Audited Financial Results for the Fiscal Year Ended June 30, 2015 December 8, 2015 1
Cherry Bekaert Comments FY 2015 Audited Financial Statements Entity Wide Statements – GASB 34 General Fund School Operating Fund Water & Sewer Fund Storm Water Fund Waste Management Fund TIP Fund Debt – June 30, 2015 2
Presentation to City Council The City of Virginia Beach, Virginia December 8, 2015
Engagement Summary You have engaged us to provide the following: Audit of the City's, School Board’s and Economic Development Authority’s FY 2015 financial statements Audit of the City’s major federal programs required by OMB Circular A-133 Audit of the City’s compliance with the laws, regulations, grants and other agreements, including the City’s compliance with the Auditor of Public Accounts’ Specifications for Audits of Counties, Cities and Towns 4
Overall Audit Results Our opinion on the 2015 financial statements was unmodified or “clean” opinion Testing of material balances and transactions Internal controls assessed for planning purposes only Comparability of financial statements to FY14: Implementation of New Standards Reclassification of the Waste Management Fund 5
Overall Audit Results Our opinions on compliance were unmodified or “clean” opinion Internal control deficiencies over financial reporting and compliance None reported Compliance with grants, agreements, laws and regulations: One instance detailed in the Schedule of Findings and Questioned Costs 6
Auditor’s Required Communications Accounting Policies Adoption of new accounting policies effective July 1, 2014 • GASB Stmt No. 68 – Accounting and Financial Reporting for Pensions – an amendment of GASB Stmt No. 27 • GASB Statement No. 71 – Pension Transition for Contributions Made Subsequent to Measurement Date – an amendment of GASB Stmt No. 68 Change in accounting policies • The application of existing policies was not changed during 2014 7
Auditor’s Required Communications Management Judgment and Accounting Estimates Allowance for Doubtful Accounts and Taxes Receivable Depreciation Expense Actuarially-computed Liabilities Disagreements with Management There were no disagreements with management regarding accounting or auditing issues Consultation with Other Accountants We are not aware of any 8
Auditor’s Required Communications Audit Adjustments and Uncorrected Misstatements None Difficulties Encountered in Performing the Audit We encountered no difficulties in preforming the audit Material Client Communications Representation letter Independence We are not aware of any relationship that we believe, based on current authoritative guidance, would impair our independence 9
New Accounting and Reporting Changes GASB statements effective for FY 2016: GASB Statement No. 72 – Fair Value Measurement and Application Significantly changes fair value measurement and disclosures • Use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value • Established a hierarchy for measurement of assets or liabilities – Level 1 – Quoted prices in active markets – Level 2 – Direct or indirect observations other than quoted prices – Level 3 – Unobservable inputs GASB Statement No. 77 – Tax Abatement Disclosures The new standard will require detailed disclosure related to taxes that were abated during the year, including type of tax being abated, a description of abatements, amount of abatements, eligibility criteria, and provisions for recapturing abated taxes 10
New Accounting and Reporting Changes GASB statements effective for FY 2017: GASB Statement No. 74 – Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans Covers reporting by OPEB plans that administer benefits on behalf of governments GASB statements effective for FY 2018: GASB Statement No. 75 – Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Requires governments to report a liability on the face of the financial statements for OPEB obligations 11
Contact Information Krista Edoff Laura Harden Partner Manager 757.228.7058 757.228.7065 kedoff@cbh.com lharden@cbh.com 12
Cherry Bekaert Comments FY 2015 Audited Financial Statements Entity Wide Statements – GASB 34 General Fund School Operating Fund Water & Sewer Fund Storm Water Fund Waste Management Fund TIP Fund Debt – June 30, 2015 13
City Schools CDC Total Assets $ 5,411.1 $ 650.1 $ 32.9 $ 6,094.1 Deferred Outflows of Resources 54.9 59.6 0.0 114.5 City Liabilities (1,604.9) (118.0) (16.6) (1,739.5) GASB68 Pension Liabilties (333.8) (634.8) 0.0 (968.6) Deferred Inflows of Resources (101.2) (117.7) 0.0 (218.9) Net Position: Net Investment in Capital Assets 3,011.1 501.2 10.9 3,523.2 Restricted 556.1 29.9 0.0 586.0 Unrestricted (141.1) (692.0) 5.4 (827.7) Total Net Position $ 3,426.1 $ (160.9) $ 16.3 $ 3,281.5 CAFR Exhibit 1 14
Net Pension Liability Addition of Net Pension Liability due to GASB68 effective FY15 City Net Pension Liability of $333.8M distributed amongst the entity-wide and enterprise funds The Net Pension Liability reduces the Net Position (equity) of these funds Waste Management Enterprise Fund Full accrual 15
% of BUDGET ACTUAL VARIANCE Budget LOCAL $ 849.5 $ 849.8 $ 0.3 0.0% STATE 150.7 147.8 (2.9) -1.9% FEDERAL 19.1 19.4 0.3 1.6% TOTAL REVENUES $ 1,019.3 $ 1,017.0 $ (2.3) -0.2% CITY $ 661.2 $ 626.5 $ 34.7 5.2% SCHOOLS 410.9 398.6 12.3 1.6% TOTAL EXPENDITURES $ 1,072.1 $ 1,025.1 $ 47.0 4.4% REVENUES OVER (UNDER) $ (52.8) $ (8.1) $ 44.7 FUND BALANCE - JULY 1 171.9 LESS: RESERVATIONS (66.8) * UNASSIGNED FUND BALANCE - JUNE 30 $ 97.0 Fund Balance as a percent of FY 2016 Revenues is 9.3% CAFR Exhibit 5 * Reflects encumbrances of $10.5 million 16
$175 159.3 156.1 150.7 149.3 147.8 145.4 145.9 143.4 $150 143.5 144.1 143.8 140.7 $125 Revenues $ Million $100 $75 $50 $25 $0 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Budget Actual 17
$200 16.0% 12.8% 11.9% $150 12.0% 11.0% 10.7% 10.4% 10.1% 10.1% 9.5% 9.3% 8.9% % of Budgeted GF Revenue $123.4 $117.8 Dollars (Millions) $113.0 $100 8.0% $104.0 $103.4 $102.4 $102.1 $97.0 $96.1 $92.7 $50 4.0% $0 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Unassigned GF Balance % of Budgeted GF Revenue Policy = 8-12% of Revenues 18
Budget Actual Variance REVENUES: City $ 390.2 $ 390.2 $ - Local 2.7 3.5 0.8 School's Reserve & Other Funds 19.2 19.1 (0.1) State Share of Sales Tax 70.1 70.4 0.3 Commonwealth 252.6 250.2 (2.4) Federal Government 16.0 14.3 (1.7) Total Revenues $ 750.8 $ 747.7 $ (3.1) EXPENDITURES $ (756.8) $ (741.4) * $ 15.4 Total Reversion to City $ 12.3 * Reflects encumbrances of $9.3 million 19
Budget Actual Diff Charges for Services $ 70.1 $ 75.7 $ 5.6 Sale of Water 45.9 45.3 (0.6) Other 4.3 7.2 2.9 Total Revenues $ 120.2 $ 128.2 $ 8.0 Water Services Contract $ 25.0 $ 23.8 $ 1.2 Operating Expenses 63.2 54.4 8.8 Debt Service 24.4 15.0 9.4 Transfers to CIP 13.8 13.8 0.0 Total Expenditures $ 126.4 $ 107.0 $ 19.4 Net Change in Position $ 21.3 20
Budget Actual Diff Charges for Services $ 38.9 $ 39.1 $ 0.2 Other 0.5 0.9 0.4 Total Revenues $ 39.4 $ 40.0 $ 0.6 Operating Expenses $ 19.0 $ 17.5 $ 1.5 Debt Service 2.8 1.6 1.2 Transfers to CIP 9.5 9.5 0.0 Total Expenditures $ 31.3 $ 28.6 $ 2.7 Net Change in Position $ 11.4 21
Budget Actual Diff Charges for Services $ 33.8 $ 34.6 $ 0.8 SPSA Rebate 8.0 8.0 0.0 Other 1.0 0.9 (0.1) Total Revenues $ 42.8 $ 43.5 $ 0.7 Program Support $ 1.1 $ 0.5 $ 0.6 Waste Disposal 18.9 18.2 0.7 Waste Collection 12.0 11.3 0.7 Yard Debris/Hazardous Waste 2.2 1.9 0.3 Recycling 5.0 4.7 0.3 Transfers to Water & Sewer 0.5 0.5 0.0 Transfers to General Fund 2.1 2.1 0.0 Total Expenditures $ 41.8 $ 39.2 $ 2.6 Net Change in Position $ 4.3 22
Budget Actual Diff Hotel Room Tax $ 15.3 $ 15.8 $ 0.5 Restaurant Meal Tax 11.5 11.5 (0.0) Amusement Tax 5.8 5.9 0.1 Cigarette Tax 0.9 1.0 0.1 Other 1.5 1.3 (0.2) Total Revenues $ 35.0 $ 35.5 $ 0.5 Debt Service $ 24.2 $ 24.1 $ 0.1 SGA Special Events 3.3 3.1 0.2 Operating Expenses 2.4 2.2 0.2 Transfer to Sandbridge SSD 2.3 2.5 (0.2) Transfer to CIP 2.8 2.8 0.0 Transfer to General Fund 2.1 2.1 0.0 Total Expenditures $ 37.1 $ 36.8 $ 0.3 Net Change in Fund Balance $ (1.3) 23
Total Debt ‐ $1.305B Agriculture Reserve Program 3.2% General Government 54.1% Storm Water 3.6% Water and Sewer 14.8% Schools 24.3% 24
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