R2019-086 2019-03-25 RESOLUTION NO. R2019-86
A Resolution of the City Council of the City of Pearland, Texas, accepting the
City's comprehensive annual financial report for fiscal year 2018 and the
accompanying independent audit as presented by the accounting firm of
Whitley Penn, LLP.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain comprehensive annual financial report for fiscal year 2018, a
copy of which is attached hereto as Exhibit "A" and made a part hereof for all purposes, is hereby
authorized and approved.
Section 2. That the City Council accepts the City's comprehensive annual financial report
for fiscal year 2018.
PASSED, APPROVED and ADOPTED this the 25th day of March, A.D., 2019.
TOM REID
MAYOR
ATTEST:
ROS'',
• NG Lr, , M =i` �/� y
Y SE 1�iETARY
APPROVED AS TO FORM: ""o`N````
C�1OL—
DARRIN M. COKER
CITY ATTORNEY
R2019-86
Exhibit "A"
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Fiscal Year 2018 Audit Results
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whitleypenn
CPAs and Professional Consultants
Engagement Team
Engagement Partner — Lupe Garcia, CPA
Concurring Partner — Tom Pedersen, CPA
f Senior Manager — Dan Hernandez, CPA
Senior — Alex Chaib, J . D.
0 Staff — Corbitt Nixon, David Reyes
2 U:
The Audit Process
Risk
Assessment
Substantive Auditor's Test of
Analytics Opinion Controls
\itVerification,
Confirmation,
and
Corroboration
3
Types of Auditor Opinions
1
• Clean Opinion
Unmodified • Highest Level of Assurance
(BEST)
• Qualified - Scope Limitation or departure from GAAP
Modified • Adverse Opinion - Scope Limitation or departure that is very material
and could mislead users
• Cannot express an opinion
= er • No assurance
(Worst)
4
Required Communications
Auditors' Responsibility Under Generally Accepted
Auditing Standards
The financial statements are the responsibility of
management.
• Our audit provides reasonable, rather than absolute,
assurance that the financial statements are free of
material misstatements.
• As a part of our audit, we obtained an understanding of
internal control sufficient to plan our audits and to
determine the nature and extent of testing performed .
5 WM
Required Communications
Significant Accounting Policies
Accounting policies and methods are appropriate and in
accordance with industry standards.
During fiscal year 2018 the City implemented
Government Accounting Standards Board ("GASB")
Statement No. 75, Accounting and Financial Reporting
for Postemployment Benefits Other Than Pensions.
6 �:
Required Communications
• Accounting Estimates
The preparation of the financial statements requires that
certain estimates and judgments be made by management.
These judgments and estimates include:
Allowances for doubtful accounts - Property tax
Allowances for doubtful accounts - Utility
Depreciation expense
,. Pension liability, deferred inflows and outflows of resources, and
pension expense
OPEB liability, deferred inflows and outflows of resources, and
OPEB expense
• We concluded that management has a reasonable basis for
significant judgments and estimates that impact the financial
statements.
7-7
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Required Communications
Difficulties Encountered in Performing the Audit
We encountered no difficulties in dealing with
management in performing and completing our audit
Corrected or Uncorrected Misstatements
There were no material misstatements that were
identified by us that required management's correction .
• Disagreements with Management
We had no disagreements with management over the
application of accounting principles or management's
judgments about accounting estimates.
Required Communications
Management Representations
We have requested certain representations from
management.
• Consultation with Other Accountants
We are not aware of any situations in which
management consulted with other accountants on
accounting or financial reporting matters.
Major Issues Discussed with Management Prior to
Retention
We discussed the application of accounting principles
and auditing standards, however, our responses were
not a condition to our retention .
Auditor's Report on Financial Statements
Page 1 of the Comprehensive Annual Financial Report
(CAFR)
Unmodified or "clean" opinion
Highest level of assurance that can be given on a set of
financial statements
Audit conducted in accordance with Government
Auditing Standards
Emphasis of Matter
Implementation of GASB No. 75
GASB Statement No . 75
Other Post- Em • to ment Benefits OPEB
• Implementing GASBS No. 75 resulted in a restatement of
beginning net position of $2 .3M
• $2.0M Governmental Activities
• $0.3M Business-type Activities
Note 14 to the financial statements
.7' Total OPEB Liability at 9/30/2017= $6.3M
$5.3M Self-funded Health Insurance
• $1.0M TMRS SDBF
Note 10 to the financial statements
s Total OPEB Liability at 9/30/2018= $5. 1M
$3.9M Self-funded Health Insurance
• $1.2M TMRS SDBF
• Note 10 to the financial statements
11 ` '
Statement of Net Position ( p . 19 )
Total Primary Government As of September As of September
(Governmental and Business-type) 30, 2018 30, 2017
Cash and investments $242,857,247 $245,070,233
Receivables/other 35,858,092 33,336,871
Capital assets, net 1,202,379,189 1,157,143,803
Total Assets (a) 1,481,094,528 1,435,550,907
Total Deferred Outflows of Resources (b) 18,365,661 24,271,989
Current liabilities (27,455,556) (33,296,280)
Long-term liabilities (704,921,598) (695,153,608)
Total Liabilities (c) (732,377,154) (728,449,888)
Total Deferred Inflows of Resources (d) (3,505,386) (196,345)
Total Net Position (e) $763,577,649 $731,176,663
Accounting formula: a + b - c — d = e
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Long-term Liabilities
Total Primary Government
(Governmental and Business-type) September 30, 2018 September 30, 2017
Certificates of obligation $41,750,000 $37,505,000
Sales tax revenue bonds 12,845,000 13,750,000
General obligation bonds 278,175,000 283,140,000
Tax increment revenue bonds 85,180,000 83,465,000
Permanent improvement bonds 4,845,000 7,360,000
Water and sewer revenue bonds 214,705,000 196,200,000
Total OPEB liability 5,140,967 -0-
Net pension liability 18,055,593 25,237,928
Bond premiums 34,741,033 35,226,997
Other 9,484,005 13,268,683
Total $704,921,598 $695,153,608
13 a•
Statement of Revenues, Expenditures, and
Changes in Fund Balances — General Fund ( p . 26)
Year Ended
September 30,
Total Revenues $74,161,257
Total Expenditures 77,343,285
Deficiency of Revenues Over Expenditures (3,182,028)
Other Financing Sources, net 2,806,665
Net Change in Fund Balance (375,363)
Fund Balance — Beginning 14,363,005
Fund Balance — Ending $13,987,642
I.
14
■M
General Fund Unassigned Fund Balance ( $ M )
$25.00
$20.00 $19.66
$17.86
$16.78
$15.00
$12.31
$11.26
$10.00
$5.00
$0.00
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
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■M
General Fund Unassigned Fund Balance ( Days)
140
120 114
109
100
86
80
60 58
52
40
20
0
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
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Statement of Revenues, Expenses, and Changes in Net
Position — Water and Sewer Fund ( p . 30)
Year Ended
September 30, 201 :
Operating revenues $55,592,837
Operating expenses 35,080,378
Non-operating revenues (expenses), net (4,235,009)
Capital contributions 4,613,449
Transfers, net (3,102,692)
Change in net position 17,788,206
Net Position — Beginning, restated 228,055,804
Net Position — Ending $245,844,010
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Net Position Enterprise Fund
Fir FY 2016 FY 2017 FY 2018
Investment in capital assets $187,936,743 $205,827,189 $210,674,024
Restricted for debt service 2,811,650 3,321,884 4,325,106
Restricted for capital projects 13,040,291 10,649,796 10,199,712
Unrestricted 12,942,728 7,336,481 20,645,168
Total Net Position $216,731,412 $227,135,350 $245,844,010
Unrestricted net position at 9/30/2018 represents 85% of operating
expenses (excluding depreciation) or 311 days of operating expenses
(excluding depreciation).
18 I•
Auditor's Report on Internal Control and
Com • liance
Internal control over financial reporting
No material weakness identified
No significant deficiencies reported
No instances of noncompliance material to the
financial statements were noted .
Auditor's Report on Compliance for Each Major
Program and On Internal Control Over Compliance
Federal Major Programs:
20.205 Highway Planning and Construction Cluster
Mykawa Road
Green Tee Trail
Shadow Creek Ranch Trail
Max Road
Fite Road
14.218 Community Development Block Grant
State Major Programs:
STP Metro Mobility: Bailey Road
McHard Road
Smith Ranch Road
20 ��
Auditor's Report on Compliance for Each Major
Program and On Internal Control Over Compliance
Internal controls over major programs
No material weakness identified
No significant deficiencies reported
Unmodified opinion on compliance for major
program
No instances of noncompliance or questioned costs
were noted
21
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