City Council - Special Meeting

Good evening. I want to call the special meeting to order for the Oxnard City Council for Monday, August 10th, 2026. Madam Clerk, may we have the roll call and posting of the agenda, please.

Council Member Parallo? Here. Councilwoman Perez? Here. Councilwoman Rodriguez? Present. Councilman Starr?

Here.

Mayor Pro Tempteran?

Here.

The agenda for this meeting was posted in the kiosk at City Hall, the Oxnard Public Library, the city administrative offices, and on the city's website on Monday, August 3rd. Thank you.

Thank you very much. The next item in the agenda is public comments. At the special meeting, a person may address the legislative body only on matters on the special meeting agenda. Public comments on report N1 will be received following the consultant's presentation. So the next agenda item is N1. Is this the appropriate time to move into the agenda item? Because we just referenced public comments. My apologies, Madam Clerk.

Mayor Pro Temen, council members, yes, the consultant will make their presentation, and then following the presentation, we'll open it up for public comments.

Mayor Pro Temen? Yes, councilor. Sorry to bother you here. Should we do the Pledge of Allegiance?

Yeah, let's go ahead and do that at the top of the meeting, yes. Thank you.

Mayor Pro Tem, just to clarify, the script I think you have has N1 when the item on the agenda is D1.

Okay, thank you very much. At this time then, the next agenda item is D1, finance department subject 2025 single audit report and fiscal year 2024-25 annual comprehensive financial report and summary presentation. Recommendation that the City Council ratify and approve the 2025 Single Audit Report, the Fiscal Year 2024-25 Annual Comprehensive Financial Report, ACFR, and Fiscal Year 2024-25 Warrants Register in the form of the ACFR. Presentation will be live upon the consultant's request. We're pleased to have Linda Hurley, partner with Macias, Ginny, and O'Connell, LLP, who will be delivering tonight's presentation. Ms. Hurley then proceeds with the presentation, and we have our CFO here, Mr. Chagoy and Lazaro.

I'll turn it over to you, sir. Good evening, Mayor Pro Tem, City Council members, Javier Chaco de Lazaro, Chief Financial Officer with the City of Oxnard. We have the fiscal year 24-25 audited financial statement report from our auditors. We have, as Mayor Pro Tem mentioned, Linda Harley to drive us through the presentation of the financials. And we also have David Bullock from the NGO as well to address any questions or comments that the City Council may have. With that introduction, I will just pass it over to Linda for the presentation. Diego, can you bring the presentation to the screen, please? Thank you.

Good evening members of the City Council. Thank you for having me tonight. I am Linda Hurley. I am the engagement partner for the fiscal year 2025 financial statement audit and single audit. So tonight I am here to present the results of the audit and the audit process and certain required communications regarding that process. So we're going to cover the ACFR highlights. So we have some financial metrics to share with you. A summary of audit results, our required communications under our audit standards, the single audit result and upcoming GASB standards that the city is going to have to consider for implementation in the next two fiscal years. OK, WE'VE PREPARED THREE SLIDES SUMMARIZING THE FINANCIAL RESULTS IN COMPARISON TO PRIOR YEARS FOR THE GOVERNMENT WIDE AND THE GOVERNMENTAL AND ENTERPRISE FUND NET POSITIONS AND FUND BALANCES. WHAT I WANT TO START WITH THOUGH IS TO COMMUNICATE WITH THE CITY COUNCIL AND OTHER USERS OF THE FINANCIAL STATEMENTS IS THAT WITHIN THE FINANCIAL SECTION OF THE FINANCIAL STATEMENTS, THERE IS A SECTION CALLED MANAGEMENT'S DISCUSSION AND ANALYSIS. And I'm not gonna get into the details tonight on why changes occurred. We're just gonna highlight what those changes are and what the results of the financial operations were. But to get more detail, The ACFR or Annual Comprehensive Financial Report, it can be a rather overwhelming document. It's 200 pages long. But this is a great starting point that MD&A or management's discussion and analysis to give you a good overview. It's the introduction to the financial statements. And it really is management's opportunity to explain why financial activities have changed from the previous year. So with that, this first slide is the government-wide perspective of the financial statement. And this is a summary of the components of the statement of net position, which includes all the activities on a full accrual basis of the city. So it includes the governmental activities, the business type activities. AND IT'S A PRESENTATION OF ALL ASSETS, LIABILITIES, DEFERRED INFLOWS AND OUTFLOWS, INCLUDING LONG-TERM ASSETS AND LIABILITIES. AND SO FOR FISCAL YEAR 2025, THE NET POSITION OVERALL INCREASED BY TWO POINT, EXCUSE ME HERE, BY 93 MILLION. APOLOGIES. SO BY $93 MILLION. This next slide highlights the governmental fund balances and the governmental activities include the general fund, all the special revenue funds, the capital project funds and the debt service funds. So this is the short term perspective of the city for their operations. And so for fiscal year 2025, the overall fund balance of the governmental funds increased by 22.5 million. The fund balance is divided into categories in the financial statements, and they represent the constraints of spending. So you're going to have fund balance that's earmarked for restricted activities, committed activities, assigned activities, and then you have unassigned fund balance. And so the government has defined what these constraints are. And so you can see what the spending constraints are for the specific governmental activities. And this next and final slide of the ACFR highlights is the enterprise fund net positions. And the city's enterprise funds include the utility operations as well as the golf course. What this slide excludes is the housing authority. And the housing authority is included in the city's financial statements. However, it's audited by other auditors. So we rely on those results, and those results have been presented separately. But for the other activities, utilities, and the golf course, the enterprise net position increased by 31.8 million. This net position is also divided into various categories. There is the net investment in capital assets, which these are not spendable assets. These are the infrastructure of your utilities and then the assets of the golf course. So they're not in cash form, but they are an asset of the city. So those are identified separately. There's also restricted net position. And that's restricted by external restrictions or enabling legislation. So this money is earmarked for specific purposes legally. And then finally, you have unrestricted net position. So I again encourage you to review that management's discussion and analysis section because it's going to give you a lot more information on the activities of the city. The next thing I'm going to cover is the summary of audit results. And so first I wanted to recap the deliverables that we have this year. One is the independent auditor's report on the basic financial statements. Then we have our report on internal controls over financial reporting and on compliance and other matters. And this is required by government auditing standards. We have our report on compliance for each major federal program report on internal controls and compliance and report on the schedule of expenditures of federal awards and this covers what has been referred to in the agenda as a single audit and then finally we have the required communications which this presentation is serving. The framework of the audits includes management's responsibility to present the financial statements in accordance with generally accepted accounting principles. And that is the basis of what we're auditing against. Our responsibilities are under generally accepted auditing standards and also government auditing standards. So that's the framework that we do plan the audit under. For fiscal year 2025, I'm pleased to report that we've issued an unmodified opinion on the city's basic financial statements. And so that is the highest level of assurance that we can provide you as external auditors that the financial statements are presented in accordance with generally accepted accounting principles. And so it's a clean opinion. Regarding our report on internal control and compliance over financial reporting in accordance with government auditing standards, we did not have any current year findings to report. REGARDING THAT. AND THEN REGARDING OUR COMPLIANCE AND INTERNAL CONTROL OVER MAJOR FEDERAL PROGRAMS, I'M GOING TO GO INTO THE SINGLE AUDIT IN A LITTLE BIT MORE DETAIL IN SEVERAL SLIDES, BUT THE HIGHLIGHT HERE IS AGAIN WE'VE GIVEN THE CITY CLEAN OPINIONS ON THE TWO MAJOR PROGRAMS THAT WE SELECTED AS PART OF THE SINGLE AUDIT. Also, one thing I wanted to highlight before we move on here is the Measure O program. We do have a separate portion of our contract to consider Measure O compliance. Measure O doesn't require a separate report, but we did design procedures and review the activity of Measure O in compliance with your ordinance. ALL RIGHT, THERE'S A LOT OF INFORMATION ON THIS NEXT SLIDE, AND WE WERE SUMMARIZING WHAT THESE REQUIRED COMMUNICATIONS WERE THAT WE MAKE AT THE END OF A FINANCIAL STATEMENT AUDIT. AND SO IN THE FIRST COLUMN WE HAVE THE AUDITOR'S RESPONSIBILITIES, AND I HAD PREVIOUSLY MENTIONED THAT WE DO AUDIT IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS AND GOVERNMENT AUDITING STANDARDS. BUT I WANT TO TAKE A STEP BACK AND DISCUSS MANAGEMENT'S RESPONSIBILITY FIRST AND THEN GIVE YOU A LITTLE BIT MORE INFORMATION ON WHAT THOSE AUDITING STANDARDS MEAN FOR US. MANAGEMENT IS RESPONSIBLE FOR PREPARING AND PRESENTING THE FINANCIAL STATEMENTS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. THEY ARE RESPONSIBLE FOR MAINTAINING COMPLETE AND ACCURATE ACCOUNTING RECORDS, DESIGNING AND IMPLEMENTING AND MAINTAINING A SYSTEM OF INTERNAL CONTROL and compliance with laws, regulations, grant agreements and contracts. We as auditors are responsible for auditing those financial statements. So the document itself, the contents of the document of the financial statements are management's responsibility, and then we audit that activity. We evaluate management system of internal controls and compliance with laws, regulations, grant agreements, and contracts. And we provide an opinion on the basic financial statements And then we would report on our consideration of internal controls and compliance over financial reporting. We do not provide an opinion on internal controls or compliance. We just provide an opinion on the presentation of the basic financial statements. Now, if we were to identify any deficiencies that would rise to a level of what we consider to be a material weakness or a significant deficiency, we would report that to this body. If we were to identify something that would be considered material noncompliance related to financial reporting, we would report that to this body. For the 2025 audit, we did not identify any of these matters that rose to that level. And then finally, under auditor responsibility, we do provide an opinion on compliance in accordance with the uniform guidance. Again, that is the single audit. And this is for each major federal program, as well as our consideration of internal control over compliance. In the next column, we have the plan scope. and timing of the audit. The scope of the audit was as contracted, and I went over those deliverables earlier. But the planned timing of the audit was delayed. It was not completed as originally planned, which was by the end of December. And there were several factors contributing to this. So our audit report date is July 29, 2026. And so I want to briefly highlight those factors of what contributed to those delays. The first being we had a reevaluation of client acceptance in the November-December timeframe to determine our continuation with the engagement. We became aware of a matter in November of 2025, which was an amended key TAM lawsuit against certain city employees and the city's prior auditors that we were actually unaware of. We thought the action had been resolved in November 2024, And so we considered that issue that we needed to reevaluate that and resolve it through our own firm's risk management process to ensure that we were able to resume the audit. And we resumed the audit in February of 2026. The second item is this was a first year audit, which can take additional time to learn and understand an organization. And while we try and plan for those in terms of transitions, we can't always anticipate issues that need additional time to resolve. So first year audits can be challenging overall. THERE WERE SEVERAL DELAYS IN THE CLOSING ADJUSTMENTS. SOME OF THEM WERE DUE TO STAFFING CONSTRAINTS AND CHALLENGES WITH THE FINANCIAL REPORTING SYSTEM. FOR EXAMPLE, THE NEW PAYROLL MODEL WENT LIVE IN JANUARY OF 2025, SO THIS WAS DURING OUR AUDIT PERIOD, AND THIS WOULD HAVE BEEN THE FIRST PERIOD THAT MANAGEMENT WAS GOING THROUGH THE FINANCIAL REPORTING PROCESS WITH THIS NEW MODULE. And with any kind of system implementation, there can be challenges to ensure that accurate information is coming out of the system to be able to report accurately in the financial statements. Our team in management, we communicated formally, weekly, and informally on a daily basis to try and mitigate a lot of the delay, especially with the closing process. And so management was very forthcoming with their challenges, and we discussed alternative solutions or agreed upon revisions as we went through that process. But the closing process is key to ensure that it stays on track. And so we worked very closely with management to do our best to keep on track with some of these challenges in the close. There were also other matters that were identified during the audit that required more research and discussion. And one of these examples is we identified questions regarding the use of the ARP funds or the American Rescue Plan funds. And there are certain criteria that we were evaluating TO DETERMINE WHETHER OR NOT ITEMS WERE ALLOWABLE. AND SO WE DON'T HAVE HISTORY WITH YOUR ORGANIZATION, SO IT TOOK A LITTLE BIT OF EXTRA TIME TO UNDERSTAND THE SPENDING PLANS AND THE INTENT OF THE USE OF THESE FUNDS, BUT WE WERE ABLE TO OBTAIN CLARIFICATION, AND THIS DID NOT RESULT IN A FINDING. The last item was information that came to our attention on May 19th. I had a discussion with the elected treasurer and that discussion resulted in some uncertainties that were brought to my attention, matters that bared on the audit. We were concerned We were concerned about information that was provided to us that needed to be evaluated. There are two matters in particular. One was the statutory role of the treasurer and the impact on the city's internal control environment. And the second being potential systematic deficiencies in the city's ERP system and the ability to issue duplicate checks. As a result of this, we did pull our initial audit report and essentially unissue it on May 19th through a letter addressed to the mayor, and I believe I cc'd all the council members with that reasoning. We were concerned enough with these comments that we needed time to evaluate them, and we did not want the financial statements publicly available. So we didn't, I mean, essentially we did not have an issued report after we pulled it. We have since completed additional procedures in these areas and concluded that there was not an impact on the financial statements or single audit reports based on the matters that were brought to our attention. Our procedures considered a reevaluation of internal controls and fraud risks over the treasury and cash disbursement functions, and a review of the city's disposition of various court orders related to this dispute with the elected treasurer over his statutory roles and responsibilities. Regarding the duplicate check issue and the concern about the systematic deficiencies in internal controls, this matter was brought to our attention. A vendor had received two checks and was told to cash them both, essentially, is what was communicated to us. we can't validate that second part on whether or not the vendor actually communicated to the city but we did take this concern we did consider this concern in the fact that you know was there an issue with the the systems or the city's new financial management system it is a newer system there can be challenges with new systems if not designed and implemented appropriately Through our review, it appears that a duplicate check was mailed to a vendor, so the vendor received two checks. However, the city's finance department had existing controls in place that the payment was rejected when the vendor tried to cash the duplicate check. So there's a positive pay system that the city has implemented with the bank, and that check was voided prior to it even being being sent out. So there was a human error here. It was unknown why that check was sent. However, the system, the city did have internal controls in place that mitigated this duplicate check issue. Regarding the second matter, we are aware that there continues to be a dispute between the elected treasurer and the city. And the city, through the direction of city council, has implemented mitigating policies, controls, and procedures to continue to operate and secure the integrity of the financial reporting process. So we understand there is a dispute. We are not lawyers. We cannot give you an illegal opinion here. But what our concern is is that were controls operating effectively that the financial statements are not materially misstated. And we believe that they are. We did not find any instances that would have caused us concern that the financial statements are misstated. AND SO WITH THAT, THE CITY DID AND SO WITH THAT, THE CITY DID ADD AN ADDITIONAL NOTE DISCLOSURE ADD AN ADDITIONAL NOTE DISCLOSURE IN THE CONTINGENCY SECTION. And so the city did add a paragraph acknowledging the dispute in the roles and responsibilities because it is in the financial statements that you do have an elected treasurer for this city and so but the financial statements have been revised and they were revised for the most part before we received the first draft and where any reference to treasurer responsibilities in the cash and investment notes had been revised to refer instead of the treasurer's pool to the city's treasury and so that is an important distinction and it YOU KNOW THERE IS I BELIEVE TRANSPARENCY HERE ABOUT HOW THE CITY IS DISCLOSING HOW THEY OPERATE IN THE TREASURY FUNCTION AND THEN ALSO ACKNOWLEDGING THIS DISPUTE ALSO SERVES AS TRANSPARENCY FOR THOSE FINANCIAL STATEMENT USERS TO UNDERSTAND THAT THERE IS A DISAGREEMENT HERE. As a reminder, our responsibilities are to opine on the financial statement and not provide an opinion on internal control or compliance over financial reporting. We do consider internal control and compliance during the audit to determine the direct and material effect on the financial statements. and also to design our procedures. And in our judgment, if matters rise to that level, as I described before, that we believe to materially affect the financial statements, we would report that to you. We did not identify any of these matters. Oops, sorry, let me go back. Okay. The third column, accounting practices and policies, there were no significant changes in accounting practices and policies for fiscal year 2025. The city did implement governmental accounting standards 101, which is compensated absences. BUT OUR CITY'S EVALUATION, OUR EVALUATION, THE CITY HAD ALREADY ADOPTED POLICIES THAT MOSTLY COMPLIED WITH THE STANDARDS, SO THERE WERE NO SIGNIFICANT CHANGES OR ADJUSTMENTS TO THE FINANCIAL STATEMENTS. WE DID NOT IDENTIFY ANY UNUSUAL TRANSACTIONS FOR 2025. We did identify a number of judgments and estimates, which are standard in financial reporting, and we evaluated them. And these for the City of Oxnard include fair value of investments, allowances for receivables, notes and loans, Leases, subscription-based IT arrangements, depreciation and amortization of capital assets, including intangibles, compensated absences, self-insurance liabilities, and pension and OPEB liabilities and related balances. We evaluated the reasonableness of the methodologies used to determine those judgments and estimates and believe that that methodology is reasonable. I do want to highlight that management used an actuarial specialist in determining liabilities for self-insured general and workers' comp liabilities and pension and OPEB liabilities. And we did evaluate the results of those actuarial valuations. Regarding adjustments, we evaluate audit differences and omitted disclosures required by generally accepted accounting principles for significance to determine if they are material to the financial statements. Materiality includes both qualitative and quantitative factors and considerations. And if an audit difference or omitted disclosure is material and not corrected, it will affect our ability to provide an unmodified or clean opinion on the financial statements. No adjustments came to our attention as a result of our audit procedures that are considered to be material audit differences or omitted disclosures within the financial statements. We did identify two uncorrected items, or what we call past adjustments, and these rose to a threshold that we would report to you. They were considered a little more than trivial. One being an unrecorded loan at the fund level. So it was recorded at the very highest level in the government wide, but it was not recorded in the fund. There was no impact to fund balance related to this loan. It was a long-term receivable, so it's offset because the proceeds are not available to pay liabilities that are due and payable today. but it was a reporting matter that we did identify and

So we were reporting that to you.

The second item is prior year uncorrected items reported by the auditors. There was a sale of capital assets in the prior year, resulting in a $400,000 gain. That gain should have been reported in the previous fiscal year, but management passed on it. It was immaterial. It does not affect the auditor's opinion, and that PARTICULAR TRANSACTION WAS RECORDED IN FISCAL YEAR 2025, SO THERE IS AN EFFECT ON BEGINNING FUND BALANCE, BUT AGAIN, IT DID NOT IMPACT OUR OPINION. IT IS CONSIDERED INSIGNIFICANT OR IMMATERIAL. THAT PARTICULAR ISSUE WAS A TIMING ISSUE ON RECOGNITION, AND BY THE END OF 2025, THE NET POSITION IS STILL CORRECT. OK. So the next column, other information. So besides the basic financial statements, there is other information reported in either the annual comprehensive financial report or the single audit documents. The first type of information is supplementary information. And in the ACFR, this would include the combining fund statements and schedules. So there's budget to actual schedules, and there's also non-major fund schedules for smaller programs or programs that rise to the level to report the front part of the financial statements. The second supplementary information is the schedule of expenditures of federal awards, and this schedule is actually in the single audit report, but we do provide an in-relationship opinion on that schedule to the basic financial statements, as well as the combining fund statements and schedules. So they are covered under our opinion. We do review them and ensure that they reconcile to the underlying accounting records and we do provide, we do apply audit procedures. The second type of information that's included in the annual comprehensive annual report is required supplementary information. This includes the management's discussion and analysis, general fund and major special revenue fund budgetary information, and pension and OPEB schedules, which is historical information. These items are required by generally accepted accounting principles to be included in the financial reports. However, they are not covered under our opinion. We do perform very limited procedures and they're not required to be covered under our opinion. But we perform very limited procedures to ensure that that information that's been presented is consistent with the financial statements and there's no material items or THINGS THAT WE THINK ARE NOT APPROPRIATELY PRESENTED. IF WE BELIEVE THAT THERE WAS AN ISSUE WITH THIS INFORMATION BASED ON THESE LIMITED PROCEDURES, IT WOULD BE INCLUDED IN OUR AUDIT OPINION. AND THEN FINALLY THERE IS OTHER INFORMATION IN THE ACFR. and this is the introductory section and the statistical section. And so again, these are not covered under our opinion. We do look at them, we read through them to make sure there's no material inconsistencies or anything that stands out to us, but these are actually not REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. ACCOUNTING PRINCIPLES. THE CITY PREPARES THESE TO MAKE THE CITY PREPARES THESE TO MAKE A COMPLETE ANNUAL COMPREHENSIVE A COMPLETE ANNUAL COMPREHENSIVE FINANCIAL REPORT IN ACCORDANCE FINANCIAL REPORT IN ACCORDANCE WITH THE GOVERNMENT FINANCE WITH THE GOVERNMENT FINANCE OFFICER ASSOCIATION STANDARDS OFFICER ASSOCIATION STANDARDS WHICH THEY SUBMIT FOR THEIR WHICH THEY SUBMIT FOR THEIR GFOA AWARD ANNUALLY. The last area I wanted to cover is observations about the audit process. We did not have any disagreements with management. We're not aware that management had any consultations with other accountants about accounting or disclosure matters. We did not have any significant issues discussed upon our initial engagement. We talked about difficulties encountered in the audit, which primarily was the delay in timeline. WE ARE INDEPENDENT TO THE CITY, And there are no internal control matters to report. And at the end of the engagement, management did give us a written communication letter regarding acknowledgement of their responsibilities and that they have cooperated and provided us all the information. We call this the management representation letter. And that's required for us to give an opinion. If management was not willing to give us the letter and we we outline the representations that we ask for, we would not be able to opine on the financial statements, but they did provide us that letter. Okay. All right, I'm gonna briefly highlight the single audit results. The single audit, the schedule of expenditures of federal awards was 17.1 million this year of all funds other than the housing authority. The housing authority is excluded from the city's single audit because they get their own single audit. And the Housing Authority's federal expenditures were $39.9 million. But for the general city, it was $17.1 million of federal expenditures. We identified two major programs based on the Office of Management Budget's criteria. We have a risk criteria we go through. We don't audit every program on the schedule of expenditures of federal awards or the SIFA. We have to go through a risk-based approach. So we covered 64% of the SIFA with the two major programs that we selected. And those two major programs are in the next column. We selected ALN 20.608, which is the minimum penalties for repeat offenders for driving while intoxicated. Those expenditures were $274,000 this past year. And then we selected ALN 21027, the coronavirus state and local fiscal recovery fund grant, and that was $10.7 million. for fiscal year 2025. As I indicated before, we have unmodified opinions on the major programs or on federal compliance. We didn't identify any deficiencies in internal controls, and we did include a status of prior year findings. This is a list of the open findings as of the end of 2024. And so as auditors, we report on the status of those findings in future audit periods. And so there were five findings that were still open. The first being a finding on the information technology general controls. So this was presented to you by the previous auditors. management is still in progress of correcting this they have made additional progress in during the fiscal year 2025 and we'll be following the up on this in the 2026. we don't have details because those findings are confidential and i know that management has been reporting on those in a confidential matter if those findings were discussed publicly it exposes the city to unnecessary risk from the outside. THE NEXT FOUR FINDINGS RELATE TO PRIOR SINGLE AUDITS, SO THIS RELATES TO FINDINGS THAT WERE IDENTIFIED IN OTHER PROGRAMS, THE CDBG AND THE SAFER GRANTS. YOU'LL SEE THAT IN OUR STATUS FOR THREE OF THEM WE SAY NOT IMPLEMENTED AND THE THIRD ONE WE HAVE PARTIALLY IMPLEMENTED. We have to evaluate the status of these findings as of the end of fiscal year that we're reporting on. So this is as of June 30th, 2025. Now management has made presentations to the council and the governance and finance committee about implementing at least three of these. So the 001, 003 and 004. We can't acknowledge that implementation yet because that didn't occur as of June 30th, 2025, so we will be reviewing that and reporting on that in 2026. But we did want to acknowledge that management has reported that they have implemented. Okay. This last slide I'd like to discuss is three upcoming GASB pronouncements that management's going to need to be considering in their financial reporting. And so the first two, GASB 103 and 104, will be required for fiscal year 2026, so this current fiscal year, and then GASB 105 is effective for fiscal year 2027. So management is currently evaluating these requirements to determine the impact, and we're going to be available for assistance. But just to give the council an idea on what they're evaluating, for GASB 103, this is a reevaluation of the reporting model. So the reporting model changed considerably in the early 2000s, and so GASB re-evaluated that. So there's three main areas that management's gonna be looking at. One is management's discussion and analysis, and GASB was finding that there were Governments were not meeting the spirit of the expectation, and so the expectation is that management is explaining the why. Most people are putting in the what, and it just really isn't meaningful. So, you know, we've worked with the city of Oxnard. Nothing has come to our attention that's egregious in the MDNA that they haven't followed the intent of the standard. So I don't think that part of the standard regarding the MDNA is going to be a huge change for the city for this coming year. But another change is going to relate to the enterprise funds, so the utilities and the golf course. And there is a change in the definition of operating and non-operating revenues. So it's not that overall revenue is going to change. It's more the classification on the financial statement. So it's going back through looking at their definitions on how it's been displayed and refining that based on the guidance of the accounting standard. And then finally, the General Fund and Major Special Revenue Fund budgetary information. Prior to GASB 103, the governments had an option to include where in the statements that these particular statements were included. They could include them in the basic financial statements or they can include them in RSI. And GASB has taken away that option. Everything needs to be in RSI. This is not going to be a change for the city because they already presented in accordance with how the GASB, they picked that option that the GASB fully adopted. There will be a little bit of change in the format. There's going to be an extra column with some information about the changes between the original and final budget. For GASB 104, this is disclosure of certain capital assets. And so this is really looking at the consistency and classification and grouping of intangible assets. So this is the leases. This is the subscription-based IT arrangements. This might be software. it's intangible in nature and so GASB has given some guidance to better clarify and refine those classifications and how they're presented in the note disclosures. I don't see this GASB as being a heavy lift, but it is something that will be adjusted within the notes. And then finally, GASB statement number 105, subsequent events, that's not going to be applicable until fiscal year 2027. And in substance, there isn't a lot of change in terms of how management considers subsequent events. But just to give some context here, Previously, GASB had a codification project where they pulled in anything that wasn't in an actual GASB standard, they pulled it into the codification, and that's one of the authoritative documents that accountants use to prepare their financial statements and understand the accounting. And so subsequent events in particular was an AICPA standard, not a GASB standard. And so GASB has actually officially moved it into their standard structure. And so management will now have to include a disclosure with a date on when subsequent events were reviewed through. Most governments don't include that paragraph. Oxnard already does, so that's not gonna be a change. But there were some terminology updates. We used to have a type one and type two subsequent event where we would determine or management would determine whether or not something that came to the attention subsequent to the financial statement date needs to pierce back through to cause an adjustment or a particular disclosure, or if this truly is an event that occurred after the fact and there was no preexisting PREEXISTING FACTORS AS OF THE REPORTING DATE. AND SO THEY NOW, INSTEAD OF CALLING THEM TYPE 1, TYPE 2, THEY NOW CALL THEM RECOGNIZED AND NONRECOGNIZED EVENTS. SO THESE CLARIFIED THOSE DEFINITIONS AND DISCLOSURES. OKAY. That concludes my remarks and presentation, and I'd be happy to answer any questions.

Thank you very much. Do any council members have questions for Ms. Hurley or staff?

Yes. Okay. Council Member Starr. It's kind of a repeat of a question I've asked you before, but I just wanted people to hear it again. Could you tell us what common misconceptions exist from among the public concerning what your responsibilities are in performing an audit and what an audit actually accomplishes?

Yeah, so the public when they think of an audit is that we're looking at every single transaction, every single disclosure event that has occurred financially within the organization. And that's just not practical. So we do set a level of what we call materiality. And I mentioned earlier that we have a quantitative factor and we have qualitative factors of materiality. So maybe that doesn't meet that quantitative level, but it's so significant that particular item to an organization that we would consider it material. And so from a quantitative perspective, we're setting a materiality limit. We pick a benchmark. It depends, you know, what the driver is. So let's say the general fund. What is the driver? Well, the driver tends to be revenue. It's general revenue on how you would FUND YOUR PROGRAMS OVERALL. IN A SPECIAL REVENUE FUND, IF IT'S A GRANT FUND, IT MIGHT BE EXPENDITURES BECAUSE THE EXPENSE WOULD DRIVE WHETHER OR NOT YOU'RE GOING TO GET REIMBURSEMENT ON REVENUE. SO WE PICK A BENCHMARK depending on what the driver of the opinion unit is, and we set a quantitative limit. And so that could be anywhere from a half a percent to five percent on average. And it really depends on the risk of that particular activity. or that particular program. And the higher the risk, the lower that percentage is. The less the risk that we might put that percentage as a little bit higher. And so we'll also go through sampling. So we have statistical sampling practices where we would go to determine samples. We consider the internal controls as part of that. So there's a lot of factors that go into this, but the common misconception is that we're auditing 100% and we're not. Our opinion is also that the financial statements are materially in accordance with generally accepted accounting principles. It doesn't mean it's an absolute. There could be errors. There could be undetected errors. There could be material undetected errors. But we do plan our audits to reduce that risk, we call it audit risk, and go through those procedures and those factors.

And I would think it would be fair to say that an auditor doesn't provide any guarantees that this is absolutely correct. It just provides reasonable assurance or something above that. I think there's really just an obligation just on your part to have certain due professional care. And as long as you're meeting that standard, you're doing what's expected of this particular engagement. I have a question about the future though. So I was not surprised that it took a long time to do this audit because it is the first year and that's pretty common. I was wondering what your, what do you anticipate is the timing for the next audit? When are you beginning? Maybe you've already begun. And when do you think it can reasonably be finished?

So we haven't begun the audit for fiscal year 2026 because we were working through 2025. So now 2025 is done. We did have a brief discussion with the finance department today. We do not have a solidified schedule, ideally, you know, you get the audit done by December 31st, that is the state deadline, that is the GFOA set deadline. But I don't have that answer for you, Council Member Starr. We have to work through that plan, but it'll depend also on the city's closing process and if there's any challenges along the way, whether they're staffing constraints or other issues that might come to light. Ideally, it would be the end of December. That would be the latest. But we'll have to work through that plan to determine what that timeline looks like.

Great. So I will request of staff that when they know when this is going to, when the schedule is figured out, that they convey that information to the council, see if our expectations are in line with what yours are currently. And I want to ask you about the issue about evaluation of client acceptance. I got the sense that, well, let me ask, is it that there was some miscommunication between the city and you as far as the status, or was it just your own conclusions you just came to based on what you've read and you realized, oh, wait a minute, this is far different than what we thought?

The initial issue from November, is that what you're referring to? Yes. Okay. Well, I think part of it was, is that the city isn't a direct party to the lawsuit. So, you know, it's not acknowledged by the city attorney's office. And so we were unaware of the status of that. And I think there were concerns around, What was in the court filing document there were questions? regarding the former auditors And we also wanted to take time to go through the document because it was against management as well That there were no improprieties or allegations of fraud or other things that were direct. And if we identified specific areas in the audit, that definitely would heighten risk. And so we would have to reevaluate the approach and whether or not we could get there, you know, with what we knew.

And I remember at the time that you asked me about it, what I could tell you about it. did provide you with some information. I was just wondering if that helped you get to the point where you felt more comfortable with what was...

It did. And going through, I don't know all the legalese, but going through the court document, the filing, we were able to... you know, evaluate and be comfortable to move forward. I will say is that when you have allegations directly against management that heightens concern from an auditor, you know, there's a factor of evaluating integrity and just understanding what those issues are so you know how to address them as part of the audit process. Okay.

Thank you. Those are all my questions.

Thank you, Council Member. Any other questions from other Council Members? Council Member Perillo.

Thank you very much for your work. Thank you for the presentation. Thank you for speaking up a little bit in the microphone, because sometimes, I'll tell you, there's only, I think, one, two, three people in the audience. There's 200,000 people that are watching this. Again, I would recommend next time we have numbered pages so we can find it. Can you explain again for the public unmodified opinion? I think you used the word highest rating.

Correct. Yes, an unmodified opinion is what we would consider a clean opinion. So that is the highest level of assurance that we can give you as your external auditors that the financial statements are presented materially in accordance with generally accepted accounting principles.

Thank you. And on your, the next column, this page here, on the second column you had plan scope and timing and you had the timeline delays. And underneath the second hash was first year audit. Was, in your professional experience, and I compliment you, As Council Member Starr made, the highest quality of your work is expected to do it. I would expect you to do no less work for any other company or any other city, not specifically for this city. You do your job. But with respect to the first year audit, did you find any irregularities or any unusual amount of time taken because this was a first year audit for this firm than any other entity you would do a first year audit?

Not necessarily. I mean, every entity is a little bit different. And it's understanding the systems that are in place, internal controls, understanding the various policies and procedures. But I wouldn't say that first year audits are difficult. And they never run as smoothly as you hope. You try and plan for that transition. sometimes things just take a little bit longer because we don't have the history with your organization. So it's trying to find sometimes the right people to explain certain processes or procedures that we think are important to the engagement.

Thank you. And just to share with you, I did watch the Finance and Governance Committee meeting when you made the presentation. I thought it was well done. It passed 3-0. The mayor is the only one not here, Mr. Starr, Council Member Rodriguez, and the mayor. And when it came to May 19th, it was a surprise to the entire council. There's more to be said about that, but not at this moment. I do appreciate the work, and I'm looking forward to working with you in the future.

Thank you very much.

Thank you.

Thank you, Councilmember. Any additional questions from Councilmembers?

Okay.

Seeing and hearing none, without objection, we'll move on to public comments. Anyone wishing to speak on agenda item, excuse me, report D1, please come forward and fill out a speaker card. If you have not yet done so, you may fill out a speaker card. Or if you're joining virtually, you may press star 9 to raise your hand. And Madam Clerk, thus far I have one speaker card in front of me. Is that correct?

Mayor Pro Tem, that is correct. Okay.

Thank you. At this time, we'll take our first speaker, Mr. Larry Stein. And as you make your way up, Mr. Stein, I'll remind you that we did receive your written comments earlier this afternoon. As a reminder, this special meeting and this agenda item, your comments should pertain specifically to the single audit report or the ACFR or those items we covered in this agenda item. You have three minutes, sir. Thank you.

Thank you much, Mr. Thank you very much, City Council, members of the public, our auditors. I agree the fact that the financial statements are maturely correct. I have some picky issues I address in my letters here. I was hoping to get answers from staff to the questions I have both legally and financially as we stand. So these are minor issues. And the fact that we have the sea walls in Oxnard Harbor are falling apart. There's nothing in the discussion on these small particularities What extent is the city liable to repair the seawalls? What is the city's responsibility for legally and financially repairing the seawalls? On the same matter, we have a specific plan, and sometimes mitigations are not finished, even though funds have been collected. Again, this is a minor issue. But funds were collected between 1992 and 2005, and these are liabilities because funds were collected to build a certain amount of infrastructure. After 30 years, infrastructure is not completed. That, to me, is a minor issue of materiality, but still an issue for some people. We have, in 2010, water bonds were approved by city council. These bonds would include building wells to recycle our water. 15 years later, the wheels still aren't built. So we're subsidizing people using non-cycled water to the tune of $10 million a year, while the rate payers of the recycled water program aren't paying as much as the people who are paying for the potable water are being subsidized by the people who use recycled water. So these, again, are minor issues. that have been brought forth by me by letters you received, not only today, but last week. And letters by staff members that said that we've answered all your questions. And none of these questions were ever answered. So the concept of an open, transparent government seems to be contrary to the fact that I ask questions and can't get answers. Thank you very much for your time.

Thank you for your comment.

Mayor Pro Tem, we actually have two virtual speakers.

Okay, we'll take the virtual speakers at this time. If any, as the clerk calls on them, if anyone here in person would like to speak, please come forward and you may fill out a comment card. Thank you.

Virtual speaker, if you can press star six to unmute and you have three minutes starting now.

Yes, good afternoon, Council. How are you? Actually, just recently I was walking down the neighbourhood in District 1 and I was actually listening to Mr. Stein in regards to the Climate Action Plan. I think that was something that was questionable by our auditors.

I know that District 1, both are great concerns that Mr. Stein has been raising up about Christmas tree walls. beach erosion, infrastructure issues like street people. A lot of the community members really questioned our audit and hearing it over and on. They've all requested maybe putting the website after the audit to see funding from SmithRank, where the money is going, maybe a little bit more transparency.

Just so if the community had any questions, any concerns, they can go directly to the website, click the link, see how much money is going into the streets, how much money is going into seawalls. how much money going into obviously coming out of that climate action plan and really being put into our city. I mean, I know that our county is a little bit behind when it comes to climate action planning.

That's very important that we are going through some kind of climate change. It's our community through our three department goals and our coastal community is really in the attention. Thank you guys for everything. Appreciate it.

Okay, Madam Clerk, may we have the next speaker please?

Virtual speaker, if you can press star six to unmute and you have three minutes starting now.

Thank you. My name is Debbie Mitchell with the Channel Islands Waterfront Homeowners Association. Thank you all for being here and thank you for the audit. The thing that I wanted to respond to is about the funding for the seawall. We have a project underway on Hemlock. Our assessment district has been paying for seawall repairs since it was formed and it is so underfunded that we have had to save money in order to have enough to fund seawall repairs as they have gone forward. The issues with the 50 50 split that people perceive the the waterfront homes here were built at a time when assessment districts were Traditionally underfunded for large infrastructure and we started asking for the ability to raise our assessment in 2006. Now we're working on an engineer report we're working on financial reports, based on the hemlock project, so that we can can understand and create a bond to pay our portion. We are currently and have been paying our portion for the seawall infrastructure repairs with a public private benefit that would be that has been standard up to this time. So I feel that there's a lot of misinformation about the people at the beach getting away with something, the people in the waterfront homes getting away with something. And quite frankly, we have a lot of information on our website about where all the money has gone. And we have been paying our way. We need to pay a lot more. And that's why the Hemlock project is important to complete so that we can increase funding. Thank you.

Thank you very much for the comment. Madam Clerk, do we have additional speakers in person or virtually?

Mayor Pro Tem and council members, that concludes our speakers in person and virtually on this item. Thank you.

Thank you very much. At this time, if there are no additional speakers, do any council members have comments?

I would, if there's no other discussion, I would move the recommended action. And I'll read it as recommended. That the city council ratify and approve the 2025 single audit report, the fiscal year 2024-25 audit comprehensive financial report, and the fiscal year 24-25 warrants register in front of the ACFR.

Okay, we have a motion by Councilor Parillo for the recommendation made on the agenda item. Do we have a second? We have a second by Councilwoman Basuwa. Before we take the vote, Madam Clerk, is there anything else from Council?

I just wanted to thank the auditors for their good work. And I was going to second, but we'll .

She beat you to it. We had another Gabby do the second there. So thank you for that, Councilwoman Rodriguez. I just want to thank Ms. Hurley as well for the comprehensive presentation this evening and for the reports and to our finance staff for all the work that's been put into this. I know there's been a number of delays as mentioned by the presentation. It's not lost on me as an individual council member. I would imagine my colleagues as well There's a lot of behind the scenes work that the public and even us and other staff may not see. And it is much appreciated because it is a lot of deep and getting your hands dirty work and mathematically speaking, I guess. But thank you all so much for that. And just regarding the comments about what an audit is, I can say that I've worked in government for a number of years in my career. and worked in the educational realm. And I oversaw programming and at one, a few times actually, I've had my program chosen as one of the ones that was going to be one audit pieces. And when you've got everything documented and kept in order, you don't break a sweat. You get everything that they ask for. You have it ready to go. If there's questions about anything, you answer the questions. And I'm proud to say that in my time we were great with our auditing and our program audit and our financial audits. And I know this has scaled up immensely City of Oxnard when you compare it to an educational institution, but I appreciate all of the staff in the programs that were selected this year or featured in this one and the audit staff for their work. It's not lost to me. It is a lot of work. Thank you. And thank you to our CFO, to you and your team. Those are my comments. So we'll go ahead and take the vote, Madam Clerk.

Mayor Pro Tem and Council Members, if you can go ahead and cast your vote. Thank you. And this motion carries six to zero. Thank you.

Mayor, I'd like to make a comment. Yes, Councillor Perlow. To the finance department, thank you very much for all the work you did. The first time this was presented, my understanding is there's been no change even with the complaints our city treasurer has identified, which he did not identify. At the meeting where our council approved $40,000 extension, Councilman councilmember Masua to her good credit and the good service to the city of Oxnard She asked if there are no findings with his claims our city treasurer. Is there any opportunity for recovery? I am very interested in pursuing that I'm also very interested in pointing out one very specific thing the lawsuit is from moving Oxnard forward which is Mr.. Star and his wife sitting right in back of you and They also miss star mrs. Alicia Purcell on occasion represents a city treasurer and With that I find it very interesting that this lawsuit which is against a treasurer Against the city manager and against a city attorney that it would not be some type of collusion between some type Between our treasurer the attorney and the council member to do extreme damage to this city The damage to the city is in the reputation. But I appreciate the audit. I appreciate what you found. Our staff does good work. And I hope that there is some interest in pursuing whatever angle we can have for recovery. And this is not the first time our city treasurer has done, in the words of a former mayor with Irish ancestry, shenanigans to hurt the group.

Pertain Catherine star just to correct the record the key Tam lawsuit Does not have the city treasurer as a party in any shape way shape or form. He's not mentioned He's not part of that lawsuit The key Tam lawsuit is actually a lawsuit on behalf of the city to recover monies and that were paid unlawfully. And that's what this is about.

Thank you. Thank you for the clarification. Seeing and hearing no other items, and there being no further business on the agenda, without objection, we are adjourned. Good night. Thank you, everyone.