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Audit firm issues unmodified opinion on Seal Beach 2023–24 financial statements; council hears fiscal overview
Summary
Auditor presented the fiscal year 2023–24 Annual Comprehensive Financial Report, said it received an unmodified (clean) opinion, and summarized the city’s net position, fund balances, pension and OPEB numbers; councilmembers discussed pension reporting lags and utility fund deficits.
Seal Beach officials and an independent audit team reviewed the city’s annual comprehensive financial report (ACFR) for the fiscal year ended June 30, 2024, during the Feb. 24 City Council meeting. The auditor reported an unmodified — or clean — opinion on the city’s financial statements.
Finance Director Arnaldo told the council the ACFR presents the city’s financial statements and disclosures and that staff submitted the report to the Government Finance Officers Association for a certificate of achievement in reporting. He introduced Francis Kuo (auditor), the managing partner from the audit firm that conducted the engagement.
Auditor’s summary
Francis Kuo said the audit was performed under generally accepted auditing standards and that the firm evaluated internal controls, accounting policies and significant estimates. Kuo noted the city implemented GASB Statement No. 100 during the year and that there were no uncorrected misstatements or reportable internal-control deficiencies identified in the audit.
Key fiscal figures discussed
Kuo summarized several figures from the ACFR: the governmentwide net position at year-end, general fund activity and business-type (utility) activity. The auditor said the city’s governmentwide net position was approximately $144 million at fiscal year-end, an increase from the prior year. The general fund reported roughly $50 million in revenue and $44 million in expenditures for the year; the general fund’s fund balance increased from about $37 million to about $39 million.
Pensions and OPEB
Kuo said the city’s net pension liability reflects CalPERS reporting timing: pension amounts in the ACFR use the CalPERS valuation that lags by one year. Council members and staff discussed how CalPERS investment returns affect reported liabilities. Kuo reported the city’s net pension liability reported in the ACFR (based on the valuation available to staff) and showed a funding ratio near the high 60s percent range; Kuo described those figures as consistent with prior reporting.
Business-type activities and subsidies
Kuo explained the city’s water and sewer enterprise recorded higher expenses than program revenue for the year and that the business-type funds experienced a deficit covered in part by transfers and fund balance. Council members asked whether the general fund currently subsidizes the utilities and were told the utility funds are using available water/wastewater fund balances for the short term while a rate study and rate decisions proceed.
Why it matters
The ACFR and auditor comments provide a formal, audited snapshot of the city’s fiscal position as of June 30, 2024. The auditor’s unmodified opinion signals the financial statements are fairly presented in all material respects; council discussion highlighted near-term policy choices required for utility fund sustainability and the multi-year nature of pension accounting.
Ending
The audit presentation concluded with council discussion of pension reporting lags, investment returns and the need for continued attention to utility rates. The council scheduled a water-and-sewer study session for March 10 to continue conversations about rate structure and long-term fiscal health.
