HomeMy WebLinkAbout2022-05-17 Finance Committee AgendasFINANCE COMMITTEE
Tuesday, May 17, 2022
Special Meeting
Council Chamber & Virtual
5:30 PM
AMENDED AGENDA
Agenda changes will appear in red below
Pursuant to AB 361 Palo Alto City Council and Committee meetings will be held as “hybrid”
meetings with the option to attend by teleconference/video conference or in p erson. To
maximize public safety while still maintaining transparency and public access, members of
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CALL TO ORDER
ORAL COMMUNICATIONS
Members of the public may speak to any item NOT on the agenda.
ACTION ITEMS
1.Approval of the Macias Gini & O’Connell’s Single Audit Report for the
Year Ended June 30, 2021
2.Discuss and Recommend the City Council Accept the Planning and
Development Services Cost of Services Study including updates to the
Fiscal Year 2023 Municipal Fee Schedule and the Renewal and
Adjustment of the Development Services Reserve Fund Policy (ITEM
CONTINUED TO JUNE 7, 2022)
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Materials related to an item on this agenda submitted to the Finance Committee after distribution of the agenda
packet are available for public inspection in the city’s website at www.cityofpaloalto.org
Presentation
2
Finance Committee Special Meeting May 17, 2022
FUTURE MEETINGS AND AGENDAS
ADJOURNMENT
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City of Palo Alto (ID # 14345)
Finance Committee Staff Report
Meeting Date: 5/17/2022 Report Type: Action Items
City of Palo Alto Page 1
Title: Approval of the Macias Gini & O’Connell’s Single Audit Report for the
Year Ended June 30, 2021
From: City Manager
Lead Department: City Auditor
Recommendation
The Office of the City Auditor and Staff recommend that the Finance Committee
approve and forward to Council for consent the following audit reports for the fiscal
year ended June 30, 2021 prepared by Macias Gini & O’Connell (“MGO”). These reports
are collectively referred to as the Single Audit.
1. Independent Auditor’s Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements in
Accordance With Government Auditing Standards.
2. Independent Auditor’s Report on Compliance for Each Major Federal Program;
Report on Internal Control Over Compliance; and Report on the Schedule of
Federal Awards Required by the Uniform Guidance.
Discussion
At the January 11, 2021 City Council Meeting, the City Council approved the following
audit reports prepared by MGO:
a) Auditor’s Report to the City Council (the “Management Letter”)
b) Cable TV Franchise, Independent Auditor’s Report and Statements of Franchise
Revenues and Expenses for the years ended December 31, 2020 and 2019
c) Palo Alto Public Improvement Corporation (a component unit of the City of Palo
Alto) Annual Financial Report for the year ended June 30, 2021
d) Regional Water Quality Control Plant, Independent Auditor’s Report and Financial
Statements for the year ended June 30, 2021
e) Independent Accountant’s Report on Applying Agreed-Upon Procedures related
to the Article XIII-B Appropriations (GANN) Limit for the year ended June 30,
2021
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City of Palo Alto Page 2
At that time, guidance necessary for the completion of the Single Audit had not yet
been released by Federal Office of Management and Budget. The Single Audit report
has since been completed, thus the recommended action within this report.
MGO reports the following within the Single Audit Report:
- Unmodified opinions as it pertains to both the Financial Statements and to
Federal Awards
- No material weaknesses or significant deficiencies in internal controls over
financial reporting or over major programs
- No findings or questioned costs
Stakeholder Engagement
This report has been prepared by the Office of the City Auditor in coordination with the
Administrative Services Department.
Environmental Review
Environmental Review is not applicable to this activity.
Attachments:
• Attachment A: FY 2021 City of Palo Alto Single Audit Report
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CITY OF PALO ALTO
Single Audit Reports
For the Year Ended June 30, 2021
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CITY OF PALO ALTO
Single Audit Reports
For the Year Ended June 30, 2021
Table of Contents
Page
Independent Auditor’s 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 .......................................................... 1
Independent Auditor’s Report on Compliance for Each Major Federal Program;
Report on Internal Control Over Compliance; and Report on Schedule of
Expenditures of Federal Awards Required by the Uniform Guidance .................................................... 3
Schedule of Expenditures of Federal Awards ............................................................................................. 5
Notes to the Schedule of Expenditures of Federal Awards ........................................................................ 6
Schedule of Findings and Questioned Costs ............................................................................................... 7
Summary Schedule of Prior Audit Findings ................................................................................................. 8
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www.mgocpa.com
Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
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Independent Auditor’s 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
Honorable Mayor and Members of the
City Council of the City of Palo Alto
Palo Alto, 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 Palo Alto,
California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements,
which collectively comprise the City’s basic financial statements, and have issued our report thereon dated
November 15, 2021.
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) 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 entity’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 financial
statements. 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.
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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.
Walnut Creek, California
November 15, 2021
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Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
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Independent Auditor’s Report on Compliance for Each Major Federal Program;
Report on Internal Control Over Compliance; and Report on Schedule of
Expenditures of Federal Awards Required by the Uniform Guidance
Honorable Mayor and Members of the
City Council of the City of Palo Alto
Palo Alto, California
Report on Compliance for Each Major Federal Program
We have audited the City of Palo Alto, California’s (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, 2021. The City’s major federal programs
are identified in the summary of auditor’s results section of the accompanying schedule of findings and
questioned costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of
its federal awards applicable to its federal programs.
Auditor’s 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, 2021.
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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 the 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 a
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,
2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial
statements. We issued our report thereon dated November 15, 2021, 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 City’s 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. 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 basic financial
statements as a whole.
Walnut Creek, California
April 20, 2022
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Grantor Assistance
Identifying Listing Federal Subrecipients
Grantor/Pass‐Through Grantor/Federal Program Title Number Number Expenditures Expenditures
U.S. Department of Housing and Urban Development
Direct:
CDBG ‐ Entitlement Grants Cluster:
Community Development Block Grants/Entitlement Grants ‐‐ 14.218 867,207$ 777,320$
COVID‐19 ‐ Community Development Block Grants/Entitlement Grants ‐‐ 14.218 304,548 281,183
Subtotal ‐ CDBG ‐ Entitlement Grants Cluster 1,171,755 1,058,503
Total U.S. Department of Housing and Urban Development 1,171,755 1,058,503
U.S. Department of Justice
Direct:
Bulletproof Vest Partnership Program ‐‐ 16.607 7,148 ‐
Total U.S. Department of Justice 7,148 ‐
U.S. Department of Transportation
Direct:
Airport Improvement Program 3‐06‐0182‐014‐2018 20.106 70,984 ‐
Airport Improvement Program 3‐06‐0182‐015‐2020 20.106 5,558,250 ‐
Subtotal ‐ Airport Improvement Program 5,629,234 ‐
Pass‐through from State of California Department of Transportation:
Highway Planning and Construction Cluster:
Highway Planning and Construction CML‐5100(027)20.205 3,741,154 ‐
Highway Planning and Construction STPL‐5100(028) 20.205 1,009,000 ‐
Highway Planning and Construction HSIPL‐5100(029) 20.205 946,170 ‐
Highway Planning and Construction BRLS‐5100(017) 20.205 197,981 ‐
Highway Planning and Construction 75LX335‐00180000017 20.205 132,323 ‐
Pass‐through from Santa Clara Valley Transportation Authority:
Highway Planning and Construction SCL 170021 20.205 15,813 ‐
Subtotal ‐ Highway Planning and Construction Cluster 6,042,441 ‐
Total U.S. Department of Transportation 11,671,675 ‐
U.S. Department of Treasury
Pass‐through from State of California Department of Finance
COVID‐19 ‐ Coronavirus Relief Fund Not Available 21.019 854,743 ‐
Total U.S. Department of Treasury 854,743 ‐
National Endowment for the Humanities
Direct:
Museums for America MA‐10‐17‐0327‐17 45.301 61,845 ‐
Museums for America MA‐40‐18‐0555‐18 45.301 86,974 ‐
Subtotal ‐ Museums for America 148,819 ‐
COVID‐19 ‐ National Leadership Grants 489610.41 45.312 56,354 ‐
Subtotal ‐ Direct Awards 205,173 ‐
Pass‐through from California State Library:
Grants to States LS246140‐OLS‐20 45.310 17,961 ‐
Total National Endowment for the Humanities 223,134 ‐
U.S. Department of Health and Human Services
Pass‐through from Christopher and Dana Reeve Foundation:
Paralysis Resource Center 90PRRC0002‐02‐00 93.325 14,325 ‐
Total U.S. Department of Health and Human Services 14,325 ‐
U.S. Department of Homeland Security
Pass‐through from California Governor's Office of Emergency Services:
Emergency Management Performance Grants 2020‐0006‐085‐00000 97.042 5,611 ‐
Homeland Security Grant Program 2018‐0054‐085‐00000 97.067 216,461 ‐
Total U.S. Department of Homeland Security 222,072 ‐
TOTAL EXPENDITURES OF FEDERAL AWARDS 14,164,852$ 1,058,503$
CITY OF PALO ALTO
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2021
See accompanying notes to the Schedule of Expenditures of Federal Awards
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CITY OF PALO ALTO
Notes to the Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2021
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NOTE 1 – REPORTING ENTITY
The Schedule of Expenditures of Federal Awards (the Schedule) includes expenditures of federal awards
for the City of Palo Alto, California (City), and its component unit as disclosed in the notes to the basic
financial statements. The information in the Schedule is presented in accordance with the 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).
NOTE 2 – BASIS OF ACCOUNTING
Basis of accounting refers to when revenues and expenditures or expenses are recognized in the
accounts and reported in the financial statements, regardless of measurement focus applied. The
Schedule is presented using the modified accrual basis of accounting for program expenditures
accounted for in governmental funds and the accrual basis of accounting for program expenditures
accounted for in proprietary funds Expenditures of federal awards reported in the Schedule are
recognized when incurred and all eligibility requirements have been met. Such expenditures are
recognized following the cost principles contained in 2 CFR 200, Subpart E (Cost Principles), wherein
certain types of expenditures are not allowable or are limited as to reimbursement. The City did not
elect to use the 10% de minimis cost rate allowed under the Uniform Guidance.
As a result of the COVID‐19 pandemic, many new federal programs have been established and funding
has been added to existing federal programs. Expenditures funded from the following acts are denoted
by the prefix COVID‐19 in the federal program title in the Schedule (as applicable):
• Coronavirus Preparedness and Response Supplemental Appropriations Act
• Families First Coronavirus Response Act
• Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
• Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA)
• American Rescue Plan Act (ARP)
NOTE 3 – DIRECT AND INDIRECT (PASS‐THROUGH) FEDERAL AWARDS
Federal awards may be granted directly to the City by a federal granting agency or may be granted to
other government agencies which pass‐through federal awards to the City. The Schedule includes both
of these types of federal award programs when related expenditures are incurred.
NOTE 4 – RELATIONSHIP TO BASIC FINANCIAL STATEMENTS
Expenditures of federal awards are reported in the City’s basic financial statements as expenditures in
the governmental funds or as expenses/capital assets in the proprietary funds. Federal award
expenditures agree or can be reconciled with the amounts reported in the City’s basic financial
statements.
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CITY OF PALO ALTO
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2021
7
Section I Summary of Auditor’s Results
Financial Statements:
Type of report the auditor issued on whether the financial
statements audited were prepared in accordance
with U.S. GAAP: Unmodified
Internal control over financial reporting:
Material weakness(es) identified? No
Significant deficiency(ies) identified? None reported
Noncompliance material to the financial statements noted? No
Federal Awards:
Internal control over major programs:
Material weakness(es) identified? No
Significant deficiency(ies) identified? None reported
Type of auditor’s report issued on compliance for the
major federal programs: Unmodified
Any audit findings disclosed that are required to be
reported in accordance with 2 CFR 200.516(a)? No
Identification of major federal programs:
Assistance Listing Numbers Name of Federal Program or Cluster
20.205 Highway Planning and Construction
21.019 Coronavirus Relief Fund
Dollar threshold used to distinguish between
type A and type B programs: $750,000
Auditee qualified as a low‐risk auditee? Yes
Section II Financial Statement Findings
None reported.
Section III Federal Awards Findings
None reported.
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CITY OF PALO ALTO
Summary Schedule of Prior Audit Findings
For the Year Ended June 30, 2021
8
Prior audit findings were not reported.
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City of Palo Alto (ID # 14391)
Finance Committee Staff Report
Meeting Date: 5/17/2022 Report Type: Action Items
City of Palo Alto Page 1
Title: Discuss and Recommend the City Council Accept the Planning and
Development Services Cost of Services Study including updates to the Fiscal
Year 2023 Municipal Fee Schedule and the Renewal and Adjustment of the
Development Services Reserve Fund Polic y
From: City Manager
Lead Department: Planning and Development Services
This report will be a late packet report and will be made available on May 12, 2022.
2
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