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Santa Barbara finance committee accepts 2024 comprehensive financial report, auditors find no material weaknesses
Summary
The City Finance Committee unanimously accepted the City of Santa Barbara's Annual Comprehensive Financial Report for fiscal year 2024. City staff reported a $68.6 million increase in net position, auditors issued a clean opinion, and members flagged pension and self-insurance liabilities and enterprise fund pressures for future attention.
The City Finance Committee on March 18 unanimously accepted the City of Santa Barbara's Annual Comprehensive Financial Report (ACFR) for fiscal year 2024 and voted to forward the report to the full City Council.
Finance Director Keith DeMartini presented the report and said the city's independent auditors, CliftonLarsonAllen (CLA), issued a clean opinion with no material weaknesses, significant deficiencies or control deficiencies identified: "It was one of the cleanest audit reports that we've ever had," DeMartini said, crediting city staff and leadership.
The report shows the citywide net position increased by $68,600,000 for fiscal year 2024, and tax revenues rose by $5,700,000 compared with the prior year, Controller Natalie Licoli told the committee. Licoli summarized the governmentwide statements, noting government activities are supported primarily by sales, property and transient-occupancy taxes and that public safety remains the single largest division requiring general-fund support.
The general fund ended the year with an $8,600,000 use of reserves and an ending fund balance reported at roughly $47,000,000; compared with the city's revised budget, revenues were $3.5 million higher and expenditures were $9.4 million lower, producing a favorable variance of about $12.9 million against the revised budget, staff said.
Committee members and staff discussed long-term liabilities. Noncurrent liabilities on the statement were driven largely by the city's pension obligation to CalPERS; staff said the unfunded pension liability is about $400,000,000 citywide and that the city has established a Section 115 trust to begin addressing that obligation. DeMartini also noted a growing other-post-employment-benefits (OPEB) liability and a still-underfunded self-insurance fund.
Enterprise funds showed mixed results. Most enterprise departments produced positive operating results and met council reserve requirements, with water and clean energy funds highlighted as strong performers. Staff noted the airport and downtown parking enterprise funds are under pressure: airport balances reflect a transition away from one-time COVID-era relief, and downtown parking continues to show financial strain that will be addressed in upcoming budget conversations. On cash flow, staff reported about 62% of enterprise funds ended the year with positive cash flow; roughly half of departments showed positive cash from operating activities.
Audit partner Joe Ludden of CliftonLarsonAllen reviewed audit procedures and reporting. Ludden described the audit as providing "reasonable assurance rather than absolute assurance" that the financial statements are free of material misstatement. He outlined the reports issued with the ACFR, including the independent auditor's report (opinion), the GAS letter (internal control letter), communication with those charged with governance, and certain agreed-upon procedures such as the Gann appropriations limit review.
Committee members praised staff for the clean audit and long record of high-quality reporting. Committee Member Harmon called the no-findings determination "incredibly impressive" and urged that the result be communicated to the public. Member Santa Maria moved to accept the staff recommendation to forward the ACFR to council; Member Harmon seconded the motion. The committee voted unanimously to approve the motion.
Looking ahead, staff said they will continue quarterly financial updates, have started the budget planning cycle for fiscal years 2026 and 2027, and will focus on reserve management, capital investment needs identified in the draft capital improvement plan, and addressing the pension and self-insurance funding shortfalls.
Votes at a glance: Motion to accept the Annual Comprehensive Financial Report for fiscal year 2024 and forward to City Council; mover: Member Santa Maria; second: Member Harmon; outcome: approved unanimously.
Questions and public comment: No members of the public spoke on the item at the meeting; online participation reported no raised hands.
The committee adjourned following the vote.
