Hello everyone.

Today is Thursday, November 13th, 2025 at 3.04 p.m.

We are here for the audit committee meeting.

We're gonna start off with a call to order.

Okay, committee member Jordan here.

And Pen Meganares?

Here.

Thank you.

All right.

Moving to public comment.

Are there any public comments?

None received.

All right, moving to item three.

Are there any agenda amendments?

Okay, all right.

Then item four, consent calendar.

Consent calendar items are considered to be routine and will be enacted by one motion.

There will be no separate discussions on these items unless a member of the committee or staff request specific items to be removed.

Any questions?

Council member Jordan.

Move approval.

Second.

Okay.

Committee member Jordan.

Yes.

Yes.

All right.

Sorry.

Moving to item five A, audit results.

And this will be led by Director Castaneda.

All right.

Thank you.

I'll make some introductory remarks and then I'll pass it on to Amy Meyer, our audit partner from Mays and Associates.

So first of all, we come officially completed and got all our reports last Friday.

So this is really off the press.

And just really want to say a big thank you to Amy and her team at Mays for another successful audit and for her guidance to our team, especially to our new accounting manager, Mike.

So really appreciate Amy, your help and Vincent's help as well and your team this cycle.

So Amy has a presentation for us and we'll go over the details and the results of the audit.

I just want to quickly highlight our general fund results because you know that's usually the first place I look at.

So general fund, uh total fund balance.

This is excluding measure I uh increased from $31 million to $34 million for the fiscal year end of June 30, 2025.

The unassigned balance or balance that isn't committed or restricted for any purpose, that increased from 30 million to 32.

Now this is as a mainly helped by our property tax assessed valuation.

That's all an increase uh by about six percent.

Uh and by the way, six percent is right around our 10-year average.

So we're kind of, you know, not above the average, not below the average.

Um, on top of that, we were able to again contain our expenditures within our final budget amount.

So overall, we saw that you know we were able to build to our fund balance just a little bit, building a little bit uh year over year.

And um our comparison cities or neighboring cities are kind of getting their financials finalized too.

And so um we will uh uh gather those information updates um uh council on the general fund comparison uh between us and the other cities uh in uh for sure during the mid year review.

Uh so with that I'll pass it on to Amy.

Right, great.

All right.

So I've got a short PowerPoint here.

If I can get it going.

So you should start it.

There we go.

You should see the first slide.

So, yeah, okay, great.

All right, and if I you have any questions along the way, uh please just you can stop me.

You don't have to, don't have to raise your hand.

Just stop me.

I talk too fast and and too quick, so please don't hesitate to interrupt.

Uh so we're happy to present the results of the audit uh today.

So in all together, we have eight reports that are included in you know in your component of the of our audit work here.

Uh so an audit is an independent verification that the city's financial statements are materially correct or fairly present the financial position of the city's funds.

So we opine on the city's basic financial statements, including the major funds individually, and major funds are those that mathematically qualify.

There's a mathematical calculation that indicates which funds are required to be reported as major funds, which means individually in the front part of the financial statements, and then there are funds.

So then any other funds are reported in the non-major section of the report, but the city can elect funds to be reported as major if it's something you know important, or sometimes you have a fund that's winding down and it used to qualify mathematically, and you kind of want to leave it until it until it's done with its work and things like that.

So major funds, excuse me, can be seen on pages 26 and 36 of the report.

So we also opine on the city's entity-wide statements as a whole.

That's all of the in the statement of net position and the statement of activities.

That's all of the city's activities boiled into the two columns: your governmental activities, which is all your governmental funds and internal service funds, and then business type activities, which is where your enterprise fund activities are housed.

And those can be found on pages 22 and 23.

So our audit was conducted in accordance with auditing standards generally accepted in the United States, as well as government auditing standards.

So again, we have eight reports to present.

We're going to go over the results from all eight of those reports.

All right.

So we audit the city's ACFR annual comprehensive financial report.

So we audit the city as a whole, which the results are.

Can I just interrupt?

Grace, when I'm taking a look at the agenda right now for item 5A.

When I click on presentation, it's not this presentation that Amy is showing right now.

Is it supposed to be?

It's supposed to be.

We will check on that link.

Um, yeah, yeah.

Well, you will definitely check on it.

You want me to read it here?

I can send it to me.

It was working.

I'll double check again.

But I mean, unless it's a different, this looks familiar.

Okay.

Hold on.

If not, I can flip over and email it to you real quick if you want.

This that would be great because the screen's a little small, and then that will make it bigger.

Well, there's checking the link.

I'll do that.

I'll flip over and do that real quick.

Yeah, I do not know why.

This this wasn't looking familiar, and I'm like, wait a minute.

You may have to clear your cache, maybe an old uh old file.

So sometimes that creates a problem.

What is your I know I have your email, but it's not popping up.

It's uh Meganaris.

Oh, I was putting the P in there.

Okay, there you go.

I see you now.

Okay.

Yeah, I don't know.

Is anybody else having that same problem?

Or is it just me?

Uh I just uh asked accessed the agenda, and I clicked on the link and it is what Amy is showing.

Same with uh council member Jordan.

So maybe, yeah, maybe it is clearing the cache like suggested.

Yeah.

So frustrating when that happens because you can't tell until you don't know it's not matching.

Yes, okay.

So hopefully you'll get them now.

I sent the the two versions of it.

All right.

So um, so uh we the the main report is the city's report, which is in the annual comprehensive annual comprehensive financial report.

So what we audit is the middle part of the report.

The report the acfer is comprised of an introductory section at the front, statist statistical section in the back, and we audit that middle part, which is the um the basic financial statements that start with our audit opinion and go all the way through to the end of the report in the um supplementary information, but before prior to the statistical section.

Uh then we also audit the measure I program and though those financial statements and perform compliance testing for uh measures A and W programs.

And then this year, if you remember in the past, you've had single audits with all the ARPA funding that came through.

You've had that federal award program audit.

So that's only required when the city expends $750,000 or more in any one year, which the city did not receive or spend that much federal funding now that the ARP has been exhausted.

The you still have federal programs, but they don't meet that threshold.

So a single audit report is not required.

Uh the make sure I'm I think I'm off of my notes.

Sorry, hold on.

Um, I am.

That's weird.

Okay, so I'm off on my own notes.

So um in the city's financial statements, they include the city's investment in the joint venture of Silicon Valley Clean Water Authority, and it's calculated based on those financial statements.

So our opinion related to the joint venture is based on that audit.

And then it also includes the investment in joint venture for the San Mateos Consolidated Fire Department JPA, which is also compared calculated on those financial statements that we do not audit.

So you'll notice in our audit opinion that there is a reference to San Mateo Consolidated Fire Department's auditors separately, but there's not a reference to Silicon Valley Clean Water Authority because we were the audit, our firm was the auditors of that entity in fiscal 24.

So that's why we don't refer to other auditors because it's us.

Um, you know, not Belmont's audit team, a different audit team, but still it's our firm.

So that's why you that's why the disconnect there in the audit opinion.

Um, let's see.

And then the other piece that we do, we also um perform agreed upon procedures related to the cities and Belmont Fire Protection District's appropriations limits.

So in the report on page one of the ACFER, you'll see that uh the city received an unmodified or clean opinion.

That's the highest level of assurance that we can provide.

Um, and then also the um, but our audit opinion did include some uh some, we'll say we'll call them extra paragraphs this year.

One related to change in accounting principles before the implementation of governmental accounting standards board pronouncement number 101 compensated absences, which is discussed in note 9G, and we'll go over that in a couple slides.

Uh, and it required the restatement of beginning balances of compensated absences for a change in the treatment of sick leave.

Doesn't change, you know, what the city is doing, doesn't change your MOUs or the you know how you handle uh compensated absences on a daily basis, but it has to do with the accounting for it uh with sick leave.

The new rules are that sick leave is recorded based on the amount earned and expected to be paid in the future, paid or converted into cash, you know, used or paid in cash in the future, as opposed to in the past, the accounting was based on vesting policies.

You know, if they they leave and they get zero, then there would be a zero accrual.

Well, that that's no longer the rule.

So that's why you see that restatement increase in the liability balance.

But again, it doesn't change your day-to-day operations, it's just a year-end transaction recording in the financial statements.

Um then there's also a second emphasis of a matter paragraph related to the, excuse me, the restatement of a balance related to the it had to do with the prior year, the issuance of the Belmont family apartments loan of $3.5 million.

The offset to that loan was in the financial statements, was reported as unearned revenue instead of unavailable revenue, which you know, category-wise, it's not too far off from each other, but then at the entity-wide financial statements, uh, it didn't get eliminated as we call it to turn it into a full accrual full accrual transaction.

So we restated the entity-wide financial statements this year to adjust the beginning net position, which increased net position at the entity wide by that 3.5 million dollars.

Uh then measure I report also received a clean or unmodified opinion.

You can see on page one, and in measures A and W, we perform, as I mentioned, compliance testing for those programs, and we had no compliance exceptions or findings related to that.

So any questions before I go keep going forward?

Let's make sure.

Okay.

So also included in the ACFER's management's discussion and analysis.

So that is so we prepare the city's financial statements.

We do the consolidations and the and and the work to bring the report together.

But city staff, um, you know, of course provide us all of the information to prepare the report, and then they also prepare the management's discussion and analysis.

Uh, and um, it's a great place to go to get that concise explanation of what happened during the year.

It can discusses all the current year activity compared to the prior year and the whys and the what's and what what changed, and and that can be found on page five of the report.

As I always say, it's a great place to start in the report.

Of course, I want you to read the whole report, but if you're gonna go somewhere, go there first because it gives you a good overview of what happened for the year.

Then you can flip back and start reading the whole report.

Um, so some major financial events, kind of a long slide this year because there's a lot going on.

It's funny, it seemed like kind of a quiet year, but when you look at it, you did have a lot, a lot going on in 25.

Your governmental activities net position increased 11.7 million dollars.

Business type activities net position nine and a half million dollars.

A lot of that had to do with capital activity uh revenues exceeding expenditures and things like that.

Uh, and your governmental activities transferred five million dollars to sewer collections this year.

Uh, and what that has to do is if with construction in progress and capitalized costs, you you established the capital improvement project.

Not that you established the fund, the fund existed, but how you're using the capital improvement projects fund changed in 24 to manage the capital projects revenue sources, all the funds, project funding is transferred into fund 399.

The activity happens, and when the projects are either complete or nearly complete, when they're in progress, they get transferred back to the enterprise fund at the end of the year for reporting.

Because they really are, you know, the enterprise funds need to show their components of the capital assets within those funds.

Uh, and so that was about five million dollars of activity this year.

Then overall capital additions of 9.4 million dollars in your capital assets.

Major projects included the pavement reconstruction projects, San Juan sewer main capacity, Hiller Pump Street rehabilitation, Belmont Creek watershed, and among others.

Uh, then you also had a um Hill Street Affordable Housing Loan that got issued this year, and then on the flip side of it, related to that transaction was the sale of land related to the the Hills Hill Street Affordable Housing.

So the land was sold for a dollar under the agreement, but the balance of the land held was one point, I believe 1.4 million.

That's not coming to me right now.

I think it was about 1.2, 1.4 million, which is why on the income statement in the affordable housing fund, you see that loss on sale of land because there was a carrying value, but then it was sold for a dollar.

Um, and then you have the loan as related to that project as well.

Then, as I mentioned earlier, you have the restatements of beginning net position, which we'll talk about on the next slide.

And then in the fund level uh statements, you'll notice some there was some movement of funds between major and non-major funds.

And GASB, the GASBY, there was a new statement that was effective last year that changes the way those are presented, and you have to have what are called ghost funds when there's movement between those statements.

That's why you'll see on both the governmental fund statements and the enterprise fund statements because you had movement of funds from major fund to and from major and non-major funds.

On the income statement side, there will be what's what's termed a ghost fund where it just shows that beginning the change to the beginning net position to show show the movement.

Uh so it's not, you know, there's nothing wrong, it's just a new required presentation when there are movements like that.

And so this year the affordable housing fund and the governmental activities moved from non-major funds to major funds, and in the enterprise funds, I think it was storm storm drainer, excuse me, storm drainage moved from major funds to non-major funds.

Then you also established the new sewer connection fees fund.

It had previously been reported as a component of the sewer collections fund, and now the activity is reported separately.

So there were some transfers between those funds to get the to separate the activity for the year.

Um one other big point is in um uh note 9D.

As you know, I know it's been talked about the last few years for the appropriations limit that you, you know, your GAN limit or your appropriations limit, your property taxes are exceeding the appropriations limit.

So you're required to, you know, you have two options.

You can refund the funds or you can put them into qualified capital outlay uh account.

I think there's a third option, too, but I've never actually seen it happen.

Um, and the qualified capital outlay, which the that's a it's a term in the state code qualified capital outlay projects that have a lifespan of over 10 years, and then there are certain limitations on the type of projects that those funds are required to be spent on.

And so at June 30, 25, the balance for qualified capital outlay for the city is five million dollars.

And for uh the fire protection district, it's 10.4 million dollars because it's an accumulation of those funds each year's over or under on the appropriations limit accumulates to these these balances.

So you'll see that in note 90.

Uh, on the pension and OPEB front, your liabilities both decrease primarily because of the uh the fair value of investments, you know.

You know, obviously you're continuing to make your contributions as required, but the investment balances at the end of the measurement period were inflated is not the right word, but you know, um, because of the fair value of adjustment higher than they had been in the past.

So that created a decrease in the outstanding liabilities for those programs.

And then as Grace had mentioned that your general fund balance increased two and a half million dollars this year.

So the next slide shows uh that effect of the restatements this is a new also a new requirement when there is an adjustment or restatement whether it be from a correction or uh an implementation of a governmental accounting standards board pronouncement you have to have a table that shows the balance as previously reported and then the adjustments to get to the revised or adjusted beginning balance at the beginning of the year.

So it's actually a good good view to see things and that includes um restatements and uh movement of the non-major to major funds and that's where you can see the second column that's a requirement there and compensated absences and then that restatement for the unearned revenue in the Affordable Housing Fund.

All right.

So also as part of our audit we test the internal controls of the city to verify the day to day practices are in line with approved policies and transactions are recorded in accordance with generally accepted accounting principles.

So that means that on a sample basis we test transactions to source documents for areas such as revenue disbursements, payroll, capital assets, long term debt and then we also test the balances on the statements of net position.

So from that work if there are matters to report, they're included in our memorandum on internal control.

And those matters can be included in one of three categories or any one of three categories and material weaknesses significant deficiencies or other matters.

So we have uh no material weaknesses to report we did have one other matter to report related to the review of the general general ledger system access roles you know when there's changes in an employee's function to make sure that any access that they may have to a particular module within the general ledger system is still appropriate and there are no conflicts and things are up to date and so we had noticed noted a few things that were outdated and need to be reviewed.

So now as you'll notice in the memo uh city staff has always provide already provided their response to the comment and their plan of remedying the situation and so that'll be included in there.

And then the report also includes upcoming GASBY pronouncements that may or may not affect the city's financial statements.

There is one next year that's going to change the the for primarily change the format of the um enterprise fund statements and the some of the content in the MDNA of the report but not anything that's changing it's not changing overall accounting it's more presentation of of information in the report.

So the other document that you have is the document called the required communication.

So we are as it says required to communicate certain things to you things including changes in accounting policy.

So there were no changes in accounting policies for the year other than that implementation of GASB 101 that I've probably beaten up enough so far you don't need to hear about it again but it was the compensated absences piece.

There were no unusual transactions this year the report does include a number of significant accounting estimates that were required to tell you about because as you know those financial statements are that frozen moment in time all of the activity for the fiscal year up to June 30 and then the balance sheet balances at June 30 and things you know there are estimates and reality can change right on July 1 or sometime in the future.

So significant estimates in the report where the actual results may vary from those estimates that are at that point include your pension and OPEB liabilities those fluctuate as things go on all year the through there out the year fair value of investments.

So that's the fair value of your investments as of June 30 and if it changes on July 1, there's no accounting requirement to pull any changes back to June 30.

And so that's you know the obviously an estimate at that moment your investment in joint ventures, depreciation on capital assets, compensated absences, subscription assets and liabilities, and claims liabilities.

So those are the more significant um accounting estimates in your financial statements.

We uh are happy to report we had no difficulties encountered or disagreements with management.

We had we did have you'll see in the report, there are two material audit adjustments, but they didn't, we didn't feel that the context of the adjustments.

We they did not what am I trying to say?

They didn't become they weren't an internal control weakness.

So that's why you didn't see a comment about them in the memorandum on internal control.

But when there are material adjustments, we're required to point them out.

So there were uh one was related to um the uh accrual of accounts payable and a capital improvement projects fund.

It had to do with the timing of when the invoice was received by finance the finance department, and then the other was to adjust uh how to record the capitalization of or excuse me, recording the capitalization of the fiscal 25 capital contributions for the Silicon Clean Valley Water Authority um investment in joint venture.

Because of the timing, the balance in the joint venture that you see on the balance sheet is is calculated as of the prior fiscal year, June 30, 24, because that's the information that's available at the time of your financial statements.

And so then any capital contributions during fiscal 25 are to be added to that asset as opposed to being expensed, and that was that the reason for that adjustment.

Uh we have no uncorrected misstatements to report.

So as we go along the audit, we're required to accumulate any uncorrected misstatements, kind of an unusual term.

It's, you know, if we find little differences here here and there, um, like say that um that accounts payable invoice.

If it wasn't material, if it was a small amount and but we noticed it, we might put it on what we call our past adjustments worksheet, and we're required to accumulate them to make sure they don't become material and then need to be adjusted and and um and recorded.

And so we have no uncorrected misstatements to report to you.

They were deemed trivial.

Uh the other two reports, um, agreed upon procedures reports that we test the calculation of the GAN limit, the appropriations limits, and we it encountered did not detect any errors in those calculations for the 252025 um limits.

So the next two slides just have uh a snippet out of the statistical section that's in the ACFR.

The first one is on page 153 of the report, and this we've just snipped the the last five years of net position.

So this is that total, all of the city's assets and liabilities for governmental activities and business type activities.

And you can see over the past five years.

Uh it's funny how quickly things can increase.

You know, you went from in 21, a total of 149 million dollars to 251 million dollars in 2025 of net assets.

You can see the largest, well, actually, not the largest component.

I was gonna say a significant portion of that is uh the net investment in capital assets.

Obviously, you can't spend that the 88 million dollars and 95 million is restricted.

So that's going to be your you know, developer fees, other restricted funding sources that that are uh restricted to certain components, including that um qualified capital outlay restriction is in there because you can only spend it on XYZ, and then your unrestricted net position is $67 million at the end of the year.

Uh and then the next slide is fund balance.

So just your governmental funds.

Um, and you can see again, I'm your faces are hiding the number for me.

There you can see the um general fund went from 35 to 38 million at 2025, and uh all your other governmental funds at the bottom there, um, from 57 to 62 million dollars.

All right.

And with that, I'd like to thank Grace and her team because they were great help.

We ask a lot of questions, as you can imagine, and ask for a lot of documents, but I think overall the audit went well, even with all the new the changes in the department, and uh we made it to the finish line.

I appreciate their help.

And Vale, if you have any questions.

All right, thank you so much, Amy, for the presentation.

So lots to take in.

Um, council member Jordan, do you have any questions?

Um I don't at the moment, no.

Okay.

So my my question is just more of a confirmation.

So what you have basically found is that once again, um, Grace and her team have hit it out of the ballpark and are doing exceptionally well in running our city from a financial perspective.

I would agree.

Yes, yeah.

No, I mean everything went well.

Like I said, we didn't have any, you know, you can see it wasn't all gloom and doom in my report.

We didn't have a lot of internal control comments to to discuss with you.

Um, no material weaknesses.

We did have a few audit adjustments, but only two.

Like I said, that that elevated to the point of having to point them out.

And but overall, not a ton of audit adjustments, which is I there's no definition for a ton when it comes to an audit.

You know, I guess there is a definition, but no, just a few audit adjustments overall.

And uh, you know, it went well.

Great.

In comparison with other cities, how how do we stack up?

Oh, that's always the hardest question.

Because every client is so different, you know.

That's um, I would say, you know, you very responsive, um, ask a lot of good questions and and especially, you know, because we have to we have to walk a fine line, right?

We have to maintain our independence, but we have to also make sure that we're providing enough information that if there are weird questions because you had new, you know, staff taking on new positions and making sure that they're um they're able to do their job, I guess is the word, you know.

So making sure that we're providing enough answers without crossing that line, you know, and then so it's your the team did really well.

You know, there were good questions, they found things as well.

You know, we're not we're not perfect as auditors, and that kind of in a sense it always kind of makes me a little comforted, I guess, when they find an oops, you know, in the report because they're looking at it and and understanding what they're looking at, which is good.

So I would say, you know, they're definitely in the upper end.

How's that?

Oh, it's always a hard, it's a hard question to ask because every client is so different or answer, I should say.

Um, yeah.

Thank you.

Grace, please, you know, on behalf of the council to yourself and to your team, let them know that we're so proud of them and so thankful that once again we have passed our audit with flying colors.

Yeah, no, I just really appreciate it.

Um, Mike is on a very well deserved vacation to Japan.

Uh so he's not here today.

He's our um, and you know, we um promoted him to the accounting manager uh during this year.

So you really took on a lot, especially, you know, with some transition in our staff.

So really do appreciate Amy's help too in guiding us.

And um, you know, she came back to our engagement after needing to rotate off last year.

And so she also came back with a fresh pair of eyes, you know, like uh noting stuff to us that's in our, you know, have been in place for years.

So that also gives us, you know, that nudge to continuously um review and monitor.

And so that we appreciate too.

All right, thank you.

So if we have nothing further on this item, we can move on to item five B.

Considerations of draft audit committee and your report by Director Castaneda.

All right.

So uh we included in your agenda packet the draft report that's um we're targeting to bring to council uh on uh the 25th.

Uh it basically said that you we've met today with our auditors, um, that you've received the uh uh audit results and the process of the audit.

And so with your approval, we'll put this um on the regular um council meeting agenda uh again for the 25th, uh recommending to the full city council to receive their financial reports for fiscal year ended June 30, 2025.

Okay, do we need a motion on that or can we just say I think we do need a motion on that?

Yes, um uh committee member Jordan.

Yes, I move approval.

Okay, cool.

Thank you.

Um, paying Meganuris.

Yes.

Aye.

Okay.

Motion passes to zero.

How do we have a vote when you have a first and a second on a two body?

Member body, I don't know.

It's a oddly sure.

All right, let's move on to item 5C committee committee meeting schedule for spring 2026.

Um if I may just uh really quickly um uh on the financial policy update, there's a memo included in the agenda packet, uh that we will also include as part of the um uh council report.

And so that financial policy update that will uh is included in this packet and it'll also be attached to the um council meeting agenda and it is basically say we follow GFOA best practices.

It also point to our budget book uh to the financial policy section, uh where we can reference you know the most important of the city's financial policies.

For example, like you know, we'll um have a 33% um uh uh general fund reserves.

Uh we will adopt the budget uh by June 30th every year.

So things like that, and that will be in the um council report as well.

So uh just a note to uh five B on that.

And then for item five D, the uh the meeting calendar.

Um we'll do a spring meeting next time.

That will be around April May.

We'll schedule that meeting as we get closer, and um that purpose will be to review the next year's or actually this current fiscal year's audit plan, uh, and we'll schedule that uh closer um uh next year, next spring.

So, and that's all for me.

Okay, beautiful.

Councilmember Jordan, any questions?

Um, no questions, just thank you very much for all of your hard work.

It's having a job where I'm sort of CFO, which I'm not, is not it's it's no easy task, so I appreciate you and the staff for everything that you know they do to keep us financially solvent year over year.

So thank you.

Please express our thanks.

We'll do thank you so much.

Agreed.

All right, moving on to item six.

Are there any committee updates and staff items?

Okay, moving on to item seven.

Are there are no matters of committee interest or clarification?

So that means we can adjourn this meeting at 3 38 p.m.

Thank you.

Thank you.

Thank you.

Okay, Scott, did you want to did you want to?