TO: AC Transit Board of Directors
FROM: Michael A. Hursh, General Manager/Chief Executive Officer
SUBJECT: Year-End Financial Statements and Independent Auditor’s Report FY 23-24
ACTION ITEM
AGENDA PLANNING REQUEST: ☐
RECOMMENDED ACTION(S):
Title
Consider receiving the Year-End Financial Statements and Independent Auditor’s Report for the Fiscal Year Ended June 30, 2024.
Staff Contact:
Chris Andrichak, Chief Financial Officer
Body
STRATEGIC IMPORTANCE:
Goal - Financial Stability and Resiliency
Initiative - Financial Efficiency and Revenue Maximization
With this staff report and its attendant financial reports, the District officially closes out its fiscal year ended June 30, 2024. These timely financial reports provide the final reference point to review the financial performance of the past fiscal year and help provide a fully informed basis to assist in planning for future periods
BUDGETARY/FISCAL IMPACT:
During Fiscal Year 2023-24, the District had revenues earned of $608.5 million over expenses (not including depreciation) of $507.7 million or an operating surplus (modified) of $100.8 million. After applying depreciation expense of $60.2 million and capital revenues of $20.8 million, as of June 30, 2024, the increase to net position was $61.4 million, to $261.7 million which includes restricted funds and operating and capital reserves. It is noted that without the $24.9 million of Federal American Rescue Plan (ARP) Act funds received during the period and the $45.4 million decrease in Other Post Employment Benefits (OPEB, primarily retiree healthcare) expense and Pension expense due to Government Accounting Standards Board (GASB) statement 75 and 68 adjustments, the District’s Net Position would have decreased to $191.4 million as of June 30, 2024.
BACKGROUND/RATIONALE:
The Statement of Fund Net Position presents information about assets and liabilities with the difference between the two reported as net position. In accordance with Board Policy 340, Accounting Policies, the annual audit of the financial statements has been completed and the report prepared by Crowe, LLP has been issued to the District. The auditors have rendered a clean opinion: “In our opinion, based on our audit and the report of the other auditors, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and fiduciary activities of the District, as of June 30, 2024, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.”
Staff is happy to report that the auditors noted no findings of deficiency for FY 2023-24, as staff worked diligently to correct the findings noted in last year’s audit. There were some small adjustments posted during the audit, but none of them were material enough to impact the financial statements.
Staff encourages readers to consider the financial information presented in the attached financial statements.
Financial Highlights
Assets
• At June 30, 2024, total assets and deferred outflow of resources were $993.4 million, a decrease of $27 million or 3%, compared to the end of the prior fiscal year, when it was $1,019.6 million. Total current assets on June 30, 2024 were $320.6 million, an increase of $28.4 million or 10%, primarily related to State Transit Assistance (STA) Funds and local sales tax receivables at year-end. Capital assets, net of accumulated depreciation, decreased by $19.7 million to $423.3 million due to ongoing District capital programs and depreciation. Other non-Current assets increased by $19.6 million due primarily to lease receivables. Deferred outflows decreased by $54.4 million or 30%, to $127 million primarily due to the pension related net of investment gains/losses, and the amortization of investment losses from prior periods.
• Deferred outflows, which are primarily related to Pension and OPEB, as of June 30, 2024, were $127.4 million. This was a decrease of $54.4 million or 30%, over the end of the prior fiscal year, when it was $181.9 million. The pension component of deferred outflows decreased by $57.3 million compared to the prior fiscal year, at $160.3 million. OPEB related deferred outflows were up by $2.9 million or 14% over the end of the prior fiscal year, when it was $21.1 million. The change in these numbers is the product of changes in actuarial assumptions, and the difference between actuarially projected and actual earnings of pension investments.
Liabilities
• On June 30, 2024, total liabilities and deferred inflows of resources were $731.7 million, decreasing moderately when compared to the end of the prior fiscal year, when they were $819.3 million. Current liabilities on June 30, 2024, were $100.3 million which is a increase of $8.2 million or 9% over the end of the prior fiscal year, when they were $92.2 million. Several factors contributed to this net result including increases of $2.3 million in Other Accrued Liabilities and $6.1 million in Unearned Revenue. Additional changes include an increase in current liabilities of $4.0 million in Claims Liabilities and a decrease of $6.2 million due to pension, related to timing.
• Total other non-current liabilities were $548.5 million, a decrease of $89.6 million or 13% from the end of the prior fiscal year, when it was $638.1 million. This result was due to decreases in net pension liability and net OPEB liability. On June 30, 2024, the net pension liability was $313.8 million, a decrease of $70.9 million or 18%. As of June 30, 2024, the net OPEB liability was $125.1 million which is a decrease of $20.9 million or 14%, over the prior fiscal year when it was $146.1 million. The net decrease in deferred inflows of $6.2 million is the product of the net activity of expected and actual experience as reflected in the pension GASB 68 and GASB 75 actuarial studies. Deferred inflows from Pension increased $2.2 million or 213%, while deferred inflows from OPEB decreased $12.2 million or 15%.
Net Position
• On June 30, 2024, net position was $261.7 million, an increase of $61.4 million or 31% from the end of the prior fiscal year, when it was $200.3 million. During FY 2023-24 total revenues grew by $27.8 million or 5%, and expenses decreased by $40.6 million or 7%. Total operating and non-operating revenues during the fiscal year were $608.5 million with capital revenues of $20.8 million, totaling $629.3 million, over total expenses of $567.9 million. A combination of Federal emergency funds of $24.9 million earned during the period and the decrease in fringe benefit expense of $45.4 million due to GASB 68 and GASB 75 entries were instrumental in preserving the District’s net position on June 30, 2024.
Operations
Operating Revenues
• For FY 2023-24, operating revenues increased by $3.3 million or 7%, to $x million to $50.5 million. There was an increase in Passenger Fares of $4.0 million or 14% over the prior fiscal year to a total of $32.4 million. Contract Services decreased 4% or $0.5 million or when compared to the prior fiscal year, when they were $12.6 million. Joint Venture (East Bay Paratransit) revenue increased by 50% to $2.0 million. This overall result is attributable to the continued increase in District ridership levels.
Operating Expenses
• In FY 2023-24, total operating expenses were $567.9 million, a decrease of $40.6 million or 7% compared to $608.5 million in the prior fiscal year. Fringe benefits decreased by $58.1 million largely due to a decrease in actuarial results related to pension and OPEB expenses. Depreciation decreased by $16.9 million, or 22%, due to the recognition of prior period depreciation expense related to the Bus Rapid Transit program in the prior fiscal year. All other related subcategories increased at year end. Most notably in insurance costs, which increased by $9.4 million, or 65%. As well as expense of the Joint Venture (East Bay Paratransit), which increased by $8.5 million, or 25%.
Non-Operating Revenue
• For FY 2023-24, non-operating revenues were $558.1 million, which is an increase of $24.5 million, or 5%, compared to the prior fiscal year when it was $533.5 million. The most notable increases occurred in property taxes and federal funds with an increase of $10.6 million or 6% and in federal funds with an increase of $9.5 million, or 24%.
• For FY 2023-24 property taxes were $189.3 million, an increase of $10.6 million or 6% over the prior fiscal year when they were $178.7 million. Local sales tax revenues decreased from $131.9 million in the prior fiscal year to $129.1 million, a change of $2.8 million or 2%. These include decreases in Measure BB and AB1107 of $3.0 million and $1.1 million respectively, offset by an increase in Measure J of $1.3 million.
• Local funds totaling $107.5 million in FY 2023-24 decreased by $4.2 million or 4% over the prior fiscal year when it was $111.6 million. Local funds included Transportation Development Act (TDA) of $92.2 million, which is a decrease of $4.8 million over the prior fiscal year. Federal non-operating revenues increased by $9.5 million or 24% to $48.4 million over the prior fiscal year, with Federal ARP Act funds providing $24.9 million of this total.
ADVANTAGES/DISADVANTAGES:
Receipt by the Board of Directors of the Annual Audited Financial Statements formally closes the 2023-24 Fiscal Year.
ALTERNATIVES ANALYSIS:
There are no alternatives to producing and accepting the Annual Audited Financial Statements.
PRIOR RELEVANT BOARD ACTION/POLICIES:
Board Policy No. 340 Accounting Policies
ATTACHMENTS:
1. Audited Basic Financial Statements for the Fiscal Year Ended June 30, 2024.
2. Measure BB
3. Measure J
4. Measure VV/C1
5. Prop 111 (Gann Limit)
6. Evaluation of Board of Director Expenses
7. Special Transit Service District 1/District 2
8. Single Audit
9. Prop 1B - PTMISEA
10. LCTOP
11. Management Letter
12. SAS 114 Letter
Prepared by:
Kenneth Myers, Controller
Approved/Reviewed by:
Chris Andrichak, Chief Financial Officer