To: AUDIT COMMITTEE
From: STEPHANIE MEYER, FINANCE DIRECTOR
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DISCUSSION AND POSSIBLE ACTION REGARDING THE ANNUAL FINANCIAL REPORTS FOR THE FISCAL YEAR ENDED JUNE 30, 2025
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EXECUTIVE SUMMARY
The City’s independent auditors, CliftonLarsonAllen, LLP (CLA), have completed their annual audit of the City’s fiscal activities for the fiscal year ended June 30, 2025. The resulting reports are listed below. We are pleased to report the City received an unmodified opinion, which is the best opinion the City can receive. This means the auditor certifies that the City’s financial statements are fairly presented in all material respects and are in conformity with Generally Accepted Accounting Principles (GAAP) and Government Accounting Standards Board (GASB) requirements.
This report includes the Annual Comprehensive Financial Report (ACFR) and following documents:
• The Inmate Trust Fund Financial Statement is prepared and submitted as required by the state penal code. This fund accounts for the money received by the City from the telephone company for providing pay telephone service to City jail inmates. Monies received are to be used solely for the benefit of the inmates.
• The Governance Communication Letter summarizes significant changes in accounting practices required by newly applicable accounting standards, describes sensitive accounting estimates which the auditors found reasonable, lists the corrected misstatements identified during the audit, and makes other similar disclosures.
• The Internal Controls Communications Letter, or Management Letter, documents levels of control deficiencies identified by the Independent External Auditors during the audit of the City’s Annual Comprehensive Financial Report. This report includes both the findings identified by the auditors as well as management's responses and enables the public to gain an understanding of the City’s financial controls.
In addition, as part of this audit cycle, the City’s auditor will prepare:
• The Single Audit Report which is required for all federal and state funded programs. These programs are audited in conformity with the provisions of the Single Audit Act of 1984 and OMB Circular A-133, Audits of State and Local Governments. Staff anticipates completing this report by the end of October 2026.
The Budget and Finance Commission reviewed the draft ACFR at a special meeting on August 27, 2026. At the meeting, CLA’s Engagement Partner (the lead partner on the City’s audit) presented audit results and responded to questions. The Commission moved to receive and file the report with no comments.
At the Audit Committee meeting, CLA’s representative will present the ACFR and overall audit results to Committee and will respond to questions. The same evening, staff has presented the report to the City Council as a consent item.
BACKGROUND
At the May 6, 2008 City Council Meeting Mayor Mike Gin recommended establishing an Audit Subcommittee of the City Council consisting of himself as Mayor and two Councilmembers. The purpose of the Committee was for the Council to become more intimately involved in understanding the audit. In July 2015, Council approved adding the City Clerk and City Treasurer to the Audit Committee, and designated the group as a standing Committee subject to the Brown Act.
The ACFR reflects the financial position of the City and its component units for the fiscal year ending June 30, 2025. The primary purpose of the report, as defined by the City Charter, is to inform the Mayor and City Council of all financial and administrative activities of the previous fiscal year. In addition, the report provides critical information to the larger financial community and Redondo Beach residents. For the residents, the report helps to correlate City services and accomplishments with use of resources. For the financial community, this report provides information necessary to evaluate financial practices of the City, assure their soundness in accordance with GAAP, and determine the financial capacity of the City to incur and service debt for long-range capital planning.
As stated above, the City’s FY 2024-25 ACFR received an unmodified opinion. The auditor’s report highlighted three findings with recommendations for how to improve related procedures. Staff agrees with the auditor’s comments and is implementing practices in response to these changes. Two of the three findings carry over from the prior year; in each, the auditors note improvement, with the recommendation to continue existing progress. The third finding relates to prior year corrections. These corrections resulted from historical practice predating current staff and accepted by the City’s prior auditor, and appeared as a result of staff’s proactive and detailed review identifying issues and presenting them with proposed corrections to the City’s new auditors. Since the FY 2023-24 audit, the City has hired and retained critical accounting staff, and with that increased capacity has implemented process documentation and cross-training procedures that will ensure continued improvement and future consistent application of best practices.
An audit is also required to obtain the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA) and is often a requirement for grants or federal awards. The City has received this award for over 30 years, and will submit the FY 2024-25 audit for this award as well.
The City Council reviewed FY 2024-25 year-end budget results with the Budget Carryover Report on February 17, 2026, and approved related budget actions, including to carry over prior year encumbrances, and unspent capital project, grants and donations balances, and to appropriate one-time funds for specific projects for which Departments received funding, but were unable to spend during the fiscal year.
COORDINATION
The Audit has been coordinated with the City’s independent auditors, with supporting information from all City departments.
FISCAL IMPACT
The total cost for this activity is included in the Financial Services Department’s portion of the FY 2025-26 Adopted Budget and is part of the department’s annual work program.
ATTACHMENTS
• Report - Annual Comprehensive Financial Report (ACFR) for year ended June 30, 2025 (Draft)
a. Letter-Governance Communication
b. Letter-Internal Controls Communication
• Report - Inmate Trust Fund Financial Statement for year ended June 30, 2025 (Draft)