FY 2022-23 San Fernando Valley Council of Governments

SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS ANNUAL FINANCIAL REPORT June 30, 2023 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS JUNE 30, 2023 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor’s Report ................................................................................................... 1 Management’s Discussion and Analysis ................................................................................... 4 Basic Financial Statements: Statement of Net Position ................................................................................................... 6 Statement of Revenues, Expenses, and Changes in Net Position ....................................... 7 Statement of Cash Flows .................................................................................................... 8 Notes to the Basic Financial Statements ............................................................................. 9 PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES CRAIG A HARTZHEIM, CPA 8383 WILSHIRE BLVD., SUITE 800 5800 HANNUM AVE., SUITE E HADLEY Y HUI, CPA BEVERLY HILLS, CA 90211 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 Independent Auditor’s Report To the Honorable Board of Directors San Fernando Valley Council of Governments Van Nuys, California Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of the San Fernando Valley Council of Governments (the Authority), as of and for the fiscal year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Authority as of June 30, 2023, and the changes in financial position and cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Authority and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 1 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 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 4 and 5, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 2, 2024, on our consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance. Moss, Levy & Hartzheim, LLP Culver City, California May 2, 2024 3 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS JOINT POWERS AUTHORITY Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 Management's discussion and analysis of the San Fernando Valley Council of Governments Joint Powers Authority (the Authority) provides a narrative overview of the Authority's financial activities for the fiscal year ended June 30, 2023. Please read it in conjunction with the accompanying financial statements, footnotes, and supplementary information. Financial Highlights  During the current fiscal year, the Authority's net position increased by $26,639 to $251,137.  Operating revenues decreased by $65,582 to $140,328 while operating expenses decreased by $71,716 to $121,490.  The Authority has no short- or long-term debt. Overview of Financial Statements This MD&A serves as an introduction to the Authority’s basic financial statements. The basic financial statements include four components: 1) Statement of Net Position; 2) Statement of Revenues, Expenses and Changes in Net Position; 3) Statement of Cash Flows; and 4) Notes to the Financial Statements.  The Statement of Net Position presents all of the Authority's assets and liabilities, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator to determine whether the financial position of the Authority is improving or deteriorating.  The Statement of Revenues, Expenses, and Changes in Net Position presents information showing how the Authority's net assets changed during the fiscal year. All changes in net position (revenues and expenses) are reported when the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Accordingly, revenues and expenses are reported in this statement for items that will result in cash flows in future fiscal periods (e.g. accrued but unpaid contract and professional service fees).  The Statement of Cash Flows presents information regarding the Authority’s use of cash during the fiscal year and is an indicator of whether or not sufficient cash flow is being generated during the fiscal year to meet the operating needs of the Authority.  The notes provide additional information that is essential for a full understanding of the data provided in the financial statements. 4 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS JOINT POWERS AUTHORITY Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 Financial Statement Analysis The operating revenues consist of member dues from the participating agencies, local grants and donations. Operating revenues totaled $140,328 for the year ended June 30, 2023 and decreased $65,582 from the prior fiscal year due to decreases in local grants received. Operating expenses consist primarily of contract and professional service fees and supplies. They totaled $121,490 for the fiscal year ended June 30, 2023, a decrease of $71,716 from the prior fiscal year. As of June 30, 2023, the Authority had total assets of $263,261, a decrease of $34,804 from the prior fiscal year. The decrease was a result of a decrease in local grants. Total liabilities as of June 30, 2023 were $12,124 compared to $73,567 as of June 30, 2022. A decrease of $61,443 was due to decrease in accrued expenses. Capital Assets As of June 30, 2023, the Authority did not have any capital assets. Debt Administration As of June 30, 2023, the Authority had no outstanding debt. Economic Factors The Authority was established to allow the members to engage in cooperative local and regional planning and the coordination of government services and responsibilities to assist the members in the conduct of their affairs; to conduct studies and projects designed to improve and coordinate the common governmental responsibilities and services on a Valley area and regional basis; and to coordinate implementation programming. The Authority’s board continues to pursue additional funding opportunities. Contacting the Authority’s Financial Management This financial report is designed to provide our citizens and other interested parties with a general overview of the Authority's finances and to demonstrate the Authority's accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the County of Los Angeles, Department of Auditor-Controller, 500 West Temple Street Room 525, Los Angeles, CA 90012. 5 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS Statement of Net Position June 30, 2023 Assets Cash on deposit with County Treasurer (Note 3) $ 250,963 Receivables: Accrued interest 2,630 Los Angeles County Homeless Grant (Note 1) 7,578 Accrued revenue 348 Prepaid expenses 1,742 Total Assets 263,261 Liabilities Accounts payable 12,124 Total Liabilities 12,124 Net Position Unrestricted (Note 4) 251,137 Total Net Position $ 251,137 See accompanying notes to the basic financial statements 6 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS Statement of Revenues, Expenses, and Changes in Net Position For the Fiscal Year Ended June 30, 2023 Operating Revenues: Membership dues $ 120,000 Donations 6,000 LA County Homeless Grants 13,980 Reimbursement of expenses 348 Total Operating Revenues 140,328 Operating Expenses: Contract and professional service fees 118,591 Utilities, supplies, and other charges 2,899 Total Operating Expenses 121,490 Operating Income 18,838 Non-Operating Revenues: Interest on deposited funds 7,801 Change in Net Position 26,639 Net Position, Beginning of the Fiscal Year 224,498 Net Position, End of the Fiscal Year $ 251,137 See accompanying notes to the basic financial statements 7 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS Statement of Cash Flows For the Fiscal Year Ended June 30, 2023 Cash Flows from Operating Activities: Cash received from membership dues $ 120,000 Cash received from LA County Homeless Grants 27,651 Cash received from donations 6,000 Cash received from reimbursement 55,000 Cash paid to suppliers for goods and services (184,675) Net Cash Provided by Operating Activities 23,976 Cash Flows from Investing Activities: Interest received 5,722 Net Cash Provided by Investing Activities 5,722 Net Increase in Cash and Cash Equivalents 29,698 Cash Deposited with County Treasurer, Beginning of Fiscal Year 221,265 Cash Deposited with County Treasurer, End of Fiscal Year $ 250,963 Reconciliation of Cash Deposited with County Treasurer to Amounts Reported on the Statement of Net Position Cash on deposit with County Treasurer $ 250,963 Reconciliation of Operating Activities to Net Income Provided by Operating Activities: Operating Income $ 18,838 Adjustments to reconcile operating income to net cash provided by operating activities: (Increase) decrease in grant receivable and accrued revenue 68,323 Increase (decrease) in accounts payable and accrued expenses (63,185) Net Cash Provided by Operating Activities $ 23,976 See accompanying notes to the basic financial statements 8 NOTES TO THE BASIC FINANCIAL STATEMENTS SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization The San Fernando Valley Council of Governments (the Authority) was formed on May 25, 2010, as a joint powers authority by the County of Los Angeles, the City of Los Angeles, the City of Santa Clarita, the City of San Fernando, the City of Glendale, and the City of Burbank. The Authority was established for the purpose of allowing the members to engage in cooperative local and regional planning and coordination of government services and responsibilities to assist the members in the conduct of studies and projects designed to improve the San Fernando Valley region. The Authority is governed by a Board of Directors composed of thirteen appointed directors: two from the Board of Supervisors of the County of Los Angeles supervisorial districts that are entirely or partially located in the San Fernando Valley, seven from the City of Los Angeles council districts that are located partially or entirely in the San Fernando Valley, one from the City of Santa Clarita, one from the City of San Fernando, one from the City of Glendale, and one from the City of Burbank. The Authority is legally separate and fiscally independent from each of the member entities. This means it can incur debt, set, and modify its own budget and fees, enter into contracts, and sue and be sued in its own name. The County of Los Angeles and the City of Los Angeles each pay annual dues of $35,000. The other cities each pay $12,500. The Authority has no employees and has contracted for Executive Director services. The Auditor-Controller and the Treasurer and Tax Collector of the Los Angeles County serve as the Auditor-Controller and Treasurer of the Authority and are responsible for the accountability of all funds and for reporting all receipts and disbursements of the Authority. The accompanying basic financial statements reflect the financial activities of the Authority. The Authority has no component units. B. Significant Accounting Policies The Authority’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Basis of Accounting and Measurement Focus The Authority is accounted for as an enterprise fund (proprietary fund type). A fund is an accounting entity with a self-balancing set of accounts established to record the financial position and results of operations of a specific governmental activity. The activities of enterprise funds closely resemble those of ongoing businesses in which the purpose is to conserve and add to basic resources while meeting operating expenses from current revenues. Enterprise funds account for operations that provide services on a continuous basis and are substantially financed by revenues derived from user charges. The Authority utilizes the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when the liability is incurred. Proprietary funds distinguish operating revenues and expenses from nonoperating items. The principal operating revenue of the Authority is the annual dues received from the members. Operating expenses include the cost of executive services and administrative expenses. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 9 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Significant Accounting Policies (Continued) The Authority’s financial statements are presented in accordance with the provisions of GASB No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments and GASB Statement No. 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB No. 34 established standards for external financial reporting for all state and local governmental entities and GASB No. 63 established standards for reporting deferred outflows of resources, deferred inflow of resources, and net position in a statement of financial position. The net position is required to be classified into three components – net investment in capital assets; restricted; and unrestricted. These classifications are defined as follows: Net investment in capital assets – This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and is reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at fiscal year- end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of net investment in capital assets. Rather, that portion of the debt is included in the same net position component as the unspent proceeds. As of June 30, 2023, the Authority had no capital assets or debt obligations. Restricted net position – This component of net position represents restricted assets net of liabilities that relate to those specific restricted assets. A restricted asset is an asset for which constraints have been placed on the asset’s use by creditors, contributors, laws, or regulations of other governments, or as a consequence of a restriction established by the reporting government’s own governing body at the time a particular fee, charge, levy, or assessment was approved. These restrictions must be narrower than the general purposes for which the reporting government can use its resources. As of June 30, 2023, the Authority had no restricted net position. Unrestricted net position – This component of net position consists of net position that does not meet the definition of “restricted” or “net investment in capital assets.” As of June 30, 2023, the Authority had a balance of $251,137 of unrestricted net position. When both restricted and unrestricted resources are available for use, it is the Authority’s policy to use restricted resources first, then unrestricted resources as they are needed. C. Revenue Recognition The Authority’s major source of revenue is the annual dues from the members. Per the Joint Powers Agreement, the County of Los Angeles and the City of Los Angeles each pay $35,000 in annual dues. The other cities each pay $12,500 annually for participation in the Authority. The Authority also receives grant revenue from the County of Los Angeles for providing homelessness prevention coordination services. 10 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Capital Assets Capital assets, which include land, buildings, and improvements, are reported in the statement of net position. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. As of June 30, 2023, there were no capital assets reported for the Authority. E. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. F. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash represents balances that can be readily withdrawn without substantial notice or penalty. Cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash or so near their maturity that they present insignificant risk of changes in value because of changes in interest rates and have an original maturity date of three months or less. G. Los Angeles County Homeless Grant Receivable Los Angeles County (the County) has approved Measure H funding to be provided to the Authority to provide regional coordination services for better homelessness services coordination between the County, the Authority, San Fernando Valley Cities, Regional Homeless Service Providers, and Faith Organizations. The regional coordination will also support the implementation and support of the County’s strategies and programs to combat homelessness with the San Fernando Valley region. The Authority had receivables from the County of $7,578 as of June 30, 2023. NOTE 2 RELATED PARTY TRANSACTIONS The County of Los Angeles maintains the books and records of the Authority, including the investment with the County Treasurer and Tax Collector. NOTE 3 CASH ON DEPOSIT WITH COUNTY TREASURER In accordance with the Joint Powers agreement and Government Code, cash balances of the Authority are deposited with and pooled and invested by the Los Angeles County Treasurer and Tax Collector for the purpose of increasing interest earnings through investment activities. Interest earned on pooled investments is deposited to participating funds based upon each fund’s average daily balance during the allocation period. California Government Code Sections 53601 and 53636 authorize the Treasurer to invest the External Investment Pool (Pool) and SPI funds in obligations of the United States Treasury, federal agencies, municipalities, asset-backed securities, bankers’ acceptances, commercial 11 SAN FERNANDO VALLEY COUNCIL OF GOVERNMENTS NOTES TO THE BASIC FINANCIAL STATEMENTS June30,2023 NOTE 3 CASH ON DEPOSIT WITH COUNTY TREASURER (Continued) paper, negotiable certificates of deposit, medium-term notes, corporate notes, repurchase agreements, reverse repurchase agreements, forwards, futures, options, shares of beneficial interest of a Joint Powers Authority that invests in authorized securities, shares of beneficial interest issued by diversified management companies known as money market mutual funds, registered with the Securities and Exchange Commission, securities lending agreements, the State of California’s Local Agency Investment Fund and supranational institutions. California Government Code Section 53534 authorizes the Treasurer to enter into interest rate swap agreements. However, these agreements should only be used in conjunction with the sale of the bonds approved by the Board. As permitted by the California Government Code, the Treasurer developed, and the Board adopted an Investment Policy that further defines and restricts the limits within which the Treasurer may invest. The investments are managed by the Treasurer, which reports investment activity to the Board on a monthly basis. In addition, the Treasurer’s investment activity is subject to an annual investment policy review, compliance oversight, quarterly financial review, and annual financial reporting. The Treasurer also maintains Other Specific Investments, which are invested pursuant to Section 1300.76.1, Title 28, California Code of Regulations. The County has neither provided nor obtained any legally binding guarantees during the fiscal year ended June 30, 2023, to support the value of shares in the Pool. Investments are stated at fair value and are valued on a monthly basis. The Treasurer categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. Securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Securities classified in Level 2 of the fair value hierarchy are valued using other observable inputs such as matrix pricing techniques or based on quoted prices for assets in markets that are not active. Matrix Pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Level 3 inputs are significant unobservable inputs. Securities classified in Level 3 are valued using the income approach such as discounted cash flow techniques. Investment in an external government investment pool is not subject to reporting within the level hierarchy. See the County of Los Angeles’ Annual Comprehensive Financial Report for disclosures related to cash and investments and the related interest rate risk, credit rate risk, custodial risk, and concentration risk. Funds deposited in the Los Angeles County Treasury Pool amounted to $250,963 as of June 30, 2023. This represents less than 0.01% of the total balance of the Los Angeles County Treasury Pool. NOTE 4 NET POSITION Net position at June 30, 2023, consisted of the following: Unrestricted Net Position $ 251,137 Total Net Position $ 251,137 NOTE 5 CONTINGENT LIABILITIES The Authority has represented there is no pending or threatened litigation. 12