Within six months of the close of each fiscal year (June 30th), state law requires the City of Cathedral City to publish a complete set of financial statements presented in conformance with Generally Accepted Accounting Principles of the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Prepared by the Finance Department according to Municipal Code, Section 2.12.040, this report is referred to as the City’s Comprehensive Annual Financial Report (CAFR).
The CAFR consists of management’s representations concerning the finances of the City. Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the City. To provide a reasonable basis for making those representations, City management has established a comprehensive internal control framework designed to both protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with U.S. GAAP.
Lance, Soll, & Lunghard, LLP, a statewide firm of licensed certified public accountants, is the independent auditor of the City’s finances. Each year, the goal of the independent audit is to provide assurance the financial statements are free of misstatement. The audit involves examining evidence supporting the amounts and disclosures in the financial statements for 50+ funds the City manages; assessing the accounting principles used, the legal and appropriate checks and balances that are in place to minimize risk; and, evaluating the overall presentation of the financial statements. Based upon the annual audit that was conducted this fall, the independent auditors have concluded there is a basis for rendering a favorable opinion of the City’s financial statements as of and for the year ended June 30, 2018.
Although the City continues to recover from the Great Recession of 2007, it has been necessary for the City to take certain actions to minimize the impact to the City’s ability to provide vital community services. This is predominantly due to the highly concentrated revenue source derived from the auto sales and services, which is considered a highly volatile industry. In order to mitigate this economic volatility and the associated risk of another downturn in our economy, it is essential we grow our General Fund’s “Savings Account”, which is formally known as our fund balance. As a result, under the direction of the City Council effective July 1, 2014, the City’s Fund Balance (“Savings Account”) Policy was amended to establish specific goals for our savings account:
Under the policy, the City must maintain a minimum fund balance of 33% of its annual general fund operating budget. By the year 2020, the City must grow its fund balance to 50% of its annual general fund operating budget for the following purposes: (1) cash flow (50%); (2) economic uncertainties/volatility (40%); and (3) unplanned budget-related adjustments (10%). The purpose is to alleviate significant unanticipated budget shortfalls and to ensure the orderly provisions of services to citizens to this community.
During fiscal year 2017/2018, we were fortunate to receive some growth in the new cannabis industry revenues that have moved us towards achieving our General Fund Balance or “Saving’s Account” target sooner than expected. The City generated revenues in the amount of $44,310,602 and incurred expenditures in the amount of $43,421,847 resulting in a net surplus of $888,755. At the end of fiscal year 2017/2018 (June 30, 2018), the City’s General Fund savings account has a balance of $19,331,246 or 44.5% of our 2017/2018 General Fund Annual Operating Budget, which brings us closer to achieving City Council’s 50% “Savings Account” target. Here’s to a healthy, safe and prosperous new (fiscal) year for the City of Cathedral City and the residents we serve.
