All right, welcome to the Novato City Council meeting, January 27th, 2026.

Please join me in the Pledge Allegiance.

I pledge allegiance to the flag.

And to the Republic.

One nation, another individual, liberty, justice.

Laura, can you please take roll call?

Councilmember Eklund.

I am present.

Councilmember Carkle.

Present.

Councilmember O'Connor.

Present.

Mayor Pertem Jacobs is absent.

Mayor Farack.

Present.

Thank you very much.

Moving on to closed session announcements.

I'll go to City Attorney Bell.

Thank you, Mayor and Council.

There's no reportable action from closed session.

Thank you very much.

This is a presentation, so I'd like to call up Carrie Walsh, Boosters President, and Park and Recreation and Community Staff Members, Alexander Camber, Perry Sue, and Carrie Proctor.

And Carrie, I believe you're going to be presenting the donation.

Yes, please.

So my name is Gary Walsh.

I am the turn of the off.

Hello, there we are.

So I'm Carrie Walsh.

I'm the president of Novato Gymnastics Boosters.

Super excited to be here tonight and to present our annual 2025 donation to the city for $25,000.

Wow.

Yeah.

Super excited to do this year after year.

It's our reinvestment into the city that has given us so much.

We are a program that you know we're so proud to represent.

We have, you know, loads of kids that go through the program from toddler through uh the time that they graduate.

Um we do multiple events every year, and we were just talking numbers.

We hosted across our meets over 1,200 attendees in one year last year.

Well, so we're super excited.

Um but mostly I want to talk just for a moment about the community.

We do this in partnership with Park and Rec and with our excellent uh coaches, and it's something that I think really makes a huge impact on our community and on our athletes, and we're just thankful to have the opportunity to have them be involved and uh to be in an environment that is so you know growth oriented and enabling for that.

Wasn't really even planning to speak, but thank you very much, Carrie.

Of course, the City of Novato works hand in hand with Novato Gymnastics boosters, especially for our large events like the Novato Classic, which is actually coming up February 6th through 8th.

Uh we have currently 550 participants planning to compete throughout the weekend.

Um that does not include spectators, of course.

Um, we're expecting a large event, including a chance to see our own Novato gymnastics team compete on Saturday.

So you're welcome to come, city council course.

Um, and if you need information, please reach out.

We'll be happy to give you more specific information.

Can you repeat those dates again, please?

Yes, February 6th through 8th.

We actually start on a Friday evening, and it'll carry through throughout the weekend.

Great, thank you.

Thank you.

One last comment.

I just want to say again, this program is so unique.

I don't know if you realize from past conversations, but Novato Gymnastics program is one of the few city-sponsored programs that has a competitive gymnastics team in the country.

Right, right.

So we're not only building confidence and engagement, and you know, like it's really lifelong skills, and it we do it very uniquely, and we do it with a lot of engagement, not only from the the athletes that are so excited and passionate to be part of this, but they take that away after they graduate high school, and either they take it to them with call to college or into their careers, and it really is the basis for you know so many things that drive success.

But I love the partnership that we do with Park and Rec and with our expert coaches and the community of parents that volunteer is farm nut.

And I just am so proud to you know represent our board and represent our membership and let you know that this is a community-based program that absolutely is not just having an individual impact, it's growing community in Novato for the long term.

Thank you.

Thank you so much.

Would any of my colleagues like to say anything?

Yeah, I'll just weigh in and thank you so much for everything that you do.

I I coach kids for a fraction of the year, and I know how much work it is.

So the 500 plus kids in the one place, that's a massive undertaking, 1200, the previous one.

And thank you.

I mean, these things don't happen without people like you and our community going out and doing the work as well.

And it takes that partnership.

So it really does.

And I'm so proud to stand, you know, next to both of these people.

Um it really is a pleasure and an honor.

And you know, we do it with smiles on our faces.

We work really hard, but we have a lot of fun, and I think we lead by example for the kids around us.

At least that's what we try to do, and uh, it really is just uh a wonderful experience.

So thank you for supporting it.

Thank you for enabling us to continue to do this for our children, and thank you for enabling us to have a lifelong impact for them.

We appreciate it.

Councilmember Uckland.

Uh, thank you.

Um to me, this is just a highlight of the city.

Um, when we became partners, and we actually created a facility where all the young folks that really wanted to do gymnastics could excel.

It's just the the partnership that we have is invaluable.

And I know that there's a lot of other cities in the state are so envious of our position, and just really just want to thank you for your tremendous work and especially being able to provide funding back to the city to help reimburse some of the costs that we have incurred over time.

Just thank you so very much, and then Perry, of course, you're outstanding, and um, I don't know if anybody told you, but you can't retire.

Okay, then tell you maybe 80 maybe might think about it.

We can hang on to them as long as I know definitely.

So, um, really, we've got quite a team, and we couldn't do it, and we couldn't do it for the kids if it wasn't for this great team that we have.

And then council member Kirkle.

Uh, yes, uh, very briefly.

I just would like to echo both of my our both of the council members who spoke before me and say thank you very much for all the efforts.

I don't have kids in that age group now that participate, but I do remember my daughter uh you know participating in all those activities many many years ago, and it's just great that you guys can put in the effort that you that you do, and so thank you very much for that, and thank you for your contribution back into um our system as well.

Thanks, so thank you overall.

Yeah, and just lastly, thank you so much.

I know it takes a lot of hard work and dedication, and we're very lucky to have you as a partner and city staff.

Excellent job just maintaining the relationship, and it's just so unique in what you guys have really accomplished.

Um, my daughter, she's in the little kid one, so hopefully eventually she'll get to go up and compete because she's really into it.

Um, just it's fun fun seeing them, you know, just learning to do like the little walking on the balance theme to you know doing flips and all that fun stuff.

So it's definitely a treasure of our city, and thank you for your hard work, your partnership, and we really appreciate it.

So, why don't we give a big ovation to the big store?

Thank you very much.

Thank you so much.

All right.

Moving on to item D, approval of the final agenda.

Do I have a motion?

I'll move the uh approval of the final agenda.

Second.

Thank you very much.

Can you call?

Councilmember Eklund.

Aye.

Councilmember Carpal.

Aye.

Councilmember O'Connor.

Aye.

Mayor Pro Tem Jacobs is absent, and Mayor Farrak.

Aye.

Alright, that motion passes.

Um, now we'll move on to reports from the city council.

We'll start with City Manager Cunningham.

Thank you, Mayor.

Um, just one item in partnership with the Novato Chamber of Commerce.

The 2026 State of the City address will be held at 5 p.m.

on Thursday, February 5th, right here at City Hall.

During the event during the event, I'll be sharing key accomplish accomplishments from the past year and highlighting upcoming programs and projects.

So I hope everyone can join us.

Thank you.

Thank you very much.

Councilmember O'Connor.

No report this evening, thank you.

Councilmember Carkle.

I live a very boring life, but I did go to the uh read um event um last Saturday, and uh I was uh happy to see a lot of people go to reacquaint myself and a bunch of other people and uh think all in all of it is a great event.

Thank you and Councilmember Eklund.

Uh thank you very much.

Um, first of all, um as usual um once a month I do volunteer at the Hamilton Museum, and so for those people who don't know, there is a great museum about the history of Hamilton that is uh right on Hangar Avenue down at Hamilton itself.

Encourage you to come by.

Um I usually volunteer the fourth Saturday of every month.

We're always looking for more volunteers, and I wanted to do a shout out for Wade Relly, who is the manager of that museum.

He does a fantastic job and um and his daughter who is helping him to do even more with the museum, which is really great.

Um, I too uh went to the Paint the Town Red, and it was a great event as usual.

Um, to recognize um a lot of folks that have done a lot of things for the city.

Um there are two other things that I wanted to also bring to the council.

One was that um I serve on the Bay Conservation Development Commission, and I represent the cities in Marin, Sonoma, and Napa, and um I write a monthly report as most council members do know.

And um this uh this month I featured um two issues.

One is the BCDC rising sea level um committee, which I am serving on, and then um also to the regional shoreline adaptation plan.

Um those two are featured in my report.

I highly recommend council members take a look at that report because I am going to be bringing to the council an item uh for us to develop a regional shoreline adaptation plan.

This is something that is um required, it's not optional.

It is required for every city and county to develop this plan, and um some counties are doing it together with cities, and there's some cities that are doing it on their own.

Um so there really hasn't been a lot of discussion in Marin about how we're gonna be handling it, but I'm gonna be bringing it to the council because um the cities are already submitting plans, and um, we want to take advantage of any grant opportunities now so that we could help have some uh funding available to help develop that plan.

That is required by state law.

Um, also, too.

I did want to bring a shout out to the uh BCDC rising sea level working group.

Um this is um a very important issue, especially for Marin County and Sonoma.

Um, so it's uh something that uh we're uh I'm tracking very closely.

And if folks want to see my reports, feel free to give me a call or I'll be glad to send it to you on email.

They also are distributed to all cities in Marin as part of the mayors and council members.

So I I believe that they have a distribution as well.

Um so those are the two things that I I really wanted to highlight um for the ABAG report.

Um, there is, as you know, there is a uh San Francisco Estray Partnership, and um we are uh we got 2.2 million dollars from the Ocean Protection Council to help do a regional shoreline adaptation plan.

So it's great that um uh funding is coming from other entities to help jurisdictions throughout the bay to develop these plans that are so important, especially for people who live close to the bay and they get flooded because of sea level rise.

So anyway, so thank you very much.

Thank you.

My report over the past two weeks, I continued strengthening our relationship and representing Novato at several important community events.

I met with three county supervisors to further build our partnership with Marine County and to discuss opportunities for deeper collaboration on shared priorities.

I also attended and presented a resolution to North Rin community services in recognition of dedicated work and the successful placement support they provided the residents of Roalmark Court.

On addition, I joined the celebration of the City of Novato's birthday, where we honored several outstanding community members.

Congratulations to all the honorees for their contribution to our city.

All right.

With that, moving on to public comment.

This is general public comment for items that are not on the agenda and for items that are listed on the consent calendar.

There is a three-minute time limit.

So if you'd like to fill out a card, you can bring it up to the city clerk.

I have one public speaker card, Curtis Aiken.

Good evening, Mayor Farrakh and Council members.

Um, first, may I borrow your term, a shout out to the gymnastic group.

My kids went through there too, some 30 years ago.

Uh so it's nice to see that program still going.

Uh, good evening, everyone.

I'm Curtis Akins.

I've lived in Novato nearly 40 years.

I fell in love with this town in 1981 when I exited Highway 101 and crossed Roland Boulevard long before Matt and Jeffs was there.

I was appointed to Human Rights Commission by former Supervisor Judy Arnold and then reappointed by current supervisor Eric Lucan.

Now I serve on the Novato Multicultural Committee Advisory Committee, and hopefully we can give you all advice.

And we meet tomorrow night.

So if the public would like to come out, please come.

I wanted to take a moment tonight to simply thank you, say thank you for your public service.

I know that serving on this council isn't always easy.

Public comments can be sharp and passionate.

However, please remember the work you do matters and is valued.

One of the things I truly appreciate about this council is that each of you are out in the community representing all five districts.

You showing up, you listen, you let people talk to you and share conversations about how to make this beautiful community thrive.

It's wonderful.

It was absolutely incredible to see all five of you, Kevin would think about you tonight at the celebration of Novato's birthday.

And I loved having a chance to speak with each one of you as a member of this community.

It was really touching to see all of you and our city manager there as well, and a lot of the city staff.

This morning I had, or this afternoon, I had lunch with two past mayors, Denise Athens and Janine McLainey.

And Jean asked me what were some of the wonderful moments about the other night.

And I shared with her.

It was great seeing the the kids dance and sing, especially the song Novato, written by our hometown girl, uh Ms.

Bloodwater.

So Broadwater.

And it was absolutely incredible hear that song.

It actually brought tears to my eyes hearing the song about Novato.

And if people watching online or here haven't heard the song, I hope they go do because it really shook me to the bone.

And she asked me whether something else special, and I said, Yeah, there was one moment when the president of Paint the Town read, Dale Clown, who I've known a long time, stopped by the table and he looked at me and he said, Curtis, that's Novato.

And we both smiled.

And we shared a high five, and it just really felt like how wonderful this community is, and it's things like that that keep us close.

And I really want you all to know that how I know how tough it is when these public comments come at you, but you all were elected to do what's best for all of us, not just a few of you.

And I truly want to take a time to say thank you from the bottom of my heart, and also let you all know that myself and many people in the community stand ready to help.

Just ask.

Thank you so much.

We keep doing the good work.

Thank you very much, Curtis.

All right, moving on to the consent calendar.

Madam Mayor.

Yes.

I forgot one important thing.

Yes.

I forgot to tell the community that on January 13th, my mom had a very significant birthday, and that was she turned 99 years old.

And she's still with us.

And just really am honored to be able to have her in my life still.

So thank you very much for letting me let the community know that.

Absolutely.

Alright, moving to the consent calendar.

One thing I would do want to mention, and it's um, I wanted to just give some kudos.

We are applying for some grant funding, which um I'm really proud of.

So great job staff there.

Do I have a motion on approval of the consent?

Uh I'll move the consent calendar.

I'll second.

Laura, can you call vote?

Councilmember Eklund?

Aye.

Councilmember Carkel.

Aye.

Councilmember O'Connor.

Aye.

Mayor Pratem Jacobs is absent, and Mayor Frack.

Aye.

All right, that passes.

Um moving on to general business.

Um, I'd like to invite Carla, our finance director, Polo Lopez, EP supervisor, um, and then Justin Williams from CPA to present the audit.

Welcome.

I'm taking over all the public space.

I'm happy to be here.

I have a big binder.

We're we're excited uh to hear the presentation.

We are caught up, I think officially with our audits.

All right, honorable mayor, city council members.

I'm pleased to be here tonight to be part of the presentation for the 24-25 annual comprehensive financial report.

While the prior audit was the audit that caught us up for me and the finance team, this is the audit that is celebratory as we went from being caught up right into this next audit uh preparation, and so it felt like we went from audit to audit, so we didn't even take a beat.

So being able to become current is a great feeling for the team, especially given some of the challenges you will hear about in this presentation.

I would like to thank the finance staff who are here tonight and not sitting in the last row, and everyone who has contributed to this effort.

We will have some work to do, but we really see it coming together.

And since we last met, um, we hired um a new payroll technician since we last met on the audit.

We have hired a new payroll technician, Maria Franklin, she's actually out sick.

We have a couple of team members that are have whatever's going around.

Um, as our payroll technician, Juliana Castode, who is with us tonight as our senior accountant.

We currently have three vacancies.

Our deputy finance director, our accounting assistant for AP, because Ignacio Lua, who is also here tonight, was recently promoted to a senior accounting assistant.

And then the final vacancy is our accountant one to the accountant that typically does the work related to the Marin Valley Mobile Country Club accounting and a few other things.

I would also like to thank the council for supporting finance with the resources that we needed to get here so that we could get the job done.

And I um very much appreciate Councilmember Carkell being appointed to the council, though I have to say I am sad that Councilmember Milberg is not here with us, as this would have pleased him immensely.

I remember him coming into my office saying this is where the magic happens, and I'm like, some days.

So we were able to submit the ACFER for the GFOA award for financial excellence, which we have not been able to do for many years.

So that in and of itself is such an accomplishment.

It's like they say at the Academy Awards, it's just nice to be nominated.

Even if you don't get the award, the fact that you could apply for it is immense progress for this group.

I would also like to recognize the Finance Advisory Commission, as they have been pivotal in supporting us through this and will continue to support us as we normalize finance operations.

And I would like to thank the rest of the staff in the city.

It isn't just finance getting audited, it is the collective result of all of our work and the department head team led by Amy Cunningham, is an awesome leadership team to be part of.

Tonight I am here with our accountant too, Polo Lopez Carrasco, who is going to help me present.

He is our accounts payable supervisor, and he has also been working on fixed assets, which has had to go through quite a bit of cleanup, as evident by the audit comment, but I am completely confident we will resolve that and get it working right.

And with that, I will turn it over to Polo to talk about the audit results and some of the improvements we've made.

Thank you, Carla.

Can you guys hear me?

Yeah.

Good evening, Mayor and Council members.

Let's start with the big picture and discuss uh the 24-25 audit results.

Uh the out the auditors issue and unmodified or commonly referred to as a clean audit opinion.

These findings are included in both the single audit report and the management letter.

Of note, we have one significant deficiency, one compliance issue related to a grant award, and four management comments.

This table was originally created by Erica Pastor, our audit partner for a presentation for a presentation, and it's especially powerful because it clearly shows the improvements we made after completing the catch-up audits and bringing everything current.

It summarizes the audit findings from fiscal year 2019-2020, as you can see, because this audit is current.

We're able to begin addressing our final material weaknesses.

While it has not been fully resolved, we made meaningful progress.

And it was downgraded to control deficiency.

Well, let's talk about the challenges.

While we received a clean audit opinion, it is important to recognize that every audit comes with its own set of challenges.

Some of the issues we have faced or continue to address include vacancies and the staff turned over.

Several key positions were vacant during the audit period, including the deputy finance director, uh senior accounting assistant, Little Field internally, payroll technician, and accountant too field just prior to the audit.

These vacancies combined with other demands, reduce our capacity at a critical time.

At the same time, our remaining staff were responsible for managing several concurrent high priority projects, including labor costing for labor negotiations, budget development, and finance and finalizing the fiscal year 2324 audit and simultaneously closing the books for fiscal year 24-25.

As a result, the responsibility for carrying the audit failed primarily on staff with the most operational knowledge.

This led to an increased workload for those employees and require sustained focus and careful prioritization to meet deadlines.

COVID-19 was another challenge.

COVID-19 funding rather has been very difficult to account for as the American Rescue Plan, also known as ARPA.

The funding was distributed across multiple areas of the city, such as the General Fund, MVMCC, CIP, in addition to direct charges to the ARPA fund.

Expenses and revenue have to be accounted for in order to be reported in a single audit.

And the city is required to recognize the revenue as expenses are incurred.

Grants, we had 10 grants at 2.9 million in expenditures, excluding ARPA, and the other department processes that provide us with information are not yet fully in place.

As a result, we still have difficulty reconciling grant funding with the CIP funding to ensure consistency across all reports.

These controls need to be refined.

Reconciliations need to be brought up up to date for major portions of the year, where it's still overcoming data from past fiscal years, and there are some errors that we cannot correct until we can look at the data monthly.

Another area that was as mentioned by Carla, fixed assets cleanup.

One of the key challenges we face was correcting misconfigured IT technology fund, which hadn't been set up properly from the start and therefore wasn't functioning as intended.

As a result, we had to perform a significant cleanup, an effort that included entering multiple years of historical data, accurately recording assets and their depreciation in the world.

While this process was complex and time consuming, it was essential, it was essential to ensure our fixed asset records were accurate, reliable, and properly aligned.

Lastly, we focus on reconciling the fixed assets of ledger with the general ledger to ensure everything matched up correctly.

While much of this work has been addressed, we are still fine-tuning a few areas to make sure everything is fully accurate and complete.

Lastly, one of the challenges, the implementation for GASP 101 for compensated absences was challenging because they need to identify and separate lead types correctly.

It is to evaluate each type of leave, vacation seek, PTO, income time, etc.

And determine whether it was payable upon termination or used for time off and apply different recognition rules to each category.

While we had some challenges, I'm pleased to report that we have also made some meaningful improvements in a few areas.

Material weaknesses, for example, we made significant improvements in managing deposits in trusts and restricted revenue.

And we successfully returned funds to the rifle owners.

A lot of these were really old issues, some going back decades, and now we are current and we have been able to make real measurable progress.

The year in clause is another improvement.

For fiscal year 24-25, we focused on improvement collaboration and communication, both internally and externally, to ensure a smoother and more efficient close.

We took a more proactive approach with our internal departments in past years.

We typically reached out when questions arose.

But this particular year, however, we changed that model.

Carla met with each department individually to walk through the year-end clause process and address the specific needs and timelines for the areas.

By doing this early and intentionally, we ensure everyone was aligned and prepared well in advance.

And we added messages to our emails and payments to help vendors understand timing and expectations around the year-end processing.

Because of these proactive efforts, both internally and the departments and externally with the vendors, we were able to shorten the overall year-end close process because we did this one on time, which is a significant improvement over prior years.

As we look ahead, our focus will remain in addressing the control deficiencies and management comments, starting with cost recovery.

At the same time, we will be putting processes in place to resolve the other findings, and we are continuing to improve and normalize our processes.

To continue our improvements, we need to carry out our work with the other departments and create efficient processes.

Now I will turn it over to Carla to talk about the numbers and the rest of the auto results.

Thank you all for your time.

Before I start this section, just a reminder that the annual comprehensive financial report is a highly technical document.

And in fact, the government finance Officers association has a popular annual financial reporting program designed to encourage state and local governments to extract information from the ACFR to produce a more readily accessible and digestible report.

Sort of like our budget in brief, but for the financial statements.

Just so it's more digestible for the general public.

So given where finance is, we have not looked at doing anything like that, but it's something we can strive to do in the future.

Overall net position increased year over year by 6.2 million.

This is an indicator of financial health of an organization, not an indicator of the general fund financial health, not an operating budget financial financial health indicator, but overall financial health.

Because when we look at this year over year increase, it's all of the various funds that the city has.

And this is basically when assets exceed liabilities.

We break these out into the types of funds: business activity funds and government funds.

Government funds are the general funds, which we have.

Any fund that starts with 100 in our financial statements is a general fund fund.

And then our special revenue funds, which are restricted for particular purpose, typically they would be used for capital improvement projects.

And then our business activity fund is our discretionary enterprise fund, Marin Valley Mobile Country Club.

The change in net position is driven by expenses and revenues.

The business type activity, Marin Valley Mobile Country Club, had an $800,000 change.

This actually was $767,000, made up of my notes here, operating income and $643,000 of operating income and $125,000 of investment income, net of interest expense.

There was also a prior period adjustment of $232,000.

This was related to a mistake that we had made in depreciation.

All assets for the Marin Valley Mobile Country Club are in the spreadsheet.

So it's pretty easy to make a mistake with a formula and an improvement that we would like to make in the future.

Government funds had a net change of 5.4 million.

Again, this is all government funds inclusive of those funds that primarily in fund primarily fund the capital improvement program.

And those adjustments are related to the cleanup we are still doing, but also the fact that there were some reconciliations that we in all this audit catch up figured out mathematically and to really identify timing issues, you have to be doing reconciliations on a monthly basis with a monthly close.

On the statement of revenues expenditures and changes in fund balance, my column that says general fund says fund 101 only.

That's not accurate, it's all of the general fund funds.

So I pull out the general fund balance as it is where most of our activity is.

And Measure M started in April 1st of 2025, so only one quarter of Measure M receipts.

That we had forecasted at mid-year.

You can see that the bulk of the activity is in the general fund, and the bulk of the activity across those general fund funds is of course in our operating budget in our general fund.

But from an from an operating perspective, that's where most of the revenues and expenses are.

And within those funds there are operating transfers.

And so in the general fund funds, one of the things that we transacted based on council's approval was a three million dollar transfer from the general fund into the emergency and response, the emergency reserve.

And that was from the unassigned balances from the prior year audits.

So the statement of revenues expenditures and changes in net position related to the proprietary funds.

Proprietary funds are those funds that are used to account for business like activities.

For Novado those funds are Marin Valley Mobile Country Club and then our internal service funds.

We have four internal service funds are equipment operation and maintenance equipment replacement technology replacement and our insurance fund that's for the actuarial portion of the insurance the internal service funds had a net loss of 446 thousand this was largely in the equipment replacement fund.

That was 329,000 and the technology and insurance funds the insurance actuarial bore the rest of the loss pretty closely and then again Marin Valley Mobile Country Club had operating income of 643,01250 of investment income.

And then for fund balances the general fund again is multiple funds it's fund 101 through 120 and then you see I have an other general fund category with an asterisk on it and I have no number there that is because there are some funds that have little tiny amounts in it and they're less than 5000 so it didn't work with my rounding in the chart so I just left it blank but wanted to point out that they do exist.

Other government funds are all the restricted funds such as the gas tax the development impact fees TAM monies and that sort of thing and then the Hamilton Trust fund is a permanent fund and that's why we're calling it out separately a total fund balance of 107 million dollars.

For Marin Valley Mobile Country Club and the ISF it's easier really to look at a cash balance they have a retained earnings and with Marin Valley Mobile Country Club we have some set asides in that fund so easier to divide it up that way.

So all of the cash accounts for Marin Valley Mobile Country Club are $7.2 million in total working capital is 2.6 million operating reserve is around $3000 actually $250 capital reserve is $1 million and then there's the long-term reserve of $3.3 million.

This of course doesn't take into account payables and that sort of thing that were on the books at the end of the year and then the ISF funds have a little bit less than a million dollars in cash so an overview of fund balance according to the standard GASBY 54 we are required to break out fund balance into specific categories non-spendable restricted committed which we have none assigned and unassigned non-spendable are notes receivable and prepaid balance sheet items not real cash on hand.

And then assigned is so large because there are amounts reserved for capital projects, emergency reserves, self-insurance reserve, that sort of thing.

This is the general fund balance.

And then the unassigned amount is a negative $94,101.

So it would typically represent an amount available, but when it's negative, there is no amount available, and you need to you need to fund the unassigned fund balance.

That was created, that fund balance actually was created by a little bit of budget savings.

This again is different than the operating budget budget savings, as this includes all investment activity, which from an operational perspective, we don't always report in the operating budget because it isn't the operations per se, but we do report it to you on the investment report and of course in the ACFAR.

And then we had prior period adjustments and other changes in fund balance.

So as an example, we um might hold funds in fund balance for one time studies that council has directed us to take on in the future.

And until that study is done, that money will sit there held based on the resolution.

And then once the study is done, we release it, and so the fund balance changes based on those factors.

So very different than a bottom line perspective.

I was just gonna use the word forecast, but it's not a forecast, it is an actual balance.

We started uh fiscal year 24-25 with 15 million.

Uh the measure M allocation um to the emergency and disaster response fund was a little less than council um had allocated out of the budget because we um earned a little bit um less, about $300,000 less.

There was investment income of $578,000, and then we transferred in the prior year unassigned fund balances from two fiscal years uh amounting to $2.1 million.

And then council policy does uh reserve policy does state that when the unassigned fund balance in the general fund is negative, that the emergency reserve will backfill the unassigned fund balance.

So that is staff recommend staff's recommendation, uh asking you to authorize that transfer um to uh the general fund so that that unassigned fund balance doesn't eat into something um else.

And then um our next steps are really to continue resolving our audit findings to continue implementing um good internal controls and refining the um controls that we have in place to making uh improvements and then normalizing our processes and of course filling the vacancies.

Um, you know, it's hard to get the job done when you're not uh fully staffed.

And with that, I'm going to turn it over to Justin Williams, the audit partner from MUN CPAs to um present the audit results.

Welcome, Justin.

Thank you.

Good evening, Mayor, council members.

Happy to be up here and seeing most of you again.

Um, as council member O'Connor mentioned, um, I've been a frequent present presenter here over the last several years, so it's nice to be here presenting the audit results for an on-time audit this year.

Obviously, is the the June 30th, 2025 um audit.

My advancing means.

Okay.

Thank you.

A couple of the slides I'm gonna go over here in a second are repetitive, but it's good to be able to put those back out there considering where the city currently is in terms of uh being caught up and timely with the audits.

So one thing I do like to remind council members as well as members of management, uh, the financial statements themselves are the representation of management, and that's our job as the auditor to come in and form an independent opinion on those financials to let the user know whether or not they're fairly stated.

So that's a goal of a financial statement audit is to present an opinion um on the numbers.

So have we got here?

Um it's been uh quite a few uh difficult years for finance, especially to get caught up like this, and as I mentioned, uh they did six audits over the course of the last three years.

So very impressive to not only be, I mean, it's bad enough you have to deal with us auditors once a year, but to have our team out there twice a year on top of uh managing uh the city's operations and at the same time as they alluded to that um resolving a lot of the findings and things at the same time as they've gone along.

So very impressive.

So it's good to be here presenting the um last fiscal year in January, which is a pretty standard uh time frame for a timely uh municipality audit.

So we're out here in October, audit team.

Again, that's pretty standard for a June 30th year end audit.

Um, a lot of the um work that goes into the audit, we do a lot of planning up front.

So even though the audit team we are physically out here in October, um, as Carla and her team knows, we request a lot of information up front.

We do a lot of planning.

Um, it allows us to put the information on our systems, uh select samples so that when we're out here, we can concentrate on uh doing the audit, um, talking to members of management staff, looking at uh supporting document uh documentation as well.

Another big part of a financial statement audit are your internal controls, and so we um, as part of the required audit standards, we look at different financial processes.

A lot of the recommendations that we've had over the years are the result of making recommendations related to these different control areas, and as we're going through these areas of cash receipts, uh, cash disbursements, HR function, payroll function, things we're looking for as we're going through these areas are things like appropriate segregation of duties.

You don't want one person having too much control over financial process.

Now we're also looking for things like evidence of approval for different transactions.

So that's more on the control side of what we're um looking at on the different uh transactional areas.

Uh, the real really the bigger part of the audit, um, I think is what most people think of when you think of the audit, it's the testing of the balances and a test at uh the testing of the numbers.

So we're looking at the balances at June 30th as well as the activity throughout the year.

Uh, put uh some different areas and different types of tests that the auditors do.

Um we send confirmation of balances, that's a strong audit test where we send uh confirmations directly to third-party uh financial institutions that confirm directly back to us those balances, cutoff testing, it's a big one.

Um, oftentimes um agencies are good at doing uh uh transactions throughout the year, day-to-day accounting functions, things like that.

You get to a cutoff in this case, June 30th.

There's different types of entries that have to be done.

Um, so just a little bit higher risk for error.

So we concentrate a lot of our tests right around that June 30th year end into the current fiscal year as well.

So we look at several months right around that June 30th.

We do a lot of detailed uh tested transactions, that's where we're selecting um transactions directly from your accounting system and then requesting the support for those to make sure they're properly valued, classified, cut off, etc.

Analytical review is another type of test uh that we do that there are things like uh variance analysis.

We'll look at uh balances and accounts over several years to see if there's any unusual fluctuations.

Uh also do things like ratio analysis where we'll look at different high-level ratios like average salary per FTE, average benefit per FTE, things like that that allows us to look at high volumes of information, and then if there's anything unusual, then we'll uh look into that a little bit further.

Another big part of your audit is a single audit.

That's the uh audit of the federal funds, and because you receive more than 750,000 in a given uh fiscal year, we have to do those additional federal procedures, and then we put the financial statements together to make sure they're in accordance with all of the many uh GASB requirements.

So to report uh the results of the audit, um, there's different reports and uh letters that we issue.

We have our independent auditors report, which is the main one.

We also have our uh yellow book or government audit standards report, the federal uniform guidance report, and then two separate letters: the management letter and then audit conclusion letter.

Uh Carlton, we just they was one over the the annual comprehensive report, but this is just a layout of how the financials are organized.

It's obviously a very long document, starts off with the introductory section that's prepared by city management, which has the basic information, transmitted letter, then gets into the financial section of the audit.

So that just the financial section is the part that's required under GASBY standards and the audit standards.

The introductory section and the statistical section, that's the part um that is elective for the annual comprehensive financial report.

So that's that's going a little bit above and beyond to put that additional information in your in your financial statements.

So again, our audit report, independent auditors report.

This is the main one, our opinion on your financial statements.

We have an unmodified or clean opinion.

Uh again, definitely very good news there.

Says that the financial statements as presented are presented in accordance with GAP, generally accepted accounting principles.

So you already saw this slide, but I'd like to show it again.

This is uh good uh good uh chart here that shows uh the progress that was made.

Material weaknesses, the two that I like to point out the most are the material weaknesses and journal entries.

Um, if you're part of an organization, almost every auditor, by the time they're done with their audit procedures, maybe they record 65 journal entries during the course of their audit.

There's probably still going to end up with an unmodified or clean opinion.

The main thing you want to pay attention to is if your agency has material weaknesses, auditor can't test everything.

And so if there are issues that rise to the level of material weakness, that means there's issues with your internal controls, that there could be errors, significant errors that the auditor just couldn't catch.

The journal entries, the reason that's important is because throughout the course of the year, you're looking at financial information.

If the auditor has to come in at the end of the year and do a lot of corrections or a lot of changes, you might want to question the validity of the financial information you're looking at throughout the course of the year.

So even if an auditor ends up with an unmodified opinion, that's great.

That's good news, but that's just step one.

You really want to look a little bit more into the material weaknesses, particularly as well as the journal entries.

And as you can see, excellent improvement.

We're almost always, even in the best cleanest of audits, going to have a couple journal entries, and then uh potentially a couple control deficiencies that we'll put on our management letter as well.

But getting rid of those material weaknesses, and then um as well as that significant deficiency and compliance, which should go away.

Hopefully, next year, we're really getting to a part where really um speaks highly of the uh quality work that finance does.

So again, the government audit standards report, that's where we report the material weaknesses and significant deficiencies or any compliance exceptions.

Uh that cash and investments one, that was the material weakness last year.

We downgraded that to a significant efficiency because there's been a lot of progress being made on that front.

Um a lot of that had to do with just reconciling cash.

And that's why a lot of their there we're still ending up with some uh prior period adjustments here and there because with bank reconciliations and things being so far behind, it's difficult to make sure everything's perfect.

So as they're going back and bringing things up to speed, then um we're able to see significant improvement in that.

So that went down to a significant efficiency.

And then we did have that one federal um compliance exception, we had to do with ensuring that you get certified payroll um reports.

And so on the the federal uh single audit, as I mentioned, if you have if any agency has more than 750,000 in a given year in federal funds, we have to do this additional single audit.

The majority of this is compliance-based.

We're looking to make sure that the funds are being spent in accordance with the grant requirements.

Um, one of those had to do with that uh compliance finding for the payroll, making sure that you're obtaining uh certified payroll from the contractors that are working um under that particular grant.

Uh, next one, the management letter.

This is where, so if we have um recommendations in your internal controls that don't rise to the level of material weakness or significant efficiency, we can report them separately on this management letter.

Not that these aren't important, but they definitely don't rise to the level of those other two.

And the deposits, capital assets, and project um expenses, though those were again repeats from the prior year.

And then I did I realized I did leave them around Valley one off of here, too.

But that's also on there as well.

Making sure that those reconciliations that are being provided by their accounts are being reviewed.

I know they're being reviewed, but the evidence of that review by uh city staff.

Uh the conclude audit conclusion letter, um, the GASB 101.

If you have a new accounting pronouncement that was implemented that was major, this one was Gasby 101 for compensated absences.

Um, that was uh resulted in different adjustments that finance had to make um in order to make sure that was correct.

If there are uh accounting estimates in your financials, we're required to let you know what those are.

Nothing unusual here, it's just the nature of how these numbers are derived.

They're considered to be uh an accounting estimate.

If we had any difficulties in performing the audit, uh we would let you know that.

We're pleased to say that there were none in the past.

We had put things on here due to the delays.

This was our this is where we would put we had delays in getting information, that's why the audit's late.

But because we are all the way uh up to a timely audit.

Uh, there were no difficulties in performing and no issues with that.

And again, the big one here, just having two audit adjustments is great.

Uh, imagine we're almost always going to have something, um, but to have that all the way down to two is very impressive.

So, overall, this is the audit results we've been shooting for for quite a few years now, and um excellent that that it's uh been achieved.

So, unmodified opinion, the no material weakness is great, and that's significant efficiency and compliance issue, no issues um in terms of the federal programs as a whole.

Uh, we had the four recommendations on the management letter and just the two audit adjustments, and then again put this on here as well.

This should be back on track uh for October field work again, and then either a January, December or January, depending on to be able to uh final that and then be able to do the presentation.

So I know I said it once, but I'll say it again.

Um, just great work uh with finance.

Um the team has done an amazing job getting caught up and to to be uh dealing with auditors twice a year is that's a lot, and so excellent, excellent work in getting caught up and ultimately ending up with great audit results.

I definitely should be commended.

Thank you very much for the presentations.

Um before we jump into city council questions, I just want to say this is a day we've been waiting for for so long, and um a monumental accomplishment here.

So wanna thank Amy for her leadership, Carla for your leadership, and everybody that was involved.

Um, this is maybe one of the most important things we've accomplished in these years.

So thank you all.

Um so I'll hand it to uh council for questions.

Councilmember Eckland.

Um, I don't have any questions, but um I wanted to do another shout out to Carla and your entire team, and I really think it's important for the entire team to stand up so we can um recognize you to know who everybody is that participated in the world.

So uh that's Juliana, Christina, Ignacio.

We have two people that are out sick today.

Um we didn't want them to spread their germs, so I was like, please stay home.

Thank you very much.

But anyway, I just oh what was that?

And Stacey, she she went to Amy's office, but she still helps finance a lot.

Well, uh a big shout out to all of you for your incredible work.

As you can see, it almost took a decade for us to get back to where we were some time ago.

But um, under Carla's leadership, uh, you guys were able to do it.

And I just wanted to thank you so much for everything that you did and uh for the entire team.

I know it's not easy to reconcile sometimes your own checkbook, but imagine several checkbooks and a lot of money with the city.

So thank you very much.

All right, come from O'Connor.

Thank you.

Great job, everybody.

I mean, I couldn't have said it better.

I just had a couple of questions.

I was hoping you could kind of spend some time explaining to me.

Um the deposits held in trash issue that's been carrying forward for a couple of years.

Could you explain a little bit about the process and maybe explain why it takes so long to for it to get caught up and cleared?

And then if you also confirm, I believe it went from 1.8 million to clear down to 382,000.

If you could just confirm that as well, and then the final part of the question is if you could just explain the funds that are remaining there, are these new funds, is this an ongoing issue, or is this historical balances not having carried forward?

Okay.

So we had um three different areas where we had deposits.

We have um deposits in trust, and that is like when public works collects um deposits for projects and so for mud and dust we call it, and then those are fully refundable deposits.

Then we had deposits in restricted revenue, which um were deposits, say for a specific purpose, a specific um project.

And then we have um cost recovery deposits.

So the area that we started with was the deposits and trust.

We reviewed those deposits with other um with the other departments, um primarily public works and community development.

And um what we do is once we know that uh deposit should be refunded or the project is inactive, we do a letter and do our due diligence to find the owner of the funds so that we can refund the money.

If we cannot find the owner of the funds after that letter goes out and we wait a certain time period, we then publish our list of unclaimed funds in the IJ, and we do that for two consecutive um like the Monday two consecutive weeks that list, and then we wait, I believe it's I want to say like 45 days um uh for anybody to respond uh if they saw the notice and the funds are theirs, and then we bring um that uh any funds remaining to council um to approve us um uh retaining the funds, the city retaining the funds and um recognizing uh the revenue um for those funds.

So we did that with deposits and trust first.

We then did the um restricted revenue and went through sort of like there were items that nobody even could identify anymore and went through that same process.

We probably have one or two small ones left um there.

And then the third category are cost recovery deposits.

These are primarily engineering and planning projects where they've taken deposits to cover the cost of the work.

And um with the implementation of the new permit system, uh finance is working on implementing um billing of cost recovery in the new permit system, and so um uh planning and um public works have provided us with a review of those deposits so we know what the disposition should be.

So we have some work now to do to actually um you know go out and try to find the rightful owner before we bring um those deposits back uh to council to recognize as revenue.

The dollar amounts are right, but they're only looking at ones that are like a certain age.

We actually are you know looking at the whole list of deposits.

We may have some that are um newer and we still want to review the disposition so we get on top of timely refunds, timely review, and that we don't get into this position where we have you know deposits from 1970, whatever.

There was one that that was that old.

That ties nicely into my next question, actually.

Are there software investments we could make to simplify some of the processes?

You d you touched on one with the permitting system.

Yeah, so the um new um permit system main star um will allow us to um do cost recovery uh billing, and what that will actually do is um the community development department planning say will collect the deposit, they um you know the entries come over to finance and we deposit any checks.

But that deposit and the transactions against that deposit will be visible to the planners, where right now it kind of sits in the finance system and they they struggle to see it and call Christina many times for many reports because they don't have the visibility to it and aren't in in the financial system all the time.

And it's a clunky billing process for us.

So this would be like you put in a ten thousand dollar deposit, the billing, um, the expenses will just import those expenses, and then it will you know go against the deposit, so even the customer will be able to see it much more timely.

That's great.

Yeah.

And then just one last quick question.

Is it correct to say our emergency reserve fund is now fully funded according to our own reserve policy?

Yes, it is.

Thank you.

I think I had the percentage and I didn't say it when I gave you the um, it's actually I think at 32%.

Fantastic.

Thank you.

You're welcome.

All right, council member Kirkle.

Um, yes, uh, just a couple comments and uh maybe a question.

Um just wanted to thank again the Carnegie Coin, my co-council members, um, both um staff uh for our job.

Well done.

Uh so really appreciate it.

Um so thank you again.

And then also thank you to Justin and his team for uh hanging in there and you know working with us through these years to get us help us get to the point where we are at.

Um the question uh so actually another comment, one of the things that when I look at documents like uh the ACFR, one of the things I like to go to at a high level is something that Carlo touched on earlier is uh take a look at what happened year over year on uh on the net position basis.

So it's interesting and nice to hear there's an actual increase in uh net position year over year.

Um so that's positive.

And but then on the big picture basis, knowing that you know it's an unmodified opinion, it's the cleanest possible opinion there can be from um an auditor.

I'm wondering um would um something like this.

Um is this something that we can forward on to our uh send to something like for a GFOA certificate and financial reporting or excellence and financial reporting award as my I don't quite remember the timeline for it, but it's somewhere around this time that it uh is this eligible for something like that, or are we going to be doing that?

Um over this weekend, because you know I'm finance all the time.

I spent um time filling out the application.

I did request that the GFOA grant us an extension that we had done the field work on time, but with the holidays we weren't going to get the audit opinion until January.

I mean, it's hard when you do uh October field work.

So they granted a 30-day extension, and um if we do get the award, then um they will notify Amy.

Great, thank you.

Alright, and I just had one question.

Um, have we implemented any process or like check and balance so um to ensure that we're not late or like missing audits again?

Um most of the processes surround our timely close.

Sometimes you know, we get behind the January's a tough month, as an example, just because of all the reporting deadlines that finance has and all the tax reporting that we have to do, like 1099s and W-2s.

But um, what I do is I go through and make sure that um every single item on the checklist is done, and we continue the checklist is a living document.

We continue to flesh it out.

And that's the main document as an accountant and a prior controller that I've always used.

That's what gets me there on time.

And then I have one for year-end, and then beyond that, I have one for the departments.

That is different because they just need to provide us certain, you know, elements.

And then, of course, to continue to you know enhance the you know, just our our normal day-to-day procedures, but it's really about that checklist where it all starts.

So the staff will tell you that I will hound them.

They have it on a note in my office, actually.

And I will just say that um Carla's being a little bit modest here because uh we didn't have checklists when I got here, and she developed all of them, and she does monitor their them very closely as the staff here is acknowledging.

Great.

Yeah, I just don't want to be three years late again and then having to do again six in what three years or whatever it was.

So let's prevent that and not have that happen.

Um so moving on to um public comment.

If you'd like to speak, please fill out a yellow card and hand it to the city clerk.

Do you have any yellow cards?

All right.

Um, so gonna ask the council for a motion.

I'll move I'll move approval.

I'll second.

Laura, can you call for council member Eklund?

Aye.

Councilmember Carkle?

Aye.

Councilmember O'Connor?

Aye.

Mayor Pro Tem Jacobs is absent, and Mayor Farak.

Aye.

All right, that motion passes.

Congrats.

Thank you all for your hard work on that one.

Um, so moving on to adjournment, uh, the next regular council meeting will be held February 10th, 2026.

Um, would the council like to adjourn a memory of anyone?

All right, hearing no one.

So we will adjourn the meeting.

Thank you all.