today's december 2nd 2025 this and um this will be a hybrid meeting allowing the public to comment

in person and virtually and instructions for addressing the committee virtually can be found

on the agenda we'll start with roll call and it looks like all committee members are present um

the first item is item um 3.1 to approve the review and approve the minutes of the may 8th

2025 CFC meeting.

Those are in our packets.

And does anyone have any questions or changes to the minutes before we ask the public?

Does anyone member of the public online wish to address this on the minutes?

Looks like not.

For motions in order to approve the May 2025 CFC meeting minutes.

Perfect.

We have a motion by committee member Ramirez, seconded by Vice Mayor Ramos.

All in favor say aye.

Aye.

Aye.

That carries unanimously.

We'll move on to oral communications from the public on non-agenda items.

Would any member of the public join us virtually or in person like to write a comment on any item that is not on today's agenda?

If so, please click the raise hand button in Zoom.

In-person attendees can raise their hand to be followed upon.

we'll take in-person speakers first.

It looks like we don't have any.

Are there any speakers online for this?

No.

So we'll close oral communications

and non-agenda items and move on

to our discussion and action items

of which there's one today.

Item 5.1 is the annual financial audit results

and review of the fiscal year 2024

and 2025 annual comprehensive financial report.

So our Chinese administrative services director

Derek Rampone will make brief remarks before the presentation by the city auditor who's with us as well.

Thank you, Chair Clark.

Derek Rampone, your Finance and Administrative Services Director.

I've got Grace Zang, the Assistant Finance and Administrative Services Director, and Helen, the accounting manager with me as well.

And so we also have Ahmed Badawi from Badawi & Associates who will speak shortly, kind of walk through a quick presentation with the committee.

It really was a successful audit, I would say.

The ACFER has been issued in draft form.

And so we'll be looking to go to council on the 16th of December for acceptance.

We were issued, once again, an unmodified opinion, which is the cleanest opinion and best opinion possible.

And so really just wanted to acknowledge that it's a real clean audit.

and ACFER looks good

and they wanted to thank the accounting team

for putting it all together.

They do a lot of work between July and now

on getting it all together

and working with the auditor

and answering a lot of questions.

So with that,

I think Ahmed will kind of take over

and that's a quick presentation

that he'll probably share.

I did provide hard copies too

so you can follow along.

Everybody, Ahmed, when you are.

All right.

Well, thank you.

Good morning.

And thank you for inviting me to the meeting.

I'm going to get started right away and share my screen here.

And please confirm if you're not able to see my screen.

We can see it.

Wonderful.

All right.

So I'm going to get started.

So thank you again for inviting me to the meeting.

I'm here to present to you the results of the 2025 audit for the City of Mountain View.

and I am going to just cover the agenda for today.

I'll give you a very brief overview of our firm and the engagement team,

a list of deliverables and the scope of our audit,

a brief overview of our audit methodology,

some of the risks that we identified during our audit process,

the type of audit report or opinion we are about to issue,

some of the required communication as your dependent auditor,

and then a brief overview of the new accounting standards.

So just a brief overview of our firm and the engagement team.

Here is just our firm by the numbers.

We have about 25 years of experience.

We're a very specialized firm.

We only work with government clients.

We currently have about 65 government audit clients.

44 of those are cities.

We have about 30 employees.

And so far, knock on wood, zero lawsuit,

legal or disciplinary actions against the firm.

As a matter of fact,

we actually just completed our peer review and we received basically the highest grade

available like we did every peer review. So that was just completed this last summer.

As far as our engagement team, I was the engagement partner. We had a quality control reviewer,

an audit manager, an IT specialist, and four professional staff assigned to the audit.

in terms of the deliverables and the scope of our audit

sorry it jumps for some reason

we were mainly engaged to provide an opinion on the city's ACFER

basic financial statements

the shoreline also region of the park community

the single audit reports which is the audit of the federal grants

the agreed upon procedure on the GAN limit

agreed upon procedure on the Silicon Shores corporation lease calculation.

And we have completed two of those during this year.

And communication with the governing body, which is what I'm doing today.

In terms of our audit methodology, just really a very brief overview here

that the audit is an ongoing process that is really performed throughout the year.

It starts with a planning phase, which is information gathering phase

about any changes that happened during the year, any changes in accounting systems, accounting

policies, personnel, and so on to help us plan the audit. We do have an interim phase where we come in

and interview city staff and focus on processes and controls and design audit procedures based

on the controls and the risk assessment that we identified. The year-end phase is when we come in

and do testing of account balances and obtain audit evidence and so on. And then finally,

the reporting phase, which is where we end right now, is to finalize the reports.

In terms of primary audit risk, so I always like to say that there are no risk-free audits.

So every audit we do have risks. And the risks that we identified in the city of Mountain View

are pretty standard in almost every audit we have. So I just wanted to clarify that there is

nothing specifically concerning about Mountain View compared to any other city. But the first

risk is the risk of management override of control. And this is really a risk that we cannot

eliminate completely because management are the ones responsible for designing, implementing,

and monitoring control. So they are oftentimes in a position to override those controls.

So we have to design audit procedures to minimize that risk to an acceptable level.

So these are just some of the procedures that we perform.

Obviously, making sure that we have experienced audit staff, incorporating element of unpredictability, evaluate management selection of accounting principle and how consistent they are, test journal entries prepared by management review accounting estimates, evaluate business rationale for unusual transactions, and evaluate fraud inquiries.

and we have not become aware of any incidents

where management has overridden control.

So just wanted to highlight that as well.

Leases is an area just high dollars.

So it's an area of risk for us.

We perform testing on lease receivable.

We review the lease summary obtained by management.

We also test material new leases,

review agreements and calculations and so on.

The next area is revenue and receivables

and proper revenue recognition.

And this is the auditing standards do require us

to consider this area a high risk area.

So we rely heavily on confirmations from third party,

especially on the governmental revenues

like sales tax, property tax, TOT, franchises.

We confirm most of these revenues

and the proprietary funds, we basically perform ratio analysis and so on.

And then finally, the accounting estimates.

Just accounting estimates by nature, they just have a high degree of uncertainties

and that makes them higher risk.

So I just wanted to also bring to your attention some of the estimates in your financial status.

Fair value of investments, the useful life of capital assets,

the pension and OPEB actuarial assumptions, the landfill liability estimate, and so on.

If we move on to the auditor's report, as Derek mentioned, it's still in a draft form,

so we haven't issued our report yet, but we are going to be issuing it soon.

The report will list the standards that we followed, and those are the generally accepted

auditing standards and also government auditing standards. We anticipate to issue an unmodified

opinion. And an unmodified opinion means that we believe the financial statements are fairly

presented in all material respects, that all accounting policies have been consistently

applied, all estimates are reasonable, and that all disclosure is properly reflected in the

financial statements. I want to move to the last part of my presentation, which is a required

communication. On the left side here is our responsibilities as the auditors, and this is to

provide an opinion on the city's financial statements, to evaluate internal control over

financial reporting, to evaluate compliance, to ensure financial statements are clear and

transparent, and to communicate with the governing body. Management have responsibilities in this

process. Management has to take responsibility for the financial statements, establish and

maintain internal control, make all financial records available to us, establish internal

control that will prevent and detect fraud, inform us of all known and suspected fraud,

comply with laws and regulations, and take corrective action on audit findings.

As far as independence, we are responsible for maintaining our independence. We follow the AICPA

and the California Board of Accountancy rules, and we normally identify any services that

could impair independence, like preparing the ACFA, for example, on behalf of the city,

and make sure that we have safeguards in place,

like having an independent reviewer not involved in the audit,

reviewing those financials and making sure that they adhere

to the standards and the requirements.

As far as timing of the audit, like Derek mentioned,

we believe that the audit was performed timely

within the timeframe communicated to management

in our engagement letter.

In terms of significant accounting policies,

there were two new accounting standards that the city implemented

during the year, compensated absences, and risk disclosure.

I'm pleased to say that we encountered no difficulties during the audit,

saying the city was prepared, was responsive, provided good audit evidence and documentation,

so we felt that the audit went well with no difficulties.

In terms of significant audit adjustment and unadjusted difference,

any adjustments that we came up with, management has posted those adjustments,

And so there is no unattracted differences.

And in terms of deficiencies in internal control over financial reporting,

there were no material weaknesses identified during our audit.

And then finally, just a heads up that there are some new accounting standards

coming your way in next year, GASB 103 and GASB 104.

GASB 103 is going to make some changes to how the financial statements look like.

Other than that, I want to say thank you for allowing us the opportunity.

I am more than happy to answer any questions.

Thank you.

Any questions?

Thank you, Chair.

And thank you, Mr. Badawi and staff for preparing all of these documents.

I have the privilege to serve on this committee for the entire time I've been on the City Council.

And I started, I think, after seven years, I've grown a little bit more comfortable with reviewing these documents.

And it's always encouraging to see a clean office.

I don't have questions about the audit itself.

I had shared a few questions in advance of the meeting, and Derek was kind enough to respond to them, so I don't want to waste everyone's time.

But we didn't have a chance to go through all of the equipment replacement fund reserve questions.

So if you could just very quickly touch on those, I'll be able to go to sleep at night.

Yeah, so I think the first question you had was that we had budgeted $11.7 million in this last fiscal year to be spent in the ERF.

And you wanted to know, you know, how much of that did we spend?

And in fact, we spent $12.5 million.

6.2 of that was actual money out the door.

And we have POs issued for $6.3 million, so about half.

So 12.5 in total.

And really the large amount in the PO is due to the timing that it takes to build some of the vehicle, the large vehicle.

That's why there's POs issued for that.

So those will be paid as soon as those equipment is completed.

And they'll be delivered once they're ready.

You did also ask about the 25% kind of target to maintain.

So currently, the ERF estimates about $60 million for total replacement of all the equipment. So 25% of that is $15 million. At the end of this last fiscal year, a couple months ago, we had $21.2 million in there. So we're about $6.2 million, a little bit over the $15 million funding, the 25% target.

I would say that the 60 million does not incorporate the replacement of vehicles at the electric cost of electric vehicles.

And we're really anticipating that to be, I think, 30 percent more than the current cost of what we have on the books at the 60 million.

And so we feel like we're in a good spot, hopefully, in taking into consideration the electric vehicles, which will be a high cost.

And then I think for the next fiscal year, we did pause the contribution to the ERF.

That was about, I think, $1.4 million.

And so we're anticipating that that five plus million excess that we have at the end of this last fiscal year will be reduced to about three and a half million dollars.

So not much play on 60 million, but excess over the 25 percent.

Thank you. And the reason I ask for the non-existent members of the public is because the fund balance is always very high.

And the annual activity, in my opinion, over the years didn't appear to justify that balance. So I'm happy to hear that we're spending down that balance in the ACFA for the next fiscal year. We'll see that number lower, right? And ratcheted down further as we start to bring online the electric vehicles.

So that's sort of the expectation, I guess, for things.

And I would say, too, we're already talking as a budget team about what the impact of the electric vehicles is really going to be financially to us.

So the goal to have it ratchet down, we may have to come back to council and reset and just tell the story of what's happening with the cost for the vehicles.

Because I think, like Derek said, we are seeing that they're 25 to 30 percent more expensive than what we pay for everything now.

so there may come a time where we do have to plan for it to go back up basically because once we

have more vehicles and it's not just trucks i mean these are major major pieces of equipment

the cost is just going up for everything for obvious reasons i mean everything happening

with the economy and tariffs just vehicles it's so expensive now so or we might have to reset but

for now it's as you say that it is i'll be gone by then i think i think there's a plan that is

transparent i think that that had not existed previously it's like what is this money being

used for it right it was growing pretty substantially and then it was stagnant and

around 30 million for a little while and i'm glad to hear that there is a plan for the yes

definitely those are my questions thank you thank you when do we find out if you got awards on this

yeah it takes takes a little while we yeah we found out the last the last budget and the last

ACFA we have received the awards for usually takes what six months ish yeah yeah yeah middle

of next year so it takes a while we issue the next one our rears kind of so we just found out

about the ACFA in the budget just a couple few months ago for last year's yeah so it'll be six

plus months but we fully expect to get it yeah I have any reason not to believe

um there are no other uh committee questions uh i don't see any members of the public

here it looks like not online okay so um yes well i'm so i was waiting for you to be

asked for public comment i'm happy to move um to recommend that city council accept the audit

it been related reports. I did have a quick addition, not part of the motion, but there were

some other questions that I didn't bore you with that I had submitted. But I think one thing that

came out of those questions is maybe there's some value in providing some additional explanation

for, for instance, the use of property and money. There's a lot of helpful information that our

staff and the auditor have that are not necessarily easily accessible that explain some of the numbers

that to the public may appear hard to understand.

So I think maybe some gentle guidance for staff and for the auditor to provide some additional

explanations and the finance director has all of that information.

Yes, that makes sense considering the use of property and money is very unique, not

super unique to MAUU, but that's the level of it is super unique to Mountain View.

We have a question by committee member from here to recommend to the city council that we

accept the review and accept the reports, same as we're doing today, seconded by the vice mayor.

and

thank you again

Ahmed and the team

I reviewed

a few audits this year

and this is by far the cleanest and most boring

which is

not that this is

boring but in terms of

you found

I'm just really glad this is

a very clean audit and

this is the largest organization

I've ever been famous

I don't know how you all do it in terms of revenue recognition and all the different funds and everything.

So I know it's a well-oiled machine at this point, but I really appreciate all the work and effort that went into this.

So motion on the floor, all in favor say aye.

Aye.

Aye.

Opposed? None. So that carries unanimously.

And that is our only CFC discussion and action item today.

Are there any staff comments, questions or reports?

Yes.

City management.

I just want to thank staff too for another great year.

I know it's tons of work.

Derek mentioned starts really in July.

It's about a six month process going through this.

So Derek and Grace and Helen, thank you guys so much for you and your teams.

Everything you do to get us to this point.

I know it's a lot of work.

and also Ahmed, Mr. Badawi,

thank you for your work with Mountain View.

And we love hearing that it was easy to work with staff

and you had no issues.

So I appreciate all of you.

So thank you.

It was a pleasure.

Thank you.

Not the case in every city.

Congratulations, everyone.

Any other members, staff?

In the Council Investment Review Committee,

There were some requests by the public.

Is there any updates on looking into essentially our investment policy on that?

Yeah, so we've been working with Chandler and we're expecting to schedule an IRC meeting sometime in 2026, not a year from the last meeting, but probably middle of the year, you know, before that to bring back some recommendations.

No other business before the committee. I'll adjourn the meeting at 8.59.

Thank you, everyone. Have a good day.

Thank you, Ahmed. Bye-bye.