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Published March 22, 2021

Report No. 1027965

Financial Statements and Federal Single

Audit Report

Puget Sound Clean Air

Agency For the period July 1, 2019 through June 30, 2020

Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (564) 999-0950 [email protected]

Office of the Washington State Auditor

Pat McCarthy

March 22, 2021

Board of Directors

Puget Sound Clean Air Agency

Seattle, Washington

Report on Financial Statements and Federal Single Audit

Please find attached our report on the Puget Sound Clean Air Agency’s financial statements and

compliance with federal laws and regulations.

We are issuing this report in order to provide information on the Agency’s financial condition.

Sincerely,

Pat McCarthy

State Auditor

Olympia, WA

Americans with Disabilities

In accordance with the Americans with Disabilities Act, we will make this document available in

alternative formats. For more information, please contact our Office at (564) 999-0950, TDD

Relay at (800) 833-6388, or email our webmaster at [email protected].

mailto:[email protected]

Office of the Washington State Auditor sao.wa.gov

TABLE OF CONTENTS

Schedule of Findings and Questioned Costs ................................................................................... 4

Independent Auditor's 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..................................................................................................... 6

Independent Auditor's Report on Compliance for Each Major Federal Program and Report on

Internal Control Over Compliance in Accordance With the Uniform Guidance ........................... 8

Independent Auditor's Report on the Financial Statements .......................................................... 11

Financial Section ........................................................................................................................... 15

About the State Auditor's Office ................................................................................................... 61


SCHEDULE OF FINDINGS AND QUESTIONED COSTS


July 1, 2019 through June 30, 2020

SECTION I – SUMMARY OF AUDITOR’S RESULTS

The results of our audit of the Puget Sound Clean Air Agency are summarized below in accordance

with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative

Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Financial Statements

We issued an unmodified opinion on the fair presentation of the basic financial statements in

accordance with accounting principles generally accepted in the United States of America

(GAAP).

Internal Control over Financial Reporting:

Significant Deficiencies: We reported no deficiencies in the design or operation of internal

control over financial reporting that we consider to be significant deficiencies.

Material Weaknesses: We identified no deficiencies that we consider to be material

weaknesses.

We noted no instances of noncompliance that were material to the financial statements of the

Agency.

Federal Awards

Internal Control over Major Programs:

Significant Deficiencies: We reported no deficiencies in the design or operation of internal

control over major federal programs that we consider to be significant deficiencies.

Material Weaknesses: We identified no deficiencies that we consider to be material

weaknesses.


We issued an unmodified opinion on the Agency’s compliance with requirements applicable to its

major federal program.

We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a).

Identification of Major Federal Programs

The following program was selected as a major program in our audit of compliance in accordance

with the Uniform Guidance.

CFDA No. Program or Cluster Title

66.605 Performance Partnership Grants

The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by

the Uniform Guidance, was $750,000.

The Agency qualified as a low-risk auditee under the Uniform Guidance.

SECTION II – FINANCIAL STATEMENT FINDINGS

None reported.

SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED

COSTS

None reported.


INDEPENDENT AUDITOR’S REPORT

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



Board of Directors


Seattle, Washington

We have audited, in accordance with auditing standards generally accepted in the United States of

America and the standards applicable to financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States, the financial statements of the

Puget Sound Clean Air Agency, as of and for the year ended June 30, 2020, and the related notes

to the financial statements, which collectively comprise the Agency’s basic financial statements,

and have issued our report thereon dated March 16, 2021.

As discussed in Note 14 to the 2020 financial statements, the full extent of the COVID-19

pandemic’s direct or indirect financial impact on the Agency is unknown. Management’s plans in

response to this matter are also described in Note 14.

INTERNAL CONTROL OVER FINANCIAL REPORTING

In planning and performing our audit of the financial statements, we considered the Agency’s

internal control over financial reporting (internal control) to determine the audit procedures that

are appropriate in the circumstances 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 Agency’s

internal control. Accordingly, we do not express an opinion on the effectiveness of the Agency’s

internal control.

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 a

material misstatement of the Agency’s financial statements will not be prevented, or detected and

corrected on a timely basis. A significant deficiency is a deficiency, or a 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.

Our consideration of internal control was for the limited purpose described in the first paragraph

of this section and was not designed to identify all deficiencies in internal control that might be

material weaknesses or significant deficiencies. Given these limitations, during our audit we did

not identify any deficiencies in internal control that we consider to be material weaknesses.

However, material weaknesses may exist that have not been identified.

COMPLIANCE AND OTHER MATTERS

As part of obtaining reasonable assurance about whether the Agency’s financial statements are

free from material misstatement, we performed tests of the Agency’s compliance with certain

provisions of laws, regulations, contracts and grant agreements, noncompliance with which could

have a direct and material effect on the determination of financial statement amounts. However,

providing an opinion on compliance with those provisions was not an objective of our audit, and

accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance or other matters that are required

to be reported under Government Auditing Standards.

PURPOSE OF THIS REPORT

The purpose of this report is solely to describe the scope of our testing of internal control and

compliance and the results of that testing, and not to provide an opinion on the effectiveness of the

Agency’s internal control or on compliance. This report is an integral part of an audit performed

in accordance with Government Auditing Standards in considering the Agency’s internal control

and compliance. Accordingly, this communication is not suitable for any other purpose. However,

this report is a matter of public record and its distribution is not limited. It also serves to

disseminate information to the public as a reporting tool to help citizens assess government

operations.

Pat McCarthy

State Auditor

Olympia, WA

March 16, 2021



Report on Compliance for Each Major Federal Program and Report on Internal

Control over Compliance in Accordance with the Uniform Guidance



Board of Directors


Seattle, Washington

REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL

PROGRAM

We have audited the compliance of the Puget Sound Clean Air Agency, with the types of

compliance requirements described in the U.S. Office of Management and Budget (OMB)

Compliance Supplement that could have a direct and material effect on each of the Agency’s major

federal programs for the year ended June 30, 2020. The Agency’s major federal programs are

identified in the accompanying Schedule of Findings and Questioned Costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and

conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of the Agency’s major federal

programs based on our audit of the types of compliance requirements referred to above. We

conducted our audit of compliance in accordance with auditing standards generally accepted in the

United States of America; the standards applicable to financial audits contained in Government

Auditing Standards, issued by the Comptroller General of the United States; and the audit

requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative

Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Those standards and the Uniform Guidance require that we plan and perform the audit to obtain

reasonable assurance about whether noncompliance with the types of compliance requirements

referred to above that could have a direct and material effect on a major federal program occurred.


An audit includes examining, on a test basis, evidence about the Agency’s compliance with those

requirements and performing such other procedures as we considered necessary in the

circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major

federal program. Our audit does not provide a legal determination on the Agency’s compliance.

Opinion on Each Major Federal Program

In our opinion, the Agency complied, in all material respects, with the types of compliance

requirements referred to above that could have a direct and material effect on each of its major

federal programs for the year ended June 30, 2020.

REPORT ON INTERNAL CONTROL OVER COMPLIANCE

Management of the Agency is responsible for establishing and maintaining effective internal

control over compliance with the types of compliance requirements referred to above. In planning

and performing our audit of compliance, we considered the Agency’s internal control over

compliance with the types of requirements that could have a direct and material effect on each

major federal program in order to determine the auditing procedures that are appropriate in the

circumstances for the purpose of expressing an opinion on compliance for each major federal

program and to test and report on internal control over compliance in accordance with the Uniform

Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control

over compliance. Accordingly, we do not express an opinion on the effectiveness of the Agency’s

internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control

over compliance does not allow management or employees, in the normal course of performing

their assigned functions, to prevent, or detect and correct, noncompliance with a type of

compliance requirement of a federal program on a timely basis. A material weakness in internal

control over compliance is a deficiency, or combination of deficiencies, in internal control over

compliance, such that there is a reasonable possibility that material noncompliance with a type of

compliance requirement of a federal program will not be prevented, or detected and corrected, on

a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a

combination of deficiencies, in internal control over compliance with a type of compliance

requirement of a federal program that is less severe than a material weakness in internal control

over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the

first paragraph of this section and was not designed to identify all deficiencies in internal control


that might be material weaknesses or significant deficiencies. We did not identify any deficiencies

in internal control over compliance that we consider to be material weaknesses. However, material

weaknesses may exist that have not been identified.

Purpose of this Report

The purpose of this report on internal control over compliance is solely to describe the scope of

our testing of internal control over compliance and the results of that testing based on the

requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other

purpose. However, this report is a matter of public record and its distribution is not limited. It also

serves to disseminate information to the public as a reporting tool to help citizens assess

government operations.

Pat McCarthy

State Auditor

Olympia, WA

March 16, 2021



Report on the Financial Statements



Board of Directors


Seattle, Washington

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of the Puget Sound Clean Air Agency, as

of and for the year ended June 30, 2020, and the related notes to the financial statements, which

collectively comprise the Agency’s basic financial statements as listed on page 15.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements

in accordance with accounting principles generally accepted in the United States of America; this

includes the design, implementation, and maintenance of internal control relevant to the

preparation and fair presentation of financial statements that are free from material misstatement,

whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with auditing standards generally accepted in the United States

of America and the standards applicable to financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States. Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers internal control


relevant to the Agency’s preparation and fair presentation of the financial statements 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 the Agency’s internal control. Accordingly, we

express no such opinion. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of significant accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,

the financial position of the Puget Sound Clean Air Agency, as of June 30, 2020, and the changes

in financial position and cash flows thereof for the year then ended in accordance with accounting

principles generally accepted in the United States of America.

Matters of Emphasis

As discussed in Note 14 to the 2020 financial statements, the full extent of the COVID-19

pandemic’s direct or indirect financial impact on the Agency is unknown. Management’s plans in

response to this matter are also described in Note 14. Our opinion is not modified with respect to

this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the

management’s discussion and analysis and required supplementary information listed on page 15

be 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

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.

Supplementary and Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements that

collectively comprise the Agency’s basic financial statements as a whole. The accompanying

Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as

required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative

Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform

Guidance).This schedule is not a required part of the basic financial statements. Such information

is the responsibility of management and was derived from and relates directly to the underlying

accounting and other records used to prepare the basic financial statements. The information has

been subjected to the auditing procedures applied in the audit of the basic financial statements and

certain additional procedures, including comparing and reconciling such information directly to

the underlying accounting and other records used to prepare the basic financial statements or to

the basic financial statements themselves, and other additional procedures in accordance with

auditing standards generally accepted in the United States of America. In our opinion, the

information is fairly stated, in all material respects, in relation to the basic financial statements

taken as a whole.

OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING

STANDARDS

In accordance with Government Auditing Standards, we have also issued our report dated

March 16, 2021 on our consideration of the Agency’s internal control over financial reporting and

on our tests of its compliance with certain provisions of laws, regulations, contracts and grant

agreements and other matters. The purpose of that report is to describe the scope of our testing of

internal control over financial reporting and compliance and the results of that testing, and not to

provide an opinion on internal control over financial reporting or on compliance. That report is an


integral part of an audit performed in accordance with Government Auditing Standards in

considering the Agency’s internal control over financial reporting and compliance.

Pat McCarthy

State Auditor

Olympia, WA

March 16, 2021


FINANCIAL SECTION



REQUIRED SUPPLEMENTARY INFORMATION

Management’s Discussion and Analysis – 2020

BASIC FINANCIAL STATEMENTS

Statement of Net Position – 2020

Statement of Revenues, Expenses and Changes in Net Position – 2020

Statement of Cash Flows – 2020

Notes to Financial Statements – 2020

REQUIRED SUPPLEMENTARY INFORMATION

Schedule of Proportionate Share of Net Pension Liability – PERS 1, PERS 2/3 – 2020

Schedule of Employer Contributions – PERS 1, PERS 2/3 – 2020

Schedule of Changes in Total OPEB Liability and Related Ratios – 2020

SUPPLEMENTARY AND OTHER INFORMATION

Schedule of Expenditures of Federal Awards – 2020

Notes to the Schedule of Expenditures of Federal Awards – 2020

MCAG No. 1024

CASH FLOW FROM OPERATING ACTIVITIESReceipts from customers 9,524,891 Payment to suppliers (1,927,076) Payment to employees (7,441,784) Net cash provided (used) by operating activities 156,031

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Non-operating revenues (expenses), net of non-cash adjustments 971,159 Net cash provided (used) by noncapital financing activities 971,159

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Purchases of capital assets 142,546 Net cash provided (used) by capital and related financing activities 142,546

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sales and maturities of investments

Interest and dividends 210,604 Net cash provided by investing activities 210,604

Net Increase (Decrease) in cash and cash equivalents 1,480,340

Balances - beginning of the year 10,150,855

Balances - end of year 11,631,195 The notes to the financials are an integral part of this statement

PUGET SOUND CLEAN AIR AGENCYSTATEMENT OF CASH FLOWS - PROPRIETARY FUNDS

For the period July 1, 2019 through June 30, 2020(In whole dollars)

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MCAG NO. 1024 Puget Sound Clean Air Agency Schedule 16 Notes to the Schedule of Expenditures of Federal Awards

Fiscal Year 2020 (July 1, 2019 through June 30, 2020)

NOTE 1 – BASIS OF ACCOUNTING

For Federal expenditures, this schedule is prepared on the same basis of accounting as the Puget Sound Clean Air Agency’s financial statements. The Agency uses the accrual basis of accounting for Proprietary funds.

NOTE 2 – PROGRAM COSTS

For Federal expenditures, the amounts shown as current year expenditures represent only the federal grant portion of the program costs. Entire program costs, including matching funds from the Agency or beneficiaries, may be higher than the expenditure amounts shown on the schedule. Such expenditures are recognized following, as applicable, whether the cost principles in the OMB circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, or the cost principles contained in Title 2 U. S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement.

NOTE 3 – AMOUNTS AWARDED TO SUBRECIPIENTS

The Agency Passed $688,354.69 to Subrecipients.

DE-01J53801 DERA School Bus Replacements $637,500.00

DE-01J40801 Puget Sound Harbor Vessel Replacement $ 50,854.69

NOTE 4 – INDIRECT COST RATE

The Agency has not elected to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance and has used the Agency’s federally approved indirect rates.

The amount expended includes $15,816.01 claimed as an indirect cost recovery distributed as follows:

Grant No. Title Indirect Rate Indirect Cost Recovery

DE-01J53801 DERA School Bus Replacements 61.37% $ 4,555.03 DE-01J40801 Puget Sound Harbor Vessel Repl 61.37% $ 5,814.83 OTGP-2020-PSCAA-00024 Harbor Vessel Engine Repl Grant 2019–Federal 61.37% $ 5,446.15

$15,816.01


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