September 15th, 2026, commencing at 6 30 p.m.

Council members in attendance, our council, council president.

Oh, these are wrong.

Council President Stewart, Council Vice President Nueva Camino, Council Members Parsi, Sony and Kritzer, and online we have Councilmember Procrea.

This meeting is being held for the 2024 Financial Audit Exit Conference and the Entrance Conference for 2025 Financial Audit, CFD 2024-01 Accountability Audit and CFD 26 2016 01 Accountability Audit.

We are joined by representatives from the state auditor's office.

And Kelly Cochran, Financial Director will introduce these items.

Thank you, Council.

And we have our audit team available this afternoon, led by Haji Adams.

And we're going to go ahead and just get it turned over to Haji right away.

We only have a half hour to cover both items, but I am available to answer any of your questions as well as our accounting manager, Nita Hermoso, if you have any once they're wrapped up.

I'll hand it over to you, Haji.

All right, thank you.

We'll go ahead and have Angela start off.

And the results are made available to the public and then published on our website.

And then last but not least, auditors are designed to help you improve operations.

So if there are any auto recommendations, they are made to assist the city in continuing to improve its efficiency and also effectiveness as well of its operations.

So with that, I'll hand it over to Angela to go over the results.

Thank you, Haji.

Okay, so as Haji mentioned, we conducted a financial statement audit for fiscal year 2024.

And the objective of a financial statement audit is to issue an opinion as to whether the information included in the financial statements can be relied upon to make decisions.

So we are pleased to report that we are issuing an unmodified clean audit opinion on the city's financial statements.

This is the opinion you want to receive, and it provides the city assurance that the financial statements are stated fairly and are materially correct.

Our audits are conducted in accordance with government auditing standards, and those standards require that we review the city's internal controls and compliance over financial reporting.

So here we reported no significant deficiencies in internal controls, no deficiencies that we consider to be material weaknesses, and no instances of noncompliance that were material to the financial statements.

However, we do have one uh management letter recommendation that we will be discussing in an upcoming slide.

So, in relation to the financial audit, professional audit standards require that we share with you whether there were material or non-missatements that were identified and subsequently corrected by management.

So we are pleased to report there were no material misstatements identified during the course of the audit.

And we are also required to communicate any uncorrected misstatements.

So here we have included in your packet a copy of the uncorrected items and has been shared with management.

So please note we have concluded these items as immaterial and does not affect the overall opinion being issued on the city's financial statements.

And so we are pleased to share with you that our evaluation showed no instances or possibilities where controls were circumvented.

So here in this next slide, we'll walk you through our management letter over capital assets.

And before we begin, please note that management letters are not included in our audit reports, but they are referenced.

And so while this is a public document, this item will not be published on our website.

And so you'll also find that we've included a copy of the cover page, followed by the first page of management letter on the slide.

But for your reference, you'll find the full version of this letter included in your exit packet on page 33.

And so although the city had procedures for reporting capital assets and calculating related accumulated depreciation, its internal controls were not adequate to ensure it accurately reported capital assets on its financial statements.

So our audit found the city did not have a process to monitor and periodically reassess the useful life of its of its assets.

Specifically, we found the city reported 717 capital assets that were fully depreciated but were still in use with an original total cost of about 50 million.

So while we do not believe this entire amount to be an error on the financial statements, reporting a significant amount of fully depreciated assets indicates that estimates were not accurate or adjusted timely.

And so we recommend the city improve internal controls over its financial statement preparation process, specifically to capital assets to ensure the reported amounts are accurate.

And further, we recommend the city dedicate adequate resources to review capital assets useful lives to ensure that they are reasonable and periodically reassessed.

So this includes the financial statement portion of the audit.

So next, we also conducted a federal grant compliance or single audit for the fiscal year of 2024.

And the objective of this audit is to ascertain whether the city materially complied with the requirements of receiving federal funding.

We are pleased to report that we are issuing an unmodified clean audit opinion on the city's compliance with federal grant requirements.

This is also the opinion you want to receive, and it provides assurance that the funds were expended in accordance with their intended purpose, and all requirements have been largely followed.

So our audits are conducted in accordance with government auditing standards and uniform guidance.

And those standards require that we review the city's internal controls and compliance over the major programs.

In our audit, we did identify significant deficiencies in internal controls, deficiencies that we consider to be material weaknesses and instances of noncompliance that were required to be reported, of which we will present in an upcoming slide.

And then included in the slide are the programs that were selected for audit.

So here we've included a copy of the finding on the slide today.

And for your reference, you'll find the full version of the finding included in your exit packet starting on page nine.

So with the finding, there are three parts to the report that we encompassed as one report under the coronavirus state and local fiscal recovery fund program.

So for the first portion of the finding is related to suspension and department.

So whenever the city enters into contracts or purchases goods or services that it expects to equal or exceed 25,000, whether it's paid in all or part of federal funds, it must verify the contractors are not suspended, debarred, or otherwise excluded from participating in federal programs.

And so although the city has processed to verify the suspension and department status for contractors, it pays over 25,000 using the federal funds.

So here we recommend the city strengthen its internal controls to ensure contractors that pays 25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain that documentation to show compliance with the requirement.

The second part of the finding is related to reporting.