December 2, 2025 Council Finance Committee/Investment Review Committee

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[00:00:00] Member Chris Clark: Uh, today's December 2nd, 2025. This, and um, this will be a hybrid meeting allowing the public to comment in person and virtually and instructions for addressing the committee virtually can be found on the agenda. We'll start with roll follow, and it looks like all committee members are present. Um, The 1st item is item, um, 3.one to approve the, to review and approve the minutes of the May, 8th, 2025 CFC meeting. Um, Those are in our packets, and, um, Does anyone have any questions or, um, changes for the minutes before we ask the public? No. I remember member of the public online, wish to address us on the minutes, books like not. Emotions in order to approve them AA 2025 CFCMD minutes. Okay. We have a motion by committee member Ramirez, 2nded by, um, vice mayor Ramos. All in favor, say, audience. Hi. I, that carries unanimously. We'll move on to oral communications for the public on non-agenda items. Would any member of the public join us virtually or in person like to write comment on, um, any item that is not on today's agenda? If so, please pick the right hand button and Zoom and person attendees can raise the right hand to be followed upon will take in-person speakers. First, it looks like we don't have any. Are there any speakers online for this? No. So we'll close or communications, non-agenda items, and move on to our discussion, action items. Uh, of which there's one today, uh, item 5.one is the annual financial audit results and review, the fiscal year, 2024, 2025 annual comprehensive, annual report. Um, so our, uh, Spanish administrative service director at Dairy Group home will make brief remarks before the presentation by the city auditor, who support this, uh,

[00:01:57] Dara Crampo (Staff): as well. Thank you, Chad Clark, Dara Crampo, and your Finance and Administrative Services Director. I've got great saying, the assistant, finance, and administrative services director, and Helen, the county manager with me as well. And so we also have Ahmed Badawi from Badawi and Associates who will speak shortly. I kind of walk through a quick presentation with the committee. Um, I really was a successful audit, I would say, uh, the act for has been issued in draft form. And so we'll be looking to go to council on the 16th of December or acceptance. Um, we were issued, once again, an unmodified opinion, which is the cleanest opinion and best opinion possible. And so, really, just, um, wanted to acknowledge that it's a real clean audit, and, uh, Akfer looks good and very, wanted to thank the accounting team for putting it all together. They do a lot of work between July and now, I'm getting it all together and working with the auditor and answering a lot of questions. Um, so with that, I think Ahmed will kind of take over and has a quick presentation that he'll probably share. I did provide hard copies too, so you can follow along. Everybody,

[00:03:04] Member Chris Clark: uh, learn when you are ready when you are. All

[00:03:07] Mr. Badawi: right. Well, thank you, good morning. And thank you for inviting me to the meeting. Uh, I'm gonna get started right away and share my screen here. And uh, and please confirm if you're not able to see my screen. Yeah, we can see it. Wonderful. All right. So I'm gonna get started. So thank you again for inviting me to the meeting. I'm here to present you the results of the 2025 audit for the city of Mountain View. And uh, I am gonna just cover uh, the agenda for today. I'll give you a very brief overview of our firm and the engagement team. list of deliverables and the scope of our audit, a brief overview of our audit methodology. Uh, some of the risks that we identified during our audit process. The type of audit report or opinion we are about to issue. Some of the required communication as your independent auditor and then a brief overview of the new accounting standards. So just a brief overview of our firm and the engagement team. Here is just affirmed by the numbers. We have about 25 years of experience. We're a very specialized firm. We only work with government clients. We currently have about 65 government audit clients. 44 of those are cities. Uh, we have about 30 employees. And so far, knock on word 0 lawsuit, legal or disciplinary actions against the firm. As a matter of fact, we actually just completed our peer review, and we received basically the highest grade available, like we did every peer review. So that was just completed this last summer. As far as our engagement team, I was the engagement partner, we had a quality control reviewer, an audit manager, an IT specialist, and 4 professional staff assigned to the it. In terms of the deliverables and the scope of our audit. Sorry, jumps for some reason. Uh, we were mainly engaged to provide an opinion on the city's actor, the uh, basic financial statements, uh, the shoreline, also a regional park community, the single audit reports, which is the audit of the federal grants. The agreed upon procedure on the game limit, agreed upon procedure on the Silicon Shores corporation lease calculation. And we have completed 2 of those during this year. And communication with the governing body, which is what I'm doing today. In terms of our audit methodology, has really a very brief overview here, that the audit is an ongoing process that is really performed throughout the year, starts with a planning phase, which is information gathering phase about any changes that happen during the year, any changes in counting systems, counting policies, personnel, and so on to help us plan the audit. We do have an interim phase where we come in and interview city staff and focus on processes and controls and design other procedures based on the controls and the risk assessment that we identified. The year end phases when we come in and do testing of account balances and obtain audit evidence and so on. And then finally, the reporting phase, which is where we end right now. is to finalize the reports. Uh, In terms of primary audit risk. So I always like to say that there are no risk free arts. So every audit we do have risks. And the risks that we identified in city and mountain view are pretty standard in almost every audit we have. So I just wanted to, uh, clarify that that there is nothing specifically concerning about mountain view compared to any other city. But the 1st risk is risk of management override of control. And this is really a risk that we cannot eliminate completely because management are the one responsible for designing, implementing, and monitoring control. So they are oftentimes in a position to override those controls. So we have to design other procedures to minimize that risk to an acceptable level. So these are some of the procedures that we perform, obviously making sure that we have experienced audits, staff, incorporating element of unpredictability, evaluate management selection of accounting principle, and how consistency, consistent they are, test journal entries, prepared by management, review, accounting estimates, evaluate business rationale for unusual transactions, and evaluate fraud inquiries. And we have not become of any aware of any incidents where management has overriding control. So just wanted to highlight that as well. Uh, leases is an area just, it's high dollars, uh, so it's an area of uh, risk for us. We perform testing on least receivable, we review the least summary, obtained by management. We also uh, tests, uh, material, new leases, review agreements and calculations and so on. The next area is revenue and receivables and proper revenue recognition, and this is the auditing standards do require us to consider this area a high risk area. Uh, so we rely heavily on confirmations from 3rd party, especially on the governmental revenues, like CS tax, property tax, TOT, franchises, uh, we confirm most of these revenues. And the proprietary funds, we basically perform ratio analysis and so on. Uh, And then finally, the accounting estimates, trust accounting estimates by nature, they are, uh, just have a high degree of uncertainties and that makes them, uh, higher risk. So I just wanted to also bring to your attention, some of the estimates in your finance, fair value of investments, the use for life of capital assets, the pension and OPEAD, actuarial assumptions, the landfill, liability estimate, and so on. We move on to the auditor's report. Uh, as Derek mentioned, is still in a draft form. So we haven't issued our report yet, but we are going to be issuing it soon. The report will list the standards that we followed, and those are the generally accepted auditing standards and also government auditing standard. We anticipate the issue an unmodified opinion. And an unmodified opinion means that we believe the financial statements are fairly presented in all material respects, that all accounting policies have been consistently applied. All estimates are reasonable and that all disclosure is properly reflected in the financial statements. When I move to the last part of my presentation, which is a required communication, uh, On the left side, here is our responsibilities as the auditors, and this is to provide an opinion on the city's financial statements, to evaluate internal control over financial reporting, to evaluate compliance, to ensure financial statements, clear and transparent, and to communicate with the governing body. Management have responsibilities in this process, management has to take responsibility for the financial statements, establish and maintain internal control. Make all financial records available to us. Establish internal control that would prevent and detect fraud, inform us of unknown and suspected fraud, comply with laws and regulations and take corrective action on audit findings. As far as independence, we are responsible for maintaining our independence. We follow the AICPA and the California Board of Accountancy rules. And we normally identify any services that impair could impair independence, like preparing the act for, for example, on behalf of the city, uh, and make sure that we have safeguards in place. like having an independent reviewer not involved in the audit, reviewing those financials and making sure that they adhere to the standards and the requirements. As far as timing of the audit, like Derek mentioned, we believe that the audit was performed timely, within the time frame communicated to management in our engagement letter. In terms of significant accounting policies, there were 2 new accounting standards that the city implemented during the year, compensated absences, and risk disclosure. Please say that we encountered no difficulties during the audit, saying the city was prepared, was responsive, provided good audit evidence and documentation. So we felt that audit went, well, with no difficulties. In terms of significant audit adjustment and unaddressed the difference, any adjustments that we came up with management has posted those adjustments. So there is no unaddjusted differences. And in terms of deficiencies and internal control over financial reporting, there were no material weaknesses identified during our art. And then finally, uh, just heads up that there are some new accounting standards coming your way in next year, uh, gas B 103 and gas B 104. Gas B 103 is going to make some changes to how the finance statements look like. Other than that, I want to say thank you for allowing us the opportunity. I am more than happy to answer any questions. Thank you.

[00:12:36] Member Lucas Ramirez: Thank you, chair. Thank you, Mr. Badawi, and staff for preparing all of these documents. I have the privilege to serve on this committee for, um, the entire time I've been on the city council and I've started, I think, after 7 years. I've grown a little bit more comfortable with reviewing these documents and it's always encouraging to see a clean op. So I don't have questions about the audit itself. I had shared a few questions in advance of the meeting and Derek was kind of up to respond to them, so I don't want to waste everyone's time. So we didn't have a chance to go through all of the equipment replacement fund, reserve questions. So if you could just very flip link cuts on those, um, uh, I'll

[00:13:20] Dara Crampo (Staff): be able to go to sleep at night. Yeah, so I think the 1st question you had was that we had budgeted 11700000 um in this last fiscal year to be spent in the ERF, and you wanted to know, you know, how much of that did we spend? And in fact, we spent $12.5 million. 6.2 of that was actual money out the door and we have POs issued for 6.300000 for about half. Um, so 12.5 in total, and really the large amount in the PO is due to the timing that it takes to, um, build the large, some of the vehicle, the large vehicle, which that's why there's POs issued for that. So those will be paid as soon as those equipment is completed. Um, and they'll be delivered once they're ready. Uh, you did also ask about the uh, 25% uh, kind of target for to maintain. So currently, uh, the ERF, uh, estimates about $60000000 for total replacement of all the equipment. So 25% of that is 15 million. At the end of this last fiscal year, a couple months ago, we had 21.2 million in there. So we're about 6200000 a little bit over, the 1500000 funding, the 25% target. Um, I would say that The 60000000 does not incorporate the replacement of vehicles at the electric cost, you know, of electric vehicles. And we're really anticipating that to be, you know, I think 30% more, um, than the, the current cost of what we have on the books at the 60 million. So, we feel like we're in a good spot. Hopefully, in taking into consideration, the electric vehicles, which will be a high cost. Uh, and then I think for the next fiscal year, we did pause the contribution to the ERF. That was about, I think, $14 million. Um, and so we're anticipating that that 5 +0000 excess that we have at the end of this last fiscal year will um, be reduced to about $3.5 million. So not much play on 60 million, but excess over the 25%. Thank you. And the reason I

[00:15:34] Member Lucas Ramirez: ask for the non-existent members of the public is because the fund balance is always very high and the annual activity. In my opinion, over the years, didn't appear to justify that balance. So I'm happy to hear that we're spending down that balance in the act for the next fiscal year. Um, we'll see that number lower, right? And, and, and ratchet it down further as we, uh, start to bring online the, um, um, electric vehicles. So that's that's sort of the expectation, I guess, for thanks. couple of years. Okay. Okay,

[00:16:11] Unknown Speaker: and I would say too, we're already talking as a budget team about what the impact of the electric field is really going to be financially to us. So the goal to have it ratchet down, we may have to come back to council and reset and just tell the story of what's happening with the cost for the vehicles because I think, like, Derek said, that it's we are seeing that they're 25 to 30% more expensive than what we pay for everything now. So there may come a time where we do have to plan for it to go back up, basically, because once we have more vehicles, and it's not just trucks. I mean, these are major, major pieces of equipment. The cost is just going up for everything for obvious reasons. I mean, everything happening with the, um, tariffs that just vehicles, it's so expensive now. So, or we might have to reset, but for now, it's as you say, that it is.

[00:17:04] Member Lucas Ramirez: I'll be gone by then. I think I think that there's a plan and that is transparent. I think that had not existed previously. It's like, what is this money being used for it? It was growing pretty substantially and then it was stagnant and around 30000000 for a little while. And I'm glad to hear that there is a plan for the bike. Yes, definitely. Those are my questions. Thank you. Anything vice mayor?

[00:17:28] Member Emily Ann Ramos: When do we find out if you got awards on this? Yeah,

[00:17:30] Dara Crampo (Staff): it takes a little while. We, yeah, we found out the last, the last budget and the last act we have received the awards for, usually takes, what, 6 months-ish? Yeah. Yeah, yeah, middle of next year. So, takes a while for me. We issued them. They found our

[00:17:44] Unknown Speaker: rears, kind of. So we just found out about the act for in the budget just a couple few months ago for last years. So

[00:17:50] Dara Crampo (Staff): it'll be 6 plus months. We fully expect to get it. Yeah. How many reason not to believe? Um. There

[00:18:02] Member Chris Clark: are no other committee questions. I don't see any member of the public. He really looks like not online. Okay. So, um, yes.

[00:18:12] Member Lucas Ramirez: So I was waiting for you to be ask for public comment. I'm happy to move. Um, to recommend that city council accept the yacht and related reports, these two.

[00:18:22] Member Emily Ann Ramos: Second.

[00:18:22] Member Lucas Ramirez: Um, I did have a quick addition, not part of the motion, but um, there were some other questions that I don't bore you with that I had submitted, but I think one thing that came out of those questions is, um, there maybe there's some value in providing some additional explanation for, for instance, the use of property and money. There's a lot of helpful information that our staff and the auditor have that are not necessarily easily accessible, that explain some of the numbers that to the public may appear. Um, I mean, hard to understand. So I think, you know, maybe some gentle guidance for staff and for the auditor to provide some additional explanations and, um, the finance director has followed that information. Yes,

[00:19:09] Member Emily Ann Ramos: that makes sense, considering the use of property and money is very unique to not super unique to money, but that's the level. level of it is super unique to Mountain View. We

[00:19:21] Member Chris Clark: have a motion by name member, um, from here to, uh, recommend to the city council that we accept, uh, uh, the, they, they review and accept the reports, um, the same as we're doing today. 2nd and by device mayor, um, And, um, uh, thank you again, um, Ahmed and, and the team, um, I reviewed, uh, a few artists this year, and this is by far the cleanest and most boring, which is, um, boring is good. Not that this is boring, but in terms of, you know, the... You found... I'm just really glad this is a very clean audit and this is the largest organization I've ever been famous. Um, I don't, I don't know how you hand. how you all do it in terms of revenue recognition and all the different funds and everything. So, I know it's, it's a well oiled machine at this point, but I really appreciate all the work and effort that went into this. So, um, emotional on the floor, um, all on paper, say hi. Hi. I opposed none so that carries unanimously. And that is our only, um, CFC discussion and action item today. Are there any committee staff, comics, questions, or reports? Yes, city manager.

[00:20:39] Unknown Speaker: I just want to thank staff too, for another great year. I know it's tons of work. Derek mentioned, starts really in July. It's about a 6 month process going through this. So, Derek and Grace and Helen. Thank you guys so much for you and your teams. Everything you do to get us to this point. I know it's a lot of work. And also, um, Ahmed, Mr. Medawi, thank you for your work with Mountain View, and we love hearing that it was easy to work with staff and and you had no issues. So I appreciate all of you. Thank you. It

[00:21:13] Member Chris Clark: was a pleasure. Thank you. Not the case in every city. Congratulations, everyone. Um, any other member staff?

[00:21:24] Member Emily Ann Ramos: Um, and the the council investment review committee, um, there were some, um, requests by the public, um, is there any updates on, um, essentially our investment policy illness? Yeah,

[00:21:38] Dara Crampo (Staff): so we've been working with Chandler, and we're expecting to schedule a IRC meeting sometime 2026, not a year from the last meeting, but probably middle of the year, you know, before that. Um, to bring back some recommendations. Mm-hmm. Um, no,

[00:21:59] Member Chris Clark: the business before the uh, the committee all adjourn the meeting at 859. That's why I said this. You can keep everyone. Have a good time. Thank

[00:22:14] Unknown Speaker: you. Amen. Thank you. Bye bye. And do we end the meeting? Yes, I don't really imagine.

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