Agenda Item Wording:
title
Review of Annual Measure N Compliance Audit for fiscal year ending 6/30/21.
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Deadline for Action: 1/18/2022
Submitting Department: Finance and Technology Services
Contact Name and Phone Number: Kari Williams 559-713-4298
Department Recommendation:
It is recommended that the City Council accepts the Measure N Compliance Audit from M. Green and Company for the Fiscal Year ending June 30, 2021.
Background Discussion:
The City, as part of the voter approved Measure N sales tax override, must have an annual audit of the uses of Measure N funds. M. Green and Company has performed this audit and it is now being presented to Council.
This audit did not include financial management and accounting practices. It is only to ensure that Measure N funds are used in accordance with the Ballot Measure, Program Guidelines, and Expenditure Plan for the fiscal year ended June 30, 2021. The financial management and accounting practices are included in the City’s annual Audit which is also being presented January 18, 2022.
This is a review of the audit and is not intended as a discussion of plan adjustments or other operational issues. Those adjustments should be considered as part of a separate discussion.
In November of 2016, the voters of Visalia passed a ½ cent Sales Tax Override, Measure N - The Visalia Essential City Services Measure. Sales Tax from Measure N will provide for essential city services such as police and fire, as well as maintenance of parks, trails, roads, and City facilities. As part of the measure, Council adopted an Accountability Ordinance (Ordinance 16-21) to establish accountability measures as outlined below:
Revenue Requirements:
• 10% of budgeted revenues must be deposited in a Measure N Uncertainty Fund. Money can only be accessed from this fund during a fiscal emergency;
• 10% of budgeted revenues must be deposited into the following categories:
o 2% Youth Programs
o 8% Maintenance and Emerging Needs
Expenditure Requirements:
• Money shall not be used for debt service payments;
• Annual expenditure plan must be approved by Council after the following has occurred:
o City Manager makes a recommendation to City Council and makes changes as requested;
o Comments and recommendation received by Sales Tax Oversight Board;
o Two Public Hearings are held at regular Council Meetings to consider expenditure plan.
Sales Tax Oversight Board:
Board will consist of 11 members that will serve two-year terms. Members may be reappointed to serve up to two additional two-year terms (total of 3 terms). Members are selected in the following manner:
• Each Council member shall select one member;
• The Citizens Advisory Committee (CAC) shall select two members;
• Visalia Economic Development Corporation shall select one member;
• Hispanic Chamber of Commerce of Tulare/Kings County or Visalia Chamber of Commerce shall select one member;
• Downtown Alliance that represents Property Based Improvement District or Downtown Merchants shall select one member;
• Home Builders Association or Board of Realtors shall select one member.
Annual Audit:
City shall provide an annual independent audit to account for the tax revenues received and expenditures to ensure consistency with the approved expenditure plan. This report is completing this requirement for fiscal year 2020/21.
Effectiveness Reviews:
The ballot measure ordinance requires an effectiveness review every 8 years from the operative date of the ordinance. The operative date is April 1, 2017, thus, the first review will occur on or before April 1, 2025. During the review, Council will hold a public hearing to review the progress of the Measure N plan and the continuing need for the sales tax measure. To continue the sales tax measure, 4/5ths of the City Council must affirm the tax.
FY 20/21 Financials (ACFR document pg. 32)
The approved FY 20/21 expenditure plan and actual expenditures are shown in Table I - Measure N Revenue & Expenditure Summary - FY 20/21. The table is a summary for the four Measure N Funds which are Essential Service, 2% Youth, 8% Maintenance & Emerging Needs, and the Economic Uncertainty Fund. Measure N sales tax revenue grew $3 million (21%) over the prior year. This extremely high growth was due to the Federal stimulus money issued which allowed consumers to continue to spend as well as the reopening of establishments. Total expenditures for the fiscal year was $10.8 million, which was lower than budget due to COVID 19 which resulted in the Club House to be closed and a Recreation Coordinator to be laid off. Lower than expected capital expenditures also contributed to the lower expenses as projects were rolled into the next fiscal year.
Table I - Measure N Revenue & Expenditure Summary - FY 20/21
Amongst the four Funds, Measure N has a fund balance of $29.7 million which includes the Economic Uncertainty Fund of $1.2 million. The remaining $28.5 million has $15.7 million in committed capital projects that rolled into fiscal year 2021-22 leaving $12.8 million available as shown in Table II - Measure N Fund Balance. It is important to have cash available in each category to be able to advance projects in the plan (if needed) and/or cover higher costs than what was outlined in the plan.
Table II - Measure N Fund Balance
FY 20/21 Audit
As required by the Ordinance, the City engaged an auditor to attest that the City has used the money as required in the ballot measure. The outside audit review assures that these funds are handled properly, assisting City management in providing the highest level of accountability for Measure N funds.
The City hired M. Green and Company to perform the audit which is attached. The audit confirmed that the plan is being implemented and adjusted according to the ballot measure, program guidelines and expenditure plan.
Fiscal Impact:
None
Prior Council Action: June 15, 2020 Measure N Budget adoption.
Other: N/A
Alternatives: N/A
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to accept the 2020/21 Measure N audit from M. Green and Company.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: Measure N Compliance Audit.