FINAL Performance Audit Financial Statement of the City of Oakland for fiscal year 2012-13, 2019-20

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Excerpt from the City of Oakland Auditor’s Report:

Mayor Schaaf, chairman of the council Bas, members of the municipal council, municipal administrator Reiskin,
and Oakland residents:

The attached audit report provides information on the financial activities of the City of Oakland for
years (AF) 2012-13 to 2019-20. This is the second year that we have produced this report. Last
year, the report provided a baseline on the city’s financial health prior to the COVID-19 pandemic.
Initially, the impetus for this report was twofold: to provide the public and leaders with a
digestible account of the city’s financial health and help decision-makers visualize the
of course, consider options, and adjust and improve the city’s long-term financial position. the
The COVID pandemic has exposed the vulnerabilities of the City’s finances. This report now also
is used to assess the fiscal impacts of the pandemic. To illustrate the impacts, we have included a section
on government funds, which focuses on the city’s short-term financial position.

Before the COVID pandemic, Oakland’s financial health was relatively stable. Based on our finances
analysis up to fiscal year 2018-2019, revenues had increased, debt was down, and cash and
credit scores were strong. In addition, the City was struggling to cope with the increasing benefits and
pension costs for civil servants. The COVID pandemic has impacted some of these gains. While
this report begins to articulate the impacts of the pandemic, the long-term consequences are not yet
to be known. In fiscal year 2019-2020, overall revenues increased slightly and government-related spending
activities decreased slightly. The reverse was true for the City’s General Purpose Fund, where
expenses exceeded revenues resulting in a negative change of $ 69 million in one year. This
seems to be attributed to a decrease in income due to the pandemic, coupled with an increase

Honorable Mayor, Honorable City Council, City Administrator and Oakland Residents
Financial Position of the City of Oakland for Fiscal Years 2012-13 to 2019-2020

in public security costs. The General Purpose Fund is the City’s discretionary fund and is used to
finance all or part of most of the city’s services.

During the 2019-2020 fiscal year, taxes on City operating permits, property transfer rights, transitional occupancy taxes,
parking taxes, sales and user taxes, and service charges decreased by $ 46.9 million from the
Previous exercice. In addition, five of the same six income categories are also lagging behind.
the first six months of fiscal year 2020-21 compared to the first six months of fiscal year 2019-20. In total, these
income categories were down $ 55.7 million, or 25.6 percent, from the first six months of
Previous exercice.

The City’s capitalization ratios for its three pension funds have remained relatively constant compared to last year as
the City’s other post-employment benefit (OPEB) liability decreased significantly from $ 841 million
in fiscal year 2018-19 to $ 599 million in fiscal year 2019-2020, a decrease of 40%. This decrease of $ 242 million is
mainly due to changes in actuarial assumptions regarding the discount rate and future benefits to be
paid.

City officials need to focus more on the city’s general fund reserves, which declined during the fiscal year
2019-20. As of June 30, 2020, the City’s General Fund reserves totaled $ 55 million, or $ 90 million
less than recommended by the Government Finance Officer Association (GFOA). Last year’s report also
noted that the City’s reserves were lower than recommended by the GFOA.

As noted in the previous year’s report, the City does not produce city-wide annual capital assets
report. Without quantifying these costs in one place, the City cannot begin to adequately determine
the future funds it needs to meet the City’s future infrastructure obligations.

Throughout the report, we’ve compared Oakland’s financial metrics to those of California cities.
with similar population size and government services. It is important to note that for
Nearly every financial indicator, Oakland does not rank favorably against these cities. the
The city would benefit from reviewing the past financial decisions of these cities and the way they develop their
respective budgets to light the future of Oakland.

A key message from this report is that the City must balance both its long-term financial position with its
short-term budgetary needs. Declining income, coupled with the General Purpose Fund
expenses exceed revenues, are clear signs that the City’s budget must be approached with caution.
We do not know exactly what the continuing impacts of the COVID pandemic are and the City is facing
pension and OPEB commitments in addition to the unknown costs of maintaining its assets. It should be a
time to implement financial strategies to consolidate finances, build up our reserves and reduce
our responsibilities so that the City can provide essential services in the future.
Respectfully submitted,

COURTNEY A. RUBY, CPA, CFE
Municipal auditor

The City of Oakland Auditor’s Report

FINAL Performance Audit City of Oaklands Financial Statement for Fiscal Years 2012 13 to 2019 20 by Zennie Abraham on Scribd

FINAL Performance Audit City of Oaklands Financial Statement for Fiscal Years 2012 13 to 2019 20 by Zennie Abraham on Scribd

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