HomeMy WebLinkAbout04.11.2023 Finance Committee Agenda PacketCity Council Finance Committee Agenda April 11, 2023
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SARATOGA CITY COUNCIL
FINANCE COMMITTEE
APRIL 11, 2023
4:00 P.M. REGULAR MEETING
Public Participation Information
In accordance with Saratoga City Council’s Remote Public Participation Policy, members of the
public may participate in this meeting in person at the location listed below or via remote
attendance using the Zoom information below.
Members of the public can view and participate in the meeting by:
1. Attending the meeting in person in the Linda Callon Conference Room located at 13777
Fruitvale Avenue, Saratoga CA 95070; OR
2. Accessing the meeting through Zoom
* Webinar URL https://us02web.zoom.us/j/87592018111
* Webinar ID: 875 9201 8111
* Calling 1.669.900.6833 or 1.408.638.0968
Written Communication
Comments can be submitted in writing at www.saratoga.ca.us/fc. Written communications will
be provided to the members of the City Council and included in the Agenda Packet and/or in
supplemental meeting materials.
Public Comment
Members of the public may comment on any item for up to three (3) minutes. The amount of
time for public comment may be reduced by the Mayor.
Meeting Recording Information
In accordance with the Saratoga City Council’s Meeting Recording Policy, the City Council
Finance Committee Meetings are recorded and made available following the meeting on the
City website.
City Council Finance Committee Agenda April 11, 2023
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CALL TO ORDER
ROLL CALL
Public Comment
AGENDA ITEMS
1. Finance Committee Minutes
Recommended Action:
Review and approve the minutes for the March 7, 2023 regular meeting and the March 29,
2023 special meeting.
Finance Committee Minutes
Finance Committee Special Meeting Minutes
2. Professional Auditor Selection
Recommended Action:
Receive recommendation from staff on selected auditor and finalize selection for City
Council approval on April 19, 2023.
Memo - Professional Auditor Selection
Attachment A - MLH Proposal
3. Financial Policies Review
Recommended Action:
Review and recommend City Council action on the 2023-24 Financial Policies.
Memo - Annual Financial Policies Review
Attachment A - DRAFT Financial Policies
4. Special Meeting
Recommended Action:
Schedule a Special Meeting to receive a 2023-24 budget overview.
Memo - Special Meeting 2023-24 Budget
ADJOURNMENT
CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA PACKET,
COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
I, Gina Scott, Administrative Analyst for the City of Saratoga, declare that the foregoing agenda
for the meeting of the City Council Finance Committee was posted and available for public
review on April 6, 2023, at the City of Saratoga, 13777 Fruitvale Ave., Saratoga, CA 95070, and
on the City’s website at www.saratoga.ca.us.
Signed this 6th day of April 2023 at Saratoga, California.
Gina Scott, Administrative Analyst
City Council Finance Committee Agenda April 11, 2023
Page 3 of 3
In accordance with the Ralph M. Brown Act, copies of the staff reports and other materials
provided to the Committee by City staff in connection with this agenda, copies of materials
distributed to the Committee concurrently with the posting of the agenda, and materials
distributed to the Committee by staff after the posting of the agenda are available on the City
website at www.saratoga.ca.us and are available for review in the office of the City Clerk at
13777 Fruitvale Avenue, Saratoga, California.
In compliance with the Americans with Disabilities Act and the Governor’s Executive Order, if
you need assistance to participate in this meeting, please contact the City Clerk at
bavrit@saratoga.ca.us or call 408.868.1216 as soon as possible before the meeting. The City will
use its best efforts to provide reasonable accommodations to provide as much accessibility as
possible while also maintaining public safety. [28 CFR 35.102-35.104 ADA title II]
City Council Finance Committee Minutes – March 7, 2023
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MINUTES
SARATOGA CITY COUNCIL FINANCE COMMITTEE
MEETING
MARCH 7, 2023
CALL TO ORDER
The meeting was called to order at 4:18 p.m.
ROLL CALL
Present:Mayor Kookie Fitzsimmons, Council Member Page, Council Member Walia
Also Present:James Lindsay, City Manager
Nick Pegueros, Administrative Services Director
Ann Xu, Accountant II
Gina Scott, Administrative Analyst
REPORT ON POSTING OF THE AGENDA
The Administrative Analyst reported the agenda for this meeting was properly posted on March 2, 2023.
AGENDA ITEMS
1. Finance Committee Minutes - Reviewed and approved as item two of the agenda.
Recommended Action:
Approve the minutes for the February 7, 2023, Finance Committee Meeting.
PAGE/FITZSIMMONS MOVED TO APPROVE THE MINUTES FOR THE FEBRUARY 7, 2023
FINANCE COMMITTEE MEETING. MOTION PASSED BY VERBAL ROLL CALL. AYES:
PAGE/FITZSIMMONS NOES: NONE. ABSTAIN: NONE.
2. Retiree Healthcare Plan June 30, 2022, Actuarial Valuation and GASBS 75 Disclosure Report
June 30, 2023.
Recommended Action:
Nick Pegueros, Administrative Services Director, gave a brief overview of the GASB 75 Retiree
Healthcare Plan and introduced Doug Pryor from Foster and Foster who provided a presentation
on the GASBS 75 Disclosure Report.
This information will be incorporated into the City’s financial statements for fiscal year ending June
30, 2023.
NO ACTION NECESSARY.
3. Draft Report on Cost of Services (User Fee) Study
Recommended Action:
Receive the Cost of Services (User Fee) Study Report and recommend cost recovery fees of 90%
in Building 75% in Planning.
Nick Pegueros, Administrative Services Director, presented an overview of the Draft Report on the
Cost of Services (User Fee) Study. Courtney Ramos from Matrix Consulting was available to
answer questions and provide clarity on full-cost to build questions from the Committee. A review
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City Council Finance Committee Minutes – March 7, 2023
Page 2
of the 70, 80, and 90% cost of recovery was discussed and cost percentage information,by program,
was also presented.
PAGE/FITZSIMMONS MOVED TO RECEIVE THE COST OF SERVICES (USER FEE STUDY
REPORT) AND RECOMMEND THAT CITY COUNCIL APPROVE OVERALL COST RECOVERY
TARGETS OF 90% IN BUILDING AND 75% IN PLANNING. MOTION PASSED BY VERBAL ROLL
CALL. AYES: PAGE/FITZSIMMONS NOES: NONE. ABSTAIN: NONE.
ADJOURNMENT
PAGE/FITZSIMMONS MOVED TO ADJOURN THE MEETING AT 5:25 PM. MOTION PASSED
BY VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS. NOES: NONE. ABSTAIN: NONE.
Minutes respectfully submitted:
Gina Scott, Administrative Analyst
City of Saratoga
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City Council Finance Committee Minutes – March 29, 2023
Page 1
MINUTES
SARATOGA CITY COUNCIL FINANCE COMMITTEE
SPECIAL MEETING
MARCH 29, 2023
CALL TO ORDER
The meeting was called to order at 3:35 p.m.
ROLL CALL
Present:Mayor Kookie Fitzsimmons, Council Member Page
Also Present:Nick Pegueros, Administrative Services Director
Ann Xu, Accountant II
Gina Scott, Administrative Analyst
REPORT ON POSTING OF THE AGENDA
The Administrative Analyst reported the agenda for this meeting was properly posted on March 28,
2023.
AGENDA ITEMS
1. Professional Auditing Services Review - Review responses to the 2023 Professional Auditing
Services Request for Proposals and select firms to interview with the Finance Committee at their
April 11, 2023 Regular Meeting.
Recommended Action:
Review responses to the 2023 Professional Auditing Services Request for Proposals and select
firms to interview with the Finance Committee at their April 11, 2023 Regular Meeting.
PAGE/FITZSIMMONS MOVED TO RECEIVE THE REQUESTS FOR PROPOSALS AND
DIRECTED STAFF TO RETURN WITH A RECOMMENDED VENDOR ON APRIL 11. MOTION
PASSED BY VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS NOES: NONE. ABSTAIN:
NONE.
ADJOURNMENT
PAGE/FITZSIMMONS MOVED TO ADJOURN THE MEETING AT 3:51 PM. MOTION PASSED
BY VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS. NOES: NONE. ABSTAIN: NONE.
Minutes respectfully submitted:
Gina Scott, Administrative Analyst
City of Saratoga
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Memorandum
DATE: April 11, 2023
TO: Finance Committee
FROM: Nick Pegueros, Administrative Services Director
SUBJECT: Consideration of Moss, Levy &Hartzheim, LLP as finalist for the City’s
independent auditor appointment
City staff transmits this recommendation to the Finance Committee for consideration of a
recommendation to the City Council on selecting an independent auditor for the fiscal year ending June
30, 2023. The City received four responses to its 2023 Audit Services Request for Proposals (RFP), and staff
deemed all proposals complete.
City staff reviewed the proposals and considered the following in its evaluation of the respondents:
Composition, hours, and municipal audit experience of audit team members
Fixed fee services and reimbursable expenses such as travel and printing costs
Interviews of the audit teams
City client reference checks
Considering the information collected above, City staff recommends Moss, Levy, Hartzheim, LLP (MLH) as
the finalist for Finance Committee consideration. MLH is based in Culver City, California, and proposed
the lowest three-year engagement cost of $121,215, including travel, printing, and miscellaneous costs.
Staff based its recommendation on the following:
1.MLH completed a rigorous review of the City’s most recent Annual Comprehensive Financial
Report (ACFR) and identified several opportunities to improve the transparency of the financial
statements.
2.MLH’s references, three existing clients provided by MLH and one client selected randomly by City
staff, all expressed a high satisfaction overall with MLH’s services, including the following topics
of greatest concern to Saratoga’s team:
a.Responsiveness to city concerns during audit fieldwork.
b.Timely completion of project deliverables.
c.Implementation support for new accounting standards.
d.Advice and support throughout the year at no extra cost to the client.
e.Existing client’s desire to extend MLH’s contract beyond the initial term.
MLH will attend the Finance Committee meeting for questions. After considering this item, City staff
requests the Committee’s vote to recommend action by the City Council on April 19.
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Memorandum
ATTACHMENTS
A.Moss, Levy & Hartzheim, LLP Proposal for Professional Auditing Services
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CITY OF SARATOGA
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
For the Fiscal Years Ending June 30, 2023, 2024, and 2025
(Optional Fiscal Years June 30, 2026, and 2027)
=========
Submitted By:
Moss, Levy & Hartzheim, LLP
5800 Hannum Avenue, Suite E
Culver City, California 90230
Phone: (310) 670-2745
Fax: (310) 670-1689
Email: mlhbh@mlhcpas.com
Website: www.mlhcpas.com
Submitted On:
March 9, 2023
Contact Person:
Craig A. Hartzheim, CPA: Partner
Hadley Y. Hui, CPA: Partner
Wilson Lam, CPA, CFE, CGFM: Partner
Bin Zeng: Principal
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CITY OF SARATOGA
AUDIT PROPOSAL
TABLE OF CONTENTS
Transmittal Letter .............................................................................................................. i
Technical Proposal:
Firm Information ................................................................................................................. 1
Approach ............................................................................................................................. 8
Work Plan ........................................................................................................................... 9
Price Proposal ..................................................................................................................... 14
Partner, Supervisory, and Staff Qualifications and Experience .......................................... 14
Contract Termination .......................................................................................................... 14
License to Practice in the State of California ...................................................................... 14
Business License ................................................................................................................. 15
Independence ...................................................................................................................... 15
Standard Agreement ............................................................................................................ 15
References ........................................................................................................................... 15
Supplemental Materials ...................................................................................................... 16
Insurance ............................................................................................................................. 16
Appendices:
Appendix A – Resumes ...................................................................................................... 17
Appendix B – Current and/or Recently Completed Governmental Audits ......................... 23
Appendix C – Segmentation and Budgeted Hours by Segment ......................................... 25
Appendix D – Professional Fees ......................................................................................... 26
Appendix E – License to Practice in California .................................................................. 27
Appendix F – Prepared by client (PBC) List ...................................................................... 28
Appendix G – Insurance ..................................................................................................... 29
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OFFICES: BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS
PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES
CRAIG A HARTZHEIM, CPA 9465 WILSHIRE BOULEVARD, 3RD FLOOR 5800 HANNUM AVENUE, SUITE E
HADLEY Y HUI, CPA BEVERLY HILLS, CA 90212 CULVER CITY, CA 90230
ALEXANDER C HOM, CPA TEL: 310.670.2745 TEL: 310.670.2745
ADAM V GUISE, CPA FAX: 310.670.1689 FAX: 310.670.1689
TRAVIS J HOLE, CPA www.mlhcpas.com www.mlhcpas.com
WILSON LAM, CPA
Mr. Nick Pegueros
Administrative Service Director
City of Saratoga
13777 Fruitvale Ave
Saratoga, CA 95070
Dear Mr. Pegueros,
We are pleased to respond to the Request for Proposal of the City of Saratoga (City) for independent professional
auditing services. We have prepared our proposal to address each of the specifications included in the City’s
Request for Proposal.
Moss, Levy & Hartzheim is an equal opportunity employer.
After sixty-six (66) years in public accounting and forty-six (46) years of performing local governmental and non-
profit audits, it is extremely gratifying to witness the continued growth of Moss, Levy & Hartzheim, LLP. The
firm is a regional full-service public accounting firm with offices in Beverly Hills, Culver City, and Santa Maria.
We and the entire staff are pleased with not only the continuing development of the firm, but also the progress and
economic health of our clients. We understand that governmental accounting is a specialized industry with its own
accounting standards and requirements. This is why we strive to constantly improve the quality of our
professional services. Our degree of dedication, coupled with our ability to inform clients of any new accounting
and auditing issues, is paramount to our success.
We feel that our size is such that we are large enough to provide a broad spectrum of services and experience
backed by an in-house training program, professional development courses, and an extensive professional library,
yet not so large as to become impersonal and rigid. Our informal style allows us to be flexible enough to complete
our engagements in a timely manner that is the most convenient for each client. Also, this style allows us to be
more accessible to our clients when our clients have questions or concerns.
At Moss, Levy & Hartzheim, LLP, our commitment to professionalism and timely completion of
engagements sets us apart as the top choice for this audit engagement. Our experienced and knowledgeable
staff, particularly in governmental audits, will bring a wealth of expertise to the table, ensuring a thorough
and efficient audit. With our track record of delivering results and exceptional client service, you can trust
that choosing our firm will be the right decision for your audit needs.
It is our understanding that we will perform an audit of the City’s basic financial statements and its component
unit (Landscape & Lighting District), in accordance with auditing standards generally accepted in the United
States of America as set forth by the American Institute of Certified Public Accountants (AICPA), and
Government Auditing Standards (GAS), with the objective of expressing an opinion on the fair presentation of the
basic financial statements, which will be in full compliance with Governmental Accounting Standards Board
(GASB) Statement No. 34 and the Government Finance Officers Association’s (GFOA) Blue Book.
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We will express an “in-relation-to” opinion on the government-wide financial statements and the fund financial
statements and supporting schedules based on the auditing procedures applied during the audit of the basic
financial statements We will also perform, if applicable, a single audit on the expenditures of federal grants in
accordance with U.S. Office of Management and Budget (OMB) Title 2 U.S. Code Federal Regulation Part 200,
Uniform Administrative Requirements, Audits of State, Local Governments, and Nonprofit Organizations; and test
compliance with the Single Audit Act as amended in 1996 and applicable laws and regulations, and provide an
“in-relation-to” report on the schedule of federal financial assistance.
In addition to the procedures deemed necessary to express our opinion on the basic financial statements of the
City, we understand that we will also be responsible for performing certain limited procedures involving the
management’s discussion and analysis (MD&A) and the required supplementary information (RSI), as mandated
by auditing standards generally accepted in the United States of America.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States of
America; Government Auditing Standards, issued by the Comptroller General of the United States, including all
applicable auditing standards issued by the American Institute of Certified Public Accountants; the provisions of
the Single Audit Act Amendments of 1996; if applicable; the U.S. Office of Management and Budget (OMB)
Title 2 U.S. Code Federal Regulation Part 200, Uniform Administrative Requirements, Audits of State, Local
Governments, and Nonprofit Organizations; and all relevant Governmental Accounting Standards Board (GASB)
Statements, in accordance with the RFP.
It is our understanding that we will be responsible for issuing the following reports: an independent auditor’s
report on the fair presentation of the City’s basic financial statements, in conformity with accounting principles
generally accepted in the United States of America; an independent auditor’s report on internal control over
financial reporting and on compliance and other matters based on an audit of the basic financial statements of the
City performed in accordance with Government Auditing Standards; an independent auditor’s report on
compliance with requirements that could have a direct and material effect on each major program and on internal
control over compliance in accordance with the U.S. Office of Management and Budget (OMB) Title 2 U.S. Code
Federal Regulation Part 200, Uniform Administrative Requirements, Audits of State, Local Governments, and
Nonprofit Organizations; a single audit report which includes a schedule of expenditures of federal awards,
footnotes, findings and questioned costs including significant deficiencies and material weaknesses, if applicable;
an agreed-upon procedures report in compliance with Proposition 111 Article XIII.B of the California State
Constitution and Government Code 7900 on its appropriations limit (GANN limit calculation); Annual Financial
Transaction Report (AFTR), and a Management Letter, including Statements on Auditing Standards No. 114 and
No. 115.
Optional Auditing Services will be provided to the West Valley Clean Waterpower Authority (Authority) for
auditing services to complete its annual financial reports, the same rates quoted for the City will be utilized for
this engagement.
Our firm is open to performing additional work as long this does not impede our independence; this includes any
agreed-upon procedures requested by the City’s staff.
We will assist the City to submit the City’s Annual Comprehensive Financial Report (ACFR), as requested, for
consideration of recognition for Certificate of Achievement for Excellence in Financial Reporting from the
Government Finance Officers Association (GFOA).
All noncompliance and significant deficiencies found during the audit will be communicated in writing. In the
required reports on compliance and internal controls, we shall communicate any significant deficiencies and
noncompliance issues found during the audit. Significant deficiencies that are also material weaknesses will
be identified as such in the report. Non-reportable conditions discovered will be reported in a separate letter to
management, which will be referred to in the reports on internal controls. All irregularities and illegal acts or
indications of illegal acts of which we become aware of during our audit will be immediately reported, in
writing, to the City Manager, City Attorney, and the Administrative Service Director.
We will ensure the City is implementing all the required Accounting Pronouncements, in accordance with the
Government Accounting Standards. We will be accessible to the City to discuss any issues or assistance
necessary.
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Moss, Levy & Hartzheim, LLP will perform the audit work within the specified time, pending no unforeseen
circumstances which the City imposes on our work.
Our firm has received all amendments and/or addenda to the RFP.
The percentage of the audit work we expect to accomplish in each month is shown below:
June October November Total
35% 50% 15% 100%
This proposal for auditing services is an irrevocable offer until June 10, 2023.
Thank you for your consideration and please do not hesitate to contact the authorized representatives listed below
with any questions, problems, or concerns.
Craig A. Harzheim, CPA - Partner 5800 Hannum Ave. Ste. E
Hadley Y. Hui, CPA - Partner Culver City, CA 90230
Wilson Lam, CPA, CFE, CGFM - Partner (310) 670-2745
Bin Zeng- Principal Mlhbh@mlhcpas.com
Sincerely,
Craig A. Hartzheim, CPA
Partner
Moss, Levy & Hartzheim, LLP is an Equal Opportunity Employer.
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CITY OF SARATOGA
AUDIT PROPOSAL
1
FIRM INFORMATION
Name of Firm: Moss, Levy & Hartzheim, LLP
Address: 5800 Hannum Avenue, Suite E
City, State, Zip: Culver City, California, 90230
Email: mlhbh@mlhcpas.com
Phone: (310) 670-2745
Contact Name: Craig A. Hartzheim, CPA, Partner
Email: Charthezim@mlhcpas.com
It is the firm’s policy to have our partners and managers involved in the managing function of our governmental
audits. Having both the partner and audit manager involved in the engagement allows the City to receive
immediate response to questions about accounting and audit topics, concerns, and findings.
The City will have one partner, one manager, and one supervising accountant assigned to the audits on a full-time
basis. In addition, one accountant will be assigned to the audit on a full-time basis. These employees will not be
changed except due to unforeseen circumstances.
It is expected that Mr. Craig A. Hartzheim, CPA would be the technical (concurring) partner in charge of the
audits of the City. He will be responsible for reviewing the City’s basic financial statements and all other required
statements and reports. He may also be responsible for addressing any City questions or concerns that arise during
the year. He has assisted numerous municipal clients and has prepared award-winning ACFRs. Mr. Craig A.
Hartzheim, CPA has 38 years of experience in the governmental auditing and accounting field and has been with
the firm for 38 years.
Mr. Wilson Lam, CPA, CFE, CGFM will be the engagement partner assigned to the audit. As engagement partner,
he will oversee the day-to-day operations of the audits, review all audit areas, and be on-site for a majority of the
fieldwork. He has assisted many municipal clients and has also prepared numerous award-winning ACFRs. This
enables the partner to become acquainted with the City’s daily operations and key personnel.
Mr. Bin Zeng- Principal, with his strong leadership skills and deep knowledge of auditing procedures, he is the
ideal person to supervise the audit of the City. His commitment to ensuring high-quality results and his ability to
effectively communicate with clients and team members make him the perfect choice for this important role. We
are confident that Mr. Zing expertise and dedication will help ensure the success of this engagement and deliver
meaningful insights to the City.
Mr. Cody Hartzheim will be the senior auditor assigned to the audits. As senior auditor, it will be his
responsibility to oversee the staff accountants, do preliminary reviews of audit sections, and perform more
difficult audit sections.
Mr. David Ortiz will be the computer specialist assigned to the audits, when needed. Mr. Ortiz has extensive
knowledge in auditing EDP functions. Mr. Ortiz may also perform the statistical sampling procedures for the audit
and also document and test the internal control structure of the computer systems.
In addition to the supervisory staff listed above two staff accountants will be assigned to the audits. All staff
accountants have degrees from accredited colleges or universities, have received in-house governmental audit
training, and at present, have at least one year of governmental auditing experience.
All staff accountants will be directly supervised by the supervisory accountant and manager assigned to the audits
at all times. All partners, managers, and staff members have worked on numerous governmental engagements
together, consistently working together will provide the City with a knowledgeable, proficient, and efficient audit
team.
Please see Appendix A – Resumes for each individual’s qualifications and experience.
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CITY OF SARATOGA
AUDIT PROPOSAL
2
FIRM INFORMATION
The firm conducts an annual firm-wide two-day training seminar to update all governmental auditors on new
pronouncements and improved audit techniques. In addition to this firm sponsored seminar, each governmental
auditor attends the annual governmental accounting conference and many other continuing education courses and
is updated on current accounting/auditing issues through our journals and supplements, which we receive on a
regular basis.
The firm will maintain staff continuity on the engagement throughout the term of the contract, barring any
terminations, illnesses, or other unforeseen circumstances (departure from the firm, promotion, or assignment to
another office). At the written request of the City, any Moss, Levy & Hartzheim, LLP employee assigned to the
audits can be removed and replaced by another qualified employee. The City retains the right to approve or reject
replacements.
Moss, Levy & Hartzheim, LLP (MLH, LLP) is a regional firm that performs audits of governmental and non-
profit entities throughout the State of California, from the Oregon border to the Mexico border. For most of our
governmental clients, we also prepare their Annual Comprehensive Financial Report (ACFR). Our firm also
performs review and compilation engagements as well as tax and consulting services to clients throughout the
United States. The firm currently employs twenty-eight (28) professionals, all of whom are trained in
governmental auditing, and has annual gross revenues in excess of $4 million dollars. The firm has three offices in
California: Culver City, Beverly Hills, and Santa Maria.
The audit work will be completed by staff from our Culver City office, located at 5800 Hannum Avenue,
Suite E, Culver City, California 90230.
The Culver City office is currently staffed by six (6) certified public accountants (three partners, two managers,
and one senior accountant). In addition, the Culver City office employs additional managers, senior accountants,
and staff accountants. All certified public accountants, managers, senior accountants, and staff accountants are
part of the governmental and non-profit audit practice.
Our firm offers a comprehensive range of services to meet the needs of our clients, including:
Audits & Attestation:
Governmental (municipalities, school districts, special districts, and single audits)
Non-Profit Organizations
Commercial Business
Compliance Audits
Transient Occupancy Tax
Accounting Services:
Reviews Services
Compilations Services
Management Advisory Services (Non-Audit Clients):
Data Processing Solutions
Business Advisory Services
Pension and Profit-Sharing Plan Consultation
Acquisition and Mergers Support
Income Tax Services:
Preparation and Filling of Tax Returns
Tax Planning and Strategy
Tax Audits and Representation with the Internal Revenue Service and Other Taxing Authorities
14
CITY OF SARATOGA
AUDIT PROPOSAL
3
FIRM INFORMATION (CONTINUED)
Please see Appendix B – Current and/or Completed Governmental Audits for a list of current governmental audits
performed by the firm.
Moss, Levy & Hartzheim, LLP has an extensive background in auditing governmental and non-profit entities with
over forty years of experience in this specialized field. The firm currently performs over thirty (30) city audits,
over seventy-five (75) special district audits, as well as the audit of the County Sanitation Districts of Los Angeles
County (all 25 districts), and twenty-two (22) school district and related audits. We have performed one hundred
(100) plus contracts for the County of Los Angeles, for compliance and fiscal monitoring. Additionally, we are
also on the master lists and have signed master contracts with the County of San Diego and the County of Los
Angeles for Compliance and Financial Audits.
The firm’s recent local similar auditing experience includes the following:
1. CSMFO and GFOA Award Programs
The firm has or is currently auditing the following entities that have participated in and have
received the CSMFO and/or GFOA Award Programs:
City of Arcadia City of Lompoc
City of Bellflower City of Paso Robles
City of Calabasas City of San Gabriel
City of Covina City of Santa Maria
City of Culver City City of Wheatland
City of El Centro City of Westlake Village
City of Eureka County Sanitation Districts of
City of Laguna Hills Los Angeles County
City of La Mirada Encina Wastewater Authority
City of La Palma Los Angeles County Flood Control District
2. Uniform Guidance
We specialize in conducting compliance audits for our municipal and school district clients,
ensuring that they are in compliance with Title 2 U.S Code of Federal Regulation Part 200,
known as the Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform Guidance).
3. Federal and State Grant Programs and the Single Audit
Each of our municipal clients, the majority of our Special District clients, and all of our School
District clients receive Federal and State Grants which require compliance audits, including
American Recovery and Reinvestment Act Grants. Some of our most commonly audited
programs are as follows:
Municipal Major Programs:
ARPA Act (2021)
Cares Act Programs
Community Development Block Grant Funds (CDBG)
Federal Emergency Management Act Funds (FEMA)
Section 8 Housing Assistance Payments
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CITY OF SARATOGA
AUDIT PROPOSAL
4
FIRM INFORMATION (CONTINUED)
The firm’s recent local similar auditing experience includes the following: (Continued)
3. Federal and State Grant Programs and the Single Audit (Continued)
Municipal Major Programs: (Continued)
Transportation Enhancement Act (TEA)
Airport Improvement Program (AIP)
Economic Development Grants (EDA)
Home Investment Partnerships Program (HOME)
Capitalization Grants for State Revolving Funds
Surveys, Studies, Investigations, and Special Purpose Grants
Home Investment Partnerships Program (HOME)
Capitalization Grants for State Revolving Funds
Surveys, Studies, Investigations, and Special Purpose Grants
Highway Planning and Construction
Other Major Programs:
Senior Nutrition Programs
Child Nutrition Programs
Title I
Title VI
Migrant Education
Vocational Education
Special Education
4. Non-profit Agencies
We have audited numerous non-profit agencies and have also prepared their federal and state tax
returns. Currently, our firm performs audit and/or tax preparation services for sixty non-profit
agencies.
5. State Controller’s Report and Street Reports
We have prepared State Controller’s Reports, Transit, and Street Reports for numerous Cities,
Special Districts, and Redevelopment Agencies. We feel this experience allows us to assist our
clients in their preparation of the State Controller’s Reports or prepare the reports as a separate
engagement for our clients.
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5
FIRM INFORMATION (CONTINUED)
The firm’s recent local similar auditing experience includes the following: (Continued)
6. Investment Compliance
In addition to financial statement audits, we also review our clients’ compliance with their
investment policies and examine investment types, including, but not limited to, an evaluation of
maturity dates (short-term or long-term), types and category, and collateral to ensure proper
disclosure of risk in the basic financial statements.
7. Bond Reporting
The firm has assisted several cities in reviewing franchise financial statements as part of
reviewing franchise requests for rate increases. In addition, the firm has performed transient
occupancy audits for ten municipalities and has performed various audits of operating lease
charges (such as use of a sewage treatment plant based on percentage of use by our client and
actual expense as recorded by the treatment plant operator).
8. TOT, Refuse and Other Audits
The firm has recently concluded auditing lease agreements between the County of Los Angeles
and a lessee for a period of 15 years. The firm has assisted several cities in reviewing franchise
financial statements as part of reviewing franchise requests for rate increases. In addition, the firm
has performed transient occupancy audits for ten municipalities and has performed various audits
of operating lease charges (such as use of a sewage treatment plant based on percentage of use by
our client and actual expense as recorded by the treatment plant operator). The firm has also
performed franchise audits of Comcast, AT&T, a local sports park, and others for Municipal
clients who have requested them.
9. School Districts
Currently, our firm audits twenty-two (22) school districts and related schools throughout the
State of California, including three Charter Schools. We have also performed audits of student
bodies for nearly all of our school district clients.
10. Special Districts
Currently, our firm audits in excess of one hundred and seventeen special districts including
sanitary districts, an open space district, the County Sanitation Districts of Los Angeles County
(all 25 Districts), water districts, recreation districts, utility districts, cemetery districts,
community services districts, fire districts, ambulance services districts, airport districts, and
vector control districts.
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6
FIRM INFORMATION (CONTINUED)
The firm’s recent local similar auditing experience includes the following: (Continued)
11. Joint Powers Authorities
We have audited the following Joint Powers Authorities (JPAs):
County of San Diego – Emergency Services Organization
Encina Wastewater Authority
Gateway Cities Council of Governments
North Coast Emergency Medical Services
San Diego Geographic Information System
Santa Barbara County Special Education Local Plan Area Joint Powers Agency
Santa Barbara Water Purveyors Joint Powers Agency
Tracy Area Public Facilities Financing Authority
Transportation Authority of Marin
West Cities Council of Governments
West Contra Costa Integrated Waste Management Authority
In addition to the joint powers authorities listed above, the vast majority of our governmental clients are members
of joint powers authorities. As such, our firm has experience in reviewing JPA statements and disclosing the
appropriate JPA information in the financial statements for each governmental client.
Culver City Office - Current Municipal Audit Clients
City of Alhambra City of El Centro City of Imperial City of Taft
City of Arcadia City of Eureka City of La Mirada City of Westlake Village
City of Artesia City of Healdsburg City of La Palma City of Wheatland
City of Bellflower City of Holtville City of Lindsay City of Willits
City of Duarte City of Hughson City of San Gabriel
Our firm has never been the object of any disciplinary action from any federal or state regulatory body or
professional organization, nor is there any disciplinary action pending.
The engagement team at our firm has extensive experience and a proven track record of successfully completing
single audits of governmental agencies. Our team is well-versed in the various requirements of single audits,
including the Uniform Guidance, the Government Auditing Standards, and the requirements of the Single Audit
Act Amendments of 1996. All team members have a thorough understanding of the Uniform Guidance, the OMB
Circulars, and the A-133 Compliance Supplement. Additionally, the engagement team is highly proficient in the
use of data analytics, which is essential when performing single audits on governmental agencies. The team is
experienced in assessing the internal control framework and assessing the risk of material misstatement of the
financial statements. The team also has the experience necessary to properly identify and test compliance with
applicable laws and regulations. Our team is well-equipped to provide single audit services that meet the highest
professional standards.
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CITY OF SARATOGA
AUDIT PROPOSAL
7
FIRM INFORMATION (CONTINUED)
Moss, Levy & Hartzheim, LLP is the ideal firm to perform this audit. Our commitment to professionalism and
ensuring timely completion of engagements is unmatched. Our staff, especially those with expertise in
governmental audits, bring a wealth of knowledge and experience to the table. Our track record of delivering
results and providing exceptional client service guarantees that selecting our firm for this audit will be the
right decision. We are the best firm for this audit.
CITY OF EUREKA
Audit of basic financial statements, and Single Audit Report, GASB 34
ACFR prepared in accordance with GAAP
Received GFOA Certificate of Achievement in Financial Reporting
2012 to Present
(625 Hours)
Engagement Partner – Craig A. Hartzheim, CPA
Contact: Lane Millar (707) 441-4379
CITY OF EL CENTRO
Audit of basic financial statements, former Redevelopment Agency, and Single Audit Report, GASB 34
ACFR prepared in accordance with GAAP
Received GFOA Certificate of Achievement in Financial Reporting
2012 to Present
(600 Hours)
Engagement Partner – Craig A. Hartzheim, CPA
Contact: Richard Romero (760) 337-4510
CITY OF COVINA
Audit of basic financial statements, preparation of the
Annual Comprehensive Financial Report (ACFR)
(GFOA Certificate), GASB 34, and Single Audit
2014 - 2018
(600 Hours)
Engagement Partner – Craig A. Hartzheim, CPA
Contact: Anita Agramonte – Finance Director (626) 384-5400
CITY OF ARCADIA
Audit of basic financial statements, former Redevelopment Agency, GASB 34, Single Audit
Received GFOA Certificate of Achievement in Financial Reporting
2016 to Present
(400 Hours)
Engagement Partner – Hadley Y. Hui, CPA
Contact: Henry Chen (626) 574-5427
CITY OF WHEATLAND
Audit of basic financial statements, GASB 34
ACFR prepared in accordance with GAAP
Received GFOA Certificate of Achievement in Financial Reporting
2018-Present
(375 Hours)
Engagement Partner – Craig A. Hartzheim, CPA
Contact: April Ouellette (530) 633-2761
Please see Appendix B – Current and/or Completed Governmental Audits for a list of current governmental
audits performed by the firm.
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AUDIT PROPOSAL
8
APPROACH
Overview of the MLH Audit Process
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AUDIT PROPOSAL
9
WORK PLAN
During the first year of the engagement, we will utilize the prior year’s financial statements, the current year’s
budget, and our knowledge of the City’s systems to determine materiality for the different audit sections. Each
year, we will select a sample of transactions to determine to what extent the systems are functioning as described
to us. The extent of our sample size will depend upon our assessment of the internal control structure and the
results of our assessment in accordance with Government Auditing Standards.
Please see Appendix C – Segmentation and Budgeted Hours by Segment for a schedule of the level of staff and
number of hours to be assigned to each segment of the engagement.
The selection of transactions for testing will be made using a combination of random, systematic, and haphazard
sampling techniques. We will identify the strength of the systems upon which we can rely in planning our
substantive tests. Our internal control review will meet all of the following requirements of AICPA: Statement on
Auditing Standards (SAS) No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit,
as amended by SAS No. 78; SAS No. 99, Consideration of Fraud in a Financial Statement Audit; SAS No. 106,
Audit Evidence; SAS No. 107, Audit Risk and Materiality in Conducting an Audit; SAS No. 108, Planning and
Supervision; SAS No. 109, Understanding the Entity and Its Environment and Assessing the Risks of Material
Misstatement; and SAS No. 110, Performing Audit Procedures in Response to Assessed Risks and Evaluating the
Audit Evidence Obtained. SAS. No. 120, Misstatement Due to Fraud.
It is estimated that the sampling size for transaction testing for compliance with systems as actually implemented
would be as follows:
I. Minimum of 40 - 60 disbursement items, including automatic and manual checks and bank debits
II. Minimum of 25 – 40 payroll checks, including direct deposits for payroll testing, depending on the
number of employees
III. Minimum of 40 – 60 receipt items
We have extensive knowledge in auditing computer systems. We have assisted numerous clients with the
implementation of accounting software and database business systems. This assistance has provided our firm with
a thorough background in computer systems with respect to both the software applications aspect and also insight
into auditing such systems. It is our policy to have a computer specialist as part of the audit team and to be used
on an as-needed basis. This individual assists the audit team in documenting the computer system internal control
structure and highlighting strengths and weaknesses relating to the computer structure of the City.
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10
WORK PLAN (CONTINUED)
In addition, all of our staff is equipped with networked laptop computers. These computers are equipped with not
only word processing and spreadsheet capabilities, but also various functional software, such as PPC Audit – e-
Tools, Adobe Acrobat, random sampling software, Lacerte Tax Program, and Easy Accounting Software, which
contain amortization programs and depreciation programs, and other applications as well.
We will perform expectation analytics and preliminary analytical review procedures using the prior fiscal year’s
audited statements and the current fiscal year’s budget. In the preliminary stage, we will adopt ratio analysis
procedures to compare the relationships between account balances and classes of transactions between prior
periods and against budgets and industry statistics. This may include budgets, trial balances, and/or draft financial
statements to help us identify the source of individual fluctuations. We will then adopt trend analysis to compare
current data with prior periods, which is particularly useful for analyzing revenue and expenditures. Any
unexpected trends or deviations will be discussed with relevant City staff to obtain explanations.
As part of our audit procedures, we usually request a working trial balance in excel format (if possible) and access
to view general ledger detail directly from the software system.
We will also review the following documents in order to determine compliance with applicable laws and
regulations:
1. Minutes of the governing body with special attention to: indications of new revenue sources,
including federal and state grants; expense authorizations and related appropriations, including
any special or restrictive provisions; appropriation transfers; authorization for bank or other debt
incurred; awards to successful bidders; authorization for new leases entered into; changes in
licenses, fines, or fees; authorization for fund balance commitments or assignments; and
authorization for significant new employees hired.
2. New agreements and amendments to agreements including, but not limited to grant agreements;
debt and lease agreements; labor agreements; joint venture agreements; disposition and
development agreements; and other miscellaneous agreements.
3. Administrative Code
4. Investment Policy
The main extent of our work would be what is required to enable us to express an opinion on the basic financial
statements in accordance with:
1. AICPA Industry Audit Guide for State and Local Governmental Units
2. AICPA Audit Standards
3. National Committee on Governmental Accounting, Auditing and Financial Reporting (Amended)
Publication
4. Laws of the State of California
5. Government Auditing Standards
6. Requirements of Title 2 U.S Code of Federal Regulation Part 200, Uniform Administrative
Requirements, Cost Principle and Audit Requirements for Federal Awards (Uniform Guidance).
7. GAO Standards for Audit of Governmental Organizations, Activities and Functions, the
Guidelines for Financial and Compliance Audits of Federally Assisted Programs
8. Our firm’s own additional standards and procedures
The audit will be conducted in accordance with auditing standards generally accepted in the United States of
America. The primary purpose of the audit is to express opinions on the basic financial statements, and such an
audit is subject to the inherent risk that material errors or fraud may exist and not be detected by us. If conditions
are discovered which lead to the belief that material errors, defalcations, or fraud may exist, or if any other
circumstances are encountered that require extended services, we will promptly advise the City.
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AUDIT PROPOSAL
11
WORK PLAN (CONTINUED)
The chart below shows some of MLH’s preliminary audit procedures:
Documents Strategy Procedure
None Go over timing and planning with
Management
Set meeting
Letter Discuss any matters with predecessor Standard required communications
Internal control memos Set location site visits Visit sites and go through internal controls, such as
cashiers at parks and recreation, fire, police,
transit, etc..
Policies and procedures Review and start risk assessment Set visitation of locations such as Courts, Parks and
Rec, Transit, etc. Cash and other controls testing
Obtain budget and budget
amendments
Ensure budgetary compliance Analyze budget‐to‐actual variances. Look at capital
projects, status of property tax assessments as
part of the focus
Obtain grant documents, any service
concession agreements
Ensure grant compliance Analyze grants
Obtain policies and procedures Evaluate effectiveness of policies, updates
and relate to key compliance matters
Analyze policies and procedures
Obtain client internal control memos
of client if they exist
Evaluate internal controls
Short interviews of accounting and selected
operating personnel for documentation of
process
Analyze internal controls, including computer
controls
Obtain prior year financials
Determine which items are important for
testing
Set preliminary “materiality” limits
Obtain appropriate schedules Ensure effective procedures Testing of cash receipts, cash disbursements, and
payroll transactions
Obtain Council minutes Ensure knowledge of key government
communication, Look for major agreements
and key decisions
Analyze important events highlighted in Council
meetings, test and inquire as necessary
Draft confirmations – third party
letters for independent verification of
cash, property taxes, attorney, etc. for
client to sign and auditor to mail
Independent verification of selected balances Client to prepare letters and auditor to send
letters
Develop document request list for
client to review and agree upon
To clarify client – auditor requests Meet with client and agree upon document
request list for audit
Preliminary trial balance Ensure preliminary results make sense Perform selected testing on balances such as
receipts, disbursements, and payroll
Obtain updates on retirement plans Discuss GASBS and any changes Audit selected components of any new reports
and changes for compliance
Request screen view access only for
computer analysis
Minimize client interruptions and view
transactions
Scan ledgers and accounts for accounting
propriety
Consider site visitations on areas
where there are significant cash, card,
deposits and billing controls, internet
site controls
Focus on controls where the risk assessment
of material misstatement of cash, card and
internet transactions could occur
Site visitations
Legal bills, key litigation Look for commitments, contingencies, and
disclosure
Discuss with client, prepare attorney letters for
confirmation and response
Obtain long‐term debt Analyze for disclosure and compliance Obtain and prepare long term debt schedules
Commitments and Contingencies Ensure auditing standards are applied for
proper accrual and disclosure
Send legal letters, talk with client, review
disclosures
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AUDIT PROPOSAL
12
WORK PLAN (CONTINUED)
If convenient for the City’s staff, the approximate target dates for the fiscal year 2023 audit would be as follows:
1. Entrance Conference with the City- No later than May 1st.
2. Written audit plan and list of schedules for fieldwork – No later than May 1st.
3. Entrance conference and interim fieldwork – Week of June 6th.
4. Progress conference with the City – Monthly Starting August 7th.
5. Entrance conference and year-end fieldwork – Week of October 16th.
6. Exit conference – No later than October 20th..
7. Draft management letter, financial statements, and other audit reports –
No later than November 6th.
8. Final management letter, financial statements, and other audit reports –
No later than November 27th.
(Other reports will be prepared in accordance with RFP deadlines)
9. Presentation to the Board- Open
On May 1st, we will contact the Administrative Service Director to provide our detailed audit plan for the audit
fieldwork. We will also discuss with the Administrative Service Director any matters that may impact our audit
procedures or your financial reporting. Before the year-end fieldwork, we will discuss with the City any
assistance the City may need with the year-end closing.
Our audit would begin when it is convenient for the City’s staff. We estimate that in the first week of June
(tentatively), we will perform interim work. Each year, the partner or manager of the firm will contact the
Administrative Service Director. The purpose of this contact will be to discuss the scope and timing of the annual
audit, to review any accounting issues known at that time, and to address any of the City’s personnel concerns
about the impending audit.
We will schedule approximately one (1) to two (2) weeks of interim work for the first year; remote work will be
performed for this engagement. During the first year, we will prepare narrative flow charts and other
documentation of the internal control structure and of the major systems, such as revenue and cash receipts,
purchasing and cash disbursements, payroll and personnel, inventory, property, and equipment, grant compliance,
investment activities, and the budget process. We will gain this information through discussions with appropriate
City staff and the review of available documented policies, organizational charts, manuals, programs, and
procedures. Once we obtain this information, we will evaluate the systems of internal controls and revise our
standard governmental audit programs. We will also meet with two City Council members during our interim
fieldwork, to discuss our audit procedures and to ascertain if there are any areas of concern.
Our year-end fieldwork would begin on October 16th. The year-end audit work would begin with an analytical
review of all significant balance sheet and revenues and expenditures/expense accounts for each fund, which
includes substantive tests on all balance sheet accounts. Analytical procedures will be used to supplement the
substantive tests, not supplant them. We will perform analytical procedures during interim and year-end
fieldwork on all balance sheet and revenue and expense/expenditure accounts.
The primary objective of the year-end audit work is to audit the final numbers that will appear in the City’s basic
financial statements. Our fieldwork would also consist of procedures required under SAS No.99 Consideration of
Fraud in a Financial Statement Audit, and SAS. No. 120, Misstatement Due to Fraud.
We will perform procedures such as:
(a) Confirmations by positive and negative circularization including but not limited to all cash and
investment accounts; selected receivable and revenue balances; all bonds, loans, notes payable,
and capital leases; all notes receivable; all insurance carriers; all legal firms employed on the
City’s business; and other miscellaneous confirmations deemed necessary
(b) Physical verifications and observations
(c) Analysis and review of evidential material
(d) Interviews and investigative efforts
(e) Electronic data processing testing for computer and software reliability
(f) Numerous other procedures
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CITY OF SARATOGA
AUDIT PROPOSAL
13
WORK PLAN (CONTINUED)
During the entire engagement, our audit team will be determining whether the audit is in compliance with
Uniform Guidance, and if this is required through review of the City Council minutes, examination of the general
ledger, and discussion with finance personnel. If a compliance audit is required, we would perform tests of:
specific requirements; claims for advances and reimbursements; and amounts claimed or used for matching in
compliance with the Single Audit Act. The compliance audit will be conducted in accordance with auditing
standards generally accepted in the United States of America, the GAO Standards for Audits of Governmental
Organizations, Programs, Activities, and Functions, and the GAO Guidelines for Financial and Compliance
Audits of Federally Assisted Programs.
The year-end fieldwork should be completed no later than October 20th.
The chart below shows some of MLH’s final audit procedures:
Document Strategy Procedure
None Set Timing Entrance conference
Obtain updated general ledger Ensure proper closing of books Analyze records and update analytical
procedures
Obtain internal control memos if there are
any changes‐ all key locations
Re‐evaluate internal controls. Assess risk and dollar
significance, brainstorm, look at IT controls
Update understanding of internal
controls and document key changes
Obtain prior GFOA ACFR comments Ensure improvement in financial reporting Implement significant changes in
financial reporting methods
Obtain and further agree upon audit
schedules as agreed upon in the contract
and RFP
To commence audit properly on final numbers Apply auditing procedures
Obtain/prior year GASB 34 conversion
entries /prepare GASB 34 Entries
Ensure that all GASB 34 conversion entries are
proper
Work on current year GASB 34
presentations
Analyze capital asset ledgers and Lease
Contracts
Review or updates from preliminary and analyze
for impairment
Obtain capital asset documents and
update for impairments
Contracts and agreements Analyze credit agreements Test schedules of credit agreements
Journal entries and post‐closing Look for proper accruals and revenue payments Look at selected billings and revenue
agreements
Risk Management Determine coverage Confirm balances and analyze for
proper accruals as necessary
Cost allocations Internal service allocation propriety Discuss and analyze internal service cost
allocations
Allocation agreements Ensure agreement compliance Analyze allocations as necessary from
client calculations and documents
Obtain OPEB and PERS documents Review for any needed updates, GASB 68 and 75 Read documents and necessary update
Bond agreements Bond compliance Test bond compliance and obtain bond
ratings
Contributions Compliance Analyze significant contributions for
compliance
Third party letters Independent verification of accounts Match to year‐end books and records
and reconcile to accounts
None Ensure proper audit process Hold timely status meetings with the
client
Adjusting entries, and any possible
management points
Obtain client agreement Post as necessary with client
None Compliance with contract and governance Attend finance and board meetings
MD&A, prepare financials, reports and
supplementary information
Ensure documents match, are consistent and
appropriately completed
Read MD&A, prepare financials, reports
and read supplementary information
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CITY OF SARATOGA
AUDIT PROPOSAL
14
WORK PLAN (CONTINUED)
Our firm utilizes a comprehensive library of current American Institute of Certified Public Accountants (AICPA),
Government Finance Officers Association (GFOA), and Governmental Accounting Standards Board (GASB)
publications and pronouncements when preparing and reviewing the financial statements of our governmental
clients. Additionally, the Governmental Accounting, Auditing and Financial Reporting (GAAFR), commonly
referred to as the "Blue Book", issued by the GFOA is often employed as a supplementary tool in our audit
process.
We will issue all of our final audit reports no later than November 27th.. All our reports are prepared by in-house
auditors (usually the partner or manager) who have worked on the City’s engagement, so they are familiar with
the City and the way in which it operates. Our draft reports go through four reviews, including one by a senior
auditor for calculations and footing, one by the technical partner, one by another senior or staff auditor for
calculations and footing, and a final review by the engagement partner.
In order to assist our clients in improving their internal control and accounting procedures, we provide
management letters as part of our audit engagements. These letters contain any observations or recommendations
that we feel should be brought to management's attention. Our approach to the management letter is collaborative
and constructive, with the aim of helping, not criticizing. Before issuing the final management letter, we present a
draft to management for open discussion.
The work papers generated during this engagement are the property of Moss, Levy & Hartzheim, LLP and contain
confidential information. In the case of a request from a Cognizant Agency, as authorized by law or regulation,
we may make specific work papers available under the supervision of Moss, Levy & Hartzheim, LLP's staff. On
demand, we can also provide photocopies of selected work papers to the Cognizant Agency. It is possible that the
Cognizant Agency may choose to share the photocopies or information contained therein with other
organizations, including other government agencies.
We understand the importance of minimizing time wasted on City staff or in repetitive requests. In order to do
this, we will utilize a list of questions that we will ask once in order to avoid making multiple requests. This list of
questions will be provided to the City's liaison, and we will have one person in charge of making all requests and
petitions. We believe that this approach will help to streamline the process and ensure that no time is wasted. We
look forward to working with the City's liaison to ensure that the audit is completed in a timely and efficient
manner.
PRICE PROPOSAL
Please see Appendix D – Professional Fees.
PARTNER, SUPERVISORY, AND STAFF QUALIFICATIONS AND EXPERIENCE
Please see our section Firm Information on page 1, Appendix A-Resumes of our audit team members.
CONTRACT TERMINATION
No contract or engagement has been cancelled or terminated in the past by any of our clients.
LICENSE TO PRACTICE IN THE STATE OF CALIFORNIA
MLH, LLP is a properly licensed certified public accounting firm in the State of California. All certified public
accountants engaged in the audit of the City are licensed to practice in the State of California and have received at
least the minimum number of governmental continuing professional education hours required by the State Board
of Accountancy and Government Auditing Standards to perform governmental audits.
Please see Appendix E – License to Practice in California.
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CITY OF SARATOGA
AUDIT PROPOSAL
15
BUSINESS LICENSE
Our firm will obtain a business license once we are selected to perform this engagement.
INDEPENDENCE
We are independent of the City of Saratoga and its component unit, defined by auditing standards generally
accepted in the United States of America, the U.S. General Accounting Office’s Government Auditing Standards,
the U.S. Securities and Exchange Commission, and all other authoritative bodies with standard or rule making
authority over the auditing profession.
Our firm has never provided any professional services for the City or any of its components unit.
The firm uses checklists and questionnaires to determine that staff members are independent of the client being
audited. We also have each staff member sign a personal independence declaration prior to commencing work on
an audit client. The partner in charge of the audit reviews all independence work papers prior to staffing each
audit.
STANDARD AGREEMENT
Per our review of the standard agreement provided in the RFP, no revisions were noted. Our firm will provide and
engagement letter for this engagement also.
REFERENCES
Governmental Agency
Total Staff
Hours Scope of Work
Fiscal
Years
Audited
Contact and Telephone
number
City of Bellflower: 16600 Civic Center Dr. Bellflower, CA
Basic Financial Statements/ 655 Financial Audit, Single Audit, 2002-
Audit Partner - Craig A. Hartzheim, C.P.A GFOA Certification
Present
City of Covina: 125 E. College St, Covina, CA 91723
Basic Financial Statements/ 625 2014-
2018
Audit Partner - Craig A. Hartzheim, C.P.A
City of La Mirada: 13700 La Mirada Blvd. La Mirada, CA 90638
Basic Financial Statements/ 525 2016-
Present
Audit Partner - Craig A. Hartzheim, C.P.A
City of Arcadia: 240 W. Huntington Dr, Arcadia, CA 91007
Basic Financial Statements/ 500
2015-Mr. Henry Chen
Present Fiscal Services Manager
(626) 574-5427
Audit Partner - Hadley Y. Hui, C.P.A
City of San Gabriel: 425 Mission Dr. San Gabriel, CA 91766
Basic Financial Statements/ 475
2020-
Present
Audit Partner - Craig A. Hartzheim, C.P.A
Annual Comprehensive Financial Report
prepared in accordance with GAAP
Annual Comprehensive Financial Report
prepared in accordance with GAAP
Financial Audit, Single Audit,
GASB Pronouncements
GFOA Certification
Annual Comprehensive Financial Report
prepared in accordance with GAAP
GFOA CERTIFICATION
Annual Comprehensive Financial Report
prepared in accordance with GAAP
State Controller's Report, and
GANN Limit , GASB Pronouncements
2012
2017-
Annual Comprehensive Financial Report
prepared in accordance with GAAP
Financial Audit, Single Audit,
GASB Pronouncements
GFOA Certification
Mr. Tae Rhee
Finance Director
(562) 804-1424
Ms. Linda Tang
Assistant Finance Director
(626) 458-2830
Financial Audit, Single Audit,
GASB Pronouncements
GFOA Certification
Ms.Anita Agramonte
Finance Director
(626) 384-5400
Ms. Melissa Pascual
Finance Manager
(562) 943-0131
Financial Audit, Single Audit,
GASB Pronouncements
GFOA Certification
Moss, Levy & Hartzheim LLP is listed in the Master list of firms for the Counties of Los Angeles and
San Diego, currently we audit various grants and component units of these counties.
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CITY OF SARATOGA
AUDIT PROPOSAL
16
SUPPLEMENTAL MATERIALS
Rates for Professional Additional Services
Our firm is always willing to perform additional work, as long this does not impede our independence as the
City’s Auditors. No work will be performed without the City’s approval.
Classification 2022-23 2023-24 2024-25 2025-26 2026-27
Partner 180$ 181$ 182$ 183$ 184$
Supervisor 140$ 141$ 142$ 143$ 144$
In-Charge (Senior) 120$ 121$ 122$ 123$ 124$
Staff 95$ 96$ 97$ 98$ 99$
Clerical 65$ 66$ 67$ 68$ 69$
Quoted Hourly Rates
Fiscal Years
Please see Appendix F – Prepared by Clients ( PBC) List.
INSURANCE
Our firm will comply with all of the insurance requirements required for this engagement.
Please refer to Appendix G - for our current Insurance coverage.
Under penalties of perjury, I declare that I am an authorized signer and that there are no and have never been any
financial interests between any officials or employees of the City of Saratoga, and Moss, Levy & Hartzheim, LLP.
Respectfully submitted,
Craig A. Hartzheim, CPA
Partner
Moss, Levy & Hartzheim, LLP is an Equal Opportunity Employer
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CITY OF SARATOGA
APPENDIX A – RESUMES
17
Craig A. Hartzheim, CPA – (Technical Partner)
California licensed CPA. with 38 years of audit experience with governmental, non-profit, and
commercial entities
Engagement partner for governmental and non-profit audits (Culver City office) including 25
municipal audits, 40 special district audits (including Los Angeles County Flood Control District
and the County Sanitation Districts of Los Angeles County), and 12 school districts and related
audits
Has assisted governmental clients with year-end closings, key position interviews, preparation of
award winning Annual Comprehensive Financial Reports, and preparation of State Controller’s
Reports
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022, 2021, and 2020 Governmental Accounting Conference
2022, 2021, and 2020 School District Conference
2022, 2021, and 2020, GAAS Update
Single Audits of Governmental Entities
Preparing Governmental Financial Statements
Yellow Book, Government Auditing Standards
GAAS Guide
Other Comprehensive Basis of Accounting (OCBOA) Statements
Audit Standards update
Fraud in Audits
Auditing update
Bachelor of Science degree in Accounting from Marquette University, was conferred in
1982
Member of the following:
American Institute of Certified Public Accountants
California Society of Certified Public Accountants
Knowledgeable in all areas of tax law including non-profit and payroll tax issues
29
CITY OF SARATOGA
APPENDIX A – RESUMES
18
Hadley Y. Hui, CPA – Partner
California licensed CPA with 24 years of audit experience with governmental, non-profit, and
commercial entities
Partner in charge of 20 municipal audits, 26 special districts audits, 8 special audits for the
County of San Diego, and 20 school districts and related audits
Partner for the CSS and DPSS Monitoring Projects for Los Angeles County
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022, 2021, and 2020 Governmental Accounting Conference
2022, 2021, and 2020 School District Conference
2022, 2021, and 2020, GAAS Update
Yellow Book, Governmental Auditing Standards
Fraud in Audits
GAAS Guide
Risk-Based Auditing Part 1, Part 2
Accounting and Auditing Update
Guide to Auditing Control Course 1, Course 2
Extensive knowledge of database systems, networking, and various accounting software
Bachelor of Arts degree in Economics with a minor in Accounting from University of California
– Los Angeles, was conferred in 1997
Member of the following:
American Institute of Certified Public Accountants
California Society of Certified Public Accountants
Knowledgeable in all areas of tax law including non-profit and payroll tax issues
30
CITY OF SARATOGA
APPENDIX A – RESUMES
19
Wilson Lam, CPA, CFE, CGFM – Partner
California licensed CPA with 14 years of audit experience with governmental and commercial
entities
Manager for 13 municipal audits, 4 special district audits, and 9 school districts audits
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022, 2021, and 2020 Governmental Accounting Conference
2022, 2021, and 2020 Single Audit Compliance
GASB 34 Training Seminars
Internal Control and Fraud in Governmental Engagements
Government Auditing Standards – Yellow Book
Advanced Fraud Techniques
Risk-Based Auditing Part 1, Part 2
2019 Accounting and Auditing Update
Guide to Auditing Control Course 1, Course 2
Bachelor of Arts in Accounting and Finance from California State University Fullerton, conferred
in 2005
Bin Zeng – Principal (Manager)
Manager with 14 years of audit experience with governmental and commercial entities
Manager for 12 municipal audits and 14 special district audits
Has met or exceed all continuing education requirements including recent courses in the
following:
2022, 2021, and 2020 Governmental Accounting Conference
2022, 2021, and 2020 Single Audit Compliance
2022, 2021, and 2020, Accounting and Auditing Standards Update: Risk
Assessment Standards
GASB 34 Training Seminars
2022 Advanced Audit Standards Workshops: Understanding Risk Assessment
2022, 2021, and 2020, GAAS Update
Auditors’ Responsibilities for Detection of Fraud
Internal Control and Fraud in Governmental Engagements
Governmental Auditing Standards - Yellow Book
Implementing SAS 112 & 114
Advanced Fraud Techniques
Grants Management
Bachelor of Arts Degree in Business Economics from the University of California – Los Angeles,
conferred in 2007
31
CITY OF SARATOGA
APPENDIX A – RESUMES
20
Terry Robertson, CPA – Manager
Audit Manager for the City of Los Angeles
Manager with 19 years of audit experience with governmental, non-profit, and commercial
entities
Manager for 12 municipal audits, 8 joint power authority audits, and 21 special district audits
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022, 2021, and 2020 Governmental Accounting Conference
2022, 2021, and 2020 Single Audit Compliance
2022, 2021, and 2020, GAAS Update
GASB 34 Training Seminars
Auditors’ Responsibilities for Detection of Fraud
Internal Control and Fraud in Governmental Engagements
Government Auditing Standards – Yellow Book
Implementing SAS 112 & 114
Advanced Fraud Techniques
Grants Management
Bachelor of Science degree in Accounting from University of Quinnipiac, was conferred in 1998
Cody Hartzheim – Senior Accountant
Senior Accountant with 8 years of audit experience with governmental, non-profit, and
commercial entities
Senior Accountant for 16 municipal audits and 6 school district audits
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022, 2021, and 2020 Governmental Accounting Conference
Governmental Auditing Standards – Yellow Book
2022 Accounting and Auditing Standards Update: Risk Assessment Standards
2022, 2021, and 2020 Single Audit Compliance
GASB 34 Training Seminars
Bachelor of Science in Accounting and Finance from Marquette University, conferred in 2014
32
CITY OF SARATOGA
APPENDIX A – RESUMES
21
Xi Long – Staff Accountant
Accountant with 1 year of audit experience with governmental and commercial entities
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022 Governmental Accounting Conference
2022 School District Conference
2022 Sing Audit Compliance
Government Auditing Standards – Yellow Book
Bachelor of Arts in Business Economics with emphasis in Accounting from University of
California, Los Angeles, was conferred in 2022
Nicholas Fuchs – Staff Accountant
Accountant with 1 year of audit experience with governmental and commercial entities
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022 Governmental Accounting Conference
2022 Single Audit Compliance
Government Auditing Standards – Yellow Book
Bachelor of Science in Business Administration with emphasis in Accounting from California
State University – Dominguez Hills, was conferred in 2021
Don Mojica – Staff Accountant
Accountant with 1 year of audit experience with governmental and commercial entities
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022 Governmental Accounting Conference
2022 School District Conference
2022 Single Audit Compliance
Government Auditing Standards – Yellow Book
Bachelor of Arts in Economics with emphasis in Accounting from University of California,
Riverside, was conferred in 2022
33
CITY OF SARATOGA
APPENDIX A – RESUMES
22
Nickolas Hartzheim – Staff Accountant
Staff Accountant with 2 years of audit experience with governmental and special districts
Staff Accountant for 6 municipal audits, non-profit, and 4 special district audits
Has met or exceeded all continuing education requirements including recent courses in the
following:
2022, 2021, and 2020 Governmental Accounting Conference
2022 and 2021 GAAS Update
Auditors’ Responsibilities for Detection of Fraud
Government Auditing Standards (GAO) Updates and Changes
Internal Control and Fraud in Governmental Engagements
Government Auditing Standards – Yellow Book
Implementing SAS 112 & 114
Bachelor of Science from San Jose University, was conferred in 2018
David Ortiz – Computer Specialist
Auditor with 22 years of audit experience with governmental and commercial entities
Computer specialist – with emphasis in fund accounting software
Extensive knowledge of database systems, networking, and accounting software
Bachelor of Science degree in Business Administration with an emphasis in Accounting from
California Polytechnic State University San Luis Obispo, was conferred in 1995
34
CITY OF SARATOGA
APPENDIX B – CURRENT AND/OR COMPLETED GOVERNMENTAL AUDITS
23
CITIES AND REDEVELOPMENT AGENCIES SCHOOL DISTRICTS
Alhambra, CA Acton-Agua Dulce Unified School District
Arcadia, CA Ballard School District
Arroyo Grande, CA Bellflower Unified School District
Artesia, CA Beverly Hills Unified School District
Atascadero, CA Blochman Union School District
Bellflower, CA Bradley Elementary School District
Buellton, CA Buellton Union School District
Brawley, CA Calaveras County Schools
Calabasas, CA Calexico Unified School District
Carmel-by-the-Sea, CA Calipatria Unified School District
Covina, CA Carpinteria Unified School District
Culver City, CA Casmalia School District
Dinuba, CA Castaic Union School District
Duarte, CA Cayucos Elementary School District
El Centro, CA Coast Unified School District
Eureka, CA Cold Springs School District
Greenfield, CA College Elementary School District
Grover Beach, CA Eastside School District
Healdsburg, CA El Segundo Unified School District
Holtville, CA Garvey School District
Hughson, CA Goleta Union School District
Imperial, CA Graves School District
Indio, CA Heber School District
La Cañada Flintridge, CA Hughes-Elizabeth Lakes Union School District
La Habra Heights, CA Keppel Union School District
La Mirada, CA Lancaster School District
La Palma, CA Magnolia Union School District
Laguna Hills, CA Manhattan Beach Unified School District
Lindsay, CA Mark Twain Union Elementary School District
Los Alamitos, CA Meadows Union School District
Morgan Hill, CA Mission School District
Ojai, CA Monrovia Unified School District
Paso Robles, CA Montecito Union School District
San Gabriel, CA Mulberry School District
Santa Maria, CA Novato Unified School District
Taft, CA Orcutt Union School District
Watsonville, CA Pacific Unified School District
Westlake Village, CA Palmdale Sc hool District
Wheatland, CA Pleasant Valley Union School District
Willits, CA Rosemead School District
Yuba City, CA San Ardo Elementary School District
San Lucas School District
OTHER SCHOOL ENTITIES San Miguel Joint Union School District
Academia Semillas del Pueblo Charter School Santa Maria Joint Union High School District
Albert Einstein Academy Santa Monica-Malibu Unified School District
Antelope Valley Schools Transportation District Shandon Unified School District
Bright Star Secondary Charter Academy Solvang Elementary School District
East Bay Regional Occupational Program Temple City Unified School District
Garr Academy of Mathematics and Entrepreneurial Studies Torrance Unified School District
Pacoima Charter School Vallecito Union School District
Santa Ynez Valley Charter School Westmoreland Elementary School District
The Accelerated Schools Wilsona School District
Southern California Regional Occupational Center PUBLIC FINANCING AUTHORITIES
Stella Middle Charter Academy The majority of our Municipalities issue debt and do
Tri-Valley Regional Occupational Program so through an established Public Financing Authority.
35
CITY OF SARATOGA
APPENDIX B – CURRENT AND/OR COMPLETED GOVERNMENTAL AUDITS
24
COUNTIES FIRE PROTECTION DISTRICTS
Los Angeles County, CA (Master List) Cayucos Fire Protection District, CA
San Diego County, CA (Master List) Lakeport Fire Protection District, CA
Orcutt Fire Protection District, CA
SANITATION DISTRICTS
Carpinteria Sanitation District, CA OTHER DISTRICTS
Cayucos Sanitation District, CA Beach Cities Health District
County Sanitation Districts of Los Angeles County, CA County of San Diego Emergency Services Organization
- All 25 Districts County of San Diego First 5 Commission
Encina Wastewater Authority, CA County of San Diego In-Home Supportive Services
Montecito Sanitation District, CA Public Authority
Orange County Sanitation District, CA - Internal Audits County of San Diego Health and Human Services Agency
Ross Valley Sanitary District, CA Child Development Program Grant
Triunfo Sanitation District, CA County of San Diego MIOCR Grant
County of San Diego RLETC Grant
UTILITY DISTRICTS County of Los Angeles Delta Sigma Theta, Head Start
Georgetown Divide Public Utility District Program, Inc.
County of San Diego DA Office of Auto Ins. Fraud
WATER/IRRIGATION DISTRICTS Grant, Urban Auto Fraud Grant, WC Ins Fraud Grant
Aldercroft Heights County Water District, CA Los Angeles County Flood Control District
Foothill Municipal Water District, CA Marin/Sonoma Mosquito and Vector Control District
Main San Gabriel Basin Watermaster, CA Peninsula Health Care District
Marina Water District, CA San Diego Geographic Information Source
North Marin Water District, CA Tracy Area Public Facilties Financing Agency
Sweetwater Springs Water District, CA West Contra Costa Integrated Waste Management
Valley County Water District, CA Authority
Valley of the Moon Water District, CA
TRANSPORTATION DEVELOPMENT ACT
AMBULANCE SERVICES DISTRICT Arroyo Grande, CA
Cambria Community Healthcare District Brawley, CA
North Coast Emergency Medical Services Calexico, CA
El Centro, CA
CEMETERY DISTRICTS Grover Beach, CA
Arroyo Grande Cemetery District, CA Holtville, CA
Atascadero Cemetery District, CA Paso Robles, CA
Gridley-Biggs Cemetery District, CA San Luis Obispo County and Cities Area Planning
San Miguel Cemetery District, CA Council:
Santa Maria Cemetery District, CA Local Transportation Fund
State Transit Assistance Fund
COMMUNITY SERVICES DISTRICTS South County Area Transit, CA
Cambria Community Services District, CA South County/San Luis Obispo Transit, CA
Cuyama Community Services District, CA Transportation Agency for Monterey County, CA
Groveland Community Services District, CA Transportation Authority of Marin
Heritage Ranch Community Services District, CA Association of Monterey Bay Area Governments
Los Alamos Community Services District, CA Santa Cruz Regional Transportation Commission
Nice Community Services District, CA
Rancho Murieta Community Services District, CA
Santa Ynez Community Services District, CA TRANSIENT OCCUPANCY TAX AUDITS
Vandenberg Village Community Services District, CA Represented the following municipalities and/or counties
in the audit of the hotel "bed tax" records:
RECREATION AND PARK DISTRICTS
Conejo Recreation and Park District, CA Arroyo Grande, CA Pismo Beach, CA
Isla Vista Recreation and Park District, CA Bellflower, CA Santa Maria, CA
Mountains Recreation and Conservation Authority, CA Bishop, CA South Lake Tahoe, CA
Rancho Simi Recreation and Park District, CA Calexico, CA Whittier, CA
Hayward Recreation and Park District, CA Carmel, CA Ojai, CA
BUILDING AUTHORITY
County of San Diego Regional Building Authority, CA
36
CITY OF SARATOGA
APPENDIX C – SEGMENTATION AND BUDGETED HOURS BY SEGMENT
25
AUDIT SEGMENTS Clerical Staff Senior Manager Partner Total
Planning 2 2 2 1 7
Risk Assessment 1 2 2 2 7
Audit Conferences 426
(Preliminary, Progress,
and Exit)
Correspondence 5 2 7
Review/Documentation of
Internal Controls:
Documentation of systems 5 10 5 20
Testing of systems 5 10 5 20
Compliance Testing 5 4 2 11
Year End Balances Testing 40 25 5 2 72
Revenue and Expense
Analysis (Analytical Procedures) 15 15 25 3 58
Preparation, Review, and Findings 5 15 22 35 45 122
GRAND TOTAL*10 90 90 85 55 330
* - Includes all services required in the RFP, some may not be applicable every fiscal year.
Estimated Hours
37
CITY OF SARATOGA
APPENDIX D – PROFESSIONAL FEES
26
CITY OF SARATOGA
Classification
Quoted
Rates
Estimated
Hours 2022-23 2023-24 2024-25 2025-26 2026-27
Partner 180$ 55 9,900$ 9,955$ 10,010$ 10,065$ 10,120$
Manager 140 85 11,900$ 11,985$ 12,070$ 12,155$ 12,240$
Senior 120 90 10,800$ 10,890$ 10,980$ 11,070$ 11,160$
Staff 95 90 8,550$ 8,640$ 8,730$ 8,820$ 8,910$
Clerical 65 10 650$ 660$ 670$ 680$ 690$
Grand Totals 330 41,800$ 42,130$ 42,460$ 42,790$ 43,120$
Discount (5,060)$ (5,235)$ (5,410)$ (5,585)$ (5,760)$ .
Total * 36,740$ 36,895$ 37,050$ 37,205$ 37,360$
* This total does not include Single Audit.
Fiscal Years
2022-2023 2023-2024 2024-2025 2025-26 2026-27
27,500$ 27,605$ 27,710$ 27,815$ 27,920$
ACFR Preparation 4,500$ 4,515$ 4,530$ 4,545$ 4,560$
TDA Report 1,495$ 1,510$ 1,525$ 1,540$ 1,555$
AFTR 2,750$ 2,765$ 2,780$ 2,795$ 2,810$
495$ 500$ 505$ 510$ 515$
36,740$ 36,895$ 37,050$ 37,205$ 37,360$
Authority Audit 5,495$ 5,510$ 5,525$ 5,540$ 5,555$
Single Audit** 3,495$ 3,510$ 3,525$ 3,540$ 3,555$
Optional Services, and/or If Applicable
**Single Audit may not occur in each year of the contract term - subject to City's expending of current federal awards granted and any new
additional awards received and expended in future years. We have priced one major program to test, an additional program will be $2,500.
Fiscal Years
Optional
Optional
City Audit
Classification
GANN Limit
Grand Totals
Discount
Moss, Levy & Hartzheim, LLP has provided a more favorable pricing for this engagement. Therefore, we are
reducing our blended hourly rate and maximum price.
Manner of Payment
Progress payments will be made based on the number of hours worked or completed during the course of the
engagement and out-of-pocket expenses incurred in accordance with the firm’s proposal Interim billings shall
cover a period of not less than one calendar month.
38
CITY OF SARATOGA
APPENDIX E – LICENSE TO PRACTICE IN CALIFORNIA
27
Moss, Levy & Harzheim, LLP
39
CITY OF SARATOGA
APPENDIX F- PREPARED BY THE CLIENT (PBC) LIST
28
1 Check registers for all accounts for current fiscal year (7/1 to 6/30)
2 List of awarded bid contracts for FY22-23
3 Current employee list - full name, position, salary information
4 Payroll register for the month of December and June
5 Any MOU and salary schedules - effective during current fiscal year
6 941 payroll forms and reconciliation between 941 forms and payroll GL expenditures
7 Fee schedules FY22-23
8 Cash receipt journal (7/1 - 6/30)
9 Business license cash receipt journal and web transaction report (7/1 - present)
10 Permits report (7/1 - present)
11 Utility billing register - October and April
12 Park & Rec. transaction detail report (7/1 - present)
13 Bank statements for current fiscal year
14 Deposit log for current fiscal year
15 Monthly reporting package and GL details - (7/1 - 6/30)
16 Chart of Accounts, in excel
17 Preliminary trial balance showing current year vs. prior year and budget to actual of current year
18 Preliminary detail general ledger, in excel or pdf
19 Final trial balance, in excel
21 Final detail general ledger, in excel or pdf
21 Gann/Appropriations Limit
22 All bank account statements and reconciliations - July 2022 and June 2023
23 All investments and reconciliations - June 30, 2023
24 Investment report with FMV - June 30, 2023 and support docs.
25 Cash held with fiscal agent statements, if applicable
26 LAIF information and statements, if applicable
27 Cash receipts for periods subsequent to year end
28 Accounts receivable list at year end per fund and supporting docs.
29 Utility billing accrual schedule
30 AR aging report - 6/30/2023
31 Inventory valuation report 6/30/2023- for all locations
32 Loan/notes receivable documents
33 Lead schedule of prepaid costs and other assets with supporting documentation
34 Lead schedule of changes in capital assets and accumulated depreciation - by type
35
Combining schedules of changes in capital assets and accumulated depreciation - by type
(land, CIP, WIP, building, etc.) with reconciliations to capital outlay and other supporting
detail for additions and deletions
36 Capital Asset Disposals Schedule and its backups (invoices and cancelled checks)
37 Capital Asset Depreciation schedule
38 Check registers for all accounts for subsequent period (July - Sept)
39 Accounts payable list at fiscal year-end per fund
40 Supporting schedule of retentions payable per fund
41 Payroll accrual calculations at fiscal year-end
42 Supporting schedule of accrued payroll and benefits
43 Supporting schedule of unearned revenue at fiscal year end
44 Supporting schedule of deposits payable at fiscal year-end
45 Supporting schedule of miscellaneous liabilities
46 New bond/lease/loans documents
47 Bonds Payable schedule at fiscal year end
48 Premium/discount amortization schedules
49 Supporting schedule of interest payable
50 Supporting schedule of claims payable
51 Capital lease schedule at fiscal year end
52 GASB 68 Valuation Report - 6/30/2023 and related census data
53 GASB 75 Valuation Report - 6/30/2023 and related census data
54 Census data testing done by the City
55 Compensated absences at year end with year end wage calculation broken out by fund
56 Schedule of advances to/from other funds, with corresponding agreements between the funds
57 Schedule of due to/from other funds
58 Schedule of transfers in/out to/from other funds
59 Schedule of Federal Expenditures
40
CITY OF SARATOGA
APPENDIX G- INSURANCE
29
41
Memorandum
DATE: April 11, 2023
TO: Finance Committee
FROM: Nick Pegueros, Administrative Services Director
Ann Xu, Accountant
Gina Scott, Administrative Analyst
SUBJECT: Annual Financial Policies Review
As part of the annual budget process, City staff presents proposed changes to City Council adopted
financial policies, Attachment A. We request the Committee consider the proposed changes and provide
direction on any additional changes. Upon its review, we seek a Committee recommendation to City
Council.
ATTACHMENTS
A.DRAFT Financial Policies Update
42
Finance Committee, April 11, 2023 Attachment A
DRAFT Financial Policies Update Page 1
General Financial Policies
GENERAL FINANCIAL POLICIES
GENERAL PRINCIPLES
The City shall ensure prudent financial
practices are incorporated into operational
procedures to ensure fiscal integrity and
safeguard the City’s assets.
The City’s fiscal policies are structured to
ensure fiscal responsibility, accountability,
transparency, and efficient use of resources.
Fiscal policies are to be reviewed, updated,
and refined as necessary, with general policy
level decisions brought to City Council for
review and approval as Council Policies, and
administrative and operational level functions
approved by the City Manager as
Administrative Policies.
Proposed revisions to the Fiscal
Management Policy Statements and Council
Policies are reviewed by the Finance
Committee and then provided to the entire
City Council at the annual Council Retreat or
Budget Study Session. Council members are
asked to provide comments or suggestions
for revisions to the Administrative Services
Director with the final draft made available for
review by the entire Council prior to adoption.
The City’s primary long-term financial goals
seek to maintain the City’s fiscal health,
preserve essential services, reduce financial
risk, and support short and long-term
administrative, financial, and operational
goals in a financially judicious manner. Long-
term financial and infrastructure planning and
the annual adoption of a structurally balanced
budget provides the foundation to these long-
term financial goals. The City shall promote
and implement strong internal financial
controls to manage risks and monitor the
reliability and integrity of financial
transactions and operational activities.
Financial information shall be provided in a
relevant, thorough, and timely manner, to
effectively communicate the City’s financial
status to the Council, residents, employees,
and all other interested parties.
Financial stability goals and judicious
responsiveness shall be the foundation upon
which proactive and advantageous financial
decisions are made, and which guide the
City’s response to local, regional, and
broader economic changes through the
years.
The City shall undertake, adopt, and
integrate new initiatives or programs in a
cautious, well-planned manner to support the
City’s long-term ability to maintain essential
services and infrastructure at the level and
quality required by its residents.
The City Council’s financial, operational, and
community goals, objectives, and policies are
incorporated into and implemented with the
development and adoption of the City’s
Operating and Capital Budgets.
Efforts will be coordinated with other
governmental agencies and joint power
associations to achieve common policy
objectives, create beneficial opportunities
and services for the community, share the
cost of providing governmental services, and
support legislation favorable to cities at the
state and federal level.
The City shall develop and incorporate long-
term financial planning tools to promote
strategic analysis and prioritization of
financial resources in decision making.
Replacement plans shall be maintained for
fixed assets, such as vehicles, equipment,
park infrastructure, building fixtures and
equipment, and technology infrastructure.
Efficient major infrastructure funding requires
comprehensive and long-term Master Plans.
The City shall endeavor to develop major
infrastructure maintenance and replacement
plans for roadways, bridges, retaining walls,
storm drains, streetlights, and similar
infrastructure.
APPROPRIATIONS &BUDGETARY CONTROL
The City Council shall adopt an annual
balanced operating budget and the first year
of an integrated five-year capital
improvement plan budget by June 30th of
43
Finance Committee, April 11, 2023 Attachment A
DRAFT Financial Policies Update Page 2
General Financial Policies
each year, to be effective for the following
fiscal year running from July 1st through June
30th. Balanced budgets present budgeted
sources in excess of budgeted uses.
Budgeted “Sources” include Revenues,
Transfers In, and Appropriated Uses of Fund
Balance. Budgeted “Uses” include
Expenditures and Transfers Out. Operating
and Capital Budgets are to align with the
City’s long-term financial goals.
Each year, the Administrative Services
Department staff provides; a short recap of
the prior-year budget; a mid-year budget
status report; and an updated five-year
financial forecast to the City Council,
typically at the Annual Council Retreat
(scheduled in late January or early
February). This annual review assists
Council with formulating direction for long-
range fiscal planning, operating budget
development, and capital project funding
appropriations.
Budgets are prepared on the same basis of
accounting used for financial reporting:
governmental fund types (General, Special
Revenue, and Debt Service) are budgeted
according to the modified accrual basis of
accounting; proprietary funds (Internal
Service Funds) and fiduciary funds
(Custodial Funds) are budgeted under the
accrual basis of accounting.
The Operating Budget is primarily funded
with current year revenues. Dedicated fund
balance reserves, such as the Carryforward
or Fiscal Stabilization Reserves represent
prior-year savings designated for specific
uses, which may be used to fund current year
operational expenses in accordance with
their purpose, upon Council approval.
Additionally, a minimal base amount of
$500,000 remains in the Unassigned Fund
Balance Reserve at year-end to provide the
first layer of fiscal protection for unanticipated
operational shortfalls or unforeseen needs in
the following fiscal year.
The Capital Budget is funded with both prior-
year surplus funding and dedicated capital
funding resources. Dedicated funding
sources include Gas Tax (HUTA) revenues,
VTA Measure B funding, road impact
assessment revenues; project revenues and
reimbursements; community benefit
assessments; and federal, state, local, and
private grants.
In practice, budgeted revenues are
conservatively stated, and budgeted
expenditures are funded at the full level
required to meet annual operational and
capital improvement goals. With effectively
managed revenue streams and efficient use
of resources, fiscal year-end operational
budget surpluses are typically available to
fund future capital improvement projects and
contribute to the City’s fiscally responsible
reserve accounts.
The City Council maintains budgetary control
at the fund level; any changes in total fund
appropriations during the fiscal year must be
submitted to the City Council for review and
Council majority approval. Operating Budget
appropriations lapse at the end of each fiscal
year unless specifically carried forward by
appropriation in the following fiscal year’s
budget. Capital Budget appropriations are
structured as a multi-year workplan;
therefore, project expenditure balances are
automatically carried forward to the following
fiscal year as part of the annual budget
adoption until funding is exhausted,modified,
or the project is completed.
The City’s adopted budget shall comply with
State law that limits annual budget
expenditures to the appropriation limit
calculated in accordance with Article XIIIB of
the Constitution of the State of California.
Known as the Gann Limit, the City Council
adopts an annual resolution to this effect.
The City Manager is authorized to implement
the City’s workplan as approved in the
adopted budget. Within a specific fund, the
City Manager has the discretion to adjust
appropriations between categories,
departments, programs, and projects as
needed to effectively operate, provided the
fund’s total appropriation amount is not
changed. An example would be to backfill a
vacant salaried position with a contract
service, therefore shifting budgeted funds
from wage and benefit appropriations to an
operating expense expenditure within the
Operating Expense appropriations. The City
Manager also has the authority to withhold
filling the position for a time if conditions
warrant a delay.
44
Finance Committee, April 11, 2023 Attachment A
DRAFT Financial Policies Update Page 3
General Financial Policies
Generally, recurring expenditures are funded
with recurring revenues, or with revenues
specifically designated for operational use.
One-time expenditures may be funded with
one-time revenues or fund balances
reserves. Fund balance reserves are to be
used for non-recurring one-time expenditures
and capital projects.
In compliance with Council’s Fiscal
Stewardship goal, fiscal stability and
sustainability principles are incorporated into
budget planning. Appropriating adequate
funds on an annual basis for the replacement
and maintenance of assets through Internal
Service Funds, prioritizing infrastructure
maintenance and repair in the capital budget,
and institutionalizing prudent payment
strategies for long-term liabilities are
foundational strategies of fiscal stability and
sustainability.
The City Council appropriates $50,000
annually to a ‘Council Discretionary account’
to provide Council with funding for unplanned
expenditures. Council direction and
consensus approval is required to utilize
these funds.
AUDITING AND FINANCIAL REPORTING
California State statutes require an annual
financial audit of the City’s financial records
and transactions by independent Certified
Public Accountants. The City shall comply
with Generally Accepted Accounting
Principles (GAAP) and produce annual
financial reports pursuant to Governmental
Accounting, Auditing, and Financial
Reporting (GAAFR) guidelines. The
independent auditor will issue an audit
opinion to be included in the City’s Annual
Comprehensive Financial Report (ACFR)
testifying to the financial report’s
conformance with accounting principles.
Additional financial reports issued by the
Auditor’s may include: a Single Audit of
federal grant expenditures when
expenditures exceed the Federal Office of
Management and Budget Single Audit
requirement, currently $750,000 in fiscal
year 2022-23), a Transportation
Development Act (TDA) report (annual
report of TDA fund expenditures), an
Appropriations Limit review report (to
establish tax revenue appropriation limit),
and a Management report on the City’s
Internal Controls.
The City shall submit the ACFR to the
Governmental Finance Officers Association
(GFOA) Financial Reporting Program each
year for review, and if in compliance with the
program’s requirements, apply to receive an
award for meeting GFOA’s financial
reporting standards.
Regularly scheduled external Financial
Reports include the following:
State Controller’s Office Annual Cities
Financial Transactions Report and
Annual Streets Report completed in
conjunction with the year-end close.
Annual Debt Transparency Report for
any debt issued after January 21, 2017.
Annual Government Compensation in
California Report for all wages paid to
individuals in a calendar year.
California Debt and Investment Advisory
Commission’s (CDIAC) Mello-Roos
Community Facilities District (CFD)
Fiscal Status Report for CFD bond debt.
Quarterly SMIP (Seismic Motion) fee
reconciliation reports; CASp (ADA
Accessibility) reconciliation reports: and
California Building Standard
Commission (green building standards)
reconciliation reports.
Quarterly Use Tax Reports to remit
uncollected sales tax to the State Board
of Equalization.
SB90 Mandated Cost reports for claims
to comply with State regulated
legislation.
Annual UST Certification report to show
fiscal responsibility for the City’s
underground storage tanks.
Annual Possessory Interest Report
submitted to the County’s Assessor’s
Office to report City-owned leased
property.
Regularly scheduled internal Financial
Reports include the following:
Weekly check registers and monthly
Cash and Investment Treasurer Reports
are submitted for review and approval at
City Council meetings.
Quarterly financial reports provide a
status update on General Fund
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revenues and expenditures for the first,
second, and third quarters.
A mid-year budget status report is
presented to City Council in February
each year to provide a comprehensive
financial overview of the current year’s
budget and to propose recommended
budget adjustments as appropriate.
A year-end financial recap is provided
after the City’s annual financial audit is
completed.
CAPITAL IMPROVEMENT PLANNING
The Capital Improvement Plan is an ongoing
process through which the City identifies,
prioritizes, and develops a multi-year
workplan for major capital expenditures and
their associated funding sources, in an effort
to improve and maintain the City of
Saratoga’s roadways, parks, and facility
infrastructure. Non-infrastructure projects
may also be included in the CIP under the
Administrative & Technology programs if
they are one-time, operational efficiency,
technology, or multi-faceted administrative
projects.
Generally, CIP improvements are major
expenditures that have a multi-year life span
and result in becoming City assets. The
City’s standard definition of a Capital
Improvement Plan project is for the
construction, acquisition, rehabilitation, or
non-routine maintenance work that
generally costs $25,000 or more, with a
useful life of at least 5 years at a fixed
location. The City also includes projects
under $25,000 if they include staged or
ongoing improvement projects, or if they are
significant multi-year projects.
Capital Planning is developed and prioritized
through infrastructure and operational
assessments of asset maintenance plans,
urgent mitigation needs to prevent structure
or system failures, health and safety issues,
federal or state mandates, availability of city
and external funding, efficiencies, impacts if
project not completed, business or
community input/dem and, and short-term vs
long term cost of replacement
considerations.
The Capital Improvement Plan includes
funded capital improvement projects,
typically scheduled for completion within the
five year plan timeline, with cost estimates
based on current year dollars. Project
estimates are updated as needed, due to
price changes, design specifications, or
project scope adjustments.
Departmental staff research and prepare
project proposals for review by Department
Directors. Directors meet with the City
Manager to identify and collaborate on
approved proposals. Additionally, City
Council members may propose projects
during City Council meetings for which, if
seconded, staff will research and prepare
project proposals. Finalized project
proposals are brought to Council for review.
Council then collectively directs which
project proposals are to be funded and
included in the following year’s Proposed
Capital Improvement Plan Budget in
accordance with available funding. Council
also determines what projects shall be
included on the Unfunded Project List for
future consideration.
The five-year Capital Improvement Plan
(CIP) is updated annually in conjunction with
the operating budget. While the CIP reflects
the current and changing needs of the
community as well as enhancements to
improve the quality of the community,
Council prioritizes the maintenance of City
infrastructure to safeguard the public’s
safety and reduce maintenance costs over
the long-term. The first year of CIP funding
is adopted annually to authorize current year
appropriations, which includes any
remaining funds appropriated in the prior
year’s CIP.
The CIP is categorized into programs by
project type. The four programs include:
Street Improvements, Park & Trail
Improvements, Facility Improvements, and
Administrative & Technology Improvements.
All projects within the CIP programs are
appropriated, managed, and tracked as
separate funding entities, with each project’s
financial status reported on a monthly basis
in the Treasurers Report.
Project updates are recorded in the annual
Capital Budget, with narrative, timeline, and
financial summary information updated with
each published budget document.
Capital improvements that specifically
benefit a select group of users and/or are
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fee-for-service based are to be financed
through user fees, service charges, special
assessments and taxes, or development
impact fees.
The City shall identify and dedicate capital
improvement related funding directly to the
CIP and to maximize the use of grant
funding for capital improvement projects.
Grants, insurance, or other reimbursement
funding is to be returned to the expenditure’s
funding source, unless otherwise directed by
Council. For instance, Hillside Reserve
funded projects that receive insurance
reimbursement payments are to be returned
to the Hillside Reserve, and grant
reimbursements for projects funded through
the CIP Reserve are to be returned to the
CIP Reserve when payment is received.
After completion of the prior year’s audit and
the General Fund’s priority funding
requirements are met, the remaining net
operations are moved into the Capital
Project Reserve at year end. Proposed uses
for the Capital Project Reserve fund is
reviewed by Council, with preliminary
allocation direction voted upon by Council at
the Budget Study Session in April. This
direction is presented at the Proposed
Budget Hearing in late May or early June,
with Final CIP funding direction determined
by Council with Budget Adoption in June.
Council has designated the following capital
projects as fundamental to maintaining City
infrastructure on an ongoing basis, and shall
therefore have priority status for available
Capital Improvement Reserve funding: The
below funding allocations are guidelines to
be reviewed by Council for budget direction
each fiscal year:
$250,000 –Annual Sidewalks, Curbs &
Gutters, Storm Drains, Bridges
Maintenance and Repairs
$200,000 –Annual Retaining Wall
Maintenance & Repairs
$250,000 –Annual Parks, Trails,
Grounds & Median Replacement
Funding
$150,000 –Annual Roadway Safety
and Traffic Calming
$25,000 –Annual Public Art
Infrastructure
$25,000 –Annual Hakone Gardens
Infrastructure Improvements
The Annual Pavement Management
Program project is the primary capital project
funded in support of Council’s goal to
maintain Saratoga city streets at an average
70 PCI rating. On occasion, separate street
specific resurfacing projects are established
that also contribute toward this goal. In
2022-23, Council dedicated all revenue,
approximately $2.6 million,from State gas
taxes,the State Roadway Rehabilitation
Fund (Senate Bill 1 or SB 1),the local refuse
vehicle impact fees assessed on the Solid
Waste Services contract provider, and
allocation of the Santa Clara County
Measure B sales tax for local roads projects.
This CIP project encompasses roadway
repairs, resurfacing, and rehabilitation
projects, traffic light, curb and gutter, and
other miscellaneous repairs, striping and
signage, and assorted street materials and
supplies.
DEVELOPMENT RELATED FINANCIAL
POLICIES
Most planning and building services are
provided for business and individual benefit
rather than for the general community’s
benefit. As such, the Community
Development Department planning
application and building permit fees are
established at rates to recover the full cost of
the service provided. However, a number of
services provided by the department are not
fee based (code compliance, event permits,
etc.), hence the department is not full-cost
recovery based overall.
The Williamson Act, also known as the
California Land Conservation Act, was
passed by the California Legislature in 1965
to encourage rural & agricultural land-owners
to keep their land undeveloped. When land-
owners enter into a contract under the act,
they benefit from lower property taxes, which
are based on the property’s current use,
rather than paying market value-based tax
rates.In exchange, the property is to remain
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undeveloped and continue to function in the
same manner for the duration of the
contract.Contracts are valid for 10 years and
are automatically renewed unless the farmer
or rancher cancels it. The City does not limit
the number of Williamson Act contracts
entered into each year.
The Mills Act is State-sponsored legislation
granting local governments the authority to
enter into an agreement with property owners
to allow reduced property tax payments in
return for the restoration and continued
maintenance of their historic property.The
property must be privately owned and on a
local, state, or national register of historic
places. After the initial 10-year contract
expires, the contract may extend one year
annually unless either party elects to non-
renew.
Since the agreement reduces the property tax
assessment, the City receives a smaller share
of property tax revenue in comparison to a
property that is assessed at market
value.Per State law, the County Assessor is
required to recalculate each individual
property’s tax assessment each year, based
upon a variety of stated market factors. This
results in reductions that are specific to each
property, with some benefiting more than
others. The City will allow approval of up to
three Mills Act Contracts per year.
EXPENDITURES AND PURCHASING
All expenditures shall be in accordance with
the City’s purchasing policy, travel policy,
credit card policy, contract policy and public
contract code, state or federal law, or any
other applicable guidelines or regulations.
Expenditures are managed at the program
level. Program managers are to ensure
expenditures do not exceed the budgeted
workplan and must take immediate action if at
any time during the fiscal year an operating
deficit is projected at year-end. Corrective
actions may include expenditure reductions,
service reductions, or with Council approval,
budget adjustments to increase the program
budget.
The City’s purchasing policy establishes
purchasing authority levels, purchasing
procedures, and procedural requirements, for
the procurement of supplies, equipment, and
services, in conformance with Federal and
State codes and regulations, and City
Ordinance No. 2-45.
Public Work projects governed by the State’s
Public Contract Code are excluded from
provisions of the City’s purchasing policy.
Guidelines established by the City’s
Purchasing Policy directs the City’s
departments to purchase the best value
obtainable, securing the maximum benefit for
funds expended, while providing all qualified
vendors an equal opportunity to do business
with the City.
Services and supplies purchases that exceed
$5,000 require written quotes and must be
approved by the Purchasing Officer or
designee, typically through the Purchase
Order process. Documentation is to be
retained by the department in accordance
with the Record Retention Policy and
schedule.
Services, supplies, and fixed asset purchases
exceeding $25,000 must be authorized by the
City Council, unless purchase is specifically
identified as approved in the adopted budget
or excluded under the Purchasing Policy.
City departments shall conduct quarterly
program and capital project reviews to
determine if projected operating revenues and
expenditures meet budgeted expectations. If
an operating deficit is projected to occur at
year-end, the departments shall evaluate and
implement corrective actions as needed and
notify Council before services will be
impacted.
FIXED ASSETS AND INFRASTRUCTURE
Tangible assets with a cost equal to or greater
than $10,000 and a useful life of more than
one year are considered fixed assets and
added to the capitalization schedules.
Repairs and maintenance of infrastructure
assets will generally not be subject to
capitalization unless the expense extends the
useful life of the asset.
The City will sustain a long-range fiscal
perspective through the use of a five-year
Capital Improvement Plan designed to
maintain the quality of City infrastructure, and
through Internal Service Fund programs to
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both maintain and replace operational
infrastructure, such as City buildings, fixtures,
and equipment, vehicles and public works
equipment, and technology related equipment
on an ongoing basis.
A Capital Asset system will be maintained to
identify all City assets, their condition,
historical and estimated replacement costs,
and useful life. Asset information is retained
to provide information for preparation of
financial statements in accordance with
generally accepted accounting principles and
Governmental Accounting Standards Board
(GASB) pronouncements.
Infrastructure management systems are to be
developed and maintained to provide long-
term financial and operational planning.
These shall include various roadway system
management programs, storm drain system
management plans, bridge replacements,
street signal system replacements, and all
other infrastructure categories that require
significant financial resources to fund
eventual replacement needs.
Information Technology software, hardware,
and auxiliary equipment and system assets
are tracked and funded through the Operating
Budget’s Internal Service Replacement Fund,
whereas annual appropriations in the
Information Technology Services program
budget funds most ongoing license,
maintenance, and security costs.
GRANTS AND DONATIONS
The City recognizes the value of grants and
donations to extend pre-existing services,
introduce new initiatives, add artistic and
cultural infrastructure, implement
technological advances, and subsidize
programmatic staffing for public safety,
recreational activities, development support,
social services, homeland security, and
economic efforts.
City will seek to obtain and effectively
administer federal, state, local, foundation,
business, and private grants that support the
City’s priorities and provide a benefit to the
City, with grant requirements taken into
consideration.
City staff shall notify City Manager of grant
proposals prior to submitting a grant
application. If approved to pursue,
requesting department’s staff are responsible
for all aspects of the grant process, including
preparing and submitting grant proposals,
preparing staff reports, ordinances and
resolutions if needed, developing grant
implementation plans, managing the grant
program, preparing and submitting reports to
grantors, and properly closing out grant
projects. Staff shall work with Finance staff
to track grant funding and expenses, and to
generate grant payment requests.
The acceptance of grant funding will be
assessed for both immediate and long-term
costs and benefits to the City. For example,
a grant to construct infrastructure would incur
future ongoing maintenance costs. These
costs shall be disclosed with the grant
application and/or pre-award notice.
All accepted grants and donations are to
have assigned staff, known as the
Grant/Donation Administrator, who is
responsible for grant/donation oversight to
ensure rigorous adherence to the grant or
donation’s related activity, ensure
accountability for financial and ethical
administration, and is consistent with the
City’s strategic priorities.
Infrastructure addition or improvement grants
in excess of $10,000 shall be brought to the
Council for review and approval.
Operating Services grants, such as funding
for health and safety programs that primarily
utilize staff or contract service or pay for
material and supplies to accomplish the grant
objectives may be approved by the City
Manager up to the City Manager’s current
purchasing limit of $25,000.
The City Council’s Public Art Policy
establishes public art grant and donation
authorization approval levels.
Donations may be accepted in accordance
with the City of Saratoga Donation Policy
most recently approved by the City Council.
Under the current policy, unrestricted
donations of $5,000 or less may be accepted
or declined by the City Manager. Restricted
donations of $500 or less may be accepted
or declined by the City Manager.
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Unrestricted donations of more than $5,000
and restricted donations of more than $500
must be brought to the City Council for
consideration. The City Manager may
choose to request City Council consideration
of any donation, regardless of value.
INTERNAL SERVICE FUNDS
Internal Services Funds are established to
both equitably allocate operating costs to
departments for support and maintenance
services, and to stabilize and spread the City’s
replacement and operational costs over fiscal
years for the purpose of providing an accurate
and balanced long-range fiscal perspective of
the use of services and assets.
Vehicles, Equipment, and Building asset
replacement and maintenance types of
Internal Service Funds are structured to
provide a consistent level of funding for
asset and equipment replacement, and to
ensure sufficient funding is available for the
regular maintenance, repair, and
replacement of the City’s vehicles,
equipment, and building fixtures in an
ongoing manner.
Technology and Office Equipment
replacement and maintenance Internal
Service Funds are structured to provide a
consistent level of funding for the
replacement of assets and projects, and to
appropriately distribute support and
maintenance costs to City departments.
The Liability and Workers Compensation
Insurance Internal Service Funds shall
maintain adequate reserves to pay all valid
self-insured claims and insurance
deductibles, including those incurred but not
reported, in order to keep the insurance
funds actuarially sound. Additionally,
funding is used to maintain required safety
related documents, such as the City’s ADA
Transition Plan, and the Industrial Injury
Prevention Plan (IIPP).
Each Internal Service Fund will set recovery
charges at rates sufficient to meet all
operating expenses, depreciation, and fund
balance reserve policy objectives.
INVESTMENTS
The City maintains a detail-level Council
approved Investment Policy that outlines the
goals of fiscal security and investment risk
levels allowed to achieve the City’s stated
security restrictions and investment
objectives. The Investment Policy is brought
to Council for review and adoption each year,
just prior to the beginning of the fiscal year.
The policy shall comply with the State’s
California Debt and Investment Advisory
Commission (CDIAC) guidelines for the
practice of public finance.
Fund Reserves and excess operational
funding reside in the State managed Local
Agency Investment Fund (LAIF) unless
expressly approved by the City Council’s
Finance Committee to invest in other vehicles
approved in the City’s Investment Policy.
The City’s Administrative Services
Department shall oversee Treasury functions
and submit a monthly Treasurer’s Report to
report on City funds, investments, and
interest earnings.
LONG-TERM DEBT
The City maintains a Council approved Debt
Policy to provide clear direction on debt
issuance. Existing debt shall comply with all
legal and reporting requirements to ensure
the City is in compliance with State
regulations, Governmental Accounting
Standards Board (GASB)guidelines, and
transparency efforts.
The City shall seek to maintain a high credit
rating through sound financial practices as a
foundational financial objective, in order to
obtain the lowest possible borrowing cost, and
maintain financial responsibility.
The City does not incur debt for operational
purposes or capital improvements as a
standard practice. Under extraordinary
circumstances, the City may seek voter
approval for General Obligation (GO) Bond
Debt for city-wide major infrastructure
rehabilitation, or through Community Facility
District Bonds for specific community desired
infrastructure improvements.
Long-term financing debt is typically incurred
for capital improvements or special projects
that cannot be financed from current or
dedicated revenues, or for large liabilities
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resulting in significant financial impacts. In
principle, long-term debt is used only if the
debt service requirements do not negatively
impact the City’s ability to meet future
operating, capital, and cash reserve policy
requirements.
Through City Council approval, the City may
function as a bonding conduit for special
districts. This may occur when a
neighborhood or distinct area is seeking to
improve private or cooperatively owned
infrastructure, such as private roads or water
system cooperatives. A special district may
also be established to improve publicly owned
infrastructure, such as a neighborhood park or
a parking lot.
For special district debt offerings, the City
shall require full liability protection and cost
recovery as necessary to protect the City and
mitigate the cost associated with such
actions.
The term for repayment of long-term financing
shall not exceed the expected useful life of the
project or extend beyond functionally
appropriate payment terms. Additionally,
financing payment terms must be established
at a manageable funding level or reasonable
assessment level.
The City shall monitor all forms of debt in
conjunction with budget development
throughout the year and will report concerns
and remedies to the City Council if needed.
The City will ensure compliance with bond
covenants, providing financial information to
reporting parties as required under the terms
of the contract or State law.
The City will comply with Government Code
Section 43605 limitations on debt, which limits
general obligation indebtedness to an
aggregate 15 percent of the assessed value
of all real and personal property of the City.
LONG-TERM FINANCIAL PLANNING
City policy is to develop, build upon, and
incorporate long-term financial planning
processes into a comprehensive plan that
provides Council, staff, and the public with
the resources to understand issues impacting
the City’s financial condition, and the tools
with which to make informed decisions.
The City’s Long-Term Financial Plan (LTFP)
shall include various analyses and
documents that support financial planning
efforts, including a financial forecast and
analysis, fiscal policies, revenue descriptions
and trend analysis, an annual pension
review, the City’s Strategic Plan, the Capital
Improvement Plan and funding analysis,
Information Technology Strategic Plan, and
numerous asset and infrastructure master
plans. While the financial trend analysis and
forecast is the foundation of the LTFP, the
entirety of the various documents provide a
comprehensive outlook on many operational
fronts.
Long-Term Financial Planning is an ongoing
event that begins at the Council Retreat to
review Strategic Plan goals and the current
financial situation at the mid-year point, and
as the starting point for the following years
budget process. Trends, critical or
concerning issues, policy changes, new
initiatives and priorities, new resource
requirements, and potential impacts and
opportunities are reviewed in conjunction
with financial projections for the future.
Direction is compiled into the following year’s
budgets, and plans are updated throughout
the year, as needed.
Council shall review a General Fund
revenue, expenditure, and financial position
forecast of at least three years, to garner a
longer-term perspective of current fiscal
expectations and fairly-reliable projected
fiscal impacts in the effort to anticipate or
mitigate operational changes for the near
future. Because funds other than the
General Fund are both specific and limited in
nature, they are not currently included in the
annual review. However, staff shall assess
the funds and incorporate any items of
concern into the forecast discussion.
Revenues shall be described, documented,
and properly classified with historical trend
analysis and known upcoming impacts built
into forecast projections. Projections should
be conservative, with those revenues of a
more volatile nature projected with a greater
conservative weight than those known to be
consistent and dependable. Additional
factors, such as unsustainable growth, shall
also be identified and folded into the
projections with caution.
Expenditures are classified by category in
summary but forecast by individual programs
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application in detail. This methodology
allows for greater specificity and accuracy in
workplan expectations, while providing a
broader view of trends. These trends are
utilized for longer perspectives in the forecast
analysis, strategic planning, asset
management, capital prioritization and
funding decisions, and funding gap analyses
within the LTFP.
A Reserve Analysis is conducted to review
and recommend appropriate levels of
reserves per the needs of the reserve
purpose, the priority of the reserve over other
needs, and compliance with GFOA
recommendations and legal requirements.
PENSION FUNDING
In the pursuit of prudent fiscal practices and
long-term financial sustainability, the City
seeks to mitigate the overall cost of pension
benefits, and prior year liabilities. Several
strategies are utilized, which includes lower
tier pension benefits, lump sum
prepayments, and accelerated payments.
The City has three Miscellaneous Employee
Pension Plan tiers:
Tier I for employees hired prior to May
12, 2012
Tier II for employees hired on/after May
12, 2012, and “Classic” employees hired
on/after January 1, 2013
Tier III/PEPRA, for employees entering
into the CalPERS pension plan system
on/after January 1, 2013
Tier I provides a 2% at 55 pension benefit.
Tier II provides a 2% at 60 pension benefit.
Tier III/PEPRA provides a 2% at 62 pension
benefit.
In 2014-15, with the CalPERS change to their
pension funding methodology, Council paid
off a large portion of the UAL liability and then
established an alternative to CalPERS 30-
year repayment policy to contribute an
annual amount approximately equal to
double the minimum Annual Required
Contribution (ARC) due at the five-year mark.
The intent was to lower the overall cost of the
liability, but also to shorten the payment
period to 15 years and maintain fiscal stability
by establishing a set payment amount.
Detailed information is provided in the
Financial Summaries Staffing Information
section.
Council also established a practice to pay
Tier II and Tier III UAL amounts in full each
year, to eliminate future unfunded liabilities
for the growing segments of employees. This
amount is minimal each year as the actuarial
determined rates are in line with current
actuarial factors, until actuarial factors are
modified.
The City’s goal is to fund pension liabilities
near or at 100 percent to reduce unfunded
liability payments to minimal payments each
year. Currently, Tier II and III unfunded
accrued liability payments are minimal, if any,
and paid in full each year in alignment with
this policy, however the Tier I pension
unfunded accrued liability is understood to be
a long-term goal.
A review of the City’s Unfunded Accrued
Liability and CalPERS annual actuarial report
will be brought to the Finance Committee for
review and analysis each year, along with
CalPERS Pension liability projection tools as
they become available.
RECESSION PREPARATIONS
The City shall incorporate preparations for
the inevitable future recession in its fiscal and
operational practices. This includes prudent
and cautious assessment of expansions in
ongoing services, diligence in maintaining
cost recovery for user services, aggressive
funding of fund balance reserves to healthy
levels in strong economies, conservative
budgeting practices, fiscal frugality,
alignment of one-time funding sources and
uses, and a continued practice of long-term
financial planning.
Education of City finances is vital to
knowledgeable financial decision making.
Finance staff remain available to all Council
Members for one-on-one training sessions
and to answer specific finance and budget
questions throughout their tenure on the
Council, either spontaneously or scheduled,
in person, by phone, or email.
Council’s identification of priority operational
services, and Council Priorities as a whole
are defined in the Strategic Plan, which is
adopted as part of the overall budget plan
each year. The Strategic Plan helps to drive
long-term planning and operations and
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provides guidance in recession decision
making when needed.
Recession fiscal decisions will ultimately be
specific to the unique time period,
recessionary causes, and economic
environment, but a basic assumption is that
recessions will impact the City’s main
revenue category of Property Tax.
Fortunately, this impact is delayed due to the
nature of tax assessments occurring before
severe impacts are felt, and the subsequent
distribution of funding, providing the City time
to prepare. More immediate impacts come
from development-related services fees,
Sales Tax, and Hotel Tax revenue
reductions. The advantage of having impacts
hit City finances in phases allows for
preliminary mitigation steps, and time to plan
if more severe mitigation steps are needed.
However, this delay also plays out in reverse
as a time lag occurs before the City’s
finances return to normal. Hence, recession
impacts will last a minimum of two years if
minor, and (typically) three to five years if
more severe.
Overall, financial resources funded during
good economic periods are recommended
for initial recessionary reductions, such as 1)
the delay or reduction of funding for Internal
Service Fund operations, 2) use of one-time
revenue resources, such as an unexpected
payment or excessive net operation funding
held for future use, and 3) the reduction of
expenditures included in the budget each
year that are not essential to providing
services, such as staff conferences or
optional consultant and contract services.
REVENUES
General Revenue funding such as taxes,
intergovernmental revenues, and interest
provide the funding for services conducted for
city-wide benefit, such as public safety,
infrastructure maintenance, and city
administration. Services provided upon
request, such as for planning services and
building permits, are financed through user
fees, service charges, and assessments
directly linked to the level of services
provided.
To provide the Saratoga community with
services and to maintain infrastructure, the
City conducts ongoing reviews of operations
to assess revenue leakage. If applicable,
assessments or charges are assessed, and
user fees are implemented for cost recovery.
Designated and legally restricted tax and
revenue funding sources will be accounted for
in the appropriate funds. General taxes and
revenues not allocated by law or contractual
agreement to other funds are accounted for in
the General Fund. Funds dedicated for
specific capital improvements are accounted
for in the appropriate Capital Improvement
Plan fund, within a designated project. An
example is VTA Measure B Sales Tax
deposited directly to the Annual Roadway
Improvement Project in the Street CIP Fund.
Categories of Revenues include Taxes,
Intergovernmental, Fees/Licenses/Permits,
Charge for Services, Interest Income, Rental
Income, other sources such as grants,
donations, sales of copies or maps, and
over/short adjustments, Internal Service Fund
charges, and Capital Improvement Revenues.
While a diversification of revenue funding is
desired, the City only pursues additional
funding streams that are in alignment with the
City’s overall goal to support and protect the
Saratoga community. The City does not enter
into profit-making enterprises that service
select user groups, but rather seeks to engage
in cost-recovery activities or taxpayer-funded
services that maintain or enhance the
Saratoga community as a whole.
Over the last decade, Property Tax revenue
increased at a much faster pace than other tax
revenues, due to rapidly increasing housing
prices and the State’s agreement to bring the
allocation percentage up to the full 7 percent
minimum rate, offset by the City’s 17.4 ERAF
calculation rather than the County’s 47.7
percent ERAF rate. As a result, Property Tax
now makes up about 80 percent of all tax
revenues, with Sales Tax, Franchise Fees,
Transient Occupancy Tax, Business License
Tax, and Construction Tax making up the
remainder. By itself, Property Tax comprises
about one-half of Total Operating Revenue,
meaning there is a significant dependency on
this one revenue category. Hence, the City
tracks Property Tax revenue closely and
makes revenue and expenditure budgetary
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General Financial Policies
projections and adjustments in line with
anticipated fluctuations. With revenue growth
expected to increase slowly now that full
allocation has been attained, City expenditure
budgets will mirror this restrained growth.
The City follows a vigilant policy of collecting
local taxes and revenues due to the City
through persistent follow-up procedures.
Efficiency of collections is paramount, and
external resources are used as needed. An
example of this practice is the City’s Business
License audit engagement where a consultant
is utilized to both educate and ensure
companies doing businesses within Saratoga
are paying their business license tax.
RISK MANAGEMENT POLICY
The City is insured for up to $30 million of
general liability, auto, and property damage
claims through a Bay Area Joint Powers
Association insurance cooperative (PLAN
JPA). Claim coverage consists of up to $5
million from the JPA, and $25 million from an
excess insurance provider. The City is self-
insured for the first $25,000 for general liability
and auto claims; property damage up to
$5,000 and third party auto claims up to
$10,000.
Workers Compensation claims are insured for
the first $250,000 of coverage through the
City’s participation in a Workers
Compensation risk pool. After the $250,000
limit is met, an excess insurance coverage
policy is activated. The excess coverage
provides an employer liability limit of $5 million
per occurrence, and workers’ comp per
occurrence limit of $100 million. Workers'
Compensation claims are managed by the
PLAN JPA as a third-party administrator
(TPA).
The City’s role in managing both Risk
Management and Workers Comp programs is
preventative in nature, which is accomplished
through careful monitoring of losses, working
closely with the third-party administrator,
participating in training, proactively
addressing infrastructure maintenance and
potential risks, and by designing and
implementing safety programs to minimize
risk and reduce losses.
Claims against the City are submitted to the
City’s pooled liability JPA administrator in a
timely matter. Adverse claims in which City
property is damaged, are also pursued for
restitution. Repair cost for damages, and
staff time for attending to the
accident/incident, cleanup, and repair time is
billed to the other party. The JPA
Administrator follows up on these matters
also.
TREASURY MANAGEMENT
The City’s Investment Policy shall be brought
to the Finance Committee and City Council for
review, discussion, direction, and adoption on
an annual basis. California Government
Code Section 53600 and City of Saratoga
Municipal Code Section 2-20.035 require the
City Council to annually review and approve
the City’s Investment Policy.
It is the policy of the City of Saratoga to invest
public funds in a manner which will provide the
maximum security with the highest investment
return, while meeting the daily cash flow
demands of the City and conforming to all
state and local statutes governing the
investment of funds.
Finance staff shall exercise due diligence to
comply with the Investment Policy. The City
currently practices conservative and cautious
investment practices by limiting its
investments to the State’s Local Agency
Investment Fund (LAIF). Certificates of
Deposits and high-grade investment vehicles
may also be utilized under the Investment
Policy, however the Finance Committee will
provide oversight, review, and direction on any
decisions to move a portion of the City’s
available funds into these other permitted
investments. The Administrative Services
Department’s Finance Division shall prepare a
monthly report to the City Council that has
sufficient detail to present the financial
condition of the City at month end, the cash
and investments balance by fund, and fund
balances by fund type.
TRUST AND AGENCY FUNDS
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The City may serve as a Fiscal Agent for an
agency organization only if the purpose of the
agency is related to City operations and is in
the best interest of the City.
A legal agreement governing the Trust or
Agency relationship is approved by the City
Council.
The Trust or Agency organization remains a
separate entity from the City and shall not
represent itself as a component of the City.
As the Fiscal Agent, the City may hold funds
provided by the agency organization in a
separate and clearly designated fund. The
fund may earn interest at the City’s investment
rate.
Depending on the level of services provided
to the agency organization, the City may
charge for the cost of any and all fiscal
services provided.
Depending on the agreement, the City may
purchase goods or services on behalf of the
agency organization, and/ or disburse funds
as directed and permitted by the agency’s by-
laws and purpose. However, the City is not
liable for any of the agency organization’s
debts, liabilities, or actions.
USER FEES
The City allows for discretion in the use of
general taxes to meet the cost of services
that provide a larger public benefit, such as
code enforcement, and to recover the full or
partial cost of services that largely or solely
benefit individuals, such as a building permit.
In some cases, fees are established with a
goal to discourage the use of a service, such
as a false alarm fee that results in the
dispatch of a public safety officer. The fee
may be structured to accelerate with usage
but allows for a level of leniency initially for
this service with the understanding that cost
recovery goals are not met.
A master schedule of User Fees is reviewed
and presented to Council on an annual basis
to allow for the adjustment of discretionary
service and rental fees. If an adjustment is
needed, a request to increase or decrease
the fee is brought to Council as a Public
Hearing and becomes effective 60 days (or
later if stated) following approval of the fee
adjustment. Typically, fee adjustments are
brought to Council in late April for a July 1st
effective date, however a stand-alone fee
adjustment may be brought to Council at any
time throughout the year.
The City’s overall goal is to establish user
charges and fees at levels that fully recover
the direct and indirect activity cost of
providing a service or product. However,
market rates and charges levied by other
municipalities (of similar size) for like services
are taken into consideration when
establishing rates, fees, and charges. As
some services have partial cost recovery
objectives, cost recovery ratios will vary in
accordance with policy objectives.
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Fund Balance Reserve Policy
FUND BALANCE RESERVE POLICY
Prudent financial management dictates that the
City reserve a portion of its funds for future use to
maintain fiscal stability; ensure the continued
orderly operation of government and provision of
services to residents; and to mitigate current and
future risks.
As a general budget precept, the City Council
decides when and whether to appropriate
available funds to and from a reserve account.
Use of reserve funds must be authorized by either
specific direction in the annual budget, or by a
separate City Council action –unless specifically
directed by policy. Responsible fiscal
stewardship also requires adequate reserves be
maintained for all known liabilities and
established City Council and community directed
initiatives.
In the following Fund Balance/Reserve Policy
guidelines, the descriptions include identification
of the fund type and classification, the purpose of
the reserve, minimum and maximum funding
goals if appropriate, appropriate utilization of the
reserve and by what authority, and the procedure
for funding the reserve initially,on an ongoing
basis, or after utilization.
FUND BALANCE AND NET POSITION
In 2009, Governmental Accounting Standards
Board (GASB) Statement No. 54 revised fund
balance classifications for “Governmental Funds”
into five specific classifications of fund balance
with the intent to identify the extent to which a
specific fund balance reserve is available for
appropriation and therefore spendable, or
whether the fund balance reserve is constrained
by special restrictions. Government Funds for
which these new rules apply include: General
Fund, Special Revenue Funds, Capital Project
Funds, and Debt Service Funds.
For “Non-Governmental Funds” equity
classifications are classified as “Net Position” with
sub-classifications of Restricted or Unrestricted
Net Position. A third component of a Non-
Governmental Fund’s equity is “Net Investment in
Capital Assets,” which for Saratoga refers to the
non-monetary portion of equity such as vehicles
and equipment, net of depreciation. Non-
Governmental Fund types include Proprietary
Funds (Enterprise and Internal Service Funds)
and Fiduciary Funds.
GOVERNMENTAL FUND TYPE RESERVE
CLASSIFICATIONS
The Governmental Reserve classifications are
defined as follows, which includes the applicable
reserves that fall into the classification.
Non-Spendable Fund Balance
Represents resources that are inherently non-
spendable from the vantage point of the current
period. The City does not presently hold Non-
Spendable Reserve funds.
Restricted Fund Balance
Represents fund balance that is subject to
external enforceable legal restrictions. The City
maintains the following restricted fund balances
under this designation:
Special Revenue Funds: Landscape &
Lighting Assessment Districts Fund Balances
Debt Services Fund: Library General
Obligation Bond Debt Service Fund;
Arrowhead Community Facility District Bond
Debt Fund
Capital Project Funds
a)Park in Lieu Funds
b)Highway User Tax Allocation Fund (Gas
Tax)
c)Capital Project Grant Funds
Committed Fund Balance
Represents fund balance constrained by
limitations the government imposes upon itself at
its highest level of decision making and remains
binding unless removed in the same manner.
The City maintains the following fund balances
under this designation:
General Fund
a) Hillside Stability Reserve
b) Road and Facility Replacement Reserve
Capital Improvement Program Funds:
a)Streets Capital
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b)Gas Taxes Capital
c)Capital Grants, including ARPA
d)Parks Capital
e)Park In-Lieu Capital
f)Facilities Capital
g)Administrative & Technology Capital
Assigned Fund Balance
Represents fund balance identified by Council for
an intended use; however as no legal obligations
exist, the funds may be re-designated and utilized
for another purpose if Council chooses. The City
maintains the following General Fund reserves
under this designation:
General Fund:
a)Future Capital Projects Reserve
b)Carryforward Reserve
Unassigned Fund Balance
Represents funding which may be held for
specific types of uses or operational
funding/stabilization purposes but is not yet
directed to a specific purpose. Only General
Fund reserves can be designated under the
“Unassigned” fund balance classification. Other
fund types are by nature structured for specific
purposes, hence the fund balances are therefore
considered “assigned” for that purpose.
General Fund:
a)Working Capital Reserve
b)Fiscal Stabilization Reserve
c)Unassigned Fund Balance
Fund Balance Ratios
To ensure the City maintains available working
cash flow and emergency funding at all times, the
collective total of the General Fund’s Assigned
and Unassigned Reserves shall be sustained at
a minimum of 20 percent of General Fund
expenditure appropriations, net of transfers out.
GENERAL FUND YEAR-END ALLOCATIONS
After the City’s financial records are finalized and
audited, with legal obligations and liability
reserves funded, revenues in excess of
expenditures are closed out to Unassigned Fund
Balance. A base amount of funding, as set by
budget policy, is to remain in the Unassigned
Fund Balance, with the remainder distributed in
the following order:
1.Repayment of Fund Balance Reserve loans
-back to established levels (e.g. borrowing
from/usage of the Fiscal Stabilization or
Hillside Stability Reserves).
For the Hillside Stability Reserve, loan
repayment shall be repaid with year-end
net operations if funding in excess of the
next year’s priority Capital Improvement
Project is available. At a minimum,
reimbursements shall be made in annual
contributions of $100,000 until reserve
balance reaches the $1 million reserve
goal.
Fiscal Stabilization loan repayments
shall be made as directed by Council.
2.Annual contribution shall be made to Road
and Facility Replacement Reserve and
Fiscal Stabilization Reserve as directed by
Council.
3.Remaining funds are allocated to the Future
Capital Projects Reserve.
GENERAL FUND RESERVES
Hillside Stability Reserve
Under the Committed Fund Balance
classification, a Hillside Stability Reserve of $1
million is set aside to provide funding for
unanticipated or unforeseen emergency or
extraordinary costs related to hillside
degradation, inclusive of slide prevention and
mitigation, slide repair, and associated drainage
and roadwork which must be commenced prior to
the next fiscal year’s CIP Project funding
availability.
Use of the reserve requires an analysis be
prepared and presented to Council for approval,
or in the event of a landslide requiring immediate
emergency work, the Public Works Director may
direct use of up to 10 percent of the reserve to
make emergency repairs and mitigate further
damage until Council takes action. Reserve
funding is to be used for emergency work which
exceeds operational funding provided for in the
Operations Budget. Upon use, refunding of the
reserve shall be provided from year-end net
operations, in full if funding is available, or at
minimum in the amount of $100,000 each fiscal
year until the $1,000,000 reserve cap is reached.
Road and Facility Replacement Reserve
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The Road and Facility Replacement Reserve is
established to accrue funding for the major
rehabilitation or replacement of City-owned
roads, building, and structures. Eligible uses of
this reserve include direct funding of public road
and facility improvements and related debt
service, if applicable. Road and facility
improvements include major and minor
replacements, renovations, or city-match for
grant or debt financed projects.
Changes in annual contributions and the reserve
goal amount shall be determined by Council
during the budget process, in line with changes in
the City’s economic situation. Utilization of the
reserve shall be brought to Council for discussion
and consideration as needed.
Future Capital Projects Reserve
Under the Assigned Fund Balance classification,
the Reserve for Future Capital Projects shall fund
capital improvement project in future years, at the
discretion of the City Council. Reserve funding is
derived from General Fund accumulated net
operations (as available) and is therefore
considered a “one-time funding source.” Funds
are held in this reserve until Council reviews
funding requests and approves a use or transfer
to a capital project fund.
Use of the reserve funding is at the Council’s
discretion, but typically occurs in conjunction with
the annual budget adoption after Council
conducts a comprehensive review of capital and
efficiency improvement needs. Reserve
replenishment is dependent upon net operational
savings in subsequent fiscal years.
Carryforward Reserve
Under the Assigned Fund Balance classification,
the Reserve for Carryforwards represents
funding held at the end of each fiscal year for
critical unexpended operating budget
appropriations to be purchased in the following
fiscal year, and any remaining Council
Contingency funding. The reserve is reconciled
at the end of each fiscal year to both release prior
year carryforward funding and reserve current
year carryforward funding into the following
budget year.
Staff determines the year-end reserve amount
after all fiscal year payments are finalized; the
reserve amount is conceptually appropriated by
Council each year in the budget adoption
resolution.
Working Capital Reserves
In accordance with the City’s cautious and
conservative fiscal philosophy, the City’s general
prevailing financial policy holds that the City
should fund daily operations with current
resources in order to avoid use of short-term
borrowing for cash flow management.
To support this policy, a Working Capital Reserve
is maintained that meets cash flow requirements,
and in turn, ensures the continuance of services
to the public while also preserving the City’s credit
worthiness. To provide adequate working capital
in the case of extreme circumstances, the City
shall maintain, in combination with the Fiscal
Stabilization Reserve, a minimum operational
reserve of 60 days of the following year’s General
Fund budgeted expenditures (net of internal
service charges and transfers out), up to a
maximum operational reserve amount equal to 90
days of the following year's General Fund
budgeted expenditures (again, net of internal
service charges and transfers out). This reserve
falls under the Unassigned Fund Balance
classification.
Effective 2016-17, the Working Capital Reserve
is maintained at $1 million (reduced from $2
million), and the Fiscal Stabilization Reserve is
maintained at $2.5 million (increased from $1.5
million). At this time, a Working Capital Reserve
of $1 million is sufficient for cash flow needs,
however, the funding level will be assessed on an
annual basis to ensure $1 million is sufficient for
cash flow needs. The $1 million funding shift to
the Fiscal Stabilization Reserve reflects a more
realistic reserve usage structure –the Working
Capital Reserve’s purpose is to ensure sufficient
operating cash; the reserve has no defined fund
uses, repayment terms, or authorization
requirements. On the other hand, the Fiscal
Stabilization Reserve’s purpose is defined and
may be called upon for critical uses in the future.
The overall 60-day General Fund operational
reserve minimum requirements shall continue to
be met.
Fiscal Stabilization Reserve
Under the Unassigned Fund Balance
classification, the Fiscal Stabilization Reserve
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represents a funding set-aside to provide
temporary financing for budget stabilization
caused by fiscal downturns, unanticipated
extraordinary expenditures related to a natural
disaster or calamity, or from an unexpected
liability or funding decrease created by a
legislative action. Effective July 1, 2016, the
Fiscal Stabilization Reserve funding level
increased by a $1 million transfer from the
Working Capital Reserve, up to $2.5 million. As
of 2018-19, the Development Services Reserve
of $650,000 was integrated into the Fiscal
Stabilization Reserve to reflect the Council’s
desire to review citywide operational priorities
and needs as a whole rather than segmented
sections. This brought the Fiscal Stabilization
Reserve up to $3.150 million; approximately 12
percent of the General Fund’s budgeted
operations. Together, these funding shifts
provide a focused but flexible reserve funding
purpose and utilization structure.
Fiscal stabilization uses are defined and
restricted to 1) revenue declines lasting more
than one year and equal to more than 5 percent
of either property tax, the combined total of other
taxes, or General Fund revenues in total; 2) an
unanticipated extraordinary operational increase
of more than 5 percent such as from a natural
disaster; or 3) an unexpected Federal, State,
County or CalPERS funding change.
Council may utilize funding at budget adoption, by
adoption of a budget adjustment resolution during
the course of the year, or after a Federal, State,
or locally declared emergency. In the event a
locally declared emergency takes place, the City
Manager has the authority to spend funds until
such time as the City Council takes action.
Reserve appropriations are to be replenished
from year-end net operations, as available, on a
priority basis. The Fiscal Stabilization Reserve
funding level will be assessed on an annual basis
and may direct staff to increase the reserve fund
through the budget adoption or through a budget
adjustment to ensure this funding level is
sufficient in light of operational reserve
requirements and utilization needs.
The General Fund budget continues to increase
each fiscal year. The overall 60-day General
Fund operational reserve minimum requirement
level is close to the current total of Working
Capital and Fiscal Stabilization Reserve Fund
total. To ensure that the Fiscal Stabilization and
Working Capital Reserves remain at a minimum
requirement level, $100,000 shall be allocated
annually into the Fiscal Stabilization Reserve
from Net Operations as part of the General Fund
Year End Close, effective 2021-22. This
allocation shall only occur if General Fund Net
Operations exceed a minimum of $1,000,000 to
ensure adequate funding is available for other
necessary allocations.
Compensated Absences Reserve
Under the Unassigned Fund Balance
classification, the Compensated Absences
Reserve is established to smooth expenditure
fluctuations resulting from the payout of accrued
leave to employees at service separation and
distribution payouts. Reserve funding equal to
one-third of the compensated absences liability is
established at year-end. Reserve funding in
excess of one-third of the liability is to be returned
to the General Fund’s Other Unassigned
Reserve.
Use of the reserve occurs when total annual
compensated absences payouts exceed
budgeted salary funds. Large payouts decrease
the compensated absences liability at year-end,
thereby supporting the practice of utilizing the
reserve if needed. Year-end reconciling
allocations to and from the reserve are approved
though Council’s budget resolution adoption each
fiscal year, with the liability and resulting reserve
amounts determined as part of the year-end close
process.
Other Unassigned Reserve
The ‘Other Unassigned Reserve’ represents
accumulated net operations not yet allocated to
other fund balance reserves, and by definition, fall
into the Unassigned Fund Balance classification.
General Fund vs Other Fund Reserves
Other Fund’s accumulated net operations are
typically accounted for in an undefined reserve
account in the fund –and typically titled ‘Fund
Balance Reserve’ meaning they do not have
reserve categories. This difference is because
other funds are structured for specific uses or
commitments, hence the fund balance already
has a directed function and fund balance is
therefore committed for that purpose. Whereas
the General Fund is used for multiple and various
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operational purposes thereby requiring a
distinction of purpose for each reserve.
SPECIAL REVENUE FUND RESERVES
Landscape & Lighting and Storm Water
Assessment Zone Funds
Assessment Zone Funds are Special Revenue
Funds, which is a type of governmental fund. As
a governmental fund, the Landscape & Lighting
and Storm Water Assessment Zone Funds
comply with GASB 54 fund balance
classifications, and by nature of the fund’s
purpose, fund balance reserves are classified as
restricted reserves.
Special Revenue Funds account for and report
the proceeds of specific revenue sources that are
restricted or committed to specified purposes
(other than for debt service or capital projects.)
For Saratoga, Assessment Zone Special
Revenue Funds are established to account for
each individual assessment zone financial assets
separately; thereby each fund has its own
separate fund balance reserve.
Each zone’s Fund Balance Reserve should be
sufficient to provide working capital to cover
operational expenses through the first half of
assessment receipts in February, therefore
equitable to approximately one-half of a district’s
annual expenditure budget. The second half of
receipts are received in late May or early June.
Some districts may include capital improvement
projects in addition to ongoing regular
maintenance. This requires accumulating fund
balance over the years to generate sufficient
resources for the improvement projects. As each
zone’s situation is different, a maximum fund
balance shall be determined by the Public Works
Director.
Requests for use of the reserve for special
projects are approved by Council through budget
adoption or by a Council approved budget
adjustment resolution throughout the year.
Reserves are replenished from the Fund’s net
operations in subsequent years.
DEBT SERVICE FUND RESERVES
Library General Obligation (GO) Bond Debt
Fund
The Library General Obligation (GO) Bond Debt
Fund is a Debt Service Fund established to
account for the financial resources accumulated
for principal, interest, and cost of issuance
expenditures associated with the Library Bond
Debt. As Debt Service Funds are a governmental
fund type, the fund reserves fall under the GASB
54 fund balance classifications. Debt Service
Fund reserves are classified as a Restricted
Reserve with the funding only spent for specific
purposes as stipulated by the bond covenants.
The Library GO Bond Debt Fund ensures receipts
are tracked separately, and that funding is
available for the GO Bond debt service
requirements. At a minimum, the year-end fund
balance reserve shall be sufficient to provide
working capital to cover the semi-annual principal
and interest debt payment due on August 1st as
the GO Bond tax receipts are received after the
1st debt payment is due. December receipts
provide for the February payment. In addition, as
bond assessments are collected as a percentage
of property values, reserves should provide
sufficient funding to compensate for tax
fluctuations. The fund’s reserve maximum is set
at no more than one-year of budgeted annual
expenditures.
The reserve balance is increased (or reduced)
through establishing assessment rates at more
(or less) than the semi-annual payments and
bond services require. Therefore, use or
replenishment of the reserve is approved by
Council through budget adoption, and
implemented through an increased or reduced
assessment rate as a result of the fund’s net
operations.
Arrowhead Community Facility District Bond
Debt Fund
In 2016, the City agreed to act as the fiduciary
agent for the Arrowhead Community Facility
District’s bond issuance to fund the community’s
water system infrastructure. The bond was
issued in December 2018, and participants in the
bond issuance began assessment payments in
2018-19. The annual debt service assessment
pays for the cost of the bond’s principal and
interest payments, and the associated
administrative costs. Fund reserves are
comprised of assessments collected less bond
costs. Assessments are established as dollar
amounts rather than percentage rates, so the
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CFD Bond Debt Reserve does not generate
unexpected excess fund balance as does the GO
Bond Debt Fund.
CAPITAL IMPROVEMENT PROJECT FUND
RESERVES
Overview
Capital Improvement Project (CIP) Funds
account for the acquisition and maintenance of
major capital assets other than those financed
through special assessments or enterprise funds.
Capital Project Funds are a type of governmental
fund and therefore comply with GASB 54 fund
balance classifications. Because Council has
directed the fund’s appropriated funding be spent
on specific capital improvement projects, the
Capital Project Fund Balance Reserve is
classified as Committed Fund Balance.
Budgeted capital improvement project funding is
determined by the scope of work approved by
Council and remains assigned for that use until
completed or reassigned by Council. Fund
Balance amounts represent the total remaining
funds in the individual projects at year-end. As
Fund Balance amounts are determined by the
amount of project completion at year-end, setting
a minimum or maximum amount is not applicable.
Fund Balance is automatically re-appropriated to
budgeted capital projects in the following fiscal
year for the improvement work to be completed.
Street Improvement Projects Funds
Street Improvement Project Funds provide for a
safe and functional roadway and pedestrian
street system. Each Street Improvement Fund
(CIP Street Fund, CIP Grant Fund, and Gas Tax
Fund) has multiple projects which roll up into the
overall fund balances but remain designated for
use by project.
The CIP Street Fund receives annual funding
from designated fees, reimbursements,
contributions, and transfers from other funds.
The CIP Grant Fund receives federal, state, and
local grants which vary in source and amount
from year-to-year. On occasion, a private grant
may be received. Typically, CIP Grant Funds
have a negative fund balance as project work is
conducted before reimbursement is received.
Gas Tax Funds represent annual Highway User
Tax and Transportation Congestion Relief
revenue allocations that are to be accounted for
separately and are subject to State audits.
Park & Trail Improvement Project Funds
Park & Trail Improvement Project Funds provide
for capital improvements to the City’s
neighborhood and city parks and plaza, the sport
fields, bike and pedestrian trails, and open space
areas throughout the City. Each of the Park &
Trail Improvement Funds (CIP Park & Trail Fund,
CIP Tree Fund, and the CIP Park & Trail Grant
Fund) have multiple projects which roll up into the
overall fund balances but remain designated for
use by project.
The CIP Park & Trail Fund receives annual
funding from Park-In-Lieu fees, occasional
subventions, reimbursements and contributions,
and transfers in from other funds. The Tree Fund
receives revenue from tree fines and transfers
from other funds upon Council direction. The CIP
Grant Fund receives federal, state, local and
occasional private grants which vary in source
and amount from year-to-year. Typically, CIP
Grant Funds have a negative fund balance as
project work is conducted beforehand and then
reimbursed from expenditure invoices.
Year-end fund balance represents the remaining
unexpended project funds (net of any negative
CIP Grant Fund Balance) which are subsequently
re-appropriated by Council into the following
budget year through budget adoption.
Facility Improvement Project Funds
Facility Improvement Project Funds provide for
capital maintenance and improvements of City-
owned buildings and structures throughout the
City. Each of the Facility Improvement Funds
(CIP Facilities Fund and the Facility Grant Fund)
have multiple projects which roll up into the
overall fund balances but remain designated for
use by project.
The CIP Facilities Fund receives annual funding
from a General Fund transfer, from Theater
Ticket Surcharge Fees, and from
reimbursements and contributions. The Facility
Grant Fund receives revenue from grants that
vary in amount from year-to-year. Typically, CIP
Grant Funds have a negative fund balance as
project work is conducted beforehand and then
reimbursed from expenditure invoices.
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Year-end fund balance represents the remaining
unexpended project funds (net of any negative
CIP Grant Fund Balance) which are subsequently
re-appropriated by Council into the following
budget year through budget adoption.
Administrative & Technology Improvement
Funds
Administrative &Technology Improvement
Project Funds provide for major capital
expenditures to improve or enhance
administrative, operational, and technology-
based systems and processes. Each of the
Administrative & Technology Improvement Funds
(CIP Admin & Tech Improvement Fund and the
Admin & Tech Grant Fund) have multiple projects
which roll up into the overall fund balances but
remain designated for use by individual project.
The CIP Administrative & Technology
Improvement Fund typically receives funding
from a General Fund transfer. Administrative and
technology improvement focused grants are
typically limited to the Community Development
function for housing elements or development
processes. If grants are received, projects
typically have a negative fund balance as project
work is conducted beforehand and then
reimbursed from expenditure invoices.
Year-end fund balance represents the remaining
unexpended project funds (net of any negative
CIP Grant Fund Balance) which are subsequently
re-appropriated by Council into the following
budget year through budget adoption.
INTERNAL SERVICE FUND RESERVES
Overview
Internal Service Funds are established to provide
centralized cost centers for shared expenses and
services in order to efficiently track costs and
manage resources. Costs are then allocated
back to operational programs based on usage to
determine cost of service.
The City’s Internal Service Funds include two
insurance funds: Risk Management and Workers
Compensation, four service/support funds:
Office Support, IT Services, Vehicle & Equipment
Maintenance, and Building Maintenance Funds,
and three equipment replacement funds: the
Vehicle & Equipment Replacement Fund, the
Office Technology Equipment Replacement
Fund, and the Building FF&E (Furniture, Fixture,
& Equipment) Replacement Fund.
Internal Service Funds are similar to the separate
checking or savings accounts a person may use
for different purposes. And, as each fund is
accounted for as a separate entity, operational
revenues less expenditures result in either a
positive or negative net operations, with their own
fund balance to offset operational losses if
needed. At year end, each fund’s net balance is
represented as the “Fund Balance Reserve.”
The intent of the Internal Service Funds Reserves
is to hold appropriate levels of reserves to support
cash flow throughout the fiscal year and to
minimize interfund loans. Some of the Internal
Service Funds do not accumulate funds in excess
of expected ongoing operational costs, but for the
replacement funds, the purpose is to accumulate
a rolling balance to fund future replacement costs
as needed. Individual fund reserve levels are
explained in more detail in the following fund
sections.
Internal Service Funds are a type of Proprietary
Fund; therefore GASB 54 fund balance
classification (for Governmental Fund types)
does not apply. Instead, Internal Service Fund’s
financial statement reports are presented similar
to private-sector businesses and use “Restricted”
and “Unrestricted Net Position” to define net
operational balances (equity/fund balance
reserves).
Unrestricted Net Position allows reserve funding
to be used (with Council approval) within the
general scope of the fund’s purpose. Restricted
Net Position reserves are limited to a specific use,
narrower than the stated purpose of the fund. For
example, grant funding provided for a defined
use, as in remaining funds from a Risk
Management Training Grant within the
Liability/Risk Management Fund, must be used
for qualified training purposes. Most Internal
Service Funds reserves are held in the
Unrestricted Net Position category.
Liability /Risk Management Reserve Fund
The Liability/Risk Management Fund’s
Unrestricted Net Position Reserve supports cash
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flow needs and minimizes interfund loans.
Appropriate levels are maintained through
service chargebacks to the programs, based on
operational risk factors. Most claims are covered
under the insurance risk pool JPA. The City is
self-insured up to $25,000 per General Liability
and City Vehicle Auto Liability occurrence, and up
to $5,000 for Property Damage and 3rd Party Auto
Liability. Non-covered claims are paid fully by the
City.
The Liability/Risk Management program receives
funding from allocations charged to departments,
from grant funding, and from claim
reimbursements. On occasion, the City is
obligated to pay a claim settlement. While some
funds are budgeted for miscellaneous claim
expenses each year, large claims may need to
utilize reserves. For this reason, the Fund
Balance Reserve goal is set at about 100 percent
of annual budget to both fund operational activity
and for claim funding as needed. At year-end,
unspent funding flows into Unrestricted Net
Position or Restricted Net Position for specific
purposes. Requests for use of reserve balance
are approved by Council through budget adoption
or by a Council approved budget adjustment
resolution during the year. If claim payments do
utilize reserve funds, the reserve is replenished
from the Fund’s net operations in subsequent
years.
Workers Compensation Fund
The Workers Compensation Fund’s Unrestricted
Net Position Reserve supports cash flow needs
and minimizes interfund loans. Appropriate
levels are maintained through service
chargebacks to the programs, based on
operational risk factors. The purpose of the
Workers' Compensation program is to provide
insurance benefit coverage for employee work-
related illness and/or injuries through its
membership in a shared risk pool. The risk pool
provides self-insurance coverage up to $250,000,
and excess insurance provides coverage over
this amount up to $10 million.
The Workers Compensation program receives
funding from allocations charged to departments,
from grant funding, and from claim
reimbursements. At year end, unspent funding
flows into Unrestricted Net Position, or Restricted
Net Position for grant funding. Requests for use
of the reserve balance are approved by Council
through budget adoption or by a Council
approved budget adjustment resolution during
the year, such as for an unexpected large claim
settlement. The reserve is replenished from the
Fund’s net operations in subsequent years.
Office Services Fund
The Office Services program provides a
centralized cost center for administrative office
support services, supplies/ equipment, and
maintenance/ repair expenses.Example services
include mailing, printing, and centralized records
management. Example supplies/ equipment
include paper, toner, and binding materials.
Maintenance and repair expenses include
service contracts on shared office equipment.For
efficiency, shared office support costs are
managed collectively and charged back to
departmental programs on a use-basis allocation.
Accumulated net operations are held in the Office
Services Fund for working capital cash flow.
The reserve is funded from the allocations
charged to covered departments. At year-end,
unspent funding flows into Unrestricted Net
Position. Requests for use of excess reserve
balance are approved by Council through budget
adoption or by a Council approved budget
adjustment resolution during the year. Reserves
are maintained at approximately the 50 percent
of budget level, however on occasion, excess
Reserve funds are used for the replacement of
assets such as the mailing machine. The reserve
is replenished from the Fund’s net operations in
subsequent years.
Information Technology Services Fund
Information Technology Services provide for the
delivery of technology-based services throughout
the City’s operations, including maintenance of
the City’s information systems and infrastructure,
program implementation, streaming video,
internet, landline, and wireless communications
systems, cloud-based technology, and support of
all existing information technology as well as new
technology initiatives. For technology oversight,
security, and efficiency, information technology
costs are managed collectively and charged back
to departmental programs on a service-based
allocation to fund the program.
Funding for the program comes from these
allocations charged to departments. At year-end,
unspent funding flows into Unrestricted Net
Position. Accumulated net operations are held in
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the Information Technology Services Fund for
working capital cash flow. Requests for use of
the reserve are approved by Council through
budget adoption or by a Council approved budget
adjustment resolution during the year. The
reserve is replenished from the Fund’s net
operations in subsequent years.
Vehicle & Equipment Maintenance Fund
The Vehicle & Equipment Maintenance program
provides for the fuel, maintenance, and servicing
of the City’s fleet and major equipment to ensure
all vehicles and equipment comply with
manufacturer’s recommendations and safety
requirements.
To fund the program, vehicle & equipment
replacement costs are charged back to the
departmental programs based on assigned
usage. Accumulated net operations are held in
the Vehicle & Equipment Maintenance Fund for
working capital cash flow. At year-end, unspent
funding flows into Unrestricted Net Position.
Requests for use of the reserve are approved by
Council through budget adoption or by a Council
approved budget adjustment resolution during
the year. The reserve is replenished from the
Fund’s net operations in subsequent years.
Facility Maintenance Fund
The Building Maintenance program provides for
the custodial, maintenance, and non-major
repairs and building improvement services for all
facilities at the Civic Center, Prospect Center, and
Museum Park. Additionally, the program
supports the maintenance and repair needs for
the tenants of City leased buildings as defined in
the lease agreements. To fund the program, total
costs are allocated back to departmental
programs primarily based on building space
usage. General and public use is allocated to the
Non-Departmental program.
Accumulated net operations are held in the
Building Maintenance Fund for working capital
cash flow. Funding comes from the allocations
charged to covered departments. At year-end,
unspent funding flows into Unrestricted Net
Position. Requests for use of the reserve are
approved by Council through budget adoption or
by establishing chargeback funding levels higher
or lower than budgeted expenditures. The
reserve is replenished from the Fund’s net
operations in subsequent years.
Vehicle & Equipment Replacement Reserve
The Vehicle and Equipment Replacement Fund
Balance Reserve accounts for accumulated
funding over an asset’s lifespan, to be used for
the replacement of the vehicle or equipment at
the end of its useful life. Initial purchases are paid
for through a department’s operational budget. If
the purchased item is for ongoing use, the
Vehicle & Equipment Replacement program
appropriates an annual allocation for the
replacement of the vehicles and equipment
based on the asset’s cost and years of life. Final
determination for replacement of the asset is
determined through an analysis of whether the
cost of maintenance equals or exceeds the cost
of replacing the asset.
The reserve is funded from allocations charged to
departments and represents accumulated
funding, less amounts expended for asset
replacement. At year-end, unspent funding is
held in Unrestricted Net Position. The reserve is
to be maintained at a level sufficient to provide
replacement funding of vehicles and equipment
in accordance with replacement schedules.
Requests for use of the reserve are approved by
Council through budget adoption or by a Council
approved budget adjustment resolution
throughout the year. The reserve is replenished
from the Fund’s net operations in subsequent
years.
Technology Equipment Replacement Fund
The Technology Equipment Replacement Fund
accounts for accumulated funding over an asset’s
lifespan to be used for the replacement of office
technology-based equipment such as desktop
computers and monitors, laptops and tablets,
network infrastructure, and various other related
equipment. Replacement costs are charged back
to the departments based on assigned equipment
costs. Initial purchases are paid for through a
department’s operational budget. If the
purchased item is for ongoing use, the Equipment
Replacement program appropriates an annual
allocation for the replacement of the equipment
based on the asset’s cost and years of life.
The reserve represents accumulated funding,
less amounts expended for replacements. The
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reserve shall be funded to provide replacement
funding in accordance with replacement
schedules. Funding for the reserve comes from
the allocations charged to covered departments.
Requests for use of the reserve are approved by
Council through budget adoption or by a Council
approved budget adjustment resolution during
the year. The reserve is replenished from the
Fund’s net operations in subsequent years.
Facility Furniture, Fixtures & Equipment (FFE)
Replacement Fund
The Facility FF&E Fund accumulates funding
over an asset’s lifespan to be used for the
replacement of furniture –such as tables, chairs,
and cubicle partitions; for fixtures -such as
kitchen appliances, sound equipment, lighting, for
equipment -such as HVAC units, boilers, and
generators; and for facility infrastructure –such
as roof, door, window, and floor/carpeting
replacement.
Initial purchases for new assets may be paid for
through the Operating Budget or through the
Capital Budget. Annual replacement charges are
charged-back to the supported department
programs with full replacement funding to be
accumulated over the asset’s estimated lifetime.
Final determination for replacement of the asset
is determined through an analysis of whether the
cost of maintenance equals or exceeds the cost
of replacing the asset. The reserve is intended to
be maintained at a level sufficient to provide
replacement funding in accordance with
replacement schedules.
Requests for use of the accumulated reserve
funding are approved by Council through budget
adoption, or if an unplanned situation occurs, by
a Council approved budget adjustment resolution
during the fiscal year. The reserve is replenished
by replacement charge allocations in subsequent
years.
TRUST AND AGENCY FUND RESERVES
Overview
Trust and Agency Funds are created to assist
City-related agencies with fund management
needs. Trust Funds hold another entity’s funds
and ensure the proper management of their
money. Agency Funds are established to receive
and disburse another entity’s money, as directed
by the associated entity.
The City does not currently have any Trust Funds
but has one Agency Fund: the West Valley Clean
Water Program. Because Agency Funds manage
their own money, the City of Saratoga does not
develop Reserve Policies for Agency Funds.
SUMMARY
Fund Balance Reserve Use
Council may utilize reserve funding at budget
adoption or by adoption of a budget adjustment
resolution during the course of the year if
necessary. Reserve funding is replenished from
year-end net operations, or if the fund has a
negative net operation, then Reserve funds would
offset the net operation loss with the close of the
fiscal year.
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CIP Project Process Policy
CAPITAL IMPROVEMENT PROGRAM (CIP)
PROJECT PROCESS POLICY
This procedural policy defines how a project
moves through the CIP Budget Funding process:
from the initial project idea, through project
development, to the Council’s CIP Project Review
and CIP Budget Study Session meetings, and if
successful, into the Capital Budget as a funded
project.
The CIP project development stage of the policy
takes different tracks, depending upon whether
the project idea is staff driven or Council
nominated. These two paths are discussed
separately below, until the tracks converge for
CIP Project Review Meeting.
STAFF PROJECT DEVELOPMENT
1.CIP Project Initiation
As a function of staff’s day-to-day work,
infrastructure improvements, large-scale
repairs, and ongoing maintenance and
replacement projects are identified as
potential capital improvements. These are
often highly-visible and tangible public assets
such as street repaving, retaining walls, or
park and trail improvements. However, many
essential CIP projects are less noticeable,
including storm drain repairs, electrical or
irrigation upgrades, or ADA enhancements.
Other projects are intangible administrative
or technology improvements and, in most
cases, invisible to the general public, such as
code updates/revisions, software and
process improvements, or economic vitality
programs.
Staff discusses CIP project ideas with the
appropriate Director or City Manager for
feedback and refinement. Ultimately,
projects need clearly defined boundaries to
identify project requirements, specifications,
and resources. While this is not always
feasible in the initial stages of project
development, the understanding that a
project will eventually require a clear and
specific scope will encourage better
preparation for discussing the project idea
and moving it through the approval process.
After receiving initial approval, staff moves
into the idea development stage.
2.Idea Development
To move the idea forward, staff will analyze
and articulate the project’s scope, political
impacts, priority factors, resource
requirements, and any other relevant
considerations.
a.Project Scope –Scope may include the
description, project size and location
parameters, project purpose, and goals
or deliverables, such as products,
services or results. Project justifications
and assumptions should support the
project’s purpose and definition, and may
include cost-benefit analysis, risk
assessments, funding availability, or
even community desirability factors.
The scope should clearly state if a project
is to be funded and/or completed in
phases rather than as a singular body of
work. If a phased project, information
regarding future phases and total costs
should be included. For instance, a
design project should include information
on the intended project’s construction
phases and total estimated cost.
If the project is ongoing infrastructure
maintenance such as a roof replacement,
or a program project such as a General
Plan element update, this too should also
be clearly noted. In the scope
description, constraints or restrictions
may help to identify project limitations.
And in some cases, project scope may
be clarified by exclusions –statements
about what the project will not
accomplish or produce.
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CIP Project Process Policy
Project Scope defines a commitment to
produce a body of work or end-product
with the resources provided under the
stated assumptions. The written scope
helps to manage expectations and
provide clarity to the involved parties,
reduce confusion and failure, prevent
scope creep, and provide transparency
to the community.
b.Political Considerations -Knowledge
of historical information, which attests to
the necessity of Council/staff
communication is of vital importance in
project development. Determine
whether this project has come up for
consideration before, or why was it not
completed previously. Have
circumstances changed? Or are there
lessons to be learned from a past project
proposal?
Another consideration includes knowing
whether a project might be controversial.
Is there a segment of the community
strongly opposed to, or strongly
supportive of this specific project? Will
this project prompt demand for further
funding or resources? Have similar
projects been completed in another part
of the city? Determine why this project
should be considered a priority over
others, and whether the project’s cost or
benefits would be supported by the
community.
c.Priority Factors -Project priority is an
important consideration in the CIP
approval decision. Ultimately, Council
wants to support those projects that are
of higher priority than others since there
will never be enough money or resources
to do every project. Decision criteria
may include factors such as:
Health and Safety Issues
Imminent failure of structure/system
Short-term cost of repair vs. long-
term cost of replacement
Availability of external or dedicated
funding
Efficiencies
Federal or State mandates
Business or community support
Impacts if project not undertaken
The severity of priority criteria is
considered in the decision-making
process. For instance, a project that falls
under the “Imminent Failure of
Structure/System” criteria is assessed to
determine whether there are safety
issues, or if immediate repairs would
provide significant replacement or
maintenance savings. Another
consideration would occur with Federal
or State mandated projects. There may
be little impact as to whether the
mandate is met, or there may be severe
fines or risk of lawsuits for lack of timely
completion. As a result, project priority is
based on the overall assessment of the
collective circumstances; many factors
contribute to priority decisions and
Council cannot rely upon a clear
hierarchical order upon which to base
their decisions.
d.Project Resources -In the City’s project
development discussions, resources
typically refer to financial funding.
However, resources may also refer to
staff time, equipment and materials,
community/stakeholder participation or
support, space requirements, information
technology services, or some other type
of support or contribution needed for a
project to be successful.
Funding plays a critical role in project
development. In many cases, lower
priority projects are approved ahead of
higher priority projects simply because
there is designated funding available for
the lower priority projects. The ability to
leverage designated funding with grant
funding for a project proposal greatly
increases the likelihood a proposed
project will be approved. Overall, a
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CIP Project Process Policy
project funded solely by Capital Project
Reserve money needs to be more
competitive due to funding limitations and
the number of projects competing for the
same pot of funds.
An additional component of project
resource considerations are the unstated
resources (identified above) required in
project construction or implementation.
For instance, staff time is limited, and
time spent working on one project
prevents staff time being spent on
another project. Project timing and staff
time requirements are therefore an
important component of the number and
types of projects brought to Council for
review.
Other Considerations -Numerous
other factors, not mentioned above, are
also taken into consideration when
assessing a project idea. For example:
a.Can the City afford the ongoing
operating budget increases to
maintain or implement the project?
b.Does the project provide operational
efficiencies or cost savings?
c.Are there environmental concerns?
d.Does it enhance the community’s art,
education, or cultural resources?
e.What impacts are there if the project
requires development be staged in
phases?
f.Are there risk management concerns,
or legal liability issues?
g.Is there strong community interest in
this project?
h.Does the project contribute toward
economic vitality?
Each project will differ, meaning analysis
is specific to the circumstances,and
diligent research and thought should be
put into developing project scope and
justification.
In summary, the goal of idea
development is to identify, quantify, and
assess a project comprehensively. This
effort is intended to ensure that a
proposed project is well thought-out,
developed, and articulated thereby
enabling the City Manager and Council to
make educated and rational decisions.
3.City Manager Approval
Staff’s proposed projects ultimately go to the
City Manager. If approved for consideration,
staff will prepare written narratives with
project scope, justification, fiscal impacts,
cost estimates, timelines, etc. as necessary
for Council Retreat assessment package and
Finance Staff will add the project to the
Proposed CIP Project List.
CITY COUNCIL PROJECT DEVELOPMENT
Council Members are often the recipients of
residents’ suggestions and requests for capital
improvements. Depending on the topic, Council
Members can take these opportunities to: 1)
educate the residents on why a project may not
be feasible; or 2) provide residents with
information on how to contact City staff with their
requests to determine feasibility; or 3) Council
may support the project suggestion and decide to
act as a proponent for the project by guiding it
through the Capital Project Nomination process:
1.Nomination
To move a project idea onto the CIP
Candidate List, a Council Member is to
propose the idea to fellow Council Members
at the end of a City Council Meeting during
the Council Items session and request that it
be put on the CIP Candidate List for review
during the next upcoming CIP budget cycle.
2.Idea Concurrence
A second Council Member must concur with
the request to move the project idea onto the
Capital Project Candidate List.
3.Follow-up
A nomination to the Proposed Capital Project
List is to be recorded in the City Council
minutes and acted upon as a follow-up item.
City Manager will clarify/verify understanding
of project scope and then assign staff to
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complete Proposed CIP Project
requirements, including preparation of project
scope narrative and justification, fiscal
impacts, cost estimates, timelines, etc.
Council nominated projects are automatically
included as a proposed CIP project in the CIP
Project Review package.
CIP PROJECT REVIEW AND APPROVAL
1.CIP Project Review Package
In preparation for the annual Capital Project
Review, Finance Staff will consolidate
Proposed CIP projects information, along
with proposed changes to current CIP
projects, and the current year’s CIP
Unfunded Project List into a presentation and
CIP Project Review package for Council.
The CIP Project Review meeting provides
Council with a forum to have an in-depth
discussion on funding availability, assess
project scopes, evaluate priority criteria and
resources, and examine impacts of other
considerations for CIP projects at one time.
The CIP Review package will include:
●Available funding
●Current year CIP projects
●Proposed changes to existing projects
●The current CIP Unfunded List
●Proposed changes to projects on the
CIP Unfunded List
●Proposed new CIP projects
●Proposed additions to the CIP Unfunded
List
2.Capital Project Review Meeting
The City Council’s review of current and
proposed funded and unfunded Capital
Projects is held annually, typically at the
Council Retreat as part of the budget
development cycle initiation. In addition to
reviewing the Capital Project Review
package, the Council may request a currently
funded capital project be reviewed to
determine if the project should continue in the
following fiscal year. If consensus direction is
given, staff will add the currently funded
project into the Review package for
discussion at the follow-up CIP Budget
Prioritization Meeting.
In reviewing Capital Projects, Council may
request revisions to a project’s scope,
funding, or other component. However,
changes that redefine a proposed project
must be Council’s consensus direction.
At the conclusion of the CIP Project Review
meeting, Council may retain the CIP Project
Review Binder although the documents will
also be available on the City’s website.
3.CIP Budget Study Session
The CIP Budget Study Session agenda is to:
Remind Council of the upcoming fiscal
year’s Capital Project funding availability.
Recap the Proposed CIP Projects
Review Meeting proposals and
associated priority issues.
Inform Council of any changes or
modifications since the CIP Project
Review Meeting.
Answer questions Council may have on
proposed projects.
Reach consensus on the Proposed CIP
Funding Scenario and CIP Unfunded
List.
Council will conduct a final assessment and
provide consensus direction to staff for CIP
Project funding to be included in the
upcoming Proposed Budget Hearing to be
held in May, and modifications to the CIP
Unfunded Project List, if any.
NOTE: Rejected project ideas may be
brought back in following years for another
attempt to become an approved project but
must go through the project development
process again.
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CIP PROJECT FUNDING
1.Proposed Budget Hearing
Staff will incorporate Council’s direction from
the CIP Budget Study Session into the
Proposed Capital Budget brought to the City
Council Budget Public Hearing that occurs in
late May or early June. Council to provide
any final comments or direction for budget
adoption.
2.Budget Adoption
The Operating and Capital Budgets are
brought to Council in June with all final
direction incorporated into the final
summaries. Council is asked to adopt the
budget at this time, with budget funding
effective on July 1st , the start of the next fiscal
year.
3.Funding Process Follow-up
Approved CIP projects that do not receive
funding allocations are assigned to the CIP
Unfunded List. The CIP Unfunded List has a
life span of one budget cycle meaning the
budget adoption keeps the Unfunded CIP
Project for consideration as a potential
project in the following fiscal year CIP project
discussions.
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Memorandum
DATE: April 11, 2023
TO: Finance Committee
FROM: Nick Pegueros, Administrative Services Director
SUBJECT: Request for Special Meeting
City staff requests a Finance Committee Special Meeting at 4:00 p.m. on Monday, May,1 or Tuesday, May
2,to present a preview of the 2023-24 budget for feedback on the budget presentation to City Council on
May 17.
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