City of Cypress, City of Cypress, California California COMPREHENSIVE ANNUAL COMPREHENSIVE ANNUAL FINANCIAL REPORT FINANCIAL REPORT For the Fiscal Year For the Fiscal Year Ended June 30, 2014 Ended June 30, 2014 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2014 Prepared by Matt Burton Director of Finance & Administrative Services CITY OF CYPRESS Comprehensive Annual Financial Report Year ended June 30, 2014 Table of Contents INTRODUCTORY SECTION Letter of Transmittal i Directory of City Officials vii Organizational Chart viii GFOA Certificate of Achievement for Excellence in Financial Reporting ix FINANCIAL SECTION Independent Auditors’ Report 1 Management’s Discussion and Analysis 4 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position 32 Statement of Activities and Changes in Net Position 33 Fund Financial Statements: Balance Sheet – Governmental Funds 34 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 37 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 38 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 41 Statement of Net Position – Proprietary Funds 42 Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds 43 Statement of Cash Flows - Proprietary Funds 44 Statement of Fiduciary Net Position – Fiduciary Funds 45 Statement of Changes in Fiduciary Net Position – Private Purpose Trust Fund 46 Notes to Basic Financial Statements 47 Required Supplementary Information Budgets and Budgetary Accounting 84 Budgetary Comparison Schedule (Budgetary Basis), General Fund 85 Budgetary Comparison Schedule (Budgetary Basis), Recreation and Park District Special Revenue Fund 86 California Public Employees’ Retirement Systems (CalPERS) 87 Post-Employment Health Care Benefits 87 CITY OF CYPRESS Comprehensive Annual Financial Report Year ended June 30, 2014 Table of Contents, Continued FINANCIAL SECTION (CONTINUED) Supplemental Schedules Combining and Individual Fund Financial Statements and Schedules: Other Major Governmental Funds Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – City Capital Projects Fund 90 Nonmajor Governmental Funds Combining Balance Sheet 92 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 94 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Streets Special Revenue Fund 96 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Local Drainage Special Revenue Fund 97 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Stanton Channel Maintenance District Special Revenue Fund 98 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Lighting District Special Revenue Fund 99 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Cable TV PEG Grant Special Revenue Fund 100 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – AB 2766 Special Revenue Fund 101 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Traffic Safety Special Revenue Fund 102 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Supplemental Law Enforcement Special Revenue Fund 103 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Narcotics Asset Seizure Special Revenue Fund 104 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Low and Moderate Housing Assets Special Revenue Fund 105 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual – Civic Center Refinancing Debt Service Fund 106 CITY OF CYPRESS Comprehensive Annual Financial Report Year ended June 30, 2014 Table of Contents, Continued FINANCIAL SECTION (CONTINUED) Combining and Individual Fund Financial Statements and Schedules (Continued): Internal Service Funds Combining Statement of Net Position 108 Combing Statement of Revenues, Expenses and Changes in Fund Net Position 110 Combining Statement of Cash Flows 112 Fiduciary Funds Statement of Changes in Fiduciary Net Position – Fiduciary Funds 116 STATISTICAL SECTION Statistical Section Index 117 Financial Trends Schedule 1 - Net Position by Component 118 Schedule 2 - Changes in Net Position 120 Schedule 3 - Fund Balances – Governmental Funds 122 Schedule 4 - Changes in Fund Balances – Governmental Funds 124 Revenue Capacity Schedule 5 - Assessed Value and Actual Value of Taxable Property 126 Schedule 6 - Direct and Overlapping Property Tax Rates 127 Schedule 7 - Principal Property Tax Payers 128 Schedule 8 - Property Tax Levies and Collections 129 Debt Capacity Schedule 9 - Ratios of Outstanding Debt by Types 130 Schedule 10 - Direct and Overlapping Governmental Activities Debt 131 Schedule 11 - Legal Debt Margin Information 132 Demographic and Economic Information Schedule 12 - Demographic and Economic Statistics 133 Schedule 13 - Principal Employers 134 Operating Information Schedule 14 - Full-time Equivalent City Government Employees by Function/Program 136 Schedule 15 - Operating Indicators by Function/Program 138 Schedule 16 - Capital Assets Statistics by Function/Program 140 CITY OF CYPRESS Comprehensive Annual Financial Report Year ended June 30, 2014 Table of Contents, Continued INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 143 CITY of CYPRESS 5275 Orange Avenue, Cypress, California 90630 Phone 714-229-6700 www.ci.cypress.ca.us December 18, 2014 To the Honorable Mayor, Members of the City Council, City Manager and Citizens of the City of Cypress, California: We are pleased to submit to you the ComprehensiveAnnual Financial Report (CAFR) of the City of Cypress for the fiscal year ended June 30, 2014. This report is published in accordance with local ordinance and state law requirements that financial statements be presented in conformity with accounting principles generally accepted in the United States ofAmerica and audited in accordance with auditing standards generally accepted in the United States of America by a firm of licensed certified public accountants. This CAFR consists of management's representations concerning the finances of the City of Cypress. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report.To provide a reasonable basis for making these representations, management of the City of Cypress has established a comprehensive internal control framework designed both to protect the City's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Cypress' financial statements. Because the cost of internal controls should not outweigh their benefits, the City of Cypress' comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The report is presented in three sections: Introductory, Financial and Statistical. While there have been no significant changes in the City's fiscal policies that impact the current year financial statements, we urge readers of the report to pay particular attention to the overview and analysis presented in the management's discussion and analysis (MD&A) found in the financial section of the CAFR. City policy requires its financial statements be audited by independent certified public accountants. The firm of White Nelson Diehl Evans LLP has performed the audit for the fiscal year ended June 30, 2014. The goal of the independent audit was to provide reasonable assurance the fiscal year end financial statements of the City of Cypress are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded there was a reasonable basis for rendering an unqualified opinion that the City of Cypress' financial statements for fiscal year ended June 30, 2014 are fairly presented in conformity with accounting principles generally accepted in the United States of America. The Independent Auditors' Report is presented as the first component of the financial section of this report. Rob Johnson, Mayor Mariellen Yarc, Mayor Pro Tem Stacy Berry, Council Member Paulo M. Morales, Council Member i Jon E. Peat, Council Member As a recipient of federal, state and county financial assistance, the City of Cypress is responsible for ensuring an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to such programs. This internal control structure is subject to periodic evaluation by management. In years when over $500,000 is expended on Federal financial assistance programs, the City is required to undergo an annual single audit in