account for monies received from the County for street projects.
Park Acquisition and Development - This fund is used to account for fees received from developers to
develop the City's park system.
Asset Forfeiture - This fund is used to account for monies received from the Federal government that
are used for special law enforcement purchases.
Air Quality - This fund is used to account for funds received from South Coast Air Quality
Management District to be used for reducing pollution.
Supplemental Law Enforcement - This law was established under Government Code Section 30061
enacted by A133229, Chapter 134, of the 1996 Statutes and is an appropriation from the State Budget
for the "Citizen Option for Public Safety Program". This fund can only be used for police front line
municipal activities that provide police services to the City in prevention of drug abuse, crime
prevention, and community awareness programs.
Housing Authority - This fund is used to account for revenues and associated expenditures to be used
for increasing or improving low and moderate income housing.
Special Tax B - This fund is used to account for Special Tax B perpetual tax levied on taxable property
in the Tustin Legacy to pay for authorized services and administrative expenses.
CAPITAL PROJECTS FUNDS
The Capital Projects Funds are used to account for financial resources to be used for the acquisition or
construction of major capital facilities.
Construction 95-1 - This fund accounts for infrastructure improvements to the Tustin 95-1 Area.
Other Capital Projects - This fund is used to account for capital projects which are not funded by a
specific source.
CFD Construction — This fund is used to account for construction and improvements to the Tustin
Legacy area.
- 97 -
CITY OF TUSTIN
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
June 30,2015
Special Revenue Funds
Park
Acquisition
and Asset Air
Gas Tax Measure M Development Forfeiture Quality
ASSETS
Cash and investments $ 5,177,648 $ 3,979,545 $ 7,988,607 $ 381,794 $ 167,414
Restricted cash and investments - - - - -
Receivables:
Accounts 209,507 251,679 - - 25,511
Interest 4,718 3,674 7,278 348 153
Loans - - - - -
Allowance for uncollectibles
Prepaid items and deposits
Land held for resale - - - - -
TOTAL ASSETS $ 5,391,873 $ 4,234,898 $ 7,995,885 $ 382,142 $ 193,078
LIABILITIES,DEFERRED
INFLOWS OF RESOURCES
AND FUND BALANCES
LIABILITIES:
Accounts payable and accrued liabilities $ 236,984 $ 217,050 $ 158,837 $ 20 $ 9
Deposits payable - - - - -
TOTAL LIABILITIES 236,984 217,050 158,837 20 9
DEFERRED INFLOWS OF RESOURCES:
Unavailable revenue - - - - -
FUND BALANCES:
Restricted 5,154,889 4,017,848 7,837,048 382,122 193,069
Assigned - - - - -
TOTAL FUND BALANCES 5,154,889 4,017,848 7,837,048 382,122 193,069
TOTAL LIABILITIES,DEFERRED
INFLOWS OF RESOURCES
AND FUND BALANCES $ 5,391,873 $ 4,234,898 $ 7,995,885 $ 382,142 $ 193,078
-98-
Special Revenue Funds(Continued) Capital Projects Funds
Total
Supplemental Other Other
Law Housing Construction Capital CFD Governmental
Enforcement Authority Special Tax B 95-1 Projects Construction Funds
$ 68,902 $ 1,355,502 $ $ 3,392,248 $ 6,886,266 $ - $ 29,397,926
- - - - 1,810,094 1,810,094
5,267 - 200,870 319 693,153
63 73,923 6,274 - 96,431
- 1,049,733 - - 1,049,733
(699,733) - (699,733)
1,831 1,831
354,927 - - - 354,927
$ 74,232 $ 2,136,183 $ $ 3,392,248 $ 7,093,410 $ 1,810,413 $ 32,704,362
$ 3,907 $ 21,896 $ $ 145,880 $ 490,808 $ 1,275,391
- 9,936 805,788 - 815,724
3,907 31,832 951,668 490,808 2,091,115
- 422,687 - 200,870 - 623,557
70,325 1,681,664 3,392,248 - 1,319,605 24,048,818
- - - 5,940,872 - 5,940,872
70,325 1,681,664 3,392,248 5,940,872 1,319,605 29,989,690
$ 74,232 $ 2,136,183 $ $ 3,392,248 $ 7,093,410 $ 1,810,413 $ 32,704,362
-99-
CITY OF TUSTIN
COMBINING STATEMENT OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCES-OTHER GOVERNMENTAL FUNDS
For the year ended June 30,2015
Special Revenue Funds
Park
Acquisition
and Asset Air
Gas Tax Measure M Development Forfeiture Quality
REVENUES:
Investment income $ 40,326 $ 30,498 $ 61,599 $ 3,036 $ 845
Intergovernmental revenue 2,184,778 6,458,491 - 58,594 122,345
Charges for services - - 20,451 - -
Rental income 174,369
Other revenue - - - - -
TOTAL REVENUES 2,225,104 6,488,989 256,419 61,630 123,190
EXPENDITURES:
Current:
General government 841,700 2,699 40,251 51,490 76
Public safety - - - - -
Community services - - -
Capital outlay 1,564,023 4,072,876 453,251 - -
TOTAL EXPENDITURES 2,405,723 4,075,575 493,502 51,490 76
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (180,619) 2,413,414 (237,083) 10,140 123,114
OTHER FINANCING SOURCES(USES):
Transfers in - - -
Transfers out (111,615)
TOTAL OTHER FINANCING
SOURCES(USES) (111,615) - - -
NET CHANGE IN
FUND BALANCES (180,619) 2,301,799 (237,083) 10,140 123,114
FUND BALANCES-
BEGINNING OF YEAR 5,335,508 1,716,049 8,074,131 371,982 69,955
FUND BALANCES-END OF YEAR $ 5,154,889 $ 4,017,848 $ 7,837,048 $ 382,122 $ 193,069
- 100-
Special Revenue Funds(Continued) Capital Projects Funds
Total
Supplemental Other Other
Law Housing Construction Capital CFD Governmental
Enforcement Authority Special Tax B 95-1 Projects Construction Funds
$ 520 $ 11,370 $ - $ 2,709 $ 49,502 $ 1,192 $ 201,597
136,623 - 2,833,686 - 593,000 213 12,387,730
- - - - 20,451
- - - - 174,369
13,683 4,254 2,206,350 335,000 2,559,287
137,143 25,053 2,833,686 6,963 2,848,852 336,405 15,343,434
- - - - 3,219 - 939,435
99,630 - - - 99,630
- 271,596 - - - 271,596
37,680 - 55,323 2,398,297 8,655,362 17,236,812
137,310 271,596 55,323 2,401,516 8,655,362 18,547,473
(167) (246,543) 2,833,686 (48,360) 447,336 (8,318,957) (3,204,039)
- - - 1,572,721 1,572,721
(2,833,686) (210,601) (537,479) (3,693,381)
(2,833,686) (210,601) - 1,035,242 (2,120,660)
(167) (246,543) (258,961) 447,336 (7,283,715) (5,324,699)
70,492 1,928,207 3,651,209 5,493,536 8,603,320 35,314,389
$ 70,325 $ 1,681,664 $ $ 3,392,248 $ 5,940,872 $ 1,319,605 $ 29,989,690
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
GAS TAX SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Investment income $ 10,000 $ 10,000 $ 40,326 $ 30,326
Intergovernmental revenue 2,004,100 2,004,100 2,184,778 180,678
TOTAL REVENUES 2,014,100 2,014,100 2,225,104 211,004
EXPENDITURES:
Current:
General government 1,003,360 1,014,302 841,700 172,602
Capital outlay 1,641,300 1,893,338 1,564,023 329,315
TOTAL EXPENDITURES 2,644,660 2,907,640 2,405,723 501,917
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (630,560) (893,540) (180,619) 712,921
FUND BALANCE-BEGINNING OF YEAR 5,335,508 5,335,508 5,335,508 -
FUND BALANCE-END OF YEAR $ 4,704,948 $ 4,441,968 $ 5,154,889 $ 712,921
- 102-
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
MEASURE M SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Investment income $ 2,000 $ 2,000 $ 30,498 $ 28,498
Intergovernmental revenue 8,967,988 8,967,988 6,458,491 (2,509,497)
TOTAL REVENUES 8,969,988 8,969,988 6,488,989 (2,480,999)
EXPENDITURES:
Current:
General government - - 2,699 (2,699)
Capital outlay 8,856,300 12,016,717 4,072,876 7,943,841
TOTAL EXPENDITURES 8,856,300 12,016,717 4,075,575 7,941,142
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES 113,688 (3,046,729) 2,413,414 5,460,143
OTHER FINANCING USES:
Transfers out (39,000) (39,000) (111,615) (72,615)
NET CHANGE IN FUND BALANCE 74,688 (3,085,729) 2,301,799 5,387,528
FUND BALANCE-BEGINNING OF YEAR 1,716,049 1,716,049 1,716,049 -
FUND BALANCE-END OF YEAR $ 1,790,737 $ (1,369,680) $ 4,017,848 $ 5,387,528
- 103-
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
PARK ACQUISITION AND DEVELOPMENT SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Investment income $ 55,000 $ 55,000 $ 61,599 $ 6,599
Charges for services 13,500 13,500 20,451 6,951
Rental income 128,000 128,000 174,369 46,369
TOTAL REVENUES 196,500 196,500 256,419 59,919
EXPENDITURES:
Current:
General government - - 40,251 (40,251)
Capital outlay 973,500 1,128,480 453,251 675,229
TOTAL EXPENDITURES 973,500 1,128,480 493,502 634,978
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (777,000) (931,980) (237,083) 694,897
FUND BALANCE-BEGINNING OF YEAR 8,074,131 8,074,131 8,074,131 -
FUND BALANCE-END OF YEAR $ 7,297,131 $ 7,142,151 $ 7,837,048 $ 694,897
- 104-
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
ASSET FORFEITURE SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Investment income $ 1,000 $ 1,000 $ 3,036 $ 2,036
Intergovernmental revenue 150,000 150,000 58,594 (91,406)
TOTAL REVENUES 151,000 151,000 61,630 (89,370)
EXPENDITURES:
Current:
General government 320,000 320,000 51,490 268,510
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (169,000) (169,000) 10,140 179,140
FUND BALANCE-BEGINNING OF YEAR 371,982 371,982 371,982 -
FUND BALANCE-END OF YEAR $ 202,982 $ 202,982 $ 382,122 $ 179,140
- 105-
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
AIR QUALITY SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Investment income $ 100 $ 100 $ 845 $ 745
Intergovernmental revenue 82,000 82,000 122,345 40,345
TOTAL REVENUES 82,100 82,100 123,190 41,090
EXPENDITURES:
Current:
General Government - - 76 (76)
Capital outlay 100,000 100,000 - 100,000
TOTAL EXPENDITURES 100,000 100,000 76 99,924
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (17,900) (17,900) 123,114 141,090
FUND BALANCE-BEGINNING OF YEAR 69,955 69,955 69,955 -
FUND BALANCE-END OF YEAR $ 52,055 $ 52,055 $ 193,069 $ 141,090
- 106-
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
SUPPLEMENTAL LAW ENFORCEMENT SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Investment income $ - $ - $ 520 $ 520
Intergovernmental revenue 123,100 123,100 136,623 13,523
TOTAL REVENUES 123,100 123,100 137,143 14,043
EXPENDITURES:
Current:
Public safety 98,500 98,500 99,630 (1,130)
Capital outlay - - 37,680 (37,680)
TOTAL EXPENDITURES 98,500 98,500 137,310 (38,810)
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES 24,600 24,600 (167) (24,767)
FUND BALANCE-BEGINNING OF YEAR 70,492 70,492 70,492 -
FUND BALANCE-END OF YEAR $ 95,092 $ 95,092 $ 70,325 $ (24,767)
- 107-
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
HOUSING AUTHORITY SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Investment income $ - $ - $ 11,370 $ 11,370
Other revenue - - 13,683 13,683
TOTAL REVENUES - - 25,053 25,053
EXPENDITURES:
Current:
Community services 366,400 366,400 271,596 94,804
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (366,400) (366,400) (246,543) 119,857
FUND BALANCE-BEGINNING OF YEAR 1,928,207 1,928,207 1,928,207 -
FUND BALANCE-END OF YEAR $ 1,561,807 $ 1,561,807 $ 1,681,664 $ 119,857
- 108-
CITY OF TUSTIN
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
SPECIAL TAX B SPECIAL REVENUE FUND
For the year ended June 30,2015
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES:
Intergovernmental revenue $ 2,250,000 $ 2,250,000 $ 2,833,686 $ 583,686
OTHER FINANCING USES:
Transfers out (2,250,000) (2,250,000) (2,833,686) (583,686)
NET CHANGE IN FUND BALANCE - - - -
FUND BALANCE-BEGINNING OF YEAR - - - -
FUND BALANCE-END OF YEAR $ - $ - $ - $ -
- 109-
The page left blank intentionally
- 110 -
CITY OF TUSTIN
AGENCY FUNDS
June 30, 2015
Agency Funds are used to account for assets held by the City in a trustee capacity or as an agent for
individual, private organizations and other governments.
Community Facilities District 04-01 - This fund records the deposit of monies held to pay the debt
service requirements of the community facilities district.
Community Facilities District 06-01 - This fund records the deposit of monies held to pay the debt
service requirements of the community facilities district.
Community Facilities District 07-01 - This fund records the deposit of monies held to pay the debt
service requirements of the community facilities district.
Community Facilities District 13-01 - This fund records the deposit of monies held to pay the debt
service requirements of the community facilities district.
- 111 -
CITY OF TUSTIN
COMBINING STATEMENT OF ASSETS AND LIABILITIES
ALL AGENCY FUNDS
June 30,2015
Community Community Community Community
Facilities Facilities Facilities Facilities
District District District District
04-01 06-01 07-01 13-01 Total
ASSETS
Cash and investments $ 18,529 $ 99,759 $ - $ 980 $ 119,268
Restricted cash and investments 1,075,291 9,246,015 1,933,317 - 12,254,623
Taxes receivable 14,372 57,846 - - 72,218
TOTAL ASSETS $ 1,108,192 $ 9,403,620 $ 1,933,317 $ 980 $ 12,446,109
LIABILITIES
Accounts payable $ - $ - $ - $ 980 $ 980
Due to bondholders 1,108,192 9,403,620 1,933,317 - 12,445,129
TOTAL LIABILITIES $ 1,108,192 $ 9,403,620 $ 1,933,317 $ 980 $ 12,446,109
- 112-
CITY OF TUSTIN
COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
ALL AGENCY FUNDS
For the year ended June 30,2015
Balance Balance
July 1,2014 Additions Deletions June 30,2015
COMMUNITY FACILITIES DISTRICT 04-01
ASSETS:
Cash and investments $ - $ 1,274,823 $ 1,256,294 $ 18,529
Restricted cash and investments 1,003,329 687,825 615,863 1,075,291
Taxes receivable 19,215 14,372 19,215 14,372
TOTAL ASSETS $ 1,022,544 $ 1,977,020 $ 1,891,372 $ 1,108,192
LIABILITIES:
Accounts payable $ - $ 687,825 $ 687,825 $ -
Due to bondholders 1,022,544 1,269,980 1,184,332 1,108,192
TOTAL LIABILITIES $ 1,022,544 $ 1,957,805 $ 1,872,157 $ 1,108,192
COMMUNITY FACILITIES DISTRICT 06-01
ASSETS:
Cash and investments $ 11,766 $ 5,539,715 $ 5,451,722 $ 99,759
Restricted cash and investments 9,145,080 3,604,914 3,503,979 9,246,015
Taxes receivable 64,249 57,846 64,249 57,846
TOTAL ASSETS $ 9,221,095 $ 9,202,475 $ 9,019,950 $ 9,403,620
LIABILITIES:
Accounts payable $ 142 $ 3,609,657 $ 3,609,799 $ -
Due to bondholders 9,220,953 5,523,894 5,341,227 9,403,620
TOTAL LIABILITIES $ 9,221,095 $ 9,133,551 $ 8,951,026 $ 9,403,620
COMMUNITY FACILITIES DISTRICT 07-01
ASSETS:
Cash and investments $ - $ 1,144,603 $ 1,144,603 $ -
Restricted cash and investments 1,908,686 914,747 890,116 1,933,317
TOTAL ASSETS $ 1,908,686 $ 2,059,350 $ 2,034,719 $ 1,933,317
LIABILITIES:
Accounts payable $ - $ 914,601 $ 914,601 $ -
Due to bondholders 1,908,686 1,144,865 1,120,234 1,933,317
TOTAL LIABILITIES $ 1,908,686 $ 2,059,466 $ 2,034,835 $ 1,933,317
(Continued)
- 113-
CITY OF TUSTIN
COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
ALL AGENCY FUNDS
(CONTINUED)
For the year ended June 30,2015
Balance Balance
July 1,2014 Additions Deletions June 30,2015
COMMUNITY FACILITIES DISTRICT 13-01
ASSETS:
Cash and investments $ - $ 217,474 $ 216,494 $ 980
TOTAL ASSETS $ - $ 217,474 $ 216,494 $ 980
LIABILITIES:
Accounts payable $ - $ 217,474 $ 216,494 $ 980
TOTAL LIABILITIES $ - $ 217,474 $ 216,494 $ 980
TOTAL ALL AGENCY FUNDS
ASSETS:
Cash and investments $ 11,766 $ 8,176,615 $ 8,069,113 $ 119,268
Restricted cash and investments 12,057,095 5,207,486 5,009,958 12,254,623
Taxes receivable 83,464 72,218 83,464 72,218
TOTAL ASSETS $ 12,152,325 $ 13,456,319 $ 13,162,535 $ 12,446,109
LIABILITIES:
Accounts payable $ 142 $ 5,429,557 $ 5,428,719 $ 980
Due to bondholders 12,152,183 7,938,739 7,645,793 12,445,129
TOTAL LIABILITIES $ 12,152,325 $ 13,368,296 $ 13,074,512 $ 12,446,109
- 114-
STATISTICAL SECTION
- 115 -
The page left blank intentionally
- 116 -
DESCRIPTION OF STATISTICAL SECTION CONTENTS
June 30, 2015
This part of the City of Tustin's Comprehensive Annual Financial Report presents detailed information
as a context for understanding what the information in the financial statements, note disclosures, and
required supplementary information says about the City's overall financial health.
Contents: Pages
Financial Trends - These schedules contain trend information to help the
reader understand how the City's financial performance and well-being have
changed over time. 118
Revenue Capacity - These schedules contain information to help the reader
assess the City's most significant local revenue source, the property tax. 128
Debt Capacity - These schedules present information to help the reader assess
the affordability of the City's current levels of outstanding debt and the City's
ability to issue additional debt in the future. 134
Demographic and Economic Information - These schedules offer demographic
and economic indicators to help the reader understand the environment within
which the City's financial activities take place. 142
Operating Information - These schedules contain service and infrastructure
data to help the reader understand how the information in the City's financial
report relates to the services the City provides and the activities it performs. 144
Sources:
Unless otherwise noted, the information in these schedules is derived from the
Comprehensive Annual Financial Reports for the relevant year.
- 117 -
CITY OF TUSTIN
NET POSITION BY COMPONENT
Last Ten Fiscal Years
(accrual basis of accounting)
Fiscal Year
2006 2007 2008 2009
Governmental activities:
Net investment in capital assets $ 261,132,785 $ 285,331,502 $ 343,062,465 $ 357,299,104
Restricted 55,021,376 94,111,615 161,669,815 145,602,640
Unrestricted 14,993,866 (19,936,964) (14,320,020) 104,037,153
Total governmental activities net position $ 331,148,027 $ 359,506,153 $ 490,412,260 $ 606,938,897
Business-type activities:
Net investment in capital assets $ 20,494,561 $ 22,150,723 $ 22,267,386 $ 24,964,824
Restricted - - - 1,191,694
Unrestricted 206,342,244 199,289,608 172,421,511 1,981,499
Total business-type activities net position $ 226,836,805 $ 221,440,331 $ 194,688,897 $ 28,138,017
Primary government:
Net investment in capital assets $ 281,627,346 $ 307,482,225 $ 365,329,851 $ 382,263,928
Restricted 55,021,376 94,111,615 161,669,815 146,794,334
Unrestricted 221,336,110 179,352,644 158,101,491 106,018,652
Total primary government net position $ 557,984,832 $ 580,946,484 $ 685,101,157 $ 635,076,914
- 118-
Fiscal Year
2010 2011 2012 2013 2014 2015
$ 360,282,692 $ 378,911,546 $ 412,683,460 $ 431,761,288 $ 461,673,323 $ 456,649,085
135,670,302 116,718,495 47,727,966 54,367,385 36,693,458 72,929,522
114,737,049 116,545,351 147,513,249 177,532,888 93,877,440 140,727,040
$ 610,690,043 $ 612,175,392 $ 607,924,675 $ 663,661,561 $ 592,244,221 $ 670,305,647
$ 24,541,113 $ 20,872,492 $ 25,479,160 $ 24,171,745 $ 23,657,878 $ 24,270,718
1,851,666 5,541,672 2,795,701 7,094,771 8,326,340 11,845,734
$ 26,392,779 $ 26,414,164 $ 28,274,861 $ 31,266,516 $ 31,984,218 $ 36,116,452
$ 384,823,805 $ 399,784,038 $ 438,162,620 $ 455,933,033 $ 485,331,201 $ 480,919,803
135,670,302 116,718,495 47,727,966 54,367,385 36,693,458 72,929,522
116,588,715 122,087,023 150,308,950 184,627,659 102,203,780 152,5 72,774
$ 637,082,822 $ 638,589,556 $ 636,199,536 $ 694,928,077 $ 624,228,439 $ 706,422,099
- 119-
CITY OF TUSTIN
CHANGES IN NET POSITION
EXPENSES AND PROGRAM REVENUES
Last Ten Fiscal Years
(accrual basis of accounting)
Fiscal Year
2006 2007 2008 2009
Expenses:
Governmental activities:
General government $ 10,269,053 $ 7,926,778 $ 8,668,759 $ 8,499,303
Public safety 23,255,837 25,269,653 27,875,230 29,126,019
Public works 14,354,535 19,091,399 30,814,898 22,102,002
Community services 3,425,790 3,444,799 3,442,833 5,112,770
Interest on long-term debt 1,003,920 1,618,814 4,715,026 3,566,782
Total governmental activities expenses 52,309,135 57,351,443 75,516,746 68,406,876
Business-type activities:
Water 9,365,401 11,879,958 11,870,706 12,569,331
Tustin Legacy 1,355,822 1,518,560 1,279,802 1,259,093
Total business-type activities expenses 10,721,223 13,398,518 13,150,508 13,828,424
Program revenues:
Governmental activities:
Charges for services:
General government 2,388,279 2,540,796 2,716,432 1,694,464
Public safety 1,364,877 1,476,811 2,749,660 2,136,772
Public works 3,230,212 2,987,687 1,688,753 2,374,308
Community services 876,199 916,075 929,548 897,386
Operating grants and contributions 3,655,881 3,677,905 3,831,037 4,253,442
Capital grants and contributions 19,470,274 9,652,907 79,210,370 18,865,776
Total governmental activities
program revenues 30,985,722 21,252,181 91,125,800 30,222,148
Business-type activities:
Charges for services:
Water 8,858,151 10,418,522 10,923,061 11,281,679
Tustin Legacy 3,660,334 409,693 34,370 22,587
Capital grants and contributions - - 28,299,036 -
Total business-type activities
program revenues 12,518,485 10,828,215 39,256,467 11,304,266
Net revenues(expenses):
Governmental activities $ (21,323,413) $ (36,099,262) $ 15,609,054 $ (38,184,728)
Business-type activities 1,797,262 (2,570,303) 26,105,959 (2,524,158)
Total net revenues(expenses) $ (19,526,151) $ (38,669,565) $ 41,715,013 $ (40,708,886)
- 120-
Fiscal Year
2010 2011 2012 2013 2014 2015
$ 7,802,579 $ 7,854,361 $ 12,266,470 $ 18,705,913 $ 14,825,780 $ 17,121,057
27,277,141 28,622,807 28,800,773 30,702,298 28,440,799 29,886,284
20,816,686 19,809,907 20,765,854 15,087,234 49,538,371 34,435,214
12,742,391 13,150,089 7,078,104 3,201,865 3,498,460 3,699,059
4,087,839 4,814,598 3,057,645 967,115 - -
72,726,636 74,251,762 71,968,846 68,664,425 96,303,410 85,141,614
11,938,146 12,578,667 13,467,541 13,574,149 16,100,137 15,982,078
11,938,146 12,578,667 13,467,541 13,574,149 16,100,137 15,982,078
1,404,925 1,109,150 1,390,073 763,101 249,237 252,074
1,168,348 1,196,830 1,133,096 917,947 920,112 1,071,099
3,761,321 3,508,904 800,328 1,248,595 1,710,813 1,564,314
957,545 969,006 974,747 926,432 967,134 892,102
3,403,411 3,441,281 3,590,210 4,513,158 3,325,304 3,546,823
6,287,231 3,395,929 20,902,629 20,998,311 12,222,106 20,244,479
16,982,781 13,621,100 28,791,083 29,367,544 19,394,706 27,570,891
10,594,471 12,422,746 15,112,161 16,688,773 18,682,821 19,375,359
10,594,471 12,422,746 15,112,161 16,688,773 18,682,821 19,375,359
$ (55,743,855) $ (60,630,662) $ (43,177,763) $ (39,296,881) $ (76,908,704) $ (57,570,723)
(1,343,675) (155,921) 1,644,620 3,114,624 2,582,684 3,393,281
$ (57,087,530) $ (60,786,583) $ (41,533,143) $ (36,182,257) $ (74,326,020) $ (54,177,442)
- 121 -
CITY OF TUSTIN
CHANGES IN NET POSITION
GENERAL REVENUES
Last Ten Fiscal Years
(accrual basis of accounting)
Fiscal Year
2006 2007 2008 2009
General revenues and other changes
in net position:
Governmental activities:
Taxes:
Property taxes $ 21,242,797 $ 28,617,969 $ 31,070,501 $ 34,022,959
Transient occupancy taxes 155,199 161,105 163,831 154,379
Business license taxes N/A N/A N/A 356,565
Other taxes 1,409,696 1,534,720 1,665,601 1,689,573
Sales tax 18,912,722 19,317,135 20,428,465 19,858,142
Motor vehicle in lieu,unrestricted 433,795 443,222 321,918 252,666
Investment income 3,202,914 4,842,033 7,417,199 4,863,469
Other general revenues 1,323,230 1,598,099 1,523,530 2,314,540
Gain(loss)on disposal of capital assets (422,555) - (1,366,208) -
Gain on sale of land held for resale - - - -
Transfers 5,931,225 7,943,105 53,668,609 103,805,196
Extraordinary item - - - -
Contribution from successor agency - - - -
Total governmental activities 52,189,023 64,457,388 114,893,446 167,317,489
Business-type activities:
Investment income 1,411,899 1,567,316 815,560 164,764
Gain(loss)on disposal of capital assets - 3,519,618 (681) -
Miscellaneous 49,070 - 23,337 82,810
Transfers (5,931,225) (7,943,105) (53,668,609) (103,805,196)
Total business-type activities (4,470,256) (2,856,171) (52,830,393) (103,557,622)
Total primary government $ 47,718,767 $ 61,601,217 $ 62,063,053 $ 63,759,867
Changes in net position:
Governmental activities $ 30,865,610 $ 28,358,126 $ 130,502,500 $ 129,132,761
Business-type activities (2,672,994) (5,426,474) (26,724,434) (106,081,780)
Total primary government $ 28,192,616 $ 22,931,652 $ 103,778,066 $ 23,050,981
- 122-
Fiscal Year
2010 2011 2012 2013 2014 2015
$ 28,347,659 $ 30,205,879 $ 23,270,718 $ 14,526,101 $ 13,661,771 $ 14,552,535
141,335 142,915 137,131 137,064 616,897 1,090,675
337,867 358,526 44,800 377,498 393,241 419,148
1,720,505 1,648,319 1,621,521 1,655,388 1,663,215 1,763,878
15,917,332 18,597,453 19,931,865 21,575,405 22,288,032 22,269,896
6,122,789 6,189,249 5,833,094 5,951,653 6,150,893 6,380,698
4,086,852 2,358,847 958,169 243,921 628,180 1,052,276
1,520,662 1,700,323 14,444,183 7,231,648 4,040,996 7,829,149
- - - 43,335,089 - 48,136,121
- - (27,314,435) - 1,412,257 -
- - - - - 32,137,773
58,195,001 61,201,511 38,927,046 95,033,767 50,855,482 135,632,149
86,654 158,242 156,855 39,700 144,381 249,863
25,340 19,064 59,222 271,858 408,749 489,090
111,994 177,306 216,077 311,558 553,130 738,953
$ 58,306,995 $ 61,378,817 $ 39,143,123 $ 95,345,325 $ 51,408,612 $ 136,371,102
$ 2,451,146 $ 570,849 $ (4,250,717) $ 55,736,886 $ (26,053,222) $ 78,061,426
(1,231,681) 21,385 1,860,697 3,426,182 3,135,814 4,132,234
$ 1,219,465 $ 592,234 $ (2,390,020) $ 59,163,068 $ (22,917,408) $ 82,193,660
- 123-
CITY OF TUSTIN
FUND BALANCES OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
Fund Balance prior to GASB 54
Fiscal Year
2006 2007 2008 2009
General fund:
Reserved $ 118,510 $ 248,372 $ 116,342 $ 120,632,293
Unreserved 24,124,968 20,454,356 24,471,029 1,971,846
Total general fund $ 24,243,478 $ 20,702,728 $ 24,587,371 $ 122,604,139
All other governmental funds:
Reserved $ 34,612,789 $ 68,724,358 $ 76,696,588 $ 49,777,973
Unreserved,reported in:
Special revenue funds 8,550,855 10,639,839 64,896,223 16,437,130
Debt service funds 2,510,686 - - -
Capital projects funds 11,145,244 12,388,651 17,558,428 90,474,987
Total all other governmental funds $ 56,819,574 $ 91,752,848 $ 159,151,239 $ 156,690,090
Fund Balance subsequent to GASB 54
General fund:
Nonspendable $ - $ - $ - $ -
Restricted - - - -
Committed - - - -
Assigned - - - -
Unassigned - - - -
Total general fund $ - $ - $ - $ -
All other governmental funds:
Nonspendable $ - $ - $ - $ -
Restricted - - - -
Committed - - - -
Assigned - - - -
Unassigned - - - -
Total all other governmental funds $ - $ - $ - $ -
- 124-
Fiscal Year
2010 2011 2012 2013 2014 2015
$ 144,139,167 $ - $ - $ - $ - $ -
5,870,992 - - - - -
$ 150,010,159 $ - $ - $ - $ - $ -
$ 66,609,267 $ - $ - $ - $ - $ -
14,277,683 - - - - -
(6,774,245) - - - - -
75,663,086 - - - - -
$ 149,775,791 $ - $ - $ - $ - $ -
$ 144,139,167 $ 144,186,955 $ 144,604,847 $ 128,988,209 $ 129,049,954 $ 122,458,642
- - - 19,615,343 1,352,309 16,650,332
47,608 - - - - -
5,823,384 - - - - -
- 7,443,165 4,077,344 44,368,566 18,781,826 84,278,138
$ 150,010,159 $ 151,630,120 $ 148,682,191 $ 192,972,118 $ 149,184,089 $ 223,387,112
$ 34,800,738 $ 22,352,713 $ 1,710,292 $ 1,287,607 $ - $ -
111,455,097 130,673,281 38,274,666 33,885,757 29,820,853 24,048,818
344,708 - - - - -
11,670,324 18,603,317 16,239,322 16,880,590 5,493,536 37,350,531
(8,495,076) (10,989,463) - - - -
$ 149,775,791 $ 160,639,848 $ 56,224,280 $ 52,053,954 $ 35,314,389 $ 61,399,349
- 125-
CITY OF TUSTIN
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
Fiscal Year
2006 2007 2008 2009
Revenues:
Taxes $ 40,542,668 $ 48,306,569 $ 51,775,505 $ 56,198,002
Licenses and permits 2,153,355 2,095,154 2,710,309 1,692,955
Fines and forfeitures 784,966 783,390 818,868 832,188
Investment income 2,849,921 4,228,582 7,529,488 4,429,915
Intergovernmental revenues 15,338,254 20,136,822 27,394,402 14,626,663
Charges for services 2,107,336 2,043,251 1,583,324 4,497,309
Rental income 304,733 349,450 786,438 771,807
Developer contributions - - - -
Gain on sale of land held for resale - - - -
Contribution from Successor Agency - - - -
Other revenues 8,260,032 3,160,370 59,309,772 1,188,200
Total revenues 72,341,265 81,103,588 151,908,106 84,237,039
Expenditures:
Current:
General government 10,134,368 7,806,916 8,295,887 6,728,236
Public safety 22,697,122 24,450,803 26,561,960 27,759,939
Public works 7,691,894 9,651,745 10,136,680 11,311,291
Community services 3,026,890 3,023,648 2,886,132 5,005,986
Capital outlay 27,057,889 28,503,673 15,080,865 24,772,717
Debt service:
Principal retirement 1,275,000 1,330,000 1,055,000 11,143,000
Interest and fiscal charges 1,023,622 1,620,897 4,718,806 3,570,834
Bond issue costs - - - -
Total expenditures 72,906,785 76,387,682 68,735,330 90,292,003
Excess(deficiency)of revenues
over(under)expenditures (565,520) 4,715,906 83,172,776 (6,054,964)
Other financing sources(uses):
Proceeds from debt issuance - 25,000,000 - -
Transfers in 7,190,511 10,795,694 7,803,274 142,866,218
Transfers out (5,270,356) (10,795,694) (7,803,274) (41,295,836)
Contribution to developer - - (11,934,400) -
Sale of property 137,442 1,676,618 44,658 40,201
Total other financing sources(uses) 2,057,597 26,676,618 (11,889,742) 101,610,583
Extraordinary gain(loss) - - - -
Special item - - - -
Net change in fund balances $ 1,492,077 $ 31,392,524 $ 71,283,034 $ 95,555,619
Debt service as a percentage of
noncapital expenditures 5.28% 6.57% 12.06% 28.96%
- 126-
Fiscal Year
2010 2011 2012 2013 2014 2015
$ 52,579,529 $ 57,324,011 $ 50,907,306 $ 44,279,024 $ 45,096,520 $ 43,696,204
3,538,198 716,144 443,928 577,044 1,284,232 885,043
890,770 893,642 875,068 678,428 631,340 752,597
3,198,484 1,632,215 472,725 173,890 621,786 1,041,661
5,378,430 5,372,905 6,413,137 21,551,042 7,453,722 15,032,387
2,708,705 5,020,485 2,813,752 2,685,080 1,787,268 1,870,401
869,645 358,030 480,255 550,003 751,724 1,113,340
4,051,180 1,593,475 - - - 16,934,704
- - - 43,340,797 - 48,136,121
- - - - - 32,137,773
1,028,432 2,425,052 14,075,025 9,773,813 6,110,735 6,302,392
74,243,373 75,335,959 76,481,196 123,609,121 63,737,327 167,902,623
7,197,709 7,505,928 11,656,331 17,357,805 14,205,424 17,568,297
26,359,435 27,508,514 28,714,347 27,944,039 28,170,314 33,062,929
10,133,685 9,110,621 6,954,384 5,980,807 5,797,705 6,417,257
12,251,479 12,740,969 6,506,381 2,752,523 3,081,299 3,170,747
13,125,983 9,979,670 25,816,530 28,487,231 74,422,436 23,800,093
7,913,000 10,659,000 2,590,000 - - 5,000,000
4,603,661 4,131,435 3,264,323 967,115 - -
- 429,731 - - - -
81,584,952 82,065,868 85,502,296 83,489,520 125,677,178 89,019,323
(7,341,579) (6,729,909) (9,021,100) 40,119,601 (61,939,851) 78,883,300
26,274,205 43,281,289 - - - -
37,207,661 2,645,014 3,020,291 6,122,454 2,084,612 5,266,102
(37,207,661) (2,645,014) (3,020,291) (6,122,454) (2,084,612) (5,266,102)
7,421 18,138 43,745 - - -
26,281,626 43,299,427 43,745 - - -
- - (98,386,142) - 1,412,257 -
- - - - - 21,404,683
$ 18,940,047 $ 36,569,518 $(107,363,497) $ 40,119,601 $ (60,527,594) $ 100,287,983
22.37% 26.76% 10.88% 1.76% 0.00% 6.42%
- 127-
CITY OF TUSTIN
ASSESSED VALUE AND ESTIMATED ACTUAL VALUE
OF TAXABLE PROPERTY
(IN THOUSANDS)
Last Ten Fiscal Years
City
Fiscal Year Taxable
Ended Assessed
June 30 Secured Unsecured Value
2006 $ 5,753,518 $ 285,670 $ 6,039,188
2007 6,397,216 301,747 6,698,963
2008 7,708,506 435,160 8,143,666
2009 7,019,706 341,056 7,360,762
2010 6,874,131 323,694 7,197,825
2011 6,791,003 318,875 7,109,878
2012 6,865,333 294,518 7,159,851
2013 6,975,148 295,303 7,270,451
2014 7,151,192 267,629 7,418,821
2015 7,503,074 287,558 7,790,632
Notes:
Exemptions are netted directly against individual categories.
In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of
1%based upon the assessed value of the property being taxed. Each year,the assessed value of property may be increased
by an"inflation factor"(limited to a maximum increase of 2%). With few exceptions,property is only reassessed at the time
that it is sold to a new owner. At that point,the new assessed value is reassessed at the purchase price of the property sold.
The assessed valuation data shown above represents the only data currently available with respect to the actual market
value of taxable property and is subject to the limitations described above.
(A) Effective February 1,2012,the Redevelopment Agency was dissolved. See Notes 18 and 19 for more information.
(B) This rate represents the weighted average of all individual direct rates applied by the City of Tustin.
- 128-
Redevelopment Agency(A)
Taxable Total
Assessed Direct Tax
Secured Unsecured Value(A) Rate(B)
$ 1,039,506 $ 71,738 $ 1,111,244 0.226%
1,496,217 84,203 1,580,420 0.261%
1,826,514 89,863 1,916,377 0.279%
2,432,407 165,392 2,597,799 0.326%
2,175,049 128,194 2,303,243 0.308%
2,180,029 129,387 2,309,416 0.310%
2,085,982 133,065 2,219,047 0.303%
2,107,792 123,929 2,231,721 0.302%
2,192,026 121,534 2,313,560 0.116%
2,362,339 139,834 2,502,173 0.116%
- 129-
CITY OF TUSTIN
DIRECT AND OVERLAPPING PROPERTY TAX RATES
Last Ten Fiscal Years
(rate per$100 of taxable value)
Fiscal Year
2006 2007 2008 2009
Direct Rate:
City of Tustin $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272
Tustin Unified School District 0.4397 0.4397 0.4397 0.4397
South Orange County Community College District 0.0886 0.0886 0.0886 0.0886
County of Orange 0.0617 0.0617 0.0617 0.0617
Orange County Flood Control District 0.0198 0.0198 0.0198 0.0198
Orange County Library District 0.0167 0.0167 0.0167 0.0167
Orange County Department of Education 0.0161 0.0161 0.0161 0.0161
Various Special Districts 0.2302 0.2302 0.2302 0.2302
Total Direct Rate 1.0000 1.0000 1.0000 1.0000
Overlapping Rates:
Tustin Unified School District Bonds 0.0311 0.0023 0.0317 0.0310
Metropolitan Water District Bonds 0.0052 0.0047 0.0045 0.0043
Rancho Santiago Community College District Bonds 0.0169 0.0191 0.0237 0.0225
Irvine Ranch Water District Bonds 0.0477 0.2138 0.2143 0.2143
Santa Ana Unified School District Bonds 0.0435 0.0392 0.0359 0.0321
Total Overlapping Rates 0.1444 0.2791 0.3101 0.3042
Total Direct and Overlapping Rates $ 1.1444 $ 1.2791 $ 1.3101 $ 1.3042
Source:Hdl,Coren&Cone
- 130-
Fiscal Year
2010 2011 2012 2013 2014 2015
$ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272
0.4397 0.4397 0.4397 0.4397 0.4397 0.4397
0.0886 0.0886 0.0886 0.0886 0.0886 0.0886
0.0617 0.0617 0.0617 0.0617 0.0617 0.0617
0.0198 0.0198 0.0198 0.0198 0.0198 0.0198
0.0167 0.0167 0.0167 0.0167 0.0167 0.0167
0.0161 0.0161 0.0161 0.0161 0.0161 0.0161
0.2302 0.2302 0.2302 0.2302 0.2302 0.2302
1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
0.0380 0.0596 0.0559 0.0672 0.0891 0.0696
0.0043 0.0037 0.0037 0.0035 0.0035 0.0035
0.0274 0.0314 0.0315 0.0324 0.0333 0.0508
0.2242 0.2242 0.2155 0.2155 0.2155 0.0960
0.0739 0.0717 0.0715 0.0775 0.0736 0.0687
0.3678 0.3906 0.3781 0.3961 0.4150 0.2886
$ 1.3678 $ 1.3906 $ 1.3781 $ 1.3961 $ 1.4150 $ 1.2886
- 131-
CITY OF TUSTIN
PRINCIPAL PROPERTY TAX PAYERS
Current Year and Ten Years Ago
2015 2005
Percent of Percent of
Total City Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Value Value Value Value
Irvine Company LLC $ 228,477,924 2.22% $ 65,223,171 1.00%
Vestar Kimco Tustin LP 162,372,463 1.58%
Avalon 11 California Value I LP 98,143,300 0.95%
Irvine Apartment Communities LP 50,873,840 0.49% 210,693,161 3.42%
Ricoh Development of California Inc 48,516,780 0.47%
PK II Larwin Square SC LP 48,263,673 0.47%
Borchard Redhill SKB-Tustin LLC 47,709,881 0.46% 30,113,321 0.46%
Cadigan Communities LP 47,482,617 0.46% 26,194,631 0.40%
Costco Wholesale Corporation 47,286,886 0.46%
CPII Park Place LLC 42,498,878 0.41%
Moffett Meadows Partners,LLC 144,651,140 2.22%
WL Homes 69,876,021 1.07%
Bascom East Tustin Avenue Apartment LLC 67,546,366 1.04%
Pan Pacific Retail Prop 44,593,136 0.68%
Saddleback Memorial Medic 39,596,614 0.61%
Bedrosian Tustin,LLC 26,753,547 0.41%
$ 821,626,242 7.97% $ 725,241,108 11.31%
The amounts shown above include the Combined Tax Rolls and the SBE Non-Unitary Tax Roll.
Sources:Hdl,Coren&Cone
- 132-
CITY OF TUSTIN
PROPERTY TAX LEVIES AND COLLECTIONS
Last Ten Fiscal Years
Collected within the
Fiscal Taxes Levied Fiscal Year of Levy Collections in Total Collections to Date
Year Ended for the Percent Subsequent Percent
June 30 Fiscal Year Amount of Levy Years Amount of Levy
2006 $ 21,602,011 $ 21,242,797 98.34% $ 309,074 $ 21,551,871 99.77%
2007 30,701,393 28,617,969 93.21% 799,215 29,417,184 95.82%
2008 33,554,781 31,070,501 92.60% 695,793 31,766,294 94.67%
2009 38,515,110 34,022,959 88.34% 1,417,067 35,440,026 92.02%
2010 31,739,378 28,347,659 89.31% 917,222 29,264,881 92.20%
2011 30,713,746 29,541,000 96.18% 610,052 30,151,052 98.17%
2012 30,163,205 20,433,400 67.74% 147,389 20,580,789 68.23%
2013 9,492,638 9,257,817 97.53% 121,715 9,379,532 98.81%
2014 9,862,476 9,655,778 97.90% 121,400 9,777,178 99.14%
2015 9,287,149 9,007,785 96.99% 163,497 9,171,282 98.75%
Notes:
The amounts presented include City property taxes and former Redevelopment Agency tax increment.
This schedule also includes amounts collected by the City and former Redevelopment Agency that were passed-through
to other agencies.
Effective February 1,2012,the former Redevelopment Agency was dissolved. See Notes 18 and 19 for more information.
Source: County of Orange Auditor Controller's Office
- 133-
CITY OF TUSTIN
RATIOS OF OUTSTANDING DEBT BY TYPE
Last Ten Fiscal Years
Fiscal Governmental Activities
Year Tax Tax Tax Lease Total
Ended Allocation Allocation Allocation Revenue Notes Notes Governmental
June 30 Bonds(1) Bonds(6) Bonds(7) Bonds(2) Payable(3) Payable(4) Activities
2006 $ 14,030,000 $ $ $ 330,000 $ $ $ 14,360,000
2007 13,020,000 - 25,000,000 38,020,000
2008 11,975,000 25,000,000 36,975,000
2009 10,870,000 14,962,000 19,284,170 45,116,170
2010 9,720,000 26,170,000 - 8,199,000 20,112,456 64,201,456
2011 8,515,000 24,915,000 44,170,000 - 20,976,317 98,576,317
2012 - - - 21,877,282 21,877,282
2013 22,816,940 22,816,940
2014 21,404,683 21,404,683
2015 16,404,683 16,404,683
Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements.
(1) On July 1,1998 the City issued$20.8 million of Tax Allocation Refunding Bonds to retire Series 1987 Refunding
Bonds. On February 1,2012,the remaining liability of$7,260,000 was transferred to the Successor Agency
to the Tustin Community Redevelopment Agency. See Notes 18 and 19 for more information.
(2) In June of 1996 the City issued$2.7 million of Lease Revenue Bonds as a member of the Countywide Joint
Powers Authority. The final maturity was August,2006.
(3) In April of 2007 the Tustin Redevelopment Agency executed a note payable in the amount of$25 million to
acquire property to carry out the program objectives of the Agency.
(4) In December of 2008 the City executed a note payable to the Tustin Redevelopment Agency in the amount of
$18,881,750 to increase its deposit of probable compensation per court order pending litigation. As of
February 1,2012,this note is payable to the Successor Agency to the Tustin Community Redevelopment Agency.
See Note 19 for more information.
(5) In September of 2003 the City issued$14.355 million of Refunding Water Revenue Bonds to defease the
outstanding Certificates of Participation and the Orange County Water District Notes. These bonds were
defeased in March 2012.
- 134-
Business-type Activity
Water Water Water Water Total Total Debt
Revenue Revenue Revenue Revenue Business-type Primary Percentage of Per
Bonds(5) Bonds(8) Bonds(9) Bonds(10) Activity Government Personal Income Capita
$ 13,461,607 $ $ $ $ 13,461,607 $ 27,821,607 1.35% $ 394
13,331,607 13,331,607 51,351,607 2.29% 719
13,080,000 13,080,000 50,055,000 2.11% 696
12,560,000 12,560,000 57,676,170 2.35% 783
11,875,000 11,875,000 76,076,456 3.16% 1,018
11,165,000 20,760,000 - 31,925,000 130,501,317 5.52% 1,722
- 20,760,000 8,910,000 29,670,000 51,547,282 2.12% 673
21,044,310 8,997,129 30,041,439 52,858,379 2.16% 678
21,034,111 8,205,372 14,160,362 43,399,845 64,804,528 2.73% 827
21,023,911 7,398,615 14,111,418 42,533,944 58,938,627 2.44% 752
(6) In March 2010 the Tustin Redevelopment Agency issued$26,170,000 Tax Allocation Housing Bonds,Series 2010
to refinance low and moderate income housing activities throughout the geographic boundaries in the City.On
February 1,2012,the remaining liability of$24,220,000 was transferred to the Successor Agency to the Tustin
Community Redevelopment Agency. See Notes 18 and 19 for more information.
(7) In November 2010 the Tustin Redevelopment Agency issued$44,170,000 MCAS Tax Allocation Bonds,Series 2010
to finance capital improvements in the MCAS project area. On February 1,2012,the remaining liability of
$43,530,000 was transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See
Notes 18 and 19 for more information.
(8) In May 2011 the City issued$20,760,000 Water Revenue Bonds,2011 Series A to finance water capital improvement
projects.
(9) In March 2012 the City issued$8.91 million of Refunding Water Revenue Bonds to defease the outstanding 2003 Water
Revenue Bonds.
(10) In October 2013 the City issued$14,045,000 Water Revenue Bonds to finance water capital improvement projects.
- 135-
CITY OF TUSTIN
RATIO OF GENERAL BONDED DEBT OUTSTANDING
Last Ten Fiscal Years
Outstanding General Bonded Debt
Fiscal Year General Tax Percent of
Ended Obligation Allocation Assessed Per
June 30 Bonds Bonds Total Value* Capita
2006 $ - $ 14,030,000 $ 14,030,000 0.20% $ 199
2007 - 13,020,000 13,020,000 0.16% 182
2008 - 11,975,000 11,975,000 0.12% 166
2009 - 10,870,000 10,870,000 0.11% 148
2010 - 35,890,000 35,890,000 0.38% 480
2011 - 77,600,000 77,600,000 0.82% 1,024
2012 - - - - -
2013 - - - - -
2014 - - - - -
2015 - - - - -
General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in
enterprise funds. The City currently does not have general bonded debt in either fund.
*-Assessed value has been used because the actual value of taxable property is not readily available in the State
of California.
Effective February 1,2012,the redevelopment agency was dissolved. The outstanding balance of tax allocation
bonds were transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See
Notes 18 and 19 for more information.
- 136-
CITY OF TUSTIN
OVERLAPPING DEBT SCHEDULE
June 30,2015
2014-15 Assessed Valuation $10,292,804,580
Redevelopment Incremental Valuation (2,334,044,315)
Adjusted Assessed Value 7,958,760,265
City's
Share of
Total Debt (1) Debt at
OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/15 %Applicable 6/30/15
Metropolitan Water District $ 110,420,000 0.444% $ 490,265
Rancho Santiago Community College District 277,290,443 0.014 38,821
Rancho Santiago Community College District School Facilities Improvement Dst No.1 70,585,000 0.001 706
Santa Ana Unified School District 282,043,547 0.001 2,820
Tustin Unified School District School Facilities Improvement District No.2002-1 49,798,788 44.364 22,092,734
Tustin Unified School District School Facilities Improvement District No.2008-1 70,495,000 42.409 29,896,225
Tustin Unified School District School Facilities Improvement District No.2012-1 32,535,000 43.748 14,233,412
Tustin Unified School District Community Facilities District No.88-1 38,360,000 100.000 38,360,000
Tustin Unified School District Community Facilities District No.06-1 13,465,000 100.000 13,465,000
City of Tustin Community Facilities Districts 75,895,000 100.000 75,895,000
Irvine Unified School District Community Facilities District No.86-1 77,270,000 0.241 186,221
Irvine Ranch Water District Improvement Districts 458,823,980 5.497-81.041 55,982,916
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $ 250,644,120
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Orange County General Fund Obligations 98,906,000 2.185% 2,161,096
Orange County Pension Obligations 366,854,623 2.185 8,015,774
Orange County Board of Education Certificates of Participation 15,190,000 2.185 331,902
Municipal Water District of Orange County Water Facilities Corporation 5,360,000 2.611 139,950
Orange Unified School District Certificates of Participation 30,614,699 0.029 8,878
Orange Unified School District Benefit Obligations 84,965,000 0.029 24,640
Santa Ana Unified School District Certificates of Participation 73,662,130 0.001 737
City of Tustin - 100.000 -
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT: 10,682,977
Less: MWDOC Water Facilities Corporation(100%self supporting) 139,950
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT: 10,543,027
OVERLAPPING TAX INCREMENT DEBT(Successor Agencies) $ 94,160,000 0.002-100.00% $ 66,170,560
GROSS COMBINED TOTAL DEBT $ 327,497,657 (2)
NET COMBINED TOTAL DEBT $ 327,357,707
(1)The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages wer
estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the
district's total taxable assessed value.
(2)Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and tax allocation bonds and non-bonded capital leas
obligations.
Effective February 1,2012,the former Redevelopment Agency was dissolved. See Notes 18 and 19 for more informatio
Ratios to 2014-15 Assessed Valuations:
Total Overlapping Tax and Assessment Debt 2.44%
Total Direct Debt 0.00%
Gross Combined Total Debt 3.18%
Net Combined Total Debt 3.18%
Ratios to Redevelopment Incremental Valuations($2,334,044,315):
Total Overlapping Tax Increment Debt 2.84%
Source:California Municipal Statistics,Inc.
- 137-
CITY OF TUSTIN
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
Fiscal Year
2006 2007 2008 2009
Assessed valuation $ 6,039,188,000 $ 6,698,963,000 $ 8,143,666,000 $ 7,360,762,000
Conversion percentage 25% 25% 25% 25%
Adjusted assessed valuation 1,509,797,000 1,674,740,750 2,035,916,500 1,840,190,500
Debt limit percentage 15% 15% 15% 15%
Debt limit 226,469,550 251,211,113 305,387,475 276,028,575
Total net debt applicable to limitation - - - -
Legal debt margin $ 226,469,550 $ 251,211,113 $ 305,387,475 $ 276,028,575
Total debt applicable to the limit
as a percentage of debt limit 0.0% 0.0% 0.0% 0.0%
The Government Code of the State of California provides for a legal debt limit of 15%of gross assessed
valuation. However,this provision was enacted when assessed valuation was based on 25%of market
value. Effective with the 1981-82 fiscal year,each parcel is now assessed at 100%of market value(as of
the most recent change in ownership for that parcel). The computations shown above reflect a conversion
of assessed valuation data for each fiscal year from the current full valuation perspective to the 25%level
that was in effect at the time that the legal debt margin was enacted by the State of California for local
governments located within the state.
Sources: County Tax Assessor's Office
City Finance Department
- 138-
Fiscal Year
2010 2011 2012 2013 2014 2015
$ 7,197,825,000 $ 7,109,878,000 $ 7,159,851,000 $ 7,270,451,000 $ 7,418,821,000 $ 7,790,632,000
25% 25% 25% 25% 25% 25%
1,799,456,250 1,777,469,500 1,789,962,750 1,817,612,750 1,854,705,250 1,947,658,000
15% 15% 15% 15% 15% 15%
269,918,438 266,620,425 268,494,413 272,641,913 278,205,788 292,148,700
$ 269,918,438 $ 266,620,425 $ 268,494,413 $ 272,641,913 $ 278,205,788 $ 292,148,700
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
- 139-
CITY OF TUSTIN
PLEDGED-REVENUE COVERAGE
Last Ten Fiscal Years
Fiscal Year Less Net Water Revenue Bonds
Ended Water Operating Available Debt Service
June 30 Revenue Expenses Revenue Principal Interest Coverage
2006 $ 9,348,715 $ 7,417,023 $ 1,931,692 $ 130,000 $ 575,410 2.74
2007 10,844,515 9,986,251 858,264 180,000 570,470 1.14
2008 11,240,752 10,053,706 1,187,046 335,000 563,450 1.32
2009 11,510,315 10,573,932 936,383 520,000 550,385 0.87
2010 12,829,902 9,928,608 2,901,294 685,000 530,105 2.39
2011 12,422,746 10,566,435 1,856,311 710,000 502,705 1.53
2012 15,112,161 10,683,621 4,428,540 740,000 1,432,659 2.04
2013 16,688,773 11,462,258 5,226,515 710,000 957,111 3.14
2014 18,955,616 13,198,598 5,757,018 710,000 1,622,859 2.47
2015 19,375,359 12,511,648 6,863,711 770,000 1,973,820 2.50
Notes:
Details regarding the City's outstanding debt can be found in the notes to the basic financial statements.
Operating expenses do not include interest or depreciation and amortization expenses.
Water revenues in 2010 include proceeds from an advance from the City's general fund.
- 140-
Tax Allocation Bonds(A)
Tax Debt Service
Allocation Principal Interest Coverage
$ 2,952,481 $ 960,000 $ 687,680 1.79
3,956,734 1,000,000 642,040 2.41
3,381,188 1,055,000 594,358 2.05
4,460,947 1,105,000 547,365 2.70
3,831,975 1,150,000 497,180 2.33
17,928,849 2,460,000 2,204,419 3.84
- 141 -
CITY OF TUSTIN
DEMOGRAPHIC AND ECONOMIC STATISTICS
Last Ten Calendar Years
Personal Per Capita County of Orange
Calendar City of Tustin Income Personal Unemployment
Year Population (In Thousands) Income Rate
2006 70,524 $ 2,064,542 $ 29,274 3.70%
2007 71,383 2,246,281 31,468 3.30%
2008 71,931 2,368,395 32,926 3.80%
2009 73,670 2,450,480 33,263 5.20%
2010 74,736 2,407,036 32,207 8.90%
2011 75,733 2,363,057 31,186 9.40%
2012 76,597 2,429,318 31,716 8.60%
2013 77,983 2,451,708 31,439 5.60%
2014 78,360 2,375,640 30,317 4.90%
2015 78,347 2,411,442 30,779 5.10%
Source:HdL Coren&Cone,LLC
- 142-
CITY OF TUSTIN
PRINCIPAL EMPLOYERS
Current Year and Nine Years Ago
2015 2006(l)
Percent of Percent of
Number of Total Number of Total
Employer Employees Employment Employees Employment
Tustin Unified School District 1,449 3.39%
Rockwell Collins Inc 600 1.40%
Ricoh Electronics Inc 500 1.17% 1,038 2.77%
Costco 450 1.05%
City of Tustin 372 0.87%
Newport Specialty Hospital 300 0.70%
Tustin Hospital Medical Center 300 0.70% 200 0.51%
Toshiba America Medical Systs 300 0.70% 300 0.76%
Micro Vention Inc. 300 0.70%
Balboa Water Group 253 0.59%
KTBN Channel 40 Trinity Broadcasting 180 0.46%
Texas Instruments 560 1.42%
MacPherson Enterprises 540 1.37%
GE Power Electronics(formerly
Cherokee International) 330 0.84%
Revere Transducers 200 0.51%
Fireman's Fund Insurance 190 0.48%
Safeguard Business Systems 175 0.45%
(1)Information is not available for fiscal year 2004-2005.
Sources:Orange County Workforce Investment Board
City of Tustin
US Census Bureau
- 143-
CITY OF TUSTIN
FULL-TIME CITY EMPLOYEES
BY FUNCTION
Last Ten Fiscal Years
Fiscal Year
Function 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
General Government 31 31 31 27 27 25 29 26 35 33
Community Development 24 28 29 28 24 17 17 15 15 16
Public Works 48 50 51 50 53 52 51 40 47 48
Police 141 145 144 147 147 140 139 131 140 141
Parks and Recreation 17 17 15 16 15 14 15 13 13 14
Redevelopment Agency 3 5 5 6 6 6 5 3 - -
Water 22 20 20 23 22 23 25 17 17 18
Total 286 296 295 297 294 277 281 245 267 270
The City contracts with the OC Fire Authority for fire services.
Source:City of Tustin Human Resource Department
- 144-
CITY OF TUSTIN
CAPITAL ASSET STATISTICS
BY FUNCTION
Last Ten Fiscal Years
Fiscal Year
Function 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Public Safety
Police Stations 1 1 1 1 1 1 1 1 1 1
Fire Stations(1) 2 2 2 2 2 2 2 2 2 2
Public Works
Street(miles) 101.8 101.8 106.3 127.2 127.2 127.2 127.2 127.2 129.1 129.1
Street Lights 2,855 2,855 3,285 3,544 3,544 3,544 3,544 3,544 3,640 3,640
Traffic Signals 97 97 113 113 116 117 118 118 121 121
Storm Drain(miles) 23.7 23.7 49.1 49.2 49.2 49.2 49.2 49.2 51.2 51.4
Street Trees 16,638 16,638 15,821 15,853 15,853 15,837 15,786 16,097 16,073 15,815
Parks and Recreation
Parks 12 12 12 12 13 13 13 13 13 13
Parks(acres) 81.5 81.5 81.5 81.5 98.5 98.5 98.5 98.5 98.5 98.5
Community Centers 1 1 1 1 1 1 1 1 1 1
Senior Centers 1 1 1 1 1 1 1 1 1 1
Water
Metered Services 13,900 14,080 14,117 14,118 14,118 14,139 14,139 14,172 14,181 14,148
Average daily consumption 12,514 17,205 14,970 14,460 14,460 12,899 13,491 13,601 13,975 13,975
Reservoirs 6 6 6 6 6 6 6 6 6 6
Wells 12 12 12 13 13 13 13 13 13 13
Water Main(miles) 173 173 173 173 173 173 173 173 173 173
Fire Hydrants 2,200 2,200 2,200 2,201 2,201 2,201 2,201 2,201 1,914 1,945
(1) The City contracts with the OC Fire Authority for fire services,and they have full use of City owned stations.
Source: City of Tustin Finance Department
- 145-
CITY OF TUSTIN
WATER CONSUMPTION BY CUSTOMER TYPE
Last Ten Fiscal Years
Fiscal Year
Type of Customer 2006 2007 2008 2009
Residential 2,847,140 3,319,069 3,202,982 3,012,575
Apartment/Multiple Units 1,218,770 1,312,731 1,264,584 1,226,181
Commercial 331,990 360,170 326,987 305,601
Fire Services 306 11,453 478 184
Irrigation 137,651 171,200 174,858 171,382
Government 179,426 265,158 260,688 264,425
Restaurants 71,356 67,378 61,029 54,916
Hospitals 14,690 14,243 14,376 11,222
Non-Profit 43,427 48,320 48,922 45,387
Industrial 77,425 71,065 69,920 67,985
Hotel/Motels 10,878 13,367 12,803 12,890
All Others 103,570 100,604 115,246 105,221
5,036,629 5,754,758 5,552,873 5,277,969
Measured in hundred cubic feet.
Source: City of Tustin Finance Department
- 146-
Fiscal Year
2010 2011 2012 2013 2014 2015
2,749,415 2,592,741 2,733,482 2,815,322 2,905,069 2,603,538
1,142,749 1,133,899 1,172,823 1,158,480 1,163,159 1,139,321
287,951 296,001 305,638 308,376 321,125 310,585
217 275 1,242 818 577 837
145,287 134,408 149,957 151,965 167,346 155,766
238,914 212,561 236,658 268,581 276,292 229,262
52,761 48,873 53,183 53,461 52,520 51,658
9,636 11,587 12,204 12,442 7,634 10,018
43,985 41,291 44,488 44,476 45,920 41,601
56,360 51,760 58,298 57,462 60,438 59,292
13,562 8,332 8,514 10,417 12,866 21,379
171,781 176,248 147,552 82,716 87,785 71,324
4,912,618 4,707,976 4,924,039 4,964,516 5,100,731 4,694,581
- 147-
CITY OF TUSTIN
WATER RATES
Last Ten Fiscal Years
Consumption Charges
Bi-Monthly Up to From From All
Fiscal Fixed 12 13 to 40 41 to 60 Over 60
Year Charge HCF HCF HCF HCF
2006 $ 18.16 $ 0.40 $ 1.27 $ 1.36 $ 1.50
2007 20.24 0.44 1.42 1.52 1.67
2008 22.26 0.49 1.56 1.67 1.84
2009 22.26 0.49 1.56 1.67 1.84
2010 22.26 0.49 1.56 1.67 1.84
Consumption Charges
Bi-Monthly Up to From From From From From All
Fiscal Fixed 10 11 to 20 21 to 30 31 to 40 41 to 50 51 to 60 Over 61
Year Charge HCF HCF HCF HCF HCF HCF HCF
2011 $ 34.49 $ 0.58 $ 1.02 $ 1.33 $ 1.65 $ 1.97 $ 2.29 $ 2.62
2012 36.94 0.70 1.22 1.60 1.99 2.37 2.76 3.17
2013 40.63 0.73 1.29 1.69 2.10 2.56 2.97 3.40
2014 43.59 0.79 1.38 1.81 2.25 2.79 3.24 3.70
2015(l) 46.85 0.84 1.48 1.94 2.41 3.05 3.53 4.05
Emergency Drought Stage 2-Consumption Charges
Bi-Monthly Up to From From From From From All
Fiscal Fixed 8 9 to 16 17 to 24 25 to 32 33 to 40 41 to 48 Over 49
Year Charge HCF HCF HCF HCF HCF HCF HCF
2015(l) $ 46.85 $ 0.84 $ 1.48 $ 1.94 $ 2.41 $ 3.05 $ 3.53 $ 4.05
Notes:
HCF=Hundred Cubic Feet(1 HCF=748 gallons)
(1) A revised seven(7)tiered rate structure was approved on August 5,2014 to address a stage 2 emergency drought
water demand reduction mandate.
A seven(7)tiered rate structure was implemented on July 1,2010. Additionally,a new fixed charge(Capital Fee)
was implemented with the new rate structure,which has been included in the Bi-Monthly Fixed Charge. The
rate shown is for a standard residential customer.
The bi-monthly fixed rate shown is based on the standard residential customer meter(5/8"). The City uses the
American Water Works Association equivalent meter capacity ratios from the AWWA Manual M6 to calculate
fixed charges for meters ranging from 1 to 6 inches.
Source: City of Tustin Finance Department
- 148-
CITY OF TUSTIN
WATER CUSTOMERS
Current Year and Nine Years Ago
2015 2006(l)
Percent of Percent of
Water Total Water Water Total Water
Water Customer Charges Revenues Charges Revenues
Tustin Unified School District $ 708,074 3.74% $ 204,869 3.50%
City of Tustin 164,480 0.87% 52,710 0.90%
AT&T Services,Inc. 83,470 0.44%
Ricoh Electronics,Inc. 80,191 0.42%
CalTrans-District 12 70,667 0.37%
Tustin Plaza Center,LP 59,833 0.32%
Schroeder Property Management 53,205 0.28% 19,940 0.34%
SKB-Tustin LLC 51,237 0.27%
Tustin Acres Comm.Assoc. 49,974 0.26% 22,501 0.38%
Westchester Park L.P. 36,694 0.19% 19,784 0.34%
Tustin Place Homeowners Association 35,756 0.19%
Tree Haven Homeowners Association 34,875 0.18%
HSA LP 34,852 0.18% 53,459 0.91%
15701 TV Way Partnership 34,080 0.18%
Sierra Corporate Management 33,912 0.18%
71286 JMJ LLC 33,124 0.17%
Residence Inn Tustin 32,925 0.17%
Briarwood Investment Co.Ltd. 31,556 0.17% 25,311 0.43%
Bascon East Tustin Ave Apt.LLC 65,410 1.12%
Pacific Bell 50,417 0.86%
V KAY-NNC Valencia Gardens 27,033 0.46%
Greenwood and McKenzie 23,490 0.40%
CMC Association Mgmt. 23,149 0.40%
Alders Apartment Company 20,903 0.36%
Pacific Point Apartments 20,513 0.35%
Arnel Management 18,655 0.32%
Regency West 18,599 0.32%
Tustin Village Community Assoc. 18,364 0.31%
Sycamore Creek Apartments 17,878 0.31%
Total Water Sales $ 1,628,905 8.58% $ 702,985 12.01%
(1)Information is not available for fiscal year 2004-2005.
Source: City of Tustin Finance Department
- 149-
The page left blank intentionally
- 150 -
APPENDIX B
PROPOSER GUARANTEES AND WARRANTIES
A. The proposer certifies it can and will provide and make available, at a minimum, all
services set forth in Section II, Nature of Services Required.
B. Proposer warrants that it is willing and able to obtain Professional Liability Insurance
providing limits not less than one (1) million dollars of coverage for the willful or
negligent acts, or omissions of any officers, employees or agents thereof, or show
evidence of the ability to provide substitute security equal to the same limit.
C Proposer warrants that it will not delegate or subcontract its responsibilities under an
agreement without the express prior written permission of the City of Tustin.
D. Proposer warrants that all information provided by it in connection with this proposal is
true and accurate.
Signature of Official:
Name (typed):
Title:
Firm:
Date:
City of Tustin RFP
Page 18 of 19
APPENDIX C
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE
2016 FINANCIAL STATEMENTS
Standard Quoted
Hours Hourly Rates Hourly Rates Total
Partners $ $ $
Managers $ $ $
Supervisory Staff $ $ $
Staff $ $ $
Other (specify) $ $ $
SUBTOTAL $ $ $
Out-of-pocket expenses:
Meals and Lodging $
Transportation $
Other (specify) $
TOTAL proposed price for 2016 audit $
Fee and Expense Proposal for Subsequent Years:
Escalation Factor 2017 2018 2019 2020
S:\Linda\Audit Commission\RFP Tustin Final-Auditing Services 2016-FINAL 1-8-16.doc
City of Tustin RFP
Page 19 of 19
EXHIBIT "B"
CITY OF TUSTIN
PROFESSIONAL AUDITING
SERVICES PROPOSAL
FOR THE THREE YEARS ENDING JUNE 30, 2018
(WITH AN OPTION FOR EACH OF THE TWO YEARS
ENDING JUNE 30, 2019 AND JUNE 30, 2020)
r�
ti
Submitted By:
TITLE PAGE
RFP Subject: Certified Audits on the City of Tustin
For the Three Years Ending June 30, 2018
(With an Option for Each of the Two Years
Ending June 30, 2019 and June 30, 2020)
Name of Proposer: White Nelson Diehl Evans LLP
Certified Public Accountants and Consultants
Local Address: 2875 Michelle Drive, Suite 300
Irvine, CA 92606-5165
Telephone: (714) 978-1300
Fax: (714) 978-7893
Federal Identification Number: 33-0686301
California CPA License Number: PAR 6123
Website: www.wndecpa.com
Email: npatel@wndecpa.com
Contact Persons: Nitin P. Patel, CPA
Engagement Partner
Robert J. Callanan, CPA
Technical Review Partner
Date: February 18, 2016
CITY OF TUSTIN
TABLE OF CONTENTS
February 18, 2016
Page
Number
Letter of Transmittal 1 - 2
Firm Profile and Qualifications:
Licensing and Independence 3
Size and Location of Firm 3
Range of Activities 3
Participation in "Quality Review" Programs 4
Education Programs 4
Participation in Professional Organizations 5
G FOA Awa rd P rog ra m 6
Computer Auditing Capabilities 7
Partner, Supervisory and Staff Qualifications and Experience:
Audit Team 8
Commitment Related To Personnel 8
Nondiscrimination Policy 8
Resumes of Audit Team Personnel 9 - 12
Prior Engagements with the City of Tustin 13
Firm Experience with Governmental Entities:
Similar Engagements with Other Municipal Entities 13
City Client References 13
Single Audit Experience 14
Experience with Preparation of State-Mandated Reports 14
Scope of Work, Timing and Audit Approach:
Entities to Be Included In Audit 15
Reports to Be Issued and Due Dates 15
Audit Timing 16
Commitment to Deliver Reports on a Timely Basis 16
Audits to Be in Accordance with GAAS and Other Requirements 16 - 17
Audit Approach 17 - 18
Audit Approach Redevelopment Agency/Successor Agency 19
Approach to Internal Control 19
Single Audit Approach 20
Determining Laws and Regulations Subject to Audit 20
Method of Sampling 20
CITY OF TUSTIN
TABLE OF CONTENTS
(CONTINUED)
February 18, 2016
Page
Number
Scope of Work, Timing and Audit Approach (Continued):
Analytical Procedures 21
Management Letters 21
Potential Audit Problems 21
Retention of and Access to Audit Workpapers 21
Other Professional Services 21
Irregularities and Illegal Acts 22
Segmentation of the Audit Hours, By Partner and Staff Level 22
Discussion of Relevant Accounting Issues:
GASB Statement No. 72 23
GASB Statement No. 73 23
GASB Statement No. 74 23
GASB Statement No. 75 23
GASB Statement No. 76 24
GASB Statement No. 77 24
GASB Statement No. 78 24
GASB Statement No. 79 24
Work Required by City Staff 25
Consulting Services Department:
Overview of Services Provided
Attachment I:
Current City Client References
Lists of City and Special District Engagements Performed in the Last 5 Years
Attachment II - Results of Outside Quality Review
Attachment III - Sample Reports
Proposer Guarantees and Warranties
WHITE�W
aDEu '�nts
February 18, 2016
Ms.Jenny Leisz
Finance Manager
City of Tustin
300 Centennial Way
Tustin, CA 92780
Dear Ms. Leisz:
We are pleased to present our proposal to continue serving as independent auditors for the City of Tustin (the
City), with a rotation of the audit team. We have prepared this information in accordance with the guidelines
set forth in your request for proposal.
Who We Are
White Nelson Diehl Evans LLP is a California certified public accounting and consulting firm with offices in
Irvine, Carlsbad and Escondido. Our firm has specialized in providing services to the governmental industry for
over 80 years and has no intentions of discontinuing these services.
Why We Are The Best Qualified Firm
We consider ourselves to be the best qualified firm to perform auditing and accounting services for the City of
Tustin. Please consider these qualifications:
• Our firm has provided the City with audit services for the past 5 years and Nitin P. Patel, CPA, served as the
engagement partner on the City audit from fiscal years 2000 to 2004 which has allowed the firm to gain
specific knowledge about the City and its operations. The specific knowledge about the City and
operations will enhance audit quality by allowing our firm to identify and focus on specific risk areas and
will reduce audit costs as your staff will not spend time training us on the operations of the City. We
understand the City's objective in enhancing auditor independence, objectivity and professional
skepticism. To achieve the City's objective while maintaining audit quality and reducing costs to the City,
we are proposing a rotation in the audit team.
• A significant part of our practice is devoted to providing professional services to the governmental industry
and over the past year, the firm provided services to approximately 100 governmental organizations and
on an annual basis our firm issues over 150 reports on audits of governmental agencies including, Cities,
the Successor Agency to Redevelopment Agencies, Special Districts and Joint Power Authorities.
• Our firm has devoted a substantial amount of time and resources in order to provide governmental
agencies with quality audits. Our knowledge of the industry is best demonstrated by the fact that our
clients who apply for the "Certificate of Achievement in Financial Reporting" issued by the Government
Finance Officers Association (GFOA) consistently receive that award. A list of these clients is presented on
page 6 of this proposal.
• We are in a professional alliance with BDO Seidman, a National Accounting Firm, and a network of
accounting firms allowing us the ability to provide quality attestation services. The BDO Alliance provides
us access to BDO's personnel and technical resources which allows White Nelson Diehl Evans LLP to deliver
the range of services and capabilities of a large national firm, including the use of specialists to support the
needs of our clients.
• Our audits include extensive use of information technology as described in detail on page 7 of this
proposal.
1
2875 Michelle Drive,Suite 300,Irvine, CA 92606 •Tel: 714.978.1300• Fax: 714.978.7893
Offices located in Orange and San Diego Counties
Why We Are The Best Qualified Firm (Continued)
• We are a full service CPA firm. Our Consulting Services Department can provide the City with a variety of
services, including investment policy compliance reviews, litigation support, dispute resolution services,
and consulting on a wide array of governmental issues.
• We understand that we provide a service to the City. We are committed to providing an effective and
efficient audit that will meet the proposed timing of the project deliverables by assigning experienced
governmental auditors. Understanding the size of the City of Tustin and the scope of work requested in the
proposal, we are proposing an engagement team with extensive governmental audit experience. The
staffing plan includes Nitin Patel, CPA, the engagement partner with 30 years of experience,
Kassie Radermacher, CPA, with 11 years of experience who will manage the audit, and Tiffany Fung, CPA, a
supervisor with 6 years of experience who will be on-site supervising and performing the audit fieldwork.
We are confident that the proposed staffing plan with an engagement team experienced in governmental
audits and who are familiar with municipal procedures will result in an effective and efficient audit that
meets the project timing and deliverables requirements with minimum disruption to your staff.
The scope of our services for the three years ending June 30, 2018 would be as follows:
• A financial audit and preparation of the basic financial statements of the City of Tustin and the
Successor Agency to the Tustin Community Redevelopment Agency (Successor Agency) in accordance
in with auditing standards generally accepted in the United States of America and Government
Auditing Standards issued by the Comptroller General of the United States, to be included in the
Comprehensive Annual Financial Report (CAFR).
• A Single Audit of Federal Grants to be performed to meet the requirements of Title 2 U.S. Code of
Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirement for Federal Awards(Uniform Guidance).
• An agreed-upon procedures review of the calculation of the City's GANN Appropriations Limit (GANN),
as required by Section 1.5 of Article XIIIB of the California Constitution.
• A management letter containing any comments or recommendations resulting from our review of the
systems of internal controls in connection with the financial audits.
• A report communicating information related to the audit to those in charge of governance at the
conclusion of the audits.
• Preparation and filing of the City's State Controller's Report.
We make a commitment to deliver all necessary reports based on the timetable presented herein on page 15.
Also, a more detailed discussion of our understanding of the work to be performed is set forth on pages 15
through 22.
Our goal is to provide the City with the highest quality of service, including a CAFR which meets all required
reporting standards. We are confident that our service and experience will be of benefit to the City and will
provide added value over and above the performance of the audit itself. Throughout the year, you should feel
comfortable in calling us for advice regarding accounting and auditing matters, as we are never too busy to
meet the needs of our clients.
We thank the City for the opportunity to present our proposal. Please feel free to contact me, or
Mr. Robert J. Callanan, CPA, at (714) 978-1300 if you have any questions. This proposal constitutes a firm and
irrevocable offer for 60 days from the date of this letter. Mr. Callanan and I are authorized to represent our
firm, and bind the firm to a contract.
Very truly yours,
WHITE NELSON DIEHL EVANS LLP
,.,:, e Ptit_
Nitin P. Patel, CPA
Engagement Partner
2
FIRM PROFILE AND QUALIFICATIONS
LICENSING AND INDEPENDENCE
Our firm, and all of our certified personnel, are properly licensed to practice public accounting in
California.
Also, we meet the independence requirements of "Government Auditing Standards", as published by
the U.S. General Accountability Office. We have no conflict of interest with the City and will provide
written notice to the City of any professional relationships contemplated with the City during our term
as auditors. We have been providing auditing and other services to the City during the past five years.
In order to continue serving as auditors, in this proposal, we decided to put together an entirely new
audit team as discussed on page 8 which will provide a fresh look during the audits of the City.
SIZE AND LOCATION OF THE FIRM
White Nelson Diehl Evans LLP is a California accounting firm with offices in Irvine, Carlsbad and
Escondido.
j Our firm has approximately 140 employees,
r� which includes 22 partners with separate
assurance and tax departments. Your City
would be served by the assurance department
from our Irvine office, which has
�I r approximately 48 professional staff members,
f including 11 partners, and 14 managers and
supervisors. The Irvine Office assurance
department staff with governmental
experience consists of four partners, four
managers, seven supervisors, six seniors and
twelve staff accountants.
White Nelson Diehl Evans LLP has extensive experience in providing auditing, accounting and
consulting services in the governmental sector. Over twenty thousand hours per year are devoted to
this area of our practice for over 100 governmental units including cities, successor agencies, special
districts, nonprofit corporations and joint power authorities.
RANGE OF ACTIVITIES
White Nelson Diehl Evans LLP is a full service CPA firm. We offer a broad range of services, including:
Certified Audits Tax Planning and Consulting
Compilations and Reviews Income Tax Preparation and Representation
Agreed-Upon Procedure Reviews Consulting Services
Financial Services Litigation Support Services
Our specific services available to governmental agencies are more fully set forth in this proposal.
3
PARTICIPATION IN"QUALITY REVIEW" PROGRAMS
In July 2015, our firm underwent a quality review, by an independent CPA firm, under provisions of
the AICPA Quality Review Program. This review is required every three years and covered our audits
of governmental agencies. A final report dated July 22, 2015 with a pass rating on our systems and
procedures was received. A copy of the independent CPA firm's report is included herein at
Attachment II. Accordingly, we are confident that our current auditing standards and techniques meet
all existing requirements.
No regulatory action has ever been taken against any office of our firm due to substandard work. We
had no significant deficiencies noted in any federal or state desk reviews over the past three years.
EDUCATION PROGRAMS
White Nelson Diehl Evans LLP has a formal continuing education program. All firm auditors are
required to obtain 80 hours of continuing education every two years in the accounting and auditing
area as required by Government Auditing Standards, and at least 24 hours of government related
continuing education courses. Our staff is continually expanding their knowledge of the governmental
industry through our in-house training programs, programs offered by the AICPA, GFOA, the California
Society of Certified Public Accountants and other professional organizations, and through on-the-job
training.
Noted below is a description of certain in-house education courses taken by our partners and staff to
meet the governmental continuing education requirements. All personnel involved with governmental
auditing are required to attend these courses.
• Understanding the Risk Assessment Standards
• Understanding of GASB Statement No. 34, Basic Financial Statements - and Management's
Discussion and Analysis -for State and Local Governments
• Understanding, and Auditing, Deposits and Investments of California Governmental Units
• Reviews of Internal Controls in Accordance With Statements on Auditing Standards
• Assessing Audit Risk and Materiality in Conducting An Audit
• Consideration of Fraud in a Financial Statement Audit
• Computer Auditing in the Governmental Environment
• The Single Audit - New Provisions under Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards (Uniform
Guidance).
• Laws and Regulations in the Government Sector
• Understanding GASB Statement 54 related to Fund Balance Reporting and Governmental Fund
Type Definitions
• Understanding GASB Statement 65 related to reporting of Deferred Outflows and Deferred Inflows
of Resources
• Understanding the new GASB Pension Standards
4
PARTICIPATION IN PROFESSIONAL ORGANIZATIONS
Our partners and staff are actively involved in professional organizations in the governmental
accounting field. Noted below is a summary of our participation in various national and California
governmental organizations.
AICPA
Our firm is a member of the AICPA Governmental Audit Quality Center. The Center is a firm-based
voluntary membership Center whose primary purpose is to promote the importance of quality
governmental audits to purchasers of governmental audit services. The Center provides members
with an online forum tool for sharing best practices, as well as discussions on audit, accounting, and
regulatory issues. As a member of the Center, the firm receives updates on changes in auditing and
accounting standards that effect governmental audits. The quality control partner is required to
attend an annual web cast to discuss auditing and reporting issues effecting governmental audits. Our
firm uses the resources of the Center to maintain the quality of our governmental audits.
GFOA, GASB and FASB
Our firm is an associate member of the Government Finance Officers Association of the United States
and Canada (GFOA).
Also, we have web based access to the latest pronouncements issued by the Governmental
Accounting Standards Board (GASB) and the Financial Accounting Standard Board (FASB), including
Interpretations, Technical Pronouncements and Newsletters. We regularly analyze these
pronouncements and advise our governmental clients of changes in accounting rules.
CSMFO
Our Irvine office partners and our Director of Consulting Services are associate members of the
California Society of Municipal Finance Officers (CSMFO). Our personnel regularly attend local CSMFO
chapter meetings throughout Southern California, and the annual statewide conference. We often
provide public speakers for these meetings.
CSCPA
Several partners and principals of the firm have been members of the Governmental Accounting and
Auditing (GAA) Committee of the Orange County Chapter of the California Society of Certified Public
Accountants (CSCPA). Mr. Patel, Mr. Ludin and Mr. Morgan have each served as chairman of this
committee. Firm personnel have been involved over the years in preparing position papers issued for
professional organizations on governmental accounting matters. Currently, Mr. Patel and Mr. Callanan
are members of the State Governmental Accounting and Auditing Committee.
5
GFOA AWARD PROGRAM
The partner and manager will be involved in all phases of report preparation or review. Reporting
checklists will be used to assure compliance with all reporting requirements. In addition, another
member of the firm, not associated with the audit, and with extensive governmental auditing and
accounting experience, will review each financial statement audited and related reports. Based on
the high quality of our review process, we have been able to assist various clients in obtaining the
GFOA "Certificate of Achievement for Excellence in Financial Reporting". The recent clients that have
received the award are:
Cities: Cities (Continued):
Alhambra Palm Desert
Bellflower Pico Rivera
Beverly Hills Rancho Santa Margarita
Burbank San Buenaventura
Camarillo San Gabriel
Campbell Sanger
Colton Signal Hill
Costa Mesa Stanton
Cypress Tustin
Del Mar West Covina
Downey West Hollywood
Fountain Valley Westminster
Gilroy
Goleta Special Districts:
Hawaiian Gardens Costa Mesa Sanitary District
Highland Inland Empire Utilities Agency
Lake Forest Las Virgenes Municipal Water District
Lakewood Olivenhain Municipal Water District
Lancaster Otay Water District
Newport Beach Rancho California Water District
Santa Ana Watershed Project Authority
Yorba Linda Water District
6
COMPUTER AUDITING CAPABILITIES
White Nelson Diehl Evans LLP uses technology to make the audit process more effective. We utilize a
paperless audit software, ProSystem fx Engagement, which allows us to manage our audit
documentation electronically. Some of the benefits of paperless audit are:
• Receive the City's schedules in either hard copy or electronic format.
• Import and integrate trial balance data from virtually any accounting system. We avoid the
time and expense of keying in account numbers, descriptions and account balances. We
simply take your electronic trial balance and import it directly into our audit software.
• Create our own lead sheets, which can include prior year balances. This helps us to easily
identify significant fluctuations between fiscal years.
• CAFR schedules are linked to trial balances. CAFR is updated automatically for any last minute
journal entries, if any.
Our approach includes using IDEA (Interactive Data Extraction and Analysis) which is a data analysis
software that can be used to analyze large amounts of information. It allows the firm to extract data
from the City's accounting records to tailor specific audit tests based on risk assessments. Some audit
procedures that IDEA can be utilized for are:
• Mechanical accuracy of worksheets or general ledgers.
• Exception and gap/completeness testing for missing check numbers.
• Cross checking different data bases for common information such as employee names.
• Duplicate testing of invoice numbers.
• Completeness of general ledger balances.
The firm also has document management software which allows our clients to access our web portal.
We utilize the web portal to transfer data files that are confidential or too large to be sent by e-mail.
7
PARTNER SUPERVISORY AND STAFF
QUALIFICATIONS AND EXPERIENCE
AUDIT TEAM
The audit team assembled consists of individuals who have extensive experience auditing
governmental agencies and are familiar with municipal accounting. In addition, each team member's
skill and experience developed working in other industries our firm serves can be applied to the
individual requirements of the City of Tustin.
The personnel assigned to the engagement team are as follows:
The engagement partner will be Mr. Nitin P. Patel, CPA. Mr. Patel has over 30 years of experience with
audits of local governments. Mr. Patel was the staff auditor/manager on the City audit from fiscal
years 1986 to 1994 and the engagement partner on the City audit from fiscal years 2000 to 2004. He
will be involved with all phases of the audit including (a) the planning phase of the audit to assess
risks related to the audit (b) a final review of all the work papers and financial reports, and (c)
attending any meetings with City's management and City council at the conclusion of the audit. He
will be responsible for assuring that all work for the City is performed in a complete and timely
manner.
Mr. Robert J. Callanan, CPA, will be the Technical Review Partner and will perform a quality review of
all reports issued in connection with the audit. Mr. Callanan has over 26 years of experience with
audits of local governments. He will also consult on the accounting treatment of unusual transactions
or audit issues.
Ms. Kassie Radermacher, CPA, will serve as the audit manager. Ms. Radermacher has over 11 years of
experience with audits of local governments. She will be the primary contact for the City and related
audits. She will (a) perform the initial review of the work papers including a review of the work
completed related to internal controls, (b) supervise the completion of the financial reports and
management letter and (c) assist in the audit of any complex or unusual audit areas.
The audit supervisor will be Ms. Tiffany Fung, CPA. Ms. Fung has over 6 years of experience with
audits of local governments. She will be on-site supervising staff accountants and performing the
fieldwork including performing tests of internal controls, substantive tests of account balances, and
analytical tests. She will also draft the financial statements and various reports required for this
engagement.
Resumes for the above partners and personnel are included at pages 9 through 12.
COMMITMENT RELATED TO PERSONNEL
We make a commitment to retain the same personnel on the City from year to year, except where
such personnel leave the firm, or where the change is approved by the City. If a staff member is
replaced, we make a commitment to replace that person with staff of at least equal experience.
NONDISCRIMINATION POLICY
Our firm has a policy to provide equal employment opportunities to all qualified persons without
regard to race, color, age, sex, religion, national origin or handicap.
8
NITIN P. PATEL, CPA
Position
Engagement Partner
Education
University of California at Irvine
Bachelor of Arts in Economics
California State University at Long Beach
Masters of Accounting Program
Licensing
Certified Public Accountant in California since 1988
Professional Organizations
American Institute of Certified Public Accountants
California Society of Certified Public Accountants
California Society of Municipal Finance Officers (CSMFO) -Associate Member
Governmental Accounting and Auditing Committee of Orange County -
Committee Chairman (2001-2002)
California Governmental Accounting and Auditing Committee Member
Range of Experience
Has been with the firm since 1986 with emphasis in governmental accounting and financial reporting and is
responsible for firm's in-house governmental accounting and auditing training programs.
Experience includes supervision of over one hundred audits of governmental agencies including cities,
successor agencies/redevelopment agencies, non-profit corporations, joint powers authorities and special
districts.
CSMFO Report Reviewer for Award Program.
GFOA Report Reviewer for Award Program -Certificate of Achievement for Excellence in Financial Reporting.
Other experience includes providing consulting services for governmental agencies including special internal
control reviews, cost allocation plans, cable television rate reviews, reviews of City Treasurer operations and
transient occupancy tax reviews of city hotels/motels.
Mr. Patel was the engagement partner on the following local government audits in 2015:
Cities: Cities(Continued):
Alhambra Stanton
Artesia West Hollywood
Bellflower Westminster
Burbank
Colton Special Districts:
Costa Mesa Chino Basin Desalter Authority
Cypress Costa Mesa Sanitary District
Gilroy Cypress Recreation and Park District
Lake Forest Inland Empire Regional Composting Authority
Laguna Hills Inland Empire Utilities Agency
Laguna Woods La Habra Heights County Water District
Newport Beach La Puente Valley County Water District
Norwalk Orchard Dale Water District
Palm Desert Rancho California Water District
Rialto Yorba Linda Water District
San Gabriel
Continuing Professional Education
Total hours were 186 in the last three years, of which 144 hours were for meeting the requirements of the
Government Audit Standards.
9
ROBERT J. CALLANAN, CPA
Position
Technical Review Partner
Education
• Aquinas College, Grand Rapids, Michigan
Bachelor of Arts, Business Administration, 1988
4 Bachelor of Science, Accounting, 1988
Licensing
Certified Public Accountant in California since 1993
Professional Organizations
American Institute of Certified Public Accountants - Member
California Society of Certified Public Accountants - Member
California Society of Municipal Finance Officers (CSMFO) -Associate Member
California Governmental Accounting and Auditing Committee Member
Range of Experience
Twenty-six years with the firm specializing in governmental audit, accounting and consulting services.
Two years of experience as Chief Financial Officer of a mortgage lending corporation.
Responsible for the firm's in-house governmental accounting and auditing training programs.
GFOA Report Reviewer for Award Program - Certificate of Achievement for Excellence in Financial
Reporting.
Mr. Callanan was the engagement partner on the following local government audits in 2015:
Cities: Special Districts:
Camarillo Laguna Beach County Water District
Campbell Pico Rivera Water Authority
Del Mar Pomona-Walnut-Rowland Joint Water
Hawaiian Gardens Line Commission
Pico Rivera Rowland Water District
Rancho Santa Margarita Sunset Beach Sanitary District
San Buenaventura Surfside Colony Stormwater Protection District
Surfside Community Services District
Ventura Port District
Continuing Professional Education
Total hours were 209 in the last three years, of which 157 hours were for meeting the requirements of
the Government Audit Standards.
10
KASSIE RADERMACHER, CPA
Position
Senior Audit Manager
Education
West Virginia University
�I Masters of Professional Accountancy, 2005
�i Bachelor of Science, 2003
� j
I
d , Licensing
Certified Public Accountant in California since 2010
Certified Public Accountant in Virginia since 2006
Professional Organizations
California Society of Certified Public Accountants (CSCPA)
Range of Experience
Ms. Radermacher has been with the firm since June 2009. Ms. Radermacher has performed all
phases of local governmental audits including cities, successor agencies/redevelopment agencies,
single audit of federal grants, special districts, compliance audits and agreed-upon procedures
engagements. As an audit manager, she is involved with planning the audit, performing fieldwork for
all aspects of the audit, supervising staff accountants and preparation of financial statements.
Ms. Radermacher served as the Audit Manager on the following local government audits in 2015:
City of Artesia La Puente Valley County Water District
City of Bellflower Lake Elsinore&San Jacinto
City of Cypress Watersheds Authority
City of Fountain Valley Local Agency Formation Commission (LAFCO)-
City of Laguna Hills Orange County
City of Lake Forest Midway City Sanitary District
City of Newport Beach Orchard Dale Water District
City of Norwalk Orange County Mosquito&Vector Control
City of Rancho Santa Margarita District
City of Rialto Pico Water District
City of San Gabriel Rancho California Water District
City of Stanton Santa Ana Watershed Project Authority
Yorba Linda Water District
Prior to joining the firm, Ms. Radermacher was senior in-charge of compilations, reviews, single
audits, and financial audits for non-profit and business clients with Rager, Lehman & Houck, P.C. in
Frederick, MD. She was also responsible for educating and monitoring the staff.
Continuing Professional Education
Total hours were 209 in the last three years, of which 189 hours were for meeting the requirements of
the Government Audit Standards.
11
TIFFANY FILING, CPA
Position
Audit Supervisor
Education
` University of California, Irvine
Bachelor of Economics with a minor in Accounting, 2010
Licensing
Certified Public Accountant in California since July 2013
Range of Experience
Ms. Fung has been with the firm since March 2011. Ms. Fung has performed all phases of local
governmental audits including cities, successor agencies/redevelopment agencies, single audit of
federal grants, special districts, and agreed-upon procedures engagements. As an audit supervisor,
she is involved with planning the audit, performing fieldwork for all aspects of the audit, supervising
staff accountants and preparation of financial statements. Ms. Fung worked on the following local
government audits in 2015:
Cities: Special Districts:
City of Newport Beach Inland Empire Regional Composting
City of Norwalk Authority
City of Palm Desert Inland Empire Utilities Agency
City of San Gabriel Lake Elsinore & San Jacinto Watersheds
City of Westminster Authority
Santa Ana Watershed Project Authority
In recent years, Ms. Fung has also been involved with the following governmental clients:
Cities: Special Districts:
City of Avalon Chino Basin Desalter Authority
City of Colton Costa Mesa Sanitary District
City of Costa Mesa EI Toro Water District
City of Downey Laguna Beach County Water District
City of Tustin Rancho California Water District
City of West Covina South Coast Water District
Walnut Valley Water District
Continuing Professional Education
Total hours were 159 in the last three years, of which 143 hours were for meeting the requirements of
the Government Audit Standards.
12
PRIOR ENGAGEMENTS WITH THE CITY OF TUSTIN
Services Performed 2011 2012 2013 2014 2015
City Audit Yes Yes Yes Yes Yes
Redevelopment Agency(RDA)Audit Yes No No No No
City's State Controller's Report(SCR) Yes Yes Yes Yes Yes
Redevelopment Agency's SCR Yes No No No No
Single Audit of Federal Grants Yes No No Yes Yes
GAS Letter Yes Yes Yes Yes Yes
Management Letter Yes Yes No No No
GANN Limit Review Yes Yes Yes Yes Yes
Due Diligence Review for RDA No Yes No No No
Cash Receipts Agreed-Upon
Procedures Review No No No Yes No
FIRM EXPERIENCE WITH GOVERNMENTAL ENTITIES
SIMILAR ENGAGEMENTS WITH OTHER MUNICIPAL ENTITIES
Your request for proposal called for a maximum of five similar engagements, ranked by total staff
hours. These are set forth below:
Engagement Total Staff
City Partner Hours Scope of Work
Newport Beach Patel 375 City&Single Audits; State Controller's Report
Westminster Patel 375 City, RDA,AQMD&Single Audits
Costa Mesa Patel 350 City, RDA, Public Financing Authority, Housing
Authority and Single Audits
Laguna Hills Patel 290 City and Single Audits;State Controller's and
Street Reports
Lake Forest Patel 270 City, RDA, Housing Authority and Single Audits
Certified audits were performed on the financial statements of all of these cities and their component
units for the past year.
Client references for these cities are included below.
City of Newport Beach City of Westminster City of Costa Mesa
Mr. Dan Matusiewicz Ms. Sherry Johnson Ms. Colleen O'Donoghue
Director of Finance Accounting Manager Assistant Finance Director
(949) 644-3126 (714) 898-3311 (714) 754-5421
danm@newport beachca.gov sjohnson@westminster-ca.gov Colleen.Odonoghue@costamesa.gov
City of Laguna Hills City of Lake Forest
Ms. Janice Mateo-Reyes Mr. Keith Neves
Finance Manager Director of Finance
(949) 707-2623 (949) 461-3400
jreyes@ci.laguna-hills.ca.us kneves@lakeforestca.gov
A complete list of similar engagements for the past five years is included in Attachment I of this
proposal.
CITY CLIENT REFERENCES
One means of judging the high quality of our auditing and accounting services would be contact with
some of our clients over the past year. We are including the names and phone numbers of the city
clients as presented in Attachment I of this proposal. We encourage you to contact any of these
individuals and verify our level of service.
13
SINGLE AUDIT EXPERIENCE
We perform single audit services for most of our cities and special districts that receive federal funds
as required by the Uniform Guidance. In recent years, Single Audits were performed for the following
cities and special districts.
Cities:
City of Alhambra City of Laguna Woods
City of Artesia City of Lake Forest
City of Bellflower City of Lakewood
City of Beverly Hills City of Lancaster
City of Burbank City of Newport Beach
City of Camarillo City of Norco
City of Campbell City of Norwalk
City of Colton City of Palm Desert
City of Costa Mesa City of Pico Rivera
City of Cypress City of Rancho Santa Margarita
City of Del Mar City of Rialto
City of Downey City of San Buenaventura
City of Fountain Valley City of San Gabriel
City of Gilroy City of Sanger
City of Goleta City of Signal Hill
City of Hawaiian Gardens City of Stanton
City of Hesperia City of Tustin
City of Highland City of West Covina
City of La Habra Heights City of West Hollywood
City of Laguna Hills City of Westminster
Special Districts:
Inland Empire Utilities Agency
Las Virgenes Municipal Water District
Olivenhain Municipal Water District
Rancho California Water District
Valley Wide Recreation and Park District
EXPERIENCE WITH PREPARATION OF STATE-MANDATED REPORTS
We have experience with the preparation of various state-mandated reports, such as the State
Controller's Report and the Annual Street Report. Specifically, with regard to cities, we have prepared
the state mandated reports, in recent years, for the Cities of Alhambra, Bellflower, Colton, Del Mar,
Goleta, La Habra Heights, Laguna Hills, Lancaster, Norco, Norwalk, Pico Rivera, San Buenaventura,
Sanger,Tustin and West Hollywood.
14
SCOPE OF WORK, TIMING AND AUDIT APPROACH
ENTITIES TO BE INCLUDED IN AUDIT
City of Tustin
Tustin Public Financing Authority
REPORTS TO BE ISSUED AND DUE DATES
Draft Final
Due Dates Due Dates
City of Tustin:
Comprehensive Annual Financial Report November 8 November 22
Management Letter November8 November 22
Audit Committee Letter November8 November 22
Report on Compliance with Article XIIIB
Appropriation Limit (GANN Limit Review) November 8 November 22
Single Audit Reports: November 22 November 30
• Independent Auditors' Report on Internal Control
Over Financial Reporting and on Compliance and
Other Matters Based on Audit of Financial
Statements Performed in Accordance With
Government Auditing Standards
• Independent Auditors' Report on Compliance for
Each Major Program and on Internal Control Over
Compliance Required by the Uniform Guidance
and on the Schedule of Expenditures of Federal
Awa rd s.
State Controller's Report for the City N/A January 31
Per page 9 of 19, of the City's RFP; we will deliver 15 copies of each of the final reports to
Ms. Jenny Leisz, Finance Manager.
15
AUDIT TIMING
Assuming that the City's books are closed and ready for examination and that all necessary schedules
and documents are available for our use by mid September each year, the suggested time schedule
for the various phases of the audit would be approximately as follows:
Completed By
Entrance conference with key City staff. Discussion of any
prior audit concerns and the performance of interim work. Week of May 16
Interim audit fieldwork and management review. May/June
Progress conference, if necessary, with the Audit Commission
and the Finance Manager. Discussion of the year-end work
to be performed, summarize results of the preliminary
review and identify key internal controls or other matters to
be tested. Mid June
Detailed audit plan and list of all schedules to be prepared by
the City June 30
Conference with the Finance Manager to commence
year-end audit fieldwork. September 12
Final audit fieldwork and management review Mid October
Exit conference to summarize the results of the fieldwork
and to review significant findings Mid October
Deliver draft copies of reports See page 15
Deliver final reports See page 15
COMMITMENT TO DELIVER REPORTS ON A TIMELY BASIS
If all books and records, schedules and documents are made available to us by mid September, we
make a commitment to have audit team members available and to provide all reports by the due
dates specified above.
AUDITS TO BE IN ACCORDANCE WITH GAAS AND OTHER REQUIREMENTS
We will audit the financial statements of the City and the component units noted on the preceding
page. The financial statements of all entities where the City exercises oversight will be combined with
the City's financial statements, in accordance with GASB requirements. Our audit will be in
accordance with auditing standards generally accepted in the United States of America as set forth by
the AICPA, and will include such auditing procedures as we consider necessary under the
circumstances. We will apply certain limited procedures, which consist principally of inquiries of
management regarding methods of measurement and presentation of required supplementary
information. However, we do not audit such information and do not express an opinion on it. Any
supplemental financial statements will be subjected to auditing procedures as we consider necessary
in relation to the financial statements taken as a whole. The scope of our audit will not include any
statistical information, and we will not express an opinion concerning it.
16
AUDITS TO BE IN ACCORDANCE WITH GAAS AND OTHER REQUIREMENTS (CONTINUED.
Our audits will conform with the guidelines set forth in the AICPA's Industry Audit Guide, Audits of
State and Local Governmental Units. Also, each examination will comply with the standards for
financial and compliance audits contained in the Government Auditing Standards, issued by the
U.S. General Accounting Office, the provisions of the Single Audit Act and the provisions of Title 2 U.S.
Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirement for Federal Awards (Uniform Guidance).
Also, we will perform an agreed-upon procedures review of the City's Gann Spending Limitation
Computation as required by Section 1.5 of Article XIIIB of the California Constitution. Our review will
be performed in conformance with the provision of the "League of California Cities Uniform
Guidelines".
AUDIT APPROACH
• Our audit approach is tailored to meet the technical requirements while maintaining professional
skepticism without forgetting that we provide a service. The following aspects of our audit
approach will add additional value to the audit services and minimize the amount of time spent
by the City's staff in dealing with the audit.
• We will assign experienced staff auditors including the in-charge field auditor having at least
3 years of experience. All other staff will run all questions through the in-charge field auditor
prior to asking City staff. This allows a cohesive approach to the audit, which will decrease the
time needed of City staff.
• We are familiar with the City's audit supporting schedules, which meet the requirements of our
audit procedures. City staff will not need to provide new or additional schedules for exiting
accounts. This will reduce the time spent by City staff when preparing for the audit.
• Throughout the year we are available as a resource to our clients in researching technical
questions, dealing with new pronouncements, reviewing complex financial entries and helping
with any other issues as they arise.
• The work papers will be reviewed by the manager or partner as field work is being completed to
minimize additional questions after the fieldwork is completed.
Our firm uses a governmental audit program which will be modified to the City of Tustin's operations
to accommodate specific client circumstances. Our audit programs are organized by the financial
statement approach and general procedures. The requirements by the Standards for assessing risk
are utilized to modify the audit programs to focus on the higher risk areas of the financial statements.
1. Audit Planning Procedures:
• Pre-audit conference with the City to establish process of communication between the
audit team and City staff.
• Discuss any new accounting pronouncements to be implemented in the current year.
• Establish scope of work and timing of fieldwork.
17
AUDIT APPROACH (CONTINUED)
2. Interim Fieldwork:
Gather information about the City and its environment, including internal control:
• We have the internal control documentation applicable to the City from the previous fiscal
year. We will review this information to gain an understanding of the City's internal
controls prior to commencement of interim fieldwork. Due to this efficiency, City staff will
only need to update the internal control documentation instead of performing lengthy
interviews and checklists for a firm without our history with the City.
• Evaluate the design of internal controls that are relevant to the audit and determine
whether the control, either individually or in combination is capable of effecting,
preventing or detecting and correcting material misstatements.
• Determine that the controls have been implemented, that is, that the controls exist and
that the City is using it.
• Specific areas to review include:
- Accounts payable/cash disbursements
- Accounts receivable/cash receipts
- Payroll disbursements
- Utility billing process
- Investment compliance
- Property and equipment
• Review of minutes of the City of Tustin.
• Review of important contracts and debt agreements.
• Interim exit conference with the City to review results of interim fieldwork, including any
findings.
3. Final Audit Work:
During the final audit work, we will assess "risk" of material misstatement based on understanding
of the City's audit environment, including its internal control, to identify account balances to audit
that appear in the City's financial statements. Our audit programs will be specifically tailored to
address any significant risks identified. The Prepared by Client (PBC) list will be provided at least
one month in advance of fieldwork. Our work may include:
• Confirmation of cash and investments balances and testing of bank reconciliations.
• Confirm significant receivable balances or review subsequent cash receipts to verify
receivable balance.
• Search for unrecorded liabilities.
• Testing of interfund balances and transfers.
• Test capital asset additions and depreciation expense.
• Confirm long-term debt balances and review the accounting treatment of debt issued or
refunded.
• Test support for other significant assets or liabilities.
• Analytical procedures on balance sheet and revenue and expenditure accounts, to evaluate
and explain unusual fluctuations from prior year balances or current year budgeted
amounts.
• Review of attorney letters for significant legal matters affecting the City's financial position.
• An exit conference will be held to review any significant adjustments or findings.
The audit workpapers will be reviewed by our management team as the work is being performed
in the field so that at the conclusion of the fieldwork we are able to report any adjustments or
findings.
18
AUDIT APPROACH REDEVELOPMENT AGENCY f SUCCESSOR AGENCY
Recent legislation related to the dissolution of Redevelopment Agencies will impact our audit
approach as detailed below.
Our procedures will include:
• Audit the balances reported for cash, investments, receivables, payables, capital assets and
long term liabilities as of end of the year.
• Review the activity reported on ROPS.
• Review the activities of the Successor Agency to ensure compliance with AB 26, AB 1484 and
other relevant legislation enacted.
APPROACH TO INTERNAL CONTROL
Our audit will include obtaining an understanding of the entity and its environment, including internal
control, sufficient to assess the risks of material misstatement of the financial statements and to
design the nature, timing, and extent of further audit procedures. Our understanding of the internal
controls will be completed by completing narratives and checklists for various processes related to
internal control. Tests of controls may be performed to test the effectiveness of certain controls that
we consider relevant to preventing and detecting errors and fraud that are material to the financial
statements and to preventing and detecting misstatements resulting from illegal acts and other
noncompliance matters that have a direct and material effect on the financial statements. Our tests,
if performed, will be less in scope than would be necessary to render an opinion on internal control
and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to
Government Auditing Standards.
As required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirement for Federal Awards (Uniform Guidance), we will
perform tests of controls over compliance to evaluate the effectiveness of the design and operation
of controls that we consider relevant to preventing or detecting material noncompliance with
compliance requirements applicable to each major federal award program. However, our tests will be
less in scope than would be necessary to render an opinion on those controls and, accordingly, no
opinion will be expressed in our report on internal control issued pursuant to the Uniform Guidance.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. However, during the audit, we will communicate to management and those charged
with governance internal control related matters that are required to be communicated under AICPA
professional standards, Government Auditing Standards, and the Uniform Guidance.
19
SINGLE AUDIT APPROACH
The single audit will be performed in accordance with all the requirements of the Single Audit Act, the
Uniform Guidance and Government Auditing Standards issued by the GAO (the "Yellow Book") for
cities that expend greater than $750,000 in federal awards in fiscal year 2015-2016 and subsequent
yea rs.
• We will identify the Major and Nonmajor Federal Programs of the City through the risk-based
approach required by the Uniform Guidance. This approach includes consideration of current
and prior audit experience, oversight by Federal agencies and pass-through entities, and the
inherent risk of the federal program.
• We will review all federal and industry-specific publications and guidance and inform the City
of any recent changes.
• We will perform tests of controls to evaluate the effectiveness of the design and operation of
controls that we consider relevant to preventing or detecting material noncompliance with
applicable compliance requirements. If weaknesses in the internal controls are noted, we will
modify our audit program as needed.
• Our audit will include tests of transactions related to major federal award programs for
compliance with applicable compliance requirements and certain provisions of laws,
regulations, contracts and grant agreements.
• Our procedures will consist of the applicable procedures described in the Uniform Guidance
for the types of compliance requirements that could have a direct and material effect on each
of the City's major programs. The purpose of those procedures will be to express an opinion
on the City's compliance with requirements applicable to major programs in our report on
compliance issued pursuant to the Uniform Guidance.
• We will assist the City in completing and filing the Data Collection Form.
DETERMINING LAWS AND REGULATIONS SUBJECT TO AUDIT
Under provisions of AICPA Auditing Standards, management of the City is responsible for identifying
to its outside auditors any laws and regulations which would have a significant effect on the audit.
This would include federal laws (such as federal grant regulations), State laws (such as permitted
investments under the California Government Code) and local laws (such as restrictions on special
revenues levied by the City). After our selection as auditors, we will consult with City officials
regarding these matters, to determine what laws and regulations need to be evaluated in connection
with our audit. If a City is not able to identify specific laws and regulations that effect it, we have
references (California Government Code and Health and Safety Code) to the more common laws, rules
and regulations in our standard audit programs for the usual activities of a California City or Successor
Agency to the Redevelopment Agency which will assist us in identifying laws and regulations to review
in the audit.
METHOD OF SAMPLING
Our approach is to utilize random sampling based in our testing of the internal control systems related
to cash receipts, cash disbursements, payroll and utility billings. Based on a statistical conclusion used
by the firm our sample sizes can range from 25 to 60 transactions for each system. A random sample
selection allows each item in the population of an equal chance of being selected. In addition, for
disbursements, we may select a stratified sample of all transactions over a specified dollar amount for
review.
20
ANALYTICAL PROCEDURES
Analytical procedures are used in the planning and final stages of the audit. In the planning phase, we
use analytical procedures to identify unusual financial transactions and comparing relationships to
expected results. We compare current year information to the prior years for balance sheet items,
revenues and expenditures. In addition, revenues and expenditures are compared to budgets to
identify unexpected results. In the final stages of the audit, the financial statements are reviewed to
identify expected relationships such as comparing debt paid to expenditures recorded on
governmental funds, transfers between funds, depreciation expense, etc. For all significant
relationships identified, explanations are obtained as to why the situation occurred and additional
audit procedures are applied to resolve any concerns.
MANAGEMENT LETTERS
In connection with each audit, a complete review of internal controls will be made of all significant
accounting procedures. Our firm uses an internal control questionnaire, computer systems
questionnaire and narration to gain an understanding of the internal control process as part of our
audit. We will identify weaknesses and after discussion with the appropriate City staff, we will submit
a management letter which will identify weaknesses observed during these reviews and throughout
the audit. The management letter will also assess the effect of the management letter comments on
the financial reporting process and recommend steps towards eliminating the weaknesses.
POTENTIAL AUDIT PROBLEMS
We do not anticipate any significant potential audit problems. If any potential audit problems are
identified, we will immediately discuss them with the City's management. Our approach is to
coordinate the resolution of any problems with the City's management. Considering our experience
with auditing governmental entities and resources, we expect minimal disruption to the City's
management in resolving any identified audit problems.
RETENTION OF AND ACCESS TO AUDIT WORKPAPERS
In accordance with provisions of the Uniform Guidance, GAO requirements, and the California Board
of Accountancy, our audit workpapers will be maintained for at least seven years after the date of the
report. These workpapers will be made available as necessary to your cognizant audit agency (or its
designee), to GAO representatives, or to any other federal or state agency needing access to the
workpapers. Also, our firm will respond to any reasonable inquiries of successor auditors and we will
allow any successor auditors to review our workpapers.
OTHER PROFESSIONAL SERVICES
We will be available for any other professional assistance you require to research and answer
accounting and reporting problems raised by the City, regardless of the time of year. Such assistance
may include, but is not limited to, tax questions, the review of bond documents, cost allocation
programs and employee benefit programs. We have provided several tax opinions to City audit clients
for matters relating to deferred compensation, fringe benefits, stipends and allowances, and other
issues. We also will keep the City informed of new developments affecting municipal finance and
reporting, changes in grant rules and regulations, etc.
21
IRREGULARITIES AND ILLEGAL ACTS
We will make an immediate, written report of all irregularities, illegal acts or indications of illegal acts
of which we become aware, to the following parties: the City Manager, the City Attorney and the
Audit Commission.
SEGMENTATION OF THE AUDIT HOURS, BY PARTNER AND STAFF LEVEL
Supervisory
Partner Managers Staff Staff Clerical Total
City of Tustin -Audit,
including preparation
of the CAFR, management
and audit committee letters 16 24 80 116 12 248
Successor Agency to the
Tustin Community
Redevelopment Agency-
Audit of transactions
included in the City's CAFR 4 8 - 40 3 55
Single Audit 2 8 - 44 2 56
Appropriations Limit
Review (GANN) 1 - - 2 1 4
City's State Controller's Report - 4 - 28 - 32
TOTAL HOURS 23 44 80 230 18 395
22
DISCUSSION OF RELEVANT ACCOUNTING ISSUES
GASB STATEMENT NO. 72
GASB Statement No. 72, "Fair Value Measurement and Application", is effective for periods beginning
after June 15, 2015. This Statement addresses accounting and financial reporting issues related to fair
value measurement. The definition of fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement
date. This Statement provides guidance for determining a fair value measurement for financial
reporting purposes. This Statement also provides guidance for applying fair value to certain
investments and disclosures related to all fair value measurements.
GASB STATEMENT NO. 73
GASB Statement No. 73, 'Accounting and Financial Reporting for Pensions and Related Assets That Are
Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB
Statements 67 and 68", is effective for periods beginning after June 15, 2015 - except for those
provisions that address employers and governmental nonemployer contributing entities for pensions
that are not within the scope of Statement 68, which are effective for periods beginning after
June 15, 2016. The requirements of this Statement extend the approach to accounting and financial
reporting established in Statement 68 to all pensions, with modifications as necessary to reflect that
for accounting and financial reporting purposes, any assets accumulated for pensions that are
provided through pension plans that are not administered through trusts that meet the criteria
specified in Statement 68 should not be considered pension plan assets. It also requires that
information similar to that required by Statement 68 be included in notes to financial statements and
required supplementary information by all similarly situated employers.
GASB STATEMENT NO. 74
GASB Statement No. 74, "Financial Reporting for Postemployment Benefit Plans Other Than Pension
Plans", is effective for periods beginning after June 15, 2016. The objective of this Statement is to
improve the usefulness of information about postemployment benefits other than pensions (other
postemployment benefits or OPEB) included in the general purpose external financial reports of state
and local governmental OPEB plans for making decisions and assessing accountability. This Statement
also includes requirements to address financial reporting for assets accumulated for purposes of
providing defined benefit OPEB through OPEB plans that are not administered through trusts that
meet the specified criteria.
GASB STATEMENT NO. 75
GASB Statement No. 75, 'Accounting and Financial Reporting for Postemployment Benefits Other Than
Pensions", is effective for periods beginning after June 15, 2017. The scope of this Statement
addresses accounting and financial reporting for postemployment benefits other than pension (other
postemployment benefits or OPEB) that is provided to the employees of state and local governmental
employers. This Statement establishes standards for recognizing and measuring liabilities, deferred
outflows of resources, deferred inflows of resources, and expense/expenditures for defined benefit
and defined contribution plans.
23
GASB STATEMENT N0. 76
GASB Statement No. 76, "The Hierarchy of Generally Accepted Accounting Principles for State and
Local Governments", is effective for periods beginning after June 15, 2015. The requirements of this
Statement improve financial reporting by (1) raising the category of GASB Implementation Guides in
the GAAP hierarchy, (2) emphasizing the importance of analogies to authoritative literature when the
accounting treatment for an event is not specified in authoritative GAAP; (3) requiring the
consideration of consistency with the GASB Concepts Statements when evaluating accounting
treatments specified in nonauthoritative literature.
GASB STATEMENT N0. 77
GASB Statement No. 77, "Tax Abatement Disclosures", is effective for periods beginning after
December 15, 2015. This Statement requires governments that enter into tax abatement agreements
to disclose the following information:
• Brief descriptive information, such as the tax being abated, the authority under which tax
abatements are provided, eligibility criteria, the mechanism by which taxes are abated,
provisions for recapturing abated taxes, and the types of commitments made by tax
abatement recipients.
• The gross dollar amount of taxes abated during the period.
• Commitments made by a government, other than to abate taxes, as part of a tax abatement
agreement.
Governments should organize those disclosures by major tax abatement program and may disclose
information for individual tax abatement agreements within those programs.
GASB STATEMENT N0. 78
GASB Statement No. 78, "Pensions Provided Through Certain Multiple-Employer Defined Benefit
Pension Plans", is effective for periods beginning after December 15, 2015. This Statement amends
the scope and applicability of Statement 68 to exclude pensions provided to employees of state or
local governmental employers through a cost-sharing multiple-employer defined benefit plan that
(1) is not a state or local governmental pension plan, (2) is used to provide defined benefit pensions
both to employees of state or local governmental employers and to employees of employers that are
not state or local governmental employers, and (3) has no predominant state or local governmental
employer (either individually or collectively with other state or local governmental employers that
provide pensions through the pension plan). This Statement establishes requirements for recognition
and measurement of pension expense, expenditures, and liabilities; note disclosures; and required
supplementary information for pensions that have the characteristics described above.
GASB STATEMENT N0. 79
GASB Statement No. 79, "Certain External Investment Pools and Pool Participants", is effective for
periods beginning after June 15, 2015, except for certain provisions on portfolio quality, custodial
credit risk, and shadow pricing, those provisions are effective for reporting periods beginning after
December 15, 2015. This Statement addresses accounting and financial reporting for certain external
investment pools and pool participants. It establishes criteria for an external investment pool to
qualify for making the election to measure all of its investments at amortized cost for financial
reporting purposes. An external investment pool qualifies for that reporting if it meets certain
applicable criteria established in this Statement. It establishes additional note disclosure
requirements for qualifying external investment pools that measure all of their investment at
amortized cost for financial reporting purposes and for government that participate in those pools.
24
WORK REQUIRED BY CITY STAFF
Our fixed annual fees contemplate that conditions satisfactory to the normal progress and completion
of the examination will be encountered and that City accounting personnel will furnish the
agreed-upon assistance in connection with the audit. However, if unusual circumstances are
encountered which make it necessary for us to do additional work, we shall report such conditions to
the responsible City officials and provide the City with an estimate of the additional accounting fees
involved.
Noted below is a listing of work required by City staff to assist in the audit.
1. Technical assistance in familiarizing our staff with:
• Updating our current documentation of the City's system of internal controls.
• Updating our current documentation of controls established to monitor compliance with
federal grants.
2. Preparation of trial balances for all funds, after posting of all year end journal entries.
3. Preparation of schedules supporting all major balance sheet accounts, and selected revenue and
expenditure accounts.
4. Typing of all confirmation requests.
5. Pulling and refiling of all supporting documents required for audit verification.
6. Assistance with the preparation of the CAM and footnotes.
25
ATTACHMENT I
CURRENT CITY CLIENT REFERENCES
AND
LISTS OF CITY AND SPECIAL DISTRICT ENGAGEMENTS
PERFORMED IN THE LAST 5 YEARS
CURRENT CITY CLIENT REFERENCES
One means of judging the high quality of our auditing and accounting services would be contact with some of our existing clients.We
are including the names and phone numbers of our city clients over the past year.We encourage you to contact any of these individuals.
City of Alhambra City of Gilroy City of Palm Desert
Mr.Paul Espinoza Ms.Christina Turner Mr. Paul Gibson
Finance Director Finance Director Director of Finance
(626)570-5027 (408)846-0750 (760)346-0611
City of Artesia City of Goleta City of Pico Rivera
Ms.Justine Menzel Ms.Genie Wilson Mr.Kambiz Borhani
Deputy City Manager Finance Director Senior Finance Manager
(562)865-6249 (805)961-7527 (562)801-4395
City of Bellflower City of Hawaiian Gardens City of Rancho Santa Margarita
Mr.Tae Rhee Ms.Linda Hollinsworth Ms.Stefanie Turner
Director of Finance Finance Director/Treasurer Finance Director
(562)804-1424 (562)420-2641 x236 (949)635-1812
City of Beverly Hills City of Hesperia City of Rialto
Mr.Don Rhoads Mr.Brian Johnson Mr.George Harris,II
Finance Director Director of Administrative Services Director of Administrative
(310)285-2429 (760)947-1442 and Community Services
(909)421-7219
City of Burbank City of Highland City of San Buenaventura
Mr.Dino Balos Mr.Chuck Dantuono Ms.Bridgette Mclnally
Accounting Manager Director of Administrative Services Accounting Manager
(818)238-5518 (909)864-6861 (805)654-7892
City of Camarillo City of Laguna Hills City of San Gabriel
Mr.Ronnie Campbell Ms.Janice Mateo-Reyes Mr.Thomas Marston
Finance Director Finance Manager Director of Finance
(805)388-5320 (949)707-2623 (626)308-2812
City of Campbell City of Laguna Woods City of Sanger
Mr.Jesse Takahashi Ms.Margaret Cady Ms.Patty Hartman
Finance Director Administrative Services/ Interim Finance Director
(408)866-2113 City Treasurer (559)876-6300
(949)639-0500
City of Colton City of Stanton
Ms.Anita Agramonte City of Lake Forest Mr.Stephen Parker
Finance Director Mr.Keith Neves Director of Administrative Services
(909)370-5039 Director of Finance (714)890-4226
(949)461-3400
City of Costa Mesa City of Tustin
Ms.Colleen O'Donoghue City of Lancaster Ms.Jenny Leisz
Assistant Finance Director Ms.Pamela Statsmann Finance Manager
(714)754-5421 Assistant Finance Director (714)573-3079
(661)723-6038
City of Cypress City of West Covina
Mr.Matt Burton City of Newport Beach Ms.Christa Buhagiar
Director of Finance&Administrative Services Mr.Dan Matusiewicz Finance Director
(714)229-6718 Director of Finance (626)939-8463
(949)644-3126
City of Del Mar City of West Hollywood
Ms.Teresa McBroome City of Norco Ms.Lorena Quijano
Director of Finance/Treasurer Ms.Olivia Hoyt Accounting Services Manager
(858)755-9354 Accounting Manager (323)848-6513
(951)270-5652
City of Fountain Valley City of Westminster
Mr.David Cain City of Norwalk Ms.Sherry Johnson
Finance Director/Treasurer Ms.Jana Stuard Accounting Manager
(714)593-4501 Director of Finance (714)898-3311
(562)929-5056
LIST OF CITY ENGAGEMENTS
We have listed below the cities which were under contract with us during the past five fiscal years.
Period of Service
City From To Scope of Work
Alhambra 2005 Present CA, RDA,SA,SCR
Artesia 2012 Present CA, RDA,SA
Avalon 2006 2012 CA, RDA,OCU,SCR
Bellflower 2013 Present CA,SA,SCR, Financing Authority, Public Facilities Corp.
Beverly Hills 2012 Present CA,SA
Burbank 2013 Present CA,AQMD,SA,Water& Utility Enterprise Fund
Camarillo 2012 Present CA, RDA,SA
Campbell 2013 Present CA,SA,T,Solid Waste Management Authority
Colton 2014 Present CA,SA,SCR,Child Care Program
Costa Mesa 2012 Present CA, RDA, PFA, SA, Housing Authority
Cypress 2012 Present CA, RDA, RA, SA
Del Mar 2014 Present CA,SA,SCR
Downey 1987 2013 CA, RDA,AQMD, PFA,SA,OCU
Fountain Valley 2013 Present CA,SA, Housing Authority, Financing Authority
Gilroy 2013 Present CA,SA
Goleta 2013 Present CA,SA,SCR,SR
Hawaiian Gardens 2012 Present CA, RDA, PFA, SA
Hesperia 1997 Present CA, RDA,SA
Highland 2012 Present CA,SA
La Habra Heights 2008 2013 CA,SA,SCR
Laguna Hills 2015 Present CA,SA,SCR. SR
Laguna Woods 2015 Present CA,SA
Lake Elsinore 2005 2012 CA, RDA, PFA, RA,SA
Lake Forest 2011 Present CA, RDA,SA, Housing Authority
Lakewood 1974 2013 CA, RDA,SA
Lancaster 2013 Present CA,SA,SCR-City, SCR- Power Authority
Newport Beach 2011 Present CA,SA
Norco 2015 Present CA,SA,SCR
Norwalk 2015 Present CA,AQMD, PFA,SA,T,OCU,SCR-City&Transit
Palm Desert 2008 Present CA, RDA,SA, Housing Authority
Pico Rivera 2012 Present CA, PFA,SA,SCR,Water Authority
Rancho Palos Verdes 2008 2012 CA, RDA, PI,SA,SCR,SR
Rancho Santa Margarita 2012 Present CA,SA
Rialto 2013 Present CA,SA
San Buenaventura 2011 Present CA, RDA, PFA, SA,SCR
San Fernando 2007 2011 CA, RDA,SA
San Gabriel 2013 Present CA,SA
Sanger 2011 Present CA, RDA, PFA, SA,SCR
Signal Hill 1962 2013 CA, RDA,SA
Stanton 2012 Present CA, RDA,SA
Tustin 2011 Present CA, RDA,SA,SCR
West Covina 2011 Present CA, RDA,AQMD,SA
West Hollywood 2014 Present CA, SA,SCR
Westminster 1997 Present CA, RDA,AQMD,SA
Legend:
AQMD-Air Quality Management District Audit RA- Recreation Authority
CA-City Audit RDA- Former Redevelopment Agency Audit
OCU-Other Component Unit Audits SA-Single Audit
PFA- Public Financing Authority SCR-State Controllers' Reports
PI- Public Improvement SR-Street Report
PP- Pension Plans T-Transportation
Substantially all of the above engagements were performed through the firm's Irvine office.
LIST OF SPECIAL DISTRICT ENGAGEMENTS
We have listed below the special districts which were under contract with us during the past five fiscal years.
Period of Service
Client Name From To
Borrego Water District 2006 2013
Calleguas Municipal Water District 2015 Present
Chino Basin Desalter Authority 2011 Present
Chino Basin Regional Financing Authority 2015 Present
Costa Mesa Sanitary District 2005 2014
Cypress Recreation and Park District 2012 Present
Downey Cemetery District 1987 2013
EI Toro Water District 2008 2013
Grossmont Healthcare District 2011 Present
Heber Public Utilities District 2014 Present
Inland Empire Regional Composting Authority 2011 Present
Inland Empire Utilities Agency 2011 Present
La Habra Heights County Water District 2002 Present
La Puente Valley County Water District 1986 Present
Laguna Beach County Water District 2002 Present
Lake Elsinore and San Jacinto Joint Powers Authority 2013 Present
Las Virgenes Municipal Water District 2007 2013
Leucadia Wastewater District 2010 Present
Midway City Sanitary District 2012 Present
Monterey Peninsula Regional Park District 2015 Present
Municipal Water District of Orange County 2007 2011
Olivenhain Municipal Water District 2009 Present
Orange County Development Authority- Eco-Rapid Transit 2015 Present
Orange County Vector Control District 2013 Present
Orchard Dale Water District 2012 Present
Otay Water District 2009 2013
Padre Dam Municipal Water District 2009 Present
Pico Water District 2010 Present
Placentia Library District 2015 Present
Puente Basin Water Agency 2005 2011
Rancho California Water District 2012 Present
Rincon del Diablo Municipal Water District 2015 Present
Rowland Water District 2007 Present
Santa Ana Watershed Project Authority 2013 Present
South Coast Water District 2011 2014
South County Regional Wastewater Authority 2013 Present
Sunset Beach Sanitary District 1986 Present
Surfside Colony Stormwater Drainage District 2010 Present
Surfside Community Services District 2010 Present
Vallecitos Water District 2010 2015
Valley Wide Recreation and Park District 1986 Present
Ventura Port District 2011 Present
Walnut Valley Water District 2002 2011
Yorba Linda Water District 2008 Present
Substantially all of the above engagements were performed through the firm's Irvine office.
ATTACHMENT II
RESULTS OF OUTSIDE QUALITY REVIEW
Heidenreich & Heidenreich, CPAs, PLLC
10201 S.511t Street,Suite#170
Phoenix,AZ 85044
(480)704-6301 fax 785-4619
System Review Report
July 22, 2015
To the Owners of
White Nelson Diehl Evans LLP
and the Peer Review Committee of the CA Society of CPAs
We have reviewed the system of quality control for the accounting and auditing practice of White
Nelson Diehl Evans LLP (the firm) in effect for the year ended March 31, 2015. Our peer review was
conducted in accordance with the Standards for Performing and Reporting on Peer Reviews
established by the Peer Review Board of the American Institute of Certified Public Accountants.-As a
part of our peer review, we considered reviews by regulatory entities, if applicable, in determining the
nature and extent of our procedures. The firm is responsible for designing a system of quality control
and complying with it to provide the firm with reasonable assurance of performing and reporting in
conformity with applicable professional standards in all material respects. Our responsibility is to
express an opinion on the design of the system of quality control and the firm's compliance therewith
based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a
System Review are described in the standards at www.aicpa.org/prsummary.
As required by the standards, engagements selected for review included engagements performed
under the Government Auditing Standards and audits of employee benefit plans.
In our opinion, the system of quality control for the accounting and auditing practice of White Nelson
Diehl Evans LLP in effect for the year ended March 31, 2015, has been suitably designed and
complied with to provide the firm with reasonable assurance of performing and reporting in conformity
with applicable professional standards in all material respects. Firms can receive a rating of pass,
pass with deficiency(ies) or fail. White Nelson Diehl Evans LLP has received a peer review rating of
pass.
C6
Heidenreich & Heidenreich, CPAs, PLLC
ATTACHMENT III
SAMPLE REPORTS
SAMPLE REPORTS
TABLE OF CONTENTS
Independent Auditors' Report - City
Independent Auditors' Report On Internal Control Over Financial
Reporting and On Compliance and Other Matters Based On An
Audit of Financial Statements Performed In Accordance With
Government Auditing Standards - Single Audit
Independent Auditors' Report on Compliance for Each Major
Program and on Internal Control Over Compliance Required by
the Uniform Guidance and on the Schedule of Expenditures of
Federal Awards - Single Audit
Independent Accountants' Report on Agreed-Upon Procedures
Applied to Appropriations Limit Worksheet No. 6
Audit Committee Letter
Management Letter
Independent Auditors' Report On Internal Control Over Financial
Reporting and On Compliance and Other Matters Based On An
Audit of Financial Statements Performed In Accordance With
Government Auditing Standards - City
INDEPENDENT AUDITORS' REPORT- CITY
To the Honorable Mayor and
Members of the City Council
City of Cabbage Patch
Cabbage Patch, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information of the City of
Cabbage Patch, California (the City), as of and for the year ended June 30, 20XX, and the related notes
to the financial statements which collectively comprise the City's basic financial statements as listed
in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due
to fraud or error.
Auditors' Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America, and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditors'judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the City's
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting polices used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City of Cabbage Patch, California, as of
June 30, 20XX, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted in the
United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis, (the schedule of proportionate share of the net pension
liability and the schedule of contributions regarding the defined benefit pension plans OR the
schedule of changes in the net pension liability and related ratios and the schedule of contributions
regarding the defined benefit pension plans), schedule of funding progress regarding the other post-
employment benefits plan, and budgetary comparison schedules, identified as Required
Supplementary Information (RSI) in the accompanying table of contents, be presented to supplement
the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the RSI in
accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing
the information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We
do not express an opinion or provide any assurance on the RSI because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City's basic financial statements. The introductory section, supplementary
information, and statistical section as listed in the table of contents are presented for purposes of
additional analysis and are not a required part of the basic financial statements.
The supplementary information, as listed in the table of contents, is the responsibility of management
and was derived from and relates directly to the underlying accounting and other records used to
prepare the basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional procedures,
including comparing and reconciling such information directly to the underlying accounting and other
records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally
accepted in the United States of America. In our opinion, the supplementary information is fairly
stated, in all material respects, in relation to the basic financial statements taken as a whole.
Other Matters (Continued)
Other Information (Continued)
The introductory section and statistical section have not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we do not express an opinion
or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated (Date of
Independent Auditors' Report), on our consideration of the City's internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts,
and grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing, and
not to provide an opinion on internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards in
considering the City's internal control over financial reporting and compliance.
Irvine, California
(Date of Independent Auditors' Report)
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS—SINGLE AUDIT
To the Honorable Mayor
and Members of the City Council
of the City of Cabbage Patch
Cabbage Patch, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, the business-type activities, each major fund and the aggregate remaining fund information
of the City of Cabbage Patch, California, (the City), as of and for the year ended June 30, 20XX, and the
related notes to the financial statements, which collectively comprise the City's basic financial
statements and have issued our report thereon dated (Date of Independent Auditors' Report).
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal
control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal
control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a
material misstatement of the City's financial statements will not be prevented, or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in
internal control that is less severe than a material weakness, yet important enough to merit attention
by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of
this section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify
any deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion
on compliance with those provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed no instances of noncompliance or other
matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
City's internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City's internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
(Date of Independent Auditors' Report)
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH
MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE
REQUIRED BY THE UNIFORM GUIDANCE AND ON THE SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS- SINGLE AUDIT
To the Honorable Mayor
and Members of the City Council
of the City of Cabbage Patch
Cabbage Patch, California
Report on Compliance for Each Major Federal Program
We have audited the City of Cabbage Patch, California's (the City) compliance with the types of
compliance requirements described in the OMB Compliance Supplement that could have a direct and
material effect on each of the City's major federal programs for the year ended June 30, 20XX. The
City's major federal programs are identified in the summary of auditors' results section of the
accompanying schedule of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts and
grants applicable to its federal programs.
Auditors' Responsibility
Our responsibility is to express an opinion on compliance for each of the City's major federal programs
based on our audit of the types of compliance requirements referred to above. We conducted our
audit of compliance in accordance with auditing standards generally accepted in the United States of
America; the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S.
Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance
require that we plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could have a direct
and material effect on a major federal program occurred. An audit includes examining, on a test basis,
evidence about the City's compliance with those requirements and performing such other procedures
as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major
federal program. However, our audit does not provide a legal determination of the City's compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance requirements
referred to above that could have a direct and material effect on each of its major federal programs
for the year ended June 30, 20XX.
Report on Internal Control over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over
compliance with the types of compliance requirements referred to above. In planning and performing
our audit of compliance, we considered the City's internal control over compliance with the types of
requirements that could have a direct and material effect on each major federal program to
determine the auditing procedures that are appropriate in the circumstances for the purpose of
expressing an opinion on compliance for each major federal program and to test and report on
internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of
expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not
express an opinion on the effectiveness of the City's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance
requirement of a federal program on a timely basis. A material weakness in internal control over
compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such
that there is a reasonable possibility that material noncompliance with a type of compliance
requirement of a federal program will not be prevented, or detected and corrected, on a timely basis.
A significant deficiency in internal control over compliance is a deficiency, or a combination of
deficiencies, in internal control over compliance with a type of compliance requirement of a federal
program that is less severe than a material weakness in internal control over compliance, yet
important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing of internal control over compliance and the results of that testing based on the requirements
of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
We have audited the financial statements of the governmental activities, the business-type activities,
each major fund and the aggregate remaining fund information of the City, as of and for the year
ended June 30, 20XX, and the related notes to the financial statements, which collectively comprise
the City's basic financial statements. We issued our report thereon dated (Date of Independent
Auditors' Report), which contained unmodified opinions on those financial statements. Our audit was
conducted for the purpose of forming opinions on the financial statements that collectively comprise
the basic financial statements. The accompanying schedule of expenditures of federal awards is
presented for purposes of additional analysis as required by the Uniform Guidance and is not a
required part of the basic financial statements.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
(Continued)
Such information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. The
information has been subjected to the auditing procedures applied in the audit of the financial
statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the basic financial statements
or to the basic financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the schedule of
expenditures of federal awards is fairly stated in all material respects in relation to the financial
statements taken as a whole.
Irvine, California
(Date of Independent Auditors' Report)
INDEPENDENT ACCOUNTANTS' REPORT
ON APPLYING AGREED-UPON PROCEDURES
TO APPROPRIATIONS LIMIT WORKSHEET NO. 6
To the Honorable Mayor
and Members of the City Council
of the City of Cabbage Patch
Cabbage Patch, California
We have applied the procedures enumerated below to the accompanying Appropriations Limit
Worksheet No. 6 of the City of Cabbage Patch, California (the City) for the year ended June 30, 20XX.
These procedures, which were agreed to by the City and the League of California Cities (as presented
in the League publication entitled "Article XIII-13 Appropriations Limit Uniform Guidelines") were
performed solely to assist the City in meeting the requirements of Section 1.5 of Article XIIIB of the
California Constitution. The City's management is responsible for the Appropriations Limit Worksheet
No. 6.
This agreed-upon procedures engagement was performed in accordance with attestation standards
established by the American Institute of Certified Public Accountants. The sufficiency of the
procedures is solely the responsibility of those parties specified in this report. Consequently, we make
no representation regarding the sufficiency of the procedures described below either for the purpose
for which this report has been requested or for any other purpose.
The procedures performed and our findings were as follows:
1. We obtained the completed Appropriations Limit Worksheet No. 6 for the year ended
June 30, 20XX, and compared the limit and annual adjustment factors included in that worksheet
to the limit and annual adjustment factors that were adopted by resolution of the City Council.
We also compared the population and inflation options included in the aforementioned
worksheet to those that were selected by a recorded vote of the City Council.
No exceptions were noted as a result of performing this procedure.
2. For the accompanying Appropriations Limit Worksheet No. 6, we added last year's limit to the
total adjustments, and compared the resulting amount to this year's limit. We also recalculated
the adjustment factors, and the adjustment for inflation and population, and compared the results
to the amounts on Appropriations Limit Worksheet No. 6.
No exceptions were noted as a result of performing this procedure.
3. We compared the prior year appropriations limit presented in the accompanying Appropriations
Limit Worksheet No. 6 to the prior year appropriations limit adopted by the City Council for the
prior year.
No exceptions were noted as a result of performing this procedure.
We were not engaged to, and did not, perform an audit, the objective of which would be the
expression of an opinion on the accompanying Appropriations Limit Worksheet No. 6. Accordingly, we
do not express such an opinion. Had we performed additional procedures, other matters might have
come to our attention that would have been reported to you. No procedures have been performed
with respect to the determination of the appropriations limit for the base year, as defined by the
League publication entitled "Article XIII-13 Appropriations Limit Uniform Guidelines".
This report is intended solely for the information and use of the City Council and management of the
City and is not intended to be, and should not be, used by anyone other than these specified parties.
Irvine, California
(Date of Independent Auditors' Report)
AUDIT COMMITTEE LETTER
To the Honorable Mayor and
Members of the City Council
of the City of Cabbage Patch
Cabbage Patch, California
We have audited the financial statements of the governmental activities, the business-type activities,
each major fund, and the aggregate remaining fund information of the City of Cabbage Patch (the
City) for the year ended June 30, 20XX. Professional standards require that we provide you with
information about our responsibilities under generally accepted auditing standards and Government
Auditing Standards, as well as certain information related to the planned scope and timing of our
audit. We have communicated such information in our letter dated (Date of Planning Letter).
Professional standards also require that we communicate to you the following information related to
our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The
significant accounting policies used by the City are described in Note 1 to the financial statements. No
new accounting policies were adopted and the application of existing policies was not changed for
the year ended June 30, 20XX. We noted no transactions entered into by the City during the year for
which there is a lack of authoritative guidance or consensus. All significant transactions have been
recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and
are based on management's knowledge and experience about past and current events and
assumptions about future events. Certain accounting estimates are particularly sensitive because of
their significance to the financial statements and because of the possibility that future events
affecting them may differ significantly from those expected.
The most sensitive estimates affecting the City's financial statements are as follows:
a. Management's estimate of the fair market value of investments, which is based on
market values provided by outside sources.
b. Management's estimate of the value of capital assets (infrastructure assets) is
based on industry standards.
c. The estimated useful lives of capital assets for depreciation purposes are based on
industry standards.
d. The annual required contributions, pension expense, net pension liability and
corresponding deferred outflows of resources and deferred inflows of resources for
the City's public defined benefit plans with CalPERS are based on actuarial
valuations provided by CalPERS.
e. The funded status and funding progress of the City's other post-employment
benefit plan are based on an actuarial valuation.
Significant Audit Findings (Continued)
Qualitative Aspects of Accounting Practices (Continued)
We evaluated the key factors and assumptions used to develop these estimates in determining that
they were reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to
financial statement users. The most sensitive disclosures affecting the financial statements were
reported in Note X regarding the City's defined benefit plans and Note X regarding the City's other
post-employment benefit plan.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements. The following material
misstatement detected as a result of audit procedures was corrected by management:
• A restatement of beginning net position for governmental activities and beginning fund
balances for governmental funds were recorded to adjust accounts receivable for
uncollectible amounts.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditors' report. We are pleased to report that no such disagreements arose
during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated (Date of Independent Auditors' Report).
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the City's financial statements or a determination of
the type of auditor's opinion that may be expressed on those statements, our professional standards
require the consulting accountant to check with us to determine that the consultant has all the
relevant facts. To our knowledge, there were no such consultations with other accountants.
Significant Audit Findings (Continued)
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the City's auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses
were not a condition to our retention.
Other Matters
We applied certain limited procedures to management's discussion and analysis, (the schedule of
proportionate share of the net pension liability and the schedule of contributions regarding the
defined benefit pension plans OR the schedule of changes in the net pension liability and related
ratios and the schedule of contributions regarding the defined benefit pension plans), schedule of
funding progress regarding the other post-employment benefits plan, and budgetary comparison
schedules, which are required supplementary information (RSI) that supplements the financial
statements. Our procedures consisted of inquiries of management regarding the methods of
preparing the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements, and other knowledge we obtained during
our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or
provide any assurance on the RSI.
We were engaged to report on the supplementary information, as identified in the table of contents,
which accompany the financial statements but are not RSI. With respect to this supplementary
information, we made certain inquiries of management and evaluated the form, content, and
methods of preparing the information to determine that the information complies with accounting
principles generally accepted in the United States of America, the method of preparing it has not
changed from the prior period, and the information is appropriate and complete in relation to our
audit of the financial statements. We compared and reconciled the supplementary information to the
underlying accounting records used to prepare the basic financial statements or to the basic financial
statements themselves.
We were not engaged to report on the introductory and statistical sections, which accompany the
financial statements but are not RSI. We did not audit or perform other procedures on this other
information and we do not express an opinion or provide any assurance it.
Restriction on Use
This information is intended solely for the use of the City Council and management and is not
intended to be, and should not be, used by anyone other than these specified parties.
Irvine, California
(Date of Independent Auditors' Report)
MANAGEMENT LETTER
To the Honorable Mayor, Members
of City Council, and Management
City of Cabbage Patch
Cabbage Patch, California
In planning and performing our audit of the financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information of the City of
Cabbage Patch, California (the City) as of and for the year ended June 30, 20XX, in accordance with
auditing standards generally accepted in the United States of America, we considered the City's
internal control over financial reporting (internal control) as a basis for designing audit procedures
that are appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City's
internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal
control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a
material misstatement of the City's financial statements will not be prevented, or detected and
corrected, on a timely basis.
Our consideration of internal control was for the limited purpose described in the first paragraph and
was not designed to identify all deficiencies in internal control that might be material weaknesses.
Given these limitations during our audit, we did not identify any deficiencies in internal control that
we consider to be material weaknesses. However, material weaknesses may exist that have not been
identified. As discussed below, we identified certain matters involving the internal control and other
operational matters that are presented for your consideration. This letter does not affect our report
dated (Date of Independent Auditors' Report) on the financial statements of the City. Our comments
and recommendations are intended to improve the internal control or result in other operating
efficiencies.
Our comments with our recommendations for improvement are summarized as follows:
Deposits
Auditor's Comment:
The City collects deposits from developers and others that are typically refundable upon satisfaction
of certain City terms. In some cases, the depositor forfeits the deposit, which the City would then
record as revenue. During our review of deposit payable accounts, we noted that some deposit
balances did not change from the prior year and some contained transactions over one year old.
Upon further inquiry with management, it was determined that some deposits should be refunded
and other deposits should be recognized as revenue. Also, in certain cases, supporting schedules of
the deposit detail were unavailable and the age of the deposit could not be determined. We
recommend the City analyze its outstanding deposits payable balances to determine the true balance
of deposits payable that constitutes refundable deposits. Status of old deposits should be researched.
The City should follow the escheating rules provided by Government Code Sections 50050 through
50055 that permit a City to transfer to the City's general fund any unclaimed deposits that have not
been claimed in response to a public listing of the same for a two-week period.
Deposits (Continued)
Management's Response:
Bank Reconciliations
Auditor's Comment:
In our review of the bank reconciliations, we noted unreconciled differences that could have been
caused by the cumulative effect of a software glitch over several years. An important element of
internal control over cash is the bank reconciliation process which enables staff to identify differences
between bank balances and general ledger balances and resolve such differences in a timely manner.
This process will provide for accurate general ledger balances and minimize the risk of
misappropriation of cash. We recommend that the City investigate the cause for the unreconciled
differences and correct the issue.
Management's Response:
Review of Bank Reconciliations and Journal Entries
Auditor's Comment:
The City's policy is to perform and review monthly bank reconciliations and corresponding journal
entries in a timely manner. During our July interim fieldwork, we noted the February through
May 2014 bank reconciliations and corresponding journal entries had not been reviewed, but were
reviewed subsequent to the July interim fieldwork. Timely review of bank reconciliations and journal
entries is an important part of the controls over cash. We recommend the City develop and
implement procedures to ensure the timely review of bank reconciliations and journal entries.
Management's Response:
City's Responses to Findings
The City's responses to the findings identified in our audit are described above. The City's responses
were not subjected to the auditing procedures applied in the audit of the financial statements and,
accordingly, we express no opinion on them.
This communication is intended solely for the information and use of management, the City Council,
and others within the City, and is not intended to be, and should not be, used by anyone other than
these specified parties.
Irvine, California
(Date of Independent Auditors' Report)
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS- CITY
The Honorable Mayor and
Members of the City Council
of the City of Cabbage Patch
Cabbage Patch, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund
information of the City of Cabbage Patch, California (the City), as of and for the year ended
June 30, 20XX, and the related notes to the financial statements, which collectively comprise the
City's basic financial statements and have issued our report thereon dated (Date of Independent
Auditors' Report).
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal
control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal
control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a
material misstatement of the City's financial statements will not be prevented, or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in
internal control that is less severe than a material weakness, yet important enough to merit attention
by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of
this section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify
any deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion
on compliance with those provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed no instances of noncompliance or other
matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
City's internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City's internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
(Date of Independent Auditors' Report)
PROPOSER GUARANTEES
AND
WARRANTIES
PROPOSER GUARANTEES AND WARRANTIES
A. The proposer certifies it can and will provide and make available, at a minimum, all services set
forth in Section II, Nature of Services Required.
B. Proposer warrants that it is willing and able to obtain Professional Liability Insurance providing
limits not less than one (1) million dollars of coverage for the willful or negligent acts, or omissions
of any officers, employees or agents thereof, or show evidence of the ability to provide substitute
security equal to the same limit.
C. Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement
without the express prior written permission of the City of Tustin.
D. Propose warrants that all information provided by it in connection with this proposal is true and
accurate.
Signature of Official: V\J" to' PtT:,t—
Name:
Nitin P. Patel, CPA
Title: Engagement Partner
Firm: White Nelson Diehl Evans LLP
Date: February 18, 2016