04-21-2020 - AGENDA ITEM 07 SECOND QUARTER FINANCIAL REPORT FOR FISCAL YEAR 2019-20AGENDA ITEM NO.7
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AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: April 21, 2020
TO: Mayor and City Council
FROM: David Carmany
City Manager
SUBJECT: SECOND QUARTER FINANCIAL REPORT FOR FISCAL YEAR 2019-20
RECOMMENDATION:
It is recommended that the City Council take the following actions:
1. Receive and file the Second Quarter Financial Report for Fiscal Year 2019-20; and
2. Adopt the following resolution:
RESOLUTION NO.2020-20 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST
COVINA, CALIFORNIA, ADOPTING A BUDGET AMENDMENT FOR THE FISCAL YEAR
COMMENCING JULY 1, 2019, AND ENDING JUNE 309 2020 (Second Quarter Financial Report)
BACKGROUND:
A quarterly report is a financial report that covers three months of the year, which is meant to highlight a
government's revenues and expenditures for one quarter of the July 1 — June 30 fiscal year. The second quarter
report emphasizes balances and transactions related to the first six months of the operating budget.
DISCUSSION:
The City of West Covina has completed the second quarter of Fiscal Year 2019-20. The attached Quarterly
Financial Report summarizes the City's overall financial position for the period of July 1, 2019 through December
31, 2019, but it is not meant to be inclusive of all finance and accounting transactions. While the focus of the
report is the General Fund, summary financial information is also provided for the Enterprise Fund (West Covina
Service Group) and Special Revenue Funds (i.e. Measure R, Proposition A, etc.).
With only 33.9% of the City's General Fund Revenues received by December 31, 2019, the General Fund
Revenues are below budget at this time. This is expected, as the City's two largest General Fund revenues (sales
and property taxes) are not received on a consistent basis. In fact, most property tax revenues are received in
December and April. As part of the second quarter review, staff reviewed General Fund revenue trends and current
available information to provide revised General Fund revenue projections. The revised revenue projections reflect
increases and decreases of various estimated revenues with a net total increase of $2,049,900. The largest increase
in estimated revenues was for Other Revenues at $1,971,200. This category reflected the sale of a parcel of land
owned by the City.
With 50% of the year completed, a review of the City's General Fund Expenditures by department shows that six
of the nine departments are on target with budget projections. The Police Department is just slightly higher than
50% and is expected to be within the budgeted amount by June 30, 2020. The Community Development
Department was over due to certain salaries not being budgeted for in the Building Services Division. The
transition from in house personnel to contract personnel was expected to take effect July 1, 2019, at the time the
budget was prepared. In reality, the contract for building services did not commence until September 2019. The
Fire Department expenditures for the second quarter are trending at 52.5% of budget. This was largely due to
vacancies in the department. The Fire Department is now fully staffed; however, overtime is expected to be
approximately $2,433,480 which is $306,480 over the budgeted amount of $2,127,000. The overtime in excess of
the budgeted amount is from the delay in filling the vacancies and training the new personnel. The use of overtime
is being closely monitored and evaluated by the City Manager and the Finance Director and necessary corrections
and alternative solutions are being evaluated. Attached is a copy of the Agreed Upon Procedures report regarding
personnel expenditures and overtime in the Fire Department (Attachment 3).
The overtime budgets for the Police and Fire Departments are being reviewed biweekly by City staff. Staff will
also provide another update on the overtime for both departments in the Third Quarter Financial Report.
This financial report encompasses the first six months of the fiscal year and does not take into effect the financial
impact of the COVID-19 pandemic. Since the preparation of this report, the pandemic has spread world-wide and
the City of West Covina will experience substantial financial loss in the coming months. Sales Tax projections for
the next several months could range between $2 million and $4 million less than the projections in the 2019-20
budget depending on how soon the restrictions on businesses are lifted and life returns to some sort of normalcy.
The largest financial impact is the sales tax; however, other revenues such as business license and transient
occupancy tax are affected as well. On April 10, 2020, the California Department of Finance issued a COVID-19
Interim Fiscal Update projecting the statewide impacts created by the pandemic (Attachment 4).
Assuming that the sales tax decrease is at the minimum of $2 million, the City's unassigned reserves will decrease
to $7,602,434. In addition to that, anticipated settlements of lawsuits totaling approximately $1,500,000 would
further reduce the City's unassigned fund balance to $6,102,434 or 8.9%.
Lastly, the City prepaid its unfunded pension liability to CalPERS at the beginning of the fiscal year at a General
Fund cost of $10,752,317. Doing so, saved the City approximately $382,685 in General Fund pension costs for the
fiscal year.
The City will also make these reports available on the City's website for future review.
Prepared by: Robbeyn Bird, Finance Director
Fiscal Impact
FISCAL IMPACT:
The proposed budget amendment will increase General Fund estimated revenues by $2,049,900 and increase
General Fund expenditures by $2,332,379 which will result in a decrease in the fund balance of the General Fund
by $282,479 for Fiscal Year ending June 30, 2020. Based on the cumulative effect of previously approved
amendments coupled with this budget amendment, the estimated unassigned fund balance at June 30, 2020 will be
$9,602,434 (14.1%); the result of which is $1,969,787 less than what is needed to meet the City's Fund Balance
Reserve Policy of 17%.
Proposed General Fund (Fund 110) changes are summarized as follows:
• Increase and decrease to various Revenues based on revised projections with a net increase of $2,049,900,
• Increase Administration Department budget by $66,200 for cost of salaries of Senior Administrative
Assistant and membership in the San Gabriel Valley Economic Partnership,
• Increase City Clerks Department Election costs budget by $280,000 for the sales tax initiative that was on
the ballot in March 2020,
• Increase Human Resources Risk Management Department budget by $162,000 for BICEP Insurance
Premium,
• Increase Police Department Salaries & Benefits budget by $652,800,
• Increase Fire Department budget by $261,300; $241,300 for Ground Emergency Medical Transportation
overpayment and $20,000 for training,
• Increase Community Development Department Salaries & Benefits by $182,879 for Building Division
salaries prior to privatization, and
• Increase Transfers Out by $567,200 for the Maintenance of Effort required by the SB 1 monies.
It should be noted that the majority of the increases in expenditures are covered by the increases in the revenues.
Attachments
Attachment No. 1 - Second Quarter Financial Report for Fiscal Year 2019-20
Attachment No. 2 - Resolution No. 2020-20 with Exhibit 1
Attachment No. 3 - Agreed Upon Procedures Fire Department
Attachment No. 4 - Department of Finance Interim Fiscal Update
CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability
CITY OF
WEST COVINA
Fiscal Year 2019-20
The City has completed the second quarter of Fiscal
Year 2019-20. This report summarizes the overall
financial performance of the City for the period of July
1, 2019 through December 31, 2019, but it is not meant
to be inclusive of all finance and accounting
transactions. While the focus of the report is the
General Fund, summary financial information is also
provided for the Enterprise Fund and Special Revenue
Funds. The information presented is unaudited. This
report is intended only to provide the City Council and
the public with an overview of the City's general fiscal
condition.
The revenue and expenditure budgets per the Budget
to Actual comparisons include adjustments for
carryovers and any appropriations made as of
December 31, 2019. The information presented
reports revenues as they are received and
expenditures when paid. Revenues and expenditures
are only accrued at year end to account for such
activity in the correct fiscal year.
GENERALFUND
The General Fund is the general operating fund for the
City. It provides the resources to sustain the day-to-
day activities and services to the community. All nine
departments receive support, either directly or
indirectly, from the General Fund.
The General Fund budget for FY 2019-20 as of
December 31, 2019 is $65,748,419 for revenues and
$65,739,509 for expenditures. With 50% of the year
complete, General Fund revenues are at 33.9% of
budget and expenditures are at 50.0% excluding the
prepayment of the PERS Unfunded Accrued Liability
(UAL).
ATTACHMENT NO. 1
General Fund
Budget to Year -to -Date Actual
$70,000,000
$65,715,919 $65,739,509
$60,000,000
$50,000,000
$40,000,000
$38 253,668
$30,000,000
$22,253,201
$20,000,000
$10,000,000
1
$_
Revenues Expenditures
■ Budget ■YTD Actual
GENERALFUND
REVENUES
BUDGET
YTD
ACTUAL
Property Tax
$ 26,680,400
$ 4,937,311
18.5 %
Sales Tax
16,900,000
5,715 860
33.8%
Other Taxes
8,907,700
2,393,358
26.9%
Licenses & Permits
1,488,700
669,345
45.0%
Fines & Forfeitures
770,000
298,150
38.7%
Interest & Rents
928,200
526,819
56.8%
Revenue from
other Agencies
2,552,500
2,143,453
84.0%
Charges for Services
5,742,100
2,969,022
51.7%
Other Revenues
591,146
2,019,334
341.6%
Transfers In
1,155,173
580,549
50.3%
TOTAL
$ 65,715,919
$ 22,253,201
33.9%
The City's two major General Fund revenue sources
are Property Tax and Sales Tax which make up over
66% of the General Fund revenues.
• Property Tax: The first major apportionment
distribution to the City for FY 2019-20 occurred
in December 2019. Also, the revenues
received in July and August are for the prior
year and accrued as such. Included in this line
item are Secured Property Taxes, Property
Taxes In -Lieu of Vehicle License Fees (VLF),
City of West Covina
Second Quarter Financial Report FY 2019-2020
and residual payments from the dissolution of
the former redevelopment agency.
Sales Tax: The City received the first monthly
allocation for sales tax in September 2019. As
of December 2019, the allocation received
represents approximately 34% of the total
sales tax allocation for the year. The City will
continue to receive sales tax allocations with
the final quarter allocation distributed by the
California State Department of Taxes and Fees
Administration (CDTFA) in August 2020. Sales
Tax growth is projected to remain flat for the
fiscal year.
• Other Taxes: This category includes
Franchise Fees, Business License Tax,
Transient Occupancy Tax, and Property
Transfer Tax. These revenues are not
received evenly throughout the year and are
expected to be on target by the close of the
fiscal year.
• License & Permits: Revenues for licenses &
permits include building and engineering
permits, and animal licenses. Revenue
projections are slightly lower than originally
projected mainly due to animal control
revenues being extremely low when compared
with previous years.
• Revenues from other Agencies: This
category includes Vehicle In -Lieu, State
Mandated Cost reimbursement revenue, and
the exchange of Prop A funds, which are the
largest revenue source in this category. The
Prop A exchange was received entirely during
the first quarter of the fiscal year.
• Charges for Services: These revenues
include plan check and zoning related fees,
recreation fees, interfund charges, and police
and fire fees. These fees are at approximately
51 % through the first half of the fiscal year.
Revenue projections were revised based on revenue
trends, and activity to date. The following revised
revenue projections reflect a total increase in
estimated revenues of $2,049,900. The single largest
reason for this increase is due to sale of a parcel of
City land at the Eastland Center.
RALiFUND;VENBUDGET
ert Tax
$ 26,680,400
ADPro
$ 91,200
$ 26,771,600
Sales Tax16
900 000
16 900 000
Other Taxes8
907 700
8 907 700
Licenses & Perm
1,488,700
1,488,700
Fines & Forfeitur
770,000
770,000
Interest& Rents
928,200
20,000
948,200
Revenue from other Apenciesl
2,552,500
2,552,500
Charges for Services
5,742,100
32 500
5,774,600
Other Revenues
591,146
11971,200
2562,346
Transfers In
1,155,173
1!155,173
TOTAL
1 $ 65,715,919
1 $ 2,049,900
1 $ 67,830,819
Administration
BuDaiiiIIIIIIIIIIIIIIIIIII
$ 2,522,139
$ 1,241,447
49.2%
Ci Clerk
296,446
131,628
44.4%
Finance
2,075,041
855,449
41.2 %
Human Resources
710,764
267,889
37.7%
Planni
407,930
169,930
41.7%
Police
25,198,086
12,722,429
50.5 %
Fire
16811515
8828461
52.5%
Public Works
1 5,494,423
1 2,656,733
1 48.4%
Community Services
891,930
627,384
70.3%
Transfers Out/Debt Service
578,918
-
0.0%
TOTAL(Excluding PERS UAL
$ 54,987,192
$27,501,350
50.0 %
PERS UAL
10,752,317
10,752,318
100.0%
TOTAL
$ 65,739,509
$38,253,668
58.2 %
As of December 31, 2019, with 50% of the year
complete, $38.3 million or 58.2% of the General Fund
budget has been expensed. The expenditures are
higher than 50% due to the July prepayment of the
CalPERS Unfunded Accrued Liability which is
approximately 16.3% of the total annual General Fund
Budget. Excluding the PERS UAL prepayment,
General Fund expenditures are at 50.0% of budget for
the second quarter.
Overtime expenditures should be 48% of budget
based on the number of payrolls for the first half of the
fiscal year. The Police Department is trending at
approximately 81.7% of the overtime budget. The Fire
2 1 P a g e
City of West Covina
Second Quarter Financial Report FY 2019-2020
Department overtime expenditures are at
approximately 69.0%. Although the Police Department
overtime expenditures are expected to exceed budget
for the fiscal year, total department personnel costs are
not projected to exceed the personnel budget. This is
mainly because of salary savings from vacant
positions in the department. The fire department
overtime is approximately $1.476 Million or 69.03% of
the budgeted amount as of December 31, 2019. The
vast majority of the overtime was due to vacancies in
the department during the first half of the fiscal year.
During that time, the Fire Department has hired 5 new
firefighters to fill vacancies. This will decrease the
overtime that the City incurs to maintain minimum
staffing levels required by law for the remainder of the
year. However, the overtime incurred for the entire
fiscal year is expected to be $2.4 Million. The overtime
is being monitored after each payroll and the costs are
decreasing as expected.
At the end of the second quarter, six of the nine
General Fund department expenditures are at or below
50% of budget, excluding the PERS UAL prepayment.
The Police Department is slightly above 50% and is
expected to be within the budgeted amounts by year
end. The Fire Department expense is at 52.5% of
budget, mainly due to increased overtime costs for the
vacancies that existed during the first part of the fiscal
year. Finally, the Community Development department
is at 70.3% of budgeted expenditures. The transition
to outsourcing the Building Services to Willdan did not
occur until early in September 2019. The adopted
budget assumed that the Building Services function
would begin on July 1". Therefore, salaries for that
department were not budgeted and the Budget
Amendment attached to this report adjusts the budget
for these costs incurred which totaled $112,900.
The adopted General Fund budget for FY 2019-20 is
$65,358,773 for revenues and expenditures. This
reflects a balanced budget with no surplus at July 1,
2019. However, after adjusting revenues to the revised
projections of $67,830,819 and taking into account a
budget amendment for revised budgeted expenditures
of $68,071,888 the revised General Fund budget is
projected to have a shortfall of $241,069.
The approved budget amendments of $240,940 were
three (3) separate budget amendments approved by
City Council. On July 16, 2019, Resolution No. 2019-
41 approved a budget amendment of $208,939.94 to
purchase one new rescue ambulance. The cost of the
ambulance was funded by a grant for State Budget Bill
AB74. On September 3, 2019, Resolution No. 2019-
57 approved a $57,145.81 budget amendment for the
purchase of three fire mutual aid vehicles. The
increased costs were off set by increased mutual aid
revenues. Finally, on December 3, 2019, Resolution
No. 2019-86 approved a $32,000 Budget Amendment
for landscaping and maintenance at the Civic Center
and City Parks. The remaining $82,650 was for carry
over expenditures from the previous year.
The requested General Fund budget amendments of
$2,332,379 areas follows: 1) $66,200 increase for the
Administration Department ($60,000 for salaries and
$5,000 for membership in the San Gabriel Valley
Economic Partnership), 2) $280,000 for City Clerk's
Election costs for the Sales Tax Initiative, 3) $162,000
for Human Resources Department insurance costs, 4)
$652,800 increase for Police Department salary
increases, 5) a $261,300 increase to fire expenditures
($241,300 for repayment to the Ground Emergency
Medical Transportation (GEMT) program. Several
years ago, the City was overpaid for this program and
this amount is a partial repayment of the overpayment
and $20,000 for training costs that are required based
on the Memorandum of Understanding with the
firefighters, 6) $160,000 for animal control costs that
were higher than the initial projections, 7) Community
3 1 P a g e
City of West Covina
Second Quarter Financial Report FY 2019-2020
Development increases for salaries that were not
budgeted for in the amount of $182,879 for the Code
Enforcement Manager ($100,000) which was partially
offset by a decrease in part time code enforcement
personnel in the amount of $30,000 and the Building
Services personnel that were not included as part of
the budget. The building services department was
contracted out as part of the 2019-20 budget.
However, the transition did not occur until September
2019. 8) $567,200 was allocated for the Maintenance
of Effort requirement for the SB 1 monies.
ENTERPRISE FUND
The following table summarizes the revenues and
expenditures for the City's Enterprise Fund:
ENTERPRISE FUND
REVENUES BUDGET YTD ACTUAL
Police Computer Service Fundl $ 1,603.800 $ 978.825 61.0%
ENTERPRISE FUND
EXPENDITURES BUDGET YTD ACTUAL
Police Computer Service Fund $ 1,782,404 $ 751,702 422%
The Police Department's Computer Service Group
revenues and expenditures are trending to be within
budget. Originally the West Covina Service Group was
budgeted at a deficit for FY 2019-20, the Police
Department is taking actions to balance their budget
and limit the deficit that was originally projected.
OTHER FUNDS
Special Revenue Funds are restricted in their use for
specified purposes. Budget versus actual comparisons
for both revenue and expenditures for Special
Revenue Funds are presented below:
Assessment Districts
BUDGET
$ 3,812,571
YTD ACT
$ 1,625,896
42.6%
Sewer Maintenance
3,750,010
1,548,710
41.3 %
Gas Tax
4,600,209
2,018,196
43.9%
Prop A
2,298,485
1,111,988
48.4%
Prop C
1,820,268
930,909
51.1 %
Measure R
1,365,348
703,384
51.5%
Measure M
1 1,547,227
790,420
51.1
Housing Authority
76,655
0.0 %
CDBG
1,326,118
1 93,125
7.0%
Grants
2,548,453
80,465
3.2%
Other S ecial Revenues
3,128,845
682 388
21.8 %
TOTAL
$ 26 197 534
1 $ 9,662,136
36.9 %
ECIAL REVENUE FUN
EXPENDITURES
essment Districts
$ 5,347,625
$ 1,521,948
28.5%
er Maintenance
8 225 641
1 110 900
13.50/6
Tax
I
3 774 671
1 054 209
27.9%
A
2,237,683
2,235,671
99.9%
C
2 797 881
842 938
30.1sure
R
3,413,735
497,924
14.6%
Measure M
3,301,009
23,861
0.7%
Housim Authority
1,054,536
416,940
39.5 %
CDBG
1 428 706
142 161
10.0 %
Grants
2,294,199
326,294
14.2%
OtherSpecial Revenues
1 2,512,607
1 615,224 1124.5%
TOTAL
1 $36,388,293
$ 8,788,070 1
24.2%
FOR MORE INFORMATION
This summary report is derived from detailed financial
information generated by the City's Finance
Department. Additional financial information is
available online at www.westcovina.org.
4 1 P a g e
ATTACHMENT NO.2
RESOLUTION NO.2020-20
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WEST COVINA, CALIFORNIA, ADOPTING A BUDGET
AMENDMENT FOR THE FISCAL YEAR COMMENCING
JULY 1, 2019, AND ENDING JUNE 309 2020 (Second Quarter
Financial Report)
WHEREAS, the City Manager, on or about June 18, 2019, submitted to the City Council
a proposed budget for the appropriation and expenditure of funds for the City of West Covina for
Fiscal Year 2019-20; and
WHEREAS, following duly given notice and prior to budget adoption, the City Council
held a public meeting on June 18, 2019, considering and evaluating all comments, and adopted a
budget for the fiscal year commencing July 1, 2019 and ending June 30, 2020; and
WHEREAS, amendments must periodically be made to the budget to conform to changed
circumstances following adoption of the budget.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WEST COVINA,
CALIFORNIA DOES RESOLVE AS FOLLOWS:
SECTION 1. Budget Amendment No. 35 is hereby approved as reflected on Exhibit No.
1, attached hereto.
SECTION 2. That this resolution shall be effective immediately upon passage and
adoption.
SECTION 3. The City Clerk shall certify to the adoption of this Resolution.
PASSED, APPROVED, AND ADOPTED this 21" day of April 2020.
Tony Wu
Mayor
I HEREBY CERTIFY that the foregoing resolution was duly adopted by the City Council
of the City of West Covina, California, at a regular meeting thereof on the 21st day of
April 2020 by the following vote of the City Council:
AYES:
NOES:
ABSENT:
ABSTAIN:
Lisa Sherrick
Assistant City Clerk
CITY OF WEST COVINA
BUDGET AMENDMENT
Exhibit No. 1
BA # 35
Posted By:
Date Posted:
Date: 3/17/2020 Fiscal Year: 2019-20
Requested by: Robbeyn Bird Amount: $2,334,879
Dept/Div: Finance Description: 2nd Qtr Financial Report Adjustments
FVDFNnTT11DFC
Account Number
Dept/Account Description
Current Budget
Proposed
Amendment
Amended
Budget
110.61.5190.6130
Animal Control Services
690 000.00
160 000.00
850
000.00
110.15.1520.6411
Insurance
626 500.00
162 000.00
788
500.00
110.95.9500.9160
Transfer Out - MOE Requirement
567 200.00
567
200.00
110.11.1120.5111
Full -Time Salaries
302 773.00
60 000.00
362
773.00
110.71.3125.5111
FT Salaries - Code Enforcement
100 000.00
100
000.00
110.32.3210.6490
Miscellaneous Expense - GEMT
241 300.00
241
300.00
Various
Police Salaries & Benefits
652 800.00
652
800.00
110.11.1120.6270
Administration
1200.00
1200.00
110.71.3125.5112
PT Salaries - Code Enforcement
90 900.00
30 000.00
60
900.00
110.12.1210.6118
Elections - City Clerk
3,200.00
280 000.00
283
200.00
110.11.1120.6030
Memberships & Subscriptions
4,155.00
5,000.00
9,155.00
110.32.3210.6551
Training
20 000.00
20
000.00
110.71.4120.5111
FT Salaries - Building Services
58 278.00
58
278.00
110.71.4120.5117
Bilingual Pa - Building Services
388.00
388.00
110.71.4120.5151
Workers' Compensation
1,423.00
1,423.00
110.71.4120.5152
Health/Flex Benefit
17 139.00
17
139.00
110.71.4120.5153
Grou Life
68.00
68.00
110.71.4120.5154
Lon -Term Disabilit
247.00
247.00
110.71.4120.5155
IMedicare
1
1239.00
1 1239.00
1,717,528.00
2,298,282.00
4,015,810.00
REVENUES
Account Number
Account Description
Current Budget
Proposed
Amendment
Amended
Budget
110.00.4012
Pro erty Tax In -Lieu
12 341
200.00
91
200.00
12 432
400.00
110.00.4410
Interest Income
208
900.00
20
000.00
228
900.00
110.00.4823
Proceeds from Sale
163
000.00
1,971,200.00
2,134,200.00
110.32.4657
Ambulance Subscription Fee
15
000.00
15
000.00
110.13.4647
Miscellaneous Reimbursement
25
000.00
17
500.00
7,500.00
12 753
100.00
2,049,900.00
14 803
000.00
revenue & expenditure budgets based on
projections.
APPROVALS
City Council Approval Date (if required, attach minutes): ❑ Approval Not Required
Dept Head Approval: see attached Date:
inance Director: Date:
unds Available? ❑ Yes ❑No
Ity Manager: see attached Date:
f over$100,000)
❑ Approved ❑ Denied
year
EXPENDITURES
Exhibit No. 1
BA#35
Account Number
Account Description
Current Budget
Proposed
Amendment
Amended
Budget
110.71.4120.5157
Retirement - Nonsworn
3,003.00
3,003.00
110.71.4120.5158
Deferred Compensation
134.00
134.00
110.71.4120.5159
Dental
576.00
576.00
110.71.4120.5161
Vision
271.00
271.00
110.71.4120.5163
Retirement Health Savings Plan
628.00
628.00
110.71.4120.5180
Leave Lump Sum
29,441.00
29,441.00
110.71.4120.5253
Cash Back
44.00
44.00
124,61.5140.6112
Accounting & Auditing
2,500.00
2,500.00
Total
36,597.00
36,597.00
REVENUES
Account Description
VLVan Lank
Fankhanel, LLP ATTACHMENT NO.3
� (;erlif feel l'u�liu Accuu�itsuls �
INDEPENDENT ACCOUNTANT'S REPORT
ON APPLYING AGREED -UPON PROCEDURES
To Management of the City of West Covina
West Covina, California
We have performed the procedures in the attached Schedule A, which were agreed to by
Management of the City of West Covina (City), on the personnel expenditures in the City's Fire
Department, including overtime pay. The City is responsible for the personnel expenditures in the
Fire Department. The sufficiency of these procedures is solely the responsibility of the City.
Consequently, we make no representation regarding the sufficiency of the procedures referred to
below, either for the purpose for which this report has been requested or for any other purpose.
The procedures and associated findings are described in the attached Schedule A
This agreed -upon procedures engagement was conducted in accordance with attestation
standards established by the American Institute of Certified Public Accountants. We were not
engaged to, and did not conduct an audit or review, the objective of which would be the expression
of an opinion or conclusion, respectively, on the personnel expenditures in the Fire Department.
Accordingly, we do not express such an opinion or conclusion. Had we performed additional
procedures, other matters might have come to our attention that would have been reported to
you.
This report is intended solely for the information and use of the Management of the City of West
Covina, and is not intended to be and should not be used by anyone other than these specified
parties.
Loma Linda, California
March 27. 2020
Van Lant & Fankhanel, LLP
25901 Kellogg Street
Loma Linda, CA 92354
909.856.6879
Schedule A
Agreed -upon Procedures
1. Obtain an organizational chart for the City's Fire Department and a list of current Fire
Department employees, with position titles and hire dates.
Results: We obtained a list of Fire Department employees as of November 2019 from the
City's management, and the organizational chart from the City's adopted budget.
2. Obtain Fire Department expenditure reports from the City's accounting system covering the
period of Fiscal Year 2014-15 through Fiscal Year 2018-19 (Period). Prepare a schedule
comparing budgeted Fire Department salaries to actual salaries expenditures, for each fiscal
year within the Period. In addition, obtain reports from the City's payroll records for the Period
and calculate the average number of Fire Department employees for each fiscal year,
comparing to the actual expenditures. Include in this schedule the total Fire Department
overtime incurred for each fiscal year.
Results: See Schedule B attached.
3. Obtain the City's policies and procedures relating to overtime and time off requests. Select
the three Fire Department employees incurring the most overtime hours within each fiscal
year of the Period and obtain payroll records for the selected employees, including personnel
files, for four pay periods during each fiscal year, as determined by City management.
Determine that the payroll records include appropriate documentation demonstrating
compliance with the City's overtime policies and procedures.
Results: We obtained and read through applicable sections of the City's Personnel Rules, the
current MOU with the West Covina Firefighters' Association, and the Fire Department's
internal Leave Management Policy. We also obtained summary reports from the City's
Finance software to determine the employees with the most overtime hours in each fiscal
year.
Based on the City's payroll records inspected, and inquiry with applicable City staff, we noted
that the payroll records for Firefighters did not contain hard copies for overtime and leave
requests and approvals. Instead, Fire Department personnel use a separate time keeping
and scheduling software (TeleStaff), in which supervisors electronically approve the upcoming
work schedules, including requests for vacation, overtime, etc.
We inquired with the Fire Chief regarding the TeleStaff system, and observed a demonstration
of how the system works, including internal controls within the system, and how the upcoming
schedule is developed and approved.
4. For the employees selected in step 3, prepare a schedule listing the number of hours
requested for time off, including vacation, personal, sick leave, etc. Inspect personnel files for
documentation of time off requests, noting whether the files document compliance with the
City's established policies and procedures.
Results: This step is not applicable based on the information in Step 3 above.
Schedule A (Continued)
5. Based on the results of the steps above, perform inquiry of applicable employees, as
determined by City management, regarding the use of overtime and any discrepancies noted.
Also obtain access to email records for the applicable employees, as determined by City
Management, and inspect for any communications regarding time off and overtime.
Results: See the results of our inquiry in Step 6 below. We performed a search of the City's
Fire Department email records, with assistance from the City's IT Department and Finance
staff, to look for emails between Firefighters/Paramedics regarding time off and overtime. This
involved inspection of certain email communications between several Fire Department
employees covering the period beginning with 2016-17 fiscal year through January 2020.
While performing these procedures, we noted a few emails where certain Fire Department
personnel had sent out mass emails asking if anyone wanted to get some overtime to cover
for a desired day off (e.g., Christmas or New Year's Eve). However, we did not encounter
any information which would indicate Fire Department personnel were working together to
abuse the time off and overtime policies, or to maximize earnings. It should be noted that the
City's IT Department represented to us that if employees delete emails, the records of the
deleted emails are only accessible for 30 days subsequent to the deletion.
6. Based on the results of the above procedures, for applicable employees as determined by
City Management, perform inquiry concerning the risk of fraud in the Fire Department, and
whether they have knowledge of any actual or suspected fraud. The inquiry will follow the
guidance described in the AICPA's Clarified Statements on Auditing Standards, AU-C Section
420. Include the responses in the agreed -upon procedures report.
Results: We performed the above inquiry for several employees in the Fire Department,
including administrative personnel, and the Finance Department. The following is a summary
of the results of this inquiry:
None of the employees interviewed, including management, were aware of any fraud or abuse
of overtime/leave within the Fire Department. Only one employee indicated concerns about
two former employees who were incurring excessive overtime during the period in which there
was a vacancy in the Fire Chief position.
Firefighters interviewed indicated the increase in overtime hours in recent years was due to
vacancies within the department. They mentioned that positions had to be filled on any given
day, which resulted in off -duty Firefighters being called up for overtime, or "mandatory" hours.
Because of the extra shifts worked, some Firefighters indicated there was "burnout" and
fatigue at times, and the only way to get a day off was to call in sick. Some of those interviewed
indicated that the vacancy situation had been resolved in the current fiscal year (2019-20 fiscal
year), and that overtime costs had decreased significantly with the recent hiring of additional
Firefighters.
Schedule B
FY 2014/15
FY 2015/16
FY 2016/17
IF 2017/18
FY 2018/19
Expenditure Accounts
Budget Actual
Variance Budget Actual
Variance
Budget Actual
Variance
Bud et Actual
Variance
Budget Actual
Variance
5110 -5112 Salaries
$ 6,580,230 $ 6,168,853
$ 6,932,233 $ 5,967,646
$ 7,527,924 $ 6,487,299
$ 7,177,680 $ 6,703,124
$ 8,066,223 $ 6,611,500
5113 Overtime Salaries
1,500000 2,700,926
1,272,128 2,696,905
1,795,104 2,896,713
3,422,053 3,636,676
1,908,364 3,236,781
5115 Paramedic
115:160 109,053
106,332 117,808
128,538 125,003
128,543 132,870
145,639 123,883
5116 Fire Investigator
2,990 3,009
2,990 3,016
2,990 3,008
3,000 3,000
3,000 3,000
5117 Bilingual Pay
14,350 13,797
13,156 11,994
10,764 11,013
14,400 14,076
15,600 13,245
5118 FLSA Overtime
130,000 116,691
- 120,064
- 107,030
108,040 122,444
130,000 119,005
5119 Longevity
173660 157,826
170,290 152,916
156,424 124,469
263,752 47,550
265,935 243,691
5120 Educational Incentive
227:010 218,667
240,188 207,758
207,636 250,851
265,320 448,933
312,000 244,128
5121 - 5125 Holiday, Sick, Vac. Buy back
287,730 303,548
297,970 282,470
289,193 288,817
404,326 277,077
430,863 237,094
Total Salaries -related Expenditures
$ 9,031,130 $ 9,792,369 $
(761,239) $ 9,035,287 $ 9,560,578 $
(525,290)
$ 10,118,573 $ 10,294,203 $
(175,630)
$ 11,787,114 $ 11,385,751 $
401,363
$ 11,277,624 $ 10,832,328 $
445,296
Total Personnel Expenditures
$ 14,451.640 $ 15,241,388 $
(789,748) $ 14,418,601 $ 15,243,927 $
(825,326)
$ 16,317,918 $ 17,128,659 $
(810,741)
$ 18,532,373 $ 18,439,256 $
93,117
$ 17,772,105 $ 18,566,398 $
(794,293)
Total Fire Department#32 Expenditures
$ 15,734,177 $ 16,501,970 $
(767,793) $ 15,830,854 $ 16,481,529 $
(650,675)
$ 17,707,596 $ 18,106,853 $
(399,257)
$ 19,680,611 $ 19,441,828 $
238,783
$ 20,001,788 $ 20,315,760 $
(313,972)
Overtime as a Percent of Total Salaries 18 % 29 % 14 % 29 % 18 % 29 % 30 % 33 % 18 % 31 %
Overtime as a Percent of Total Personnel Costs 11 % 18% 9 % 18 % 11 % 18 % 19% 20% 11 % 18 %
Total Salaries as Percent of Total Expenditures 57% 59% 57% 58% 57% 57% 60% 59% 56% 53%
Total Fire Department Overtime Hours 52,856 52,211 54,651 67,779 57,070
Average Number of Fire Department Employees 79 78 75 72 77
Average Personnel Costs per Employee $ 192,929 $ 195,435 $ 228,382 $ 256,101 $ 241,122
,,{4T o,
ATTACHMENT N0.4
i
o IIII �
DEPARTMENT OF
O PMAVIN NEwsum - GOVERNOR
FI NAN C E
4C,pORN1 IS- CAPITOL ■ ROOM 1 1 45 ■ BA—AM—D CA ■ 95B 1 4-499B ■ www...—.—
OFFICE OF THE DIRECTOR
April 10, 2020
Honorable Holly Mitchell, Chair Honorable Phil Ting, Chair
Joint Legislative Budget Committee Assembly Budget Committee
Senate Budget and Fiscal Review Committee
Honorable Anthony Portantino, Chair Honorable Lorena Gonzalez, Chair
Senate Appropriations Committee Assembly Appropriations Committee
COVID-19—Interim Fiscal Update
As the Legislature assesses the extraordinary impacts of the COVID-19 pandemic on the
state's fiscal condition, the Department of Finance provides the following interim fiscal
update. Finance will continue to refine the information in this letter, as well as the
state's revenue and expenditure estimates, as it develops the May Revision.
Economic Forecast and Revenues
The need to implement stay-at-home measures in California to protect public health
and safety, combined with the effects of the COVID-19 pandemic on the national and
world economies, have dramatically affected the state's economy. The economic
disruption from the pandemic is expected to result in a recession and have significant
negative effects on state revenues; concurrently, the drop in the stock market may
cause further revenue declines.
This impact is expected to be immediate, affecting fiscal year 2019-20, and will
continue in to fiscal year 2020-21 and additional years depending on the pace of
recovery of local, state and national economies.
To give some perspective, Finance modeled a moderate recession scenario for the
Governor's Budget, when it was released in January of this year, in which
unemployment was projected to peak at 9.1 percent in the second quarter of 2021,
compared to 6.9 percent and 12.3 percent for the 2001 and 2009 recessions,
respectively. Due to the scope of the COVID-19 pandemic, unemployment could peak
at a level higher than the Great Recession.
Expenditures
Fortunately, California begins this fiscal downturn in far better shape than in prior
downturns because of our significant budget reserves and a cash cushion. Over the
past several years, the state has paid off all of its past budgetary borrowing (the "wall of
debt"), and has committed billions of dollars to paying down other liabilities. This, along
with the maintenance of a structurally balanced budget in the last several years, has
also made the state's fiscal condition more resilient.
-2-
Given the magnitude of this crisis, however, difficult decisions lie ahead. Accordingly,
on March 24, Finance issued a Budget Letter (BL 20-08) informing all state departments
that Finance is reevaluating all budget changes within the context of a workload
budget, defined generally as the budget year costs of currently authorized services. In
addition, resource constraints will likely force a further prioritization and reduction of
expenditures.
At the same time, the state has been faced with implementing a massive public health
response to the COVID-19 pandemic. This effort is critical to protecting the health of
Californians and preparing the state's health care infrastructure for a surge of patients
who will be infected and need to be hospitalized for life-saving supports. The
cascading impacts of the public health response on the economy have also required
historic intervention.
The state's response requires significant upfront emergency expenditures beyond the
$1 billion allocated in Chapter 2, Statutes of 2020. For cash flow purposes, an additional
$6 billion in response -related expenditures is projected in 2020. This funding is being
used to secure personal protective equipment and critical medical supplies to expand
the surge capacity of hospitals and medical facilities, as well as to support the state's
efforts to protect public health and safety and reduce the spread of COVID-19. The
state expects a majority of these expenditures will be reimbursed by the federal
government. Given the scale of economic dislocation and other impacts of the public
health orders, the Administration also expects increased expenditures due to higher
caseloads in Medi-Cal, CaIWORKs, and other health and human services programs.
Federal Stimulus
Congress has enacted three COVID-19 relief packages to date. The Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act"), signed into law on March 27,
includes $2.2 trillion in federal stimulus for the nation. Direct payments provided to
approximately two-thirds of California families, the additional $600 per week added to
unemployment checks, and expanded food benefits are all critical to supporting
Californians during the crisis. The additional funding for small businesses through the
Small Business Administration is also necessary to avoid long-term impacts on the state's
economy.
Additional federal funding for schools, colleges and universities, child care, hospitals,
housing, homelessness, and others will also provide critical support for both increased
demand on programs and extraordinary expenditures related to delivering programs in
different ways under the state's public health orders.
The federal stimulus will also provide at least $8.4 billion in direct assistance for the
state's COVID-19-related expenditures and up to $6.9 billion for direct assistance to
local governments. This funding is critical to support needed expenditures as the state
and local governments work to keep Californians safe and reduce the spread of
COVID-19. The Administration has directed all state agencies and departments to put
procedures in place to draw down all available federal assistance and allocate these
funds expeditiously.
-3-
Finally, on March 22, California secured a Presidential Major Disaster Declaration which
makes federal funding available to the state for emergency protective measures,
including direct federal assistance and reimbursement of state costs through the
Federal Emergency Management Agency (FEMA). FEMA is expected to reimburse the
state for approximately 75 percent of direct expenditures, and has committed to
advancing up to 50 percent of the federal share of certain expenditures. Under this
cost sharing arrangement, the federal government will fund approximately $5.25 billion
of the $7 billion the state currently plans for expenditure.
A significant increase in federal funding will be needed beyond what has been
provided for states and local governments to maintain critical programs and services.
The Governor recently sent a letter (copy attached) to Speaker of the House Nancy
Pelosi requesting significant funding from Congress—$1 trillion in direct and flexible relief
for all states and local governments in recognition of the profound challenges ahead.
Cash Flow
The state's cash position was strong entering fiscal year 2019-20, but has been
impacted by the COVID-19 pandemic. Current projections indicate that the state will
have sufficient cash and internal borrowable resources available through the end of
the current fiscal year despite the rapidly changing conditions related to the COVID-19
pandemic.
The State Controller's Office has updated these projections to reflect the delay in the
deadlines for filing and payment of the primary General Fund tax revenue sources
(personal income tax, corporate income tax and sales tax) to July 15, 2020, and
assumes the state will receive approximately $19.8 billion in revenue from April through
June of 2020—roughly 39 percent of the estimated receipts for this period reflected in
the Governor's January Budget.
The following other significant assumptions are also reflected in these preliminary cash
projections:
The state will receive an $8.4 billion allocation of federal funding pursuant to the
federal CARES Act in May 2020; and
The state will spend roughly $7 billion in emergency COVID-19 response -related
expenditures in 2020. The updated cash flow projections conservatively do not
reflect additional federal reimbursements in 2019-20 other than the $500 million
already received by the state.
Based on these assumptions, the cash flow projections indicate that as of June 30, 2020,
the state will have approximately $8.7 billion in available cash and unused internal
borrowable resources.
The fast-moving and fluid nature of the state's fiscal condition during this crisis require a
range of cash management tools. Accordingly, the Governor authorized the State
Controller to open and transfer funds to an account known as the General Cash
Revolving Fund. Establishing this fund is a precautionary measure that would allow the
4-
state to issue Revenue Anticipation Warrants, also called "RAWs", which are external
cash borrowings that extend beyond a single fiscal year. The State Controller's Office,
however, does not anticipate issuing RAWs this year because of the projected
available cash and unused internal borrowable resources.
Conclusion
The May Revision that the Administration will submit to the Legislature by the statutory
deadline will reflect the extraordinary impacts of the COVID-19 pandemic on the
state's fiscal condition. As this letter demonstrates, the state faces daunting challenges
and difficult decisions in the weeks and months ahead. The Administration will continue
to work with the Legislature during this unprecedented crisis to maintain a balanced
budget that promotes opportunity, and supports an equitable economic recovery.
EELY MARTI�me'tOSLER
Director, D o Finance
Attachment
cc: Honorable Jim Nielsen, Vice Chair, Senate Budget and Fiscal Review Committee
Honorable Jay Obernolte, Vice Chair, Assembly Budget Committee
Gabriel Petek, Legislative Analyst (3)
Joe Stephenshaw, Staff Director, Senate Budget and Fiscal Review Committee
Kirk Feely, Budget Fiscal Director, Senate Republican Fiscal Office
Christopher W. Woods, Senate President pro Tempore's Office (2)
Christian Griffith, Chief Consultant, Assembly Budget Committee
Cyndi Hillery, Budget Director, Assembly Republican Caucus, Office of Policy and
Budget
Jayme Chick, Deputy Chief of Staff, Policy, Assembly Republican Leader's Office
Joe Shinstock, Chief Consultant, Assembly Republican Leader's Office
Jason Sisney, Assembly Speaker's Office (2)
Mark McKenzie, Staff Director, Senate Appropriations Committee
Jay Dickenson, Chief Consultant, Assembly Appropriations Committee
OFFICE OF THE QQVERNOR
April 8, 2020
The Honorable Nancy Pelos!
Speaker
United States House of Representatives
H-232, The Capitol
Washington, DC 20515
Dear Speaker Pelosi:
lappreclafe your leadership in addressing the COVID-1 9 emergency, and I am writing
to request further relief as We contend with this pandemic and Its effects,
For the state of California, our top-priotty request is for Congress to appropriate $1,
trillion In d1r6cfand flexible relief to states and local government. This level of
assistance won't replace the national decline in state and local revenue, which may
reach $1 .5 trillion or more over the next three years. Builds" for us to fight this
pandemic while minimizing the most d ' evostbling cuts to our schools, social services,
hospitals, and first responders, and keeping our economy afloat,
The state also requests bold federal action in live specific areas:
* Heolft This Is a health crisis, and the effects will likely Iasi far longer than COVID-
19 Itself. We cannot addregg-this crisis witimut investments at the scale of the
01`10110ngOStcltps need funding to ensure we con- provide coverage to the rising
numbers of people who Will newly quality for Medicaid, fully coverCOVID-1 9
related health needs, and free up state funding to address the need for
continued invest I merits in poblichealth.
To achieve these goals, I ask that Congress double the temporary FMAP 6,2
percentage point increase enacted lost month, and tie the duration of the•
increase to vnemployment-rate benchmarks so states do not lose Investment
while still In recovery, Congress must also help stabilize health insurance markets
grappling with rising COVID-1 9 costs. Hospitals that are being stretched to
capacity require additional funding. Finally, I urge Congress to prohibit the
enactment of the proposed Medicaid Fiscal Accountability Rule,
* Workers: The unemployment measures that Congress enacted lost month were
meaningfut- but shorMerm. Given the depth of this c641s, I urge Congressjo
GOVERNOR GAVIN NFWSOM - SACRAUPNTC), CA P5814 - (916) 445-2841,
Ow.
continue the $600lweek increase and eligibility expansions until the
unemployment rate recovers. This boost will be the difference between poverty
and stability for millions of people and wan provide needed economic stimulus.
Further, states should be allowed to drerry zero-interesf UI loans post'2020 so that
we are not diverting resources in a historic economic emergency.
Sm±olf Business: Right now, the relief provided in the CARES legislation is not
moving quickly to people in need. This initlative must be fixed: with expanded
funding, clear guidance on how small-business owners can qualify for grants,
structural changes to encourage banks to process applications from all owners
Who are eligible including addressing the secondary market, and fair treatment
of owners no matter when in the day they'fiie, so west coast owners -;are not
disadvantaged from a "first come, first serve" rule that favors east coast small
businesses due to time differences. The U.S. Small Business Administration should
also expedite guidance on the application process for new 7a lenders to meet
demand, Congress should also expand eligibility For nonprofits so that those with
greater than:500 employees can also participate;: Finally, Congress should
consider assistance for businesses who had business -interruption insurance but
who nonetheless cannot recover from insurers,
Fond, Housing, and Homelessness: I was grateful for your, advocacy last month
NAP
as you sought to raise Sbenefits by of least 15;percent, and I conItinue to
support this gnat. Further, support for affordable housing and homelessness
prevention will also help stabilize families:; New funding fhotenables states to
provide more rental assistance and local governments to acquire housing for9he
formerly homeless will make a big difference, as will lifting the bond cap for tax-
exempt financing for low-income housing, These goals have taken on new
urgency os we seek to contain COVID-1 9.
Education: Qur schools, colleges, and universities require more investment to
response to the rising tide of economic insecurity people are facing, The
assistance provided in CARES was helpful — but.simply not enough. These
institutions will face damaging Cuts without much more help.
Congress should double the maximum Fell Grant -to help low-income students,
invest tens of billions of dollars to faster a more robust federal -state higher
education partnership, expand loan forgiveness for borrowers with student debt,
and allocpte hundreds of billions of dollars to shore up our I-12 system in a time
of crisis. Congress should also double down. on recent increases to the Child
Care & Development Block Grant to help ensure .essential workers and others
who are returning to Work have access to child core. Finally, broodbond-for-ail
pan no longer be a talking point at a time wf�en tens of rriilltom of students rely
on, distance ledrning.1t must be!a national priority_,
I am also developing a, broader set of proposals that will help create a more just and
equitable future for Americans In the wake of this crisis. This emergency has Mposed
how intertwined oursaciety is and how little economic security people truly have, we
must act so that a crisis of this magnitude neverhappens' again,
But before we can do that, we must contain the pandemic, avoid devastating cuts...
and create a path to recovery, I am grateful for your leadership,and look forward to
working th you to meat this m ment and the needs of our people,
Si car
Gavin Ne s
Governor p orn1a
, V(
1�Y