2. FY Ending June 2025 Financial Audit — Costa Mesa City Council, May 5, 2026

TRAVEL COSTA MESA

FINANCIAL ST ATEMENTS
June 30, 2025 and 2024
Attachment 2

TRAVEL COSTA MESA
Costa Mesa, California

FINANCIAL STATEMENTS
June 30, 2025 and 2024

CONTENTS
INDEPENDENT AUDITOR'S REPORT.

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS, LIABILITIES AND NET ASSETS-CASH BASIS STATEMENTS OF REVENUE AND EXPENSES - CASH BASIS.
.1
.3
.4
NOTES TO FINANCIAL STATEMENTS .5
JCrowe Crowe LLP
Independent Member Ctowe Global

INDEPENDENT AUDITOR'S REPORT
Board of Directors
Travel Costa Mesa
Opinion
We have audited the financial statements of Travel Costa Mesa (the "Organization"), a California nonprofit corporation, which comprise the statements of assets, liabilities and net assets - cash basis as of June 30, 2025 and 2024, and the related statements of revenue and expenses - cash basis for the years then ended and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the assets and liabilities arising from cash transactions of the Organization as of June 30, 2025 and 2024, and its revenue collected and expenses paid during the years then ended in accordance with the cash basis accounting principles described in Note 1.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Organization and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basfs of Accounting
We draw attention to Note 1 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the cash basis of accounting described in Note 1, and for determining that the cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances.

Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
(Continued)
L
Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding ofinternal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
( LIP
Crowe LLP
Los Angeles, California
December 4 9, 2025

2. TRAVEL COSTA MESA

STATEMENTS OF ASSETS, LIABILITIES AND NET ASSETS-CASH BASIS Years Ended June 30, 2025 and 2024
ASSETS
Cash

LIABILITIES
Current liabilities
Commitments and contingencies

NET ASSETS
Net assets without donor restrictions
Total liabilities and net assets
June 30,
2025 2024
$ 2,647.036 $ 3.131.781
2,647,036 3,131 ,781
2 47 $ 3,131.781

3. TRAVEL COSTA MESA

STATEMENTS OF REVENUE AND EXPENSES-CASH BASIS
Years Ended June 30, 2025 and 2024

CHANGE IN NET ASSETS WITHOUT DONOR RESTRICTIONS
Rewnues and other income
Business improwment area assessment, net of
handling fees
Interest income
Net rewnues and other income
Expenses:

Hotel marketing fiinds (taken out of bank reserws) Marketing
City sponsorship funds (taken out of bank reserws)
Sales department
Group incentiw program
Salaries and benefits
Personnel incentiw payout (taken out of bank reserws) Other (taken out of bank reserhs)
General and administratiw
Total expenses
Decrease in net assets without donor restrictions
Net assets without donor restrictions, beginning of year Net assets without donor restrictions, end of year
For The Years Ended June 30
2025 2024
$ 3,304,903
36,992
3,341 ,895
475, 172
1 ,908,531
164,000
185,544
16,473
797,580
30,181
32,450
216,710
3,826,640
(484,745)
3,131,781
2,647,036
$ 3,286,105
5,230
3,291 ,335
463,049
1585,828
164,000
150,827
74,000
708,742
3,864
187,991
3,338,301
(46,966)
3,178,747
3,131,781

4. TRAVEL COSTA MESA

NOTES TO FINANCIAL STATEMENTS
June 30, 2025 and 2024
NOTE 1- NATURE OF ACTMTIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities
Travel Costa Mesa (the "Organization") is a California non-profit corporation formed in 1995 to market the City of Costa Mesa (the "City") as a leisure travel and group business destination.

The vision of the Organization is to be a destination-marketing leader by supporting and selling the City's distinct visitor brand experiences and advocating community tourism benefits. The Organization's mission is to enhance and promote the City's brand experience, thus increasing visitor spending for industry and community economic viability, sustainability and quality of life.

The Organization is funded by the eleven member hotels that comprise the Business Improvement Area ("BIA") established by the City. The member hotels are Costa Mesa Marriott, Hilton Costa Mesa, Hampton by Hilton Costa Mesa Newport Beach, Residence Inn by Marriott, Avenue of the Arts, A Tribute Portfolio Hotel, Ayres Hotel, The Westin South Coast Plaza, Ramada Inn and Suites Costa Mesa, Best Western Plus Newport Mesa Inn, Crowne Plaza, and QC Hotel Costa Mesa.

California state law provides that BIA assessments are to be used for the purposes specified in the authorizing resolution that established the assessment. The City's resolution that established the BIA stated that its purpose is to promote tourism to the City and to fund programs and activities that benefit the hotel and motel business within the City.

Basis of Presentation
The accompanying financial statements have been prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Consequently, revenues are recognized when received rather than when earned, and expenses are recognized when disbursed rather than when the obligation is incurred.

Net assets and revenues, expenses, gains,
of donor-imposed restrictions. Accordingly,
follows:
and losses are classified based on the existence or absence net assets and changes therein are classified and reported as Without donorrestrictions - Net assets that are not subject to donor-imposed stipulations. These assets are available to support the Organization's general activities and operations at the discretion of the Board of Directors.

Xhth donorrestrictions - Net assets that are subject to donor-imposed restrictions. Some donor-imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor-imposed restrictions are perpetual in nature, where the donor stipulates that such resources be maintained in perpetuity. Generally, the donors of these assets permit the Organization to use all or part of the income earned on related investments for general or specific purposes.

As of and for the years ended June 30, 2025 and 2024, the Organization had no net ASSETS with donor restrictions.
(Continued)

5. TRAVEL COSTA MESA

NOTES TO FINANCIAL STATEMENTS
June 30, 2025 and 2024
NOTE 1 - NATURE OF ACTMTIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenues are reported as increases in net assets without donor restrictions unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in net assets without donor restrictions. Gains and losses on investments and other assets are reported as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulations or by law.

Tax Status
The Organization qualifies as a tax-exempt organization for Federal income taxes under Section 501 (c%6) of the United States Internal Revenue Code and for California state income taxes under Section 2370al(d) of the California Revenue and Taxation Code; therefore, the Organization has no provision for federal or state income taxes. During the years ended June 30, 2025 and 2024, the Organization had no unrelated business income.

The Organization annually evaluates tax positions as part of the preparation of its exempt tax return. This process includes an analysis of whether tax positions the Organization takes with regard to a particular item of income or deduction would meet the definition of an uncertain tax position under current accounting guidance. The Organization believes its tax positions are appropriate based on current facts and circumstances. The Organization's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. At June 30, 2025 and 2024, the Organization did not have any unrecognized tax benefits. The Organization is no longer subject to u.s.

Federal and state income tax examinations by tax authorities for tax years before 2021.

Use of Estimates
The preparation of financial statements in conformity with the cash basis of accounting requires management to make estimates and assumptions that affect certain reported amounts and disclosures.

Significant estimates made by the Organization's management include, but are not limited to, the allocation of expenses to program expenses. Actual results could differ from those estimates.

Revenues and Other Income
The City levies a special assessment on the eleven-member hotels in the BIA based on the sale of overnight guest room stays. For the fiscal years ended June 30, 2025 and 2024, the levy was three percent (3%).

The levy is transmitted by the hotels to the City; the City then aggregates the levies and sends a monthly remittance to the Organization, net of a one percent (1%) handling fee.

Allocated Expenses
The costs of providing program activities and supporting services have been summarized on a functiona) basis in Note 7. The Organization incurs expenses that directly relate to, and can be assigned to, a specific program or supporting activity. The Organization also conducts a number of activities which benefit both its program objectives as well as supporting services. These costs, which are not specifically attributable to a specific program or supporting activity, are allocated by management on a consistent basis among program and supporting services benefited, based on either financial or nonfinancial data, such as headcount, occupancy or estimates of time and effort incurred by personnel. (Continued)

6. TRAVEL COSTA MESA

NOTES TO FINANCIAL STATEMENTS
June 30, 2025 and 2024
NOTE 2 - LIQUIDITY AND AV AILABILITY
At June 30, 2025 and 2024, the Organization has $2,647,036 and $3,131,781, respectively, of financial assets available within one year of the date of the statement of assets, liabilities and net assets - cash basis to meet cash needs for general expenditures, all of which consist of cash. None of the financial assets are subject to donor or other contractual restrictions that make them unavailable for general expenditures within one year of the statement of assets, liabilities and net assets - cash basis. The Organization has a goal to maintain financial assets, which consist of cash on hand to meet six months of normal operating expenses per the Organization's reserves. The Organization has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due.

Funding for the Organization is dependent on the hotel room nights booked in the City each year and the subsequent portion of the levy that is allocated through the City to the Organization. Annual revenue fluctuates depending on annual visitors to the City. As a result, the Organization closely monitors the monthly projected and received revenue to determine if any change needs to be made to budgeted expenditures.

NOTE 3 - CASH
Cash consists of demand deposits at the following institutions as of June 30:

Citizens Business Bank
Pacific Premier Bank
Cash equivalents (Treasury Bills)
2025
121,026
2,526,011
2024
$ 549,314
2,582,467
$ 2,647,036 $ 3,131,781
The Organization maintains cash deposits at institutions which are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. At various times during 2025 and 2024, the Organization maintained balances in excess of FDIC limits. The Organization periodically reviews the quality of the financial institutions it has deposits with to minimize risk of loss.

Cash equivalents consist of Treasury Bills with original maturities of three months or less.

NOTE 4 - HOTEL MARKETING FUNDS EXPENSE
During portions of each of the fiscal years ended June 30, 2025 and 2024, the Organization allocated $200 per room to each BIA member hotel for hotel-specific marketing purposes. The allocation subsidizes hotel- specific advertising and marketing efforts that may also include the Organization's logo. Vendor invoices are paid by the Organization and, in some cases, paid by the hotel and reimbursed by the Organization.

Samples of advertising and marketing material are submitted for reimbursement. For advertising or marketing material where the Organization's logo cannot be used, the Organization requests that the hotel partners use the following verbiage,"Hotel partner name is a proud partner of Travel Costa Mesa." Hotel marketing funds expense totaled $475,172 and $463,049 for fiscal years ended June 30, 2025 and 2024, respectively. If the hotels do not use all their allocated funds, the funds revert to the Organization. (Continued)

7. TRAVEL COSTA MESA

NOTES TO FINANCIAL STATEMENTS
June 30, 2025 and 2024
NOTE 5 - GROUP INCENTIVE PROGRAM
The Organization has a group incentive program which is used for certain qualifying groups and was created to assist the Organization's partners and the City with group business. The group incentive program funds totaled $16,473 and $74,000 during the years ended June 30, 2025 and 2024, respectively.

NOTE 6 - MARKETING EXPENSE
The Organization incurs marketing expenses related to its mission of promoting the City as a tourist destination. For the fiscal years ended June 30, 2025 and 2024, marketing expenses totaled $1,908,531 and $1,585,828, respectively.

Marketing expenses include online marketing, video and photography production, electronic collateral, print advertising, various promotions, and tradeshow costs.

NOTE 7 - ST ATEMENT OF FUNCTIONAL EXPENSES
The statement of functional expenses for the year ended June 30, 2025 is as follows:

8. TRAVEL COSTA MESA

NOTES TO FINANCIAL STATEMENTS
June 30, 2025 and 2024
NOTE 7 - STATEMENT OF FUNCTIONAL EXPENSES (Continued) The statement of functional expenses for the year ended June 30, 2024 is as follows:

Salaries and benefits $
Marketing (Eblasts and Web Hosting)
Hotel marketing funds
Online marketing
City sponsorship
Sales department
Group incentiw program
Office and copier leases
Trawl, meetings, conferences and mileage
Accounting and fees
Insurance
Dues and subscriptions
Office supplies
Telephone and internet
Banking charges
Filing fee and state assessment
Postage
Parking
Recruiting sermces
Professional services
Total functional expenses $
Program
Activities
570 525 $
6 883
463 049
1,578,945
164,000
150,827
74,000
38,696
61,246
3,108,171 $
General and
Administrative Total
138,217 $
9,374
12,363
22,310
14,254
7,304
20 ,921
255
63 550
21 2
443
3,864
230,130 $
708,742
6,883
463, 049
1 ,578,945
164,000
150,827
74,000
48, 070
61 ,246
12,363
22,310
14,254
7,304
20, 921
255
63 550
212
443
3,864
3,338,301
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Indemnities
The Organization has made certain indemnities, under which it may be required to make payments to an indemnified party, in relation to certain actions or transactions. The Organization indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of California. In connection with its facility lease, the Organization has indemnified its lessor for certain claims arising from the use of the facilities. The duration of the indemnities varies and is generally tied to the life of the agreement. These indemnities do not provide for any limitation of the maximum potential future payments the Organization could be obligated to make. Historically, the Organization has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying statements of assets, liabilities and net assets - cash basis. (Continued)

9. TRAVEL COSTA MESA

NOTES TO FINANCIAL STATEMENTS
June 30, 2025 and 2024
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued) Operatinq Leases
The Organization has a lease for office space through December 2030. The Organization also has a lease for a color copier through September 2028. Total rent expense for the fiscal years ended June 30, 2025 and 2024 totaled $51,468 and $48,070, respectively.

Future minimum lease obligations as of June 30, 2025 consist of the following:

Litigation
Years Ending
June 30,
2026
2027
2028
:o;g
2030
59,256
70,012
70,012
68,509
34 104
In the ordinary course of business, the Organization may face various claims brought by third parties and they may, from time to time, make claims or take legal actions to assert their rights. Any of these claims could subject the Organization to costly litigation and, while the Organization generally believes that it has adequate insurance to cover many different types of potential liabilities, its insurance carriers may deny coverage or its policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the Organization's operations and financial position. Additionally, any such claims, whether or not successful, could damage the Organization's reputation and business.

NOTE 9 - EMPLOYEE BENEFIT PLAN
The Organization sponsors a defined contribution salary deferral plan (the "Plan") covering all employees.

Beginning in April 2012, the Board of Directors agreed to Safe Harbor contributions of 3% of the eligible employee's salary. During each of the fiscal years ended June 30, 2025 and 2024, Safe Harbor contributions totaled approximately $16,000, which are recorded in salaries and benefits in the accompanying statements of revenue and expenses - cash basis.

NOTE lO - RISKS AND UNCERT AINTIES
Due to the nature of the Organization's business, the Organization's revenue is entirely dependent on the City and the member hotels. The City established the BIA and collects the BIA levy from the eleven hotels in Costa Mesa and the member hotels are voluntary participants (see Note 1 ). A cancellation of the BIA or withdrawal of the member hotels would adversely and severely impact the Organization's financial position. (Continued)

10. TRAVEL COSTA MESA

NOTES TO FINANCIAL STATEMENTS
June 30, 2025 and 2024
NOTE 11- SUBSEQUENT EVENTS
Management has evaluated and determined that no other events have occurred through December 19, 2025, the date that the financial statements were available to be issued, which would require inclusion or disclosure in its financial statements, except as disclosed herein.

11.

Costa Mesa City CouncilMay 5, 2026

Costa Mesa City Council
May 5, 2026