By Claire Harlin
The Solana Beach City Council on March 27 approved the city’s comprehensive annual financial report for the 2011-2012 fiscal year. Although the city’s auditor deemed it an “unusual” year due to the recent dissolution of the Redevelopment Agency (RDA), there were no concerns about the city’s statements.
“We felt that the controls were solid,” said Richard Kikuchi, a partner with local auditing firm Lance, Soll & Lunghard (LSL), which conducted the audit.
The city had to report extraordinary losses due to the dissolution of Solana Beach’s RDA, which would have supplied funding for revitalizations projects such as La Colonia Park and the Cedros Avenue train station but was nixed along with more than 400 others statewide. The move, made by the governor’s office to address state budget woes, went into effect on Feb. 1, 2012, after which the City Council then had to establish itself as the successor agency. Over the course of the year, the city moved its assets, liabilities and reserves from the RDA and reported them as a private-purpose trust. The council implemented a seven-member board, which included the mayor, county education superintendent, a community member and several other leaders, to oversee the process.
Kikuchi presented a report of the financial audit, which involved assessing the city’s balances and internal controls. He handed down an “unqualified opinion,” which means the amounts in the city’s financial statements are correct, and no material weakness or significant deficiencies were noted. The audit took more than 500 hours, he added, which consisted of much planning, risk assessment, documentation and testing of internal controls.
The city’s net assets increased by about $3.4 million to about $76 million, with business-type net assets totaling about $30 million and government net assets totaling about $45 million, reported a city financial staff member.
Business activities also exceeded expenses by about $3 million, with revenue coming in at $24.8 million and expenditure equalling $21.5 million. The general fund reported a revenue of $798,000. The general fund reserves ended with a balance of about $7.3 million, up by about $800,000 from last year.
Kikuchi said the audit was handed down much later than it should have, as the year was an “anomaly” due do the RDA’s dissolution.
“That really threw a wrench in the lives of many finance people and auditors in the state of California this last year,” he said. “It was a lot of work.”
In 2015, the city will have another shake-up in its financial procedures that will greatly affect numbers in the final audit, Kimichi added. Issued in 2012 by the Governmental Accounting Standards Board (GASB), a new public pension accounting rule will go into effect that will mandate the city report unfunded pension liabilities in its statement of net position.
“In most cities across the state and across the nation,” Kikuchi said, “that’s going to be a big number.”