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LAFCO audit returns unmodified opinion; GASB 101 raises accrued time-off liability
Summary
An independent audit of the Riverside LAFCO for the year ending June 30, 2025, found an unmodified (clean) opinion but recorded a higher compensated-absences liability after the agency implemented GASB 101, prompting modest reserve and budgeting adjustments.
Joyce Amancua, a CPA and manager with Davis Pharr, told the Riverside Local Agency Formation Commission on Feb. 26 that her firm's audit of the fiscal year ending June 30, 2025, resulted in an unmodified opinion — the highest standard in financial reporting. "Our opinion was unmodified," Amancua said. "Everything in the financial statements is fairly stated in all material respects."
The audit included an emphasis of matter for the implementation of GASB 101, a new accounting standard for compensated absences. Amancua said the change altered when and how leave is accrued and added payroll taxes to the calculation, which increased the reported compensated-absences liability. "The implementation of GASB 101 made compensated absences increase in the current year," she said, explaining the standard requires accrual for leave more likely than not to be used rather than only when it is payable at termination.
Executive Officer Gary Thompson said the accounting change does not change existing leave policy but will affect internal budget analysis and reserve contributions. "These changes don't affect our policy in place, but it'll affect the internal analysis I do to set the budget," Thompson said, noting the commission may schedule additional contributions to a compensated-absences reserve.
Amancua reported no misstatements and no internal-control exceptions were found during substantive testing. She also highlighted several metrics: the commission’s current ratio was 7.63, indicating ample liquidity, and a decline in net income that she attributed to the absence of roughly $142,000 in grant revenue that appeared in the prior fiscal year but not the audited year. Amancua said pension and OPEB liabilities showed little change from the prior year.
Commissioners thanked staff and auditors for the work; a commissioner moved to receive and file the audit report, the motion was seconded and approved by voice vote. The commission’s action was to officially receive and file the audit report; no further policy changes were adopted during the meeting.
The commission will incorporate the GASB 101 impact into its budget planning and reserve contributions during the upcoming budget process.
