CITY OFLOYALTON COUNTY OF SIERRA % 605 5 SCHOOL STREET * P.O. BOX 128 LOYALTON, CALIFORNIA 96118 I (530) 993-6750 190 N cityofloyalton.org PUNTY, OFFICEC OF THE MAYOR AGENDA FOR THE SPECIAL MEETING OF THE LOYALTON CITY COUNCIL 5:00 PM - CITY HALL AUDITORIUM 605 SCHOOL STREET DECEMBER 19TH 2023 LOYALTON, CA. AGENDA AND PACKET AVAILABLE ON CITY WEB SITE cityofloyalton.org NEXT ORDINANCE #425 NEXT RESOLUTION #7-2023 CALL TO ORDER: PLEDGE OF ALLEGIANCE: ROLL CALL: APPROVAL OF AGENDA: ANNOUNCEMENTS: STAFF REPORTS: PUBLIC COMMENT: This is an opportunity for members of the public to address the Council on items which are not on the agenda. Please state your name for the record. Comments are limited to three minutes. Written comments should be submitted to the Board Clerk 24 hours prior to the meeting to allow for distribution. Under Government Code Section 54954.2 - Brown Act, the Council çannot take action on any item not on the agenda. The City Mayor may choose to acknowledge the comment or, where appropriate, briefly answer a question, refer the matter to staff, or set the item for discussion at a future meeting. A SPECIAL MEETING IS BEING HELD TO CONDUCT THE FOLLOWING BUSINESS: CLOSED SESSION: 1. Closed Session pursuant to Government Code Section 54957, Public Employee mployment/Bookkcepet/Accountant/Maintenance Worker, Employee Evaluation Reviews. Agenda Input of Upcoming Meetings Council Member Closing Remarks ADJOURNMENT CITY - OFLOYALTON COUNTY OF SIERRA 5 09 605 SCHOOLS STREET * P.O. BOX 128 LOYALTON, CALIFORNIA 96118 (530) 993-6750 3 1 cityofloyalton.org Cc UNTY CA OFFICE OF THE: MAYOR AGENDA FOR THE REGULAR MEETING OF THE LOYALTON CITY COUNCIL 6:00 P.M. = CITY HALL AUDITORIUM 605 SCHOOL STREET DECEMBER 19TH, 2023 NEXT ORDINANCE #425 NEXT RESOLUTION NO. 7-2023 AGENDA & PACKET AVAILABLE ON CITY WEB SITE cityofloyalton.org Any person with a disability may submit a request for reasonable modification or accommodation to the above-described means for accessing and offering comment at the meeting to Kathy LeBlanc, City Clerk, at ofclerk-cityofloyalton@psin.com) who will swiftly resolve such request. 1. CALLTO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLLCALL 4. APPROVAL OF AGENDA 5. ANNOUNCEMENTS 6. APPROVALOF MINUTES Special Meeting November 16, 2023 (Attachment) Regular Meeting November 20, 2023 (Attachments) 7. STAFF REPORTS 1. Water Rate Structure (Information Only Attachment) 8. APPOINTMENT OF MAYOR AND VICE-MAYOR 9. APPOINTMENT OF COMMITTEES AND BOARDS 10. PUBLIC COMMENT This is an opportunity for members of the public to address the Council on items which are not on the agenda. Please state your name for the record. Comments are limited to three minutes. Written comments should be submitted to the City Clerk 24 hours prior to the meeting to allow for distribution. Under Government Code Section 54954.2 Brown Act, the Council cannot take action on any item not on the posted agenda 11. FIRE DEPARTMENT REPORT 12. FINANCIAL COMMITTEE REPORTS 1. Financial Committee Report/Update Approval of Reconciled Accounts for November 2023 (Attachment) Approval of Bill Sheet November 2023 (Attachment) Acknowledgment of Approval of Fund Transfer from General 1956 to Enterprise Loan MM 0559 not to exceed $24,000. (Attachment) 13. PUBLIC WORKS COMMITTEE REPORTS/PARK AND RECREATION 14. OTHER COMMITTEE REPORTS 15. DISCUSSION AND POSSIBLE ACTION ITEMS 1. Discussion and Possible Action regarding Reaffirming our State of Emergency Water Distribution System. 2. Discussion and Possible Action regarding Town Hall Meeting on Water Distribution System. 3. Discussion and Possible Action regarding Approval of Final Audit 2022-2023 4. Discussion and Possible Action regarding Pressure Washer Pump for WWTP. 5. Discussion and Possible Action regarding Tree Removal WWTP. 6. Discussion and Possible Action approval of Business License for East Fork Roofing. 16. AGENDA INPUT FOR UPCOMING MEETINGS 17. BOARD MEMBER CLOSING REMARKS 18. ADJOURNMENT November 20th, 2023 REGULAR MEETING The Regular meeting of the Loyalton City Council was called to order by Mayor Riede on November 20th, 2023, at 6:00 p.m. Loyalton City Auditorium COUNCIL MEMBERS PRESENT Mayor Riede, J. Markum, D. Gayner, B. Mertton, S. MclIravy COUNCIL MEMBERS ABSENT STAFF PRESENT City Clerk- Kathy LeBlanc GUESTS PRESENT T. Wiley, J. Buck, D. Lawyer, L. Horner, J. Herod, L. Mcintosh, J. Powers, L. Garza, C. Johnson, M. DeBerg APPROVAL OF AGENDA It was moved by D. Gayner, seconded by.. Markum to approve the agenda and addendum as presented. Motion unanimously carried. ANNOUNCEMENTS 1. Mayor Riede announced she would like to set up a Fund-raising committee. She also stated that she will be looking into getting a separate account for Prop 218 monies. APPROVAL OF MINUTES 1. It was moved by D. Gayner, seconded by B. Mertton to approve the minutes of the Regular Meeting on October 17, 2023. S. Mcliravy abstained. Motion carried. 2. It was moved by D. Gayner, seconded by B. Mertton to approve the minutes of the Special Meeting on November 6, 2023. S. Mcliravy abstained. Motion carried. STAFF REPORTS/WRITTEN COMMUNICATIONS 1. It was decided by consensus that Mayor Riede will be appointed to the Solid Waste Task Force. 2. Councimember Mciiravy announced that she is working on getting a waiver for the Housing Element as the City needs the money for the water infrastructure. She will be working with Senator Dahal office. 3. Mayor Riede gave a brief update on the fund transfer for the Loyalton Fire Department stating that the City will be paying them as soon as funds become available. PUBLIC COMMENT 1. L. Mcintosh addressed the Council on HUD-Community Development Block Grants. 2. J. Herod presented al letter to the Council signed by We The People regarding the Prop 218 taxes. Councilmember MclIravy read the letter to the public. 3. L. Garza stated that the letter does not speak for all the citizens of Loyalton. FIRE DEPARTMENT REPORT No Fire Department Report. FINANCIAL COMMITTEE REPORT/UPDATE No Financial Report was given. It was moved by B. Mertton, seconded by D. Gayner to approve the reconciled accounts for October 2023. Motion unanimously carried. It was moved by D. Gayner, seconded by S. Mclravy to approve bills for October not to exceed $112,479.14. Motion unanimously carried. ACKNOWIEDGEMENT OF APPROVAL OF FUNDS TRANSFERS. 1. It was moved by S. Mcllravy, seconded by D. Gayner to approve fund transfer from General 1956 to Enterprise Loan MM 0559 not to exceed $24,000. Motion unanimously carried. PUBLIC WORKS COMMITTEE REPORTS/PARK AND RECREATION 1. Mayor Riede spoke on snow plowing fori the City of Loyalton, she also reported that the maintenance crew is working on keeping weeds down at the WWTP. Mayor Riede reported that the Bathrooms are now closed for the winter at the park and the water downtown has been shut off. Mayor Riede reported that she has interviewed for general maintenance and snow plowing. OTHER COMMITTEE REPORTS 1. Councilmember Gayner stated that Cal-Trans will paint lines downtown Highway 49. DISCUSSION AND POSSIBLE ACTION ITEMS 1. Mayor Riede gave a brief update on the water distribution system, after a brief discussion It was moved by. J. Markum, seconded by D. Gayner to reaffirm our State of Emergency Water Distribution System. Motion unanimously, carried. (This item will be added to next agenda) 2.Councilmeber B. Mertton gave a brief report on the Town Hall meeting on November 2, 2023. He reported that Justus Lundy and Kenn Bennette attended and answered questions for the community. (This item will be added to the next agenda) 3. After a brief discussion, it was moved by D. Gayner, seconded by J. Markum to approve Pricing Recapitulation for surge protector for the WWTP not to exceed $11,241.00. Motion unanimously carried. 4. After a brief discussion, it was moved by J. Markum, seconded by B. Mertton to table the purchase of duck weed skimmer for the WWTP until spring. Motion unanimously carried. 5. Councilmember Gayner stated that there was no conflict of interest regarding the contract with Sierra Valley Cogen, LLC. She informed the council that the price would be $175.00 per hour with a 4-hour minimum. After a brief discussion, it was moved by S. Mcllravy, seconded by J. Markum to approve the contract upon a clean provision of the contract with the changes. Motion unanimously carried. 6. After a brief discussion, it was moved by. J. Markum, seconded by S. Mcllravy to approve the Holiday Incentive for the employees for a $100.00 gift certificate from Leonard's Market. Motion unanimously carried. 7. Magdeline DeBerg Exeçutive Director of the Loyalton Senior Center addressed the Council regarding a new heater for the Thrift Store. She stated that the Senior Center will purchase the heater for the Thrift Store and would like to maintain a good working relationship with the City of Loyalton. It was moved by D. Gayner, seconded by J. Markum to approve the purchase of the new heater. Motion unanimously carried. IMPUT FOR UPCOMING MEETINGS 1. Discussion on grant manager/writer for proposed grants. 2. Appointment of Mayor and Vice Mayor and Committees. CLOSING REMARKS Happy Thanksgiving Meeting Adjourned APPROVED: Mayor Darlene Riede ATTEST: Kathy LeBlanc, City Clerk November 16th, 2023 SPECIAL MEETING The special meeting of the Loyalton City Council was called to order by Mayor Riede on November 16th, 2023, at 4:00 p.m. COUNCIL MEMBERS PRESENT Mayor D. Riede, D. Gayner, B. Mertton, J. Markum COUNCIL MEMBERS ABSENT: STAFF PRESENT GUESTS PRESENT:J. Buck, J. Powers, J. Cameron, L. Garza, C. Johnson, L. Mcintosh, W. Bergstrom, J. Herod APPROVAL OF AGENDA It was moved by D. Gayner, seconded by J. Markum to approve the agenda as presented. Motion carried. ANNOUNCEMENTS Mayor Riede announced that Congressman Kiley stated that the grant is moving forward. STAFF REPORTS PUBLIC COMMENT 1. J. Cameron questioned the posting of the agendas. 2. J. Herod questioned the counçil on the grant funds for the water project. DISCUSSION AND POSSIBLE ACTIONS 1. It was moved by J. Markum, seconded by D. Gayner to appoint S. Mcliravy to the vacant council position. Roll Call: Mayor Riede-Aye, D. Gayner-Aye, J. Markum-Aye, B. Mertton-Aye. Motion carried. (S. Mcilravy will be sworn in on Monday) 2. After a discussion It was moved by J. Markum, seconded by B. Mertton to approve the Draft Audit. Motion carried 3. Linsey Mcintosh addressed the council on possible grants for the Old Museum. After a discussion L. McIntosh will bring back to the council more information. AGENDA IMPUT FOR UPCOMMING MEETING 1. Lindsey Mcintosh regarding Old Museum Planning Grant COUNCIL MEMBER CLOSING REMARKS MEETING ADJOURNED APPROVED: Mayor Darlene Riede ATTEST: Kathy LeBlanc- City Clerk PROVOST8PRICHARD CONSULTING GROUP 455 W Fir Ave.Clovis, CA 93611 . (559) 449-2700 wwwpoosandpndardcom MEETING NOTES Date: 11/30/2023 Time: 11:30 am - 12:00 pm Called by: Provost & Pritchard Location: Video Conference (Teams) Subject: AR7090 - City of Loyalton X Darlene Riede, City of Loyalton, Mayor R Heather Bashian, Provost & Pritchard Attendees: a Kathy LeBlance, City of Loyalton, Clerk X Andy Scheer, Provost & Pritchard B Steve Watson, SWRCB, DDW R Mindy Geiselman, Provost & Pritchard K Salem Alyafeai, SWRCB, DFA B Ryan Reese, Provost & Pritchard ASSISTANCE REQUEST UNDERSTANDING: Rate Study A5 5-year progressive rate structure is preferred Prop 218 o P&P will prepare all notices, including mailing list, and facilitate public hearing notice distribution The City's counse! can review materials, as needed Community Outreach P&P will prepare materials (notices, fliers, ballots) for City to distribute P&P will prepare presentations for and the facilitate meetings SYSTEM BACKGROUND System components: Two active wells One primary (park well) and one backup (high school) Wells provide sufficient capacity and address fire flow o 346 residential services, most unmetered 10 commercial services, 5 metered, 5 unmetered Distribution system is having issues that are being addressed by engineer Distribution System will be replaced entirely with upcoming project Two water storage tanks o System maintains a backup generator located at the waste water plant Currentrate structure: Rates currently charged: flat rate ($126.19 per month for water and sewer) $53.72 per month for water City plans to maintain a flat rate going forward Currently community is under emergency water restrictions Trigger for rate study August 2023 - Ad Hoc/Townhall meeting to discuss water infrastructure, solutions, etc. Building moratorium is in place until the water system has been improved. Entire water distribution system replacement project in process An appropriation will be provided, however, there will be a match requirement Engineering Structural . Geostructural Surveying Planning Environmental GIS Construction Services Hydrogeology Consulting Clovis Visalia Bakersfield . Modesto . Los Banos . Chico . Sacramento Sonora . San Luis Obispo Boise,ID AR7090 City ofl Loyalton November 30, 2023 Page 2of2 The match will be funded partially through a property tax assessment, which has a progressive increase over 40 years Remaining match funding still begin determined; may include loan component Rate Study needed to address escalating costs and possibly funding match loan repayment. Data availability: Financial audits - annually; in process now Good level of data available; the City does regular audits and has been through rate studies before. NEXT STEPS AND TIMELINE: P&P will prepare draft Work Plan and distribute to stakeholders by December 15; comments requested by December 22. P&P will prepare final Work Plan for DFA approval and submit to the SWRCB by. January 2; approval is anticipated by end of March but possibly sooner VepmgomlpdaademucA SWACB-OINVA401Z30Z AR7090 City of Loyalton200 Technical202 Community Kickoff/AR7090 City of Loyalton Kickoff Meeting Notes.docx CITY COUNCIL BOARD MEMBERS 2023 DARLENE RIEDE MAYOR P.O. Box 488, Loyalton, CA 96118 530-993-4541 DORIE GAYNER VICE MAYOR P.O. Box 559, Loyalton, CA 96118 858-204-6700 JOY MARKUM Council Member P.O. Box 559, Loyalton, CA. 96118 530-993-4102 BILL MERTTON Council Member P.O. Box 5, Loyalton, Ca. 96118 530-386-2895 KATHY LEBLANC City Clerk P.O. Box 128, Loyalton Ca. 96118 530-993-6750 BOARDS LAFCO - Dorie Gayner, Joy Markum, Bill Merton-Alternate LTC - Dorie Gayner, Joy Markum, Bill Mertton SCORE = Kathy LeBlanc, Dorie Gayner-Alternate COMMITTEES Finance - Darlene Riede, Bill Mertton Public Works = Darlene Riede, Bill Mertton Personnel - Darlene Riede, Dorie Gayner SVGWMD- Joy Markum, Bill Mertton-Alternate CITY OF LOYALTON FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2023 CITY OF LOYALTON Table of Contents Independent Auditor's Report. Basic Financial Statements: Goverment-Wide Finançial Statements: Statement ofl Net Position, 4 Statement of Activities 5 Fund Financial Statements: Governmental Funds: Balançe Sheet. 6 Reconciliation oft the Governmental Funds Balance Sheet to the Government-Wide Statement of! Net Position = Governmental Activities 7 Statement ofRevenues, Expenditures and Changes in Fund Balances 8 Reconciliation of the Statement of Revenues, Expenditures and Changes In Fund Balances of Governmental Funds to the Government-Wide Statement of Activities Governmental Activities 9 Proprietary Funds: Statement of Net Position 10 Statement of Revenues, Expenses and Changes in Net Position, 11 Statement of Cash Flows, 12 Notes to the Financial Statements 13 Required Supplementary Information: Budgetary Comparison Schedule: General Fund, 27 Special Revenue Fund Gas Tax Fund 28 Note to the Required Supplementary Information. 29 LARRY BAIN, CPA An Accounting Corporation 2148 Frascati Drive, El Dorado Hills, CA 95762 / 916.601-8894 pbain@sbcglobal.net INDEPENDENT AUDITOR'S REPORT To the City Council City ofLoyalton, California Qualified Opinion Except for the effects of the matters described in the "Basis for Qualified Opinion" paragraph, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of the City of Loyalton as of June 30, 2023, and the respective changes in finançial position and where applicable, cash flows thereof for the fiscal year then ended in conformity with U.S. generally accepted accounting principles. Basis for Qualified Opinion The City does not utilize an accounting system with a self-balancing set of accounts for recording transactions to each fund. As a result entries can be posted to the general ledger causing the financial statements to be out of balance by fund and entries posted to funds causing material misstatement without being detected in a timely manner by the finance staff. The City has not reviewed and adjusted prior year allocations for the enterprise funds debt service reserve transfers. The net effect of adjustments could result in material misstatements to these finançial statements, the amount of which is unknown. The City has not obtained an actuarial valuation and has not recorded the information in these financial statements in accordance with Governmental Accounting Board Statement No. 68 (GASB 68), for the pension commitment made to certain retirees ofthe City. As a result ofnot obtaining an actuarial valuation in accordance with GASB 68, the amount of misstatement to the net pension liability, the deferred outflow of resources, the deferred inflow of resources and pension expense is unknown. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are required to be independent of the City of Loyalton and to meet our other ethical responsibilities in accordance with the relevant ethiçal requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 Responsibilities ofl Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance ofi internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about City of Loyalton's ability to continue as a going concern within one year after the date that the financial statements are available to be issued. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in açcordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influençe the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards, we: Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of City of Loyalton's internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about City of Loyalton's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit. Required Supplementary Information Management has omitted the 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 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. Our opinion on the basic financial statements are not affected by this missing information. 2 Other Information The required supplementary information other than Management Discussion and Analysis, described as the budgetary comparison schedules in the table of contents on pages 27 and 28 are 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 (GASB), 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. ew J 3a Larry Bain, CPA An Accounting Corporation November 28, 2023 3 CITY OF LOYALTON STATEMENT OF NET POSITION JUNE 30, 2023 Govemmental Business-type Activities Activities Total Current Assets Cash and investments $ 381,049 $ 1,865,679 $ 2,246,728 Prepaid expense 28,786 28,786 Inventory 127,400 127,400 Accounts receivable 19,135 56,260 75,395 Grants receivable 20,310 15,985 36,295 Restricted cash and investments 52,469 350,878 403,347 Total current assets 472,963 2,444,988 2,917,951 Non Current Assets Internalbalances 560,583 (560,583) Capitalassets: Land 55,293 373,319 428,612 Buildings 609,570 415,920 1,025,490 Site improvements 2,363,686 11,392,235 13,755,921 Equipment 1,050,603 797,853 1,848,456 Less: accumulated depreciation (1,826,786) (6,408,712) (8,235,498) Total capital assets 2,252,366 6,570,615 8,822,981 Total non current assets 2,812,949 6,010,032 8,822,981 Total assets 3,285,912 8,455,020 11,740,932 Liabilities Current liabilities: Accounts payable 8,846 21,931 30,777 Accrued wages 1,044 5,213 6,257 Customer deposits 7,902 7,902 Accrued interest payable 55,672 55,672 Uneamed revenue-advance 66,260 66,260 Long-term liabilities-due within one year 144,800 144,800 Total current liabilities 76,150 235,518 311,668 Liabilities-due in more than one year: Note payable 721,529 721,529 Certificate of participation 3,523,300 3,523,300 Total liabilities due in more than one year 4,244,829 4,244,829 Total liabilities 76,150 4,480,347 4,556,497 Net Position Net investment in capital assets 2,252,366 2,180,986 4,433,352 Restricted 350,878 350,878 Unrestricted 957,396 1,442,809 2,400,206 Total net position $ 3,209,762 $ 3,974,673 $ 7,184,435 The accompanying notes are an integral part of these financial statements 4 CITY OF LOYALTON STATEMENT OF ACTIVITIES JUNE 30, 2023 Net (Expense) Revenue and Program Revenues Changes in Net Position Charges for Operating Grants Governmental Business-type Functions/programs Expenses Services and Contributions Activities Activities Total Governmental Activities: General government $ 307,769 $ 20,161 $ $ (287,608) $ $ (287,608) Public safety 195,925 56,322 222,046 82,443 82,443 Public works 1,793 15,699 13,906 13,906 Health and welfare-cemetery 367 (367) (367) Streets and roads 58,994 23,299 19,472 (16,223) (16,223) Community development 3,115 1,459 (1,656) (1,656) Culture/recreation 53,457 230 (53,227) (53,227) Interest expense 2,673 (2,673) (2,673) Total governmental activities 624,093 115,711 242,977 (265,405) (265,405) Business-type Activities: Water 573,025 290,187 (282,838) (282,838) Sewer 541,147 390,911 (150,236) (150,236) Interest on long-term debt 142,157 (142,157) (142,157) Total business-type activities 1,256,329 681,098 (575,231) (575,231) Total Government $1,880,422 $ 796,809 $ 242,977 (265,405) (575,231) (840,636) General Revenues: Taxes: Property taxes 45,635 45,635 Sales and use tax 68,326 68,326 Franchise tax Motor vehicle in lieu tax 35,289 35,289 Other 9,582 9,582 Sale of assets 1,500 1,500 Investment income 691 52,647 53,338 Total general revenues 161,023 52,647 213,670 Change in net position (104,382) (522,584) (626,966) Net position beginning of fiscal year 3,287,184 4,497,257 7,784,441 Prior period adjustment 26,960 26,960 Net position end of fiscal year $ 3,209,762 $3,974,673 $7,184,435 The accompanying notes are an integral part of these financial statements 5 CITY OF LOYALTON GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2023 Major Special Total Revenue Fund Governmental General Gas Tax Funds Assets Cash and investments $ 372,166 $ 8,883 $ 381,049 Restricted cash 52,469 52,469 Receivables Accounts 19,135 19,135 Grants 20,310 20,310 Due from other funds 708,519 18,974 727,493 Total assets $ 1,120,130 $ 80,326 $1,200,456 Liabilties Accounts payable $ 5,143 $ 3,703 $ 8,846 Accrued wages 1,044 1,044 Unearned revenue-advance 13,791 52,469 66,260 Due to other funds 104,227 62,683 166,910 Total liabilities 124,205 118,855 243,060 Fund Balances Restricted Assigned for specialrevenue funds Unassigned 995,925 (38,529) 957,396 Total fund balances 995,925 (38,529) 957,396 Total liabilities and fund balances $ 1,120,130 $ 80,326 $1,200,456 The accompanying notes are an integral part of these financial statements 6 CITY OF LOYALTON RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2023 Fund balances of governmental funds $ 957,396 Amounts reported for governmental activities in the statement of net position are different because: Capital assets, net of accumulated depreciation, are not current financial resources and are not included in the governmental funds. 2,252,366 Net position of governmental activities $ 3,209,762 The accompanying notes are an integral part of these financial statements 7 CITY OF LOYALTON GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE FISCAL YEAR ENDED JUNE 30, 2023 Major Special Total Revenue Fund Governmental General Gas Tax Funds Revenues Taxes $ 113,961 $ $ 113,961 Licenses and permits 21,445 21,445 Intergovernmental 277,645 42,771 320,416 Charges for current services 71,267 71,267 Use of money and property 356 356 Other 9,616 9,616 Totalrevenues 494,290 42,771 537,061 Expenditures Current: General government 234,232 234,232 Public safety 148,925 148,925 Health and sanitation 367 367 Highways and streets 58,994 58,994 Community development 3,115 3,115 Culture and recreation 20,950 20,950 Debt service Principal 43,465 43,465 Interest 2,674 2,674 Capital outlay 108,700 108,700 Totalexpenditures 562,427 58,994 621,421 Excess (deficit) of revenues over expenditures before other financing sources (uses) (68,137) (16,223) (84,360) Other Financing Sources (Uses) Sale of assets 1,500 1,500 Operating transfers in 32,278 32,278 Operating transfers out (32,278) (32,278) Total other financing sources (uses) (30,778) 32,278 1,500 Net change in fund balances (98,915) 16,055 (82,860) Fund balances, beginning of fiscal year 1,035,835 (22,539) 1,013,296 Prior period adjustment 59,005 (32,045) 26,960 Fund balances, end of fiscal year $ 995,925 $ (38,529) $ 957,396 The accompanying notes are an integral part of these financial statements 8 CITY OF LOYALTON RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES-GOVERNMENTAL ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2023 Net change in fund balances - total governmental funds $ (82,860) Amounts reported for governmental activities in the statement of activities differs from the amounts reported in the statement of revenues, expenditures and changes in fund balances because: Governmental funds report capital outlays as expenditures. However, in the statement of activities. The costs of those assets is allocated over their estimated useful lives as depreciation expense or are allocated to the appropriate functional expense when the cost is below the capitalization threshold. This activity is reconciled as follows: Cost of assets capitalized 108,700 Depreciation expense (154,838) Principal payment on long-term debt is recorded as an expense in the fund financial statements, however the payment is recorded as a reduction to the liability in the statement of net position 43,466 Change in net position of governmental activities $ (85,531) The accompanying notes are an integral part of these financial statements 9 CITY OF LOYALTON STATEMENT OF NET POSITION PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2023 Water Sewer Totals Current Assets: Cash and investments $ (209,162) $ 2,074,841 $ 1,865,679 Restricted çash and investments 61,887 288,991 350,878 Prepaid expense 323 28,463 28,786 Inventory 127,400 127,400 Receivables Accounts (net ofallowance for doubtful accounts) 25,383 30,877 56,260 Interest reçeivable 15,985 15,985 Due fromother funds 71,963 43,224 115,187 Total current assets 77,794 2,482,381 2,560,175 Capital assets: Nondepreciable Capital Assets: Land 373,319 373,319 Depreciable Capital Assets Building 415,920 415,920 Site improvements 2,787,734 8,604,501 11,392,235 Equipment 145,993 651,860 797,853 Less accumulated depreciation (1,477,517) (4,931,195) (6,408,712) Totalcapital: lassets (net ofaccumulated depreciation) 1,456,210 5,114,405 6,570,615 Total: assets 1,534,004 7,596,786 9,130,790 Liabilities Current Liabilities: Accounts payable 12,762 9,169 21,931 Accrued payroll 1,957 3,256 5,213 Customer deposits 3,161 4,741 7,902 Due to other funds 158,707 517,063 675,770 Current portion long term liabilities 23,600 121,200 144,800 Interest payable 12,872 42,800 55,672 Total current liabilities 213,059 698,229 911,288 Noncurrent Liabilities: Bonds payable 721,529 721,529 Certificates of! participation 834,500 2,688,800 3,523,300 Total noncurrent liabilties 834,500 3,410,329 4,244,829 Total liabilities 1,047,559 4,108,558 5,156,117 Net Position: Net investment in capital assets 598,110 1,582,876 2,180,986 Restricted for debt service 61,887 288,991 350,878 Unrestricted (173,552) 1,616,361 1,442,809 Total net position $ 486,445 $ 3,488,228 $ 3,974,673 The accompanying notes are an integral part of these financial statements 10 CITY OF LOYALTON STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2023 Water Sewer Totals Operating Revenues Charges for services $ 290,187 $ 390,911 $ 681,098 Total operating revenues 290,187 390,911 681,098 Operating Expenses Salaries and benefits 105,643 143,801 249,444 Services and supplies 395,613 169,238 564,851 Depreciation expense 71,769 228,108 299,877 Total operating expenses 573,025 541,147 1,114,172 Operating income (loss) (282,838) (150,236) (433,074) Non-Operating Revenues (Expenses) Interest income 196 52,451 52,647 Interest expense (39,123) (103,034) (142,157) Total non-operating revenues (expenses) (38,927) (50,583) (89,510) Net increase (decrease) in net position (321,765) (200,819) (522,584) Net position, beginning offiscalyear 808,210 3,689,047 4,497,257 Net position, end offiscalyear $ 486,445 $ 3,488,228 $ 3,974,673 The accompanying notes are an integral part of these financial statements 11 CITY OF LOYALTON STATEMENT OF CASH FLOWS PROPRIETARY FUNDS JUNE 30, 2023 Water Sewer Totals Cash Flows from Operating Activities Cash received from customers $ 294,260 $ 396,073 $ 690,333 Cash payments to suppliers (515,484) (156,871) (672,355) Cash payments to employees (103,686) (140,545) (244,231) Net cash provided by (used for) operating activities (324,910) 98,657 (226,253) Cash Flows from Capital and Related Financing Activities Purchase offixed assets (6,219) (6,219) Reductions ofdebt (22,600) (116,200) (138,800) Interest expense (39,462) (104,612) (144,074) Net cash provided by (used for) capital and related financing activities (62,062) (227,031) (289,093) Cash Flows from Investing Activities: Interest income 196 36,467 36,663 Net cash provided by investing activities 196 36,467 36,663 Net increase (decrease) in cash and cash equivalents (386,776) (91,907) (478,683) Cash and cash equivalents, beginning offiscalyear 239,501 2,455,739 2,695,240 Cash and cash equivalents, end offiscal year $ (147,275) $ 2,363,832 $ 2,216,557 Reconciliation ofCash and Cash Equivalents: Cash and investments $ (209,162) $ 2,074,841 $ 1,865,679 Restricted cash and investments 61,887 288,991 350,878 Total cash and cash equivalents $ (147,275) $ 2,363,832 $ 2,216,557 Reconciliation ofOperating Income to Net Cash Provided by (used for) operating activities $ (282,838) $ (150,236) $ (433,074) Adjustments to operating income: Depreciation 71,769 228,108 299,877 (Increase) decrease in accounts receivable 912 421 1,333 (Increase) decrease in prepaid expense (323) 5,305 4,982 (Increase) decrease in inventory (127,400) (127,400) Increase (decrease) in accounts payable 7,852 7,062 14,914 Increase (decrease) in accrued payroll 1,957 3,256 5,213 Increase (decrease) in customer deposits 3,161 4,741 7,902 Net cash provided by (used for) operating activities $ (324,910) $ 98,657 $ (226,253) The accompanying notes are an integral part of these financial statements 12 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 1: Summary of Significant Accounting Policies The basic financial statements of City of Loyalton, California, (the "City") have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") as applied to governmental agencies. The Governmental Accounting Standards Board ("GASB") is the acceptable standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. A. Reporting Entity The City was incorporated in 1901, as a municipal corporation operating under the general laws of the State of California. The City operates under a Council-Manager form of government and provides services including general government, public works, public safety, water, sewer, and parks and recreation. Control or dependence is determined on the basis of budget adoption, selection of governing authority and designation of management, outstanding debt secured by revenues or general obligations of the City and ability to significantly influence operations. The financial reporting entity, as defined by the GASB, consists of the primary government, the City, organizations for which the primary government is finançially accountable, and any other organization for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. B. Basis of Accounting The government-wide, proprietary and agency fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned or, for property tax revenues, in the period for which levied. Expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Revenue from sales tax is recognized when the underlying transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligible requirements have been satisfied. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of açcounting. Revenues are recognized when both measurable and available. Measurable means the amount of the transaction can be determined and available means collectible in the current period or soon enough thereafter to be used to pay liabilities of the current period. Resources not available to finance expenditures and commitments of the current period are recognized as deferred revenue or as a reservation of fund balance. The City considers property taxes available ifthey are collected within sixty-days after year-end. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt, as well as compensated absences and claims and judgments are recorded only when payment is due. General capital acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and capital leases are reported as other financial sources. When applicable, the City reports deferred revenue on its combined balance sheet. Deferred revenue arises when a potential revenue source does not meet both the measurable and available criteria for recognition in the current period. Deferred revenues also arise when resources are received by the City before it has legal claim to them, as when grant monies are received prior to the occurrençes of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has legal claim to the resources, deferred revenue is removed from the combined balance sheet and revenue is recognized. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity ofthe fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non- exchange transactions or ancillary activities. 13 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 1: Summary of Significant Accounting Policies (Continued) C. Basis of Presentation Government-Wide Financial Statements The statement of net position and statement of activities display information about the primary government (the City). These statements include the financial activities of the overall government. These statements distinguish between the governmental and business-type activities of the City. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties. The statement of activities demonstrates the degree to which the program expenses of a given function are offset by program revenues. Program expenses include direct expenses, which are clearly identifiable with a specific function. Program revenues include I) charges paid by the recipient of goods or services offered by the programs and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues. When both restricted and unrestricted net position are available, unrestricted resources are used only after the restricted resources are depleted. Fund Financial Statements The fund financial statements provide information about the City's funds. Separate statements for each fund category governmental and proprietary are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in separate columns. All remaining governmental and enterprise funds are separately aggregated and reported as non-major funds. The City reports the following major governmental funds: General Fund - This fund accounts for all the financial resources not required to be accounted for in another fund. This fund consists primarily of general government type activities. Gas Tax Fund - This fund is used to account the revenues and expenditures of the State Gas Tax The City reports the following major enterprise funds: Water and Sewer Funds - account for the operation of the City's water and sewer utilities. Activities of these funds include administration, operation and maintenance of the water and sewer systems and billing and collection activities. The Funds also accumulate resources for, and payment of long-term debt principal and interest. All costs are financed through charges made to utility customers with rates reviewed regularly and adjusted if necessary to ensure the integrity ofthe Funds. D. Use ofEstimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expendituresexpenses during the reporting period. Actual results could differ from those estimates. 14 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 1: Summary of Significant Accounting Policies (Continued) E. Cash Equivalents For the purpose of the statement of cash flows, the City considers cash and cash equivalents as short term, highly liquid investments that are both readily convertible to known amounts of cash and sO near their maturity that they present insignificant risk ofchanges in value because of changes in interest rates. Restricted cash and unrestricted pooled cash and investments held by the City are considered cash equivalents for purposes of the combined statement of cash flow's because the City's cash management pool and funds invested by the City possess the characteristics of demand deposit accounts. F. Fixed Assets Capital assets, recorded at historical cost or estimated historical cost if actual historical cost is not available, are reported in governmental activities column of the government-wide financial statements. Contributed fixed assets are valued at their estimated fair market value. Capital assets include land, buildings and building improvements and equipment. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000. The costs of normal maintenançe and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Depreciation is recorded in the government-wide financial statements on the straight-line basis over the useful life of the assets as follows: Assets Useful Life Building and improvements 40-50 years Utility Systems 18-50 years Equipment and machinery 5-15 years G. Property Tax Sierra County is responsible for assessing, collecting and distributing property taxes in açcordance with enabling legislation. Revenue received is based on an allocation factor calculated by the County under the provisions of Proposition 13 plus a percentage of the increase in market value in specific areas. The City's property tax is levied each July I on the assessed values as of the prior January 1 for all real and personal property located in the City. Property sold after the assessment date (January I)is reassessed and the amount of property tax levied is prorated. Secured property taxes are due in two equal installments; the first is due November I and delinquent with penalties after December 10; the second is due February 1 and delinquent with penalties after April 10. Unsecured property tax is levied on July 1 and due on July 31 and becomes delinquent on August 31. Based on a policy by the County called the Teeter Plan, 100% of the allocated taxes are transmitted by the County to the City, eliminating the need for an allowançe for unçollectable. The County, in return, receives all penalties and interest on the related delinquent taxes. H. Balance Sheet Classifications Certain resources are classified as restricted assets as their use is restricted for specific purposes by bond agreements, lease agreements, trust agreements, grant agreements, City Charter provisions, or other requirements. Governmental fund types' restricted assets are for grant advances. Proprietary fund types' restricted assets are for renewal and replacement of equipment and debt service reserves. 15 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 1: Summary of Significant Accounting Policies (Continued) I. Compensated Absences City employees are granted vacation in varying amounts based on classification and length of service. Upon termination or retirement, the City is to pay 100% of the vacation time accrued and 25-35% of the accrued sick leave depending on the length of employment with the City. Governmental Funds - Governmental funds record expenditures for compensated absences as they are taken by employees. Proprietary Funds Proprietary funds reçord expenditures for compensated absences as they are taken by employees. J. Intergovernmental Revenues Federal and state governments reimburse the City for costs incurred on certain fixed asset construction projects under capital grant agreements. Amounts claimed under such grants are credited to intergovernmental revenues if the project is being administered by a Capital Projects fund or to contributed capital if administered by a Proprietary fund. Additionally, the City receives reimbursement from federal and state governments for other programs, such as streets, housing and rehabilitation. These reimbursements are recorded in the fund administering the program as intergovernmental revenues with related program costs included in expenditures. The respective grant agreements generally require the City to maintain accounting reçords and substantiating evidence to determine if all costs incurred and claimed are proper and that the City is in compliance with other terms of the grant agreements. These records are subject to audit by the appropriate government agency. Any amounts disallowed will reduce future claims or be directly recovered from the City. K. Net Position The government-wide and proprietary fund financial statements utilize a net position presentation. Net position are categorized as invested in capital assets (net of related debt), restricted, and unrestricted. Net investment in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets. Restricted net position Consists of net position with constraints placed on their use either by (1) external groups such as creditors, grantors, contributors or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. These principally include restrictions for capital projects, debt service requirements and other special revenue fund purposes. Unrestricted net position All other net position that do not meet the definition of"restricted" or "net investment in capital assets. 16 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 1: Summary of Significant Accounting Policies (Concluding) L. Fund Balances As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. As of June 30, 2023, fund balances for governmental funds are made up of the following: Non-spendable fund balance - includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example: inventories, prepaid, and long-term receivables. Restricted fund balance - includes amounts that can be spent for specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. Committed fund balance - includes amounts that can only be used for the specific purposes determined by a formal action of the City's highest level of decision-making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action that imposed the constraint originally (for example: resolution and ordinance). Assigned fund balançe - comprises amounts intended to be used by the City for specific purposes that are neither restricted nor committed. Intent is expressed by (I) the City Council or (b) a body (for example: a budget or finance committee) or official to which City Council has delegated the authority to assign amounts to be used for specific purposes. Unassigned fund balance - is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. In other governmental funds, if expenditures incurred for specific purposes exceeded the amounts restricted, committed, or assigned to those purposes, that fund would report a negative unassigned fund balance. Note 2: Cash and Investments The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the çombined balance sheet as cash and investments. Unless otherwise dictated by legal or çontractual requirements, income earned or losses arising from the investment of pooled cash are allocated on a quarterly basis to the participating funds and component units based on their proportionate shares of the average quarterly cash balance. The City maintains "restricted cash and investments". Monies restricted are for debt service reserves and legal settlement funds for the wastewater treatment plant. Cash and investments at June 30, 2023, consisted oft the following: Cash and investments $ 2,246,728 Restricted cash and investments 403,347 Total per statement of activities $ 2,650,075 Checking account $ 378,016 Imprest cash 400 Savings 235,726 LAIF 2,035,933 Total cash and investments $ 2,650,075 17 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 2: Cash and Investments (Continued) A. Investments Authorized by the California Government Code and the Entity's Investment Policy The table below identifies the investment types that are authorized for the City of Loyalton by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions ofthe California Government Code (or the City's investment policy, where more restrictive) that address interest rate risk, credit risk and concentration 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, rather than the general provisions of the California Government Code or the City investment policy. Maximum Percentage Investment Authorized Investment Type Maturity ofPortfolio in One Issuer Investment pools authorized under CA Statutes governed by Government Code N/A None $40 million U.S. Treasury Obligations 5 years None None Bank Savings Accounts N/A 25% None Federal Agencies 5 years 75% None Commercial Paper 180 days 20% None Negotiable Certifiçates of Deposit 180 days 20% None Re-Purchase Agreements 180 days 20% None Corporate Debt 5 years 25% None B. Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of and investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the District's investment by maturity: Remaining Maturity (in Months) 12 Months 13-48 Investment Type Totals or Less Months State Investment Pool* $ 2,035,933 $ 2,035,933 $ Totals $ 2,035,933 $ 2,035,933 $ *Not subject to categorization C. Concentrations of Credit Risk The investment policy of the City contains limitations on the amount that can be invested in any one issuer. There are no investments to one issuer exceeding those limits. D. 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 deposit 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 of 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 provision for deposits; The California Government Code requires that a financial institution secured 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 government unit). The fair 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 the City's deposits by pledging first deed mortgage notes having a value of 150% of the secured public deposits. 18 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 2: Cash and Investments (Continued) D. Custodial Credit Risk (Continued) At June 30, 2023, the City's deposits balance was $601,666 and the carrying amount was $613,742. The difference between the bank balance and the carrying amount was due to normal outstanding checks and deposits in transit. Of the bank balance $250,000 was covered by the Federal Depository Insurance. E. Investment in State Investment Pool LAIF is included in the State's Pooled Money Investment Account. The total amount invested by all public agencies in the State's Pooled Money Investment Account approximates $176.44 billion. Of the $176.44 billion managed by the State Treasurer, 100% is invested in non-derivative financial products and 2.78% is invested in structured notes and asset-backed securities. The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by state statute. Investments are accounted for in accordance with the provisions of GASB Statement No. 31, which requires governmental entities to report certain investments at fair value in the balance sheet and recognize the corresponding change in fair value of investments in the year in which the change occurred. The City reports its investments at fair value based on quoted market information obtained from fiscal agents or other sources if the change is material to the financial statements. Note 3: Liability, Insured Programs and Workers Compensation Protection The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. In 1986, the City, joined together with other cities in the State to form Small Cities Organized Risk Effort (SCORE), a public entity risk pool currently operating as a common risk management and insurance program for member cities. The City pays an annual premium to SCORE for its insurance coverage. The Agreement for Formation of the SCORE provides that SCORE will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of self-insured levels. A Board of Directors governs the SCORE, consisting of one member appointed by each Member City. A management group employed by the SCORE handles the day-to-day business. At the termination of the joint power agreement and after all claims been settled, any excess or deficit will be divided among the cities in accordance with its governing documents. Finançial statements of SCORE are available at the City. 19 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 4: Capital Assets Capital asset activity for the year ended June 30, 2023 was as follows: Balance Retirements/ Balance Governme ntal Activities July 1, 2022 Additions Adjustments June 30, 2023 Capital assets, not being depreciated: Land $ 55,293 $ $ $ 55,293 Construction in progress 88,500 (88,500) Capital assets, being depreciated: Buildings and improvements 2,363,686 (257,500) 2,106,186 Site improvements 867,070 867,070 Equipment 855,403 197,200 (2,000) 1,050,603 Total capital assets, being depreciated 4,086,159 197,200 (2,000) 4,023,859 Less accumulated depreciation for: Buildings and improvements (1,014,762) (76,581) 257,500 (833,843) Site Improvements (478,952) (29,463) (508,415) Equipment (437,735) (48,793) 2,000 (484,528) Totalaccumulated depreciation (1,931,449) (154,837) 259,500 (1,826,786) Total capital assets, being depreciated, net 2,154,710 42,363 2,197,073 Governmental activities capital assets, net $ 2,298,503 $ 42,363 $ (88,500) $ 2,252,366 Business-Type Activities Water Capital assets, being depreciated: Site improvements $ 2,787,734 $ $ $ 2,787,734 Equipment 149,993 (4,000) 145,993 Total capital assets, being depreciated 2,937,727 (4,000) 2,933,727 Less accumulated depreciation (1,409,748) (71,769) 4,000 (1,477,517) Total capital assets, being depreciated, net 1,527,979 (71,769) 1,456,210 Water capital assets, net $ 1,527,979 $ (71,769) $ $ 1,456,210 Ser wer Capital assets, not being depreciated: Land $ 373,319 $ $ $ 373,319 Construction in progress 17,550 (17,550) Capital assets, being depreciated: Buildings 415,920 415,920 Site improvements 8,598,282 6,219 8,604,501 Equipment 637,310 17,550 (3,000) 651,860 Total capital assets, being depreciated 9,651,512 23,769 (3,000) 9,672,281 Less accumulated depreciation (4,706,087) (228,108) 3,000 (4,931,195) Total capital assets, being depreciated, net 4,945,426 (204,339) 4,741,086 Sewer capital assets, net $ 5,336,295 $ (204,339) $ (17,550) $ 5,114,405 20 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 4: Capital Assets (Continued) Depreciation Depreciation expense was charged to functions/programs of the City as follows: Governmental Activities General government $ 73,537 Public safety 47,000 Streets and roads 1,793 Parks 32,507 Total $ 154,837 The City believes the estimated useful lives of some of the assets involved at the Wastewater Treatment Plant will be much less than was previously anticipated at the time the assets were completed. Depreciation expense has been increased accordingly. The ultimate useful life of these items will depend on the alternative corrective action the City selects for repair ofthe facility. Note 5: Lease Income The City of Loyalton derives a portion of its revenue from the rental of real property based on a fixed lease amount. All leases of the City are treated as operating leases for accounting purposes. Lease terms can be terminated by lessor at any time and without cause. Because these are cancelable leases we do not present the operating revenue over the term ofthe lease, and they are not subject to GASB 87. Note 6: Long-term Liabilities Govemmental-Type Activities: A summary of changes in the City's governmental-type activities long-term liabilities for the year ended June 30, 2023: Balance Retirements/ Balance Due Within July 1, 2022 Additions Adjustments June 30, 2023 One Year Capital leases $ 43,465 $ $ (43,465) $ $ Total $ 43,465 $ $ (43,465) $ $ During the 2019-20 fiscal year, the City purchased a fire tender water truck for $241,869, paying $171,869 cash and $70,000 with a capital lease. The capital lease agreement was executed on April 24, 2020 with 5 annual payments of $15,536 including interest, starting April 24, 2021 through April 24, 2025, with an interest rate of3.574%. This loan was paid off during the 2022/23 fiscal year. 21 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 6: Long-term Liabilities (Continued) Business-Type Activities: A summary of changes in the City's business-type activities long-term liabilities for the year ended June 30, 2023: Water Fund Balance Retirements/ Balance Due Within July 1,2022 Additions Adjustments June 30, 2023 One Year 2004 COP $ 880,700 $ $ (22,600) $ 858,100 $ 23,600 Total $ 880,700 $ $ (22,600) $ 858,100 $ 23,600 SewerF Fund Balance Retirements/ Balance Due Within July 1,2022 Additions Adjustments June 30, 2023 One Year 1995A Sewer revenue bond $ 665,238 $ $ (38,600) $ 626,638 $ 40,900 1995B Sewer revenue bond 100,491 (5,600) 94,891 6,300 2009 COP 2,882,000 (72,000) 2,810,000 74,000 Total $ 3,647,729 $ $ (116,200) $ 3,531,529 $ 121,200 Water Fund - 2004 Certificates of Participation The City of Loyalton issued $1,144,600 in certificates of participation on March 1, 2004 through Rural USDA to provide funds for the construction of various water system improvements. The installment payments are secured by a pledge of the net revenues of the City's water system as provided in the installment purchase contract. The interest rate is 4.5% with payment due dates of March 1 and September 1 and final payment due September 1, 2044. Future annual requirements to amortize the long-term debt outstanding as of June 30, 2023 are as follows: Fiscal Year End June 30, Principal Interest Total 2024 $ 23,600 $ 38,615 $ 62,215 2025 24,700 36,997 61,697 2026 25,800 35,861 61,661 2027 27,000 34,673 61,673 2028 28,200 33,431 61,631 2029-2033 161,200 146,475 307,675 2034-2038 200,900 105,905 306,805 2039-2043 250,100 55,361 305,461 2044-2045 116,600 5,306 121,906 Totals $ 858,100 $492,622 $1,350,722 22 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 6: Long-term Liabilities (Continued) Sewer Fund - Series 1995-A Revenue Bond The City of Loyalton issued $1,256,500 in revenue bonds on February 1, 1995 through Rural Economic and Community Development Service to provide funds for the construction of various water system improvements. The payments are secured by a pledge of the net revenues of the City's sewer system as provided in the installment purchase contract. The interest rate is 4.5% with payment due dates of February 1 and August 1 and final payment due August 1, 2034. Future annual requirements to amortize the long-term debt outstanding as of June 30, 2023 are as follows: Fiscal Year End June 30, Principal Interest Total 2024 $ 40,900 $ 27,281 $ 68,181 2025 42,600 25,403 68,003 2026 44,300 23,447 67,747 2027 46,200 21,411 67,611 2028 48,600 19,278 67,878 2029-2033 275,900 60,892 336,792 2034-2035 128,138 5,819 133,957 Totals $ 626,638 $183,530 $ 810,168 Sewer Fund - Series 1995-B Revenue Bond The City of Loyalton issued $186,200 in revenue bonds on February 1, 1995 through Rural Economic and Community Development Service to provide funds for the construction of various water system improvements. The payments are secured by a pledge of the net revenues ofthe City's sewer system as provided in the installment purchase contract. The interest rate is 4.5% with payment due dates of February 1 and August 1 and final payment due August 1, 2034. Future annual requirements to amortize the long-term debt outstanding as of June 30, 2023 are as follows: Fiscal Year End June 30, Principal Interest Total 2024 $ 6,300 $ 4,129 $ 10,429 2025 6,600 3,839 10,439 2026 6,900 3,535 10,435 2027 7,100 3,220 10,320 2028 7,400 2,894 10,294 2029-2033 41,600 9,077 50,677 2034-2035 18,991 864 19,855 Totals $ 94,891 $ 27,556 $ 122,447 23 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 6: Long-term Liabilities (Continued) Sewer Fund - 2009 Certificate of Participation The City of Loyalton issued $3,569,000 in certificates of participation on February 1, 2010 through Rural USDA to provide funds for the construction of various sewer system improvements. The installment payments are secured by a pledge of the net revenues of the City's water system as provided in the installment purchase contract. The interest rate is 2.5% with payment due dates of February 1 and August 1 and final payment due August 1, 2049. Future annual requirements to amortize the long-term debt outstanding as of June 30, 2023 are as follows: Fiscal Year End June 30, Principal Interest Total 2024 $ 74,000 $ 69,325 $ 144,250 2025 76,000 67,450 143,450 2026 78,000 65,525 143,525 2027 80,000 63,550 143,550 2028 82,000 61,525 143,525 2029-2033 441,000 275,488 716,488 2034-2038 499,000 216,813 715,813 2039-2043 564,000 150,450 714,450 2044-2048 638,000 75,450 713,450 2049-2050 278,000 7,000 285,000 Totals $2,810,000 $1,052,575 $ 3,863,500 Note 7: Defined Benefit Pension Plan On November 16, 2016, the CalPERS Board of Administration declared the city of Loyalton in default of its obligation to CalPERS. Effective January 2018, CalPERS reduced the retirement benefits paid to City ofLoyalton retirees', , pursuant to Government code section 20577 to 40% of retiree' base pension benefit, as subject to cost of living adjustments as calculated by CalPERS ("Reduced Benefit Amount".) Per a settlement agreement with three City of Loyalton retirees, beginning April 2019, and on a monthly basis thereafter, the City of Loyalton agreed to pay an amount equal to 1.075 times the monthly Reduced Benefit Amount for the three retirees. In no event shall Loyalton's monthly payment, when combined with CalPERS' monthly payment, exceed 83% of the three retirees Base Pension or Survivor Benefit (whichever is appliçable). Loyalton's obligations under this Agreement will cease once CalPERS ceases making payments to the retirees or their designated survivors. The total amount paid by the City of Loyalton to the retirees during the 2022/23 fiscal year was $51,470. 24 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 8: Interfund Transactions Operating transfers are transactions to allocate resources from one fund to another fund not contingent on the incurrence of specific expenditures in the receiving fund. Interfund transfers are generally recorded as operating transfers in and operating transfers out in the same accounting period. Receivables and Payables Balances representing lending/borrowing transactions between funds outstanding at the fiscal year end are reported as either "due from/due to other funds" (amounts due within one year), "advançes to/from other funds" (non-current portions of interfund lending/borrowing transactions), or "loans to/from other funds" (long-term lending/borrowing transactions evidençed by loan agreements). Advances and loans to other funds are offset by a fund balance reserve in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources. The interfund balances are not expected to be repaid within one year of the balance sheet date. Interfund transactions for the fiscal year ended June 30, 2023 are summarized as follows: Due to Due from Other Funds Other Funds General fund $ 104,227 $ 708,519 Special revenue funds 62,683 18,974 Enterprise funds 675,770 115,187 Totals $ 842,680 $ 842,680 Note 9: Stewardship, Compliance and Accountability A. Deficit Fund Balances The gas tax fund had a deficit fund balance of $38,529 at June 30, 2023. The deficit fund balance is expected to be eliminated upon receipt of future funding or transfers from the general fund. The water fund had an unrestricted negative net position of $173,552 and a negative cash balance of $147,275 at June 30, 2023. B. Expenditures over Budgeted Appropriations General fund expenditures were over the appropriations budget by $217,179 and general fund operating transfers out were over budget by $32,278. Note 10: Revenue Limitations Imposed by California Proposition 218 Proposition 218, which was approved by the voters in November 1996, regulates the City's ability to impose, increase, and extend taxes and assessments. Any new increase or extended taxes and assessments subject to the provisions of Proposition 218, requires voter approval before they can be implemented. Additionally, Proposition 218 provides that these taxes and assessments are subject to voter initiative and may be rescinded in the future years by the voters. Note 11: Related Party Transactions The City currently is operating without a City Manager. Members of the City Council have taken on the job duties normally performed by a City Manager. The members of the City Council are not compensated for taking on these duties in excess ofthe approved stipend per meeting received by all City Council members. 25 CITY OF LOYALTON Notes to the Financial Statements June 30, 2023 Note 12: Gann Limit Proceeds subject to the limit for 2022-23 $ 213,466 Amount of limit for 2022-23 1,377,796 Amount (under)/over the limit $ (1,164,330) Per Capita Percentage Change 7.55% Population Change 0.00% Note 13: Operating Lease On March 21, 2017 the City entered into an operating lease agreement with the Sierra County Probation Department, whereas the City agreed to lease the 1,334 square foot building at 105 Beckwith Street to the Sierra County Probation Department for $1,000 per month, plus the Probation Department has agreed to pay all utilities for the building. The lease had an initial 5-year lease with an option to renew for a one-year period. As of June 30, 2023 the lease was on a month-to-month rental period per the holdover provision of the lease, furthermore the rent was reduçed to $900 per month to compensate for utilities used by others in the building. Note 14: Prior Period Adjustment Prior period adjustments were recorded increasing beginning general fund, fund balance by $59,005 to account for $28,064 strike team revenue from 2021/22 that was received in 2022/23, record prior year telecom revenue for $735, true up prior year payroll liabilities for $496 account for a $2,070 payment to SCORE related to the 2021/22 fiscal year, and to account for a $31,780 VLF transfer that was double booked in the prior year. Prior year adjustments were made decreasing the gas tax fund, fund balance $32,045 to account for the general fund transferring $31,780 in the prior year that was double recorded and to account for a prior year payment to SCORE for $264. Note 15: Commitments and Contingencies Grants Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, ifany, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, ifany, to be immaterial. Commitments The City had ongoing engineering and professional service commitments as of June 30, 2023. Note 16: Subsequent Events The City of Loyalton management has evaluated subsequent events through November 28, 2023, the date these financial statements were available to be issued. 26 CITY OF LOYALTON REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND JUNE 30, 2023 Variance Original Final Favorable Budget Budget Actual (Unfavorable) Revenues Taxes $ 125,000 $ 135,000 $ 113,961 $ (21,039) Licenses and permits 4,500 16,155 21,445 5,290 Intergovernmental 1,459 121,914 277,645 155,731 Charges for current services 47,594 57,300 71,267 13,967 Use of money and property 15,150 14,290 356 (13,934) Other 5,500 8,569 9,616 1,047 Total revenue 199,203 353,228 494,290 141,062 Expenditures Current: General government 174,049 230,878 234,232 (3,354) Public safety 57,494 67,520 148,925 (81,405) Health and sanitation 367 (367) Community development 3,115 (3,115) Culture and recreation 20,950 (20,950) Debt service Principal 12,862 43,465 43,465 Interest 2,674 2,674 2,674 Capital outlay 712 108,700 (107,988) Total expenditures 247,079 345,249 562,427 (217,179) Excess (deficit) of revenues over expenditures before other financing sources (uses) (47,876) 7,979 (68,137) (76,116) Other Financing Sources (Uses) Sale of assets 1,500 1,500 Operating transfers in 12,400 Operating transfers out (32,278) (32,278) Total other financing sources (uses) 12,400 1,500 (30,778) (32,278) Net change in fund balance $ (35,476) $ 9,479 (98,915) $ (108,394) Fund balance, beginning of fiscal year 1,035,835 Prior period adjustment 59,005 Fund balance, end of fiscal year $ 995,925 27 CITY OF LOYALTON REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GAS TAX FUND JUNE 30, 2023 Variance Original Final Favorable Budget Budget Actual (Untavorable) Revenues Intergovernmental $ 66,000 $ 74,574 $ 42,771 $ (31,80. Total revenue * 66,000 74,574 42,771 (31,80: Expenditures Current: Highways and streets 66,000 74,291 58,994 15,29 Total expenditures * 66,000 74,291 58,994 15,29 Excess (deficit) of revenues over expenditures before other financing sources (uses) 283 (16,223) (16,50 Other Financing Sources (Uses) Operating transfers in 32,278 32,27: Total other financing sources (uses) 32,278 32,27: Net change in fund balançe * $ $ 283 16,055 $ 15,77: Fund balance, beginning of fiscal year (22,539) Prior period adjustment (32,045) Fund balance, end of fiscal year $ (38,529) 28 CITY OF LOYALTON Note to Required Supplementary Information June 30, 2023 Budgets and BudgetaryAccounting As required by State law the City prepares and legally adopts a final operating budget. Public hearings were conducted on the proposed and final budget to review all appropriations and the source of financing. The budgets for the general fund and Gas Tax fund are adopted on the modified accrual basis of accounting. The budget for the general fund and Gas Tax fund are the only legally adopted budgets. Appropriations lapse at fiscal year-end. The budgetary data presented in the final budgeted amount in the accompanying financial statements includes all revisions approved by the City Council. 29 CITY OF LOYALTON MANAGEMENT REPORT JUNE30, 2023 LARRY BAIN, CPA Member of American Institute of Certified Public Accountants An Accounting Corporation Member of AICPA Peer Review Program 2148 Frascati Drive, El Dorado Hills, CA 95762 / 916.601-8894 pbaln@sbcglobal.net COMMUNICATION OF SIGNIFICANT DEFICIENCIES AND MATERIAL WEAKNESSES To: City Council City of Loyalton We have audited the financial statements of City of Loyalton as of and for the fiscal year ended June 30, 2023, and have issued our report thereon dated November 28, 2023. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. In planning and performing our audit, we considered City ofLoyalton' S (City) internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly we do not express an opinion on the effectiveness ofthe City's internal control over financial reporting. 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 material misstatement of the entity's financial statements will not be prevented. or detected and corrected on a timely basis. Our consideration ofthe internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all such deficiencies have been identified. We consider findings 2023-001 through 2023-004 in the following schedule of findings to be deficiencies in internal control that we consider to be material weaknesses. A significant deficiency is a deficiency, or 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 finding findings 2023-005 through 2023-008 in the following schedule of findings to be significant deficiencies in the City's internal control: City of Loyalton's Response to Findings The City of Loyalton's written response to the significant deficiencies identified in our audit and any follow up for subsequent year çorrections has not been subjected to the audit procedures applied in the audit of the financial statements and accordingly, we do not express an opinion on the responses. Purpose ofthis Report The purpose of this report is solely to describe the scope of our testing of internal controls over financial reporting and the result ofthat testing, and not to provide an opinion on the effectiveness of the City's internal control. This report is an integral part of an audit performed in accordance with auditing standards generally accepted in the United States of America in considering the City's internal control over financial reporting, accordingly this report is not suitable for any other purpose. This report is intended solely for the information and use of the board of directors and management ofCity ofLoyalton. v Larry Bain, CPA, An Accounting Corporation November 28, 2023 2 CITY OF LOYALTON SCHEDULE OF FINDINGS JUNE 30, 2023 Significant Deficiencies Deemed Material Weaknesses Finding 2023-001: During our setup of the auditor's trial balance we noted the City general ledger is not a self-balancing set ofaccounts per fund. Significant adjustments need to be made in order to balance the funds. Furthermore the City trial balance had not been adjusted for the prior year audit entries and therefore the equity was not be in balance by fund. We noted the City hired a qualified external accountant to assist with posting the prior year audit entries and with balancing the funds. The risk of material misstatement resulting from these conditions is high and this is a condition for the qualified opinion on the financial statements. We have noted this condition in prior audits. Current Year Follow Up: Condition not corrected during the current year audit period. The City started the conversion to a fund accounting software program, but was unable to complete the conversion and went back to using QuickBooks. For the June 30, 2023 fiscal year-end audit, the City is using an outside accountant to assist with balancing the funds. Recommendation: We recommend the City continue to pursue replacing QuickBooks with fund accounting software. Finding 2023-002: During our audit we proposed material journal entries to reclassify $317,450 from water capital assets to repair and maintenance and inventory for a water line repair project. We also proposed a material journal entry reversing a city entry for $19,937 that was posted to a liability account and a prior period adjustment in error. We proposed a material journal entry to record LAIF interest receivable in the amount of$15,985. During our audit we proposed entries that weren't considered material to a) reduce a building permit billed to Verizon for $619, b) reduçed sewer accumulated depreciation by $3,000, c) reduced water accumulated depreciation $4,000, d) reclassify $5,580 from undeposited funds to taxes receivable e) recorded $6,149 for Sierra Fire Service Area receivable that should have been accrued at June 30, 2023. Recommendation: We recommend as part of year-end closing procedures, the City agree each account in the final trial balance to the underlying documentation. Finding 2023-003: During our audit we noted the City entered into a settlement agreement with four retirees of the City, whereby the City agreed to pay a portion ofthe amount of pension benefits that the retirees receive from CalPERS. As a result of this agreement the City is subject to rules of Government Accounting Standards Board Statement No. 68 (GASB 68) for pension plans. During the 2018/19 fiscal year the City did not hire an actuarial to determine the net pension liability, the deferred outflows of resources, the deferred inflows of resources and the pension expense on an actuarial basis. This was a condition for the qualified opinion. We have noted this condition in prior audits. Current Year Follow Up: No change in obtaining an actuarial in compliance with GASB 68. We noted the City did a good job in allocating the pension expense between the general fund, and the enterprise funds in accordance with the budgeted percentages. Recommendation: We recommend the City obtain an actuarial report for the pension benefits and reçord the activity in the financial statements in accordance with GASB 68. Finding 2023-004: During our review ofthe Gas Tax fund, we noted the fund balance ended with a negative fund balance of $38,529. The Gas Tax fund appears to have a structural deficit. Furthermore, as ofJune 30, 2023, the gas tax fund owes other funds net $43,709, and has an advance from FEMA of $52,469 that is required to be spent on a disaster relief project. The Gas Tax fund had $61,352 cash and restricted cash as of June 30, 2023. We have noted these condition in prior audits Recommendation: We recommend the City review the activity in the Gas Tax fund and take action to cure the deficit fund balance and either complete the FEMA project or repay the money that was advançed. 3 CITY OF LOYALTON SCHEDULE OF FINDINGS JUNE 30, 2023 Significant Deficiencies Not Deemed Material Weaknesses Finding 2023-005: We noted the City had a lack of segregation of duties, as one person is capable of handling all aspects of certain transactions from beginning to end. A lack of segregation of duties increases the risk of potential errors or irregularities occurring without being detected; however, due to a limited number of personnel an adequate segregation ofduties is not possible without incurring additional costs. We have noted this condition in prior audits. City Response: Due to our small budget, it is not feasible to hire enough staff to mitigate this finding. The City is aware of the deficiency and has taken steps to minimize risk. The City has a part-time Clerk, a Bookkeeper, two outside Financial Consultants, and an ongoing Finance Committee. Financial policy reviews are in progress. Finding 2023-006: During our testing of the general checking 1956-NEW bank reconciliation we noted there were many uncleared checks that were offset by uncleared deposits. These items should have been removed from the bank reconciliation prior to finalizing the June 30, 2023 bank reconciliation. We also noted that bank accounts owned by the City may not be in Public Fund accounts where deposits are required by California Law to be collateralized. Furthermore the interest received on the checking accounts is minimal at between .16% and .36% at June 30, 2023 on bank balances for all Plumas Bank accounts of $726,011. Recommendation: We recommend removing uncleared items that are not supported by the underlying activity. We recommend verifying that the bank accounts with commercial banks are in Public Fund accounts. Furthermore the City should research if there are higher interest rates available for the City cash accounts. Finding 2023-007: During our audit we noted the City has $842,678 interfund loans recorded between the general fund. special revenue funds and the enterprise funds. The interfund loans appear to be an accumulation ofreconciling entries needed to balance the funds at year-end, because the City does not utilize an accounting software program with a self-balancing set of accounts. These interfund loans are classified as due to, due from other funds. The interfund loans have been on the City books for several years and as such they appear to be long-term in nature. Long-term interfund loans should be categorized as advances to and advance from other funds and should carry interest that would be paid from the borrowing fund to the lending fund. We have noted this condition in prior audits. Recommendation: We recommend the City review the due to/due from accounts and determine if the interfund balances should be paid off or converted to advançes with terms such as an amortization schedule showing when the payments will be made and the interest rate associated with the lending. Finding 2023-008: During our review of payroll we noted the City made an agreement with the wastewater treatment operator where he will act as the plant operator in exchange for an increase to his pension payouts equaling $485 per month plus cola S. in lieu of receiving wages. Because the operator is performing a normal business function for the City, and does not own a company that provides this type of service to other organizations, it would appear that he should be treated as an employec of the City in accordance with AB 2257, Labor Code Section 2775 to 2787. Recommendation: We recommend the City review the activity for the wastewater treatment operator and consider not paying the wages as a non-taxable pension benefit, but treat him as an employee of the City subject to all relevant payroll taxes. 4 LARRY BAIN, CPA Member of American Institute of Certified Public Accountants An Accounting Corporation Member of AICPA Peer Review Program 2148 Frascati Drive, El Dorado Hills, CA 95762 / 916.601-8894 pbain@sbcglobal.net November 28, 2023 To the City Council City ofLoyalton We have audited the finançial statements of the governmental-type activities, business-type activities and fund information of City ofLoyalton for the fiscal year ended June 30, 2023, and have issued our report thereon dated November 28. 2023. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards As stated in our engagement letter dated May 25, 2023, our responsibility, as described by professional standards. is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit ofthe financial statements does not relieve you or management of your responsibilities. Planned. Scope and Timing ofthe Audit We performed the audit in accordance with the planned scope and timing previously communicated on May 25. 2023. Significant Audit Findings Qualitative Aspecis ofAccounting Practices Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by City of Loyalton are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the 2022-2023 fiscal year. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's 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 finançial statements and because ofthe possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the financial statements was (were): Management"' 's estimate of the useful lives of assets for calculating depreciation expense is based on GFOA recommended useful lives. We evaluated the key factors and assumptions used to develop the useful life estimates in determining that it is reasonable in relation to the financial statements taken as a whole. Management' S estimate in allocating salaries and other expenses to governmental and business type funds are based on actual timesheets as well as estimated percentages of certain employee and management time based on historical activity. We reviewed the allocations and assumptions used by management in determining reasonableness to the financial statements. During the 2021-22 fiscal year management again reviewed the allocation and made adjustments as deemed necessary. 5 Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We provided management with all known adjusting entries and after review all entries were posted to the accounting system. A prior period adjustment was reçorded in the general fund and the gas tax fund to comply with the Cities maintenance of effort requirements for State Road Maintenance funding. Disagreements with Management For purpose ofthis letter, professional standards define a disagreement with management as a financial accounting. reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significance to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management, Representations We have requested certain representations from management that are included in the management representation letter dated November 28, 2023. Management Consultation with Other Independent. Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. similar to obtaining a "second opinion" on certain situations. If a consultation involves application ofan accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety ofmatters, including the application of accounting principles and auditing standards. with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of the City Council and management of City ofLoyalton and is not intended to be and should not be used by anyone other than these specified parties. Very tpuly yours, ) Larry Bain, CPA An Accounting Corporation 6 BLUE TEAM WESTERN NEVADA SUPPLY Q - UO T A T - o N TO: CITY OF LOYALTON DATE: 11/29/23 NO. 1080658 **210 FRONT ST.* EFFECTIVE 11/29/23 TO 12/29/23 P.O. BOX 128 LOYALTON, CA 96118-0128 TERMS: 28 10TH PAGE# 1 FOB ORIGIN JOB: : PRESSURE WASHER PUMP PREP. BY: CLIFF WIGGINS 775-353-0285 REMARKS: iginstgeblutm.con WE ARE PLEASED TO QUOTE YOU ON THE FOLLOWING MATERIAL Western Nevada Supply Co expressly reserves the right to equitably adjust the quoted price at any time prior to shipment in the event that material costs increase for reasons beyond our control ** * SALES TAX NOT INCLUDED Qty Part # Description Price. Extended 1 -> PRESSURE WASHER PUMP 2 DZNS731710 PA VB200/150 PRS WSHR PUMP UNLOADER VLV 546.65 1093.30 SEGMENT 1 TOTAL 1,093.30 QUOTATION TOTALS 1,093.30 SALES TAX NOT INCLUDED * THE MATERIAL LIST ABOVE IS QUOTED PER THE PLANS / SPECS PROVIDED TO WNS, AND WHETHER SPECIFIED OR NOT WILL BE SUBJECT TO THE ENGINEERS APPROVAL. ALL SALES ARE SUBJECT TO SALES TAX. Nursery: Estimate 35 Buckskin Trails Sierra Brooks Date Estimate # Mailing: 11/21/2023 405 PO Box 684 nb Loyalton, 96118 Yardscapes Name 1 Address Loyalton Waste Water Plant City ofLoyalton Loyalton Ca 96118 Item Description Qty Rate Total PROPERTY Willow Tree Take Down. Removal of Debris Est hours 6 PROP-101 Removal 300.00 300.00 EQU,P-101 Equipment Use Charge; 2 SAWS 180.00 180.00 DT-2020 Dump Trailer Use: 1 day 350.00 350.00T Sales Tax (7.25%) $25.38 Total $855.38 CITY OF LOYALTON COUNIYOH SILRKA % 605 SCHOO1. STRERT a PO. nQX 128 LOYALTON, CALIFORNIA 96118 ($30) 993-6750 M / eityoflayalion-erg > OFTICHOPTIEMAYOR SOUNTY, APPLICATION FOR A BUSINESS LICENSE Name ofOwner ofBusiness: Michael T. Davis (Firat) (Middle) (Last) Address: PO Box 2801 Sparks, NV 89431 Telephone: 775-800-7663 Name of Business: East Fork. Roofing, Nature of Business: Boof replacements. and repairs State Contractors Liçense No. 1057756 Resale License No: Permanent Location of Business: 2400 Tampa St. Ste 101 Reno, NV 89512 Telephone: 775-800-7663 Is Business a Corporation or Partnership? Yes No Ifs so, please indiçate the name(s), address(s), and firle(s)ofofficerts) or partner(s): 87 434 Auchart IS IZo f 6 a 6 Hegeping Heck Ry Dvis P4oz Recrtic 87403 Meribe Annual Gross Receipts from Business $ C (The City needs this information to deterpine the tax de per quarter. Sce schedule belon.) 12/4/23 LL 12 Managing Member Date Signature Title Sales or use tax may apply to your business activities. You may seek, written advice Is regarding the application oftax for your particular business by writing to the nearest State Board of Equalization office. TAXES (Section 5.04.220 ofLoyalton Municipal Code) All businesses having gross receipts of: A. a Less than $10,000 annually Fee of S 70.40* per year B. a Between $10,000 and 50,000 annually Fee of$114.40: per year C., 4 Between $ 50,000 and $100,000 annually Fee ofs $158.40* per year D. a Between $100,000 and $150,000 annually Fee of $202.40* per year E. a More than $150,000 annually Fee of $268.40* per) year * Please note the $4.00 fee has been included with the annual fee for the ( State. ADA Fees Fors ofliçial use onh. Date Received: Fee Received: City Clerk: Date approved: