Oxnard FINALLY releases 2014/2015 CAFR (Comprehensive Annual Financial Report)

By George Miller

Six months late and a year after the fiscal year ended, The City of Oxnard FINALLY released the 2014/2015 CAFR (Comprehensive Annual Financial Report) and audit results.

This was announced by City Manager Greg Nyhoff, after four lengthy City Councl meetings in three days (review is still not complete, to be continued on 6/21/16), including thirteen hours of budget meetings on Tuesday and Wednesday.

He said that copies of the CAFR would be given to the Council Members as they left the meeting about 5 PM today and that it would be posted on the City web site this evening. Mayor Flynn was asked by former City Finance Director Phil Molina if the audit was qualified or non-qualified. He admitted that he didn’t know, then punted the question to City Manager Nyhoff, who didn’t know either.  But, either way, here it is.

OxnardCAFR-Jun2016

Click for CAFR HERE 

 

During two long days of drudgery at the budget review meetings, it was admitted by City manager Nyhoff and new CFO Dave Milican that the budgets were light on detail and lacked the true “Priority-Based Budgeting” approach promised. They attributed this to the time-driven emphasis on straightening out Oxnard’s troubled financial records, finishing the audit, then the CAFR. Hundreds of correcting entries were needed to set it right. Approval of the CAFR is scheduled for 6/28/16.

The parties involved believe it is the cleanest set of books the City has had in years and sets the foundation to move forward. Along with fixing records, many procedures had to be improved or at least better-implemented along the way. The new City Management thoroughly audited all operational areas starting in late 2014, discovering many problems justifying a massive cleanup.

During this time, the Finance Dept. lost a Finance Director, CFO, Controller, Management Accountant, Budget Manager and more. They had to use consultants and Assistant City Manager Maria Hurtado to complete the CAFR, per new CFO and former consultant Dave Millican.

The audit is not an unqualified endorsement:

EadeiPayneQualified6-14-16

 

Per Phil Molina:

FYI these explanations of “types of audit opinions” might prove helpful to you.

1. Unqualified Audit Opinion Report = GOOD AUDIT OPINIONIn an unqualified report, the auditors conclude that the financial statements of your business present fairly its affairs in all material aspects. The opinion embodies the assumptions that your business observed compliance with generally accepted accounting principles and statutory requirements. Also known as a clean report, such a report implies that any changes in the accounting policies, their application and effects, are adequately determined and divulged. This opinion does not tell that your business is in good economic health. It merely states that your financial report is transparent and thorough and has not hidden important facts.

2. Qualified Report = BAD AUDIT OPINION

A qualified report is one in which the auditor concludes that most matters have been dealt with adequately, except for a few issues. An auditor’s report is qualified when there is either a limitation of scope in the auditor’s work, or when there is a disagreement with management regarding application, acceptability or adequacy of accounting policies. For auditors an issue must be material or financially worth consideration to qualify a report. The issue should not be pervasive, that is, the issue should not misrepresent the factual financial position. If issues are material and pervasive, the auditor issues a disclaimer or adverse opinion. A qualified audit report does not mean that your business is suffering, and it doesn’t mean that your financial statement isn’t transparent. It merely reflects the auditor’s inability to give a clean report.

3. CONSEQUENCES: Impact of the type of audit Opinion

As a Councilmember, you should keep in mind that there are deep-held perceptions about auditors’ opinions. Banks, investors, bond brokers, insurers and regulators such as the IRS rely on audited financial statements for their analytical needs. Stakeholders such as banks, brokers, bond insurers, bond counsel  and investors view qualified audit report unfavorably. Therefore, you should hope to receive an unqualified audit report because it gives a positive impression of your business.

First I want to thank the staff, consultants and auditors for submitting the city audited financial statements for our review. I just got my first glimpse at the report.
For the first time you will see a new term: unmodified opinion. While technically different from an “unmodified opinion” for the common use it is the same as an “unqualified opinion”. Now how did the city’s auditors differentiate between the “General Fund” and the “Governmental Activities” where one received a “qualified” opinion and the other an “unmodified”opinion will be interesting and educational for all of us?
 
(In order to converge the American Institute of CPAs with the International Standards, for the first time you will also see the “unmodified opinion”, in the city’s audit report: AICPA  February 2014 Financial Reporting Center Brief.  The AICPA’s Auditing Standards Board (ASB) has redrafted all of the auditing sections in Codification of Statements on Auditing Standards (contained in AICPA Professional Standards). The overall goal of this landmark, multiyear project of the ASB is to make the standards easier to read, understand, and implement and to converge them with the International Standards on Auditing (ISAs).)
Finally, the difference between an “audit” and the CAFR has always been the receipt of a “Certificate” from the GFOA. That certificate means that all the required reports, statistical data, and management discussion has been included and that the city’s Executive staff attested that all the information contained in the CAFR is accurate, complete and correct. It of course assumes executive management is ethical, lawful, and trustworthy, which we now all agree was dubious for past city executives.
Oxnard’s financial report has not received that certification for fy 14-15 and auditors, bankers, brokers, investors, bond attorneys, and other sophisticated market analyst will not consider fy14-15 as a CAFR, nor in my opinion should the city.
The public will have many questions concerning the city’s 15-16 audit which will need to be addressed by the auditors.
Phillip Molina

 

You can read many stories on CitizensJournal.us about Oxnard accounting problems, irregularities and the extensive steps taken to attempt to address them.


George Miller is Publisher of CitizensJournal.us and a “retired” operations management consultant residing in Oxnard.

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Debbie
Debbie
4 years ago

Wow – finally – Thanks for reporting this and providing the explanations of types of audits.
I saw nothing disrespectful in the article at all – sometimes I think people read inflection where there is none…

BTW: my WOW was meant as a “wow – at last” in acknowledgement of the number of holdups and all the archeological fiscal digging that needed to take place.

Lisa Quinones
Lisa Quinones
4 years ago

I want to know why the writer is so rude and disrespectful to the management that is working hard to correct the city operations? As a citizen of OXNARD Mr. Nyhoff is doing an excellent job as the City Manager.