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03-02-2021 - AGENDA ITEM 05 CONSIDERATION OF COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) AND OTHER RELATED REPORTS FOR THE YEAR ENDED JUNE 30, 2020
AGENDA ITEM NO. 5 AGENDA STAFF REPORT City of West Covina I Office of the City Manager DATE: March 2, 2021 TO: Mayor and City Council FROM: David Carmany City Manager SUBJECT: CONSIDERATION OF COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) AND OTHER RELATED REPORTS FOR THE YEAR ENDED JUNE 30, 2020 RECOMMENDATION: It is recommended that the City Council receive and file the following letters and financial reports for the year ended June 30, 2020: • Comprehensive Annual Financial Report; • Government Auditing Standards Letter; • Audit Communication Letter; • West Covina Housing Authority Fund Financial Report; • West Covina Housing Authority Fund Addendum to the Annual Progress Report; and • Air Quality Improvement Fund Financial Statements. DISCUSSION: Annually, the Finance Department prepares and publishes the City's Comprehensive Annual Financial Report (CAFR) following the completion of an independent and certified audit. Attached is the June 30, 2020, CAFR (Attachment No. 1). This document is an extensive report summarizing the financial activities of the City that occurred from July 1, 2019 through June 30, 2020. The CAFR is prepared in compliance with the Governmental Accounting Standards Board (GASB) standards. Pursuant to GASB guidelines, the City's CAFR is divided into three sections: Introductory, Financial, and Statistical. The Introductory section contains a Letter of Transmittal. This letter includes a brief overview of the City, the economic outlook, operational controls and major initiatives. The Financial section contains the independent auditors' opinion letter, Management's Discussion and Analysis (MD&A), and the Basic Financial Statements. The audit firm of Rogers, Anderson, Malody, & Scott, LLP has issued an unmodified ("clean") opinion on the financial statements for the year ended June 30, 2020. This means that their examination, testing and audit procedures allowed them to conclude that the financial statements present fairly the financial position of the City. This is the best opinion the City can receive from its City of West Covina Comprehensive Annual Financial Report For the Year Ended June 30, 2020 TABLE OF CONTENTS, (Continued) STATISTICAL SECTION (UNAUDITED): Net Position by Component...............................................................................................197 Changesin Net Position.....................................................................................................199 Changes in Net Position - Governmental Activities............................................................203 Changes in Net Position - Business -Type Activities..........................................................205 Fund Balances of Governmental Funds.............................................................................207 Changes in Fund Balances of Governmental Funds.........................................................209 Assessed Value and Estimated Actual Value of Taxable Property....................................211 Direct and Overlapping Property Tax Rates......................................................................213 Principal Property Taxpayers.............................................................................................215 Property Tax Levies and Collections..................................................................................216 Ratios of Outstanding Debt by Type..................................................................................218 Ratios of General Bonded Debt Outstanding.....................................................................220 Directand Overlapping Debt..............................................................................................221 Legal Debt Margin Information...........................................................................................222 Pledged -Revenue Coverage..............................................................................................224 Demographic and Economic Statistics...............................................................................226 PrincipalEmployers...........................................................................................................227 Full-time and Part-time City Employees.............................................................................228 Operating Indicators by Function.......................................................................................229 Capital Asset Statistics by Function/Program....................................................................231 City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) A) EPMC Replacement Supplemental Retirement Plan, (continued) Net Pension Liability. (continued) Discount Rate GASB 67 and 68 generally require that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan's Fiduciary Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses. A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 67 and 68 will often require that the actuary performs complex projections of future benefit payments and asset values. The following circumstances were included in the evaluation of sufficiency for the City: • Annual contributions of 0.7% of payroll (closed group basis) are assumed (beginning with 2015/16). • Benefit payments are annually withdrawn from the Trust until assets are exhausted and then benefit payments made directly by the City. • All cash flows are assumed to occur on average halfway through the year. • The long-term expected rate of return on pension plan investments is 6.25%. • The actuarial assumptions do not change. • GASB 67 and 68 specify that the projections regarding future solvency assume that plan assets earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions, which means that the projections would not reflect any adverse future experience which might impact the plan's funded position. Based on these circumstances, it is the actuary's opinion that a depletion date projection is not appropriate. Therefore, the discount rate is based on the projected portion of the Total Pension Liability funded by the Fiduciary Net Position in each future year. For the funded portion, the long-term expected rate of return on pension plan investments (6.25%) was used. For the unfunded portion, the Bond Buyer 20-Bond Go Index as of the June 30, 2019, measurement date (3.50%) was used. The discount rate used (3.90%) represents the single equivalent rate of return, as described under GASB 68 (paragraph 31). The best -estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. -80- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) A) EPMC Replacement Supplemental Retirement Plan, (continued) Net Pension Liability. (continued) Discount Rate, (continued) The table below reflects the long-term expected real rate of return by asset class: Target Expected Real Asset Class Component Allocation Rate of Return Equity 58.00% 4.82% REITs 2.00% 3.76% Fixed Income 35.00% 1.47% Cash 5.00% 0.06% Total 100.00% The plan's fiduciary net position was not projected to be available to make all projected future benefit payments of current retirees. Therefore, the discount rate for calculating the total pension liability is equal to the single equivalent rate that results in the same actuarial present value as the long-term expected rate of return applied to benefit payments, to the extent that the plan's fiduciary net position is projected to be sufficient to make projected benefit payments, and the municipal bond rate applied to benefit payments, to the extent that the plan's fiduciary net position is not projected to be sufficient. The City chose the Bond Buyer General Obligation 20-Bond Index resulting in the use of a 3.90% discount rate (single equivalent rate of return) in calculating the pension liability. -81- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) A) EPMC Replacement Supplemental Retirement Plan, (continued) Changes in the Net Pension Liability The changes in the net pension liability for the Plan are as follows: Increase Decrease Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (a) (b) (c) _ (a) - (b) Balances as of June 30, 2018* $ 961,657 $ 154,676 $ 806,981 Changes for the year: Service Cost 29,665 - 29,665 Interest 46,211 46,211 Difference between actual and expected experience 45,697 45,697 Assumptions Changes 90,640 - 90,640 Contributions- employer - 62,350 (62,350) Net Investment Income 6,567 (6,567) Benefit payments and refunds (80,968) (80,968) - Administrative Expenses 769 769 Net Chan es 131,245 12,820 144065 Balance as of June 30, 2019* 1 $ 1,092,902 1 $ 141,856 $ 951:046 Measurement Date Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability (asset) of the City for the Plan, calculated using the discount rate for the Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1- percentage point higher than the current rate: Discount Rate -1 % 1 (2.90%) Current Discount Rate (3.90%) Discount Rate + 1IX (4.90%) Net Pension Liability $ 1,068,709 $ 951,046 $ 853,771 -82- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) A) EPMC Replacement Supplemental Retirement Plan, (continued) Changes in the Net Pension Liability, (continued) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions: For the year ended June 30, 2020, the City recognized pension expense of $103,307 A complete breakdown of the pension expense for the Plan is as follows: Description Amount Service cost $ 29,665 Interest on total pension liability 46,211 Projected earnings on investments (9,061) Administrative expense 769 Recognition of deferred outflows/(inflows): Experience 8,588 Assumptions 24,458 Asset returns 2,677 Total pension expense $ 103,307 At June 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of of Resources Resources Differences between Expected and Actual Experience $ 101,991 $ (24,000) Changes of Assumptions 152,977 (69,493) Net Difference between Projected and Actual Earnings on Pension Plan 3,717 Employer Contributions Subsequent to Measurement Date 56,957 Total $ 315,642 $ (93,493) -83- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) A) EPMC Replacement Supplemental Retirement Plan, (continued) Chanaes in the Net Pension Liabilitv. (continued) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, (continued): The $56,957 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability during the upcoming fiscal year. Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows: Fiscal Year Ended June 30, 2021 2022 2023 2024 2025 Thereafter Payable to the Pension Plan Deferred Outflows/(Inflows) of Resources, Net EPMC $ 35,323 33,325 25,709 21,839 21,341 27,655 The City has no outstanding amount of contributions to the pension plan required for the year ended June 30, 2020. B) Supplemental Retirement Plan for Executive Staff and City Council General Information about the Pension Plan Plan Description and Benefits Effective November 1, 2007, the City established a agent multiple -employer defined benefit plan to supplement the current CalPERS retirement benefits that is to be administered for the City by with the Public Agency Retirement System (PARS), a third - party administrator. The plan meets the requirements of a pension trust under California Government Code. Phase II Systems is the PARS Trust Administrator. The plan does not issue separate financial reports and is closed to new hires. -84- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) B) Supplemental Retirement Plan for Executive Staff and City Council, (continued) General Information about the Pension Plan. (continued) Plan Description and Benefits, (continued) This agent multiple -employer defined benefit pension plan is separated into three tiers Tier 1 (full-time non -safety Department Head and the City Manager) and Tier 2 (City Council) provides an additional retirement amount to miscellaneous department heads, City Manager and City Council in an amount equal to the amount of $823 per month. This benefit amount increases each year by CPI, up to 2%. In order to be eligible for this benefit, participants must have five years of service with the City and must retire into PERS from the City. Tier 3 (City Manager) provides an increased retirement benefit to a former City Manager consistent with the terms of his contract. It will convert the retirement formula for all years of prior CalPERS service at non -West Covina agencies to the CalPERS 2.5% @ 55 formula currently in place with the City of West Covina. Contributions All three tiers are combined for funding purposes in this plan. The City makes all contributions to these plans. Participants do not make any contributions. The actuarially required contribution is determined on a pay as you go funding policy and most recent measurement available when the contribution for the reporting period was adopted. The City is funding the plan to pay the benefit payments payable each year. The City's contribution for the year ended June 30, 2020 was $77,814. Employees Covered At June 30, 2019, the measurement date, the following employees were covered by the benefit terms for the plan: Miscellaneous Inactive employees or beneficiaries currently receiving benefits 11 Active employees 1 Total 12 -85- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) B) Supplemental Retirement Plan for Executive Staff and City Council, (continued) Net Pension Liability The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2019, using an annual actuarial valuation as of June 30, 2019. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions The total pension liability in the June 30, 2019, the measurement date, was determined using the following actuarial assumptions: Supplemental Valuation Date June 30, 2019 Measurement Date June 30, 2019 Actuarial Cost Method Entry Age Normal Actuarial Assumptions: Discount Rate 3.63% at June 30, 2019 4.16% at June 30, 2018 Inflation 2.75% annually Salary Increases Aggregate - 3% annually Merit - CalPERS 1997-2015 Experience Study Investment Rate of Return 6.25% at June 30, 2019 and June 30, 2018 Mortality Rate Table CalPERS 1997-2015 Experience Study -86- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) B) Supplemental Retirement Plan for Executive Staff and City Council, (continued) Net Pension Liability. (continued) Discount Rate GASB 67 and 68 generally require that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan's Fiduciary Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses. A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 67 and 68 will often require that the actuary perform complex projections of future benefit payments and asset values. GASB 67 (paragraph 43) and 68 (paragraph 29) do allow for alternative evaluations of projected solvency, if such evaluation can reliably be made. GASB does not contemplate a specific method for making an alternative evaluation of sufficiency; it is left to professional judgment. The following circumstances justify an alternative evaluation of sufficiency for the City: • The City ceased contributions and withdrawals from the Trust. The City will pay benefits directly to retirees until the trust is sufficient, on an expected basis, to pay all remaining benefits. • All cash flows are assumed to occur on average halfway through the year. • The long-term expected rate of return on pension plan investments is 6.25%. • The actuarial assumptions do not change. • GASB 67 and 68 specify that the projections regarding future solvency assume that plan assets earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions, which means that the projections would not reflect any adverse future experience which might impact the plan's funded position. Based on these circumstances, it is the actuary's opinion that a depletion date projection is not appropriate. Therefore, the discount rate is based on the projected portion of the Total Pension Liability funded by the Fiduciary Net Position in each future year. For the funded portion, the long-term expected rate of return on pension plan investments (6.25%) was used. For the unfunded portion, the Bond Buyer 20-Bond Go Index as of the June 30, 2019, measurement date, (3.50%) was used. The discount rate used (3.63%) represents the single equivalent rate of return, as described under GASB 68 (paragraph 31). -87- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) B) Supplemental Retirement Plan for Executive Staff and City Council, (continued) Net Pension Liability. (continued) Discount Rate, (continued) The best -estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The table below reflects the long-term expected real rate of return by asset class: Asset Class Component Equity REITs Fixed Income Cash Target Expected Real Allocation Rate of Return 58.00% 4.82% 2.00% 3.76% 35.00% 1.47% 5.00% 0.06% Total 100.00% The plan's fiduciary net position was not projected to be available to make all projected future benefit payments of current retirees. Therefore, the discount rate for calculating the total pension liability is equal to the single equivalent rate that results in the same actuarial present value as the long-term expected rate of return applied to benefit payments, to the extent that the plan's fiduciary net position is projected to be sufficient to make projected benefit payments, and the municipal bond rate applied to benefit payments, to the extent that the plan's fiduciary net position is not projected to be sufficient. The City chose the Bond Buyer General Obligation 20-Bond Index resulting in the use of a 3.63% discount rate (single equivalent rate of return) in calculating the pension liability. -88- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) B) Supplemental Retirement Plan for Executive Staff and City Council, (continued) Changes in the Net Pension Liability The changes in the net pension liability, with a measurement date of June 30, 2019, for the Plan are as follows: Increase Decrease Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (a) (b) (c) _ (a) - (b) Balances as of June 30, 2018* $ 3,267,938 $ 580,176 $ 2,687,762 Changes for the year: Service Cost 11,963 - 11,963 Interest 133,267 133,267 Difference between actual and expected experience 477,904 477,904 Assumptions Changes 281,983 - 281,983 Contributions -employer - 78,102 (78,102) Contributions- employee - Net Investment Income 31,817 (31,817) Benefit payments and refunds (152,749) (152,749) - Administrative Expenses (3,109) 3,109 Net Changes 752,368 (45,939) 798,307 Balance as of June 30, 2019* $ 4,020,306 $ 534,237 $ 3,486,069 *Measurement date Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City for the Plan, calculated using the discount rate for the Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate: Discount Rate - 1 % 1 Current Discount Rate Discount Rate + 1 (2.63%) (3.63%) 1 (4.63%) Net Pension Liability I $ 4,172,623 1 $ 3,486,069 1 $ 2,942,802 -89- Usm!"TV , Zown '%%-* MN I Finance Department February 17, 2021 To the Members of the City Council, the City Manager, and the Citizens of the City of West Covina: It is a pleasure to submit the Comprehensive Annual Financial Report (CAFR) of the City of West Covina (City) for the fiscal year ended June 30, 2020. This report consists of management's representations concerning the finances of the City. Management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed to both protect the City'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 GAAP. Because the cost of internal controls should not outweigh their benefits, the City's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City's financial statements have been audited by Rogers, Anderson, Malody & Scott, LLP, a firm of certified public accountants. The auditors have issued an unmodified opinion on these financial statements. Their report is located at the front of the financial section of this report. The Management's Discussion and Analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Profile of the Government The City of West Covina is located in the San Gabriel Valley, 20 miles east of downtown Los Angeles and 15 miles north of Orange County. Incorporated as a general law city in 1923, the City's 16 square miles flourished with walnut groves and orange groves for many decades. The post -World War II building boom rapidly transformed the City, which experienced a significant population increase between 1950 and 1960, from less than 5,000 to more than 50,000 citizens. Subsequent to this rapid population increase, the City has continued to grow at a steady pace with a current population in excess of 110,000. City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) B) Supplemental Retirement Plan for Executive Staff and City Council, (continued) Changes in the Net Pension Liability. (continued) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions: For the year ended June 30, 2020, the City recognized pension expense of $884,523. A complete breakdown of the pension expense for the Plan is as follows: Description Amount Service cost $ 11,963 Interest on total pension liability 133,267 Projected earnings on investments (33,832) Administrative expense 3,109 Recognition of deferred outflows/(inflows): Experience 477,904 Assumptions 281,983 Asset returns 10,129 Total pension expense $ 884,523 At June 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Net Difference between Projected and Actual Earnings on Pension Plan Pension Contributions Subsequent to Measurement Date Total Deferred Outflows Deferred Inflows of of Resources Resources $ 2,497 $ 77,814 $ 80,311 $ The $77,814 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability during the upcoming fiscal year. -90- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) Changes in the Net Pension Liability. (continued) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, (continued) Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows: Fiscal Year Ended June 30, 2021 2022 2023 2024 2025 Thereafter Payable to the Pension Plan Deferred Outflows/(Inflows) of Resources, Net Supplemental $ 4,129 (2,271) 236 403 The City has no outstanding amount of contributions to the pension plan required for the year ended June 30, 2020. -91- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 16) DEFINED CONTRIBUTION PENSION PLAN Plan Description During the 1991-1992 fiscal year, the City established the West Covina Part -Time Retirement Plan, a defined contribution retirement plan, for all non -benefited, part-time employees in accordance with Internal Revenue Code Section 457, to conform to Section 3121(b)(7)(F) of the Internal Revenue Code added by the Omnibus Budget Reconciliation Act of 1990. The plan is administered by Nationwide Retirement Solutions. The plan was established by the authority of the City Council who retains the authority to amend the plan. A defined contribution pension plan provides pension benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual's account are to be determined instead of specifying the amount of benefits the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant's account and the returns earned on investments of the contributions. Part-time, non -benefited, non-persable employees of the City must participate in the plan. During 2012-13, 195 part-time employees participated in the plan. All contributions to the plan vest immediately. An employee who leaves the City is entitled to all contributions and earnings applied to the individual's account through the date of separation, less legally required income tax withholding. Contribution levels into the deferred compensation plan were established by City Council resolution at 0% for the City and 7.5% for non -benefited, non-persable part-time employees. During the year, total required and actual contributions amounted to $70,471 and covered payroll for the year ended June 30, 2020 totaled $912,588. No contributions were made by the City and employees contributed $70,471 (7.72% of current covered payroll). Total plan assets at June 30, 2020 were $839,723. Plan assets are held in trust for the exclusive benefit of participants and their beneficiaries and, therefore, are not included in the financial statements. -92- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 17) OTHER POST -EMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Descriptions Medical The City administers a single -employer defined benefit plan which provides healthcare benefits to eligible retirees and their dependents in accordance with various labor agreements. City paid amounts are capped at varying amounts depending on employee's bargaining unit, as follows: • Police: o $1,005 per month for employees hired before July 1, 2012, with five years of sworn service or hired after July 1, 2012, with more than twenty years of sworn service o PEMHCA minimum amount ($122 and $125 per month in calendar years 2015 and 2016, respectively) for employees hired after July 1, 2012, with less than twenty years of sworn service • Fire o $1,005 per month for employees hired before July 1, 2012, with five years of sworn service o PEMHCA minimum amount ($122 and $125 per month in calendar years 2015 and 2016, respectively) for employees hired after July 1, 2012 • Miscellaneous - At the PEMHCA minimum amount ($122 and $125 per month in calendar years 2015 and 2016, respectively). Life Insurance Eligible retirees, in accordance with various labor agreements, receive life insurance benefits from the City as follows: • $500 Confidential/Exempt, General, Maintenance and Non -Sworn Safety bargaining units • $10,000 Executive Management, Mid -Management, Police Management (retired after September 1, 2006), Fire Management and Fire bargaining units • $10,500 Police bargaining unit Employees Covered As of the June 30, 2019 actuarial valuation, the following current and former employees were covered by the benefit terms under the Plan: Active employees 279 Inactive employees or beneficiaries currently receiving benefits 379 Inactive employees entitled to, but not yet receiving benefits 39 Total 697 -93- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 17) OTHER POST -EMPLOYMENT BENEFITS OTHER THAN PENSIONS, (continued) Contributions The contribution requirements of plan members and the City are established and may be amended by City Council. The contribution required to be made under City Council and bargaining unit requirements is based on a pay-as-you-go basis (i.e. as medical insurance premiums become due). For fiscal year ended June 30, 2020, the City contributed $2,516,858 to the plan, including $2,101,638, for current premiums (100% of total premiums), and $408,000 of implied subsidy premiums. Total OPEB Liability The City's total OPEB liability was measured as of June 30, 2019 and the total OPEB liability used to calculate the total OPEB liability was determined by an actuarial valuation dated June 30, 2019 based on the following actuarial methods and assumptions: Actuarial Assumptions June 30, 2019 Measurement Date Actuarial Valuation Date June 30, 2019 Contribution Policy No pre -funding Discount Rate 3.50% at June 30, 2019 (Bond Buyer 20-Bond Index) 3.87% at June 30, 2018 (Bond Buyer 20-Bond Index) General Inflation Mortality, Retirement, Disability, Termination Salary increases Medical Trend Healthcare Participation Discount Rate 2.75% annually CalPERS 1997-2015 Experience Study Aggregate - 3% annually Merit - CalPERS 1997-2015 Experience Study Non -Medicare — 7.25% for 2021, decreasing to an ultimate rate of 4.00% in 2076 Medicare — 6.3% for 2021, decreasing to an ultimate rate of 4.00% in 2076 Actives: 60% for PEMHCA minimum benefits Retirees: 100% if covered, 5% re-elect at 65 if waived A discount rate of 3.50% was used in the valuation for measurement date June 30, 2019. -94- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 17) OTHER POST -EMPLOYMENT BENEFITS OTHER THAN PENSIONS, (continued) Changes in the OPEB Liability The changes in the total OPEB liability for the Plan are as follows: Total OPEB Liability Balance at June 30, 2019 (6/30/18 measurement date) $ 58,697,077 Changes recognized for the measurement period: Service cost 1,545,500 Interest 2,285,257 Differences between expected and actual experience (1,738,131) Changes of assumptions 2,887,380 Benefit payments (2,384,056) Net changes 2,595,950 Balance at June 30, 2020 (6/30/19 measurement date) $ 61,293,027 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2019: 1% Decrease Current Discount 1% Increase (2.50%) Rate (3.50%) (4.50%) Total OPEB Liability $ 71,292,480 $ 61,293,027 $ 53,335,618 Sensitivity of the Total OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the total OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2019: Current Healthcare 1% Decrease Cost Trend Rates 1% Increase Total OPEB Liability $ 57,790,809 $ 61,293,027 $ 65,223,868 OPEB Plan Fiduciary Net Position The Plan Fiduciary Net Position was $0 at the June 30, 2019 measurement date, as the City is not prefunding with an OPEB trust. The City does not have assets accumulated in a trust that meets the criteria of GASB 75 to pay related benefits. -95- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 17) OTHER POST -EMPLOYMENT BENEFITS OTHER THAN PENSIONS, (continued) Recognition of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The net difference between projected and actual earnings on OPEB plan investments is amortized using the straight-line method over 5 years, while all other amounts are amortized over the expected average remaining service lifetime (EARSL) of plan participants, which was 5.1 years as of the 2019 valuation date. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the fiscal year ended June 30, 2020, the City recognized OPEB expense of $2,405,199. A complete breakdown of the pension expense for the Plan is as follows: Description Amount Service cost $ 1,545,500 Interest on total OPEB liability 2,285,257 Administrative expense 14,622 Recognition of deferred outflows/(inflows) Experience (316,024) Assumptions (1,124,156) Total OPEB expense $ 2,405,199 As of fiscal year ended June 30, 2020, the City reported deferred outflows of resources related to OPEB from the following sources: Deferred Outflows of Deferred Inflows of Resources Resources Differences between expected and actual experience $ - $ 1,422,107 Changes in assumptions 2,362,402 5,052,852 Contributions to OPEB plan subsequent to the measurement date 2,516,858 - Total $ 4,879,260 $ 6,474,959 The $2,516,858 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2019 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending June 30, 2020. -96- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 17) OTHER POST -EMPLOYMENT BENEFITS OTHER THAN PENSIONS, (continued) OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB Other amounts reported as deferred outflows or inflows of resources related to OPEB will be recognized as expense as follows: Deferred Fiscal Year Ended Outflows/(Inflows) of June 30 Resources 2021 $ (1,440,180) 2022 (1,440,180) 2023 (1,197,407) 2024 (139,269) 2025 104,479 Thereafter - 18) COMMITMENTS AND CONTINGENCIES A) In 1989, in order to assist in the expansion of the Fashion Plaza shopping center, the City enacted an ordinance to allow the Redevelopment Agency of the City of West Covina (the predecessor to the West Covina Community Development Commission) to receive the sales tax generated as a result of the expansion project. At the same time, the City enacted an ordinance providing a credit for sales tax payable by the developer in the amount equal to the sales tax due to the redevelopment agency. These sales tax ordinances and related agreements between the City and the Agency essentially transferred the sales tax increment due to the Fashion Plaza expansion project from the City to the Agency. B) On July 25, 2005, the Board of Directors of the former West Covina Community Development Commission adopted Resolution No. 2005-50. By this resolution, the Board of Directors authorized the Commission to reimburse the City of West Covina over a period of 17 years for the sales tax revenue that had essentially been shifted from the City to the Agency. These budgeted interfund transfers between the primary government of the City of West Covina and the former Community Development Commission will be recorded in the fiscal year that they result in a flow of current financial resources, as required by the measurement focus prescribed for governmental funds. As a result of the dissolution of the Redevelopment Agency, the Department of Finance has deemed this agreement as an unenforceable obligation. C) The City is currently a defendant in a wrongful termination lawsuit in which the jury awarded the plaintiff an amount in excess of $4,000,000. The City has appealed the verdict and is awaiting oral arguments related to the appeal. Of the award amount, $3,000,000 would be covered by excess insurance, however, the excess insurance provider is disputing the coverage. The City, after June 30, 2020, filed action against the excess insurance provider related to the coverage issues. At this time, it is unknown when either matter will be settled or specifically whether the excess insurance coverage will be provided. -97- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 19) CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT AGENCIES On June 29, 2011, Assembly Bill 1 X 26 (the "Dissolution Act") was enacted as part of the fiscal year 2011-12 state budget package. On December 29, 2011, the California Supreme Court Upheld the Dissolution Act which provided for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit. The Dissolution Act provided that upon dissolution of a redevelopment agency, either the city or another unit of local government would agree to serve as the successor agency (Successor Agency) to hold the assets until they are distributed to other units of state and local government. On January 10, 2012, the City elected to serve as the Successor Agency of the Community Development Commission of the City of West Covina. After enactment of the law, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution. Senate Bill 107, signed on September 22, 2015, required the creation of consolidated Oversight Boards commencing after July 1, 2018. Effective July 1, 2018 the Successor Agency of the Community Development Commission and 22 other RDAs in the First Supervisorial District of Los Angeles County were consolidated into the First District Consolidated Oversight Board, which has fiduciary responsibility to the holders of enforceable obligations and the taxing entities that benefit from distributions of property tax and other revenue. 20) SUCCESSOR AGENCY DISCLOSURES The assets and liabilities of the Commission's former non -housing redevelopment activities were transferred to the City in its fiduciary capacity as the Successor Agency to the Redevelopment Agency of the City of West Covina on February 1, 2012, as a result of the dissolution of California redevelopment agencies. These assets and liabilities and any activities related to them are reported in the City's fiduciary private -purpose trust fund financial statements. Disclosures related to these assets and liabilities are as follows: Assessment Receivable In connection with the Commission's issuance of its $51,220,000 1996 Special Tax Refunding Bonds, $32,520,000 in assessments receivable was recorded. The assessment is an annual special tax levied on the Community Facilities District No.1989-1 in an amount sufficient to ensure payment of the debt service on the 1996 Special Tax Refunding Bonds. This special tax supplements sales and property tax increment revenues that also support the debt service on the bonds. The assessments receivable outstanding as of June 30, 2020 was $12,910,000. -98- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 20) SUCCESSOR AGENCY DISCLOSURES, (continued) Due from the City of West Covina As part of the dissolution process, AB1484 required the Successor Agency to have due diligence reviews of both the low and moderate income housing funds and all other funds to be completed by October 15, 2012, and January 15, 2013, to compute the funds (cash) which were not needed by the Successor Agency to be retained to pay for existing enforceable obligations. The Successor Agency remitted $1,891,166 to the County Auditor - Controller (CAC) on December 19, 2012, for the low and moderate income housing funds due diligence review. The due diligence review for all other funds was finalized with the final letter of determination issued by the DOF on April 24, 2013. The DOF determined that the principal and interest payments made by the former Community Development Commission totaling $12,205,531 on various loans from the City of West Covina for the period January 1, 2011, to June 30, 2012, were on loans not made within the first two years of the formation of the former redevelopment agency. The DOF ordered the Successor Agency to remit $11,578,351 to the CAC within five days from the date of the letter. City management, in consultation with its legal counsel, did not agree with the DOF's decision and filed a lawsuit to contest the decision. The City also did not remit the payments that were disallowed to the CAC. In December 2015, the City entered into a settlement agreement, which requires the City to repay the $11,578,351 over a period of 20 years. See additional details on the long-term payable in Note 8. As the City repays the Successor Agency, the Successor Agency will remit the amounts collected to the CAC. The City reported a long-term liability of $8,683,761 (reported as part of notes payable) in the governmental activities and a receivable of $8,683,761 in the Successor Agency related to the DOF's determination at June 30, 2020. Land Held for Resale Land held for resale is valued at the lower of cost or the sales price per contract with the developer. The land held for resale at June 30, 2020 was comprised of BKK Project in the amount of $54,279. -99- The City's location and access to major freeways makes West Covina close to many visitor attractions and an ideal business and commercial center. The City has over 32,000 housing units and offers the amenities of a big city location with a high standard of living for its community. Under the Council -Manager form of government, the five City Council members are elected by districts to overlapping four-year terms. The City Council selects a Mayor from one of its members each November to serve a one-year term. The City Council is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring both the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments. The City provides a full range of services to its citizens, including police, fire and emergency medical; construction and maintenance of streets, traffic signalization and other infrastructure; planning and building safety; and social, recreational and cultural activities and events. The City offers sixteen parks, four community centers, a Sports Complex, and a county operated library. The City is financially accountable for the Successor Agency to the former Redevelopment Agency of the City of West Covina, a financing authority, and a housing authority, which are combined within the City's financial statements. Additional information regarding all three of these legally separate entities can be found in the notes to the financial statements. The annual budget serves as a foundation for the City's financial planning and control. The City Council holds public hearings and adopts an annual budget for all funds. The budget appropriations are prepared by fund, function, and department. The City Manager is authorized to transfer budgeted amounts within departments to assure adequate and proper standards of service. Budgetary revisions, including supplemental appropriations which increase total appropriations in individual funds must be approved by the City Council. Economic Outlook and Major Objectives From early in its history, the City of West Covina has been noted as a city of beautiful homes. Through its General Plan, the City Council strives to maintain the City's high -quality residential base and living environment. The City's identity is defined by carefully designed entry point elements, landmark areas, and open space areas. Known as the headquarters of the East San Gabriel Valley, the City strives to maintain a prosperous business and commercial climate. Despite the current challenging financial and economic environment, West Covina derives significant economic stability from the City's three major commercial districts: Plaza West Covina, Eastland Center, and The Lakes. The California State Auditor has identified several risks in the City's financial condition, including a major unfunded pension liability, general fund expenditures that have exceeded revenues, and high turnover and reductions in staff in recent years. The City of West Covina continues work to secure the financial future of the City while safeguarding the delivery of great public services. This requires stewardship and a willingness to consider all alternatives in service provision. The City of West Covina will continue to strive to provide the highest level of service to its residents and businesses, so the community can thrive. City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 20) SUCCESSOR AGENCY DISCLOSURES, (continued) Long -Term Liabilities Long-term liability activity for the year ended June 30, 2020 was as follows: Balance Balance Due Within Successor Agency: June 30, 2019 Additions Deletions June 30, 2020 One Year Special Tax Bonds: 1996 Special Tax Refunding Bonds $ 16,190,000 $ - $ (3,495,000) $ 12,695,000 $ 3,735,000 Tax Allocation Bonds: 2017 Tax Allocation Revenue Refunding Bonds 12,135,000 - (1,820,000) 10,315,000 1,865,000 Plus deferred amounts: Issuance premium 224,623 (14,975) 209,648 14,975 Total Bonds Payable 28,549,623 - (5,329,975) 23,219,648 6,614,975 Developer agreement payable 63,950,023 8,947,700 (245,667) 72,652,056 - DuetoCountyofLosAngeles 1,286,752 (1,286,752) Total $ 93,786,398 $ 8,947,700 $ (6,862,394) $ 95,871,704 $ 5,614,975 Special Tax Bonds 1996 Special Tax Refunding Bonds (The Fashion Plaza Project) In 1996, the Community Development Commission issued $51,220,000 of Special Tax Refunding Bonds comprised of $9,980,000 of serial bonds and $41,240,000 of term bonds to finance public parking facilities, street and other improvements located in or adjacent to the Community Development Commission Community Facilities District. The serial bonds matured during the fiscal year ended June 30, 2007. The term bonds bear interest at a rate from 5.75% to 6.0% payable semiannually and are due September 1, 2022. The term bonds are not subject to optional redemption; mandatory redemption begins September 1, 2007, then annually thereafter through September 1, 2022. Interest is payable semiannually on March 1 and September 1 of each year. The bonds are secured by and payable from a portion of the revenues derived from an annual special tax to be levied against all taxable real property within the Special Assessment District. In addition, the Commission has pledged certain other incremental revenues generated within the District consisting of property taxes and sales taxes. In addition, the reserve requirement of $5,002,670 was fully funded at June 30, 2020. There was a bond call on March 1, 2016, for $425,000. The outstanding principal balance of the bonds at June 30, 2020 was $12,695,000. -100- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 20) SUCCESSOR AGENCY DISCLOSURES, (continued) Long -Term Liabilities, (continued) Special Tax Bonds, (continued) 1996 Special Tax Refunding Bonds (The Fashion Plaza Project), (continued) The annual debt service requirements on the 1996 Special Tax Bonds as of June 30, 2020 were as follows: Year Ending June 30, Principal Interest Total 2021 $ 3,735,000 $ 649,650 $ 4,384,650 2022 4,055,000 415,950 4,470,950 2023 4,905,000 147,150 5,052,150 Total $ 12,695,000 $ 1,212,750 $ 13,907,750 Tax Allocation Bonds 2017 Tax Allocation Revenue Refunding Bonds On February 14, 2017, the Successor Agency issued Tax Allocation Revenue Refunding bonds, Series 2017A (Tax -Exempt) and 2017B (Federally Taxable). These bonds refinanced the 1998 Housing Set -Aside Tax Allocation Bonds Series A & B, the 2001 Housing Set -Aside Tax Allocation Revenue Bonds, the 2002 Tax Allocation Refunding Bonds and the 1999 Taxable Variable Rate Demand Tax Allocation Bonds. The bonds are payable from and secured solely from the Trust Estate, which will consist primarily of principal and interest payments on the Local Obligations to be purchased by the Authority as set forth in the Agency Indenture. The interest on the Series A bonds is payable semiannually on September 1 and March 1 of each year at interest rates ranging from 2% to 5%. The principal of the Series A bonds is due annually throughout 2026, in amounts ranging from $400,000 to $670,000. The interest on the Series B bonds is payable semiannually on September 1 and March 1 of each year at interest rates ranging from 1 % to 3.75%. The principal of the Series B bonds is due annually throughout 2032, in amounts ranging from $145,000 to $1,215,000. The required reserve of $1,537,074 at June 30, 2020 was fully funded. The principal balance of outstanding bonds at June 30, 2020 was $10,315,000. As a result of the refunding, the Successor Agency reduced its debt service cash flow by $1,443,006, resulting in an economic gain of $603,922 (calculated as the difference between the debt service payments under the old and new bonds discounted to present value using the effective interest rate). -101- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 20) SUCCESSOR AGENCY DISCLOSURES, (continued) Long -Term Liabilities, (continued) Tax Allocation Bonds (continued) 2017 Tax Allocation Revenue Refunding Bonds (continued) The annual debt service requirements on the 2017 Tax Allocation Revenue Refunding Bonds as of June 30. 2020 were as follows: Year Ending June 30, Principal Interest Total 2021 $ 1,865,000 $ 305,641 $ 2,170,641 2022 1,615,000 253,006 1,868,006 2023 1,425,000 205,613 1,630,613 2024 1,255,000 160,406 1,415,406 2025 1,290,000 117,281 1,407,281 2026-2030 2,620,000 235,929 2,855,929 2031-2032 245,000 8,156 253,156 Total $ 10,315,000 $ 1,286,032 $ 11,601,032 Developer Agreement Payable On June 26, 1989, the Commission entered into an agreement with a developer to share certain future tax revenues generated by the Community Facilities District. Since 1992, the developer's share of revenues totaled $55,372,039, the unpaid balance accrues interest at a rate of 10%. The Commission has made payments to the developer totaling $21,678,037. The balance outstanding at June 30, 2020 was $72,652,056. Due to the County of Los Angeles Based on an agreement dated June 19, 1990, between the Commission and the County, during the first twenty years beginning in 1990, the Commission will retain from the County 50% of the County portion of tax increment. Per the agreement, the Commission must repay all amounts withheld from the County beginning in 2011. The repayment is made annually and is based on a calculation of excess tax increment revenues from the sub -project area. The outstanding balance accrues interest at 7%. As of June 30, 2020, the Successor Agency has repaid the final balance of $1,286,752 of the loan to the County. -102- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 20) SUCCESSOR AGENCY DISCLOSURES, (continued) Net Position Restatement The beginning net position of the Successor Agency Private Purpose Trust Fund was restated by $2,088,820 to $66,659,581 due to the omission of an accrual in the prior year in error. 21) SUBSEQUENT EVENTS On July 23, 2020, the City of West Covina issued 2020 Lease Revenue Bonds, 2020 Series A in the amount of $204,095,000 for the purposes of funding all or a portion of its CalPERS Obligation, capital improvements for the City, a reserve for the 2020A Bonds and its cost of issuance. The 2020 Series A Bond was placed with U.S. Bank National Association. 22) COVID-19 AND THE CITY'S ABILITY TO CONTINUE AS A GOING -CONCERN On March 4, 2020, Governor Newsom proclaimed a State of Emergency in response to the global outbreak of the novel coronavirus, or COVID-19. The Governor issued a "Shelter -in - Place" order on March 19, 2020 to slow the spread of the virus. With the disruption to the economy and the unanticipated loss of revenue to the City, staff immediately began analyzing potential impacts to City finances. As this was an unpresented crisis, quick decisions were made to postpone non -essential expenditures and implement a hiring freeze for all non -essential positions. Although the City's services are considered essential, the City Hall was temporarily closed to the public, certain other services transitioned to online -only and because the City's major revenue sources, including businesses that collect sales taxes, are directly impacted by these events, it is probable that this matter will negatively impact the future revenue of the City. On May 19, 2020, the City declared the Fiscal Emergency as part of the City's on -going process to address and improve the City's fiscal position. In August 2020, Governor Newsom introduced a "Tiered State Monitoring" system to provide a framework towards the safe reopening of businesses within each county. Los Angeles County has been Purple (Widespread) Tier since the introduction of the monitoring system. Through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) the Federal Government provided governments financial assistance to help address the impacts of COVID-19. However, there was no flexibility to utilize the funding for revenue losses. Eligibility for CARES Act funding required a local government agency to have a population that exceeds 500,000. Since the City did not meet this criterion, relief for the financial impacts of COVID-19 were limited to programs offered from the State's CARES Act allocations. The City applied for and was granted $1,308,784 from the State. These funds were received in fiscal year 2020-21 and will help offset any revenue losses or expenditure impacts from the COVID-19 pandemic. On December 1, 2020, the California State Auditor has reported that West Covina is a high - risk city because of the significant risks it faces related to its financial and operational management. -103- REQUIRED SUPPLEMENTARY INFORMATION City of West Covina Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios CalPERS Pension Plan - Miscellaneous Last Ten Years' Measurement Period 2013-14 2014-15 2015.16 2016-17 2017-18 TOTAL PENSION LIABILITY Service Cost $ 1,653,769 $ 1,454,757 $ 1,395,164 $ 1,568,756 $ 1,598,999 Interest 9,849,865 10,180,561 10,423,152 10,499,411 10,735,301 Changes of Benefit Terms - - - 8,138,458 - Difference Between Expected and Actual Experience - (134,455) (568,485) (1,086,666) 884,485 Changes of Assumptions - (2,336,836) - - (792,110) Benefit Payments, Including Refunds of Employee Contributions (6,835,867) (7,534,397) (8,197,448) (8,527,256) (9,225,744) Net Change in Total Pension Liability 4,667,767 1,629,630 3,052,383 10,592,703 3,200,931 Total Pension Liability -Beginning 133,922,583 138,590,350 140,219,980 143,272,363 153,865,066 Total Pension Liability - Ending (a) $ 138,590,350 $ 140,219,980 $ 143,272,363 S 153,865,066 $ 157,065,997 PLAN FIDUCIARY NET POSITION ConNbutions-Employer $ 1,441234 $ 1,507,469 $ 1,871,710 $ 2,449,585 $ 2,610,696 Contributions -Employee 921:495 714,712 819,011 788,064 785,970 Net Investment Income 17,189,513 2,500,142 590,110 11,531,815 9,216,240 Benefit Payments, Including Refunds of Employee Contributions (6,835,867) (7,534,397) (8,197,448) (8,527,256) (9,225,744) Plan to Plan Resource Movement - 307 (4,880) - (266) Administrative Expense - (123'626) (66,948) (154,821) (172,889) Omer Miscellaneous Income/(Expense)' (328,320) Net Change in Fiduciary Net Position 12,716,375 (2,935,313) (4,988,445) 6,087,387 2,885,687 Plan Fiduciary Net Position - Be9innin9 100,069,306 112,785,681 109,850,288 104,861,843 110,949,230 Plan Flduelary Net Posltlon - Enrling (b) $ 112,785,681 $ 109,850,288 $ 194,861,843 $ 119,949,239 $ 113,834,917 Plan Net Pension Liability - Ending (a)-(b) $ 25,804,669 $ 30,369,692 $ 38,410,520 $ 42,915,836 $ 43,231,080 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 81.38% 78.34% 73.19% 72.11% 72.48% Covered Payroll $ 10,025,879 $ 9,381,292 $ 9,349,710 $ 14,062,225 $ 12,173,646 Plan Net Pension Liability as a Percentage of Covered Payroll 257.38% 323.73 % 410.82% 305.19% 355.12 % Measurement data 6/3012014 (fsral year 2015) was the first year of implementation. Additional years will be presented as information becomes available. ' During Fiscal Year 2017-18, as a result of Governmental Accounting Standards Board Statement (GASB) No. 75, Accounting and Finandal Reporting for Postemployment Benefit Plans Other than Pensions (GASB 75), CaIPERS reported Its proportionate share of activity related to postemployment benefits for participation in the State of California's agent OPEB plan. A—rdingly, CaIPERS rewrded a one-time expense as a result of the adoption of GASB 75. Additionally, CaIPERS employees participate in various Stale of California agent pension plans and during Fiscal Year 2017-18, CWPERS recorded a conection to previously reported financial statements to properly reflect its proportionate share of activity relatetl to pensions in accordance with GASB Statement No. 68, Acoounting and Financial Reporting for Pensions (GASB 68) Changes in Benefit Terms: The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2016 valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Changes in Assumptions: There were no changes in assumptions in 2019. In 2018, demographic assumptions and inflation mte were changed in accordance to the CaIPERS Experience Study and Review of Acluanal Assumptions December 2017. There were no changes in the discount rate in 2019. In 2017, me accounting discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes in the discount rate. In 2015, amounts reported reflect n adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5 percent discount rate. -104- Measurement Period 2018-19 TOTAL PENSION LIABILITY Service Cost $ 1,488,940 Interest 11,031,185 Changes of Benefit Terms - Differenc , Belveen Expected and Actual Experience 1,166,025 Changes of Assumptions - Benefit Payments, Including Refunds of Employee Contributions (9,388,384) Net Change in Total Pension Liability 4,297,766 Total Pension Liability - Beginning 157,065,997 Total Pension Liability - Ending (a) $ 161.363.763 PLAN FIDUCIARY NET POSITION Contnbutons-Employer $ 3,041,783 Contributions - Employee 597814 Net Investment Income 7,327:093 Benefit Payments, Including Refunds of Employee Contributions (9,388,384) Plan to Plan Resource Movement - Administrative Expense (81,235) Omer Miscellaneous Incomel(Expense)' 266 Net Change in Fiduciary Net Position 1,497,337 Plan Fltluelary Net Posltlon - Beginning 113,834,917 Plan Fltluelary Net Posltlon -Ending (b) $ 115,332,254 Plan Net Pension Liability - Ending (a)-(b) $ 46,031,509 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 71.47% Covered Payroll $ 8,498,816 Plan Net Pension Liability as a Percentage of Covered Payroll 541.62% -105- City of West Covina Required Supplementary Information Schedule of Plan Contributions CalPERS Pension Plan - Miscellaneous Last Ten Years' Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2014-15 2015-16 2016-17 2017-18 2018-19 Actuarially Determined Contribution S -7-7,T4 =, �. T Contributions in Relation to the Actuarially Determined Contribution (1,507,469) (1,871,710) (2,449,585) (2,610,696) (3,041,539) Contribution Deficiency (Excess) $ - $ - $ - $ - $ - Covered Payroll $ 9,381,292 $ 9,349,710 $ 14,062,225 $ 12,173,646 $ 8,498,816 Contributions as a Percentage of Covered Payroll 16.07% 20.02% 17.42% 21.45% 35.79% ' Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2019-20 were from the June 30, 2018 Funding Valuation Report. Actuarial Cost Method Entry Age Normal Amortization Method/Period For details, see June 30, 2017, Funding Valuation Report. Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2013, Funding Valuation Report. Inflation 2.50% Salary Increases Varies by Entry Age and Service Payroll Growth 3.00% Investment Rate of Return 7.375% Net of Pension Plan Investment and Administrative Expenses, includes Inflation. Retirement Age The probabilities of Retirement are based on the 2017 CAPERS Experience Study for the period from 1997 to 2015. Mortality The probabilities of mortality are based on the 2017 CaIPERS Experience Study for the period from 1997 to 2015. Pre -retirement and Post -retirement mortality rates include 15 years of projected mortality improvement using 90%of Scale MP-2016 published by the Society of Actuaries. -106- Actuarially Determined Contribution Contributions in Relation to the Actuarially Determined ContributionContribution Deficiency (Excess) Covered Payroll Contributions as a Percentage of Covered Payroll Fiscal Year 2019.20 (3,588,349) $ 7,843,755 45.75% -107- City of West Covina Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios CalPERS Pension Plan - Safety Last Ten Years' Measurement Period 2013-14 2014-15 2015-16 2016-17 2017-18 TOTAL PENSION LIABILITY Service Cost $ 4,824,545 $ 4,604,800 $ 4,729,431 $ 5,376,792 $ 5.300,363 Interest 23,426,151 24,117,128 24,899,740 25,330,388 26.141,448 Changes of Benefit Terms - - - - - Diffemi-ce Between Expected and Actual Experience - (1,760,971) (145,882) (2,764,123) 2,470,547 Changes of Assumptions - (5,858,071) - 21,000,606 (1,644,342) Benefit Payments, Including Refunds of Employee Contributions (17,362,607) (17,865,208) (18,951,025) (19,858,900) (20,444,515) Net Change in Total Pension Liability 10,888,089 3,237,678 10,532,264 29,084,763 11,823,501 Total Pension Liability -Beginning 318,617,717 329,505,806 332,743,484 343,275,748 372,360,511 Total Pension Liability - Ending (a) $ 329,505,806 $ 332,743,484 $ 343,275,748 $ 372,360,511 $ 384,184,012 PLAN FIDUCIARY NET POSITION Contributions -Employer $ 6,403,118 $ 7,339,064 $ 8,387,165 $ 10,058,079 $ 10,515,780 Contributions -Employee 2:416:548 1:628:630 1:660:160 1,818,024 1,830,019 Net Investment Income 34,775,710 5,057,426 1,179,228 23,916,665 19,582,552 Benefit Payments, Including Refunds of Employee Contributions (17,362:607) (17,865,208) (18,951,025) (19,858,900) (20,444,515) Plan to Plan Resource Movement - 10,338 4,880 - (568) Administrative Expense - (254,287) (137,683) (321,946) (364,120) Other Miscellaneous Income/(Expense)' (691,471) Net Change in Fiduciary Net Position 26,232,769 (4,084,037) (7,857,271) 15,611,922 10,427,677 Plan Fiduciary Net Position -Beginning 203,765,462 229,998,231 225,914,194 278,056,919 233,668,841 Plan Flduelary Net Posltlon - Ending (b) $ 229,998,231 $ 225,914,194 $ 218,056,919 $ 233,668,841 $ 244,096,518 Plan Net Pension Liability - Ending (a)-(b) $ 99,507,575 $ 106,829,290 $ 125,218,829 $ 138,691,670 $ 140,087,494 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 69,80% 67.89% 63.52% 62.75% 63,54% Covered Payroll $ 16,974,682 $ 16,517,686 $ 17,288,458 $ 17.084,933 $ 14,051,195 Plan Net Pension Liability as a Percentage of Covered Payroll 586.21 % 646.76% 724.29% 811.78% 996.98% `Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. ' During Fiscal Year 2017-18, as a result of Governmental Accounting Standards Board Statement (GASB) No. 75, Accounting and Financial Reporting for Postemploymenl Benefit Plans Other than Pensions (GASB 75), CalPERS reported its proportionate share of activity related to postemployment benefits for participation in the State of California's agent OPEB plan. Accordingly, CalPERS recorded a one-time expense as a result of the adoption of GASB 75. Additionally, CalPERS employees participate in various State of California agent pension plans and during Fiscal Year 2017-18, CaIPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68). Changes in Benefit Terms: The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2016 valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Changes in Assumptions: There were no changes in assumptions in 2019. In 2018, demographic assumptions and inflation rate were changed in accordance to the CaIPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate in 2019. In 2017, the accounting discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes in the discount rate. In 2015, amounts reported reflect n adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5 percent discount rate. -108- Short-term and Long-term Financial Planning Annually, the City adopts a budget covering operating revenues and expenditures, labor usage, capital expenditures, and other sources and uses of funds. For financial planning purposes, the City conducts comprehensive citywide financial forecasting in conjunction with its revenue consultants and other sources. During the past few years, the City has utilized a range of temporary and permanent cost reduction initiatives, economic development, and revenue generation priorities, outside grants, and the use of fiscal reserves as necessary. As a result, the City has weathered the effects of the recession while providing critical services to the public in areas such as public safety, facility maintenance, parks maintenance, and infrastructure improvement. On June 5, 2018, the City Council adopted a fund balance policy to maintain a minimum unassigned fund balance of 17% of the General Fund operating expenditures. Awards and Acknowledgements The preparation of this report could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department. I would like to express my appreciation to all members of the Department who assisted and contributed to the preparation of this report. These are extremely challenging times for local government in which many difficult decisions must be made. Credit also must be given to City Council for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Robbeyn Bird Finance Director Measurement Period 2018-19 TOTAL PENSION LIABILITY Service Cost $ 5.573.847 Interest 26.959.893 Changes of Benefit Terms - Difference Between Expected and Actual Experience 706,038 Changes of Assumptions - Beneft Payments, Including Refunds of Employee Contributions (21,231,071) Net Change in Total Pension Liability 12,008,707 Total Pension Liability - Beginning 384,164,012 Total Pension Liability- Ending (a) $ 396,192,719 PLAN FIDUCIARY NET POSITION Contributions -Employer $ 11,176,490 Contributions - Employee 1,731,882 Net Investment Income 15,909,762 Benefit Payments, Including Refunds of Employee Contributions (21,231,071) Plan to Plan Resource Movement - Administrative Expense (174,192) Other Miscellaneous Income/(Expense) 568 Net Change in Fiduciary Net Position 7,413,439 Plan Fiduciary Net Position -Beginning 244,096,518 Plan Fiduciary NO Position - Ending (b) $ 251,509,957 Plan Net Pension Liability - Ending (a) - (b) $ 144,682,762 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 63 48% Covered Payroll $ 16,289,859 Plan Net Pension Liability as a Percentage of Covered Payroll 888.18% -109- City of West Covina Required Supplementary Information Schedule of Plan Contributions CalPERS Pension Plan - Safety Last Ten Years' Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2014-15 2015-16 2016.17 2017.18 2018.19 Actuarially Determined Contribution 7,339.064 8.387,165 , 5 , =7 ,5 5,7-F-TTT77ZW Contributions in Relation to the Actuarially Determined Contribution (7,339,064) (8,387,165) (10,058,079) (10,515,780) (11,174,096) Contribution Deficiency (Excess) $ - $ - $ - $ - $ - Covered Payroll $ 16.517,686 $ 17,288,458 $ 17,084,933 $ 14,051.195 $ 16.289,859 Contributions as a Percentage of Covered Payroll 44.43 % 48.51 % 58.87 % 74.84% 68.60 % Measurement dale 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. Notes to Schedule; The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2019-20 were from the June 30, 2018 Funding Valuation Report. Actuarial Cost Method Entry Age Normal Amortization Method/Period For details, see June 30, 2017, Funding Valuation Report. Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2013, Funding Valuation Report. Inflation 2.50% Salary Increases Varies by Entry Age and Service Payroll Growth 3.00% Investment Rate of Return 7.375% Net of Pension Plan Investment and Administrative Expenses, includes Inflation. Retirement Age The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Mortality The probabilities of mortality are based on the 2017 CaIPERS Experience Study for the period from 1997 to 2015. Pre -retirement and Post -retirement mortality rates include 15 years of projected mortality improvement using 90%of Scale MP-2016 published by the Society of Actuaries. -110- Actuarially Determined Contribution Contributions in Relation to the Actuarially Determined Contribution Contribution Deficiency (Excess) Covered Payroll Contributions as a Percentage of Covered Payroll Fiscal Year 2019.20 12.592,730 (12,592,730) $ 16,447,485 76.56 City of West Covina Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios CalPERS Pension Plan- EPMC Replacement Supplemental Retirement Plan Last Ten Years' Measurement Period 2013.14 2014-15 2015.16 2016.2017 2017.2018 TOTAL PENSION LIABILITY Service Cost $ 36,000 $ 36,000 $ 40,000 $ 35,733 $ 29,701 Interest 36,000 28000 32,000 35,268 46,463 Difference Between Expected and Actual Experience - (72:000) - 98,508 - Changes of Assumpfions - 200'000 (37,000) (85,060) 10,475 Changes in benefits - - - - - Benefit Payments, Including Refunds of Employee Contributions (64,000) (9,000) (91,000) (42,877) (56,554) Net Change in Total Pension Liability 8,000 183,000 (56,000) 41,572 30,085 Total Pension Liability - Beginning 755,000 763,000 946,000 890,000 931,572 Total Pension Liabil ily -Ending (a) $ 763,000 $ 946,000 $ 890,000 $ 931,572 $ 961,657 PLAN FIDUCIARY NET POSITION Contributions -Employer $ 65,000 $ 56,000 $ 56,000 $ 61,019 $ 60,056 Contributions -Employee - - - - Net Investment Income 12,000 3,000 (1,000) 10,029 8,234 Benefit Payments, Including Refunds of Employee Contributions (64,000) (9,000) (91,000) (42,877) (56,554) Plan to Plan Resource Movement - - - - - Administrative Expense (3,000) (7,000) (1,000) (9,456) (775) Net Change In Fiduciary Net Position 10,000 43,000 (37,000) 18,715 10,961 Plan Fiduciary Net Position - Beginning 109,000 119,000 162,000 125,000 143,715 Plan Fiduciary Net Position - Ending (b) $ 119,000 S 162,000 $ 125,000 $ 143,715 $ 154,676 Plan Net Pension Liability - Ending (a) - (b) $ 644,000 $ 784,000 $ 765,000 $ 787,857 $ 806,981 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 15.60% 17.12% 14.04% 15.43% 16.08% Covered Employee Payroll I'llsl W. W. $ 13,388,000 Na $ 15,855,534 Plan Net Pension Liability as a Percentage of Covered Payroll n/a n/a 5.71 % Na 5.09% " Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will he presented as information becomes available. Notes to Schedule: Changes in Benefit Terms: None. Changes in Assumptions: In 2019, the discount rate was updated to 3.90 % and the mortality improvement scale was updated to Scale MP- 2019. In 2018, the discount rate used to measure the total pension liability was 4.86 percent. In 2017, amounts reported reflect an adjustment of the discount rate from 3.90 percent to 4.98 percent. In 2016, amounts reported reflect an adjustment of the discount rate from 3.50 percent to 3.90 percent. In 2015, amounts reported reflect an adjustment of the discount rate from 4.80 percent to 3.50 percent. In 2014, amounts reported were based on the 4.80 percent discount rate. (1) Covered -employee payroll mpresented above is based on covered -employee payroll provided by the employer. GASS 68 defines covered -employee payroll as the total payroll of employees that are provided with pensions through the OPEB plan. Contributions are not based on a measure of pay, therefore, covered -employee payroll is used in this schedule. (2) Covered employee payroll was for the 12-month period ended on the Measurement Dale as reported by the City. -112- Measurement Period 2018.2019 TOTAL PENSION LIABILITY Service Cost $ 29,665 Interest 46,211 Difference Between Expected and Actual Experience 45,697 Changes of Assumptions 90.640 Changes in benefits - Benefit Payments, Including Refunds of Employee Contributions (80.968) Net Change in Total Pension Liability 131,245 Total Pension Liability - Beginning 961,657 Total Pension Liability - Ending is) $ 1,092,902 PLAN FIDUCIARY NET POSITION Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Plan to Plan Resource Movement Adminisimtive Expense Net Change in Fiduciary Net Position Plan Fiduciary Net Position -Beginning Plan Fitluclary Net Position -Entling (b) Plan Net Pension Liability - Ending (a) -(b) Plan Fiduciary Net Position as a Percentage of the Total Pension Liability Covered Employee Payroll rom Plan Net Pension Liability as a Percentage of Covered Payroll $ 62,350 6,567 (80,968) (769) (12,820) 154,676 $ 141,856 $ 951,046 12.98 % $ 14,447,921 6.58% -113- City of West Covina Required Supplementary Information Schedule of Plan Contribution CalPERS Pension Plan — EPMC Replacement Supplemental Retirement Plan Last Ten Years' Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2014-15 2015-16 2016-17 2017-18 2018-19 Actuarially Determined Contribution $ 82,000 $ 105,000 $ 105,000 $ 104,000 $ 134,000 Contributions in Relation to the Actuarially Determined Contribution (56,000) (59,000) (66,000) (60,056) (62,350) Contribution Deficiency (Excess) $ 26,000 $ 46,000 $ 39,000 $ 43,944 $ 71,650 Covered Employee Payroll (11121 We $ 13,737,000 n/a We $ 14,447,921 Contributions as a Percentage of Covered Payroll n/a 0.43% n/a n/a 0.43% ` Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. Notes to Schedule Valuation Date June 30, 2019 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount 7-year fixed (closed) period for 2019/20 Asset Valuation Method Investment gains and losses spread over 5-year rolling period At lead 80% but no more than 120% of market value Discount Rate: 6 % All Other Assumptions: Same as those used to develop the TPL (1) Covered -employee payroll represented above is based on covered -employee payroll provided by the employer. GASS 68 defines covered -employee payroll as the total payroll of employees that are provided with pensions through the OPEB plan. Contributions are not based on a measure of pay, therefore, covered -employee payroll is used in this schedule. (2) Covered employee payroll was for the 12-month period ended on June 30 of the fiscal year as reported by the City. -114- Fiscal Year 2019-20 Actuarially Determined Contribution $ 134,000 Contributions In Relation to the Actuarially Determined Contribution (56,957) Contribution Deficiency(Excess) $ 77,043 Covered Employee Payroll (1) $ 10,222,450 Contributions as a Percentage of Covered Payroll 0.56% -115- City of West Covina Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios CalPERS Pension Plan - Supplemental Retirement Plan for Executive Staff Last Ten Years' Measurement Period 2013=14 2014-15 2015-16 2016=17 2017-18 TOTAL PENSION LIABILITY Service Cost $ 112,000 $ 116,000 $ 30,000 $ 20,388 $ 12,235 Interest 168.000 178,000 141,000 161,327 130.692 Difference Between Expected and Actual Experience - (643,000) - (111,492) - Changes ofAssumptions - 346,000 (455,000) 803,038 (101,877) Changes in benefits - - - - - Benefit Payments, Including Refunds of Employee Contributions (82,000) (104,000) (137,000) (136,317) (139,056) Net Change in Total Pension Liability 198,000 (107,000) (421,000) 736,944 (98,006) Total Pension Liability - Beginning 2,959,000 3,157,000 370501000 2,629,000 3,365,944 Total Pension Liability -Ending (a) $ 3,157,000 $ 3,050,000 $ 2,629,000 $ 3,365,944 $ 3,267,938 PLAN FIDUCIARY NET POSITION Contributions- Employer $ 59,000 $ 78,000 $ 78,000 S 73,467 $ 74,100 Contributions -Employee - - - - - Net lnvestmentIncome 75,000 13,000 9,000 49,861 36,931 Benefit Payments, Including Refunds of Employee Contributions (82,000) (104,000) (137,000) (136,317) (139,056) Plan to Plan Resource Movement - - - - - Administrative Expense (6,000) (6,000) (41000) (87431) (3,379) Net Change in Fiduciary Net Position 46,000 (19,000) (54,000) (21,420) (31,404) Plan Fiduciary Net Position -Beginning 660,000 708,000 687,000 833,000 811,580 Plan Fiduciary Net Position - Ending (b) $ 706,000 $ 687,000 $ 633,000 $ 611,680 $ 580,176 Plan Net Pension Liability -Ending (a)-(b) $ 2,451,000 $ 2,363,000 $ 1,996,000 $ 2,754,364 $ 2,687,762 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 22,36% 22.52% 24.08% 18.17% 17,75% Covered Employee Payroll nlPl n/a n/a $ 143,000 n/a $ 172,512 Plan Net Pension Liability as a Percentage of Covered Payroll n/a We 1395.80% We 1558,01 % Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. Notes to Schedule: Changes in Benefit Terms: None. Changes in Assumptions: In 2019, the discount rate was updated to 3.63%and the mortality improvement scale was updated to Scale MP-2019. In 2018, the discount rate used to measure the total pension liability was 4.16 percent. In 2017, amounts reported reflect an adjustment of the discount rate from 6.25 percent to 3.95 percent. In 2016, amounts reported reflect an adjustment of the discount rate from 4.70 percent to 6.25 percent. In 2015, amounts reported reflect an adjustment of the discount rate from 5.55 percent to 4.70 percent. In 2014, amounts reported were based on the 5.55 percent discount rate. (1) Covered -employee payroll represented above is based on covered -employee payroll provided by the employer. GASS 68 defines covered -employee payroll as the total payroll of employees that are provided with pensions through the OPEB plan. Contributions are not based on a measure of pay, therefore, covered -employee payroll is used in this schedule. (2) Covered employee payroll was for the 12-month period ended on the Measurement Date as reported by the City -116- Measurement Period 2018-19 TOTAL PENSION LIABILITY Service Cost $ 11,963 Interest 133,267 Difference Between Expected and Actual Experience 477,904 Changes of Assumptions 281,983 Changes in benefits - Beneft Payments, Including Refunds of Employee Contributions (152,749) Net Change in Total Pension Liability 752,368 Total Pension Liability - Beginning 3,267,938 Total Pension Liability - Ending (a) $ 4,020,306 PLAN FIDUCIARY NET POSITION Contributions -Employer $ 78,102 Contributions - Employee - Net Investment Income 31,817 Benefit Payments, Including Refunds of Employee Contributions (152,749) Plan to Plan Resource Movement - Administmtive Expense (3,109) Net Change in Fiduciary Net Position (45,939) Plan Fiduciary Net Position -Beginning 580,178 Plan Fiduciary Net Position - Ending (b) $ 534, 337 Plan Net Pension Liability - Ending (a) - (b) $ 3,486,069 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 13,29% Covered Employee Payroll (u $ 179,572 Plan Net Pension Liability as a Percentage of Covered Payroll 1941.32% -117- City of West Covina Required Supplementary Information Schedule of Plan Contributions CalPERS Pension Plan - Supplemental Retirement Plan for Executive Staff Last Ten Years' Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2014-15 2015-16 2016-17 2017-18 2018-19 Actuanally Determined Contribution $ 439,000 $ 439,000 $ 279,000 $ 278,000 $ 314,000 Contnbutions in Relation to the Actuarially Determined Contribution (78,000) (78,000) (73,000) (74,100) (78,102) Contribution Deficiency (Excess) $ 361,000 $ 361,000 $ 206,000 $ 203,900 $ 235,898 Covered Employee Payroll ml lzl n/a No $ 96,000 n/a $ 179,572 Contributions as a Percentage of Covered Payroll n/a We 76.04 % n/a 43.49% Measurement data 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. Notes to Schedule Valuation Date June 30, 2019 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount 7-year fixed (closed) period for 2019/20 Asset Valuation Method Investment gains and losses spread over 5-year rolling period At least 80% but no more than 120% of market value Discount Rate: 6% All Other Assumptions: Same as those used to develop the TPL (1) Covered -employee payroll represented above is based on covered -employee payroll provided by the employer. GASS 68 defines ered-employee payroll as the total payroll of employees that are provided with pensions through the OPEB plan. Contributions are not based on a measure of pay, therefore, covered -employee payroll is used in this schedule. (2) Covered employee payroll was for the 12-month period ended on June 30 of the fiscal year as reported by the City. -118- This page intentionally left blank. Actuarially Determined Contribution Contributions in Relation to the Actuarially Determined Contribution Contribution Deficiency (Excess) Covered Employee Payroll i'I Contributions as a Percentage of Covered Payroll Fiscal Year 2019-20 $ 313.000 (77.814) $ 235,186 $ 219.555 35.44 -119- City of West Covina Required Supplementary Information Schedule of Changes in the Total OPEB Liability and Related Ratios Last Ten Years* Fiscal Year End Measurement Period Total OPEB Liability Service cost Interest Differences between expected and actual experience Changes of assumptions Benefit payments Net change in total OPEB liability Total OPEB liability- beginning Total OPEB liability- ending Covered -employee payroll o) Total OPEB liability as a percentage of covered employee -payroll Notes to Schedule: 6/30/2018 6/30/2019 6/30/2020 6/30/2017 6/30/2018 6/30/2019 $ 1,913,541 $ 1,619,250 $ 1,545,500 1,889,517 2,158,673 2,285,257 - - (1,738,131) (7,040,369) (2,524,608) 2,887,380 (2,467,893) (2,470,254) (2,384,056) (5,705,204) (1,216,939) 2,595,950 65,619,220 59,914,016 58,697,077 59,914,016 58,697,077 61,293,027 $ 26,527,000 $ 28,239,505 $ 26,672,215 225.9 % 207.9 % 229.8 % Changes in assumptions: Discount rate was updated on municipal bond rate as of the measurement date. Mortality improvement scale was also updated to Scale MP-2019. Discount rate increased from 3.87% at June 30, 2018 to 3,50% at June 30, 2019. Discount rate increased from 3.58% at June 30, 2017 to 3.87% at June 30, 2018. Discount rate increased from 2.85% at June 30, 2016 to 3.58% at June 30, 2017. The City does not have assets accumulated in a trust that meets the criteria of GASB 75 to pay related benefits. * Historical information is required only for measurement periods for which GASB 75 is applicable. Future years' information will be displayed up to 10 years as information becomes available. Fiscal Year 2017-18 was the first year of implementation. (1) Covered -employee payroll represented above is based on covered -employee payroll provided by the employer. GASB 75 defines covered -employee payroll as the total payroll of employees that are provided OPEBs through the OPEB plan. Contributions are not based on a measure of pay, therefore, covered - employee payroll is used in this schedule. -120- City of West Covina Required Supplementary Information General Fund General Fund The General Fund is the City's primary operating fund. It accounts for all financial resources of the City except those required to be accounted for in another fund. -121- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual General Fund For the Year Ended June 30, 2020 Budgeted Amounts Original Final Actual Variance with Final Budget Positive (Negative) REVENUES Taxes $ 52,488,100 $ 52,579,300 $ 53,768,822 $ 1,189,522 Licenses and permits 1,048,700 1,688,700 1,491,744 (196,956) Fines and forfeitures 840,000 840,000 921,872 81,872 Investment income 208,900 228,900 1,667,494 1,438,594 Rental income 719,300 719,300 700,455 (18,845) Revenue from other agencies 2,290,500 2,552,500 2,645,700 93,200 Charges for services 7,142,100 7,109,600 7,381,617 272,017 Other revenues 496,000 2,562,346 2,357,219 (205,127) Total revenues 65,233,600 68,280,646 70,934,923 2,654,277 EXPENDITURES Current: General government Public safety Public works Community services Community development Debt service: Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Capital leases Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning of year Fund balance, end of year 6,355,625 6,822,625 6,457,768 364,857 51,707,665 52,947,250 55,337,813 (2,390,563) 3,802,135 4,624,455 4,349,341 275,114 2,600,266 2,760,266 2,512,749 247,517 510,922 510,922 502,326 8,596 4,000 (4,000) 64,976,613 67,665,518 69,163,997 (1,498,479) 256,987 615,128 1,770,926 1,155,798 196,759 196,759 196,759 157,673 157,673 - (157,673) (578,918) (1,146,118) (1,474,057) (327,939) (224,486) (791,686) (1,277,298) (485,612) 32,501 (176,558) 493,628 670,186 19,181,696 19,181,696 19,181,696 $ 19,214,197 $ 19,005,138 $ 19,675,324 $ 670,186 -122- City of West Covina Required Supplementary Information Major Special Revenue Funds West Covina Housing Authority Special Revenue Fund This fund accounts for assets and related income received from the former Community Development Commission to be used for the administration of providing affordable housing in the City. State Gas Tax Special Revenue Fund This fund accounts for the City's proportionate share of gas tax monies collected by the State of California and Proposition 1 B monies which are used for street construction and maintenance. -123- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual West Covina Housing Authority Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ - $ - $ 444,792 $ 444,792 Revenue from other agencies - - 36,034 36,034 Other revenues 52,731 52,731 Total revenues 533,557 533,557 EXPENDITURES Current: Public Safety 207,722 231,077 189,368 41,709 Community development 482,158 798,080 526,695 271,385 Total expenditures 689,880 1,029,157 716,063 313,094 Excess (deficiency) of revenues over(under)expenditures (689,880) (1,029,157) (182,506) 846,651 OTHER FINANCING SOURCES (USES) Transfers out (33,000) 33,000 Total other financing sources (uses) (33,000) 33,000 Net change in fund balance (689,880) (1,062,157) (182,506) 879,651 Fund balance, beginning of year 24,674,322 24,674,322 24,674,322 Fund balance, end of year $ 23,984,442 $ 23,612,165 $ 24,491,816 $ 879,651 -124- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual State Gas Tax Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment Income $ - $ - $ 55,139 $ 55,139 Revenue from other agencies 4,478,141 4,478,141 4,400,170 (77,971) Charges for services - - 23 23 Other revenues 122,068 122,068 184,192 62,124 Total revenues 4,600,209 4,600,209 4,639,524 39,315 EXPENDITURES Current: General government 2,500 2,500 2,980 (480) Publicworks 1,949,548 3,794,071 3,308,598 485,473 Total expenditures 1,952,048 3,796,571 3,311,578 484,993 Excess (deficiency) of revenues over(under)expenditures 2,648,161 803,638 1,327,946 524,308 OTHER FINANCING SOURCES (USES) Transfers in 567,148 567,148 Total other financing sources (uses) 567,148 567,148 Net change in fund balance 2,648,161 803,638 1,895,094 1,091,456 Fund balance, beginning of year 2,825,217 2,825,217 2,825,217 Fund balance, end of year $ 5,473,378 $ 3,628,855 $ 4,720,311 $ 1,091,456 -125- City of West Covina Notes to Required Supplementary Information June 30, 2020 BUDGETARY INFORMATION The annual budget adopted by the City Council provides for the general operation of the City. The annual budget is adopted in summary by the City Council in June of each year for the General Fund, special revenue funds, debt service fund and capital projects funds. For the fiscal year ending June 30, 2020 the City adopted budgets for the general fund, special revenue funds, debt service fund, and capital projects funds with the exception of the SAFER Grant, Integrated Waste Management, Art in Public Places Special Revenue Funds, Park Development and Development Impact Fees Capital Projects Fund. The resolution sets a combined appropriation of the funds for the operation of the City. The City Manager is authorized to transfer budgeted amounts between departments to ensure adequate and proper standards of service. Budgetary revisions, including supplemental appropriations which increase appropriations in individual funds, must be approved by the City Council. The budgetary level of control is at the departmental level for the general fund and at the fund level for all other funds. The budgeted figures used in the financial statements' budget to actual comparisons are the final amended amounts. The budget is formally integrated into the accounting system and employed as a management control device during the year for the General Fund, special revenue funds, debt service fund and capital projects funds. Budgets for governmental fund types are adopted on a basis consistent with generally accepted accounting principles. Operating appropriations lapse at the end of the fiscal year. Capital projects funds are appropriated on a project basis and appropriations are funded by the council to continue until the specific projects are completed. -126- City of West Covina Notes to Required Supplementary Information June 30, 2020 2) EXPENDITURES IN EXCESS OF APPROPRIATIONS Governmental Funds Final Budget Expenditures Excess Major Fund - General Fund: Public safety $ 52,947,250 $ 55,337,813 $ (2,390,563) Debt service: Interest and fiscal charges - 4,000 (4,000) Major Fund - State Gas Tax: General Government 2,500 2,980 (480) Non -Major Special Revenue Funds: Measure M 33,722 69,642 (35,920) Proposition A 2,255,183 2,255,247 (64) Various Grant 281,051 367,317 (86,266) CDBG 20,118 22,341 (2,223) Non -Major Capital Projects Funds: Park Development - 65 (65) -127- SUPPLEMENTARY INFORMATION City of West Covina Organizational Chart -iv- City of West Covina Non -Major Governmental Funds SPECIAL REVENUE FUNDS — These funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. DEBT SERVICE FUND — This fund is used to account for the accumulation of resources for, and the payment of, governmental long-term debt principal and interest. CAPITAL PROJECTS FUNDS — These funds are used to account for the purchase or construction of major capital facilities which are not financed by Proprietary Funds. Capital Projects Funds are ordinarily not used to account for the acquisition of furniture, fixtures, machinery, equipment and other relatively minor or comparatively short-lived capital assets. -128- City of West Covina Combining Balance Sheet Non -Major Governmental Funds June 30, 2020 Total Special Capital Non -Major Revenue City Debt Projects Governmental Funds Service Fund Funds Funds ASSETS Cash and investments $ 33,011,370 $ 1,200,611 $ 1,802,306 $ 36,014,287 Cash and investments with fiscal agent - 2,570,106 - 2,570,106 Receivables, net: Accounts 259,771 36,523 296,294 Taxes 236,502 - - 236,502 Other 99,452 250,000 349,452 Due from other agencies 222,472 222,472 Total assets $ 33,829,567 $ 4,057,240 $ 1,802,306 $ 39,689,113 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $ 2,643,391 $ 1,250 $ 15,491 $ 2,660,132 Other accrued liabilities 159,874 - - 159,874 Deposit payable 340 - - 340 Due to other funds 782,605 - - 782,605 Advances from other funds 332,173 - - 332,173 Unearned revenue 10,675 10,675 Total liabilities 3,929,058 1,250 15,491 3,945,799 Deferred inflows of resources: Unavailable revenue 200,469 200,469 Fund Balances: Restricted: Debt service - 4,055,990 4,055,990 Community services 4,843,488 - 4,843,488 Public safety 7,730,436 - - 7,730,436 Public works 18,285,074 - - 18,285,074 Assigned - - 1,786,815 1,786,815 Unassigned (1,158,958) (1,158,958) Total fund balances 29,700,040 4,055,990 1,786,815 35,542,845 Total liabilities, deferred inflows of resources, and fund balances $ 33,829,567 $ 4,057,240 $ 1,802,306 $ 39,689,113 -129- City of West Covina Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Non -Major Governmental Funds For the Year Ended June 30, 2020 Total Special City Capital Non -Major Revenue Debt Projects Governmental Funds Service Fund Funds Funds REVENUES Taxes $ 8,729,761 $ - $ 89,673 $ 8,819,434 Special assessments 6,490,254 - - 6,490,254 Investment income 387,401 110,097 12,122 509,620 Revenue from other agencies 6,990,284 1,314,727 - 8,305,011 Charges for services 22,656 286,523 - 309,179 Other revenues 594,978 594,870 1,189,848 Total revenues 23,215,334 1,711,347 696,665 25,623,346 EXPENDITURES Current: General government 27,344 - - 27,344 Public safety 3,055,629 274,761 3,330,390 Public works 9,534,132 - 70,153 9,604,285 Community services 4,750,238 65 4,750,303 Community development 185,537 - - 185,537 Debt service: Principal - 1,833,918 1,833,918 Interest and fiscal charges 1,928,807 1,928,807 Total expenditures 17,552,880 3,762,725 344,979 21,660,584 Excess (deficiency) of revenues over (under) expenditures 5,662,454 (2,051,378) 351,686 3,962,762 OTHER FINANCING SOURCES (USES) Transfers in 9,000 578,918 339,847 927,765 Transfers out (191,042) (11,856) (202,898) Total other financing sources (uses) (182,042) 578,918 327,991 724,867 Net change in fund balance 5,480,412 (1,472,460) 679,677 4,687,629 Fund balances, beginning of year 24,219,628 5,528,450 1,107,138 30,855,216 Fund balances, end of year $ 29,700,040 $ 4,055,990 $ 1,786,815 $ 35,542,845 -130- City of West Covina Non -Major Governmental Funds — Special Revenue Funds SPECIAL REVENUE FUNDS are used to account for specific revenues that are legally restricted to expenditure for particular purposes. Drug Enforcement Rebate — This fund accounts for the City's portion of revenue received from drug asset seizures. The revenue is used to enhance the police programs. Measure M — This fund accounts for the 0.5% sales tax collected in Los Angeles County used for transportation projects. Air Quality Improvement — This fund accounts for the City's portion of motor vehicle registration fees collected under AB 2766. This fee was levied to fund programs to reduce air pollution from mobile sources such as cars, trucks and buses. Money is distributed to the cities based on population, and additional discretionary grants are made based on specific requests. Proposition A — This fund accounts for the 0.5% sales tax collected in Los Angeles County which is used for transportation programs and projects. Proposition C — This fund accounts for gasoline taxes which are restricted for transportation programs and projects. CESF — This fund is to account for coronavirus emergency supplemental funding received and expenditures in preventing, preparing for, and responding to the event. Police Donations — This fund accounts for donations received and expenditures related to various police programs. Transportation Development Act — This fund accounts for regional Transportation Development Act funds received from Los Angeles County which are used for local streets and roads. AB939 — This fund accounts for programs to reduce solid waste deposits in local landfills, pursuant to AB939. Public Safety Augmentation — This fund accounts for sales tax revenue legally restricted for public safety. Revenue is used to augment police operations. COPS/SLESA — This fund accounts for revenue from the State restricted for supplementing police operations. -131- City of West Covina Non -Major Governmental Funds — Special Revenue Funds, (continued) Charter PEG — This fund accounts for monies received from the City's cable television franchisee for a one-time litigation settlement and for cable -related capital expenditures. Art in Public Places — This fund accounts for development fees paid in lieu of acquisition and installation of approved artwork in a development with expenditures restricted to acquisition, installation, maintenance and repair of artworks at approved sites. Measure R — This fund accounts for sales tax revenues collected in Los Angeles County to provide transportation related projects and programs. Inmate Welfare — This fund accounts for any money, refund, rebate or commission received from a telephone call from inmates while incarcerated to meet the requirements of California Penal Code: Part 3; Title 4; Chapter 1; Section 4025. The monies are to be expended for the benefit, education, and welfare of inmates confined within the jail. Any funds that are not needed for the welfare of the inmates may be expended for the maintenance of the jail facilities. West Covina Community Services Foundation — This fund accounts for activity of the West Covina Community Services Foundation, a 501(c) (3) nonprofit organization. Various Grants — This fund accounts for various Federal, State of California, and local grants that are restricted to expenditures for specific programs and projects. Community Development Block Grant (CDBG) — This fund accounts for the activities of the Community Development Block Grant received from the U.S. Department of Housing and Urban Development. SAFER Grant — This fund accounts for personnel costs that are reimbursable through the Staffing for Adequate Fire and Emergency Response (SAFER) Grant. Maintenance District #1 — The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Maintenance District #2 — The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Coastal Sane Shrub — This community facilities district was formed to provide for the restoration and ongoing maintenance of sensitive environmental habitat within the development area of a former landfill, including habitat for endangered species such as the California gnatcatcher (Polioptila californica). Maintenance District #4 — The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. -132- City of West Covina Non -Major Governmental Funds — Special Revenue Funds, (continued) Maintenance District #6 — The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Maintenance District #7 — The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Citywide Maintenance District — Revenue for the fund comes from annual special benefit assessments from property owners who benefit from covered improvements. This fund provides the majority of funding for the City's street lighting system and street tree program. Sewer Maintenance — This fund supports the City's street sweeping program and maintenance of the City's sewer system. The City also provides services to the City of Covina through this fund. Auto Plaza Improvement District — This fund is an assessment district supported by six of West Covina's automobile dealers to fund the construction, maintenance and operations of a reader board adjacent to Interstate 10. Integrated Waste Management — This fund accounts for landfill local enforcement agency activities and waste management programs, other than AB939. Mental Health Awareness Training — This fund accounts for funding received and expenditure incurred to support jailer mental health awareness training programs. Measure H — This funding accounts for funding received and expenditures related to prevent and combat homelessness. -133- This page intentionally left blank. City of West Covina Combining Balance Sheet Non -Major Special Revenue Funds June 30, 2020 Drug Air Enforcement Measure Quality Proposition Rebate M Improvement A ASSETS Cash and investments $ 6,817,968 $ 3,034,801 $ 261,910 $ Receivables, net: Accounts - - 200,000 Taxes - Other Due from other agencies Total assets $ 6,817,968 $ 3,034,801 $ 461,910 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $ 91,821 $ 392,601 $ 145,599 $ 6,000 Other accrued liabilities 6,563 61,870 - - Deposits payable - - - Due to other funds 30,739 Advances from other funds - Uneamed revenue Total liabilities 98,384 454,471 145,599 36,739 Deferred Inflows of Resources: Unavailable revenue Fund Balances (Deficit): Restricted: Community services - 2,580,330 Public safety 6,719,584 - - Public works - 316,311 Unassigned (36,739) Total fund balances (deficit) 6,719,584 2,580,330 316,311 (36,739) Total liabilities, deferred inflows of resources, and fund balances $ 6,817,968 $ 3,034,801 $ 461,910 $ -134- tinued Transportation Public Proposition Police Development Safety C CESF Donations Act AB939 Augmentation COPS/SLESA $ 1,780,096 $ $ 36,367 $ $ 649,206 $ 430,774 $ 541,027 - 117,552 61,115 - - 2,200 994 - - - $ 1,780,096 $ 2,200 $ 36,367 $ 994 $ 710,321 $ 548,326 $ 541,027 $ 202,227 $ 2,341 $ $ $ 493 $ - $ 104,290 3,479 - 1,428 19,071 - 61,451 205,706 2,341 61,451 1,921 19,071 104,290 1,574,390 - - - - 36,367 - 529,255 436,737 - - 708,400 - - (141) (60,457) 1,574,390 (141) 36,367 (60,457) 708,400 529,255 436,737 $ 1,780,096 $ 2,200 $ 36,367 $ 994 $ 710,321 $ 548,326 $ 541,027 -135- City of West Covina Combining Balance Sheet Non -Major Special Revenue Funds (continued) June 30, 2020 Art in Charter Public Measure Inmate ASSETS Cash and investments $ 113,047 $ 296,815 $ 2,975,394 $ 10,087 Receivables, net: Accounts - - - - Taxes - Other 396 Due from other agencies Total assets $ 113,047 $ 296,815 $ 2,975,394 $ 10,483 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $ 5,198 $ $ 61,298 $ 2,000 Other accrued liabilities - 6,091 - Deposits payable - Due to other funds Advances from other funds Due to other governments Unearned revenue Total liabilities 5,198 67,389 2,000 Deferred Inflows of Resources: Unavailable revenue Fund Balances (Deficit): Restricted: Community services 107,849 296,815 - Public safety - - - 8,483 Public works 2,908,005 - Unassigned Total fund balances (deficit) 107,849 296,815 2,908,005 8,483 Total liabilities, deferred inflows of resources, and fund balances $ 113,047 $ 296,815 $ 2,975,394 $ 10,483 -136- CITY OF WEST COVINA City Officials June 30, 2020 CITY COUNCIL Mayor Tony Wu Mayor Pro Tern Letty Lopez-Viado Councilmember Dario Castellanos Councilmember Jessica C. Shewmaker Councilmember Lloyd Johnson CITY MANAGER David Carmany EXECUTIVE MANAGEMENT Thomas Duarte City Attorney Nick Lewis City Clerk Robbeyn Bird Finance Director Vincent Capelle Fire Chief Helen Tran Human Resources Director Jeff Anderson Planning Director Jeff Anderson Community Development Director Richard Bell Chief of Police -v- (continued) West Covina Community Community Services Various Development SAFER Maintenance Maintenance Coastal Sage Foundation Grants Block Grant Grant District #1 District #2 Shrub $ 255,262 $ - $ 107,540 $ 10 $ 2,638,614 $ 652,613 $ 366,192 - 59,771 - - - - - - - 9,576 1,299 124 28,028 70 9,843 - - - 137,431 81,847 $ 283,290 $ 197,272 $ 199,230 $ 10 $ 2,648,190 $ 653,912 $ 366,316 $ 1,465 $ 26,595 $ 279,727 $ - 24,317 3,796 - 340 481,638 184,805 10,675 1,465 543,225 468,668 200,469 281,825 (345,953) (469,907) 281,825 (345,953) (469,907) $ 24,453 $ 859 $ 3,650 6,570 728 - 31,023 1,587 3,650 10 - - - 2,617,167 652,325 362,666 10 2,617,167 652,325 362,666 $ 283,290 $ 197,272 $ 199,230 $ 10 $ 2,648,190 $ 653,912 $ 366,316 -137- City of West Covina Combining Balance Sheet Non -Major Special Revenue Funds (continued) June 30, 2020 ASSETS Cash and investments Receivables, net: Accounts Taxes Other Due from other agencies Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable Other accrued liabilities Deposits payable Due to other funds Advances from other funds Unearned revenue Total liabilities Deferred Inflows of Resources: Unavailable revenue Fund Balances (Deficit): Restricted: Community services Public safety Public works Unassigned Total fund balances (deficit) Total liabilities, deferred inflows of resources, and fund balances Citywide Maintenance Maintenance Maintenance Maintenance District #4 District #6 District #7 District $ 2,282,191 $ 244,609 $ 326,859 $ 1,666,662 12,962 2,242 1,542 23,062 $ 2,295,153 $ 246,851 $ 328,401 $ 1,689,724 $ 86,448 $ 8,729 $ 5,345 $ 293,499 1,917 547 560 1,651 88,365 9,276 5,905 295,150 2,206,788 237,575 322,496 1,394,574 2,206,788 237,575 322,496 1,394,574 $ 2,295,153 $ 246,851 $ 328,401 $ 1,689,724 -138- tinued Total Auto Plaza Integrated Mental Health Non -Major Sewer Improvement Waste Awareness Measure Special Maintenance District Management Training H Revenue Funds $ 7,364,595 $ 156,452 $ $ 2,279 $ $ 33,011,370 - - - 259,771 60,042 8,101 236,502 - - 99,452 222,472 $ 7,424,637 $ 164,553 $ $ 2,279 $ $ 33,829,567 $ 844,584 $ 4,533 $ $ 21,286 - - 11,073 332,173 - 865,870 336,706 11,073 $ 49,636 $ 2,643,391 - 159,874 - 340 12,899 782,605 - 332,173 10,675 62,535 3,929,058 200,469 2,279 4,843,488 - - 7,730,436 6,558,767 18,285,074 (172,153) (11,073) (62,535) (1,158,958) 6,558,767 (172,153) (11,073) 2,279 (62,535) 29,700,040 $ 7,424,637 $ 164,553 $ $ 2,279 $ - $ 33,829,567 -139- City of West Covina Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Non -Major Special Revenue Funds For the Year Ended June 30, 2020 Drug Air Enforcement Measure Quality Proposition Rebate M Improvement A REVENUES Taxes $ $ 1,470,650 $ $2,102,971 Special assessments - Investment income 81,810 40,517 1,523 Revenue from other agencies 5,197,210 - 657,470 Charges for services - - Other revenues 1,900 Total revenues 5,280,920 1,511,167 658,993 2,102,971 EXPENDITURES Current: General government - - - - Public safety 1,652,100 - - Public works - 1,383,695 146,000 - Community services 69,642 - 2,255,247 Community development Total expenditures 1,652,100 1,453,337 146,000 2,255,247 Excess of revenues over (under) expenditures 3,628,820 57,830 512,993 (152,276) OTHER FINANCING SOURCES (USES) Transfers in - - - Transfers out (182,042) Total other financing sources (uses) (182,042) Net change in fund balances 3,446,778 57,830 512,993 (152,276) Fund balances (deficit), beginning of year 3,272,806 2,522,500 (196,682) 115,537 Fund balances (deficit), end of year $ 6,719,584 2,580,330 $ 316,311 $ (36,739) -140- tinued Transportation Public Proposition Police Development Safety C CESF Donations Act AB939 Augmentation COPS/SLESA $ 1,744,419 $ $ $ $ $ 773,318 $ 23,360 376 7,085 5,049 6,216 - 2,200 - 994 - - 205,045 11,488 256,933 1,767,779 2,200 11,864 994 264,018 778,367 211,261 - 2,341 1,560 - - 704,585 182,661 570,393 - - 994 120,501 - - 1,228,026 - - 39,345 1,837,764 2,341 1,560 994 120,501 704,585 182,661 (69,985) (141) 10,304 143,517 73,782 28,600 (69,985) (141) 10,304 143,517 73,782 28,600 1,644,375 26,063 (60,457) 564,883 455,473 408,137 $ 1,574,390 $ (141) $ 36,367 $ (60,457) $ 708,400 $ 529,255 $ 436,737 -141- City of West Covina Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Non -Major Special Revenue Funds (continued) For the Year Ended June 30, 2020 REVENUES Taxes Special assessments Investment income Revenue from other agencies Charges for services Other revenues Total revenues EXPENDITURES Current: General government Public safety Public works Community services Community development Total expenditures Excess of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficit), beginning of year Fund balances (deficit), end of year Art in Charter Public Inmate $ $ $ 1,306,443 $ 1,534 3,637 35,237 117 103,038 1,828 1,534 106,675 1,341,680 1,945 27,344 - - - 1,999 671,700 - 268,158 27,344 939,858 1,999 (25,810) 106,675 401,822 (54) (25,810) 106,675 401,822 (54) 133,659 190,140 2,506,183 8,537 $ 107,849 $ 296,815 $ 2,908,005 $ 8,483 -142- tinued West Covina Community Community Services Various Development SAFER Maintenance Maintenance Coastal Sage Foundation Grants Block Grant Grant District #1 District #2 Shrub $ $ $ $ $ 596,837 $ 200,459 $ 107,650 2,911 698 30,790 7,732 4,346 - 825,087 99,308 - - - - 22,656 - 120,153 85,870 123,064 848,441 185,178 627,627 208,191 111,996 1,453 485,890 22,341 - - - - 232,259 52,186 312,021 128,563 84,565 31,356 367,317 530,492 - - - 40,773 32,809 1,085,466 645,792 312,021 128,563 84,565 90,255 (237,025) (460,614) 315,606 79,628 27,431 (9,000) (9,000) 90,255 (237,025) (460,614) 315,606 70,628 27,431 191,570 (108,928) (9,293) 10 2,301,561 581,697 335,235 $ 281,825 $ (345,953) $ (469,907) $ 10 $ 2,617,167 $ 652,325 $ 362,666 -143- City of West Covina Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Non -Major Special Revenue Funds (continued) For the Year Ended June 30, 2020 REVENUES Taxes Special assessments Investment income Revenue from other agencies Charges for services Other revenues Total revenues EXPENDITURES Current: General government Public safety Public works Community services Community development Total expenditures Excess of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficit), beginning of year Fund balances (deficit), end of year Citywide Maintenance Maintenance Maintenance Maintenance 1,026,385 153,539 173,266 1,644,661 28,817 3,035 3,825 18,462 1,055,202 156,574 177,091 1,663,123 1,226,280 164,685 143,509 1,554,962 1,226,280 164,685 143,509 1,554,962 (171,078) (8,111) 33,582 108,161 9,000 9,000 (162,078) (8,111) 33,582 108,161 2,368,866 245,686 288,914 1,286,413 $ 2,206,788 $ 237,575 $ 322,496 $ 1,394,574 -144- tinued Total Auto Plaza Integrated Mental Health Non -Major Sewer Improvement Waste Awareness Measure Special Maintenance District Management Training H Revenue Funds $ 311,398 $ 115,616 $ $ $ $ 8,729,761 3,492,403 - 6,490,254 78,328 1,988 8 387,401 - - 2,970 6,990,284 - - 22,656 13,768 594,978 3,895,897 117,604 2,978 23,215,334 - - - 27,344 - 699 3,055,629 2,741,819 - 9,534,132 - - 4,750,238 42,884 62,535 185,537 2,741,819 42,884 699 62,535 17,552,880 1,154,078 74,720 2,279 (62,535) 5,662,454 9,000 (191,042) (182,042) 1,154,078 74,720 2,279 (62,535) 5,480,412 5,404,689 (246,873) (11,073) 24,219,628 $ 6,558,767 $ (172,153) $ (11,073) $ 2,279 $ (62,535) $ 29,700,040 -145- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Drug Enforcement Rebate Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ $ $ 81,810 $ 81,810 Revenue from other agencies 5,197,210 5,197,210 Other revenues 1,900 1,900 Total revenues 5,280,920 5,280,920 EXPENDITURES Current: Public safety 2,933,693 1,652,100 1,281,593 Total expenditures 2,933,693 1,652,100 1,281,593 Excess (deficiency) of revenues over(under)expenditures (2,933,693) 3,628,820 6,562,513 OTHER FINANCING SOURCES (USES) Transfers out (182,042) (182,042) Total other financing sources (uses) (182,042) (182,042) Net change in fund balance (2,933,693) 3,446,778 6,380,471 Fund balance, beginning of year 3,272,806 3,272,806 3,272,806 Fund balance, end of year $ 3,272,806 $ 339,113 $ 6,719,584 $ 6,380,471 -146- ©0 ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino, CA 92408 909 889 0871 T 909 889 5361 F ramscpa.net INDEPENDENT AUDITOR'S REPORT PARTNERS Brenda L. Odle, CPA, MST Terry P. Shea, CPA Scott W. Manno, CPA, CGMA The Honorable City Council Leena Shanbhag, CPA, MST. CGMA of the City of West Covina Braciferd A. Welebtr, CPA, MBA, CGMA West Covina, California Jenny W. Liu, CPA, MST MANAGERS/STAFF Report on the Financial Statements Charles De Simoni, CPA Gardenya Duran, CPA We have audited the accompanying financial statements of the Brianna Schultz CPA governmental activities, the business -type activities, each major fund, and Jingpe Wu, CPA the aggregate remaining fund information of the City of West Covina, Evelyn Morentin-Barcena, CPA Veronica Hernandez, CPA California (City), as of and for the year ended June 30, 2020, and the Tara R. Thorp, CPA, MSA related notes to the financial statements, which collectively comprise the Laura Arvizu, CPA City's basic financial statements as listed in the table of contents. Louis Fernandez, CPA Abigail Hernandez Conde, CPA, MSA Management's Responsibility for the Financial Statements Zoe Xinlu Zhang, CPA, MSA John Maldonado. CPA, MSA 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. MEMBERS American Institute of Certified Public Accountants Auditor's Responsibility PCPS The AICPA Alliance for CPA Firms Our responsibility is to express opinions on these financial statements Governmental Audit based on our audit. We conducted our audit in accordance with auditing Quality Center standards generally accepted in the United States of America and the Employee Benefit Plan standards applicable to financial audits contained in Government Auditing Audit Quality Center Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable California Society of Certified Public Accountants assurance about whether the financial statements are free from material misstatement. Proud Member of AlliottGlobalAlliance' -1- STABILITY. ACCURACY. TRUST. City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Measure M Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 1,547,227 $ 1,547,227 $ 1,470,650 $ (76,577) Investment income 40,517 40,517 Total revenues 1,547,227 1,547,227 1,511,167 (36,060) EXPENDITURES Current: Public works - 3,267,287 1,383,695 1,883,592 Community services 33,722 33,722 69,642 (35,920) Total expenditures 33,722 3,301,009 1,453,337 1,847,672 Net change in fund balance 1,513,505 (1,753,782) 57,830 1,811,612 Fund balance, beginning of year 2,522,500 2,522,500 2,522,500 Fund balance, end of year $ 4,036,005 $ 768,718 $ 2,580,330 $ 1,811,612 -147- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Air Quality Improvement Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ - $ - $ 1,523 $ 1,523 Revenue from other agencies 695,200 1,249,399 657,470 (591,929) Total revenues 695,200 1,249,399 658,993 (590,406) EXPENDITURES Current: Public works 17,264 161,665 146,000 15,665 Total expenditures 17,264 161,665 146,000 15,665 Net change in fund balance 677,936 1,087,734 512,993 (574,741) Fund balance (deficit), beginning of year (196,682) (196,682) (196,682) Fund balance (deficit), end of year $ 481,254 $ 891,052 $ 316,311 $ (574,741) -148- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Proposition A Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 2,194,485 $ 2,194,485 $ 2,102,971 $ (91,514) Revenue from other agencies 104,000 104,000 (104,000) Total revenues 2,298,485 2,298,485 2,102,971 (195,514) EXPENDITURES Current: Community services 2,237,683 2,255,183 2,255,247 (64) Total expenditures 2,237,683 2,255,183 2,255,247 (64) Net change in fund balance 60,802 43,302 (152,276) (195,578) Fund balance, beginning of year 115,537 115,537 115,537 Fund balance (deficit), end of year $ 176,339 $ 158,839 $ (36,739) $ (195,578) -149- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Proposition C Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 1,820,268 $ 1,820,268 $ 1,744,419 $ (75,849) Investment income 23,360 23,360 Total revenues 1,820,268 1,820,268 1,767,779 (52,489) EXPENDITURES Current: Public works 451,393 1,544,675 570,393 974,282 Community services 1,411,959 1,411,959 1,228,026 183,933 Community development 46,560 46,560 39,345 7,215 Total expenditures 1,909,912 3,003,194 1,837,764 1,165,430 Net change in fund balance (89,644) (1,182,926) (69,985) 1,112,941 Fund balance, beginning of year 1,644,375 1,644,375 1,644,375 Fund balance, end of year $ 1,554,731 $ 461,449 $ 1,574,390 $ 1,112,941 -150- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual CESF Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Revenue from other agencies $ $ 60,602 $ 2,200 $ (58,402) EXPENDITURES Current: Public safety 6,000 2,341 3,659 Total expenditures 6,000 2,341 3,659 Net change in fund balance 54,602 (141) (54,743) Fund balance (deficit), beginning of year Fund balance (deficit), end of year $ $ 54,602 $ (141) $ (54,743) -151- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Police Donations Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ $ - $ 376 $ 376 Other revenues 11,488 11,488 Total revenues 11,488 11,864 376 EXPENDITURES Current: Public safety 2,015 1,560 455 Total expenditures 2,015 1,560 455 Net change in fund balance 9,473 10,304 831 Fund balance, beginning of year 26,063 26,063 26,063 Fund balance, end of year $ 26,063 $ 35,536 $ 36,367 $ 831 -152- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Transportation Development Act Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Revenue from other agencies $ 70,000 $ 70,000 $ 994 $ (69,006) EXPENDITURES Current: Public works 80,243 994 79,249 Total expenditures 80,243 994 79,249 Net change in fund balance 70,000 (10,243) - 10,243 Fund balance (deficit), beginning of year (60,457) (60,457) (60,457) Fund balance (deficit), end of year $ 9,543 $ (70,700) $ (60,457) $ 10,243 -153- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual AB939 Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ - $ - $ 7,085 $ 7,085 Other revenues 170,000 170,000 256,933 86,933 Total revenues 170,000 170,000 264,018 94,018 EXPENDITURES Current: Public works 151,547 151,547 120,501 31,046 Total expenditures 151,547 151,547 120,501 31,046 Net change in fund balance 18,453 18,453 143,517 125,064 Fund balance, beginning of year 564,883 564,883 564,883 Fund balance, end of year $ 583,336 $ 583,336 $ 708,400 $ 125,064 -154- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Public Safety Augmentation Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 786,000 $ 786,000 $ 773,318 $ (12,682) Investment income 5,049 5,049 Total revenues 786,000 786,000 778,367 (7,633) EXPENDITURES Current: Public safety 786,000 793,126 704,585 88,541 Total expenditures 786,000 793,126 704,585 88,541 Net change in fund balance - (7,126) 73,782 80,908 Fund balance, beginning of year 455,473 455,473 455,473 Fund balance, end of year $ 455,473 $ 448,347 $ 529,255 $ 80,908 -155- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual COPSISLESA Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ $ - $ 6,216 $ 6,216 Revenue from other agencies 163,853 205,045 41,192 Total revenues 163,853 211,261 47,408 EXPENDITURES Current: Public safety 184,060 182,661 1,399 Total expenditures 184,060 182,661 1,399 Net change in fund balance (20,207) 28,600 48,807 Fund balance, beginning of year 408,137 408,137 408,137 Fund balance, end of year $ 408,137 $ 387,930 $ 436,737 $ 48,807 -156- An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2020 and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, 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- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Charter PEG Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ $ $ 1,534 $ 1,534 EXPENDITURES Current: General government 129,280 27,344 101,936 Total expenditures 129,280 27,344 101,936 Net change in fund balance - (129,280) (25,810) 103,470 Fund balance, beginning of year 133,659 133,659 133,659 Fund balance, end of year $ 133,659 $ 4,379 $ 107,849 $ 103,470 -157- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Measure R Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 1,365,348 $ 1,365,348 $ 1,306,443 $ (58,905) Investment income 35,237 35,237 Total revenues 1,365,348 1,365,348 1,341,680 (23,668) EXPENDITURES Current: Public works 545,822 3,100,282 671,700 2,428,582 Community services 325,247 313,453 268,158 45,295 Total expenditures 871,069 3,413,735 939,858 2,473,877 Net change in fund balance 494,279 (2,048,387) 401,822 2,450,209 Fund balance, beginning of year 2,506,183 2,506,183 2,506,183 Fund balance, end of year $ 3,000,462 $ 457,796 $ 2,908,005 $ 2,450,209 -158- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Inmate Welfare Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ - $ - $ 117 117 Other revenues 1,000 1,000 1,828 828 Total revenues 1,000 1,000 1,945 945 EXPENDITURES Current: Public safety 3,000 12,065 1,999 10,066 Total expenditures 3,000 12,065 1,999 10,066 Net change in fund balance (2,000) (11,065) (54) 11,011 Fund balance, beginning of year 8,537 8,537 8,537 Fund balance, end of year $ 6,537 $ (2,528) $ 8,483 $ 11,011 -159- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual West Covina Community Services Foundation Special Revenue Fund For the Year Ended June 30, 2020 REVENUES Investment income Other revenues Total revenues EXPENDITURES Current: Public safety Community services Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ $ - $ 2,911 $ 2,911 19,418 120,153 100,735 19,418 123,064 103,646 2,036 1,453 583 153,425 31,356 122,069 155,461 32,809 122,652 (136,043) 90,255 226,298 191,570 191,570 191,570 $ 191,570 $ 55,527 $ 281,825 $ 226,298 -160- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Various Grants Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ - $ - $ 698 $ 698 Revenue from other agencies 748,951 2,792,671 825,087 (1,967,584) Charges for services 40,000 40,000 22,656 (17,344) Total revenues 788,951 2,832,671 848,441 (1,984,230) EXPENDITURES Current: Public safety 619,090 875,810 485,890 389,920 Public works 74,535 1,662,182 232,259 1,429,923 Community services 281,051 281,051 367,317 (86,266) Total expenditures 974,676 2,819,043 1,085,466 1,733,577 Net change in fund balance (185,725) 13,628 (237,025) (250,653) Fund balance (deficit), beginning of year (108,928) (108,928) (108,928) Fund balance (deficit), end of year $ (294,653) $ (95,300) $ (345,953) $ (250,653) -161- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Community Development Block Grant Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Revenue from other agencies $ 1,282,868 $ 1,756,672 $ 99,308 $ (1,657,364) Other revenues 43,250 43,250 85,870 42,620 Total revenues 1,326,118 1,799,922 185,178 (1,614,744) EXPENDITURES Current: Public safety 20,118 20,118 22,341 (2,223) Public works - 658,393 52,186 606,207 Community development 279,260 753,064 530,492 222,572 Community services 470,935 470,935 40,773 430,162 Total expenditures 770,313 1,902,510 645,792 1,256,718 Excess (deficiency) of revenues over(under)expenditures 555,805 (102,588) (460,614) (358,026) Fund balance (deficit), beginning of year (9,293) (9,293) (9,293) Fund balance (deficit), end of year $ 546,512 $ (111,881) $ (469,907) $ (358,026) -162- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Maintenance District #1 Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 920,000 $ 920,000 $ 596,837 $ (323,163) Investment income 13,000 13,000 30,790 17,790 Total revenues 933,000 933,000 627,627 (305,373) EXPENDITURES Current: Public works 346,526 499,580 312,021 187,559 Total expenditures 346,526 499,580 312,021 187,559 Net change in fund balance 586,474 433,420 315,606 (117,814) Fund balance, beginning of year 2,301,561 2,301,561 2,301,561 Fund balance, end of year $ 2,888,035 $ 2,734,981 $ 2,617,167 $ (117,814) -163- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Maintenance District #2 Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 288,000 $ 288,000 $ 200,459 $ (87,541) Investment income 5,000 5,000 7,732 2,732 Total revenues 293,000 293,000 208,191 (84,809) EXPENDITURES Current: Public works 148,401 305,181 128,563 176,618 Total expenditures 148,401 305,181 128,563 176,618 Excess (deficiency) of revenues over (under) expenditures 144,599 (12,181) 79,628 91,809 OTHER FINANCING SOURCES (USES) Transfers out (9,000) (9,000) (9,000) Net change in fund balance 135,599 (21,181) 70,628 91,809 Fund balance, beginning of year 581,697 581,697 581,697 Fund balance, end of year $ 717,296 $ 560,516 $ 652,325 $ 91,809 -164- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Coastal Sage Shrub Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 110,000 $ 110,000 $ 107,650 $ (2,350) Investment income 1,600 1,600 4,346 2,746 Total revenues 111,600 111,600 111,996 396 EXPENDITURES Current: Public works 84,218 184,218 84,565 99,653 Total expenditures 84,218 184,218 84,565 99,653 Net change in fund balance 27,382 (72,618) 27,431 100,049 Fund balance, beginning of year 335,235 335,235 335,235 Fund balance, end of year $ 362,617 $ 262,617 $ 362,666 $ 100,049 -165- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Maintenance District #4 Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Special assessments $ 2,075,900 $ 2,075,900 $ 1,026,385 $ (1,049,515) Investment income 10,000 10,000 28,817 18,817 Total revenues 2,085,900 2,085,900 1,055,202 (1,030,698) EXPENDITURES Current: Public works 930,465 1,618,335 1,226,280 392,055 Total expenditures 930,465 1,618,335 1,226,280 392,055 Excess (deficiency) of revenues over (under) expenditures 1,155,435 467,565 (171,078) (638,643) OTHER FINANCING SOURCES (USES) Transfers in 9,000 9,000 9,000 Net change in fund balance 1,164,435 476,565 (162,078) (638,643) Fund balance, beginning of year 2,368,866 2,368,866 2,368,866 Fund balance, end of year $ 3,533,301 $ 2,845,431 $ 2,206,788 $ (638,643) -166- Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and the nonmajor fund budgetary comparison schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 17, 2021, on our consideration of the City'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 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 City's internal control over financial reporting and compliance. kc eA-W tt tou-, 1�'%+.10 -e �coti� LLP. San Bernardino, California February 17, 2021 -3- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Maintenance District #6 Special Revenue Fund For the Year Ended June 30, 2020 REVENUES Special assessments Investment income Total revenues EXPENDITURES Current: Public works Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 309,400 $ 309,400 $ 153,539 $ (155,861) 500 500 3,035 2,535 309,900 309,900 156,574 (153,326) 142,669 194,989 164,685 30,304 142,669 194,989 164,685 30,304 167,231 114,911 (8,111) (123,022) 245,686 245,686 245,686 $ 412,917 $ 360,597 $ 237,575 $ (123,022) -167- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Maintenance District #7 Special Revenue Fund For the Year Ended June 30, 2020 REVENUES Special assessments Investment income Total revenues EXPENDITURES Current: Public works Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 341,642 $ 341,642 $ 173,266 $ (168,376) 2,000 2,000 3,825 1,825 343,642 343,642 177,091 (166,551) 142,579 184,924 143,509 41,415 142,579 184,924 143,509 41,415 201,063 158,718 33,582 (125,136) 288,914 288,914 288,914 $ 489,977 $ 447,632 $ 322,496 $ (125,136) -168- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Citywide Maintenance District Special Revenue Fund For the Year Ended June 30, 2020 REVENUES Special assessments Investment income Total revenues EXPENDITURES Current: Public works Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year Budgeted Amounts Original Final Actual Variance with Final Budget Positive (Negative) $ 3,380,000 $ 3,380,000 $ 1,644,661 $ (1,735,339) 4,000 4,000 18,462 14,462 3,384,000 3,384,000 1,663,123 (1,720,877) 1,544,206 2,351,398 1,554,962 796,436 1,544,206 2,351,398 1,554,962 796,436 1,839,794 1,032,602 108,161 (924,441) 1,286,413 1,286,413 1,286,413 $ 3,126,207 $ 2,319,015 $ 1,394,574 $ (924,441) -169- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Sewer Maintenance Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 420,000 $ 420,000 $ 311,398 $ (108,602) Special assessments 7,060,020 7,060,020 3,492,403 (3,567,617) Investment income 10,000 10,000 78,328 68,328 Other revenue 13,768 13,768 Total revenues 7,490,020 7,490,020 3,895,897 (3,594,123) EXPENDITURES Current: Public works 1,671,904 8,272,178 2,741,819 5,530,359 Total expenditures 1,671,904 8,272,178 2,741,819 5,530,359 Net change in fund balance 5,818,116 (782,158) 1,154,078 1,936,236 Fund balance, beginning of year 5,404,689 5,404,689 5,404,689 Fund balance, end of year $ 11,222,805 $ 4,622,531 $ 6,558,767 $ 1,936,236 -170- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Auto Plaza Improvement District Special Revenue Fund For the Year Ended June 30, 2020 REVENUES Taxes Investment income Total revenues EXPENDITURES Current: Community development Total expenditures Net change in fund balance Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 115,668 $ 115,668 $ 115,616 $ (52) 1,988 1,988 115,668 115,668 117,604 1,936 66,737 66,737 42,884 23,853 66,737 66,737 42,884 23,853 48,931 48,931 74,720 25,789 Fund balance (deficit), beginning of year (246,873) (246,873) (246,873) Fund balance (deficit), end of year $ (197,942) $ (197,942) $ (172,153) $ 25,789 -171- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Mental Health Awareness Training Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ $ - $ 8 $ 8 Revenue from other agencies 2,970 2,970 Total revenues 2,970 2,978 8 EXPENDITURES Current: Public safety 699 699 Total expenditures 699 699 Net change in fund balance 2,271 2,279 8 Fund balance, beginning of year Fund balance, end of year $ $ 2,271 $ 2,279 $ 8 -172- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Measure H Special Revenue Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Revenue from other agencies $ $ 343,250 $ $ (343,250) Total revenues 343,250 (343,250) EXPENDITURES Current: Community development Excess (deficit) of revenues over(under)expenditures OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses) Net change in fund balance Fund balance, beginning of year Fund balance (deficit), end of year 376,250 62,535 313,715 (33,000) (62,535) 313,715 33,000 (33,000) 33,000 (33,000) - (62,535) (62,535) $ $ $ (62,535) $ (62,535) -173- This page intentionally left blank. City of West Covina Non- Major Governmental Fund — Debt Services Fund DEBT SERVICE FUND — This fund is used to account for the accumulation of resources for, and the payment of, governmental long-term debt principal and interest. City Debt Service — This fund accounts for the payments of principal, interest, and related costs on the City long-term debt issues. -174- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual City Debt Service Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ 65,000 $ 65,000 $ 110,097 $ 45,097 Revenue from other agencies 1,314,777 1,314,777 1,314,727 (50) Charges for services 400,000 400,000 286,523 (113,477) Total revenues 1,779,777 1,779,777 1,711,347 (68,430) EXPENDITURES Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning of year Fund balance, end of year 1,833,918 1,833,918 1,833,918 - 1,992,167 1,997,167 1,928,807 68,360 3,826,085 3,831,085 3,762,725 68,360 (2,046,308) (2,051,308) (2,051,378) (70) 1,500,598 1,500,598 578,918 (921,680) (1,903,794) (1,903,794) 1,903,794 (403,196) (403,196) 578,918 982,114 (2,449,504) (2,454,504) (1,472,460) 982,044 5,528,450 5,528,450 5,528,450 - $ 3,078,946 $ 3,073,946 $ 4,055,990 $ 982,044 -175- auditors. The MD&A provides a narrative of how the financial report is presented and key highlights of some of the changes in financial position. The MD&A provides tables showing comparative information from the year ended June 30, 2019 to the year ended June 30, 2020. The final section of the CAFR is the Statistical section. This section presents data useful in analyzing the City's financial and operational history for comparative purposes. Some of the statistics tracked include financial trends, revenue capacity, and debt capacity which are useful for evaluating the City's financial stability. Additional statistics include operating indicators. Financial Highlights The CAFR represents the City of West Covina's financial position at June 30, 2020 and includes financial statements for all of its component units. Financial highlights of the fiscal year are noted in the Financial section of the CAFR and include the following: • At June 30, 2020, the City's total net position (assets plus deferred outflows of resources less liabilities and less deferred inflows of resources) was a deficit balance of $18.9 million. • The City's total net position decreased $16.4 million from the prior year. This is mostly due to a decrease in the Deferred Outflows of Resources related to pension costs ($2.6 million) and increases in the Net Pension Liability and Other Post -Employment Benefits other than Pensions ($10.9 million), which totaled approximately $13.5 million. • The City's total governmental funds reported a combined ending fund balances of $84.4 million, an increase of $6.9 million in comparison with the prior fiscal year of $77.5 million. Of this, $7.2 million, or 8.5% of this total is non -spendable (not available for new spending). The restricted fund balance categories of $64.1 million or 75.9% is spendable for restricted purposes. The assigned fund balance of $1.8 million or 2.1 % represents amounts that are intended to be used for specific purposes but are not formally restricted or committed. The unassigned fund balance category of $11.4 million or 13.5% represents the City's fund balance reserves. • The City's business -type computer service enterprise activity (West Covina Service Group) had an operating gain for Fiscal Year 2019-20 of $82,266, compared with a $51,375 operating loss in Fiscal Year 2018-19. The total net position for the computer service enterprise fund as of June 30, 2020 was ($244,119). The net position in the prior year was ($326,385). • At the end of the current fiscal year, the City had debt outstanding of $66.1 million, an increase of $1.0 million. Of this amount, $39.7 million represents outstanding bonds and $26.4 million represents other debt such as compensated absences payable, claims and judgments payable, capital lease obligations, and the Successor Agency note. All of the outstanding bonds are lease revenue bonds secured by leases from the General Fund. Government Auditing Standards Letter The Government Auditing Standards Letter (Attachment No. 2) notes any identified deficiencies or weaknesses in internal control over financial reporting that could lead to material misstatements in the City's financial statements as well as any other compliance findings. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial This page intentionally left blank. City of West Covina Non -Major Governmental Funds — Capital Projects Funds CAPITAL PROJECTS FUNDS are used to account for the purchase or construction of major capital facilities which are not financed by Proprietary Funds. Capital Projects Funds are ordinarily not used to account for the acquisition of furniture, fixtures, machinery, equipment and other relatively minor or comparatively short-lived capital assets. City Capital Projects — This fund accounts for all capital expenditures not being accounted for in the capital projects described below or in other fund types. Construction Tax — This fund accounts for monies received from developers based on the construction of dwelling units and used primarily to construct public domain assets. Information Technology — The funds paid into this fund are to be used for information technology capital outlay projects. Park Development — This fund accounts for park fees received from residential developers to be used for new park construction. Development Impact Fees — This fund accounts for fees received from residential developers to help fund the purchase/replacement of vehicles/equipment along with the repairs and improvements of city facilities. -176- City of West Covina Combining Balance Sheet Non -Major Capital Projects Funds June 30, 2020 ASSETS Cash and investments Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Total liabilities Fund Balances: Assigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances Construction Information City Tax Technology $ 179,516 $ 218,538 $ 174,292 $ 179,516 $ 218,538 $ 174,292 $ 6 $ - $ 15,485 15,485 179,510 218,538 158,807 179,510 218,538 158,807 $ 179,516 $ 218,538 $ 174,292 -177- Total Development Non -Major Park Impact Capital Projects Development Fees Funds $ 730,751 $ 499,209 $ 1,802,306 $ 730,751 $ 499,209 $ 1,802,306 $ $ $ 15,491 15,491 730,751 499,209 1,786,815 730,751 499,209 1,786,815 $ 730,751 $ 499,209 $ 1,802,306 -178- City of West Covina Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non -Major Capital Projects Funds For the Year Ended June 30, 2020 REVENUES Taxes Investment income Other revenues Total revenues EXPENDITURES Current: Public safety Public works Community services Total expenditures Excess of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year Construction Information City Tax Technology $ $ 89,673 $ 2,520 44,074 92,193 44,074 274,761 - - - 10,680 59,473 274,761 10,680 59,473 (274,761) 81,513 (15,399) 327,991 11,856 (11,856) 316,135 11,856 41,374 81,513 (3,543) 138,136 137,025 162,350 $ 179,510 $ 218,538 $ 158,807 -179- Total Development Non -Major Park Impact Capital Projects Development Fees Funds $ - $ $ 89,673 9,602 12,122 459,900 90,896 594,870 469,502 90,896 696,665 274,761 70,153 65 65 65 344,979 469,437 90,896 351,686 339,847 (11,856) 327,991 469,437 90,896 679,677 261,314 408,313 1,107,138 $ 730,751 $ 499,209 $ 1,786,815 (continued) -180- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual City Capital Projects Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Revenue from other agencies $ $ 200,000 $ $ (200,000) Other revenues Total revenues 200,000 (200,000) EXPENDITURES Current: Public safety 1,377,808 274,761 1,103,047 Excess (deficiency) of revenues over (under) expenditures (1,177,808) (274,761) 903,047 OTHER FINANCING SOURCES (USES) Transfers in 327,991 327,991 Transfers out (11,856) (11,856) Total other financing sources (uses) 316,135 316,135 Net change in fund balance (1,177,808) 41,374 1,219,182 Fund balance, beginning of year 138,136 138,136 138,136 Fund balance, end of year $ 138,136 $ (t,039,672) $ 179,510 $ 1,219,182 -181- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Construction Tax Capital Projects Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 70,000 $ 70,000 $ 89,673 $ 19,673 Investment income 2,520 2,520 Total revenues 70,000 70,000 92,193 22,193 EXPENDITURES Current: Public safety - 150,000 10,680 139,320 Public works 20,000 23,948 23,948 Total expenditures 20,000 173,948 10,680 163,268 Net change in fund balance 50,000 (103,948) 81,513 185,461 Fund balance, beginning of year 137,025 137,025 137,025 Fund balance, end of year $ 187,025 $ 33,077 $ 218,538 $ 185,461 -182- City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Information Technology Capital Projects Fund For the Year Ended June 30, 2020 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Other revenues $ $ $ 44,074 $ 44,074 Total revenues 44,074 44,074 EXPENDITURES Current: Public works 145,831 59,473 86,358 Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses) Net change in fund balance Fund balance, beginning of year Fund balance, end of year (145,831) (15,399) 130,432 11,856 11,856 11,856 11,856 - (145,831) (3,543) 142,288 162,350 162,350 162,350 $ 162,350 $ 16,519 $ 158,807 $ 142,288 -183- City of West Covina Internal Service Funds INTERNAL SERVICE FUNDS — These funds are used to account for vehicle and equipment maintenance and replacement, for the City's self-insurance programs, and for retirement health savings plans for qualified City employees. Departments of the City are charged for the services provided or benefits received from these funds. Fleet Management — This fund provides maintenance on materials and supplies for City vehicles and other gasoline or diesel powered equipment. Self -Insurance — This fund accounts for the use of funds that are charged to departments for the administration and payment of claims under the City's self -insured general liability and workers' compensation programs. Retiree Health Savings Plan — This fund accounts for the set aside lump sum benefits for retiring employees. Vehicle Replacement — This fund provides for replacement of City vehicles. -184- City of West Covina Combining Statement of Net Position Internal Service Funds June 30, 2020 Fleet Management Self -Insurance ASSETS Current Assets: Cash and investments $ 221,873 $ 11,455,901 Receivables, net: Accounts 494,818 - Inventories 30,473 - Total current assets 747,164 11,455,901 Noncurrent Assets Capital assets: Capital assets 1,891,536 Less accumulated depreciation (1,766,222) Total capital assets 125,314 Total noncurrent assets 125,314 - Total assets 872,478 11,455,901 LIABILITIES Current Liabilities: Accounts payable 101,523 429,646 Other accrued liabilities 589 - Claims and judgments - current portion - 4,402,010 Compensated absences - current portion 200 - Due to other funds - Total current liabilities 102,312 4,831,656 Noncurrent Liabilities: Claims and judgments - 8,776,893 Total noncurrent liabilities - 8,776,893 Total liabilities 102,312 13,608,549 NET POSITION (DEFICIT) Net investment in capital assets 125,314 - Unrestricted 644,852 (2,152,648) Total net position (deficit) $ 770,166 $ (2,152,648) -185- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 The following discussion and analysis of the financial performance of the City of West Covina (the City) provides an overview of the City's financial activities for the fiscal year ended June 30, 2020. The information presented herein should be considered in conjunction with the transmittal letter and financial statements identified in the accompanying table of contents. FINANCIAL HIGHLIGHTS • As of June 30, 2020, the City's total net position (assets plus deferred outflows of resources less liabilities and less deferred inflows of resources) was a deficit of $18.9 million. • The City's total net position decreased $16.4 million from the prior year. This is mostly due to a decrease in the Deferred Outflows of Resources related to pension ($2.6 million) and increases in the Net Pension Liability and Other Post -Employment Benefits other than Pensions ($10.9 million), which totaled approximately $13.5 million. • The City's total governmental funds reported combined ending fund balances of $84.4 million, an increase of $6.9 million in comparison with the prior fiscal year of $77.5 million. Of this, $7.2 million, or 8.5% of this total is non -spendable (not available for new spending). The restricted fund balance categories of $64.1 million or 75.9% is spendable for restricted purposes. The assigned fund balance of $1.8 million or 2.1 % represents amounts that are intended to be used for specific purposes, but are not formally restricted or committed. The unassigned fund balance category of $11.4 million or 13.5% represents the City's fund balance reserves. • The City's business -type computer service enterprise activity (West Covina Service Group) had an operating gain for fiscal year (FY) 2019-20 of $82,266, compared with a $51,375 operating loss in FY 2018-19. The total net position for the computer service enterprise fund as of June 30, 2020 was ($244,119). The net position in the prior year was ($326,385). OVERVIEW OF THE FINANCIAL STATEMENTS The annual report consists of four parts — management's discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non -major governmental funds and internal service funds. The basic financial statements include two kinds of statements that present different views of the City: • The first two statements are government -wide financial statements that provide both long- term and short-term information about the City's overall financial status. • The remaining statements are fund financial statements that focus on individual parts of the City government, reporting the City's operations in more detail than the government - wide statements. • The governmental funds statements tell how general government services like public safety were financed in the short-term as well as what remains for future spending. -4- Retiree Health Vehicle Savings Plan Replacement Totals $ 368,073 $ - $ 12,045,847 368,073 494,818 30,473 12,571,138 1,365,658 3,257,194 (630,291) (2,396,513) 735,367 860,681 - 735,367 860,681 368,073 735,367 13,431,819 531,169 589 4,402,010 - 200 _ 62,452 62,452 62,452 4,996,420 8,776,893 8,776,893 62,452 13,773,313 - 735,367 860,681 368,073 (62,452) (1,202,175) $ 368,073 $ 672,915 $ (341,494) -186- City of West Covina Combining Statement of Revenues, Expenses, and Changes in Net Position Internal Service Funds For the Year Ended June 30, 2020 OPERATING REVENUES: Charges for services Other revenues Total operating revenues OPERATING EXPENSES: Personnel services Cost of sales, services and operations Depreciation Insurance and claims paid Total operating expenses Operating income (loss) NONOPERATING REVENUES: Investment income Gain on sale of assets Total nonoperating revenues Gain (loss) before transfers Transfers in Transfers out Change in net position Net position, beginning of year Net position (deficit), end of year Fleet Management Self -Insurance $ 1,913,910 $ 5,468,745 31,545 96,484 1,945,455 5,565,229 123,848 - 1,453,221 733,684 11,966 - - 8,511,966 1,589,035 9,245,650 356,420 (3,680,421) 9,700 9,700 366,120 (3,680,421) 2,792 (63,282) 305,630 (3,680,421) 464,536 1,527,773 $ 770,166 $ (2,152,648) -187- (continued) Retiree Health Vehicle Savings Plan Replacement Totals $ $ - $ 7,382,655 19,629 147,658 19,629 7,530,313 29,500 153,348 - - 2,186,905 167,122 179,088 8,511,966 29,500 167,122 11,031,307 (29,500) (147,493) (3,500,994) 4,734 1,011 5,745 - 10,637 20,337 4,734 11,648 26,082 (24,766) (135,845) (3,474,912) 245,324 248,116 (2,792) (66,074) (24,766) 106,687 (3,292,870) 392,839 566,228 2,951,376 $ 368,073 $ 672,915 $ (341,494) -188- City of West Covina Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2020 Fleet Management Self -Insurance CASH FLOWS FROM OPERATING ACTIVITIES: Received from user departments $ 1,647,550 $ 5,571,824 Payments to suppliers for goods and services (1,495,754) (5,784,640) Payments to employees for services (135,358) Net cash provided by (used for) operating activities 16,438 (212,816) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Received from other funds 2,792 24,698 Paid to other funds (63,282) Net cash provided by (used for) noncapital financing activities (60,490) 24,698 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets - - Proceeds from sale of assets 9,700 Net cash provided by (used for) capital and related financing activities 9,700 CASH FLOWS FROM INVESTING ACTIVITIES: Interest received on investments Net cash provided by (used for) investing activities Net increase (decrease) in cash and cash equivalents (34,352) (188,118) Cash and cash equivalents, beginning of year 256,225 11,644,019 Cash and cash equivalents, ending of year $ 221,873 $ 11,455,901 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES: Operating income (loss) $ 356,420 $ (3,680,421) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation 11,966 - (Increase) Decrease in operating assets: Accounts receivable (297,905) 6,595 Inventories (299) - Increase (Decrease) in operating liabilities: Accounts payable (40,523) 338,290 Other accrued liabilities (1,711) - Claims and judgments payable - 3,122,720 Compensated absences payable (11,510) Net cash provided by (used for) operating activities $ 16,438 $ (212,816) -189- Retiree Health Vehicle Savings Plan Replacement Totals $ $ 19,629 $ 7,239,003 (82,579) (7,362,973) (29,500) (164,858) (29,500) (62,950) (288,828) 307,776 335,266 (2,792) (66,074) 304,984 269,192 (559,024) (559,024) 10,637 20,337 (548,387) (538,687) 4,734 1,011 5,745 4,734 1,011 5,745 (24,766) (305,342) (552,578) 392,839 305,342 12,598,425 $ 368,073 $ $ 12,045,847 $ (29,500) $ (147,493) $ (3,500,994) 167,122 179,088 (291,310) (299) (82,579) 215,188 (1,711) 3,122,720 (11,510) $ (29,500) $ (62,950) $ (288,828) (continued) -190- This page intentionally left blank. City of West Covina Pension Trust Funds PENSION TRUST FUNDS are used to account for monies required to be held in trust for the members and beneficiaries of defined benefit pension plans. Retirement Enhancement Defined Benefit Pension Trust Fund - This fund accounts for the assets and activities of the Public Agency Retirement System Enhancement Plan. Supplemental Retirement Defined Benefit Pension Trust Fund - This fund accounts for the assets and activities of the Public Agency Supplemental Retirement Plan. -191- City of West Covina Combining Statement of Net Position Pension Trust Funds June 30, 2020 ASSETS Cash and investments NET POSITION Held in trust for pension benefits Retirement Supplemental Total Enhancement Retirement Pension Defined Benefit Defined Benefit Trust Pension Fund Pension Fund Funds $ 87,926 $ 461,804 $ 549,730 $ 87,926 $ 461,804 $ 549,730 -192- City of West Covina Combining Statement of Changes in Net Position Pension Trust Funds For the Year Ended June 30, 2020 Retirement Supplemental Total Enhancement Retirement Pension Defined Benefit Defined Benefit Trust Pension Fund Pension Fund Funds ADDITIONS Employer contribution $ 56,957 $ 77,814 $ 134,771 Investment income 2,909 15,032 17,941 Total Additions 59,866 92,846 152,712 DEDUCTIONS Administrative costs 12,017 9,475 21,492 Benefit distributions 103,008 155,804 258,812 Total Deductions 115,025 165,279 280,304 Change in net position (55,159) (72,433) (127,592) Net position, beginning of year 143,085 534,237 677,322 Net position, end of year $ 87,926 $ 461,804 $ 549,730 -193- This page intentionally left blank. City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 OVERVIEW OF THE FINANCIAL STATEMENTS, (continued) • Proprietary funds statements offer short- and long-term financial information about the activities that are operated like a business, such as the West Covina Service Group, the City's computer service enterprise. • Fiduciary fund statements provide information about the fiduciary relationships — like the agency funds of the City — in which the City acts solely as an agent or trustee for the benefit of others, to whom the resources in question belong. The financial statements also include notes that provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. Reoortino the City as a Whole The accompanying government -wide financial statements include two statements that present financial data for the City as a whole. The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private -sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City's net position and changes in them. The City's net position is one way to measure the City's financial health, or financial position. Over time, increases and decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. You will need to consider other non -financial factors, however, such as changes in the City's property tax or sales tax base and the condition of the City's roads, to assess the overall health of the City. The Statement of Net Position and the Statement of Activities are divided into two kinds of activities: • Governmental activities — Most of the City's basic services such as public safety, streets and roads, economic development and parks and recreation, are reported here. Sales taxes, property taxes, state subventions, and other revenues finance most of these activities. • Business -type activities — The City charges a fee to customers to help it cover all or most of the cost of the services accounted for in these funds. These activities include the City's computer service enterprise operation. The government -wide financial statements include the West Covina Housing Authority, the West Covina Public Financing Authority, the Parking Authority of the City of West Covina and the West Covina Community Services Foundation (component units), along with the City of West Covina (the primary government). Although legally separate, these component units are important because the City is financially accountable for them. The activities of the Successor Agency of the former redevelopment agency can be found in the Fiduciary Fund Section of the Financial Statements in the Private Purpose Trust Fund. -5- City of West Covina Agency Fund AGENCY FUNDS are used to account for monies held by the City in a trustee capacity as an agent for individuals, private organizations and other governmental units. Special Deposits — This fund accounts for developer funds placed on deposit with the City pending either a return to the depositor or disbursement by the City on behalf of the depositor to pay for studies and other developer expenses. -194- City of West Covina Statement of Changes in Assets and Liabilities Agency Fund For the Year Ended June 30, 2020 Balance Balance June 30, 2019 Additions Deletions June 30, 2020 ASSETS Cash and investments $ 1,917,047 $ 403,989 $ 501,966 $ 1,819,070 Receivables, net: Other 1,956 2,166 1,956 2,166 Total Assets $ 1,919,003 $ 406,155 $ 503,922 $ 1,821,236 LIABILITIES Accounts payable $ 52,284 $ 475,926 $ 440,746 $ 87,464 Deposits 1,866,719 458,812 591,759 1,733,772 Total Liabilities $ 1,919,003 $ 934,738 $ 1,032,505 $ 1,821,236 -195- City of West Covina Statistical Section This section of the City's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. CONTENTS Page Financial Trends 197 These schedules contain trend information to help the reader understand how the City's financial performance and well being have changed over time. Revenue Capacity 211 These schedules contain information to help the reader assess one of the City's most significant local revenue source, the property tax. Debt Capacity 218 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and its ability to issue additional debt in the future. Demographic and Economic Information 226 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take palce. Operating Information 228 These schedules contain service and infastructure data to help the reader understand how the information in the City's financial report relates to the services the government provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. -196- City of West Covina Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) 2011 2012 2013 2014 Governmental activities: Net investment in capital assets $179,236,866 $222,784,189 $164,621,539 $161,771,546 Restricted 25,286,909 53,331,999 46,016,224 47,468,277 Unrestricted 1,884,827 (27,344,668) (297,086) 191,878 Total governmental activities net position $ 206,408,602 $ 248,771,520 $ 210,340,677 $ 209,431,701 Business -type activities: Net investment in capital assets $ - $ - $ - $ - Restricted - Unrestricted (999,624) (994,560) (426,769) 60,922 Total business -type activities net position $ (999,624) $ (994,560) $ (426,769) $ 60,922 Primary government: Net investment in capital assets $ 179,236,866 $ 222,784,189 $ 164,621,539 $161,771,546 Restricted 25,286,909 53,331,999 46,016,224 47,468,277 Unrestricted (98,187) (28,339,228) (723,855) 252,800 Total primary government net position $ 204,425,588 $ 247,776,960 $ 209,913,908 $ 209,492,623 -197- (continued) 2015 2016 2017 2018 2019 2020 $ 144,215,248 $ 148,989,212 $153,784,463 $153,940,332 $147,204,908 $140,572,511 48,793,821 56,902,504 50,717,656 51,130,936 57,782,735 65,969,665 (129,152,694) (138,162,202) (144,659,629) (201,951,785) (207,212,078) (225,184,697) $ 63,856,375 $ 67,729,514 $ 59,842,490 $ 3,119,483 $ (2,224,435) $(18,642,521) 188,045 (135,676) (252,336) (275,010) (326,385) (244,119) $ 188,045 $ (135,676) $ (252,336) $ (275,010) $ (326,385) $ (244,119) $ 144,215,248 $ 148,989,212 $ 153,784,463 $ 153,940,332 $ 147,204,908 $140,572,511 48,793,821 56,902,504 50,717,656 51,130,936 57,782,735 65,969,665 (128,964,649) (138,297,878) (144,911,965) (202,226,795) (207,538,463) (225,428,816) $ 64,044,420 $ 67,593,838 $ 59,590,154 $ 2,844,473 $ (2,550,820) $ (18,886,640) -198- City of West Covina Changes in Net Position Last Ten Fiscal Years (accrual basis of accoun Expenses: Governmental activities: General government Public safety Public works Community services Community development Interest expense Total governmental activities expenses Fiscal Year 2011 2012 2013 2014 $ 2,922,898 $ 4,953,340 $ 5,519,153 $ 7,472,254 45,253,725 49,369,913 47,323,516 45,443,958 21,052,423 20,510,387 20,372,375 21,109,952 6,629,292 6,949,951 6,878,176 6,437,040 9,414,730 4,071,050 1,127,924 658,082 7,101,037 5,927,002 1,652,750 1,677,062 92,374,105 91,781,643 82,873,894 82,798,348 Business -type activities: Computer enterprise 2,086,135 1,701,367 1,435,855 1,284,419 Total business -type activities expenses 2,086,135 1,701,367 1,435,855 1,284,419 Total primary government expenses 94,460,240 93,483,010 84,309,749 84,082,767 Program revenues: Governmental activities: Charges for services: General government Public safety Public works Community services Community development Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business -type activities: Charges for services: Computer enterprise Total business -type activities program revenues Total primary government program revenues 681,877 599,066 548,333 486,478 3,571,864 3,196,729 3,018,478 3,037,891 8,043,988 7,046,096 7,781,333 8,878,122 1,166,675 1,141,162 1,195,612 1,180,562 240,462 255,669 348,112 621,352 10,189,050 12,557,141 10,344,778 11,021,410 678,827 958,459 597,405 4,458,250 Source: City of West Covina Finance Department 24,572,743 25,754,322 23,834,051 29,684,065 2,268,982 1,805,242 2,105,421 1,873,636 2,268,982 1,805,242 2,105,421 1,873,636 26,841,725 27,559,564 25,939,472 31,557,701 -199- Fiscal Year 2015 2016 2017 2018 2019 2020 $ 5,676,067 $ 4,963,302 $ 5,775,173 $ 7,523,129 $ 7,515,920 $ 7,781,252 49,813,447 48,410,511 56,169,907 67,734,047 58,057,784 72,653,866 20,586,770 20,259,279 21,243,019 21,161,586 21,625,190 23,649,892 7,035,872 7,368,492 7,926,410 8,926,070 9,280,450 9,418,860 766,886 753,721 2,190,319 1,618,181 795,685 1,394,131 1,353,156 1,572,645 1,575,724 1,515,826 1,680,335 1,874,899 85,232,198 83,327,950 94,880,552 108,478,839 98,955,364 116,772,900 1,427,789 1,638,573 1,575,066 1,305,426 1,263,693 1,230,639 1,427,789 1,638,573 1,575,066 1,305,426 1,263,693 1,230,639 86,659,987 84,966,523 96,455,618 109,784,265 100,219,057 118,003,539 885,123 400,051 546,626 814,465 829,295 369,796 2,825,831 3,170,579 3,201,495 3,610,467 3,839,103 4,304,075 8,278,038 8,271,744 7,714,148 8,967,472 9,156,370 2,034,963 1,275,278 1,365,482 1,491,858 2,110,943 1,903,119 2,438,156 502,621 425,013 416,014 264,959 465,097 6,780,115 12,405,742 13,317,378 10,955,031 10,285,701 12,097,219 19,989,920 2,224,864 1,004,826 445,980 151,966 360,872 582,023 28,397,497 27,955,073 24,771,152 26,205,973 28,651,075 36,499,048 1,655,134 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 1,655,134 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 30,052,631 29,368,187 26,045,470 27,405,135 29,750,103 37,748,243 -200- City of West Covina Changes in Net Position, (continued) Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2011 2012 2013 2014 Net revenues (expenses): Governmental activities $ (67,801,362) $ (66,027,321) $ (58,612,191) $ (53,114,283) Business -type activities 182,847 103,875 669,566 589,217 net primary government revenues (expenses) (67,618,515) (65,923,446) (57,942,625) (52,525,066) General revenues and other changes in net position: Governmental activities: Taxes: Property taxes 30,888,074 23,313,556 20,937,356 20,420,020 Sales tax 12,550,157 13,177,914 13,307,736 14,705,790 Franchise tax 3,159,080 3,224,053 3,361,812 3,478,532 Othertaxes 5,449,323 7,835,918 6,265,257 7,451,947 Motor vehicle in lieu, unrestricted 517,098 55,880 57,902 - Investment income 2,281,105 1,647,399 185,451 695,341 Other general revenues 4,412,125 5,193,850 7,310,544 5,960,967 Transfers 95,934 98,811 101,775 101,775 Extraordinary gain (loss) 55,825,872 (19,629,066) Total governmental activities 59,352,896 110,373,253 31,898,767 52,814,372 Business -type activities: Investment income - - - - Other revenues Transfers (95,934) (98,811) (101,775) (101,775) Total business -type activities (95,934) (98,811) (101,775) (101,775) Total primary government 59,256,962 110,274,442 31,796,992 52,712,597 Changes in net position: Governmental activities (8,448,466) 44,345,932 (26,713,424) (299,911) Business -type activities 86,913 5,064 568,040 487,442 Total primary government change in net position $ (8,361,553) $ 44,350,996 $ (26,145,384) $ 187,531 Source: City of West Covina Finance Department -201- Fiscal Year 2015 2016 2017 2018 2019 2020 $ (56,834,701) $ (55,372,877) $ (70,109,400) $ (82,272,866) $ (70,304,289) $ (80,273,852) 227,345 (225,459) (300,748) (106,264) (164,665) 18,556 (56,607,356) (55,598,336) (70,410,148) (82,379,130) (70,468,954) (80,255,296) 21,156,596 22,352,163 23,994,740 25,392,860 26,365,067 27,422,706 15,096,101 17,228,237 16,503,563 17,449,827 17,464,609 17,033,647 3,635,092 3,540,011 3,698,184 4,011,817 4,207,765 4,445,101 7,433,106 6,485,394 6,725,309 7,692,437 9,158,794 5,026,703 660,157 (566,064) 4,452,938 559,164 2,016,573 2,682,794 6,999,034 4,236,920 6,847,642 9,256,591 5,747,563 7,244,815 101,775 101,775 - - - - 9,789,266 55,081,861 63,167,702 62,222,376 64,362,696 64,960,371 63,855,766 1,553 3,513 2,070 884 1,083 - - - 182,018 82,706 112,207 63,710 (101,775) (101,775) (100,222) (98,262) 184,088 83,590 113,290 63,710 54,981,639 63,069,440 62,406,464 64,446,286 65,073,661 63,919,476 (1,752,840) 7,794,825 (7,887,024) (17,910,170) (5,343,918) (16,418,086) 127,123 (323,721) (116,660) (22,674) (51,375) 82,266 $ (1,625,717) $ 7,471,104 $ (8,003,684) $ (17,932,844) $ (5,395,293) $ (16,335,820) -202- City of West Covina Changes in Net Position Governmental Activities Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2011 2012 2013 2014 Expenses: General government $ 2,922,898 $ 4,953,340 $ 5,547,949 $ 7,472,254 Public safety 45,253,725 49,369,913 47,160,347 45,443,958 Publicworks 21,052,423 20,510,387 20,465,106 21,109,952 Community services 6,629,292 6,949,951 6,911,667 6,437,040 Community development 9,414,730 4,071,050 708,422 658,082 Interest expense 7,101,037 5,927,002 1,652,751 1,677,062 Total expenses 92,374,105 91,781,643 82,446,242 82,798,348 Program revenues: Charges for services: General government 681,877 599,066 548,333 486,478 Public safety 3,571,864 3,196,729 3,018,478 3,037,891 Public works 8,043,988 7,046,096 7,781,333 8,878,122 Community services 1,166,675 1,141,162 1,195,612 1,180,562 Community development 240,462 255,669 348,112 621,352 Operating grants and contributions 10,189,050 12,557,141 10,344,778 11,021,410 Capital grants and contributions 678,827 958,459 597,405 4,458,250 Total program revenues 24,572,743 25,754,322 23,834,051 29,684,065 Net program revenues (expenses) (67,801,362) (66,027,321) (58,612,191) (53,114,283) General revenues and other changes in net position: Taxes: Property taxes 30,888,074 23,313,556 20,937,356 20,420,020 Sales tax 12,550,157 13,177,914 13,307,736 14,705,790 Franchise tax 3,159,080 3,224,053 3,361,812 3,478,532 Othertaxes 5,449,323 7,835,918 6,265,257 7,451,947 Motor vehicle in lieu, unrestricted 517,098 55,880 57,902 - Investment income 2,281,105 1,647,399 185,451 695,341 Other general revenues 4,412,125 5,193,850 7,310,544 5,960,967 Transfers 95,934 98,811 101,775 101,775 Extraordinary gain (loss) 55,825,872 (19,629,066) Total governmental revenues and other changes 59,352,896 110,373,253 31,898,767 52,814,372 Changes in net position $ (8,448,466) _L 44,345,932 $ (26,713,424) $ (299,911) Source: City of West Covina Finance Department -203- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 OVERVIEW OF THE FINANCIAL STATEMENTS, (continued) Reporting the City's Most Significant Funds The fund financial statements provide detailed information about the City's most significant funds — not the City as a whole. Some funds are required to be established by State law or by bond covenants. However, City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting administrative responsibilities for using certain taxes, grants, or other money (like grants received). The City's two kinds of funds — governmental and proprietary— use different accounting approaches. Governmental funds — Most of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for spending. These funds are reported using the modified accrual accounting method, which measures cash and all other current financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. We describe the relationship or differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in reconciliations on the pages following the fund financial statements in this report. • Proprietary funds — When the City charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the City's enterprise funds are the same as the business - type activities we report in the government -wide statements but provide more detail and additional information, such as cash flows for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the City's other programs and activities. Reporting the City's Fiduciary Responsibilities The City is an agent for certain assets held for, and under the control of, other organizations and individuals. All of the City's fiduciary activities are reported in separate fiduciary funds. These activities are not included in the government -wide financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. -6- (continued) Fiscal Year 2015 2016 2017 2018 2019 2020 $ 5,676,067 $ 4,963,302 $ 5,775,173 $ 7,523,129 $ 7,515,920 $ 7,781,252 49,813,447 48,410,511 56,169,907 67,734,047 58,057,784 72,653,866 20,586,770 20,259,279 21,243,019 21,161,586 21,625,190 23,649,892 7,035,872 7,368,492 7,926,410 8,926,070 9,280,450 9,418,860 766,886 753,721 2,190,319 1,618,181 795,685 1,394,131 1,353,156 1,572,645 1,575,724 1,515,826 1,680,335 1,874,899 85,232,198 83,327,950 94,880,552 108,478,839 98,955,364 116,772,900 885,123 400,051 546,626 814,465 829,295 369,796 2,825,831 3,170,579 3,201,495 3,610,467 3,839,103 4,304,075 8,278,038 8,271,744 7,714,148 8,967,472 9,156,370 2,034,963 1,275,278 1,365,482 1,491,858 2,110,943 1,903,119 2,438,156 502,621 425,013 416,014 264,959 465,097 6,780,115 12,405,742 13,317,378 10,955,031 10,285,701 12,097,219 19,989,920 2,224,864 1,004,826 445,980 151,966 360,872 582,023 28,397,497 27,955,073 24,771,152 26,205,973 28,651,075 36,499,048 (56,834,701) (55,372,877) (70,109,400) (82,272,866) (70,304,289) (80,273,852) 21,156,596 22,352,163 23,994,740 25,392,860 26,365,067 27,422,706 15,096,101 17,228,237 16,503,563 17,449,827 17,464,609 17,033,647 3,635,092 3,540,011 3,698,184 4,011,817 4,207,765 4,445,101 7,433,106 6,485,394 6,725,309 7,692,437 9,158,794 5,026,703 660,157 (566,064) 4,452,938 559,164 2,016,573 2,682,794 6,999,034 4,236,920 6,847,642 9,256,591 5,747,563 7,244,815 101,775 101,775 - - - - 9,789,266 55,081,861 63,167,702 62,222,376 64,362,696 64,960,371 63,855,766 $ (1,752,840) $ 7,794,825 $ (7,887,024) $ (17,910,170) $ (5,343,918) $ (16,418,086) -204- City of West Covina Changes in Net Position Business -Type Activities Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2011 2012 2013 2014 Expenses: Computer Enterprise $ 2,086,135 $ 1,701,367 $ 1,435,606 $ 1,284,419 Total expenses 2,086,135 1,701,367 1,435,606 1,284,419 Program revenues: Charges for services: Computer Enterprise 2,268,982 1,805,242 2,105,421 1,873,636 Total program revenues 2,268,982 1,805,242 2,105,421 1,873,636 Net revenues (expenses) 182,847 103,875 669,815 589,217 General revenues and other changes in net position: Investment income - - - - Other revenues Transfers (95,934) (98,811) (101,775) (101,775) Total general revenues and other changes (95,934) (98,811) (101,775) (101,775) Changes in net position $ 86,913 $ 5,064 $ 568,040 $ 487,442 Source: City of West Covina Finance Department -205- (continued) Fiscal Year 2015 2016 2017 2018 2019 2020 $ 1,427,789 $ 1,638,573 $ 1,575,066 $ 1,305,426 $1,263,693 $1,230,639 1,427,789 1,638,573 1,575,066 1,305,426 1,263,693 1,230,639 1,655,134 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 1,655,134 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 227,345 (225,459) (300,748) (106,264) (164,665) 18,556 1,553 3,513 2,070 884 1,083 - - - 182,018 82,706 112,207 63,710 (101,775) (101,775) 182,018 82,706 112,207 (100,222) (98,262) 366,106 166,296 225,497 63,710 $ 127,123 $ (323,721) $ 65,358 $ 60,032 $ 60,832 $ 82,266 -206- City of West Covina Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2011 2012 2013 2014 General Fund: Nonspendable $ 20,827,056 $ 15,580,789 $ 6,621,695 $ 6,595,326 Restricted - - - - Assigned - - - - Unassigned 8,786,221 13,187,181 4,108,967 5,687,385 Total general fund $ 29,613,277 $ 28,767,970 $ 10,730,662 $ 12,282,711 All other governmental funds: Nonspendable $ 8,210,093 $ 6,200,423 $ 6,814,431 $ 157,500 Restricted 38,138,456 31,101,636 32,133,653 56,225,097 Assigned 1,964,946 1,378,401 893,566 3,891,565 Unassigned (12,759,988) (110,042) (373,264) (47,867) Total all other governmental funds $ 35,553,507 $ 38,570,418 $ 39,468,386 $ 60,226,295 Source: City of West Covina Finance Department -207- (continued) 2015 2016 2017 2018 2019 2020 $ 6,483,924 $ 7,129,779 $ 6,982,268 $ 9,952,978 $ 8,976,583 $ 7,086,958 - - - - - 7,650 - - - 320,200 320,200 - 20,531,695 15,032,610 14,119,078 11,979,653 9,884,913 12,580,716 $ 27,015,619 $ 22,162,389 $ 21,101,346 $ 22,252,831 $19,181,696 $19,675,324 $ 151,923 $ 5,277,203 $ 4,980,450 $ 110,833 $ 99,167 $ 82,420 59,918,077 51,467,448 45,082,696 49,600,866 57,840,755 64,044,695 4,930,693 5,065,065 2,820,665 2,004,895 1,107,138 1,786,815 (438,708) (531,412) (1,100,860) (710,218) (692,305) (1,158,958) $ 64,561,985 $ 61,278,304 $ 51,782,951 $ 51,006,376 $58,354,755 $64,754,972 -208- City of West Covina Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2011 2012 2013 2014 Revenues: Taxes $ 63,663,702 $ 53,636,172 $ 46,185,045 $ 48,785,393 Special assessments 5,210,062 5,270,856 5,511,465 5,513,535 Licenses and permits 1,099,083 866,642 1,156,196 1,717,153 Fines and forfeitures 1,056,923 1,097,836 1,048,819 1,036,732 Investment income 4,124,960 3,419,665 533,388 716,472 Rental income 468,123 421,521 370,913 367,798 Revenue from other agencies 8,363,460 12,481,691 9,496,633 11,097,551 Charges for services 6,779,667 6,732,076 6,124,201 6,751,541 Repayment of notes and loans 721,348 332,698 925,235 26,148 Other 3,781,096 1,720,792 5,105,117 6,258,384 Total revenues 95,268,424 85,979,949 76,457,012 82,270,707 Expenditures Current: General government 4,180,878 4,950,311 5,205,956 7,087,335 Public safety 41,938,421 44,109,598 42,688,487 43,332,847 Public works 15,325,261 18,209,981 16,203,144 17,790,042 Community services 5,412,009 5,917,227 5,872,485 5,399,732 Community development 8,228,653 4,246,590 666,255 679,007 Pass -through payments 5,863,850 2,112,227 - - Debt service: Principal retirement 4,649,975 5,155,105 1,773,261 1,870,239 Interest and fiscal charges 8,520,890 6,307,988 1,659,473 1,666,054 Cost of issuance - - - - Developer agreement payments 2,317,114 351,444 Total expenditures 96,437,051 91,360,471 74,069,061 77,825,256 Excess (deficiency) of revenues over(under)expenditures (1,168,627) (5,380,522) 2,387,951 4,445,451 Other financing sources (uses): Capital leases - - - - Transfers in 11,171,460 8,947,657 3,639,400 3,744,115 Transfers out (11,075,526) (8,848,846) (3,537,625) (3,642,340) Issuance of bonds 2,185,000 Premium of refunding bonds issued - Payment to refunded bond escrow agent (2,248,061) Extraordinary gain (loss) 7,453,315 (19,629,066) Total other financing sources (uses) 95,934 7,552,126 (19,527,291) 38,714 Net change in fund balances $ (1,072,693) $ 2,171,604 $(17,139,340) $ 4,484,165 Debt service as a percentage of noncapital expenditures 19.89 % 16.20 % 5.21 % 5.18 Source: City of West Covina Finance Department -209- (continued) 2015 2016 2017 2018 2019 2020 $ 50,918,823 $ 54,237,649 $ 55,502,969 $ 59,255,716 $ 62,477,442 $ 62,588,256 5,595,338 5,550,657 5,318,497 6,077,861 6,347,182 6,490,254 1,419,457 1,156,613 1,037,389 1,089,850 1,140,622 1,491,744 959,606 796,989 894,618 1,290,187 1,318,333 921,872 679,844 (570,132) 4,448,607 551,948 2,008,971 2,677,045 406,350 529,833 604,817 649,968 647,749 700,455 10,769,196 11,218,711 10,193,278 7,920,178 12,581,261 15,386,915 6,803,615 7,731,236 7,359,139 8,681,704 7,473,923 7,690,819 5,490,327 1,487,103 2,129,531 4,229,895 1,142,659 3,783,990 83,042,556 82,138,659 87,488,845 89,747,307 95,138,142 101,731,350 5,757,334 5,103,814 6,214,682 5,700,461 6,828,020 6,488,092 45,906,138 50,962,883 54,480,972 53,087,630 58,205,797 58,857,571 13, 724,417 15, 509, 267 15, 328, 717 17, 635, 489 14, 800, 936 17, 262, 224 5,816,443 6,864,180 10,824,395 6,975,178 7,290,775 7,263,052 761,896 898,714 2,198,881 1,182,255 1,086,128 1,214,558 1,866,947 2,027,461 7,931,202 1,958,918 13,353,918 1,833,918 1,360,370 1,574,753 1,566,392 1,501,956 1,691,316 1,932,807 - - - - 389,726 - 75,193,545 82,941,072 98,545,241 88,041,887 103,646,616 94,852,222 7,849,011 (802,413) (11,056,396) 1,705,420 (8,508,474) 6,879,128 - 2,568,446 500,000 - - 196,759 3,201,793 4,831,038 5,643,232 3,902,056 149,121 1,494,913 (3,100,018) (10,812,296) (5,643,232) (5,232,566) (9,121) (1,676,955) 24,165,000 1,380,718 (12,900,000) 11,578,351 11,680,126 (3,412,812) 500,000 (1,330,510) 12,785,718 14,717 $ 19,529,137 $ (4,215,225) $(10,556,396) $ 374,910 $ 4,277,244 $ 6,893,845 4.92% 4.70% 10.29% 4.18% 15.08% 3.97% -210- City of West Covina Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years City Fiscal Year Taxable Ended Less: Assessed June 30 Secured Non -Unitary Unsecured Exemptions Value 2011 $ 6,276,734 $ $ 11,705 $ (86,340) $ 6,202,099 2012 6,381,873 12,762 (85,792) 6,308,843 2013 6,477,468 10,645 (93,277) 6,394,836 2014 6,670,267 15,080 (73,615) 6,611,732 2015 7,116,733 12,346 (94,084) 7,034,995 2016 7,458,200 14,738 (95,915) 7,377,023 2017 7,829,861 11,212 (100,253) 7,740,820 2018 8,229,924 9,185 (84,900) 8,154,209 2019 8,718,033 10,356 (101,379) 8,627,010 2020 9,003,076 11,057 (79,629) 9,014,134 NOTE: In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1 % based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Source: HdL Coren & Cone, Los Angeles Assessor 2010/2011 - 2019/2020 Combined Tax Rolls -211- (continued) Successor Agency (SA) of the former Community Development Commission (CDC) City and SA Taxable Total Taxable Total Less: Assessed Assessed Direct Tax Secured Unsecured Exemptions Value Value Rate $ 2,336,269 $ 157,035 $ (142,764) $ 2,350,540 $ 8,552,639 33.326% 2,408,026 152,958 (152,569) 2,408,415 8,717,258 33.518% 2,429,152 160,821 (152,386) 2,437,587 8,832,423 33.456% 2,498,131 161,438 (186,502) 2,473,067 9,084,799 14.083% 2,566,170 161,710 (184,907) 2,542,973 9,577,968 14.116% 2,795,635 162,488 (189,554) 2,768,569 10,145,592 14.138% 3,028,206 165,375 (170,529) 3,023,052 10,763,872 14.165% 3,103,316 163,326 (154,330) 3,112,312 11,266,521 14.109% 3,305,249 167,442 (168,062) 3,304,629 11,931,639 14.221% 3,483,295 169,859 (195,530) 3,457,624 12,471,758 14.236% -212- City of West Covina Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (rate per $100 of assessed value) Basic Levy' Baldwin Park Unified Bassett Unified School District County Detention Facilities 1987 Debt Covina Valley Unified School District Hacienda -La Puente Unified LA County Flood Control Metropolitan Water District Mt. San Antonio College Rowland Heights Unified Walnut Valley Unified West Covina Municipal Maint. Dist. West Covina Unified Total Direct & Overlapping2 Tax Rates City Share of 1 % Levy Per Prop 13' Redevelopment Rate Total Tax Rates Fiscal Year 1.00000 1.00000 1.00000 1.00000 0.16673 0.17506 0.16406 0.15842 0.12316 0.11628 0.12773 0.11632 0.00000 0.00000 0.00000 0.00000 0.09003 0.08999 0.09500 0.11472 0.06462 0.06430 0.06689 0.06653 0.00000 0.00000 0.00000 0.00000 0.00370 0.00370 0.00350 0.00350 0.02636 0.02642 0.02896 0.02023 0.07538 0.09195 0.10053 0.12297 0.11839 0.11735 0.12554 0.11342 0.18180 0.18180 0.18180 0.18310 0.05920 0.05377 0.04965 0.03626 1.90937 1.92061 1.94365 1.93547 0.13820 0.13820 0.13820 0.13820 1.00370 1.00370 N/A N/A 0.33326 0.33518 0.33456 0.14083 1 In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00 % fixed amount. This 1.00 % is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00 % fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of any voter approved bonds. 2 Overlapping rates are those of local and county governments that apply to property owners within the City. Not all overlappping rates apply to all city property owners. ' Citys share of 1 % Levy is based on the Citys share of the general fund tax rate area with the largest net taxable value within the City. ERAF general fund tax shifts may not be included in tax ratio figures. 4 Redevelopment Rate is based on the largest RDA tax rate area and only includes rate(s) from indebtedness adopted prior to 1989 per California State statute. RDA direct and overlapping rates are applied only to the incremental property values. The approval of ABX1 26 eliminated Redevelopment from the State of California for the fiscal year 2012/13 and years thereafter. 5 Total Direct Rate is the weighted average of all individual direct rates applied to by the government preparing the statistical section information and excludes revenues derived from aircraft taxes. Beginning in 2013/14 the Total Direct Rate no longer includes revenue generated from the former redevelopment tax rate areas. Challenges to recognized enforceable obligations are assumed to have been resolved during 2012/13. For the purpose of this report, residual revenue is assumed to be distributed to the City in the same proportions as general fund revenue. Source: Los Angeles County Assessor 2010/11 - 2019/20 Tax Rate Table -213- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 GOVERNMENT -WIDE FINANCIAL STATEMENTS Statement of Net Position As noted earlier, net position may serve over time as a useful indicator of a government's financial position. At June 30, 2020, net position for the City was a deficit balance of $18.9 million. Compared to the prior year, the net position of the City decreased by $16.3 million. The City's net position of a deficit of $18.9 million is made up of three components: Net investment in Capital Assets, Restricted Net Position and Unrestricted Net Position. The largest portion of the City's net position, $140.6 million, reflects its net investment in capital assets (e.g., infrastructure, land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to the community. As such, these assets are not available for spending. In addition, $66.0 million of the City's net position represents resources that are subject to external restrictions on how they may be used. The remaining deficit balance of unrestricted net position of $225.4 million is a result of the implementation of GASB 68 and GASB 75. The table below reflects the Statement of Net Position for the fiscal year ended June 30, 2020, with the comparative data for the fiscal year ended June 30, 2019: Table 1 Statement of Net Position Governmental Activities Business -Type Activities Total 2020 2019 2020 2019 2020 2019 Assets: Current and other assets $ 105,277,948 $ 95,707,477 $ (46,057) $ (211,769) $ 105,231,891 $ 95,495,708 Capital assets 189,635,902 197,975,200 189,635,902 197,975,200 Total assets 294,913,850 293,682,677 (46,057) (211,769) 294,867,793 293,470,908 Deferred Outflows of Resources: Pension related 22,698,850 27,771,055 - - 22,698,850 27,771,055 OPEB related 4,879,260 2,398,678 4,879,260 2,398,678 27,578,110 30,169,733 27,578,110 30,169,733 Liabilities: Long -ten debt outstanding 322,543,812 310,595,540 63,620 91,515 322,607,432 310,687,055 Other liabilities 8,822,639 5,789,689 134,442 23,101 8,957,081 5,812,790 Total liabilities 331,366,451 316,385,229 198,062 114,616 331,564,513 316,499,845 Deferred Inflows of Resources: Pension related 3,293,071 2,989,630 - - 3,293,071 2,989,630 OPEB related 6,474,959 6,701,986 6,474,959 6,701,986 9,768,030 9,691,616 9,768,030 9,691,616 Net Position: Net investment in capital assets 140,572,511 147,204,908 - - 140,572,511 147,204,908 Restricted 65,969,665 57,782,735 - - 65,969,665 57,782,735 Unrestricted (225,184,697) (207,212,078) (244,119) (326,385) (225,428,816) (207,538,463) Total net position $ (1$642,521) $ (2,224,435) $ (244,119) $ (326,385) $ (18,886,640) $ (2,550,820) (continued) Fiscal Year 2015 2016 2017 2018 2019 2020 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 0.16519 0.16288 0.10510 0.13039 0.12402 0.13032 0.11539 0.15771 0.16781 0.17443 0.16349 0.14196 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.11426 0.11062 0.12581 0.14205 0.13976 0.13521 0.06432 0.06394 0.06600 0.10531 0.10706 0.08252 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00350 0.00350 0.00350 0.00350 0.00350 0.00350 0.02129 0.02154 0.02400 0.02371 0.02435 0.04781 0.14313 0.12426 0.12444 0.11841 0.11861 0.10760 0.11510 0.09285 0.06601 0.07388 0.10582 0.09538 0.18310 0.18310 0.18310 0.18310 0.18310 0.18310 0.05412 0.04205 0.04914 0.09514 0.09795 0.08192 1.97941 1.96245 1.91492 2.04992 2.06766 2.00932 0.13820 0.13820 0.13820 0.13820 0.13820 0.13820 N/A N/A N/A N/A N/A N/A 0.14116 0.14138 0.14165 0.14109 0.14221 0.14236 -214- This page intentionally left blank. City of West Covina Principal Property Taxpayers Current Year and Nine Years Ago Taxpayer Taxable Assessed Value 2020 Rank Percent of Total Taxable Assessed Value Taxable Assessed Value 2011 Rank Percent of Total Taxable Assessed Value Plaza West Covina LLC $ 276,110,914 1 2.21 % $183,924,412 1 2.15% BRIE DDR SR Eastland California LLC 180,509,731 2 1.45 % 0.00% Colony at the Lakes 176,262,499 3 1.41 % - 0.00% 624 South Glendora Avenue Owner LLC 73,950,991 4 0.59 % - 0.00% Deutsche Mellon National Asset LLC 68,285,940 5 0.55 % - 0.00% WC MB RE LLC 62,897,717 6 0.50% - 0.00% Walnut Ridge Apartments LP 60,621,979 7 0.49 % - 0.00% TPA Nasch LLC 58,034,550 8 0.47 % - 0.00% MillBrook Park Apartments 45,753,701 9 0.37 % - 0.00% Francisquito Avenue Fee Owner LLC 44,733,422 10 0.36% - 0.00% Eastland Shopping Center LLC - 0.00% 102,072,600 2 1.19% Gateway Crescent LLC - 0.00% 56,730,228 3 0.66% PPC WR Apartments LLC - 0.00% 51,361,141 4 0.60% Eastland Tower Partnership - 0.00% 51,008,272 5 0.60% Legacy Partners Verandas LP - 0.00% 48,065,859 6 0.56% CP Lafayette Parc LLC - 0.00% 43,724,863 7 0.51% SP Torrey Pines LLC - 0.00% 40,107,000 8 0.47% Hassan Real Estate Partnership - 0.00% 34,956,936 9 0.41% KOR BAM Sunset Plaza LLC 0.00% 30,540,327 10 0.36% Totals $1,047,161,444 8.40% $642,491,638 7.51% Source: HdL Coren & Cone; Los Angeles County Assessor 2010-11 and 2019-20 Combined Tax Rolls and the SBE Non UnitaryTax Roll -215- City of West Covina Property Tax Levies and Collections Last Ten Fiscal Years City Collected within the Fiscal Taxes Levied Fiscal Year of Levy Collections in Total Collections to Date Year Ended for the Percent Subsequent Percent June 30 Fiscal Year Amount of Levy Years Amount of Levy 2011 $ 8,782,946 $ 8,287,440 94.36% $ 201,261 $ 8,488,701 96.65% 2012 8,961,279 8,280,265 92.40% (167,264) 8,113,001 90.53% 2013 9,094,235 8,853,013 97.35% (75,056) 8,777,957 96.52% 2014 9,119,226 9,105,997 99.85% (67,229) 9,038,768 99.12% 2015 9,702,185 9,491,592 97.83% 34,965 9,526,557 98.19% 2016 10,173,156 9,881,520 97.13% 88,647 9,970,167 98.00% 2017 10,671,800 10,440,321 97.83% 109,928 10,550,250 98.86% 2018 11,679,354 11,040,516 94.53% 267,238 11,307,754 96.82% 2019 12,395,960 11,894,401 95.95% 233,272 12,127,673 97.84% 2020 12,607,874 11,998,360 95.17% 241,683 12,240,043 97.08% Notes: The amounts presented include City property taxes and Community Development Commission tax increment. This schedule also includes amounts collected by the City and the Community Development Commission that were passed -through to other agencies. Fiscal year 2012 collections for Community Development Commission are as of January 1, 2012. This is due to ABx1 26 (RDA Dissolution Bill ) that was effective February 1, 2012. Subsequent to January 1, 2012, there were no property taxes levied under the Community Development Commission. Source: Los Angeles County Auditor Controller's Office - Accounting Division -216- (continued) Community Development Commission Collected within the Taxes Levied Fiscal Year of Levy Collections in Total Collections to Date forthe Percent Subsequent Percent Fiscal Year Amount of Levy Years Amount of Levy $ 20,132,138 $ 19,147,814 95.11% $ 394,313 $ 19,542,127 97.07% 20,612,835 8,727,674 42.34% 191,262 8,918,936 43.27% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -217- City of West Covina Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Fiscal Year Lease Special Tax Capital Total Ended Revenue Assessment Allocation Lease Governmental June 30 Bonds Bonds (a) Bonds (1) (a) Loans Obligations Activities 2011 $56,115,000 $35,870,000 $25,815,000 $42,385,673 $ 1,843,538 $ 162,029,211 2012 50,825,000 - - 1,800,221 1,409,134 54,034,355 2013 49,645,000 1,658,532 957,535 52,261,067 2014 48,385,000 1,512,768 773,282 50,671,051 2015 47,225,000 12,941,113 216,342 60,382,455 2016 46,000,000 12,208,103 2,715,337 60,923,440 2017 42,570,000 10,920,515 - 53,490,515 2018 41,190,000 10,341,597 51,531,597 2019 39,680,000 9,762,679 - 49,442,679 2020 38,425,000 9,183,761 180,122 47,788,883 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements (1) The 1994 West Covina Public Financing Authority Water Revenue Bonds were defeased as of June 30, 2000 due to the sale of the City's water system. (2) These ratios are calculated using personal income and population for the prior calendar year. (a) As a result of the dissolution of the Community Development Commission on January 31, 2012 indebtedness was transferred to the Successor Agency. Source: City of West Covina Finance Department -218- (continued) Business -Type Activities Total Total Percentage Debt Certificates of Business -type Primary of Personal Per Participation Activities Government Income (2) Capita (2) $ $ $162,029,211 6.35% $ 1,435 54,034,355 2.02% 506 52,261,067 1.90% 487 50,671,051 1.88% 470 60,382,455 2.28 % 560 60,923,440 2.27 % 565 53,490,515 1.98 % 496 51,531,597 1.88% 476 - - 49,442,679 1.70 % 457 47,788,883 1.56% 451 -219- City of West Covina Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years in thousands(000s) Fiscal Year Lease Special Tax Percent of Ended Revenue Assessment Allocation Assessed Per June 30 Bonds Bonds(a) Bonds(a) Total Value(1) Capita 2011 $ 56,115 $ 35,870 $ 25,815 $ 117,800 1.38% $ 497 2012 50,825 - - 50,825 0.58% 476 2013 49,645 49,645 0.56% 463 2014 48,385 48,385 0.53% 449 2015 47,225 47,225 0.49% 438 2016 46,000 46,000 0.45% 426 2017 42,570 42,570 0.40% 395 2018 41,190 41,190 0.37% 381 2019 39,680 39,680 0.33% 367 2020 38,425 38,425 0.31% 363 Notes: General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (of which, the City has none). (1) Assessed value has been used because the actual value of taxable property is not readily available in the State of California. (a) As a result of the dissolution of the Community Development Commission on January 31, 2012 indebtedness was transferred to the Successor Agency. Source: City of West Covina Finance Department and Los Angeles County Assessor's Office -220- City of West Covina Direct and Overlapping Debt June 30, 2020 Estimated Estimated Share Debt Percentage of Overlapping Governmental Unit Outstanding Applicable(1) Debt Debt repaid with Property Taxes: Metropolitan Water District $ 18,151,752 0.728 $ 132,141 MT. SAN ANTONIO CCD DS 2008 SERIES 2013A 161,708,000 12.917 20,88B,478 MT. SAN ANTONIO CCD DS 2008 SERIES 2013B 3,805,000 12.917 491,507 MT. SAN ANTONIO CCD DS 2013 REF SERIES A 23,500,000 12.917 3,035,590 MT. SAN ANTONIO CCD DS 2013 REF SERIES B 27,185,000 12.917 3,511,597 MT. SAN ANTONIO CCD DS 2008 SERIES 2015C 10,870,000 12.917 1,404,122 MT. SAN ANTONIO CCD DS 2015 REF BONDS 17,365,000 12.917 2,243,107 MT. SAN ANTONIO CCD DS 2018 SERIES 2019A 401,245,000 12.917 51,830,442 BALDWIN PARK USD 2006 SERIES 2013 2,112,709 0.293 6,198 BALDWINPARK USD 2006 SERIES 2019 44,761,025 0.293 131,320 BASSETT USD DS 2006 SER B 10,535,729 0.062 6,483 BASS ETTUSDDS2014REFSERIESA 7,860,000 0.062 4,837 BASSETT USD DS 2014 REF SERIES B 5,995,000 0.062 3,689 SASSETT USD DS 2016 REF BONDS 7,090,000 0.062 4,363 BASSETTUSDDS 2014SERIESB 19,755,000 0.062 12,157 COVINA VALLEY USD DS 2001 SERIES B 9,447,069 31.981 3,021,260 COVINA VALLEY USD DS 2001 REFUND 2010 SERIES A 1,935,000 31.981 618,831 COVINA VALLEY USD DS 2012 SERI ES A 4,815,000 31.981 1,539,882 COVINA VALLEY USD DS 2013 REF BONDS 11,865,000 31.981 3,794,537 COVINA VALLEY USD DS 2012 SERI ES B 36,145,000 31.981 11,559,507 COVINA VALLEY USD DS 2012 SERI ES C 31,490,000 31.981 10,070,795 COVINA VALLEY USD DS 2012 SERI ES C 29,380,000 31.981 9,395,997 COVINA VALLEY USD DS 2016 REF BONDS 14,000,000 31.981 4,477,330 COVINA VALLEY USD DS 2012 SERIES D 58,690,000 31.981 18,769,607 HACIENDA -LA PUENTE USD DS 2005 REFUNDING BONDS 19,550,000 1.374 268,661 HACIENDA -LA PUENTE USD DS 2007 REFUNDING 51,100,000 1.374 702,229 HACIENDA -LA PUENTE USD DS 2016 SERIES 2017A 59,695,000 1.374 820,344 ROINLAND HEIGHTS USD DS 2005 REF BONDS 6,984,432 14.634 1,022,072 ROWLAND HEIGHTS USD DS 2006 SERIES B 19,272,549 14.634 2,820,261 ROWLAND HEIGHTS USD DS 2019 14,355,000 14.634 2,100,648 ROWLAND HEIGHTS USD DS 2006 SERIES D OSCB 14,075,000 14.634 2,059,674 ROWLAND HEIGHTS USD DS 2006 SERIES E 557,451 14.634 81,575 ROINLAND HEIGHTS USD DS 2012 SERIES A 40,330,000 14.634 5,901,717 ROWLAND HEIGHTS USD DS 2013 REF BONDS 23,840,000 14.634 3,488,642 ROINLAND HEIGHTS USD DS 2012 SERIES B 65,999,972 14.634 9,658,150 ROWLAND HEIGHTS USD DS 2015 REF BONDS 41,420,000 14.634 6,061,223 WALNUT VALLEY USD DS 2000 SERIES D 11,428,114 0.748 85,530 WALNUT VALLEY USD DS 2000 SERIES E 4,509,459 0.748 33,750 WALNUT VALLEY USD DS 2011 REF 745,000 0.748 5,576 WALNUT VALLEY USD DS 2007 SERIES B MEAS.S 10,284,601 0,748 76,972 WALNUT VALLEY USD DS 2007 SERIES C 310,547 0.748 2,324 WALNUT VALLEY USD DS 2014 REF BONDS SERIES A 3,260,000 0.748 24,398 WALNUT VALLEY USD DS 2014 REF BONDS SERIES B 2,345,000 0.748 17,550 WALNUT VALLEY USD DS 2016 REF BONDS 39,205,000 0.748 293,417 WALNUT VALLEY USD DS 20182019 66,730,000 0.748 499,418 WEST COVINA USD 2002 REFUNDING SERIES A 8,985,000 95.442 8,575,453 WEST COVINA USD DS 2012 REF BONDS 9,900,000 95.442 9,448,746 WEST COVINA USD DS 2016 SERIES A 69,355,000 95.442 66,193,713 Sub Total Overlapping Debt 267,404,480 City of West Covina Direct Debt - Lease Revenue Bonds 23,025,000 Total Direct and Overlapping Debt $ 290,429,480 Note: Ovedapping govemments are those that windde, at least in part, with the geographic b.und.des of the City. This schedule estimates the portion of th, outstanding debt,f those ovedapping governments that Is home by the residents and businesses W Glendora. This process recognizes that, when considering the City', ability to issue and repay lorg-term debt, the entire debt b,bd,n bome by the residents antl businesses should be taken into acmunt. However, this does not imply that every t m,yer is a resident and, therefore, responsible ter the debt, for sach overlapping government. geswareestimetetl (1)Thet,mbte,ofovedappingtlebt applirablegestimatetlusingd,deenddividiproperlyvalues.',plll by tle[erminirg the poNan of tM1e ble... CounMs rouble assessetl value that is within the government's boundaries antl tlivitling it by the Counry's total taxable assessed value. Source: HtlL Coren 8 Cone, Lee Angeles, County Assessor and AudiWr Combined M19-20 Lien Data Tax Rdls -221- City of West Covina Legal Debt Margin Information Last Ten Fiscal Years in thousands(000s) Fiscal Year 2011 2012 2013 2014 Assessed valuation $ 6,202,099 $ 6,308,843 $ 6,394,836 $ 6,611,732 Conversion percentage 25 % 25 % 25 % 25 Adjusted assessed valuation 1,550,525 1,577,211 1,598,709 1,652,933 Debt limit percentage 15 % 15 % 15 % 15 Debt limit 232,579 236,582 239,806 247,940 Total net debt applicable to limitation - - - - Legal debt margin $ 232,579 $ 236,582 $ 239,806 $ 247,940 Total debt applicable to the limit as a percentage of debt limit 0.0 % 0.0 % 0.0 % 0.0 The Government Code of the State of California provides for a legal debt margin of 15 % of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25 % of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100 % of market value (as of the most recent change in ownership for that parcel). Although the statutory debt limit has not been amended by the State since this change, the percentages presented in the above computations have been proportionately modified to 3.75 % (25 % of 15%) for the purpose of this calculation in order to be consistent with the computational effect of the debt limit at the time of the state's establishment of the limit. Source: City of West Covina Finance Department Los Angeles County Tax Assessor's Office -222- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 Changes in Net Position The City's total revenues of $100.4 million for governmental activities are $16.4 million less than the expenses of $116.8 million. The decrease is a result of expenditures, the largest being public safety, that are higher than the slow -growing revenues. A summary of the government -wide statement of activities for the year ended June 30, 2020, with the comparative data for the fiscal year ended June 30, 2019, is as follows: Table 2 Changes in Net Position Governmental Activities Business -Type Activities Total 2020 2019 2020 2019 2020 2019 Revenues Program revenues: Charges for services $ 15,927,105 $ 16,192,984 $ 1,249,195 $ 1,099,028 $ 17,176,300 $ 17,292,012 Operating contributions and grants 19,989,920 16,153,620 - - 19,989,920 16,153,620 Capital contributions and grants 582,023 360,872 - - 582,023 360,872 General revenues: Property taxes 27,422,706 26,365,067 - - 27,422,706 26,365,067 Sales taxes 17,033,647 17,464,609 - - 17,033,647 17,464,609 Othertaxes 9,471,804 9,310,158 - - 9,471,804 9,310,158 Other general revenues 9,927,609 7,764,136 63,710 113,290 9,991,319 7,877,426 Total revenues 100,354,814 93,611,446 1,312,905 1,212,318 101,667,719 94,823,764 Expenses General government $ 7,781,252 $ 7,515,920 - - 7,781,252 7,515,920 Public safety 72,653,866 58,057,784 - - 72,653,866 58,057,784 Public works 23,649,892 21,625,190 - - 23,649,892 21,625,190 Community services 9,418,860 9,280,450 - - 9,418,860 9,280,450 Community development 1,394,131 795,685 - - 1,394,131 795,685 Interest expense 1,874,899 1,680,335 - - 1,874,899 1,680,335 Computer service 1,230,639 1,263,693 1,230,639 1,263,693 Total expenses 116,772,900 98,955,364 1,230,639 1,263,693 118,003,539 100,219,057 Increase (decrease) in net position (16,418,086) (5,343,918) 82,266 (51,375) (16,335,820) (5,395,293) Beginning net position (2,224,435) 3,119,483 (326,385) (275,010) (2,550,820) 2,844,473 Ending net position $ (18,642,521) $ (2,224,435) $ (244,119) $ (326,385) $ (18,886,640) $ (2,550,820) -8- (continued) Fiscal Year 9n1s 9n1R 9n17 9n1A 9n1Q 9n9n $ 7,034,995 $ 7,377,023 $ 7,740,820 $ 8,154,209 $ 8,627,010 $ 9,014,134 25% 25% 25% 25% 25% 25% 1,758,749 1,844,256 1,935,205 2,038,552 2,156,753 2,253,534 15% 15% 15% 15% 15% 15% 263,812 276,638 290,281 305,783 323,513 338,030 $ 263,812 $ 276,638 $ 290,281 $ 305,783 $ 323,513 $ 338,030 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 -223- City of West Covina Pledged -Revenue Coverage Last Ten Fiscal Years in thousands(000s) Lease Revenue Bonds and Certificates of Participation Fiscal Year Ended General Fund Debt Service June 30 Revenue Principal Interest Coverage 2011 $ 47,672 $ 1,855 $ 1,268 $ 15 2012 48,347 1,505 1,155 18.18 2013 53,006 1,605 1,272 18.42 2014 54,753 1,715 1,249 18.47 2015 57,588 1,655 891 22.62 2016 58,133 1,900 1,121 19.24 2017 64,372 4,005 1,185 12.40 2018 67,196 2,005 1,306 20.29 2019 65,426 1,255 1,918 20.62 2020 70,935 1,255 1,918 22.36 Tax Allocation Bonds Fiscal Year Ended Tax Debt Service June 30 Increment Principal Interest Coverage 2011 $ 19,542 $ 1,205 $ 1,127 8.38 2012 17,260 1,250 1,079 7.41 2013 12,152 1,305 1,030 5.20 2014 8,675 1,358 978 3.71 2015 9,260 1,420 920 3.96 2016 15,110 1,480 853 6.48 2017 9,365 19,005 802 0.47 2018 10,256 1,480 - 6.93 2019 12,625 1,820 361 5.79 2020 9,633 1,820 361 4.42 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest or depreciation expenses. Source: City of West Covina Finance Department -224- (continued) Assessment District Bond Fiscal Year Less Net Ended Operating Available Debt Service June 30 Revenue Expenses Revenue Principal Interest Coverage 2011 $ 3,591 $ 470 $ 3,121 $ 1,485 $ 2,197 0.85 2012 4,444 70 4,374 1,580 2,105 1.19 2013 5,569 1,027 4,542 1,770 2,004 1.20 2014 5,740 767 4,973 2,055 1,890 1.26 2015 3,305 1,457 1,848 2,340 1,758 0.45 2016 6,911 1,429 5,482 2,940 2,124 1.08 2017 4,596 2,536 2,060 2,745 1,365 0.50 2018 4,596 2,536 2,060 3,000 1,429 0.47 2019 5,304 929 4,375 3,250 1,004 1.03 2020 3,999 3,365 634 3,495 1,120 0.14 -225- City of West Covina Demographic and Economic Statistics Last Ten Calendar Years Per Personal Capita Annual Calendar Income Personal Unemployment Year Population (in thousands) Income Rate 2010 112,890 $ 2,552,782 $ 22,613 11.2% 2011 106,713 2,670,706 25,027 10.9% 2012 107,248 2,751,555 25,656 8.2% 2013 107,828 2,698,504 25,026 6.7% 2014 107,879 2,653,176 24,594 10.1% 2015 107,873 2,680,000 24,844 8.2% 2016 107,813 2,705,736 25,096 6.4% 2017 108,245 2,737,892 25,293 5.2% 2018 108,116 2,916,516 26,975 4.6% 2019 105,999 3,053,619 28,807 4.4% Sources: HdL Coren & Cone, California State Department of Finance, and California Employment -226- City of West Covina Principal Employers Current Year and Nine Years Ago 2020 2011 Percent of Percent of Number of Total Number of Total Employer Employees Rank Employment Employees Rank Employment Queen of the Valley Campus 1,685 1 3.29 % 1,782 1 3.23 WC Unified School District 1,375 2 2.69% 1,223 2 2.22% Merakey Allos 663 3 1.29 California Respite Care 400 4 0.78 Macy's 343 5 0.67 % 271 5 0.49 City of West Covina 333 6 0.65 % 482 3 0.87 Porto's Bakery 313 7 0.61 Target Store #T-2147 253 8 0.49 Interspace/Concorde Battery Corporation 248 9 0.48 % 206 8 0.37 Target Store #T1028 247 10 0.48 % 404 4 0.73 JC Penney Corp Inc. #1505-7 257 7 0.47 S G V Newspaper Group 264 6 0.48 B.J's Restaurant & Brewery 201 9 0.36% Sears Roebuck & Company 145 10 0.26 Totals 5,860 11.45% 5,235 9.48% Note: "Total Employment" as used above represents the total employment of all employers located within City limits. Source: Labor Market Info, EDD, State of California HdL Coren & Cone -227- This page intentionally left blank. City of West Covina Full-time and Part-time City Employees By Function Last Ten Fiscal Years Fiscal Year Function 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 General government 39 36 31 31 31 32 42 46 36 32 Public safety 281 264 253 244 268 268 282 259 238 237 Public works 76 72 64 69 71 71 75 56 44 - Public services - - - - - - - - - 25 Community services 44 44 41 42 41 41 87 64 64 27 Community development 19 16 7 2 2 2 1 1 3 12 Total 459 432 396 389 413 414 487 426 385 333 Source: City of West Covina Finance Department -228- City of West Covina Operating Indicators by Function Last Ten Years Function/Program Public safety: Police: Total arrests Calls for police service (1) Graffiti sites cleaned Fire: Emergency responses Fire inspections Public works: Building permits issued Graffiti sites cleaned (2) Community services: Recreation class registrations (3) Fiscal Year 2011 2012 2013 2014 3,210 2,557 2,755 2,537 71,254 71,741 65,554 69,874 15,781 23,579 19,910 20,014 7,454 7,545 7,871 7,990 430 496 837 749 2,477 2,435 3,882 2,925 N/A N/A N/A N/A 7,041 6,927 6,027 6,283 Note: (1) Calls received that generated an incident number but not necessarily a police response. (2) Due to department restructuring, the responsibility for graffiti abatement was absorbed by the Police Department starting fiscal year 2008-2009 and by Public Works starting fiscal year2015-2016. (3) The increase in recreation class registrations in FY18 relates to inclusions of daycare classes. (4) The decrease in recreation class registrations in FY20 relates to COVID restrictions. Source: City of West Covina Finance Department -229- (continued) Fiscal Year 2015 2016 2017 2018 2019 2020 2,544 2,624 2,818 3,080 2,538 2,037 71,098 72,368 74,898 84,850 73,713 68,605 16,156 N/A N/A N/A N/A N/A 8,555 9,494 9,353 9,383 9,289 8,944 717 778 816 805 1,009 356 3,617 5,038 1,547 1,399 2,938 3,022 N/A 13,964 6,694 2,391 3,077 3,140 6,487 7,129 7,500 17,902 26,482 8,075 -230- City of West Covina Capital Asset Statistics by Function/Program Last Ten Fiscal Years Fiscal Year Function 2011 2012 2013 2014 Public safety: Police: Stations 1 1 1 1 Fire: Stations 5 5 5 5 Public works: Streets (miles) 231.0 231.0 231.0 231.0 Streetlight poles 826 826 826 826 Streelight fixtures 1,109 1,109 1,109 1,109 Traffic signals 116 117 117 117 Parks and recreation: Sports Complex 1 1 1 1 Parks 16 16 16 16 Community centers 4 4 4 4 Wastewater: Sanitary sewers (miles) 238.9 238.9 238.9 238.9 Storm sewers (miles) 42.0 42.0 42.0 42.0 Source: City of West Covina -231- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 Governmental Activities Some of the more significant changes in the revenues and expenses of the City's governmental activities presented above are as follows: • Operating contributions and grants increased by $3.8 million, primarily due to an increase of $2.7 million in Asset Forfeiture monies received, an increase of $250,000 for ambulance transportation service revenues, and an increase of $153,000 in funding for the Senior Meals Program. • Capital contributions and grants increased by approximately $0.2 million due to an increase in developer fees. Development fluctuates from year to year and residential development of the Meritage Homes resulted in developer fees dedicated to park development collections in FY 2019-20. • Property taxes, the City's largest revenue source, increased $1.0 million primarily due to an increase in the property assessment valuations. • Sales Tax decreased $0.4 million, due to the ongoing COVID-19 pandemic and the associated economic impact of various businesses closures. • Other taxes increased by $0.2 million due to an increase in collection of business license fees, franchise fees and documentary transfer taxes collected with a corresponding decrease in transient occupancy tax of $0.3 million due to the COVID-19 pandemic. • Other general revenues increased $2.2 million primarily due to the sale of land at the Eastland Center in the amount of $1.97 million. • Overall expenditures increased by $17.8 million, primarily due to a $2.4 million increase in public safety salaries during fiscal year ended June 30, 2020 and increases in unfunded pension liability costs of $12.2 million. Public Works had an increase of approximately $2 million. Of that amount, approximately $925,000 was due to contracting with an outside vendor for building and engineering services. The remainder was due to increased expenditures for street projects completed during 2019-20. -9- Fiscal Year (continued) 2015 2016 2017 2018 2019 2020 1 1 1 1 1 1 5 5 5 5 5 5 231.0 240.3 240.3 240.3 240.3 240.3 826 826 674 674 674 674 1,109 1,109 420 420 420 420 114 114 97 97 97 97 1 1 1 1 1 1 16 16 16 16 16 16 4 4 4 4 4 4 238.9 238.9 227.0 227.0 227.0 227.0 42.0 42.0 26.0 26.0 26.0 26.0 -232- This page intentionally left blank. ATTACHMENT NO.2 ©0 ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino, CA 92408 909 889 0871 T REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 909 889 5361 F AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN ramscpa.net AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS PARTNERS Brenda L. Odle, CPA, MST Independent Auditor's Report Terry P. Shea, CPA Scott W. Manno, CPA, CGMA To the Honorable Mayor and Members of the City Council Leena Shanbhag, CPA, MST. CGMA City of West Covina Braciferd A. Welebtr, CPA, MBA, CGMA West Covina, California Jenny W. Liu, CPA, MST We have audited, in accordance with the auditing standards generally MANAGERS/STAFF accepted in the United States of America and the standards applicable to Charles De Simoni, CPA financial audits contained in Government Auditing Standards issued by Gardenya Duran, CPA the Comptroller General of the United States, the financial statements of Briar. Schultz. CPA the governmental activities, the business -type activities, each major fund, v e Wu, CPA and the aggregate remainingfund information of the Cityof West Covina, Evel Evelyn Morentin-Barcena, CPA Veronica Hernandez, CPA California (the City), as of and for the year ended June 30, 2020, and the Tara R. Thorp, CPA, MSA related notes to the financial statements, which collectively comprise the Laura Arvizu, CPA City's basic financial statements, and have issued our report thereon Louis Fernandez, CPA dated February 17, 2021 Abigail Hernandez Conde, CPA, MSA Zoe Xinlu Zhang, CPA, MSA Internal Control over Financial Reporting John Maldonado. CPA, MSA In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the MEMBERS American Institute of effectiveness of the City's internal control. Accordingly, we do not express Certified Public Accountants an opinion on the effectiveness of the City's internal control. PCPS The AICPA Alliance for CPA Firms Our consideration of internal control over financial reporting was for the Governmental Audit limited purpose described in the preceding paragraph and was not Quality Center designed to identify all deficiencies in internal control that might be Employee Benefit Plan material weaknesses or significant deficiencies and therefore, material Audit Quality Center weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying Schedule of California Society of Certified Public Accountants Findings and Responses, we did identify certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. Proud Member of Alliottl3lobalAlliance' -1- STABILITY. ACCURACY. TRUST. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as item 2020-001, 2020-002 and 2020-003 to be material weakness. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as items 2020-004 and 2020-005 to be significant deficiencies. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. We noted certain matters that we have reported to management of City of West Covina in a separate letter dated February 17, 2021. City's Response to Findings The City's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Responses. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 40c�e�cs, �ioa, 1►'la,[ooly 2 CAP. San Bernardino, California (/ February 17, 2021 -2- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-001 — Internal Control Environment Material Weakness Criteria An important element of internal controls over financial reporting is for the entity to have procedures in place to ensure that all applicable financial reporting guidelines are followed and properly applied. Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the request for the Actuarial Valuation report for GASB 75 Accounting Information regarding Other Post -Employment Benefits (OPEB) and GASB 68 Accounting and Financial Reporting for Pensions — An Amendment of GASB Statement No. 27 was postponed. This matter has been the cause of significant delays in producing complete, reconciled and properly adjusted financial statements and other information. Cause The City did not maintain the appropriate staffing levels within the Finance Department to ensure that all financial closing procedures were performed. This is a repeat finding from prior year identified as finding 2019-001. Effect Delay in the completion of the audit and release of the Comprehensive Annual Financial Report. Recommendation We recommend the City maintain appropriate staffing in the Finance Department which will ensure that the policies and procedures in the year-end review process are properly carried out. Management's Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting key personnel and has recently hired a Purchasing Manager and two new accountant positions. In addition, the City is currently recruiting for an Assistant Finance Director position. Once the Finance Department is fully staffed and trained, this finding will be resolved. -3- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-002— Errors in Pension Census Data Material Weakness Criteria In order for the City to record its liability for providing supplemental pension benefits to eligible participants, it must submit census data to actuaries who use this information to calculate the City's liability. Condition and Context During the audit, we were unable to vouch participant information from the census data to source documents. Cause Due to the turnover of key staff, there is a lack of appropriate documentation maintained in personnel files. Effect The City's pension liability could be improperly calculated and misstated. Recommendation We recommend the Finance Department review the participant files, ensure only eligible participants are included in the census data to be submitted and maintain proper documentation for the information provided to actuaries. Management's Response The census data that City staff was unable to locate was for employees that have not been employed with the City for quite some time. Human Resources will review and verify that all participants included in the census data are eligible employees. Staff will also make every attempt to update the files with current information. -4- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-003 — Internal Control over Federal Grant Reporting Material Weakness Criteria An important element of internal controls over financial reporting is for the entity to have procedures in place for the accurate completion of the Schedule of Expenditures of Federal Awards (SEFA). Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the SEFA has not been prepared by a consistent person and has required multiple revisions. Cause The City did not maintain the appropriate staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. This is a repeat finding from prior year identified as finding 2019-002. Effect The City could be under/over stating expenditures on the SEFA. Recommendation We recommend the City maintain proper staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. Management's Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting for key personnel and has recently hired a Purchasing Manager and two new accountant positions. In addition, the City is currently recruiting for an Assistant Finance Director position. Once the Finance Department is fully staffed and trained, this finding will be resolved. -5- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-004 — Purchasing Approvals Significant Deficiency Criteria A system of purchasing approval should be established, maintained and updated in a timely manner. Condition During our audit of the City, we noted that a listing of authorized purchasing approval limit signatures was not updated to reflect changes in authorized personnel. Cause The City did not update authorized purchasing approvals in a timely manner. Effect Approval for payments could be completed by individuals without the appropriate authorizations. Recommendation We recommend that the City perform an annual review of authorized purchasing approvals on record and make any necessary updates as soon as possible. Management's Response City staff has reviewed and updated the list of authorized purchasing approvals and will continue to review and update the list on an annual basis. -6- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-005 — Bank Reconciliation Review Significant Deficiency Criteria Bank reconciliations should be prepared, reviewed and approved in a timely manner. Condition During our audit of the City, we noted that bank statements for various accounts were not reviewed or approved in a timely manner. Cause Even though the bank reconciliations were prepared, there was no documentation for the date of completion and no indication of a review had been completed. Effect Errors in the reconciliations can go undetected for a period of time without the appropriate review and approval procedures. Recommendation We recommend that the City ensure that all bank reconciliations are reviewed in a timely manner and documentation of when the preparation and review are completed. Management's Response The City has multiple bank accounts for various functions. Each bank account is reconciled individually, signed and dated by the individual that prepared the account, and reviewed, signed, and dated by the supervisor. After the individual bank reconciliations are completed, a summary report is completed to combine all bank accounts. The summary sheet was not signed and dated by the preparer or the reviewer. Earlier this year, the City implemented a procedure to have both preparer and reviewer sign and date the summary sheet indicating that the preparation and review had been completed. -7- ATTACHMENT NO.3 ©0 ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino, CA 92408 909 889 0871 T 909 889 5361 F To the Honorable Mayor and Members of the City Council ramscpa.net City of West Covina West Covina, California PARTNERS Brenda L. Odle, CPA, MST We have audited the financial statements of governmental activities, the Terry P. Shea. CPA business -type activities, each major fund, and the aggregate remaining Scott W. Manno, CPA, CGMA fund information of the City of West Covina, California, (the City) as of and Leena Shanbhag, CPA, MST. CGMA for the year ended June 30, 2020, and have issued our report thereon Bracifjenny r A. Weleb,CPA, r, CPA, MBA, CGMA dated February 17, 2021. Professional standards require that we advise W. Jenny W. Liu, CPA, MST you of the following matters relating to our audit. MANAGERS/STAFF Charles De Simoni, CPA Gardenya Duran, CPA Brianna Schultz, CPA Jingpe Wu, CPA Evelyn Morentin-Barcena, CPA Veronica Hernandez, CPA Tara R. Thorp, CPA, MSA Laura Arvizu, CPA Louis Fernandez, CPA Abigail Hernandez Conde, CPA, MSA Zoe Xinlu Zhang, CPA, MSA John Maldonado. CPA, MSA MEMBERS American Institute of Certified Public Accountants PCPS The AICPA Alliance for CPA Firms Governmental Audit Quality Center Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated April 29, 2020, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. Employee Benefit Plan We are also responsible for communicating significant matters related to Audit Quality Center the audit that are, in our professional judgment, relevant to your California Society of responsibilities in overseeing the financial reporting process. However, we Certified Public Accountants are not required to design procedures for the purpose of identifying other matters to communicate to you. Planned Scope and Timing of the Audit Proud Member of AlliottGlobalAlliance' We conducted our audit consistent with the planned scope and timing we previously communicated to you. -1- STABILITY. ACCURACY. TRUST. City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 Revenues by Source — Governmental Activities Capital grants and Operating grants contributions and contributions 0.6% Property taxes 19.9% 27.3% Charges for Sales taxes 17.0 /o services Other taxes 15.9% Other general 9.4% revenue 9.9% The most significant revenues of the governmental activities are property taxes ($27.4 million), sales tax ($17.0 million), other general revenue ($9.9 million), and other taxes ($9.5 million). Program revenues are $36.5 million of the total revenues of the governmental activities, which included charges for services ($15.9 million), operating contributions and grants ($20.0 million), and capital grants and contributions ($0.6 million). 10- Compliance with All Ethics Requirements Regarding Independence The engagement team and others in our firm have complied with all relevant ethical requirements regarding independence. Qualitative Aspects of the City's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by City is included in Note 1 to the financial statements. There have been no initial selection of accounting policies and no changes in significant accounting policies or their application during the year. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. The most sensitive accounting estimates affecting the financial statements are: Management's estimate of fair market value of investments based on market values provided by outside sources. Management's estimate of depreciation expense is based on the useful lives of acquired assets. We evaluated the key factors and assumptions used to develop depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole. The estimate of the net pension liability and related deferred amounts are based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the statements taken as a whole. The estimate of the net OPEB obligation and related deferred amounts are based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the statements taken as a whole. -2- Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the City's financial statements relate to: The disclosure of capital assets, net, in Note 7 to the basic financial statements is based on historical information which could differ from actual useful lives of each capitalized item. The disclosure of net pension liability and related deferred amounts in Note 14 and Note 15 to the financial statements is based on actuarial assumptions. Actual future liabilities may vary from disclosed estimates. The disclosure of net OPEB obligation and related deferred amounts in Note 17 to the financial statements is based on actuarial assumptions. Actual future liabilities may vary from disclosed estimates. The disclosure related to the commitment and contingencies in Note 18. The disclosure related to the effects of COVID-19 in Note 22. The financial statement disclosures are neutral, consistent, and clear. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. None of the misstatements identified by us as a result of our audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City's financial statements or the auditor's report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management, which are included in the attached letter dated February 17, 2021. -3- Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City's auditors. Other Information in Documents Containing Audited Financial Statements Pursuant to professional standards, our responsibility as auditors for other information in documents containing the City's audited financial statements does not extend beyond the financial information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards: We applied certain limited procedures to the required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the supplementary information, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements. This report is intended solely for the use of the City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. k-ogeAs, tcocc, �'ia.tooly 2 ,�Coti, LAP. February 17, 2021 Q -4- ATTACHMENT NO.4 CITY OF WEST COVINA, CALIFORNIA WEST COVINA HOUSING AUTHORITY FUND (A COMPONENT UNIT OF THE CITY OF WEST COVINA) FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT JUNE 30, 2020 City of West Covina, California West Covina Housing Authority Fund Table of Contents June 30, 2020 PAGE Independent Auditor's Report 1 Basic Financial Statements Balance Sheet 4 Statement of Revenues, Expenditures, and Changes in Fund Balance 5 Notes to the Financial Statements 6 Required Supplementary Information Budgetary Comparison Schedule 11 Note to Required Supplementary Information 12 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 13 ©0 ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 INDEPENDENT AUDITOR'S REPORT 735 E. Carnegie Dr. Suite 100 San Bernardino, CA 92408 The Board of Directors 909 889 0871 T 909 889 5361 F West Covina Housing Authority ramscpa.net West Covina, California PARTNERS Report on the Financial Statements Brenda L. Odle, CPA, MST Terry P. Shea, CPA We have audited the accompanying financial statements of the West Scott W. Manno, CPA, CGMA Covina Housing Authority Fund (the Housing Authority), (a component Leena Shanbhag, CPA, MST. CGMA unit of the City of West Covina, California (the City), as of and for the Bracifjenny r A. Weleb,CPA, r, CPA, MBA, CGMA year ended June 30, 2020, and the related notes to the financial W. Jenny W. Liu, CPA, MST statements as listed in the table of contents. MANAGERS / STAFF Management's Responsibility for the Financial Statements Charles De Simoni, CPA Gardenya Duran, CPA Management is responsible for the preparation and fair presentation of Brianna Schultz. CPA these financial statements in accordance with accounting principles v e Wu,CPA generally p accepted in the United States of America; this includes the Evel Evelyn Morentin-Barcena, CPA Veronica Hernandez, CPA design, implementation, and maintenance of internal control relevant to Tara R. Thorp, CPA, MSA the preparation and fair presentation of financial statements that are free Laura Arvizu, CPA from material misstatement, whether due to fraud or error. Louis Fernandez, CPA Abigail Hernandez Conde, CPA, MSA Auditor's Responsibility Zoe Xinlu Zhang, CPA, MSA John Maldonado. CPA, MSA Our responsibility is to express an opinion on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to MEMBERS American Institute of obtain reasonable assurance about whether the financial statements are Certified Public Accountants free from material misstatement. PCPS The AICPA Alliance for CPA Firms An audit involves performing procedures to obtain audit evidence about Governmental Audit the amounts and disclosures in the financial statements. The procedures Quality center selected depend on the auditor's judgment, including the assessment of Employee Benefit Plan the risks of material misstatement of the financial statements, whether Audit Quality Center due to fraud or error. In making those risk assessments, the auditor California Society of considers internal control relevant to the entity's preparation and fair Certified Public Accountants presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also Proud Member of includes evaluating the appropriateness of accounting policies used and AlliottGlobalAlliance' the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. -1- STABILITY. ACCURACY. TRUST. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Housing Authority, as of June 30, 2020, and the changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, the financial statements present only the Housing Authority and do not purport to, and do not present fairly the financial position of the City as of June 30, 2020, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the budgetary comparison schedule, identified as Required Supplementary Information (RSI) in the accompanying table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statement, 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 RSI 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 the audit of the basic financial statements. We do not express an opinion or provide any assurance on the RSI because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of that basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. Our opinion on the basic financial statements is not affected by this missing information. -2- Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated February 17, 2021, on our consideration of the Housing Authority's internal control over financial reporting and 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 Housing Authority's internal control over financial reporting and compliance. 40geAX, fi e t.coa, Is'ia.[ooly 2 �cott, LLP. San Bernardino, California (/ February 17, 2021 -3- City of West Covina, California West Covina Housing Authority Fund Balance Sheet June 30, 2020 Assets Cash and investments $ 7,872,283 Notes and loans receivable, net 14,502,425 Advances to Successor Agency 2,057,833 Prepaids 82,420 Total assets $ 24,514,961 Liabilities and fund balance Liabilities: Accounts payable $ 8,878 Other accrued liabilities 14,267 Total liabilities 23,145 Fund balance: Nonspendable: Prepaids 82,420 Restricted for: Affordable housing 24,409,396 Total fund balance 24,491,816 Total liabilities and fund balance $ 24,514,961 The accompanying notes are an integral part of these financial statements. -4- City of West Covina, California West Covina Housing Authority Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the vear ended June 30, 2020 Revenues Investment income $ 444,792 Revenues from other agencies 36,034 Other revenues 52,731 Total revenues 533,557 Expenditures Current: Public safety 189,368 Affordable housing 526,695 Total expenditures 716,063 Net change in fund balance (182,506) Fund balance, beginning of year 24,674,322 Fund balance, end of year $ 24,491,816 The accompanying notes are an integral part of these financial statements. -5- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 Expenses by Function — Governmental Activities The City's expenses cover a range of services whose expenses were as follows: Public safety ($72.7 million), public works ($23.7 million), community services ($9.4 million), general government ($7.8 million), interest expense ($1.9 million) and community development ($1.4 million). These expenses include capital outlays which are now reflected in the City's capital assets. im City of West Covina, California West Covina Housing Authority Fund Notes to the Financial Statements For the year ended June 30, 2020 Note 1— Organization and Summary of Significant Accounting Policies The City of West Covina (the City) was incorporated on February 23, 1923, under the laws of the State of California and enjoys all the rights and privileges applicable to a general law city. It is governed by an elected five -member City Council. The following is a summary of the significant accounting policies of the City as they pertain to the West Covina Housing Authority Fund (the Housing Authority). Only the Housing Authority information is included herein and these financial statements, therefore, do not purport to represent the financial position or results of operations of the City. Basis of Accounting These fund financial statements are reported using the modified -accrual basis of accounting. Under the modified -accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e. when they are both measurable and available). "Measurable" means the amount of the transaction can be determined, and "available" means collectible within the current period or soon enough thereafter (within 60 days) to be used to pay liabilities of the current period. Expenditures are generally recognized in the accounting period in which the liability is incurred, if measurable. Use of Estimates in the Preparation of Financial Statements The financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. Note 2 — Cash and Investments Cash at June 30, 2020 consisted of the following: Amnunt Pooled cash and investments $ 7,872,283 The City follows the practice of pooling cash and investments for all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures. For more information on the City's cash and investments as of June 30, 2020, please see the City's Comprehensive Annual Financial Report. -6- City of West Covina, California West Covina Housing Authority Fund Notes to the Financial Statements For the vear ended June 30. 2020 Note 3 — Notes and Loans Receivable As of June 30, 2020, the following notes and loans receivable were outstanding: Housing rehabilitation $ 353,888 First time home buyers 214,537 Housing preservation program 640,949 Home improvement program 738,213 Lark Ellen Towers 6,380,133 Executive Lodge Apartments Limited Partnership 6,271,978 West Covina Senior Villas, LLC 2,833,333 West Covina Senior Villas II, L.P. 8,513,884 Other loans 608,196 Allowance for doubtful accounts (12,052,686) Total $ 14,502,425 Several housing rehabilitation loans totaling $353,888 have been made to qualified applicants using Community Development Block Grants received by the City and housing set -aside funds of the former Commission's redevelopment activities. These loans bear interest up to 5% and are repaid when title to the property changes. The City has included 5% of the balance in the allowance for doubtful accounts. The Housing Authority has loans to first-time home buyers totaling $214,537. Loans are secured by second trust deeds and bear interest at 5%. Principal and interest are deferred for five years and are due monthly in years 6 through 30. There were 19 individual loans outstanding at June 30, 2020 ranging from $5,710 to $22,407. The City has included 5% of the balance in the allowance for doubtful accounts. The Housing Authority also has housing preservation loans to qualified applicants using housing set -aside funds totaling $640,949. Principal and interest are deferred for ten years; after the tenth year loans bear interest at 5%. Loans are repaid after the tenth year or when title to the property changes. There were 81 individual loans outstanding at June 30, 2020 ranging from $205 to $10,659. The City has included 5% of the balance in the allowance for doubtful accounts. Several housing improvement loans totaling $738,213 have been made to qualified applicants. The loans are secured by second trust deeds. The City has included 5% of the balance in the allowance for doubtful accounts. In May 1997, the Commission loaned $4,270,000 to Lark Ellen Towers. The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan accrues interest at 3% per annum and requires annual payments equal to the maximum of $35,000 or 50% of net profits earned by the project. The outstanding principal and accrued interest at June 30, 2020 was $6,380,133. -7- City of West Covina, California West Covina Housing Authority Fund Notes to the Financial Statements For the vear ended June 30. 2020 Note 3 — Notes and Loans Receivable, (continued) In April 1998, the Commission loaned $5,622,300 to Executive Lodge Apartments Limited Partnership (Promenade Apartments project). The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan was amended and restated on April 1, 2017, with a principal of $6,056,621 accruing interest at 2.82% compounded annually and requires annual payments equal to 50% of "Available Cash Flow". The outstanding principal and accrued interest at June 30, 2020 was $6,271,978. In May 2002, the Commission loaned $4,360,000 to West Covina Senior Villas, LLC. The loan is secured by a deed of trust. The loan does not accrue interest. The loan requires annual payments of $141,667 through May 2032 that are forgiven by the City unless the borrower defaults on the agreement. The outstanding principal at June 30, 2020 was $2,833,333. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. In May 2009, the Commission entered into an agreement with West Covina Senior Villas II, L.P. to provide $8,600,000 for the acquisition of real property in the City and construction and maintenance of an approximately 65-unit apartment complex to be rented to low income and very low income senior citizens. The loan is secured by a deed of trust. The loan does not accrue interest and is forgiven so long as the borrower does not default on the loan. The outstanding principal at June 30, 2020 was $8,513,884. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. Other notes consist of affordable housing loans of $400,000. The notes do not accrue interest and are forgiven unless the borrower sells or refinances the property. Additionally, the balance included a note of $208,196 for low income housing which accrues no interest and is forgivable if the owner maintains the low and moderate income housing status. The outstanding principal of these loans combined at June 30, 2020 was $608,196. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. -8- City of West Covina, California West Covina Housing Authority Fund Notes to the Financial Statements For the vear ended June 30. 2020 Note 4 — Advances to the Successor Agency of the City of West Covina Prior to the dissolution of the Commission's redevelopment activities on February 1, 2012, the City authorized several advances to be used for completing redevelopment projects throughout the community. As a result of the dissolution, the liabilities related to these advances were transferred to the Successor Agency. At June 30, 2020, the outstanding receivable side of these advances was as follows: (a) In May 2010, the Commission made an advance of $6,529,308 from its housing assets to satisfy the Commission's Supplemental Educational Revenue Augmentation Fund (SERAF) obligation as allowed by Assembly Bill ABX4-26. The advance bears no interest. In May 2011, the Commission made an advance of $1,344,269 from its housing assets to satisfy SERAF obligation as allowed by Assembly Bill ABX4-26. On February 1, 2012, these advances receivables were transferred to the Housing Authority. The advance bears no interest and the outstanding balance at June 30, 2020 was $1,395,758. (b) The General Fund of the City has made several advances to the Commission totaling $8,100,000 for administrative and capital improvement construction costs. Eighty percent (80%) of the balance is reported in the City's General Fund and remaining twenty percent (20%) balance is reported in the Housing Authority. The outstanding balance at June 30, 2020 was $662,075. With regard to repayment of the SERAF advances, repayment was authorized to begin in the 2014-15 fiscal year and annual repayments are capped pursuant to a statutory formula. Successor Agency and the Housing Authority management believes, in consultation with legal counsel, that the SERAF advances are enforceable obligations payable by the Successor Agency under the Dissolution Act's repayment restrictions. Therefore, the Housing Authority has not recorded an allowance for uncollectible advances. That said, the Dissolution Act is a complicated statutory scheme and the State and local agency implementation thereof has been the subject of substantial dispute and litigation. As such, repayment of the SERAF advances cannot be guaranteed. Note 5 — Fund Balance Fund balances in governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the Fund is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The Fund considers restricted fund balance to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the Fund considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts. A City's Council Ordinance or Resolution is the formal action that would effectively commit fund balances for a particular purpose. -9- City of West Covina, California West Covina Housing Authority Fund Notes to the Financial Statements For the vear ended June 30. 2020 Note 5 — Fund Balance, (continued) The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: • Nonspendable — amounts that are not in a spendable form (such as inventory) or are required to be maintained intact. • Restricted — amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions or by enabling legislation. • Committed — amounts constrained to specific purposes by a government itself, using the highest level of decision -making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint. • Assigned — amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. • Unassigned — amounts that are for any purpose; positive amounts are reported only in a general fund. The City Council establishes (and modifies or rescinds) fund balance commitments by passage of an ordinance or resolution. The Director of Finance has the authority, granted by the Council, to assign City resources. When both restricted and unrestricted resources are available for use when an expenditure is incurred, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. It is also the City's policy to consider committed amounts as being reduced first, followed by assigned amounts and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. The Housing Authority's governmental fund balance at June 30, 2020 is presented below: West Covina Housing Authority Fund Nonspendable: Prepaids $ 82,420 Restricted for: Affordable housing 24,409,396 Total fund balance $ 24,491,816 10- REQUIRED SUPPLEMENTARY INFORMATION City of West Covina, California West Covina Housing Authority Fund Budgetary Comparison Schedule For the vear ended June 30. 2020 Budgeted Amounts Variance with Original Final Actual Final Budget Revenues Investment income $ - $ - $ 444,792 $ 444,792 Revenue from other agencies - - 36,034 36,034 Other revenues 52,731 52,731 Total revenues 533,557 533,557 Expenditures Current: Public safety 207,722 231,077 189,368 41,709 Affordable housing 482,158 798,080 526,695 271,385 Total expenditures 689,880 1,029,157 716,063 313,094 Excess (deficiency) of revenues over expenditures (689,880) (1,029,157) (182,506) 846,651 Other Financing Sources (Uses) Transfers out (33,000) 33,000 Net change in fund balance (689,880) (1,062,157) (182,506) 879,651 Fund balance, beginning of year 24,674,322 24,674,322 24,674,322 Fund balance, end of year $ 23,984,442 $ 23,612,165 $ 24,491,816 $ 879,651 See accompanying note to required supplementary information. -11- City of West Covina, California West Covina Housing Authority Fund Note to Required Supplementary Information For the vear ended June 30. 2020 Note 1 — Budgetary Data The annual budget adopted by the City Council provides for the general operation of the Housing Authority. The annual budget is adopted in summary by the City Council in June of each year. The resolution sets a combined appropriation of the fund for the operation of the Housing Authority. The City Manager is authorized to transfer budgeted amounts between departments to ensure adequate and proper standards of service. Budgetary revisions, including supplemental appropriations which increase appropriations, must be approved by the City Council. The budgetary level of control is at the fund level. The budgeted figures used in the financial statements' budget to actual comparisons are the final amended amounts. The budget is formally integrated into the accounting system and employed as a management control device during the year. Budgets for governmental fund types are adopted on a basis consistent with generally accepted accounting principles. Operating appropriations lapse at the end of the fiscal year. 12- ©0 ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino, CA92408 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 909 889 0871 T AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN 909 889 5361 F AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ramscpa.net ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS PARTNERS Independent Auditor's Report Brenda L. Odle, CPA, MST Terry P. Shea, CPA The Board of Directors Scott W. Manno, CPA, CGMA Leena Shanbhag, CPA, MST. CGMA West Covina Housing Authority Braciferd A. Welebtr, CPA, MBA, CGMA West Covina, California Jenny W. Liu, CPA, MST We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to MANAGERS/STAFF financial audits contained in Government Auditing Standards issued by Charles De Simoni, CPA Gardenya Duran, CPA the Comptroller General of the United States, the financial statements of Brianna Schultz. CPA the West Covina Housing Authority Fund (the Housing Authority), (a Jingjie Wu, CPA component unit of the City of West Covina (the City), California), as of Evelyn Morentin-Barcena, CPA and for the year ended June 30, 2020, and the related notes to the Veronica Hernandez, CPA financial statements, which collectively comprise the Housing Authority's Tara R. Thorp, CPA, MSA basic financial statements, and have Issued our report thereon dated Laura Arvizu, CPA Louis Fernandez, CPA February 17, 2020. The financial statements present only the Housing Abigail Hernandez Conde, CPA, MSA Authority and do not purport to, and do not, present fairly the financial Zoe Xinlu Zhang, CPA, MSA position of the City. John Maldonado. CPA, MSA _ Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Housing Authority's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in MEMBERS the circumstances for the purpose of expressing our opinions on the American Institute of Certified Public Accountants financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Housing Authority's internal control. Accordingly, PCPS erms Alliance we do not express an opinion on the effectiveness of the Housing p p g for (or CPA Firms Authority's internal control. Governmental Audit Quality Center Our consideration of internal control over financial reporting was for the Employee Benefit Plan limited purpose described in the preceding paragraph and was not Center Audit Quality Center designed to identify all deficiencies in internal control that might be California Society of material weaknesses or significant deficiencies and therefore, material Certified Public Accountants weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying Schedule of Findings and Responses, we did identify certain deficiencies in internal Proud Member of control that we consider to be material weaknesses and significant Alliottl3lobalAlliance' deficiencies. -13- STABILITY. ACCURACY. TRUST. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as item 2020-001, 2020-002 and 2020-003 to be material weakness. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as items 2020-004 and 2020-005 to be significant deficiencies. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. We noted certain matters that we have reported to management of City of West Covina in a separate letter dated February 17, 2021. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Housing Authority's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Housing Authority's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Bernardino, California (/ February 17, 2021 14- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 Business -Type Activities The business -type activity is the West Covina Service Group, which provides dispatch and records management software and services to other police departments. The business -type activity's expenses decreased by $33,054 or 2.6% from the prior fiscal year. Charges for services and other revenues increased by $100,587 in FY 2019-20 causing the increase in net position of $82,266. 12- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-001 — Internal Control Environment Material Weakness Criteria An important element of internal controls over financial reporting is for the entity to have procedures in place to ensure that all applicable financial reporting guidelines are followed and properly applied. Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the request for the Actuarial Valuation report for GASB 75 Accounting Information regarding Other Post -Employment Benefits (OPEB) and GASB 68 Accounting and Financial Reporting for Pensions — An Amendment of GASB Statement No. 27 was postponed. This matter has been the cause of significant delays in producing complete, reconciled and properly adjusted financial statements and other information. Cause The City did not maintain the appropriate staffing levels within the Finance Department to ensure that all financial closing procedures were performed. This is a repeat finding from prior year identified as finding 2019-001. Effect Delay in the completion of the audit and release of the Comprehensive Annual Financial Report. Recommendation We recommend the City maintain appropriate staffing in the Finance Department which will ensure that the policies and procedures in the year-end review process are properly carried out. Management's Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting key personnel and has recently hired a Purchasing Manager and two new accountant positions. In addition, the City is currently recruiting for an Assistant Finance Director position. Once the Finance Department is fully staffed and trained, this finding will be resolved. 15- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-002 — Errors in Pension Census Data Material Weakness Criteria In order for the City to record its liability for providing supplemental pension benefits to eligible participants, it must submit census data to actuaries who use this information to calculate the City's liability. Condition and Context During the audit, we were unable to vouch participant information from the census data to source documents. Cause Due to the turnover of key staff, there is a lack of appropriate documentation maintained in personnel files. Effect The City's pension liability could be improperly calculated and misstated. Recommendation We recommend the Finance Department review the participant files, ensure only eligible participants are included in the census data to be submitted and maintain proper documentation for the information provided to actuaries. Management's Response The census data that City staff was unable to locate was for employees that have not been employed with the City for quite some time. Human Resources will review and verify that all participants included in the census data are eligible employees. Staff will also make every attempt to update the files with current information. 16- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-003 — Internal control over federal grant reporting Material Weakness Criteria An important element of internal controls over financial reporting is for the entity to have procedures in place for the accurate completion of the Schedule of Expenditures of Federal Awards (SEFA). Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the SEFA has not been prepared by a consistent person and has required multiple revisions. Cause The City did not maintain the appropriate staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. This is a repeat finding from prior year identified as finding 2019-002. Effect The City could be under/over stating expenditures on the SEFA. Recommendation We recommend the City maintain proper staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. Management's Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting for key personnel and has recently hired a Purchasing Manager and two new accountant positions. In addition, the City is currently recruiting for an Assistant Finance Director position. Once the Finance Department is fully staffed and trained, this finding will be resolved. -17- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-004 — Purchasing Approvals Significant Deficiency Criteria A system of purchasing approval should be established, maintained and updated in a timely manner. Condition During our audit of the City, we noted that a listing of authorized purchasing approval limit signatures was not updated to reflect changes in authorized personnel. Cause The City did not update authorized purchasing approvals in a timely manner. Effect Approval for payments could be completed by individuals without the appropriate authorizations. Recommendation We recommend that the City perform an annual review of authorized purchasing approvals on record and make any necessary updates as soon as possible. Management's Response City staff has reviewed and updated the list of authorized purchasing approvals and will continue to review and update the list on an annual basis. -18- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-005 — Bank Reconciliation Review Significant Deficiency Criteria Bank reconciliations should be prepared, reviewed and approved in a timely manner. Condition During our audit of the City, we noted that bank statements for various accounts were not reviewed or approved in a timely manner. Cause Even though the bank reconciliations were prepared, there was no documentation for the date of completion and no indication of a review had been completed. Effect Errors in the reconciliations can go undetected for a period of time without the appropriate review and approval procedures. Recommendation We recommend that the City ensure that all bank reconciliations are reviewed in a timely manner and documentation of when the preparation and review are completed. Management's Response The City has multiple bank accounts for various functions. Each bank account is reconciled individually, signed and dated by the individual that prepared the account, and reviewed, signed, and dated by the supervisor. After the individual bank reconciliations are completed, a summary report is completed to combine all bank accounts. The summary sheet was not signed and dated by the preparer or the reviewer. Earlier this year, the City implemented a procedure to have both preparer and reviewer sign and date the summary sheet indicating that the preparation and review had been completed. 19- ATTACHMENT NO. 5 Housing Successor of the City of West Covina Addendum to the Annual Progress Report For Fiscal Year Ended June 30, 2020 ROGERS, ANDERSON, MALODY & SCOTT, LLP CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino, CA 92408 909 889 0871 T 909 889 5361 F i amscpa. net Independent Accountant's Disclaimer Report Applied to the PARTNERS Preparation of the Addendum to the Annual Progress Report of the Brenda L. Odle, CPA, MST Housing Successor of the City of West Covina Terry P. Shea, CPA Scott W. Manno, CPA, CGMA Leena Shanbhag, CPA, MST. CGMA Bradferd A. Weleblr, CPA, MBA, CGMA To Management of the Jenny W. Liu, CPA, MST Housing Successor of the City of West Covina West Covina, California MANAGERS/STAFF Charles De Simoni, CPA Gardenya Duran, CPA We have prepared the accompanying Addendum to the Annual Progress Brianna Schultz, CPA Report ("Addendum to the APR") of the Housing Successor of the City of v e Wu, CPA West Covina ("Housing Successor") as of June 30, 2020, and for the year Evelyn Morentin-Barcena, CPA Evel Veronica Hernandez, CPA then ended in accordance with the reporting provisions of the California Tara R. Thorp, CPA, MSA Health & Safety Code Section 34176 as amended by Senate Bill 341 Laura Arvizu, CPA (Chapter 796, Statutes of 2013, effective January 2014) ("SB 341 "), and Louis Fernandez, CPA as amended by Senate Bill 107 (Chapter 325, Statutes of 2015, effective Abigail Hernandez Conde, CPA, MSA January 2016) HSC Section 34176.1(f). Zoe Xinlu Zhang, CPA, MSA John Maldonado. CPA, MSA The accompanying Addendum to the APR of the Housing Successor as of June 30, 2020, and for the year then ended was not subjected to an audit, review, or compilation engagement by us and, accordingly, we do not express an opinion, conclusion, nor provide any assurance on it. This Addendum to the APR is intended solely for the information and use MEMBERS American Institute of of management of the Housing Successor of the City of West Covina, and Certified Public Accountants is not intended to be and should not be used by anyone other than this PCPS The AICPA Alliance specified party. for CPA Firms Governmental Audit Quality Center A� _� ��-� •" -� -� u p .µ toAQeAACI �cld".LpLV, "/ .a�to t LLP Employee Benefit Plan // Audit Quality Center VVV San Bernardino, California California Society of Certified Public Accountants December 29, 2020 Proud Member of Alliottl3lobalAlliance' STABILITY. ACCURACY. TRUST. Housing Successor of the City of West Covina Addendum to the Annual Progress Report For Fiscal Year Ended June 30, 2020 1) The amount the City, County, or City and County received pursuant to subparagraph (A) of paragraph (3) of subdivision (b) of Section 34191.4. No amounts received in pursuant to subparagraph (A) of paragraph (3) of subdivision (b) of Section 34191.4. 2) The amount deposited to the Low and Moderate Income Housing Asset Fund, distinguishing between amounts deposited pursuant to subparagraphs (B) and (C) or paragraph (3) of subdivision (b) of Section 34191.4, amounts deposited for others items listed on the Recognized Obligation Payment Schedule from other amounts deposited. The Housing Successor received $533,557 as of June 30, 2020. None of these amounts were deposited for items listed on the Recognized Obligation Payment Schedule. 3) A statement of the balance in the fund as of the close of the fiscal year, distinguishing any amounts held for items listed on the Recognized Obligation Payment Schedule from other amounts. The balance in the Housing Successor as of June 30, 2020, was $24,491,816. None of which was held for items listed on the Recognized Obligation Payment Schedule. 4) A description of expenditures from the fund by category, including, but not limited to, expenditures a. for monitoring and preserving the long-term affordability of units subject to affordability restrictions or covenants entered into by the redevelopment agency or the housing successor and administering the activities described in paragraphs (2) and (3) of subdivision (a), The Housing Successor's expenditures related to this category as of June 30, 2020, were $526,696 in administrative expenditures. b. for homeless prevention and rapid re -housing services for the development of housing described in paragraph (2) of subdivision (a), and The Housing Successor had $189,368 related to homeless prevention and rapid re -housing services as of June 30, 2020. c. for the development of housing pursuant to paragraph (3) of subdivision (a). The Housing Successor had no expenditures related to the development of housing as of June 30, 2020. 5) As described in paragraph (1) of subdivision (a), the statutory value of real property owned by the housing successor, the value of loans and grants receivable, and the sum of these two amounts. The Housing Successor owned real property with a statutory value of zero, as of June 30, 2020. The value of loans and notes receivable in the Housing Successor as of June 30, 2020 is $14,502,425. The sum of the statutory value of real property and the value of loans and notes receivable is $14,502,425. 6) A description of any transfers made pursuant to paragraph (2) of subdivision (c) in the previous fiscal year and, if still unencumbered, in earlier fiscal years and a description of and status update on any project for which transferred funds have been or will be expended if that project has not yet been placed in service. No transfers occurred pursuant to paragraph (2) of subdivision (c) in the previous fiscal year or earlier fiscal years. 7) A description of any project for which the housing successor receives or holds property tax revenue pursuant to the Recognized Obligation Payment Schedule and the status of that project. The Housing Successor Fund did not receive or hold property tax revenues pursuant to the Recognized Obligation Payment Schedule during the fiscal year ended June 30, 2019. 8) For interests in real property acquired by the former redevelopment agency prior to February 1, 2012, a status update on compliance with Section 33334.16. For interests in real property acquired on or after February 1, 2012, a status update on the project. As of June 30, 2020, the Housing Successor did not hold any property acquired prior to February 1, 2012. No properties were acquired subsequent to February 1, 2012. 9) A description of any outstanding obligations pursuant to Section 33413 that remained to transfer to the housing successor on February 1, 2012, of the housing successor's progress in meeting those obligations, and of the housing successor's plans to meet unmet obligations. In addition, the housing successor shall include in the report posted on its Internet Web site the implementation plans of the former redevelopment agency. As of June 30, 2020, there were no outstanding obligations pursuant to Section 33413 that remained to be transferred to the Housing Successor on February 1, 2012. 10) The information required by subparagraph (B) of paragraph (3) of subdivision (a). As of June 30, 2020, the Housing Successor is in compliance with the requirements of subparagraph (B) of paragraph (3) of subdivision (a). 11) The percentage of units of deed -restricted rental housing restricted to seniors and assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the previous 10 years in relation to the aggregate number of units of deed -restricted rental housing assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the same time period. As of June 30, 2020, the Housing Successor had 59.76% of units of deed -restricted rental housing restricted to seniors and assisted individually or jointed by the housing successor, its former redevelopment agency, and its host jurisdiction within the previous 10 years in relation to the aggregate number of units of deed -restricted rental housing assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the same time period. 12) The amount of any excess surplus, the amount of time that the successor agency has had excess surplus, and the housing successor's plan for eliminating the excess surplus. The Housing Successor Fund did not have any excess surplus as of June 30, 2020, or at any point during the fiscal year ended June 30, 2020. 13)An inventory of homeownership units assisted by the former redevelopment agency or the housing successor that are subject to covenants or restrictions or to an adopted program that protects the former redevelopment agency's investment of moneys from the Low and Moderate Income Housing Fund pursuant to subdivision (f) of Section 33334.3. a. The number of those units. The Housing Successor assisted with approximately 147 homeownership units that are subject to affordable restrictions b. In the first report pursuant to this subdivision, the number of units lost to the portfolio after February 1, 2012, and the reason or reasons for those losses. For all subsequent reports, the number of the units lost to the portfolio in the last fiscal year and the reason for those losses. The Housing Successor lost 19 units in fiscal year 2019-2020. The loans on these units were paid off in the fiscal year. c. Any funds returned to the housing successor as part of an adopted program that protects the former redevelopment agency's investment of moneys from the Low and Moderate Income Housing Fund. The Housing Successor had funds returned of $168,285 during fiscal year ended June 30, 2020. statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. The auditors did identify deficiencies in internal control over financial reporting that they considered to be material weaknesses. These findings and managements response are discussed in Attachment No. 2. Furthermore, the results of the tests performed identified two significant deficiencies that are also discussed in Attachment No. 2. Audit Communication Letter The Audit Communication Letter (Attachment No. 2) provides certain information related to the audit of the City's financial records including the following: • Qualitative Aspects of Accounting Practices — The letter notes that City management is responsible for the selection and use of appropriate accounting policies. The letter indicates that there have been no significant changes in accounting policies or their application during the fiscal year. The letter also notes that there were no transactions entered into by the City during Fiscal Year 2019-20 for which there was a lack of authoritative guidance, and that all significant transactions were recorded in the proper accounting periods. • Significant Difficulties Encountered During the Audit — The letter communicates the auditors encountered no significant difficulties in dealing with management relating to the performance of the audit. • Uncorrected and Corrected Misstatements — The letter communicates the auditors' responsibility to note all known and likely misstatements identified during the audit. The auditors noted no such misstatements that were material, either individually or in aggregate, to the financial statements taken as a whole. • Disagreements with Management — The auditors are required to communicate any disagreements with management related to an accounting, reporting or auditing matter, whether resolved or not, in the Audit Communication Letter. No such disagreements arose during the course of the audit for Fiscal Year 2019-20. West Covina Housing Authority Annual Financial Report Changes in state law require the Housing Authority, as the Housing Successor, to prepare an annual report regarding the low and moderate income housing asset fund (Report) of the former West Covina Redevelopment Agency (RDA). The law also requires the completion of an independent audit of the low and moderate -income housing asset fund (Fund). The attached annual report includes both the Report and the audit mentioned above (Attachment No. 4). Senate Bill 341 (SB 341), which is partly codified in Health and Safety Code Section 34176.1 and became effective on January 1, 2014, requires each housing successor that assumed the housing functions of a former redevelopment agency (RDA), to post a report on its website that contains information regarding the Fund of the former redevelopment agency for the previous fiscal year. Each housing successor is also required to present this report to its governing body. In this case, the City Council designated the Community Development Commission (CDC) as the governing body of the Housing Authority. Because the CDC's membership is the City Council, the Housing Authority, as the housing successor, is required to present the Report on the Fund to the City Council pursuant to SB 341. In addition, the Housing Successor is required to conduct and provide to the City Council an independent financial audit (Audit) of the Fund. Similar to the above, the West Covina Housing Authority assumed the housing functions of the former RDA. The transfer of the functions included the transfer of formerly City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 MAJOR FUNDS As noted earlier, the City uses fund accounting to provide proper financial management of the City's resources and to demonstrate compliance with finance -related legal requirements. Maior Governmental Funds The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the General Fund was $12.6 million, while total fund balance was $19.7 million. As a measure of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 18.19% of total general fund expenditures, while total fund balance represents 28.45% of that same amount. The non -spendable portion of fund balance in the amount of $7.1 million mainly consists of amounts currently owed to the City by the former redevelopment agency in the amount of $3.6 million and Land Held for Resale in the amount of $3.0 million. The reasons for significant changes in the revenues and expenditures of the City's General Fund from the prior year are as follows: • Total revenues, exclusive of fund transfers in, increased $5.5 million while total expenditures, exclusive of fund transfers out, increased $0.5 million. • Total taxes were up $2.3 million (4.5%) from the prior year. Property taxes increased by $1.1 million (4.0%) and sales tax revenues decreased by $0.4 million (2.5%). • Investment income increased by $0.6 million from the prior year due primarily to higher interest rates for most of the fiscal year. • Other revenue increased by $1.97 million from the prior year primarily due to the sale of land from Successor Agency. The West Covina Housing Authority Fund provides for low and moderate income activities that were previously provided by the redevelopment agency. The Authority has outstanding loans receivable of $14.5 million and is due $2.06 million from the Successor Agency for amounts borrowed by the former redevelopment agency to fund the SERAF payments and 20% of the loans made to the former redevelopment agency by the City. The State Gas Tax Fund accounts for tax collected on fuel to fund maintenance and repair of the States' highways and roads. The fund finished the fiscal year with a total fund balance of $4.7 million. 13- d. Whether the housing successor has contracted with any outside entity for the management of the units and, if so, the identity of the entity. The Housing Successor has contracted Amerinat Loan Servicing for the management of the loans during fiscal year ended June 30, 2020. CITY OF WEST COVINA AIR QUALITY IMPROVEMENT SPECIAL REVENUE FUND FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT JUNE 30, 2020 City of West Covina Air Quality Improvement Special Revenue Fund Table of Contents June 30, 2020 PAr,F Independent Auditor's Report 1 Basic Financial Statements Balance Sheet 4 Statement of Revenues, Expenditures, and Changes in Fund Balance 5 Notes to the Financial Statements 6 Required Supplementary Information Budgetary Comparison Schedule 9 Note to Required Supplementary Information 10 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 11 ©0 ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 INDEPENDENT AUDITOR'S REPORT 735 E. Carnegie Dr. Suite 100 San Bernardino, CA 92408 909 889 0871 T The Honorable Mayor and 909 889 5361 F City Council of the City of West Covina ramscpa.net West Covina, California PARTNERS Report on the Financial Statements Brenda L. Odle, CPA, MST Terry P. Shea, CPA We have audited the accompanying financial statements of the Air Scott W. Manno, CPA, CGMA Quality Improvement Special Revenue Fund (the Fund) of the City of Leena Shanbhag, CPA, MST. CGMA West Covina, California (the City), as of and for the year ended June 30, Bracifjenny r A. Weleb,CPA, r, CPA, MBA, CGMA 2020, and the related notes to the financial statements as listed in the W. Jenny W. Liu, CPA, MST table of contents. MANAGERS / STAFF Management's Responsibility for the Financial Statements Charles De Simoni, CPA Gardenya Duran, CPA Management is responsible for the preparation and fair presentation of Brianna Schultz. CPA these financial statements in accordance with accounting principles v e Wu,CPA generally p accepted in the United States of America; this includes the Evel Evelyn Morentin-Barcena, CPA Veronica Hernandez, CPA design, implementation, and maintenance of internal control relevant to Tara R. Thorp, CPA, MSA the preparation and fair presentation of financial statements that are free Laura Arvizu, CPA from material misstatement, whether due to fraud or error. Louis Fernandez, CPA Abigail Hernandez Conde, CPA, MSA Auditor's Responsibility Zoe Xinlu Zhang, CPA, MSA John Maldonado. CPA, MSA Our responsibility is to express an opinion on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to MEMBERS American Institute of obtain reasonable assurance about whether the financial statements are Certified Public Accountants free from material misstatement. PCPS The AICPA Alliance for CPA Firms An audit involves performing procedures to obtain audit evidence about Governmental Audit the amounts and disclosures in the financial statements. The procedures Quality center selected depend on the auditor's judgment, including the assessment of Employee Benefit Plan the risks of material misstatement of the financial statements, whether Audit Quality Center due to fraud or error. In making those risk assessments, the auditor California Society of considers internal control relevant to the City's preparation and fair Certified Public Accountants presentation of the Fund's financial statements 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 City's internal control related to the Fund. Accordingly, we express no such Proud Member of opinion. An audit also includes evaluating the appropriateness of AlliottGlobalAlliance' accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. -1- STABILITY. ACCURACY. TRUST. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund of the City, as of June 30, 2020, and the changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 2, the financial statements present only the Fund and do not purport to, and do not present fairly the financial position of the City, as of June 30, 2020, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the budgetary comparison schedule, identified as Required Supplementary Information (RSI) in the accompanying table of contents, be presented to supplement the basic financial statements. Such Information, although not a part of the basic financial statement, 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 RSI 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 the audit of the basic financial statements. We do not express an opinion or provide any assurance on the RSI because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of that basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. -2- Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated February 17, 2021, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters related to the Fund. 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 Fund's internal control over financial reporting and compliance. 40geAX, fi e t.coa, Is'ia.[ooly 2 �cott, LLP. San Bernardino, California (/ February 17, 2021 -3- City of West Covina Air Quality Improvement Special Revenue Fund Balance Sheet June 30, 2020 Assets Cash and investments $ 261,910 Accounts receivable 200,000 Total assets $ 461,910 Liabilities and fund balance Liabilities: Accounts payable $ 145,600 Total liabilities 145,600 Fund balance: Restricted for: Public works 316,311 Total fund balance 316,310 Total liabilities and fund balance $ 461,910 The accompanying notes are an integral part of these financial statements. -4- City of West Covina Air Quality Improvement Special Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2020 Revenues Investment income $ 1,523 Revenue from other agencies 657,470 Total revenues 658,993 Expenditures Public works 146,001 Excess of revenues over (under) expenditures 512,992 Net change in fund balance 512,992 Fund balance (deficit), beginning of year (196,682) Fund balance, end of year $ 316,310 The accompanying notes are an integral part of these financial statements. -5- City of West Covina Air Quality Improvement Special Revenue Fund Notes to the Financial Statements For the year ended June 30, 2020 Note 1 — General California Assembly Bill 2766 authorizes air pollution control districts to levy fees on motor vehicles. Fees are to be used to reduce air pollution. Under this program, the Department of Motor Vehicles collects the fees and subvenes the amounts to the South Coast Air Quality Management District (SCAQMD) for vehicles registered in the South Coast District. Forty cents of every dollar subvened to SCAQMD is allocated to the cities and counties in the South Coast District proportionately based upon population. The amounts attributable to the City of West Covina (the City), are maintained in the City's Air Quality Improvement Special Revenue Fund (the Fund). Note 2 — Summary of Significant Accounting Policies The following is a summary of the significant accounting policies of the City as they pertain to the Fund. Only the Fund information is included herein and these financial statements, therefore, do not purport to represent the financial position or results of operations of the City. The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity with a self -balancing set of accounts. Monies received under Assembly Bill 2766 (AB2766) are recorded in the Fund that is used to account for the proceeds of revenue to be used for the purpose of implementing the California Clean Air Act. Basis of Accounting The Fund is accounted for using the modified -accrual basis of accounting. Under the modified - accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e. when they are both measurable and available). "Measurable" means the amount of the transaction can be determined, and "available" means collectible within the current period or soon enough thereafter (within 60 days) to be used to pay liabilities of the current period. Expenditures are generally recognized in the accounting period in which the liability is incurred, if measurable. Use of Estimates in the Preparation of Financial Statements The financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. Deferred Outflows and Inflows of Resources Deferred outflows of resources are transactions that result in the consumption of assets in one period that are applicable to future periods and are not considered assets as described by the statement. Deferred outflows of resources are required to be presented separately after assets on the statement of net position. Deferred inflows of resources are transactions that result in the acquisition of assets in one period that are applicable to future periods and are not considered to be liabilities as described by the statement. Deferred inflows of resources are required to be presented separately after liabilities on the statement of net position. -6- City of West Covina Air Quality Improvement Special Revenue Fund Notes to the Financial Statements For the year ended June 30, 2020 Note 3 — Cash and Investments Cash at June 30, 2020 consisted of the following: Amount Pooled cash and investments $ 261,910 The City follows the practice of pooling cash and investments for all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures. For more information on the City's cash and investments as of June 30, 2020, please see the City's Comprehensive Annual Financial Report. Note 4 — Fund Balance Fund balances in governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the Fund is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The Fund considers restricted fund balance to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the Fund considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts. A City's Council Ordinance or Resolution is the formal action that would effectively commit fund balances for a particular purpose. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: • Nonspendable — amounts that are not in a spendable form (such as inventory) or are required to be maintained intact. • Restricted — amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions or by enabling legislation. • Committed — amounts constrained to specific purposes by a government itself, using the highest level of decision -making fund; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint. • Assigned — amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the fund. • Unassigned — amounts that are for any purpose; positive amounts are reported only in a General Fund. -7- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 GENERAL FUND BUDGET There were numerous budget amendments throughout the fiscal year mostly due to clean up items, but the net effect to the General Fund budget was approximately $5.05 million. Taxes in total exceeded the budget by $1,189,500, consisting primarily of secured property taxes received during the fiscal year. The City budgeted conservatively for these sources of revenue as it generally fluctuates from year to year. Other revenue exceeded the budget by $1.9 million due to sale of land. Interest Income increased due to higher interest earnings. An increase in fair value adjustment caused an increase to other revenue in the amount of $302,244 for FY19-20. CAPITAL ASSETS Governmental Activities Business -Type Activities Total 2020 2019 2020 2019 2020 2019 Land $ 47,212,535 $ 48,815,622 $ - $ - $ 47,212,535 $ 48,815,622 Buildings and improvements 66,803,771 68,862,050 - - 66,803,771 68,862,050 Equipment and vehicles 8,635,313 8,778,313 - - 8,635,313 8,778,313 Infrastructure 49,625,180 56,067,902 - - 49,625,180 56,067,902 Rights of way 14,376,498 14,376,498 - - 14,376,498 14,376,498 Construction in progress 2,982,605 1,074,815 2,982,605 1,074,815 Total $ 189,635,902 $ 197,975,200 $ $ $ 189,635,902 $ 197,975,200 The major additions to capital assets during the year ended June 30, 2020 were as follows: • Construction in progress had a net increase of $1.9 million. The $2.98 million currently in progress includes the following: • City Hall Improvements ($30,000) • Various Street Projects ($2.5 million) • Facility Repairs/Improvements ($81,000) • Completed fixed asset additions of $3.8 million included: • Fire station pre -alerting systems ($253,000) • Various Park Improvements ($203,000) • Landscaping Improvements ($281,000) • Upgrades to Azusa Sewer Lift station ($305,000) • Upgrades to CNG facility ($855,000) • Traffic Signal Modification ($600,000) • Sewer and Street Rehabilitation Projects ($573,000) • School Crossing Upgrades ($123,000) • Various Facility Repairs/Improvements ($500,000) • Various Information Technology Upgrades ($27,000) Additional information on the City's capital assets can be found in Note 7 of this report. 14- City of West Covina Air Quality Improvement Special Revenue Fund Notes to the Financial Statements For the year ended June 30, 2020 Note 4 — Fund Balance (continued) The City Council establishes (and modifies or rescinds) fund balance commitments by passage of an ordinance or resolution. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balances are available, the City's policy is to apply restricted fund balance first. When an expenditure is incurred for purposes for which committed, assigned or unassigned fund balances are available, the City's policy is to apply committed fund balance first, then assigned fund balance, and finally unassigned fund balance. The Fund's governmental fund balance at June 30, 2020 is presented below: Air Quality Improvement Restricted for: Public works $ 316,311 Total fund balance $ 316,311 -8- REQUIRED SUPPLEMENTARY INFORMATION City of West Covina Air Quality Improvement Special Revenue Fund Budgetary Comparison Schedule For the year ended June 30, 2020 Budgeted Amounts Variance with Original Final Actual Final Budget Revenues Investment income $ - $ - $ 1,523 $ 1,523 Revenue from other agencies 695,200 1,249,399 657,470 (591,929) Total revenues 695,200 1,249,399 658,993 (590,406) Expenditures Current: public works 17,264 161,665 146,001 15,664 Excess (deficiency) of revenues over (under) expenditures 677,936 1,087,734 512,992 (574,742) Net change in fund balance 677,936 1,087,734 512,992 (574,742) Fund balance (deficit), beginning of year (196,682) (196,682) (196,682) Fund balance, end of year $ 481,254 $ 891,052 $ 316,310 $ (574,742) See accompanying note to required supplementary information. -9- City of West Covina Air Quality Improvement Special Revenue Fund Note to Required Supplementary Information For the year ended June 30, 2020 Note 1— Budgetary Data The annual budget adopted by the City Council provides for the general operation of the Fund. The annual budget is adopted in summary by the City Council in June of each year. The resolution sets a combined appropriation of the Fund for the operation of the City. The City Manager is authorized to transfer budgeted amounts between departments to ensure adequate and proper standards of service. Budgetary revisions, including supplemental appropriations which increase appropriations, must be approved by the City Council. The budgetary level of control is at the fund level. The budgeted figures used in the financial statements' budget to actual comparisons are the final amended amounts. The budget is formally integrated into the accounting system and employed as a management control device during the year. Budgets for governmental fund types are adopted on a basis consistent with generally accepted accounting principles. Operating appropriations lapse at the end of the fiscal year. 10- ©0 ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino, CA 92408 909 889 0871 T REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 909 889 5361 F AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN ramscpa.net AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS PARTNERS Brenda L. Odle, CPA, MST Independent Auditor's Report Terry P. Shea, CPA Scott W. Manno, CPA, CGMA Leena Shanbhag, CPA. MST. CGMA The Honorable Mayor and Braciferd A. Welebtr, CPA, MBA, CGMA City Council of the City of West Covina Jenny W. Liu, CPA, MST West Covina, California MANAGERS /STAFF We have audited, In accordance with the auditing standards generally Charles De Simoni, CPA Gardenya Duran, CPA accepted in the United States of America and the standards applicable to Brianna Schultz CPA financial audits contained in Government Auditing Standards issued by Jingjie Wu, CPA the Comptroller General of the United States, the financial statements of Evelyn Morentin-Barcena, CPA the Air Quality Improvement Special Revenue Fund (the Fund) of the City Veronica Hernandez, CPA of West Covina, California (the City), as of and for the year ended Tara R. Thorp, CPA, MSA June 30, 2020, and the related notes to the financial statements, which Laura Arvizu, CPA Louis Fernandez, CPA collectively comprise the Fund's basic financial statements, and have Abigail Hernandez Conde, CPA, MSA issued our report thereon dated February 17, 2021. The financial Zoe Xinlu Zhang, CPA, MSA statements present only the Fund and do not purport to, and do not, John Maldonado. CPA, MSA present fairly the financial position of the City. - Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal MEMBERS control) to determine the audit procedures that are appropriate in the American Institute of circumstances for the purpose of expressing our opinions on the financial Certified Public Accountants statements, but not for the purpose of expressing an opinion on the PCPS The AICPA Alliance effectiveness of the City's internal control. Accordingly, we do not express for CPA Firms an opinion on the effectiveness of the City's internal control. Governmental Audit Quality Center Our consideration of internal control over financial reporting was for the Employee Benefit Plan limited purpose described in the preceding paragraph and was not Audit Quality Center designed to identify all deficiencies in internal control that might be California Society of material weaknesses or significant deficiencies and therefore, material Certified Public Accountants weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying Schedule of Findings and Responses, we did identify certain deficiencies in internal Proud Member of control that we consider to be material weaknesses and significant AlliottGlobalAlliance' deficiencies. -11- STABILITY. ACCURACY. TRUST. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as item 2020-001, 2020-002 and 2020-003 to be material weakness. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as items 2020-004 and 2020-005 to be significant deficiencies. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. We noted certain matters that we have reported to management of City of West Covina in a separate letter dated February 17, 2021. City's Response to Findings The City's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Responses. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Fund's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. k1ogeA.t, I%"u-z-oa, Is'%..[ooly 2 fco# LLP. San Bernardino, California (/ February 17, 2021 12- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-001 — Internal Control Environment Material Weakness Criteria An important element of internal controls over financial reporting is for the entity to have procedures in place to ensure that all applicable financial reporting guidelines are followed and properly applied. Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the request for the Actuarial Valuation report for GASB 75 Accounting Information regarding Other Post -Employment Benefits (OPEB) and GASB 68 Accounting and Financial Reporting for Pensions — An Amendment of GASB Statement No. 27 was postponed. This matter has been the cause of significant delays in producing complete, reconciled and properly adjusted financial statements and other information. Cause The City did not maintain the appropriate staffing levels within the Finance Department to ensure that all financial closing procedures were performed. This is a repeat finding from prior year identified as finding 2019-001. Effect Delay in the completion of the audit and release of the Comprehensive Annual Financial Report. Recommendation We recommend the City maintain appropriate staffing in the Finance Department which will ensure that the policies and procedures in the year-end review process are properly carried out. Management's Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting key personnel and has recently hired a Purchasing Manager and two new accountant positions. In addition, the City is currently recruiting for an Assistant Finance Director position. Once the Finance Department is fully staffed and trained, this finding will be resolved. 13- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-002 — Errors in Pension Census Data Material Weakness Criteria In order for the City to record its liability for providing supplemental pension benefits to eligible participants, it must submit census data to actuaries who use this information to calculate the City's liability. Condition and Context During the audit, we were unable to vouch participant information from the census data to source documents. Cause Due to the turnover of key staff, there is a lack of appropriate documentation maintained in personnel files. Effect The City's pension liability could be improperly calculated and misstated. Recommendation We recommend the Finance Department review the participant files, ensure only eligible participants are included in the census data to be submitted and maintain proper documentation for the information provided to actuaries. Management's Response The census data that City staff was unable to locate was for employees that have not been employed with the City for quite some time. Human Resources will review and verify that all participants included in the census data are eligible employees. Staff will also make every attempt to update the files with current information. 14- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-003 — Internal control over federal grant reporting Material Weakness Criteria An important element of internal controls over financial reporting is for the entity to have procedures in place for the accurate completion of the Schedule of Expenditures of Federal Awards (SEFA). Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the SEFA has not been prepared by a consistent person and has required multiple revisions. Cause The City did not maintain the appropriate staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. This is a repeat finding from prior year identified as finding 2019-002. Effect The City could be under/over stating expenditures on the SEFA. Recommendation We recommend the City maintain proper staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. Management's Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting for key personnel and has recently hired a Purchasing Manager and two new accountant positions. In addition, the City is currently recruiting for an Assistant Finance Director position. Once the Finance Department is fully staffed and trained, this finding will be resolved. 15- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-004 — Purchasing Approvals Significant Deficiency Criteria A system of purchasing approval should be established, maintained and updated in a timely manner. Condition During our audit of the City, we noted that a listing of authorized purchasing approval limit signatures was not updated to reflect changes in authorized personnel. Cause The City did not update authorized purchasing approvals in a timely manner. Effect Approval for payments could be completed by individuals without the appropriate authorizations. Recommendation We recommend that the City perform an annual review of authorized purchasing approvals on record and make any necessary updates as soon as possible. Management's Response City staff has reviewed and updated the list of authorized purchasing approvals and will continue to review and update the list on an annual basis. -16- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 LONG-TERM DEBT At the end of the current fiscal year, the City had debt outstanding of $66.1 million. Of this amount, $39.7 million represents outstanding bonds and $26.4 million represents other debt such as compensated absences payable, claims and judgments payable, capital lease obligations, and the Successor Agency note. All of the outstanding bonds are lease revenue bonds secured by leases from the General Fund. Outstanding Bonds Governmental Activities 2020 2019 Lease Revenue Bonds $ 39,699,508 $ 41.007,613 Total $ 39,699,508 $ 41,007,613 Additional information on the City's long-term debt can be found in Note 8 of this report KEY ECONOMIC FACTORS On March 4, 2020, Governor Newsom proclaimed a State of Emergency in response to the global outbreak of the novel coronavirus, or COVID-19. The Governor issued a "Shelter -in -Place" order on March 19, 2020 to slow the spread of the virus. With the disruption to the economy and the unanticipated loss of revenue to the City, staff immediately began analyzing potential impacts to City finances. As this was an unpresented crisis, quick decisions were made to postpone non- essential expenditures and implement a hiring freeze for all non -essential positions. In August 2020, Governor Newsom introduced a "Tiered State Monitoring" system to provide a framework towards the safe reopening of businesses within each county. Los Angeles County has been Purple (Widespread) Tier since the introduction of the monitoring system. Through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) the Federal Government provided governments financial assistance to help address the impacts of COVID-19. However, there was no flexibility to utilize the funding for revenue losses. Eligibility for CARES Act funding required a local government agency to have a population that exceeds 500,000. Since the City did not meet this criterion, relief for the financial impacts of COVID-19 were limited to programs offered from the State's CARES Act allocations. The City applied for and was granted $1,308,784 from the State. These funds were received in fiscal year 2020-21 and will help offset any revenue losses or expenditure impacts from the COVID-19 pandemic. 15- City of West Covina Schedule of Findings and Responses For the Year Ended June 30, 2020 2020-005 — Bank Reconciliation Review Significant Deficiency Criteria Bank reconciliations should be prepared, reviewed and approved in a timely manner. Condition During our audit of the City, we noted that bank statements for various accounts were not reviewed or approved in a timely manner. Cause Even though the bank reconciliations were prepared, there was no documentation for the date of completion and no indication of a review had been completed. Effect Errors in the reconciliations can go undetected for a period of time without the appropriate review and approval procedures. Recommendation We recommend that the City ensure that all bank reconciliations are reviewed in a timely manner and documentation of when the preparation and review are completed. Management's Response The City has multiple bank accounts for various functions. Each bank account is reconciled individually, signed and dated by the individual that prepared the account, and reviewed, signed, and dated by the supervisor. After the individual bank reconciliations are completed, a summary report is completed to combine all bank accounts. The summary sheet was not signed and dated by the preparer or the reviewer. Earlier this year, the City implemented a procedure to have both preparer and reviewer sign and date the summary sheet indicating that the preparation and review had been completed. -17- City of West Covina Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2020 CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Finance Director, at City of West Covina, 1444 West Garvey Avenue South, West Covina, California 91790. 16- BASIC FINANCIAL STATEMENTS This page intentionally left blank. City of West Covina Statement of Net Position June 30, 2020 Governmental Business -Type Activities Activities Total ASSETS Cash and investments $ 71,151,079 $ - $ 71,151,079 Cash and investments with fiscal agent 2,570,106 - 2,570,106 Restricted cash and investments 7,650 - 7,650 Receivables, net: Accounts 906,442 460,604 1,367,046 Taxes 2,618,936 - 2,618,936 Interest 236,146 - 236,146 Notes and loans 14,502,425 - 14,502,425 Other 3,243,815 - 3,243,815 Internal balances 518,705 (518,705) - Inventories 30,473 - 30,473 Advances to Successor Agency 5,657,793 - 5,657,793 Due from other agencies 597,133 12,044 609,177 Prepaids and other assets 229,443 - 229,443 Land held for resale 3,007,802 - 3,007,802 Capital assets: Non -depreciable 64,571,638 1,059,120 65,630,758 Depreciable, net 125,064,264 (1,059,120) 124,005,144 Total assets 294,913,850 (46,057) 294,867,793 DEFERRED OUTFLOWS OF RESOURCES Pension related 22,698,850 - 22,698,850 OPEB related 4,879,260 4,879,260 Total deferred outflows of resources 27,578,110 27,578,110 LIABILITIES Accounts payable 5,666,398 125,675 5,792,073 Other accrued liabilities 1,866,552 8,767 1,875,319 Interest payable 152,384 - 152,384 Unearned revenues 31,101 - 31,101 Deposits 1,106,204 - 1,106,204 Long-term liabilities: Total OPEB liability 61,293,027 - 61,293,027 Net pension liability 195,151,386 - 195,151,386 Due within one year 8,407,758 55,648 8,463,406 Due in more than one year 57,691,641 7,972 57,699,613 Total liabilities 331,366,451 198,062 331,564,513 DEFERRED INFLOWS OF RESOURCES Pension related 3,293,071 - 3,293,071 OPEB related 6,474,959 6,474,959 Total deferred inflows of resources 9,768,030 9,768,030 NET POSITION (DEFICIT) Net investment in capital assets 140,572,511 - 140,572,511 Restricted for: Affordable housing 24,491,816 - 24,491,816 Debt service 4,055,990 - 4,055,990 Pension trust 7,650 - 7,650 Community services 4,925,661 - 4,925,661 Public safety 12,416,659 - 12,416,659 Public works 20,071,889 - 20,071,889 Unrestricted (225,184,697) (244,119) (225,428,816) Total net position (deficit) $ (18,642,521) $ (244,119) $ (18,886,640) The accompanying notes are an integral part of these financial statements. -17- City of West Covina Statement of Activities For the Year Ended June 30, 2020 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Governmental activities: General government $ 7,781,252 $ 369,796 $ - $ - Public safety 72,653,866 4,304,075 7,130,325 1,453 Public works 23,649,892 2,034,963 6,090,848 - Community services 9,418,860 2,438,156 6,698,667 491,127 Community development 1,394,131 6,780,115 70,080 89,443 Interest expense 1,874,899 Total governmental activities 116,772,900 15,927,105 19,989,920 582,023 Business -type activity: Computer service 1,230,639 1,249,195 Total business -type activity 1,230,639 1,249,195 Total $ 118,003,539 $ 17,176,300 $ 19,989,920 $ 582,023 General revenues: Taxes: Property taxes Sales taxes Franchise taxes Transient occupancy taxes Othertaxes Investment income Other revenues Total general revenues Change in net position Net position (deficit), beginning of year Net position (deficit), end of year The accompanying notes are an integral part of these financial statements. -18- Net (Expense) Revenue and Chanaes in Net Position Governmental Business -Type Activities Activities Total $ (7,411,456) $ - $ (7,411,456) (61,218,013) (61,218,013) (15,524,081) - (15,524,081) 209,090 - 209,090 5,545,507 5,545,507 (1,874,899) (1,874,899) (80,273,852) (80,273,852) 18,556 18,556 18,556 18,556 (80,273,852) 18,556 (80,255,296) 27,422,706 - 27,422,706 17,033,647 - 17,033,647 4,445,101 - 4,445,101 1,508,885 - 1,508,885 3,517,818 3,517,818 2,682,794 - 2,682,794 7,244,815 63,710 7,308,525 63,855,766 63,710 63,919,476 (16,418,086) 82,266 (16,335,820) (2,224,435) (326,385) (2,550,820) $ (18,642,521) $ (244,119) $ (18,886,640) (continued) 19- City of West Covina Balance Sheet — Governmental Funds June 30, 2020 ASSETS Cash and investments Cash and investments with fiscal agent Restricted cash and investments Receivables, net: Accounts Taxes Interest Notes and loans Other Due from other funds Advances to Successor Agency Advances to other funds Due from other agencies Prepaid expenses Land held for resale Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable Other accrued liabilities Due to other funds Advances from other funds Deposits Unearned revenue Total liabilities Deferred inflows of resources: Unavailable revenue Fund balances (deficit): Nonspendable Restricted: Affordable housing Debt service Pension trust Community services Public safety Public works Assigned Unassigned Total fund balances (deficit) Total liabilities, deferred inflows of resources, and fund balances Special Revenue Funds West Covina General Housing State Gas Fund Authority Tax $ 9,815,444 $ 7,872,283 $ 5,403,218 7,650 115,330 2,382,434 236,146 - - 14,502,425 - 2,401,775 - 492,588 1,363,762 - - 3,599,960 2,057,833 332,173 - 374,661 - 147,023 82,420 - 3,007,802 $ 23,784,160 $ 24,514,961 $ 5,895,806 $ 1,344,707 $ 8,878 $ 1,121,512 1,637,839 14,267 53,983 1,105,864 20,426 4,108,836 23,145 1,175,495 7,086,958 82,420 24,409,396 7,650 4,720,311 12,580,716 19,675,324 24,491,816 4,720,311 $ 23,784,160 $ 24,514,961 $ 5,895,806 The accompanying notes are an integral part of these financial statements. -20- designated RDA low and moderate -income housing funds together with any funds generated by former RDA housing assets. The funds must be maintained by the Housing Authority in a separate fund and expended in accordance with Health and Safety Code section 34176.1 ("Section 34176.1 "). To ensure that the monies in the Fund are expended in accordance with the law, Section 34176.1(f) requires an independent financial audit of the Fund. SB 341 also requires annual reporting and website posting of additional housing information related to the Fund. As noted above, the CDC is the governing body of the Housing Authority and the City Council serves as the membership of the CDC. During their review of our compliance with Senate Bill 341 (Attachment No. 5), the auditors noted no instances of non-compliance for Fiscal Year 2019-20. Air Quality Improvement Fund Financial Statements California Assembly Bill 2766 authorizes air pollution control districts to levy fees on motor vehicles. Fees are to be used to reduce air pollution. Under this program, the Department of Motor Vehicles collects the fees and provides the amounts to the South Coast Air Quality Management District (SCAQMD) for vehicles registered in the South Coast District. Forty cents of every dollar provided to SCAQMD is allocated to the cities and counties in the South Coast District proportionately based upon population. The amounts attributable to the City of West Covina are maintained in the City's Air Quality Improvement Special Revenue Fund (Attachment No. 6). The audit firm of Rogers, Anderson, Malody & Scott, LLP has issued an unmodified ("clean") opinion on the financial statements for the year ended June 30, 2020. Prepared by: Robbeyn Bird, Finance Director Additional David Carmany, City Manager Approval: Fiscal Impact FISCAL IMPACT: There is no fiscal impact associated with this item. Attachments Attachment No. 1 - Comprehensive Annual Financial Report for the Year Ended June 30, 2020 Attachment No. 2 - Government Auditing Standards Letter Attachment No. 3 - Audit Communication Letter Attachment No. 4 - City of West Covina Housing Authority Fund Financial Report Attachment No. 5 - West Covina Housing Authority Fund Addendum to the Annual Progress Report Attachment No. 6 - Air Quality Improvement Fund Financial Statements CITY Achieve Fiscal Sustainability and Financial Stability COUNCIL Enhance the City Image and Effectiveness GOALS & OBJECTIVES: Non -Major Total Governmental Governmental Funds Funds $ 36,014,287 $ 59,105,232 2,570,106 2,570,106 - 7,650 296,294 411,624 236,502 2,618,936 - 236,146 - 14,502,425 349,452 3,243,815 - 1,363,762 - 5,657,793 - 332,173 222,472 597,133 - 229,443 3,007,802 $ 39,689,113 $ 93,884,040 $ 2,660,132 $ 5,135,229 159,874 1,865,963 782,605 782,605 332,173 332,173 340 1,106,204 10,675 31,101 3,945,799 9,253,275 200,469 200,469 7,169,378 - 24,409,396 4,055,990 4,055,990 - 7,650 4,843,488 4,843,488 7,730,436 7,730,436 18,285,074 23,005,385 1,786,815 1,786,815 (1,158,958) 11,421,758 35,542,845 84,430,296 $ 39,689,113 $ 93,884,040 (continued) -21- This page intentionally left blank. City of West Covina Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2020 Fund balances for governmental funds Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets and accumulated depreciation are not considered current financial resources in the governmental funds (this does not include internal service fund net capital assets of $860,681): Capital assets Less accumulated depreciation Long-term debt and compensated absences applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities, both current and long-term, are reported in the Statement of Net Position (this does not include internal service fund long-term liabilities of $8,776,893): Bonds payable (including premium) Capital lease payable Compensated absences (less internal service $200) Notes payable Net pension liability Total OPEB liability Accrued interest payable for the current portion of interest due on bonds payable has not been reported in the governmental funds. Revenues that are measurable but not available are reported as unavailable revenues under the modified accrual basis of accounting. $ 84,430,296 $ 432,565,212 (243,789,991) 188,775,221 (39,699,508) (180,122) (3,856,905) (9,183,761) (195,151,386) (61,293,027) (309,364,709) (152,384) 200,469 Deferred inflows and outflows of resources related to pensions and OPEB that have not been included in the government fund activity: Deferred outflows of resources - pension related 22,698,850 Deferred outflows of resources - OPEB related 4,879,260 Deferred inflows of resources - pension related (3,293,071) Deferred inflows of resources - OPEB related (6,474,959) 17,810,080 Internal service funds were used by management to charge the costs of certain activities, such as vehicle and equipment maintenance and replacement, the City's self-insurance programs and retirement health benefits to individual funds. The assets and liabilities of the internal service funds must be added to the Statement of Net Position. Net position of governmental activities The accompanying notes are an integral part of these financial statements. -22- (341,494) $ (18,642,521) City of West Covina Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds For the Year Ended June 30, 2020 Special Revenue Funds West Covina State General Housing Gas Fund Authority Tax REVENUES Taxes $ 53,768,822 $ $ Special assessments - Licenses and permits 1,491,744 Fines and forfeitures 921,872 Investment income 1,667,494 444,792 55,139 Rental income 700,455 - - Revenue from other agencies 2,645,700 36,034 4,400,170 Charges for services 7,381,617 - 23 Other revenues 2,357,219 52,731 184,192 Total revenues 70,934,923 533,557 4,639,524 EXPENDITURES Current: General government 6,457,768 - 2,980 Public safety 55,337,813 189,368 - Public works 4,349,341 - 3,308,598 Community services 2,512,749 - - Community development 502,326 526,695 Debt service: Principal - - Interest and fiscal charges 4,000 Total expenditures 69,163,997 716,063 3,311,578 Excess (deficiency) of revenues over (under) expenditures 1,770,926 (182,506) 1,327,946 OTHER FINANCING SOURCES (USES) Capital leases 196,759 - Transfers in - 567,148 Transfers out (1,474,057) - Total other financing sources (uses) (1,277,298) 567,148 Net change in fund balances 493,628 (182,506) 1,895,094 Fund balances, beginning of year 19,181,696 24,674,322 2,825,217 Fund balances, end of year $ 19,675,324 $ 24,491,816 $ 4,720,311 The accompanying notes are an integral part of these financial statements. -23- Non -Major Total Governmental Governmental Funds Funds $ 8,819,434 $ 62,588,256 6,490,254 6,490,254 - 1,491,744 - 921,872 509,620 2,677,045 - 700,455 8,305,011 15,386,915 309,179 7,690,819 1,189,848 3,783,990 25,623,346 101,731,350 27,344 6,488,092 3,330,390 58,857,571 9,604,285 17,262,224 4,750,303 7,263,052 185,537 1,214,558 1,833,918 1,833,918 1,928,807 1,932,807 21,660,584 94,852,222 3,962,762 6,879,128 - 196,759 927,765 1,494,913 (202,898) (1,676,955) 724,867 14,717 4,687,629 6,893,845 30,855,216 77,536,451 $ 35,542,845 $ 84,430,296 -24- City of West Covina Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2020 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the Statement of Activities are different because: $ 6,893,845 Governmental funds report capital outlay as expenditures. However in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation exceeded capital outlays and disposals in the current period: (this does not include the following internal service fund activity: depreciation expense of $179,088). Capital outlay $ 5,668,952 Depreciation expense (12,227,935) Capital asset deletion (1,603,087) Construction in progress deemed not viable (547,164) (8,719,234) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Capital leases (196,759) Principal payments of capital leases 16,637 Principal payments on long-term debt 1,833,918 1,653,796 The Statement of Net Position includes accrued interest on long-term debt. This is the net change in the current year. 4,803 Change in revenues that are measureable but not available are reported as unavailable revenue under the modified accrual basis of accounting. 200,469 Expenses reported in the Statement of Activities which do not require the use of current financial resources are not reported as expenditures in the governmental funds: (this does not include the following internal service fund activity: change in compensated absences of $11,510) Amortization of bond premium 53,105 Change in compensated absences 390,056 Pension & OPEB expense reported in the governmental funds includes the annual required contributions. In the Statement of Activities, pension & OPEB expense includes the change in the net pension & total OPEB liability, and related changes in pension & OPEB amounts for deferred outflows of resources and deferred inflows of resources. (13,602,056) Internal service funds are used by management to charge the cost of certain activities, such as vehicle and equipment maintenance and replacement, the City's self-insurance, and retirement health benefits to individual funds. The net revenues (expenses) of the internal service funds is reported with governmental activities. (3,292,870) Change in net position of governmental activities $ (16,418,086) The accompanying notes are an integral part of these financial statements. -25- City of West Covina Statement of Net Position Proprietary Funds June 30, 2020 Business -type Governmental Activity Activities Computer Service Internal Enterprise Service Fund Funds ASSETS Current Assets: Cash and investments $ - $ 12,045,847 Receivables, net Accounts 460,604 494,818 Due from other agencies 12,044 - Inventories 30,473 Total current assets 472,648 12,571,138 Noncurrent Assets: Capital Assets: Capital assets 1,059,120 3,257,194 Less accumulated depreciation (1,059,120) (2,396,513) Total capital assets, net 860,681 Total noncurrent assets 860,681 Total assets 472,648 13,431,819 LIABILITIES Current Liabilities: Accounts payable 125,675 531,169 Other accrued liabilities 8,767 589 Claims and judgments - current portion - 4,402,010 Compensated absences - current portion 55,648 200 Due to other funds 518,705 62,452 Total current liabilities 708,795 4,996,420 Noncurrent Liabilities: Claims and judgments - 8,776,893 Compensated absences 7,972 Total noncurrent liabilities 7,972 8,776,893 Total liabilities 716,767 13,773,313 NET POSITION (DEFICIT) Net investment in capital assets - 860,681 Unrestricted (244,119) (1,202,175) Total net position (deficit) $ (244,119) $ (341,494) The accompanying notes are an integral part of these financial statements. -26- City of West Covina Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Year Ended June 30, 2020 OPERATING REVENUES Charges for services Other revenues Total operating revenues OPERATING EXPENSES Personnel services Cost of sales, services and operations Depreciation Insurance and claims paid Total operating expenses Operating income (loss) NONOPERATING REVENUES Investment income Gain on sale of assets Total nonoperating revenues Loss before transfers Transfers in Transfers out Change in net position Net position (deficit), beginning of year Net position (deficit), end of year Business -type Governmental Activity Activities Computer Service Internal Enterprise Service Fund Funds $ 1,249,195 $ 7,382,655 63,710 147,658 1,312,905 7,530,313 825,411 153,348 405,228 2,186,905 - 179,088 - 8,511,966 1,230,639 11,031,307 82,266 (3,500,994) 5,745 20,337 - 26,082 82,266 (3,474,912) - 248,116 - (66,074) 82,266 (3,292,870) (326,385) 2,951,376 $ (244,119) $ (341,494) The accompanying notes are an integral part of these financial statements. -27- City of West Covina Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2020 Business -type Governmental Activity Activities Computer Service Internal Enterprise Service Fund Funds CASH FLOWS FROM OPERATING ACTIVITIES Received from customers $ 898,670 $ 7,239,003 Payments to suppliers for goods and services (293,887) (7,362,973) Payments to employees for services (853,306) (164,858) Net cash provided by (used for) operating activities (248,523) (288,828) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Received from other funds 248,523 335,266 Paid to other funds - (66,074) Net cash provided by (used for) non -capital financing activites 248,523 269,192 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets - (559,024) Proceeds from sale of assets 20,337 Net cash provided by (used for) capital and related financing activites (538,687) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 5,745 Net increase (decrease) in cash and cash equivalents (552,578) Cash and cash equivalents, beginning of year 12,598,425 Cash and cash equivalents, end of year $ $ 12,045,847 The accompanying notes are an integral part of these financial statements. -28- City of West Covina Statement of Cash Flows, (Continued) Proprietary Funds For the Year Ended June 30, 2020 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation (Increase) Decrease in operating assets: Accounts receivable Intergovernmental receivable Inventories Increase (Decrease) in operating liabilities: Accounts payable Other accrued liabilities Claims and judgments payable Compensated absences payable Net cash provided by (used for) operating activities Business -type Governmental Activity Activities Computer Service Internal Enterprise Service Fund Funds 82,266 $ (3,500,994) - 179,088 (402,191) (291,310) (12,044) - (299) 119,173 215,188 (7,832) (1,711) 3,122,720 (27,895) (11,510) $ (248,523) $ (288,828) The accompanying notes are an integral part of these financial statements. -29- ATTACHMENT NO. 1 41D CITY OF WEST COVINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2020 WWW.WESTCOVINA.ORG City of West Covina Statement of Fiduciary Net Position Fiduciary Funds June 30, 2020 ASSETS Cash and investments Cash and investments with fiscal agent Restricted cash and investments Receivables, net: Taxes Interest Assessments Other Due from City of West Covina Land held for resale Total assets LIABILITIES Accounts payable Accrued liabilities Interest payable Unearned revenue Due to other governments Deposits Advances from the City of West Covina Long-term liabilities: Due to County Auditor Controller Due within one year Due in more than one year Total liabilities NET POSITION (DEFICIT) Held in trust for Successor Agency Held in trust for pension benefits Total net position (deficit) Successor Agency Private Pension Special Purpose Trust Deposits Trust Fund Funds Agency Fund $ 8,549,511 $ 549,730 $ 1,819,070 7,333,604 - - 5,284,166 203,612 1,584 12,910,000 - 28,019 2,166 8,683,761 - 54,279 43,048,536 549,730 $ 1,821,236 105,411 $ 87,464 1,096 - 364,989 83,026 518,630 - - 1,733,772 5,657,793 - 8,683,761 5,614,975 90,256,729 111,286,410 - $ 1,821,236 (68,237,874) - 549,730 $ (68,237,874) $ 549,730 The accompanying notes are an integral part of these financial statements. -30- City of West Covina Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended June 30, 2020 ADDITIONS Taxes Employer contribution Investment income Rental income Other revenues Total additions DEDUCTIONS Program administration Administrative costs Benefit distributions Interest and fiscal charges Total deductions Change in net position Net position (deficit), beginning of year (restated) Net position (deficit), end of year Successor Agency Private Pension Purpose Trust Trust Fund Funds $ 11,926,731 $ - 134,771 396,522 17,941 37,500 - 2,102,015 14,462,768 152,712 14,875,384 - - 21,492 - 258,812 1,165,677 16,041,061 280,304 (1,578,293) (127,592) (66,659,581) 677,322 $ (68,237,874) $ 549,730 The accompanying notes are an integral part of these financial statements. -31- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A) Basis of Presentation The basic financial statements of the City of West Covina, California (the City) have been prepared in accordance with Generally Accepted Accounting Principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard -setting body for establishing governmental accounting and financial reporting principles. The City's significant accounting policies are described below: B) Description of Reporting Entity The City was incorporated on February 23, 1923 under the general laws of the State of California. The accompanying financial statements present the City and its component units; entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City's financial statements to be misleading or incomplete. Because each component unit meets the above -mentioned criteria, included within the financial reporting entity of the City are the City of West Covina Housing Authority, the West Covina Public Financing Authority, the Parking Authority of the City of West Covina, and the West Covina Community Services Foundation, Inc. A brief description of each component unit follows: The West Covina Housing Authority (the Housing Authority) was formed on January 17, 2012 and is responsible for the administration of providing affordable housing in the City. The Housing Authority is administered by a Board which consists of members of the City Council. The transactions of the Housing Authority are reported as a special revenue fund. The West Covina Public Financing Authority (the Authority) was created by a joint powers agreement between the City and the Community Development Commission of the City on June 1, 1990. The purpose of the Authority is to provide, through the issuance of debt, financing necessary for various capital improvements. The Authority is administered by the Board who are the members of the City Council. The Authority's sole source of income is installment sale, loan and lease payments received from the City and former Community Development Commission (the Commission) which are used to meet the debt service requirements on debt issues. The Authority is blended into the debt service fund of the City. -32- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) B) Description of Reporting Entity, (continued) The Parking Authority of the City of West Covina (the Parking Authority) was formed under the provision of the government code of the State of California for the purpose of financing and constructing parking facilities for lease to the City. The City Council acts as the governing body of the Parking Authority and is able to impose its will on the Parking Authority. It is a component unit of the City, and the financial statements of the Parking Authority are included within the financial statements of the City using the blended method. The Parking Authority has been inactive since 1999. The West Covina Community Services Foundation. Inc. (the Foundation) was established on July 26, 2005 as a nonprofit public benefit corporation. It was organized and operates exclusively for charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code. The Foundation is administered by the Board of Directors who are the members of the City Council. The Foundation is blended into the special revenue funds of the City. Since the City Council serves as the governing board for these component units, all of the City's component units are considered to be blended component units. Blended component units, although legally separate entities, are in substance, part of the City's operations and so data from these units are reported with the interfund data of the primary government. Except for the Housing Authority, these component units do not issue component unit financial statements. Separate financial statements for the Housing Authority can be obtained from the City of West Covina, City Hall. C) Basis of Accounting and Measurement Focus The basic financial statements of the City are composed of the following: • Government -wide financial statements • Fund financial statements • Notes to basic financial statements -33- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) C) Basis of Accounting and Measurement Focus, (continued) Government -wide Financial Statements Government -wide financial statements display information about the reporting government as a whole except for its fiduciary activities. These statements include separate columns for the governmental and business -type activities of the primary government (including its blended component units). Eliminations have been made in the Statement of Activities so that certain allocated expenses are recorded only once (by the function to which they were allocated). However, general government expenses have not been allocated as indirect expenses to the various functions of the City. Interfund services provided and used are not eliminated in the process of consolidation. The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. Government -wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government -wide financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange -like transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets and liabilities resulting from nonexchange transactions are recognized in accordance with the requirements of Generally Accepted Accounting Principles. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. Taxes and other items not included among program revenues are reported as general revenues. Amounts paid to acquire capital assets are capitalized as assets in the government -wide financial statements, rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the government -wide financial statements rather than as an other financing source. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability rather than as an expenditure. -34- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) C) Basis of Accounting and Measurement Focus, (continued) Fund Financial Statements The underlying accounting system of the City is organized and operated on the basis of separate funds; each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Fund financial statements for the primary government's governmental, proprietary, and fiduciary funds are presented after the government -wide financial statements. These statements display information about the major funds individually and other governmental funds in the aggregate for governmental funds. Fiduciary statements represent assets held by the City in a custodial capacity for other individuals or organizations in the private purpose trust, pension trust, and agency funds. Governmental Funds In the fund financial statements, governmental funds are presented using the modified - accrual basis of accounting. Their revenues are recognized when they become measurable and available. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. Revenue recognition is subject to the measurable and available criteria for the governmental funds in the fund financial statements. Significant revenues subject to the criteria include taxes, licenses and permits, and intergovernmental revenues. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed non -exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government -mandated and voluntary non -exchange transactions are recognized as revenues when all applicable eligibility requirements have been met. -35- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) C) Basis of Accounting and Measurement Focus, (continued) Governmental Funds, (continued) In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets, deferred outflows of resources, current liabilities and deferred inflows of resources are generally included on their balance sheets. The reported fund balance is considered to be a measure of "available spendable resources'. Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balance. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Revenues, expenditures, assets, and liabilities resulting from non -exchange transactions are recognized in accordance with the requirements of Generally Accepted Accounting Principles. The City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Therefore, recognition of governmental fund type revenue represented by receivables is reported as deferred inflows of resources until they meet the "availability" criteria. Sales taxes, property taxes, franchise taxes, revenue from other agencies, rental income, occupancy taxes and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period to the extent normally collected within the availability period. Other revenue items are considered to be measurable and available when cash is received by the government. The availability period for all revenues is 60 days. Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as other financing sources rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures rather than as a reduction of a fund liability. -36- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) C) Basis of Accounting and Measurement Focus, (continued) Proprietary and Fiduciary Funds The City's enterprise and internal service funds are proprietary funds. In the fund financial statements, the proprietary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the economic resources measurement focus. This means that all assets, deferred outflows of resources, liabilities, and deferred inflows of resources (whether current or noncurrent) associated with their activity are included on their statement of net position. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non -operating revenues, such as subsidies, taxes, and investment earnings result from non -exchange transactions or ancillary activities. Amounts paid to acquire capital assets are capitalized as assets in the enterprise fund financial statements rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the enterprise fund financial statements rather than as another financing source. Amounts paid to reduce long-term indebtedness of the enterprise fund are reported as a reduction of the related liability rather than as an expenditure. The City's fiduciary private purpose and pension trust funds are accounted for using the economic resources measurement focus and accrual basis of accounting. The private purpose trust fund accounts for the assets held by the City for the Successor Agency to the former Community Development Commission of the City. The pension trust fund account for assets and activities of the Public Agency Retirement System Enhancement and Supplemental Retirement defined benefit pension plans. The City's fiduciary agency funds have no measurement focus but utilize the accrual basis for reporting its assets and liabilities. Because these funds are not available for use by the City, fiduciary funds are not included in the governmental -wide statements. -37- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) D) Fund Classifications The City reports the following major governmental funds: General Fund This fund is the City's primary operating fund. It accounts for all financial resources of the City except those required to be accounted for in another fund. West Covina Housing Authority Special Revenue Fund This fund is used to account for assets and related income received from the former Community Development Commission to be used for the administration of providing affordable housing in the City. State Gas Tax Special Revenue Fund This fund accounts for the City's proportionate share of gas tax monies collected by the State of California and Proposition 1 B monies which are used for street construction and maintenance. The City reports the following major proprietary fund: Computer Service Enterprise Fund This fund is used to account for operations that are financed and operated in a manner similar to private business enterprises. The City's enterprise fund is used to account for computer services provided by the Police Department to other public agencies. Additionally, the City reports the following fund types: Non -Major Governmental Fund Types Special Revenue Funds — These funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. Capital Projects Funds — These funds are used to account for the purchase or construction of major capital facilities which are not financed by Proprietary Funds. Capital Projects Funds are ordinarily not used to account for the acquisition of furniture, fixtures, machinery, equipment and other relatively minor or comparatively short-lived capital assets. City Debt Service Fund — This fund accounts for the payment of principal, interest, and related costs on the City's long-term debt issues. -38- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) D) Fund Classifications, (continued) Proprietary Fund Types Internal Service Funds — These funds are used to account for vehicle and equipment maintenance and replacement, for the City's self-insurance programs, and for retirement health savings plans for qualified City employees. Departments of the City are charged for the services provided or benefits received from these funds. Fiduciary Fund Types Successor Agency Private Purpose Trust Fund — This fund is used to account for the assets and activities of the Successor Agency to Community Development Commission of the City of West Covina. Pension Trust Funds — These funds are used to account for the assets and activities of the Public Agency Retirement System Retirement Enhancement and Supplemental Retirement plans. Special Deposits Aoencv Fund — This fund accounts for developer funds placed on deposit with the City pending either a return to the depositor or disbursement by the City on behalf of the depositor to pay for studies and other developer expenses. E) Financial Statement Elements 1) Cash, Cash Equivalents, and Investments The City follows the practice of pooling cash and investments of all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures. Each fund's share in this pool is displayed in the accompanying financial statements as cash and investments. Interest income earned on pooled cash and investments is allocated monthly to the various funds based on the month -end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund. The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Investments are reported at fair value. The State Treasurer's Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. -39- City of West Covina, California COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2020 Prepared by the West Covina Finance Department City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) E) Financial Statement Elements, (continued) 2) Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds' (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non -current portion of interfund loans). Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. 3) Inventory Inventory is stated at average cost. Physical counts of inventory are taken on a cyclical basis during each fiscal year with perpetual records adjusted to actual at that time. The City uses the consumption method of accounting for inventory. 4) Prepaid Items Certain payments to vendors for costs applicable to future accounting periods are recorded as prepaid items in both government -wide and fund financial statements using the consumption method. 5) Notes Receivable The accompanying financial statements reflect the recording of certain notes receivable that represent loans made to private developers and other parties. In certain cases, the amount of collection is dependent upon future residual receipts to be generated by the property or contingent upon the ability of the owner to sell the property at an amount sufficient to pay all liens against the property. 6) Deferred Outflows/Inflows of Resources In addition to assets, the Statement of Net Position and the governmental funds balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The City has reported the deferred outflow related to pensions and other postemployment benefits. -40- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) E) Financial Statement Elements, (continued) 6) Deferred Outflows/Inflows of Resources, (continued) In addition to liabilities, the Statement of Net Position and the governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future periods and will not be recognized as an inflow of resources (revenue) until that time. The City has two items that qualify for reporting in this category. The first item is unavailable revenues, which arise only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, unavailable revenues are reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: taxes and grants. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The second item is a deferred inflow of resources related to pensions and other postemployment benefits. 7) Net Position Flow Assumptions Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government -wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's practice to consider restricted net position to have been depleted before unrestricted net position is applied. 8) Property Taxes Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the cities based on complex formulas. Accordingly, the City of West Covina accrues only those taxes which are received within 60 days after year end. The property tax calendar is as follows: Lien Date: January 1 Levy Date: July 1 Due Dates: First Installment — November 1 Second Installment — February 1 Delinquency Dates: First Installment — December 10 Second Installment —April 10 -41- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) E) Financial Statement Elements, (continued) 8) Property Taxes, (continued) Taxes are collected by Los Angeles County and are remitted to the City periodically. Dates and percentages are as follows: December 20 40% Advance January 17 10% Advance February 20 Collection No. 1 April 18 35% Advance May 20 Collection No. 2 July 18 Collection No. 3 9) Capital Assets Capital assets greater than $5,000 and infrastructure greater than $100,000 are capitalized and recorded at cost or at an estimated fair value of the assets at the time of acquisition where complete historical records do not exist. Contributed capital assets are valued at their acquisition value at the date of the contribution. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Capital assets include public domain infrastructure assets consisting of certain improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, medians, sewer and storm drains. Depreciation has been provided using the straight-line method over the estimated useful life of the assets in the government -wide financial statements and in the fund financial statements of the proprietary and the private -purpose trust funds. Depreciation starts the year following acquisition. Interest is capitalized on proprietary fund assets acquired with tax-exempt debt. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds over the same period. There was no interest capitalized during the year ended June 30, 2020 since the proprietary funds have no debt utilized to construct capital assets. -42- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) E) Financial Statement Elements, (continued) 9) Capital Assets, (continued) Capital assets are depreciated using the straight-line method over the following estimated useful lives: Governmental activities: Infrastructure - pavement 25 years Infrastructure - other 20-75 years Buildings 20-50 years Improvements other than buildings 20-50 years Equipment and vehicles 5-25 years Business -type activities: Equipment and machinery 5-25 years 10) Claims and Judgments The City records a liability for litigation, judgments, and claims when it is probable that an asset has been impaired or a liability (including claims incurred but not reported) has been incurred prior to year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. This liability is recorded in the internal service fund that accounts for the City's self-insurance activities. 11) Compensated Absences A liability is recorded for unused vacation and similar compensatory leave balances since the employees' entitlement to these balances are attributable to services already rendered and it is probable that virtually all of these balances will be liquidated by either paid time off or payments upon termination or retirement. A liability is recorded for unused sick leave balances only to the extent that it is probable that the unused balances will result in termination payments. This is estimated by including in the liability the unused balances of employees currently entitled to receive termination payment, as well as those who are expected to become eligible to receive termination benefits as a result of continuing their employment with the City. Other amounts of unused sick leave are excluded from the liability since their payment is contingent solely upon the occurrence of a future event (illness) which is outside the control of the City and the employee. The General Fund and Computer Service Enterprise Fund typically have been used to liquidate the liability for compensated absences. -43- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) E) Financial Statement Elements, (continued) 12) Long -Term Obligations In the government -wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed during the current period. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 13) Reclassifications and Eliminations Interfund balances must generally be eliminated in the government -wide statements except for net residual amounts due between governmental activities. Amounts involving fiduciary funds should be reported as external transactions. Any allocations must reduce the expenses of the function from which the expenses are being allocated so that the expenses are reported only once in the function in which they are allocated. 14) Use of Estimates The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. 15) Pension Plans For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City's California Public Employees' Retirement System (CaIPERS) and Public Agency Retirement System plans (PARS) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CalPERS and PARS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. -44- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) E) Financial Statement Elements, (continued) 15) Pension Plans, (continued) Generally accepted accounting principles require that the reported results for pensions must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used for CaIPERS: Valuation Date (VD) Measurement Date (MD) Measurement Period (MP) The following timeframes are used for PARS: Valuation Date (VD) Measurement Date (MD) Measurement Period (MP) 16) Other Postemployment Benefits (OPEB) June 30, 2018 June 30, 2019 July 1, 2018 to June 30, 2019 June 30, 2019 June 30, 2019 July 1, 2018 to June 30, 2019 For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City's plan (OPEB Plan) and additions to/deductions from the OPEB Plan's fiduciary net position have been determined on the same basis. For this purpose, benefit payments are reported at fair value. Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used: Valuation Date (VD) Measurement Date (MD) Measurement Period (MP) June 30, 2019 June 30, 2019 July 1, 2018 to June 30, 2019 -45- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 2) CASH AND INVESTMENTS Cash and investments are classified in the accompanying financial statements as follows: Statement of Net Position: Cash and investments $ 71,151,079 Cash and investments with fiscal agents 2,570,106 Restricted cash and investments 7,650 Statement of Fiduciary Net Position: Cash and investments 10,918,311 Cash and investments with fiscal agents 7,333,604 Restricted cash and investments 5,284,166 Total Cash and Investments $ 97,264,916 Cash and investments at June 30, 2020 consisted of the following: Cash on hand $ 15,900 Deposits with financial institutions 26,243,396 Investments 71,005,620 Total Cash and Investments $ 97,264,916 -46- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 2) CASH AND INVESTMENTS, (continued) Investments Authorized by the California Government Code and the City's Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code and the City's investment policy. This table also identifies certain provisions of the California Government Code (or the City's investment policy, if more restrictive) that addresses interest rate risk and concentrations of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City and investments in the City's retirement enhancement and supplemental retirement defined benefit pension trust funds that are in the Public Agency Retirement Plans (PARS Trust Pool), rather than the general provisions of the California Government Code or the City's investment policy. Authorized Maximum Maximum Investment Types by Investment Maximum Percentage Investment Authorized by State Law Policy Maturity* of Portfolio* in One Issuer* U.S. Treasury Obligations Yes 5 years None None U.S. Government Sponsored Agency Securities Yes 5 years None None Municipal Securities Yes 5 years 30% 5% Supernationals Yes 5 years 30% 10% Medium -Term Notes Yes 5 years 30% 5% Collateralized Certificate of Deposit Yes 5 years 25% 25% Negotiable Certificate of Deposit Yes 5 years 30% 30% Banker's Acceptance Yes 180 days 40% 30% Commercial Paper Yes 270 days 25% 5% Asset -Backed Securities Yes 5 years 20% 20% Money Market Mutual Funds Yes N/A 20% 10% Repurchase Agreements Yes 100 days 20% 20% County Pooled Investment Funds Yes N/A None None Local Agency Investment Fund Yes N/A None $75,000,000 * Based on state law requirements or investment policy requirements, whichever is more restrictive. -47- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 2) CASH AND INVESTMENTS, (continued) Investments Authorized by Debt Agreements Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are generally authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk. Maximum Authorized Investment Type Maximum Maturity Maximum Percentage Allowed Maximum Investment in One Issuer U.S. Treasury Obligations 5 years None None U.S. Government Sponsored Agency Securities 5 years None None Certificate of Deposit 5 years 25% None Negotiable Certificate of Deposit 5 years 30% None Banker's Acceptance 180 days None None Commercial Paper 270 days 25% 5% Repurchase Agreements 100 days 20% None Local Agency Investment Fund None None None Los Angeles County Investment Pool None None None Money Market Mutual Funds 5 years 20% 10% Municipal Securities 5 years 30% None Supernationals 5 years 30% None Medium -Term Notes 5 years 30% None Investments Authorized by Pension Trust Agreements Investments of pension trust fund contributions held by the trustee are governed by the trust agreements. The City selected an investment strategy allowed by the trust agreements with the objective of providing current income and moderated capital appreciation. The strategic ranges for the investment strategy selected by the City are as follows: 5% Cash 45% Fixed Income 48.50% Equities 1.50% REIT Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater is the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. -48- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 2) CASH AND INVESTMENTS, (continued) Interest Rate Risk, continued Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: Less than 1 to 3 3 to 5 Investment Type 1 year Years Years Total Los Angeles County Investment Pool $ 47,606 $ $ $ 47,606 Local Agency Investment Fund 70,068,805 70,068,805 Money Market Mutual Funds 64,706 64,706 Asset -Backed Securities 274,773 274,773 Subtotal $ 70,181,117 $ 274,773 $ 70,455,890 PARS Trust Pool 549,730 Total Investments $ 71,005,620 Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code, the City's investment policy, or debt agreements and the actual rating as of year-end by Standard and Poor's or Moody's or Fitch for each investment type: Investment Type Minimum Legal Rating* Total as of June 30, 2020 AAA Not Rated Los Angeles County Investment Pool N/A $ 47,606 $ $ 47,606 Local Agency Investment Fund N/A 70,068,805 70,068,805 Money Market Mutual Funds AAA 64,706 64,706 - Asset -Backed Securities AA 274,773 274,773 - PARS Trust Pool N/A 549,730 549,730 Total $ 71,005,620 $ 339,479 $ 70,666,141 * N/A- Not Applicable -49- City of West Covina Comprehensive Annual Financial Report For the Year Ended June 30, 2020 TABLE OF CONTENTS INTRODUCTORY SECTION: Letterof Transmittal................................................................................................................. i OrganizationalChart .............................................................................................................. iv CityOfficials............................................................................................................................ v FINANCIAL SECTION: Independent Auditor's Report ................................................................................................1 Management's Discussion and Analysis................................................................................4 Basic Financial Statements: Government -Wide Financial Statements: Statement of Net Position.........................................................................................17 Statement of Activities..............................................................................................18 Fund Financial Statements: Balance Sheet - Governmental Funds..................................................................... 20 Reconciliation of the Balance Sheet of Governmental Funds to the Statementof Net Position................................................................................... 22 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds..........................................................................................23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ..............25 Statement of Net Position - Proprietary Funds.........................................................26 Statement of Revenues, Expenses, and Changes in Fund Net Position - ProprietaryFunds...............................................................................................27 Statement of Cash Flows - Proprietary Funds.........................................................28 Statement of Fiduciary Net Position - Fiduciary Funds ............................................ 30 Statement of Changes in Fiduciary Net Position - Fiduciary Funds .........................31 Notes to Basic Financial Statements.............................................................................32 Required Supplementary Information: Schedule of Changes in Net Pension Liability and Related Ratios - CalPERS Pension Plan — Miscellaneous.........................................................104 Schedule of Plan Contributions - CalPERS Pension Plan — Miscellaneous ...........106 Schedule of Changes in Net Pension Liability and Related Ratios - CalPERS Pension Plan — Safety......................................................................108 Schedule of Plan Contributions - CalPERS Pension Plan — Safety .......................110 Schedule of Changes in Net Pension Liability and Related Ratios - CalPERS Pension Plan - EPMC Replacement Supplemental Retirement Plan ...............112 Schedule of Plan Contributions - CalPERS Pension Plan - EPMC Replacement Supplemental Retirement Plan.........................................................................114 Schedule of Changes in Net Pension Liability and Related Ratios - CalPERS Pension Plan - Supplemental Retirement Plan for Executive Staff ..116 Schedule of Plan Contributions - CalPERS Pension Plan - Supplemental Retirement Plan for Executive Staff.................................................................118 Schedule of Changes in the Total OPEB Liability and Related Ratios ...................120 City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 2) CASH AND INVESTMENTS, (continued) Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. There was no investments in any one issuer (other than U.S. Government Agencies, Supranationals, Money Market Funds, and external investment pools) that represent 5% or more of total City investments. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker -dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provisions for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. All the City's deposits are either federally insured or collateralized as of June 30, 2020. Investments held by bond trustee are selected under the terms of the applicable trust agreement. The trustee acquires the investment and holds the investment on behalf of the reporting government. Investment in County Investment Pool The City is a voluntary participant in the Los Angeles County Investment Pool (LACIP) that is regulated by the California Government Code and the Los Angeles County Board of Supervisors under the oversight of the Los Angeles County Treasurer -Tax Collector. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amount based upon the City's pro-rata share of the fair value provided by LACIP for the entire LACIP portfolio. The balance for withdrawal is based on the accounting records maintained by LACIP, which are recorded on an amortized cost basis. -50- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 2) CASH AND INVESTMENTS, (continued) Fair Value Measurements Generally accepted accounting principles requires classifying investments under a fair value hierarchy consisting of three broad levels: Level 1 inputs consist of quoted prices (unadjusted) for identical assets and liabilities in active markets that a government can access at the measurement date, Level 2 inputs consist of inputs other than quoted prices that are observable for an asset or liability, either directly or indirectly, and Level 3 inputs have the lowest priority and consist of unobservable inputs for an asset or liability. The following table presents the balances of the assets measured at fair value on a recurring basis as of June 30, 2020: Fair Value Measurement Using Investments by Fair Value Level Total Level 1 Level 2 Level 3 Asset -Backed Securities $ 274,773 $ $ 274,773 $ Total Investments by Fair Value Level 274,773 $ $ 274,773 $ Investments not subject to the fair value hierarchy: Los Angeles County Investment Pool 47,606 Local Agency Investment Fund 70,068,805 Money market mutual funds 64,706 PARS Trust Pool 549,730 Total $ 71,005,620 Level 2 investments are valued using a Continuous Fixed Income Evaluated Pricing service. -51- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 3) INTERFUND RECEIVABLES AND TRANSFERS Interfund transactions — Due to/due from interfund borrowings Interfund receivable and payable balances at June 30, 2020 were as follows: Payable Fund Fund~ Non -Major Governmental Funds $ 782,605 Enterprise Fund 518,705 Internal Service Funds 62,452 Total $ 1,363,762 These interfund payables represent temporary loans to cover negative cash balances. Interfund transactions - Advances Payable Fund General Fund Non -Major Governmental Funds $ 332,173 Advances between the General Fund and the Auto Plaza Improvement District non -major special revenue fund are for cash advanced for the replacement of the reader board sign at the Auto Plaza. Interfund transactions - Transfers The following schedule summarizes the City's transfer activity: Transfer In Non -Major Internal Total State Gas Governmental Services Transfers Transfers Out: Tax Funds Funds Out General Fund $ 567,148 $ 906,909 $ - $ 1,474,057 Non -major Governmental Funds - 20,856 182,042 202,898 Internal Service Funds - - 66,074 66,074 Total Transfers In: $ 567,148 $ 927,765 $ 248,116 $ 1,743,029 -52- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 3) INTERFUND RECEIVABLES AND TRANSFERS, (continued) Interfund transactions — Transfers, (continued) The $567,148 transfer from General Fund to State Gas Tax fund was for the SB1 project. The $906,909 transfer from General Fund to Non -major Governmental Funds included $578,918 for the Successor Agency Note payment to the County and $327,991 as the remainder for capital projects. The $20,856 transfer within Non -major Governmental Funds was for shared services. The $66,074 transfer within Internal Services Funds and the $182,042 transfer from Non - major Governmental Funds to Internal Services Funds were for the acquisition of police vehicles. 4) LONG-TERM RECEIVABLES FROM SUCCESSOR AGENCY Prior to the dissolution of the Commission's redevelopment activities on February 1, 2012, the City authorized several advances to be used for completing redevelopment projects throughout the community. As a result of the dissolution, the liabilities related to these advances were transferred to the Successor Agency. See Note 18 and 20 for additional information. The outstanding receivable side of these advances at June 30, 2020 was as follows: a) The General Fund had made the several advances to the Commission totaling $8,100,000 for administrative and capital improvement construction costs ("General Advance"). Eighty percent (80%) of the balance is reported in the General Fund and the remaining twenty percent (20%) balance is reported in the West Covina Housing Authority Special Revenue Fund. b) In May 2010, the Commission made an advance of $6,529,308 from the Low and Moderate Income Housing Capital Projects Fund to the Citywide Project Area Debt Service Fund to satisfy the Commission's Supplemental Educational Revenue Augmentation Fund (SERAF) obligation as required by Assembly Bill ABX4-26. The advance bears no interest. In May 2011, the Commission made an advance of $1,344,269 from the Low and Moderate Income Housing Capital Projects Fund to the Citywide Project Area Debt Service Fund to satisfy the SERAF obligation as required by Assembly Bill ABX4-26. The advance bears no interest and must be repaid by August 1, 2022. Effective February 1, 2012, the Commission's redevelopment activities were dissolved, and the receivable side of these advances were retained by the Housing Authority. The "Dissolution Act" (AB 1x26 as amended by AB 1484) outlines the method of repayment for the General Advances and the SERAF Advances by the Successor Agency. -53- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 4) LONG-TERM RECEIVABLES FROM SUCCESSOR AGENCY, (continued) The Dissolution Act sets a defined schedule by which the general advances may be repaid. The repayment schedule is to span a reasonable term of years, with outstanding balances incurring interest at a rate not to exceed that earned by the funds deposited into the Local Agency Investment Fund ("LAIF"). Repayment of the general advances is subject to additional repayment limitations. Repayment commenced in the 2015-2016 fiscal year, annual payments are capped as determined by a specific formula, repayment of the general advances is on a lower payment priority than other obligations of the Successor Agency, and twenty percent (20%) of the repayment amount must be deposited in the LMIHF for the benefit of the Housing Authority. Total general advance and SERAF advance repayments made in the fiscal year 2019-20 were $635,182 and $2,696,738, respectively. c) The advances from Successor Agency of $951,661 are related to in -transit deposits that the City is still requesting from the Department of Finance. The outstanding balances at June 30, 2020 were as follows: General advances $ 3,310,374 Tax sharing advances 951,661 SERAF advances 1,395,758 Total advances to Successor Agency $ 5,657,793 5) NOTES AND LOANS RECEIVABLE The following notes and loans receivable were outstanding as of June 30, 2020: Housing rehabilitation $ 353,888 First time home buyers 214,537 Housing preservation program 640,949 Home improvement program 738,213 Lark Ellen Towers 6,380,133 Executive Lodge Apartments Limited Partnership 6,271,978 West Covina Senior Villas, LLC 2,833,333 West Covina Senior Villas II, L.P. 8,513,884 Other loans 608,196 Less allowance for doubtful accounts (12,052,686) Total $ 14,502,425 Several housing rehabilitation loans totaling $353,888 have been made to qualified applicants using Community Development Block Grants received by the City and housing set -aside funds of the former Commission's redevelopment activities. These loans bear interest up to 5% and are repaid when title to the property changes. The City has included 5% of the balance in the allowance for doubtful accounts. -54- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 5) NOTES AND LOANS RECEIVABLE, (continued) The Housing Authority has loans to first-time home buyers totaling $214,537. Loans are secured by second trust deeds and bear interest at 5%. Principal and interest are deferred for five years and are due monthly in years 6 through 30. There were 19 individual loans outstanding at June 30, 2020 ranging from $5,710 to $22,407. The City has included 5% of the balance in the allowance for doubtful accounts. The Housing Authority also has housing preservation loans to qualified applicants using housing set -aside funds totaling $640,949. Principal and interest are deferred for ten years; after the tenth year loans bear interest at 5%. Loans are repaid after the tenth year or when title to the property changes. There were 81 individual loans outstanding at June 30, 2020 ranging from $205 to $10,659. The City has included 5% of the balance in the allowance for doubtful accounts. Several housing improvement loans totaling $738,213 have been made to qualified applicants. The loans are secured by second trust deeds. The City has included 5% of the balance in the allowance for doubtful accounts. In May 1997, the Commission loaned $4,270,000 to Lark Ellen Towers. The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan accrues interest at 3% per annum and requires annual payments equal to the maximum of $35,000 or 50% of net profits earned by the project. The outstanding principal and accrued interest at June 30, 2020 was $6,380,133. In April 1998, the Commission loaned $5,622,300 to Executive Lodge Apartments Limited Partnership (Promenade Apartments project). The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan was amended and restated on April 1, 2017, with a principal of $6,056,621 accruing interest at 2.82% compounded annually and requires annual payments equal to 50% of "Available Cash Flow". The outstanding principal and accrued interest at June 30, 2020 was $6,271,978. In May 2002, the Commission loaned $4,360,000 to West Covina Senior Villas, LLC. The loan is secured by a deed of trust. The loan does not accrue interest. The loan requires annual payments of $141,667 through May 2032 that are forgiven by the City unless the borrower defaults on the agreement. The outstanding principal at June 30, 2020 was $2,833,333. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. In May 2009, the Commission entered into an agreement with West Covina Senior Villas II, L.P. to provide $8,600,000 for the acquisition of real property in the City and construction and maintenance of an approximately 65-unit apartment complex to be rented to low income and very low income senior citizens. The loan is secured by a deed of trust. The loan does not accrue interest and is forgiven so long as the borrower does not default on the loan. The outstanding principal at June 30, 2020 was $8,513,884. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. -55- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 5) NOTES AND LOANS RECEIVABLE, (continued) Other notes consist of affordable housing loans of $400,000. The notes do not accrue interest and are forgiven unless the borrower sells or refinances the property. Additionally, the balance included a note of $208,196 for low income housing which accrues no interest and is forgivable if the owner maintains the low and moderate income housing status. The outstanding principal of these loans combined at June 30, 2020 was $608,196. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. 6) LAND HELD FOR RESALE Land held for resale is valued at the lower of cost or the sales price per contract with the developer. The land held for resale at June 30, 2020 was comprised of land to be used as open space or a municipal golf course in the amount of $3,007,802. 7) CAPITAL ASSETS Capital asset activity was as follows for governmental activities for the year ended June 30, 2020: Governmental activities: Capital assets, not depreciated: Land Rights of way Construction in progress Total capital assets, not depreciated Capital assets, being depreciated: Buildings and improvements Equipment and vehicles Infrastructure - pavement Infrastructure - other Total capital assets, being depreciated Less accumulated depreciation for: Buildings and improvements Equipment and vehicles Infrastructure - pavement Infrastructure - other Total accumulated depreciation Total capital assets, being depreciated, net Total governmental activities Balance Balance June 30, 2019 Additions Deletions Transfers June 30, 2020 $ 48,815,622 $ - $ (1,603,087) $ - $ 47,212,535 14,376,498 - - - 14,376,498 1,074,815 3,613,345 (1,705,555) 2,982,605 64,266,935 3,613,345 (3,308,642) 64,571,638 115,048,221 676,389 - - 115,724,610 32,601,682 2,362,139 (628,349) - 34,335,472 196,892,462 144,801 - - 197,037,263 23,573,729 579,694 24,153,423 368,116,094 3,763,023 (628,349) 371,250,768 (46,186,171) (2,734,668) - - (48,920,839) (23,823,369) (2,505,139) 628,349 - (25,700,159) (146,271,704) (6,738,389) - - (153,010,093) (18,126,585) (428,828) (18,555,413) (234,407,829) (12,407,024) 628,349 (246,186,504) 133,708,265 (8,644,001) 125,064,264 $ 197,975,200 $ (5,030,656) $ (3,308,642) $ $ 189,635,902 Construction in progress not deemed viable of $547,164 is included in the deletions for the current year. -56- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 7) CAPITAL ASSETS, (continued) Depreciation expense (including $179,088 from Internal Service Funds) was charged to the following functions in the Statement of Activities for the year ended June 30, 2020 as follows: General government $ 422,430 Public safety 1,771,494 Public works 8,358,734 Community services 1,854,366 Total depreciation expense — governmental activities $ 12,407,024 Capital asset activity was as follows for business -type activities for the year ended June 30, 2020: Business -type activities: Balance Balance June 30, 2019 Additions Deletions June 30, 2020 Capital assets, being depreciated: Equipment and vehicles $ 1,059,120 $ - $ - $ 1,059,120 Less accumulated depreciation for: Equipment and vehicles (1,059,120) (1,059,120) Total business -type activities $ $ $ $ There was no depreciation expense charged to the computer service program for the year ended June 30, 2020. -57- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 8) LONG-TERM LIABILITIES The following is a summary of changes in long-term liabilities for governmental activities for the year ended June 30, 2020: Balance Balance Due Within Governmental activities: June 30, 2019 Additions Deletions June 30, 2020 One Year Long-term debt Direct borrowing: Notes payable $ 9,762,679 $ $ (578,918) $ 9,183,761 $ 578,918 Lease Revenue Bonds: 2006 Lease Revenue Bonds 15,860,000 - (460,000) 15,400,000 515,000 2018 Lease Revenue Refunding Bonds 23,820,000 - (795,000) 23,025,000 835,000 Plus deferred amounts: Issuance premium 1,327,613 (53,105) 1,274,508 53,105 Total Lease Revenue Bonds 41,007,613 (1,308,105) 39,699,508 1,403,105 Subtotal long-term debt 50,770,292 (1,887,023) 48,883,269 1,982,023 Other long-term liabilities Capital Lease Payable - 196,759 (16,637) 180,122 37,037 Compensated absences 4,258,671 1,557,692 (1,959,258) 3,857,105 1,986,688 Claims and judgments payable 10,056,183 8,147,744 (5,025,024) 13,178,903 4,402,010 Subtotal other long-term liabilities 14,314,854 9,902,195 (7,000,919) 17,216,130 6,425,735 Total long-term liabilities $ 65,085,146 $ 9,902,195 $ (8,887,942) $ 66,099,399 $ 8,407,758 The following is a summary of changes in long-term liabilities for business -type activities for the year ended June 30, 2020: Balance Balance Due Within Business -type activities: June 30, 2019 Additions Deletions June 30, 2020 One Year Compensated absences $ 91,515 $ 27,971 $ (55,866) $ 63,620 $ 55,648 Notes Payable — Direct Borrowing CVHP Note Payable On September 13, 2016, the City entered into a note agreement for $500,000 with Citrus Valley Health Partners (CVHP) to finance the purchase of certain real property to expand Cameron Park. The promissory note was part of the negotiations for the potential sale of Sunset Field to CVHP and bears no interest. The City has granted to CVHP the option to purchase the Sunset Field before the expiration date as set forth in the Memorandum of Option. The City has the right to prepay the outstanding principal amount in whole or in part without penalty. The full principal amount will be credited to Lender against the purchase price payable if Lender acquires the Sunset Field from the City. The outstanding balance at June 30, 2020 was $500,000. In July 2020, the sale agreement of the Sunset Field between the City and CVHP has been executed. The outstanding balance of the note therefore has been credited against the purchase price and the loan is deemed paid in full. -58- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 8) LONG-TERM LIABILITIES, (continued) Notes Payable, (continued) Successor Agency Note On December 4, 2015, the City and Successor Agency entered into a settlement agreement with the California Department of Finance (DOF) regarding the Other Funds Due Diligence Review. The agreement requires the City to repay the Successor Agency $11,578,351 for transfers that did not represent enforceable obligations. The Successor Agency will then remit these funds to the Los Angeles County Auditor -Controller for allocation to the affected taxing entities. The amount of the note must be repaid through biannual payments in the amount of $289,459 each January 15th and June 15th until the loan is repaid in full on June 15, 2035. There is no interest charged on this repayment. The outstanding balance as of June 30, 2020 was $8,683,761. The annual debt service requirements on the Successor Agency note as of June 30, 2020 were as follows: Year Ending June 30, Principal 2021 $ 578,918 2022 578,918 2023 578,918 2024 578,918 2025 578,918 2026-2030 2,894,590 2031-2035 2,894,581 Total $ 8,683,761 Lease Revenue Bonds 2006 Lease Revenue Bonds, Series A and B (Big League Dreams Project) In September 2006, the City issued $10,710,000 of Lease Revenue Bonds, Series A and $7,295,000 of taxable Lease Revenue Bonds, Series B to provide financing for facilities and infrastructure related to the Big League Dreams sports park. The Series A bonds mature annually through June 1, 2036, in amounts ranging from $80,000 to $1,270,000, with interest rates that range from 4.0% to a maximum of 5.0% over the term of the bonds. The Series B bonds mature annually through June 1, 2036, in amounts ranging from $115,000 to $550,000, with interest rates that range from 5.39% to a maximum of 6.07% over the term of the bonds. The bonds are payable from lease payments as rental for certain public facilities. The reserve requirement was fully funded at June 30, 2020. The outstanding principal balance as of June 30, 2020 was $15,400,000. -59- City of West Covina Comprehensive Annual Financial Report For the Year Ended June 30, 2020 TABLE OF CONTENTS, (Continued) FINANCIAL SECTION, (Continued): Required Supplementary Information, (continued): Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: GeneralFund.................................................................................................122 West Covina Housing Authority Special Revenue Fund...............................124 State Gas Tax Special Revenue Fund..........................................................125 Notes to Required Supplementary Information......................................................126 Supplementary Information: Non -Major Governmental Funds: Combining Balance Sheet................................................................................129 Combining Statement of Revenues, Expenditures, and Changes in FundBalance.............................................................................................130 Non -Major Special Revenue Funds: Combining Balance Sheet................................................................................134 Combining Statement of Revenues, Expenditures, and Changes in FundBalance.............................................................................................140 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Drug Enforcement Rebate Special Revenue Fund....................................146 Measure M Special Revenue Fund............................................................147 Air Quality Improvement Special Revenue Fund........................................148 Proposition A Special Revenue Fund.........................................................149 Proposition C Special Revenue Fund.........................................................150 CESF Special Revenue Fund.....................................................................151 Police Donations Special Revenue Fund...................................................152 Transportation Development Act Special Revenue Fund ...........................153 AB939 Special Revenue Fund...................................................................154 Public Safety Augmentation Special Revenue Fund..................................155 COPS/SLESA Special Revenue Fund.......................................................156 Charter PEG Special Revenue Fund..........................................................157 Measure R Special Revenue Fund.............................................................158 Inmate Welfare Special Revenue Fund......................................................159 West Covina Community Services Foundation Special Revenue Fund .....160 Various Grants Special Revenue Fund......................................................161 Community Development Block Grant Special Revenue Fund ..................162 Maintenance District #1 Special Revenue Fund.........................................163 Maintenance District #2 Special Revenue Fund.........................................164 Coastal Sage Shrub Special Revenue Fund..............................................165 City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 8) LONG-TERM LIABILITIES, (continued) Lease Revenue Bonds, (continued) 2006 Lease Revenue Bonds, Series A and B (Big League Dreams Project), (continued) The annual debt service requirements on the 2006 Lease Revenue Bonds as of June 30, 2020 were as follows: Year Ending June 30, Principal Interest Total 2021 $ 515,000 $ 830,990 $ 1,345,990 2022 585,000 804,327 1,389,327 2023 660,000 772,557 1,432,557 2024 695,000 736,880 1,431,880 2025 730,000 699,295 1,429,295 2026-2030 4,305,000 2,856,229 7,161,229 2031-2035 6,090,000 1,553,179 7,643,179 2036 1,820,000 96,885 1,916,885 Total $ 15,400,000 $ 8,350,342 $ 23,750,342 2018 Lease Revenue Refunding Bonds, Series A and B On November 20, 2018, the City issued $19,310,000 of Lease Revenue Bonds, Series A and $4,855,000 of taxable Lease Revenue Bonds, Series B to provide financing for the advance refunding of the City's 2002 Lease Revenue Bonds Series A, 2004 Lease Revenue Bonds Series A&B, and the 2013 Lease Revenue Refunding Bonds Series A. The Series A bonds mature annually through May 1, 2044, in amounts ranging from $460,000 to $125,000, with interest rates that range from 4.0% to a maximum of 5.0% over the term of the bonds. The Series B bonds mature annually through May 1, 2030, in amounts ranging from $345,000 to $500,000, with interest rates that range from 2.953% to a maximum of 4.469% over the term of the bonds. The bonds are payable from lease payments as rental for certain public facilities. The reserve requirement was fully funded as of June 30, 2020. The outstanding principal balance as of June 30, 2020 was $23,025,000. The net savings and economic gain (loss) from this current refunding is unavailable due to those refunded bond series (including 2002 Lease Revenue Bonds Series A, 2004 Lease Revenue Bonds Series A&B, and the 2013 Lease Revenue Refunding Bonds Series A) having variable interest rates. -60- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 8) LONG-TERM LIABILITIES, (continued) Lease Revenue Bonds, (continued) 2018 Lease Revenue Refunding Bonds, Series A and B, (continued) The annual debt service requirements on the 2018 Lease Revenue Bonds as of June 30, 2020 were as follows: Year Ending June 30, Principal Interest Total 2021 $ 835,000 $ 1,028,098 $ 1,863,098 2022 870,000 991,076 1,861,076 2023 910,000 952,011 1,862,011 2024 950,000 910,569 1,860,569 2025 990,000 866,750 1,856,750 2026-2030 5,680,000 3,592,601 9,272,601 2031-2035 7,075,000 2,099,750 9,174,750 2036-2040 5,245,000 541,000 5,786,000 2041-2044 470,000 48,000 518,000 Total $ 23,025,000 $ 11,029,855 $ 34,054,855 Capital Lease Payable On October 8, 2019, the City financed the purchase of fire trucks by a five-year lease with the term at $196,759. The loan bears an interest at 4.36% a year and matures on December 1, 2024. Under the lease term, the City has a purchase option of these vehicles at the maturity of the term for $0. These assets have been capitalized with the obligation shown in the statement of net position. The cost of the trucks was $196,759 with the accumulated depreciation of $28,108 as of June 30, 2020. The total principal amount outstanding at June 30, 2020 was $180,122. The City's outstanding loan from direct borrowing of is secured with the vehicles as collateral. The outstanding loan from direct borrowings contain a provision that in an event of default, the timing of repayment of outstanding amounts may become immediately due or the vehicles may be repossessed. The future minimum payments on the lease are as follows Year Ending Principal Interest June 30, Total 2021 $ 37,037 $ 7,115 $ 44,152 2022 38,684 5,469 44,153 2023 40,404 3,749 44,153 2024 42,200 1,953 44,153 2025 21,797 278 22,075 $ 180,122 $ 18,564 $ 198,686 -61- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 8) LONG-TERM LIABILITIES, (continued) Compensated Absences The liability of $3,857,105 represents the governmental activities portion of total unpaid vacation and compensation time earned by employees of the City. There is no fixed payment schedule for earned but unpaid compensated absences. The General Fund typically has been used to liquidate the liability for compensated absences. The liability of $63,620 represents the business -type activity portion of total unpaid vacation and compensation time earned by employees of the City. There is no fixed payment schedule for earned but unpaid compensated absences. Claims and Judgments The City is exposed to various risks of loss related to its operation, including losses associated with errors and omissions, injuries to employees and members of the public. The City's Internal Service Self -Insurance Fund is used to account for and finance its uninsured risks of loss. The claims and judgments liability reported in the Internal Service Self -Insurance Fund is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims and judgments be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. Claims and judgments payable, including estimated claims for incurred but not reported claims, amounted to $13,178,903 as of June 30, 2020. Changes in the claims and judgments payable amounts in fiscal year 2020 for the Self - Insurance Fund were as follows: Beginning of Claims and End of Fiscal Year Changes in Claims Fiscal Year Fiscal Year Liability Estimates Payments Liability 2018-2019 $ 10,283,674 $ 2,507,859 $ (2,735,350) $ 10,056,183 2019-2020 10,056,183 8,147,744 (5,025,024) 13,178,903 -62- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 9) SELF-INSURANCE The City is a member of California State Association of Counties (CSAC) Excess Insurance Authority. The Authority is a member directed joint powers insurance pool, which has been operational since October 1979.The purpose of the Authority is to arrange and administer programs for the pooling of self -insured losses, to purchase excess insurance or reinsurance, and to arrange for group purchased insurance for property and other coverage. The City participates in the excess workers' compensation and excess general liability programs of the Authority. The City is exposed to various risks of loss related to its operation, including losses associated with errors and omissions, injuries to employees and members of the public. The City's Internal Service Self -Insurance Fund is used to account for and finance its uninsured risks of loss. The City is self -insured for the first $1,000,000 each for general liability and workers' compensation claims against the City. For workers' compensation, the City has a self -insured retention of $1,000,000 per occurrence. The City has a pooled retention of $5,000,000 each occurrence, a $20,000,000 reinsurance layer in excess of the $5,000,000 pooled retention per occurrence for general liability. During the past three fiscal years, none of the above programs of protection have had settlements or judgments that exceeded pooled or insured coverage. There has been no significant reduction in pooled or insured liability coverage from coverage in the prior year. On May 5, 2020, the City was approved to join the California Joint Powers Insurance Authority (CJPIA) and pool the City's self-insurance general liability and workers' compensation insurance through the CJPIA programs effective July 1, 2020. The City's withdrawal from the CSAC was also authorized by the City Council effective concurrently. 10) NON -CITY OBLIGATION DEBT Emanate Health, a California nonprofit public benefit corporation (the Corporation"), has requested that the California Statewide Communities Development Authority (the "Authority") participate in the issuance of one or more series of revenue bonds in an aggregate principal amount not to exceed $260,000,000 (the "Bonds") for the acquisition, construction, equipping, improvement, renovation, rehabilitation and/or remodeling of hospital, health care and related facilities (the "Facilities") to be owned and operated by the Corporation or one of its affiliates (the "Project"). For each component of the Project, the issuance of the Bonds by the Authority must be approved by the applicable city in which the component of the Project is located before construction can begin. One component of the Project consists of the construction of two separate buildings at the Queen of the Valley Hospital campus located in West Covina. On May 19, 2020, the City Council approved the issuance of the Bonds and Refunding Bonds by the Authority for the purposes of financing and/or refinancing the Project via the adoption of the resolution number 2020-26. -63- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 11) FUND BALANCE CLASSIFICATION The fund balances reported on the fund statements consist of the following categories: Non -spendable Fund Balance - This includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted Fund Balance - This includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. Committed Fund Balance - This classification includes amounts that can be used only for the specific purposes determined by a formal action of the City's highest level of decision - making authority. The City Council is the highest level of decision -making authority for the City that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Assigned Fund Balance - This classification includes amounts intended to be used by the City for specific purposes but do not meet the criteria to be classified as committed. The City Council (Council) has by resolution authorized the City Manager to assign fund balance. The Council may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year's appropriated budget. Unlike commitments, assignments generally only exist temporarily. Additional formal action does not normally have to be taken for the removal of an assignment. Unassigned Fund Balance - This is the residual classification that includes all spendable amounts not contained in the other classifications. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balances are available, the City's policy is to apply restricted fund balance first. When an expenditure is incurred for purposes for which committed, assigned or unassigned fund balances are available, the City's policy is to apply committed fund balance first, then assigned fund balance, and finally unassigned fund balance. -64- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 11) FUND BALANCE CLASSIFICATION, (continued) The details of fund balance as of June 30, 2020 were presented below: Special Revenue Funds West Covina Non -Major Total General Housing State Gas Governmental Governmental Fund Authority Tax Funds Funds Non -spendable: Prepaid expenses $ 147,023 $ 82,420 $ - $ - $ 229,443 Advances to other funds 332,173 - - - 332,173 Advancesto Successor Agency 3,599,960 - - - 3,599,960 Land held for resale 3,007,802 - 3,007,802 Restricted: Affordable housing - 24,409,396 - - 24,409,396 Debt service - - 4,055,990 4,055,990 Pension Trust 7,650 - - - 7,650 Community services - 4,843,488 4,843,488 Public safety - - - 7,730,436 7,730,436 Public works - - 4,720,311 18,285,074 23,005,385 Assigned: Capital projects - - - 1,786,815 1,786,815 Unassigned 12,580,716 - - (1,158,958) 11,421,758 Totals $ 19,675,324 $ 24,491,816 $ 4,720,311 $ 35,542,845 $ 84,430,296 -65- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 12) ACCUMULATED FUND BALANCES/NET POSITION DEFICITS The following funds reported deficits in fund balances/net position as of June 30, 2020: Deficit Balance Non -Major Funds: Proposition A Special Revenue Fund $ (36,739) CESF Special Revenue Fund (141) Transportation Development Act Special Revenue Fund (60,457) Various Grants Special Revenue Fund (345,953) Community Development Block Grant Special Revenue Fund (469,907) Auto Plaza Improvement District Special Revenue Fund (172,153) Integrated Waste Management Special Revenue Fund (11,073) Measure H Special Revenue Fund (62,535) Self -Insurance Internal Service Fund (2,152,648) Computer Service Fund Enterprise Fund (244,119) Governmental activities (18,642,521) The deficit of $36,739 in the Proposition A Special Revenue Fund, $141 in the U.S Department of Justice Special Revenue Fund, $60,457 in the Transportation Development Act Special Revenue Fund, $345,953 in the Various Grants Special Revenue Fund, $469,907 in the Community Development Block Grant Special Revenue Fund, $172,153 in Auto Plaza Improvement District Special Revenue Fund, $11,073 in the Integrated Waste Management Special Revenue Fund and $62,535 in the Measure H Special Revenue Fund are the results of expenditures incurred prior to reimbursement from grantors. The deficits will be eliminated through future grant revenues and as the Auto Plaza Improvement District pays back their advance from the General Fund. The deficit in the self-insurance internal service fund was a result of multiple litigation settlements during the year. The deficit will be eliminated through future revenues to this fund. The deficit in the Computer Services Fund net position was a result of additional expenses incurred for the development of new software. City Council has approved an agreement to transition the Computer Services Fund to a private vendor. The deficit will be eliminated through future revenues as a part of the transition. The deficit in the Governmental activities net position was a result of increased pension costs for unfunded liabilities and other post -employment benefits. -66- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 13) PENSION PLAN SUMMARY The City currently has a total of two pension plans administered by CalPERS and two retirement enhancement plans administered by PARS. The pension plans consist of a miscellaneous agent plan and a safety agent plan (see Note 14 for a full description of the plans). The retirement enhancement plan consists of an EPMC replacement supplemental retirement plan and a supplemental retirement plan for executive staff and City Council (see Note 15 for a full description of the plans). The summary of the pension related liability, deferred inflows of resources and deferred outflows of resources are as follows: Miscellaneous Safety EPMC Exec Total Deferred Outflows of Resources - Pension related $ 4,140,677 $ 18,162,220 $ 315,642 $ 80,311 $ 22,698,850 Deferred Inflows of Resources - Pension related 621,252 2,578,326 93,493 - 3,293,071 Pension Liability 46,031,509 144,682,762 951,046 3,486,069 195,151,386 14) RETIREMENT PLAN - CALPERS A) General Information about the Pension Plans Plan Descriptions The Plans are agent multiple -employer defined benefit pension plans administered by the California Public Employees' Retirement System (CaIPERS). A full description of the pension plans regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the plan's June 30, 2018 Annual Actuarial Valuation Report (funding valuation). Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CaIPERS' audited financial statements are publicly available reports that can be obtained at CaIPERS' website, at www.calpers.ca.gov. Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non -duty disability benefits after 5 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. -67- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) A) General Information about the Pension Plans, (continued) Benefits Provided. (continued) The Plan operates under the provisions of the California Public Employees' Retirement Law (PERL), the California Public Employees' Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan's authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board. The Plans' provisions and benefits in effect at June 30, 2020 are summarized as follows: Miscellaneous Plan Prior to After Prior to On or After Hire date January 1, 2011 January 1, 2011 January 1, 2013 January 1, 2013 Benefit formula 2.0%@55 2.5%@55 2.0%@60 2.0%@62 Benefit vesting schedule 5 years of service 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life monthly for life Retirement age 50 - 67+ 50 - 67+ 50 - 67+ 52 - 67+ Monthly benefits, as a % of eligible compensation 1.426%to 2.418% 2.0%to 2.5% 1.092%to 2.418% 1.0%to 2.5% Required employee contribution rates 0.00% 8.00% 7.00% 6.25% Required employer contribution rates 8.731 % 8.731 % 8.731 % 8.731 Safety Plan Prior to Prior to On or After Hire date July 1, 2012 January 1, 2013 January1, 2013 Benefit formula 3.0 % @ 50 3.0 % @ 55 2.7 % @ 57 Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 & Up 50 - 55+ 50 - 57+ Monthly benefits, as a % of eligible compensation 3.0 % 2.4% to 3.0 % 2.0% to 2.7% Required employee contribution rates 9.00 % 9.00 % 11.50 Required employer contribution rates 19.950 % 19.950 % 19.950 Employees Covered As of June 30, 2018, (valuation date), the following employees were covered by the benefit terms: Miscellaneous Safety Inactive employees or beneficiaries currently receiving benefits 437 340 Inactive employees entitled to but not yet receiving benefits 248 65 Active employees 152 161 Total 837 566 -68- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) A) General Information about the Pension Plans, (continued) Contributions Section 2O814(c) of the California Public Employees' Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CaIPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Miscellaneous and Safety Plan's for the fiscal year ended June 30, 2020 were $3,588,349 and $12,592,730, respectively. B) Net Pension Liability The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2019, using an annual actuarial valuation as of June 30, 2018 rolled forward to June 30, 2019 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows. Actuarial Methods and Assumptions Used to Determine Total Pension Liability Valuation Date June 30, 2018 Measurement Date June 30, 2019 Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB 68 Asset Valuation Method: Market Value of Assets. Actuarial Assumptions: Discount Rate 7.15 Inflation 2.50 Salary Increase Varies by Entry Age and Service Mortality Rate Table t'i Derived using CalPERS' membership data for all funds Post Retirement Benefit Increase The lesser of contract COLA up to 2.50 % until purchasing power protection allowance floor on purchasing power applies, 2.50 % thereafter (1) The mortality table used was developed based on CaIPERS' speck data. The table includes 15 years of mortality improvements using Society of Actuaries Scale 90 % of scale MP 2016. For more details on the table, please refer to the December 2017 experience study report (based on CaIPERS demographic data from 1997 to 2015) that can be found on the CaIPERS —bite. -69- City of West Covina Comprehensive Annual Financial Report For the Year Ended June 30, 2020 TABLE OF CONTENTS, (Continued) FINANCIAL SECTION, (Continued): Supplementary Information, (continued): Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Maintenance District #4 Special Revenue Fund.........................................166 Maintenance District #6 Special Revenue Fund.........................................167 Maintenance District #7 Special Revenue Fund.........................................168 Citywide Maintenance District Special Revenue Fund...............................169 Sewer Maintenance Special Revenue Fund..............................................170 Auto Plaza Improvement District Special Revenue Fund ...........................171 Mental Health Awareness Training Special Revenue Fund .......................172 Measure H Special Revenue Fund.............................................................173 Non -Major Debt Service Fund: Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual: CityDebt Service Fund...............................................................................175 Non -Major Capital Projects Funds: Combining Balance Sheet................................................................................177 Combining Statement of Revenues, Expenditures, and Changes in FundBalances............................................................................................179 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: City Capital Projects Fund..........................................................................181 Construction Tax Capital Projects Fund.....................................................182 Information Technology Capital Projects Fund...........................................183 Internal Service Funds: Combining Statement of Net Position...............................................................185 Combining Statement of Revenues, Expenses, and Changes in Net Position.............................................................................187 Combining Statement of Cash Flows...............................................................189 Pension Trust Funds: Combining Statement of Net Position...............................................................192 Combining Statement of Changes in Net Position...........................................193 Agency Fund: Statement of Changes in Assets and Liabilities...............................................195 City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) B) Net Pension Liability, (continued) Actuarial Methods and Assumptions Used to Determine Total Pension Liability. (continued) All other actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS' website, at www.calpers.ca.gov. Long-term Expected Rate of Return The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CaIPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The expected real rates of return by asset class are as follows New Strategic Real Return Real Return Asset Class' Allocation Years 1 - 102 Year 11+3 Global Equity 50.0 % 4.80 % 5.98 Fixed income 28.0 % 1.00 % 2.62 Inflation Assets 0.0 % 0.77 % 1.81 Private Equity 8.0 % 6.30 % 7.23 Real Assets 13.0 % 3.75 % 4.93 Liquidity 1.0 % 0.00 % (0.92 % ) Total 100.0 ' In the System's CAFR, fixed income is included in global debt securities; liquidity is included in short-term investments; inflation assets are included in both global equity securities and global debt securities. 2 An expected inflation of 2.0 % used for this period 3 An expected inflation of 2.92 % used for this period -70- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) B) Net Pension Liability, (continued) Change in Assumptions There were no changes of assumptions. Discount Rate The discount rate used to measure the total pension liability was 7.15 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Pension Plan Fiduciary Net Position Information about the pension plan's assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in CaIPERS' audited financial statements, which are publicly available reports that can be obtained at CaIPERS' website, at www.calpers.ca.gov. The plan's fiduciary net position and additions to/deductions from the plan's fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. The plan fiduciary net position disclosed in the GASB 68 accounting valuation report may differ from the plan assets reported in the funding actuarial valuation report due to several reasons. First, for the accounting valuations, CalPERS must keep items such as deficiency reserves, fiduciary self-insurance and Other Post -Employment Benefits (OPEB) expense included as assets. These amounts are excluded for rate setting purposes in the funding actuarial valuation. In addition, differences may result from early Comprehensive Annual Financial Report closing and final reconciled reserves. -71- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) C) Changes in the Net Pension Liability and Proportionate Share of Net Pension Liability The following table shows the changes in net pension liability recognized over the measurement period. Miscellaneous Plan: Increase Decrease Total Pension Plan Fiduciary Net Net Pension Liability Position Liabilityl(Asset) (a) b c=a-b Balance at: 6/30/2018 (VD) $ 157,065,997 $ 113,834,917 $ 43,231,080 Changes Recognized for the Measurement Period: • Service Cost 1,488,940 - 1,488,940 Interest on the Total Pension Liability 11,031,185 - 11,031,185 Differences between Expected and Actual Experience 1,166,025 - 1,166,025 Contributions from the Employer - 3,041,783 (3,041,783) Contributions from Employees - 597,814 (597,814) Net Investment Income 7,327,093 (7,327,093) • Benefit Payments, including Refunds of Employee Contributions (9,388,384) (9,388,384) - Administrative Expense (81,235) 81,235 • Other Miscellaneous Income/ Ex ense 266 266 Net Chan ee durin 2018-19 4,297,766 1,497,337 2,800,429 Balance at: 6/30/2019 MD $ 161,363,763 $ 115,332,254 $ 46,031,509 Valuation Date (VD), Measurement Date (MD). -72- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) C) Changes in the Net Pension Liability and Proportionate Share of Net Pension Liability, (continued) Safety Plan Increase (Decrease) Total Pension Plan Fiduciary Net Net Pension Liability Position Liability/(Asset) (a) (b) (c) _ (a) - (b) Balance at: 6/30/2018 VD $ 384,184,012 $ 244,096,518 $ 140,087,494 Changes Recognized for the Measurement Period: Service Cost 5,573,847 - 5,573,847 Interest on the Total Pension Liability 26,959,893 26,959,893 Differences between Expected and Actual Experience 706,038 - 706,038 Contributions from the Employer - 11,176,490 (11,176,490) Contributions from Employees 1,731,882 (1,731,882) Net Investment Income 15,909,762 (15,909,762) Benefit Payments, including Refunds of Employee Contributions (21,231,071) (21,231,071) - Administrative Expense (174,192) 174,192 Other Miscellaneous Income/ Ex ense 568 568 Net Chan es Burin 2018-19 12,008,707 7,413,439 4,595,268 Balance at: 6/30/2019 MD $ 396,192,719 $ 251,509,957 $ 144,682,762 Valuation Date (VD), Measurement Date (MD). Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Miscellaneous and Safety Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage -point lower (6.15 percent) or 1 percentage -point higher (8.15 percent) than the current rate: Discount Rate - 1% Current Discount Discount Rate + 1% (6.15%) Rate (7.15%) (8.15%) Miscellaneous Plan's Net Pension Liability $ 65,680,446 $ 46,031,509 $ 29,722,459 Safety Plan's Net Pension Liability $ 197,221,568 $ 144,682,762 $ 101,474,111 -73- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) C) Changes in the Net Pension Liability and Proportionate Share of Net Pension Liability, (continued) Subsequent Events There were no subsequent events that would materially affect the results presented in this disclosure. Amortization of Deferred Outflows and Deferred Inflows of Resources Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss: Net difference between projected 5-year straight-line amortization and actual earnings on pension plan investments All other amounts Straight-line amortization over the average expected remaining service lives (EARSL) of all members that are provided with benefits (active, inactive and retired) as of the beginning of the measurement period The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). The EARSL for the Miscellaneous Plan for the measurement date ending June 30, 2019 is 1.9 years, which was obtained by dividing the total service years of 1,614 (the sum of remaining service lifetimes of the active employees) by 837 (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to 0. Also note that total future service is based on the members' probability of decrementing due to an event other than receiving a cash refund. The EARSL for the Safety Plan for the measurement date ending June 30, 2019 is 3.4 years, which was obtained by dividing the total service years of 1,925 (the sum of remaining service lifetimes of the active employees) by 566 (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to 0. Also note that total future service is based on the members' probability of decrementing due to an event other than receiving a cash refund. -74- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) D) Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions As of the start of the measurement period (July 1, 2018), the net pension liability for Miscellaneous and Safety Plan was $43,231,080 and $140,087,494, respectively. For the measurement period ending June 30, 2019 (the measurement date), the City incurred a pension expense of $6,407,181 for the Miscellaneous Plan and $22,636,723 for the Safety Plan. A complete breakdown of the pension expense for Miscellaneous and Safety Plan is as follows: Miscellaneous Plan Description: Amount Service Cost $ 1,488,940 Interest on the Total Pension Liability 11,031,185 Recognized Differences between Expected and Actual Experience 1,055,939 Recognized Changes of Assumptions (396,055) Employee Contributions (597,814) Projected Earnings on Pension Plan Investments (7,918,718) Recognized Differences between Projected and Actual Earnings on Plan Investments 1,662,735 Administrative Expense 81,235 Other Miscellaneous (Income)/Expense (266) Total Pension Expense $ 6,407,181 Safety Plan Description: Amount Service Cost $ 5,573,847 Interest on the Total Pension Liability 26,959,893 Recognized Differences between Expected and Actual Experience 129,697 Recognized Changes of Assumptions 5,219,077 Employee Contributions (1,731,882) Projected Earnings on Pension Plan Investments (17,105,470) Recognized Differences between Projected and Actual Earnings on Plan Investments 3,417,937 Administrative Expense 174,192 Other Miscellaneous (Income)/Expense (568) Total Pension Expense $ 22,636,723 -75- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 14) RETIREMENT PLAN - CALPERS, (continued) D) Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions, (continued) As of June 30, 2020, the City has deferred outflows and deferred inflows of resources related to pensions as follows: Miscellaneous Safety Deferred Deferred Outflows of Deferred Inflows Outflows of Deferred Inflows Resources of Resources Resources of Resources Differences between Expected and Actual Experience $ 552,328 $ - $ 1,596,401 $ (522,943) Changes of Assumptions - - 3,973,089 (730,818) Net Difference between Projected and Actual Earnings on Pension Plan Investments - (621,252) - (1,324,565) Difference in Actual vs Projected Contributions - - - - Pension Contributions Subsequent to Measurement Date 3,588,349 12,592,730 $ 4,140,677 $ (621,252) $ 18,162,220 $ (2,578,326) These amounts above are net of outflows and inflows recognized in the 2018-19 measurement period expense. The $3,588,349 and $12,592,730 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the upcoming fiscal year. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Fiscal Year Deferred Outflows/(Inflows) of Ended Resources, Net June 30, Miscellaneous Safety 2021 $ 1,034,177 $ 4,880,900 2022 (1,035,243) (1,800,677) 2023 (186,183) (328,199) 2024 118,325 239,140 2025 - - Thereafter D) Payable to the Pension Plan The City had no outstanding amount of contributions to the pension plan required for the year ended June 30, 2020. -76- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) A) EPMC Replacement Supplemental Retirement Plan General Information about the Pension Plan Plan Description and Benefits Effective November 1, 2007, the City established an agent multiple -employer defined benefit plan to supplement the current CalPERS retirement benefits that is to be administered for the City by the Public Agency Retirement System (PARS), a third -party administrator. The plan meets the requirements of a pension trust under California Government Code. Phase II Systems is the PARS Trust Administrator. The plan does not issue separate financial reports. The EPMC Replacement Plan was established to replace a long-standing benefit for city employees no longer allowed by CaIPERS. The plan provides for a benefit in an amount equal to the member's years of service, times the member's final pay, times the CalPERS age factor, times .70% for miscellaneous employees (times .89% for safety employees). At the time of retirement, employees will make an election to receive either a lump sum payment or receive ongoing stipends over their lifetime. Employees shall be eligible to receive benefits under this plan if he or she meets all of the following requirements under one of the following tiers: Tier 1 • Full time miscellaneous employees on or after July 1, 2004 but hired prior to July 1, 2011. • Classified as a department head or city council, employee represented by the Confidential Employees' Association, General Employees' Association, West Covina Maintenance and Crafts Employees' Association, Mid -Management Employees' Association and Non -Sworn Support Employees' Association. • Has had compensable earnings under CalPERS impacted by CalPERS regulation, thereby causing a reduction in CalPERS benefits. • At least fifty (50) years of age. • Has completed at least one year of employment. • Has terminated employment with the City and concurrently retired under CalPERS under a regular service retirement and remains in retired status under CalPERS. • Has applied for benefits under this plan. -77- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued): A) EPMC Replacement Supplemental Retirement Plan, (continued) General Information about the Pension Plan. (continued) Plan Description and Benefits, (continued) Tier 2 • Full time employee: o Fire management employee on or after July 1, 2004 but hired prior to July 1, 2011. o Fire safety employee on or after July 1, 2004 but hired prior to July 1, 2012. o Police management employee on or after July 1, 2004 but hired prior to December 31, 2012, or an employee hired prior to January 1, 2013 who promotes or transfers to police management position on or after January 1, 2013. • Not represented by the West Covina Police Officers Association. • Has had compensable earnings under CalPERS impacted by CalPERS regulation, thereby causing a reduction in CalPERS benefits. • At least fifty (50) years of age. • Has completed at least one year of employment. • Has terminated employment with the City and concurrently retired under CalPERS under a regular service retirement, and remains in retired status under CalPERS. • Has applied for benefits under this plan. Contributions The City makes all contributions to these plans. Participants do not make any contributions. The actuarially required contribution is determined on the funding policy and most recent measurement available when the contribution for the reporting period was adopted. The City is funding the plan to pay the benefit payments payable each year. The City's contribution for the year ended June 30, 2020 was $56,957. -78- City of West Covina Notes to Basic Financial Statements For the Year Ended June 30, 2020 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS), (continued) A) EPMC Replacement Supplemental Retirement Plan, (continued) General Information about the Pension Plan. (continued) Employees Covered At June 30, 2019, the measurement date, the following employees were covered by the benefit terms for the plan: EPMC Inactive employees or beneficiaries currently receiving benefits 39 Active employees 109 Total 148 Net Pension Liability The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2019, using an annual actuarial valuation as of June 30, 2019. A summary of principal assumptions and methods used to determine the net pension liability is shown on the next page. Actuarial Assumptions The total pension liability at June 30, 2019, the measurement date, was determined using the following actuarial assumptions: EPMC Valuation Date June 30, 2019 Measurement Date June 30, 2019 Actuarial Cost Method Entry Age Normal Actuarial Assumptions: Discount Rate 3.90% at June 30, 2019 4.86% at June 30, 2018 Inflation 2.75% annually Salary Increases Aggregate - 3% annually Merit - CalPERS 1997-2015 Experience Study Investment Rate of Return 6.25% at June 30, 2019 and June 30, 2018 Mortality Rate Table CalPERS 1997-2015 Experience Study -79-