CITY OF PORTERVILLE Transportation and Transit Funds Audited Financial Statements Years Ended June 30, 2016 and 2015
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CITY OF PORTERVILLE Transportation and Transit Funds Audited Financial Statements June 30, 2016 and 2015 Table of Contents Independent Auditor s Report... 1-2 Financial Statements Local Transportation Fund Special Revenue Funds Balance Sheet... 3 Statements of Revenues, Expenditures, and Changes in Fund Balance... 4 Transit Fund Enterprise Funds Statements of Net Position... 5 Statements of Revenues, Expenses, and Changes in Net Position... 6 Statement of Cash Flows... 7 Notes to Financial Statements... 9-17 Other Reports 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, the Transportation Development Act, Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA) and Measure R Funds... 19-20 Page
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INDEPENDENT AUDITOR S REPORT City Council City of Porterville Porterville, California Report on the Financial Statements We have audited the accompanying financial statements of the Transportation and Transit Funds of the City of Porterville, California (City), as of and for the year ended June 30, 2016, and the related notes to the financial statements, as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Transportation and Transit Funds of the City as of June 30, 2016 and 2015, and the changes in financial position and, where applicable, cash flows thereof for the fiscal years then ended in accordance with accounting principles generally accepted in the United States of America. 1 925 Highland Pointe Drive, Suite 450, Roseville, CA 95678-5418 tel: 916.784.7800 fax: 916.784.7850 www.gallina.com
City Council City of Porterville Report on Comparative Information We have previously audited the Funds 2015 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 30, 2016. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived. Emphasis of Matter Transit Fund Reporting As discussed in Note 1 A, the financial statements present only the Transportation and Transit Funds and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2016 and 2015, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 29, 2016, on our consideration of the City s internal control over financial reporting as it relates to the Transportation and Transit Funds and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control over financial reporting and compliance. Roseville, California December 29, 2016 2
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CITY OF PORTERVILLE Local Transportation Fund Balance Sheets June 30, 2016 and 2015 2016 2015 Assets Cash and investments in Treasury $ 4,626,679 $ 3,575,580 Due from other governmental agencies 1,200,286 1,975,436 Due from other funds 1,534,212 440,469 Total Assets $ 7,361,177 $ 5,991,485 Deferred Inflows of Resources Unavailable grant revenue $ 177,842 $ -- Fund Balance: Restricted for: Laws and regulations of other governments 7,183,335 5,991,485 Total Deferred Inflows of Resources and Fund Balance $ 7,361,177 $ 5,991,485 The accompanying notes are an integral part of these financial statements. 3
CITY OF PORTERVILLE Local Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues: Local Transportation Funds $ 729,617 $ 1,786,423 Measure R 996,394 5,205,933 Other grants 106,038 1,912,010 Interest 116,218 48,815 Total Revenues 1,948,267 8,953,181 Expenditures: Streets and roads 756,417 6,125,162 Change in Fund Balance 1,191,850 2,828,019 Fund Balance, July 1 5,991,485 3,163,466 Fund Balance, June 30 $ 7,183,335 $ 5,991,485 The accompanying notes are an integral part of these financial statements. 4
CITY OF PORTERVILLE Transit Fund Statement of Net Position June 30, 2016 and 2015 Assets 2016 2015 Current Assets: Fares receivable $ 57,379 $ 132,083 Due from other governments 1,359,814 1,341,224 Prepaids 98,400 -- Total Current Assets 1,515,593 1,473,307 Capital Assets: Nondepreciable 3,349,963 710,037 Depreciable, net 7,574,264 7,876,095 Total Capital Assets 10,924,227 8,586,132 Total Assets 12,439,820 10,059,439 Deferred Outflows of Resources Deferred pension-related items 24,131 6,229 Liabilities Current Liabilities: Accounts payable 196,641 131,205 Payroll payable 4,887 1,814 Due to other funds 1,534,212 440,469 Unearned revenue 370,784 1,121,824 Total current liabilities 2,106,524 1,695,312 Noncurrent Liabilities Net pension liability 112,235 94,252 Total noncurrent liabilities 112,235 94,252 Total Liabilities 2,218,759 1,789,564 Deferred Inflows of Resources Deferred pension-related items 5,348 13,458 Net Position Net investment in capital assets 10,924,227 8,586,131 Unrestricted (deficit) (684,383) (323,485) Total Net Position $ 10,239,844 $ 8,262,646 The accompanying notes are an integral part of these financial statements. 5
CITY OF PORTERVILLE Transit Fund Statement of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues: Fares $ 534,697 $ 531,394 Operating Expenses: Purchased transportation 2,208,640 1,520,115 Vehicle maintenance 819,948 678,107 General and administrative 653,977 437,426 Depreciation 835,055 678,461 Total Operating Expenses 4,517,620 3,314,109 Operating Loss (3,982,923) (2,782,715) Non-Operating Revenues: Local Transportation Funds 1,424,228 373,591 State Transit Assistance Funds 57,848 864,965 Measure R 285,527 120,250 State grants and reimbursements -- 62,271 Federal grants 1,766,818 785,084 Interest -- 3,280 Other revenues 401,370 91,033 Gain on disposal of capital assets 2,350 -- Total Non-Operating Revenues 3,938,141 2,300,474 Income (Loss) Before Contributions (44,782) (482,241) Capital contributions 2,021,980 851,883 Changes in Net Position 1,977,198 369,642 Total Net Position - Beginning 8,262,646 7,992,879 Prior period adjustment -- (99,875) Total Net Position - Beginning restated 8,262,646 7,893,004 Total Net Position - Ending $ 10,239,844 $ 8,262,646 The accompanying notes are an integral part of these financial statements. 6
CITY OF PORTERVILLE Transit Fund Statement of Cash Flows For the Years Ended June 30, 2016 and 2015 2016 2015 Cash Flows from Operating Activities: Cash received from customers $ 609,396 $ 609,816 Cash payments to employees for services (102,815) (41,264) Cash payments to suppliers for goods and services (3,617,665) (2,586,853) Net Cash Used in Operating Activities (3,111,084) (2,018,301) Cash Flows from Non-Capital Financing Activities: Local Transportation Funds 1,029,848 153,250 State Transit Assistance Funds 57,848 483,703 Interfund loans 1,093,743 440,469 Measure R 180,530 15,250 Federal operating assistance 1,496,568 667,652 Other revenue 401,370 91,033 Net Cash Provided from Non-Capital Financing Activities 4,259,907 1,851,357 Cash Flows from Capital and Related Financing Activities: Construction and other capital projects (2,698,087) (63,139) Acquisition of fixed assets (533,226) (986,568) Disposal of equipment 60,510 -- Prop 1B PTMISEA -- 568,578 Federal capital grants 2,021,980 110,140 Net Cash Provided from (Used in) Capital and Related Financing Activities (1,148,823) (370,989) Cash Flows from Investing Activities: Interest income -- 3,280 Net Increase (Decrease) in Cash -- (534,653) Cash, July 1 -- 534,653 Cash, June 30 $ -- $ -- Reconcile of Operating Loss to Net Cash Used in Operating Activities: Operating loss $ (3,982,923) $ (2,782,715) Adjustment to reconcile operating loss to net cash used in operating activities: Depreciation 835,055 678,461 Change in assets and liabilities: (Increase) decrease in fares receivable 74,704 78,422 (Increase) decrease in prepaids (98,400) -- Increase (decrease) in accounts payable 65,436 5,231 Increase (decrease) in pension liability (8,029) 1,606 Increase (decrease) in accrued payroll 3,073 694 Net Cash Used in Operating Activities $ (3,111,084) $ (2,018,301) The accompanying notes are an integral part of these financial statements. 7
CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The financial statements are intended to reflect the financial position, results of operation and compliance of the Transportation Development Act (TDA), Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA) and the Tulare County Measure R funds allocated for nontransit and transit purposes to the Transportation Fund and the Transit Fund of the City of Porterville with the laws, rules and regulations of the Transportation Development Act, the Tulare County Association of Governments and Proposition 1B bond compliance. They do not present fairly the financial position and results of operations of the City of Porterville, in conformity with generally accepted accounting principles. B. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows, liabilities, deferred inflows, fund equity or net position, revenues and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into two generic fund types and two broad fund categories as follows: Government Fund Types Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to expenditures for specified purposes. Proprietary Funds Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through use charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accounting ability, or other purposes. C. Basis of Accounting Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences are recorded only when payment is due. Capital asset acquisitions are reported expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. 9
CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Basis of Accounting (continued) When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, then unrestricted as they are needed. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. D. Deposits and Investments Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Under the provisions of the City s investment policy and California Government Code Section 53601, the City s Treasury is authorized to invest in negotiable certificates of deposit, obligations of the U.S. Treasury, banker s acceptances, certain federal agency obligations, commercial paper, guaranteed investment contracts (GIC), and the California Local Agency Investment Fund (LAIF). The policy does not permit investment in Repurchase Agreements, or borrow funds through the use of Reverse-Repurchase Agreements. The collateral underlying investments must be delivered to the City. If U.S. Treasury Bills are used as the underlying collateral, delivery may be made by book entry only. For all other collateral, the security must be physically delivered either to the City or to a third-party custodial agent. All investments are reported at fair value. California banks and savings and loan associations are required to secure a city s deposits by pledging government securities as collateral. The fair value of the pledged securities must equal at least 110 percent of a city s deposits. The City Treasurer, at his or her discretion, may waive the 110 percent collateral requirement for deposits that are insured up to the $250,000 by the FDIC. It is the City s policy to waive the collateral requirement in order to receive a higher interest yield on its deposits. It is also the City s policy not to deposit more than $250,000 in a savings and loan association or a small bank. California law allows financial institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150 percent of a city s total deposits. It is the City s policy not to accept this form of collateral. E. Capital Assets Capital assets are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. As the City acquires additional capital assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs, which are amounts essentially spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimates. In case of donations, capital assets are valued at their estimated fair value at the date of donation. Depreciation is recorded on a straight-line basis over the useful life of the following assets: Buildings 50 years Structural Improvements 20 years Machinery and equipment (non-auto) 5 years Vehicles 5 years 10
CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Use of Management Estimates The preparation of the basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Accordingly, actual results could differ from those estimates. G. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position reports a separate section for deferred outflows of resources. Deferred outflows of resources represent a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expenses) until then. The deferred pension related item relates to pension contributions made subsequent to the actuarial measurement date. In addition to liabilities, the statement of financial position reports a separate section for deferred inflows of resources. Deferred inflows of resources represent an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Fund s pension-related item relates to excess investment earnings on pension plan investments. H. Fund Equity In the fund financial statements, the following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: Nonspendable fund balance This includes amounts that cannot be spent because they are either not spendable in form or legally or contractually required to remain intact. Restricted fund balance This includes amounts with constraints placed on their use by those external to the City, including creditors, grantors, contributors, or laws or regulations of other governments. It also includes constraints imposed by law through constitutional provisions or enabling legislation. Committed fund balance This includes amounts that can only be used for specific purposes determined by formal action of the City Council and that remain binding unless removed in the same manner. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period. Assigned fund balance This includes amounts that are constrained by the City s intent to be used for specific purposes. The intent can be established at either the highest level of decision making or an official designated for that purpose. Unassigned fund balance This is the residual classification that includes amounts not contained in the other classifications. The City Council establishes, modifies or rescinds fund balance commitments and assignments by passage of a resolution. When restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, followed by the unrestricted resources that are committed, assigned and unassigned, in this order as they are needed. 11
CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Implementation of Accounting Pronouncements GASB recently released several new accounting and financial reporting standards. The following GASB Statements have been implemented in the current financial reports. GASB Statement No. 72, Fair Value Measurement and Application, is effective for the periods beginning after June 15, 2015. GASB Statement No. 73, Accounting and Financial Reporting for Pension and Related Assets that are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68, is effective for periods beginning after June 15, 2015, except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of GASB Statement No. 68, which are effective for periods beginning after June 15, 2016. GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, is effective for periods beginning after June 15, 2015. J. Reclassifications Certain prior year balances may have been reclassified in order to conform to current year presentation K. Pensions For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions and pension expense, information about the fiduciary net position of the City s California Public Employees Retirement System (CalPERS) plans (Plans) and additions to/deductions from the Plans fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. NOTE 2: CASH AND CASH EQUIVALENTS The City follows the practice of pooling cash and investments of all funds except those required to be held by outside fiscal agents under the provisions of bond indentures. Interest income earned on the pooled cash and investments is allocated monthly to the various funds based on monthly cash balances. The investment policy of the City of Porterville is consistent with guidelines set forth under State of California Government Code Section 53601 and serves to maximize investment income consistent with safe and prudent investment practices. All surplus funds are managed by the City Finance Director in compliance with the Statement of Investment Policy adopted by the City Council which delegates to the City Finance Director the authority to invest the City funds and to deposit securities. Information regarding categorization of investments can be found in the City s financial statements. NOTE 3: PORTERVILLE DIAL-A-COLT The City of Porterville has contracted with Sierra Management to provide service for the management and operation of a demand-responsive transit system. 12
CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 NOTE 4: CAPITAL ASSETS The changes in capital assets and the related accumulated depreciation for the years ended June 30, 2016 and 2015 are as follows: Balance Additions/ Balance July 1, 2015 Adjustments Deletions June 30, 2016 Capital Assets: Non-Depreciable Assets: Land $ 352,599 $ -- $ -- $ 352,599 Construction in progress 357,438 2,698,086 58,160 2,997,364 Total Non-Depreciable Assets 710,037 2,698,086 58,160 3,349,963 Depreciable Assets: Buildings 2,757,699 -- -- 2,757,699 Structural improvements 910,926 120,223 -- 1,031,149 Machinery & equipment 529,856 76,039 -- 605,895 Vehicles 6,772,751 -- 287,604 6,485,147 Infrastructure 970,638 336,964 -- 1,307,602 Total Depreciable Assets 11,941,870 533,226 287,604 12,187,492 Less: accumulated depreciation 4,065,775 835,057 287,604 4,613,228 Capital Assets, Net $ 8,586,132 $ 2,396,255 $ 58,160 $ 10,924,227 Balance Additions/ Balance July 1, 2014 Adjustments Deletions June 30, 2015 Capital Assets: Non-Depreciable Assets: Land $ 352,599 $ -- $ -- $ 352,599 Construction in progress 444,251 56,455 143,268 357,438 Total Non-Depreciable Assets 796,850 56,455 143,268 710,037 Depreciable Assets: Buildings 2,757,699 -- -- 2,757,699 Structural improvements 910,926 -- -- 910,926 Machinery & equipment 529,856 -- -- 529,856 Vehicles 5,786,183 986,568 -- 6,772,751 Infrastructure 825,876 144,762 -- 970,638 Total Depreciable Assets 10,810,540 1,131,330 -- 11,941,870 Less: accumulated depreciation 3,387,314 678,461 -- 4,065,775 Capital Assets, Net $ 8,220,076 $ 509,324 $ 143,268 $ 8,586,132 13
NOTE 5: FARE REVENUE RATIO CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 The City is required under the Transportation Development Act to maintain a fare revenue to operating expense ratio of 20% for year end June 30. The calculation of the fare revenue ratio for the years ended June 30, 2016 and 2015 is as follows: 2016 2015 Fare revenue $ 534,697 $ 531,394 Advertising revenue 86,274 -- Measure R expanded routes -- 120,250 Total Fare Revenue $ 620,971 $ 651,644 Operating expenses $ 4,517,621 $ 3,314,109 Less: extention of services expenses (394,125) -- Less: depreciation (835,055) (678,461) Net Operating Expense $ 3,288,441 $ 2,635,648 Ratio 18.88% 24.72% The City did not meet its fare revenue to operating expense ratio objective of 20% for the fiscal year ended June 30, 2016. The City met its fare revenue to operating expense ratio objective of 20% for the fiscal year ended June 30, 2015. NOTE 6: PTMISEA In November 2006, California voters passed a bond measure enacting the Highway Safety, Traffic Reduction, Air Quality and Port Security Bond Act of 2006. Of the $19.925 billion of state general obligation bonds authorized, $4 billion was set aside by the State as instructed by statute as the Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA). These funds are available to the California Department of Transportation for intercity rail projects and to transit operators in California for rehabilitation, safety or modernization improvements, capital service enhancements or expansions, new capital projects, bus rapid transit improvements or for rolling stock procurement, rehabilitation or replacement. During the fiscal year ended June 30, 2015, the City applied for and received proceeds of $568,578 from the State s PTMISEA account for the purchase of an automatic passenger counter system and a mobile fare payment system. During the fiscal year ended June 30, 2016, the City expended restricted PTMISEA monies allocated during the year ended June 30, 2015, for security enhancements and the automatic passenger counter system. During the fiscal year ended June 30, 2014, the City applied for and received proceeds of $169,263 from the State s PTMISEA account for the purchase of a bus stop amenities system and security enhancements. During the fiscal year ended June 30, 2015, the City expended restricted PTMISEA monies allocated during the year ended June 30, 2014, for security enhancements. As of June 30, 2015, all PTMISEA monies had not been expended on qualifying expenditures, resulting in unearned revenue as reported in Note 7. 14
NOTE 7: UNEARNED REVENUES CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 As of June 30, 2016 and 2015, the Transit fund had unearned allocations and grants received in advance of meeting revenue recognition criteria as follows: Balance Balance July 1, 2015 Additions Deductions June 30, 2016 Local Transportation Fund $ 375,790 $ 1,048,438 $ (1,424,228) $ -- Measure R 120,723 180,527 (285,527) 15,723 Proposition 1B 625,311 2,415 (272,665) 355,061 State Transit Assistance -- 57,848 (57,848) -- $ 1,121,824 $ 1,289,228 $ (2,040,268) $ 370,784 Balance Balance July 1, 2014 Additions Deductions June 30, 2015 Indian Gaming Grant $ 62,271 $ -- $ (62,271) $ -- Local Transportation Fund 596,131 153,250 (373,591) 375,790 Measure R 225,723 15,250 (120,250) 120,723 Proposition 1B 91,701 568,578 (34,968) 625,311 State Transit Assistance 381,262 483,703 (864,965) -- $ 1,357,088 $ 1,220,781 $ (1,456,045) $ 1,121,824 NOTE 8: PENSION PLAN Plan Description All qualified permanent and probationary employees are eligible to participate in the City s Miscellaneous Plan, an agent multiple-employer defined benefit pension plan. The City s Miscellaneous Plan is part of the California Public Employees Retirement System (PERS), a public employee retirement system which acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and other requirements are established by State statute and City resolution. The City s defined benefit pension plans provide retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and their beneficiaries. The City selects optional benefit provisions by contract with CalPERS and adopts those benefits through City ordinance. CalPERS issues a separate comprehensive annual financial report. Copies of CalPERS annual financial reports which include required supplementary information (RSI) may be obtained from CalPERS Executive Offices, Lincoln Plaza North, 400 Q Street, Sacramento, CA 95811. 15
NOTE 8: PENSION PLAN (CONTINUED) Benefits Provided CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 All pension plans provide benefits, upon retirement, disability or death of members. Retirement benefits are based on years of service, final average compensation, and retirement age. Employees terminating before accruing five years of retirement service credit forfeit the right to receive retirement benefits unless they establish reciprocity with another public agency within a prescribed time period. Non-vested employees who terminate service are entitled to withdraw their accumulated contributions plus accrued interest. Employees who terminate service after earning five years of retirement service credit may leave their contributions on deposit and elect to take a deferred retirement. Differences between expected and actual experience for vested and non-vested benefits may result in an increase or decrease to pension expense and net pension liability. Additional information on benefits provided can be found in the City of Porterville Comprehensive Annual Financial Report. Pension Expense, Deferred Outflows and Deferred Inflows of Resources For the year ended June 30, 2016, the Transit Fund recognized pension income of $8,029 as follows: Change in net pension liability $ 17,983 Contributions 6,229 Deferral for subsequent contributions (24,131) Deferred inflows excess investment earnings (8,110) Pension income $ (8,029) At June 30, 2016, the Transit Fund reports the following deferred outflows and deferred inflows of resources related to pensions: Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to the measurement date $ 24,131 $ -- Net difference between projected and actual earnings on pension plan investments -- (5,348) Total $ 24,131 $ (5,348) Deferred outflows of $24,131 related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Amounts reported as deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Year ended Deferred Inflows June 30 of Resources 2016 (1,337) 2017 (1,337) 2018 (1,337) 2019 (1,337) 16
NOTE 9: SUBSEQUENT EVENTS CITY OF PORTERVILLE Transportation and Transit Funds Notes to Financial Statements For the Year Ended June 30, 2016 Subsequent events have been evaluated through December 29, 2016, the date these financial statements have been made available to be issued. There were no subsequent events identified by management which would require disclosure in the financial statements. NOTE 10: FUTURE ACCOUNTING PRONOUNCEMENTS The following Governmental Accounting Standards Board (GAS) Statements will be implemented in future financial statements. Statement No 74 Statement No. 75 Statement No. 77 Statement No. 78 Statement No. 79 Statement No. 80 Statement No. 81 Statement No. 82 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans Accounting and Financial reporting for Postemployment Benefits Other Than Pension Plans Tax Abatement Disclosures Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans Certain External Investment Pools and Pool Participants Blending Requirements for Certain Component Units Irrevocable Split-Interest Agreements Pension Issues - an Amendment of GASB Statements No. 67, No. 68 and No. 73 The provisions of this statement are effective for financial statement periods beginning after June 15, 2016. The provisions of this statement are effective for financial statement periods beginning after June 15, 2017. The provisions of this statements are effective for financial statement periods beginning after December 15, 2015. The provisions of this statements are effective for financial statement periods beginning after December 15, 2015. The provisions of this statements are effective for financial statement periods beginning after December 15, 2015. The provisions of this statements are effective for financial statement periods beginning after June 15, 2016. The provisions of this statements are effective for financial statement periods beginning after December 15, 2016. The provisions of this statements are effective for financial statement periods beginning after June 15, 2017. 17
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OTHER REPORTS
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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, THE TRANSPORTATION DEVELOPMENT ACT, PUBLIC TRANSPORTATION MODERNIZATION IMPROVEMENT AND SERVICE ENHANCEMENT ACCOUNT, AND MEASURE R City Council City of Porterville Porterville, 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 Transportation and Transit Funds of the City of Porterville, California (City), for the year ended June 30, 2016, and the related notes to the financial statements, and have issued our report thereon dated December 29, 2016. 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 it relates to the Transportation and Transit Funds to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City s internal control. Accordingly, we do not express an opinion on the effectiveness of City s internal control. A deficiency in internal control exists when the design or operation of 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 and therefore, material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in the 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 Transportation and Transit Fund financial statements are free of material misstatement, we performed tests of compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Our audit was further made to determine that Transportation Development Act (TDA) and Measure R funds allocated to and received by the City were expended in conformance with applicable statutes, rules and regulations of the TDA, Measure R Ordinance, and allocation instructions and resolutions of Tulare County Association of Governments as required by Section 6667 of Title 21 of the California Code of Regulations and the Tulare 19 925 Highland Pointe Drive, Suite 450, Roseville, CA 95678-5418 tel: 916.784.7800 fax: 916.784.7850 www.gallina.com
County Transportation Authority. Our audit was expanded to include verification of receipt and appropriate expenditures of PTMISEA bond funds in accordance with Government Code 8879.55(f). 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 the TDA, Measure R and PTMISEA. 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 entity 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 entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Roseville, California December 29, 2016 20