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09 Desk Item PREPARED BY: Stephen Conway Finance Director Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832 www.losgatosca.gov TOWN OF LOS GATOS COUNCIL AGENDA REPORT MEETING DATE: 12/15/2020 ITEM NO: 9 DESK ITEM DATE: December 15, 2020 TO: Mayor and Town Council FROM: Laurel Prevetti, Town Manager SUBJECT: Comprehensive Annual Financial Report (CAFR): a. Receive the Comprehensive Annual Financial Report (CAFR) for the Fiscal Year Ended June 30, 2020, and b. Adopt a Resolution Confirming June 30, 2020 Fund Balances in Accordance Fiscal Year 2019/20 Final Audit and Town Council General Fund Reserve Policy REMARKS: Attachment 7 contains public comments received after 11:00 a.m. Friday, December 11, 2020 and before 11:01 a.m. Tuesday, December 15, 2020. Staff would like Council to be apprised that the Sales Tax Revenue Audit that will be conducted by the Town’s independent auditor is a separate engagement from the CAFR and will be scheduled for presentation at the first meeting of the newly created Finance Commission. In preparation for that meeting, staff has established a new “assigned” fund balance called “Measure G 2018 District Sales Tax.” This assignment acknowledges that no Measure G monies have been expended to date. The initial meeting of the Finance Commission will provide an opportunity to review the prior expenditure direction of the Sale Tax Oversight Committee as reported to the Council in the FY 2020/21 – 2024/25 Capital Improvement Program Transmittal Letter. Attachments (previously distributed with the Staff Report and Addendum): 1. Draft Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2020. 2. Fund Balance Resolution Establishing June 30, 2020 Fund Balances 3. Independent Auditor Presentation to the Council Finance Committee 4. Finance Committee December 7, 2020 Staff Report with Desk Item PAGE 2 OF 2 SUBJECT: Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2020 DATE: December 15, 2020 5. Public Comments Received after Distributing the Staff Report and before 11:01 a.m. Friday, December 11, 2020. 6. Replacement page 129 for the Draft CAFR Attachment (distributed with this Desk Item): 7. Public Comments Received after 11:01 a.m. Friday, December 11, 2020 and before 11:01 Tuesday, December 15, 2020 2 called “Measure G 2018 District Sales Tax” with the following description - “assigned fund balance will be used to track receipt and use of the 1/8 cents District tax funds collected by the Town”. It is also noted that the balance in the assigned reserve is $1,181,162 as of June 30, 2020.  While this disclosure is helpful, it does not fully comply with Measure G since there is no discussion as to the “collection and expenditure of revenue from the tax authorized by this chapter”. What is presented is one number, the fund balance of $1,181,162, which represents a balance that has been established by the Town Manager. There is no disclosure as to why that is the correct number or how it was determined. We wish to remind this Council of the legal obligation to disclose annually how much money the Town received and where the Town spent those sales tax receipts. When can the voters expect the auditor to issue the “findings” required by the Ordinance?  The same section of the Ordinance requires “the committee” to review the “auditor’s findings”. This has not occurred since there has not been a meeting of the Sales Tax Oversight Committee since December 2019. To complicate the matter, Measure A is now legally in effect and requires the new Finance Commission to assume the duties of the disbanded Sales Tax Oversight Committee, including reviewing the “auditor’s findings” and advising the Town Council on whether expenditures meet the Town Council’s objectives for the tax.  We understand that the new Finance Commission will be appointed during the month of January. Once that has happened, when can we expect the Finance Commission to review the “auditor’s findings” and advise the Town Council on whether expenditures meet the Town Council’s objectives for the tax?   If the Council decides to move forward with agenda item #9 to receive the FY 2020 CAFR and adopt a resolution confirming the fund balances, we strongly suggest that this accomplished with a conditional statement that the auditor produce the “findings” as required by the Sales Tax Ordinance and the new Finance Commission review that report as soon as practical in accordance with newly enacted Measure A. Given that both Measures were approved by voters, we think it is in the best interest of the Town Council to guarantee that the will of the people is fully honored.  Thank you.  Jak Van Nada   Los Gatos Community Alliance