Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: RECEIVE AND FILE THE FISCAL YEAR 2024/25 AUDITED
ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR),
POPULAR ANNUAL FINANCIAL REPORT (PAFR), AND THE
AUDIT REPORT ON THE APPROPRIATIONS LIMIT.
Date: November 18, 2025
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council receive and file the Fiscal Year 2024/25 audited Annual Comprehensive Financial Report (ACFR), the Popular Annual Financial Report (PAFR), and the Report on Agreed-Upon Procedures Applied to the Appropriations Limit Schedule.
Background
Annual Comprehensive Financial Report
The Annual Comprehensive Financial Report (ACFR) is an audited summary report of the financial transactions of the City for the Fiscal Year 2024/25, ending June 30, 2025. The report is presented to the City Council and is designed to provide summary financial information for citizens, other government agencies, municipal lenders, and other interested parties. The format of this report complies with the Generally Accepted Accounting Principles (GAAP) and reporting requirements of the national Governmental Accounting Standards Board (GASB).
Chavan and Associates, llp, licensed Certified Public Accountants who specialize in governmental audits, have audited the City’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2025, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation.
The ACFR is intended to improve access and transparency by providing ten years of historical financial information and expert narrative analysis of the City's finances. This provides a multiyear look at the City finances and helps the reader understand the information presented in the Basic Financial Statements section of the ACFR.
Since fiscal year 2017/18 the City has applied for and received the Government Finance Officers Association (GFOA) ACFR award called the Certificate of Achievement for Excellence in Financial Reporting and will continue to apply for this award, which has historically been awarded to less than 1% of cities our size.
Popular Annual Financial Report
The Government Finance Officers Association (GFOA) established the Popular Annual Financial Reporting Awards Program (PAFR Awards Program) in 1991 to encourage and assist state and local governments to extract information from their Annual Comprehensive Financial Report (ACFR) to produce high quality popular annual financial reports, specifically designed to be readily accessible and easily understandable to the general public and other interested parties without a background in public finance, and then to recognize individual governments that are successful in achieving that goal.
The Popular Annual Financial Report (PAFR) for the City of Cotati provides a snapshot of financial data and City specific information as was included within the audited ACFR. It highlights the topics of most frequent interest including; City overview including history, vital statistics, and resources available to the public; financial highlights including details on comparative revenues, expenses, net position fund balance; as well as strategic goals and accomplishments made during the year.
To reach more citizens about the vitality of the City and our financial standing, staff also translated the full document into Spanish. Both English and Spanish versions will be published online and promoted through social media with a City Financials Quiz consistent with prior years, and new this year we will be generating a short video to also post through social media and on the City Website.
Annual Appropriations Limit
The Appropriations Limit, otherwise known as the Gann Limit, is a law in California that limits the amount of money state and local governments can spend on tax-funded services. It was approved by voters in 1979 and is based on the amount of money spent in 1978/79, adjusted for inflation and population changes.
Analysis/Discussion
The City’s financial statements provide information about the finances of the City in its entirety, as well as information about individual funds. The ACFR is organized into the four sections summarized below.
Introductory Section
Letter of Transmittal - which is designed to complement Management’s Discussion and Analysis (the MD&A) and is prepared by management and used to communicate information on areas that may have an impact on the City’s finances now and in the future. This includes economic factors as well as budget and management factors. Both should be read together to understand the City’s financial position.
Financial Section (the main body of the ACFR for current year information) Independent Auditors’ Report – the City’s report card on the content of the ACFR. Management’s Discussion and Analysis (MD&A) – provides an analytical overview of the City’s financial status and results for the year.
Basic Financial Statements – reports finances at a point in time (assets - liabilities) and throughout the year (revenues - expenditures), and cash flows. Government-Wide Statements – overview of financial information including all the City’s operations by financial activity.
Fund Financial Statements – a detailed look at funds, reporting the Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balance. Notes to the Financial Statements (Notes) – a narrative explanation that accompanies the Basic Financial Statements.
Required Supplementary Information
Budget to Actual Comparisons – for all governmental funds with a legally adopted budget.
Pension Information – schedule of changes in the pension liability and related ratios; schedule of contributions by plan.
OPEB Information – schedule showing Other Post-Employment Benefits Other Than Pensions since fiscal year 2017/18.
Other Supplementary Information
Non-Major Funds combining financial statements including the balance sheet and statements of revenues, expenditures, and changes in fund balances. Budget to Actual Comparisons – for non-major governmental funds with a legally adopted budget.
Statements for Internal Service Funds.
Schedule of Measure S Revenues and Uses for the fiscal year.
Statistical Section (current and historical information – up to 10 years) The last section of the ACFR, which is unaudited, contains schedules of statistical data about the City of Cotati in five major categories:
1. Financial Trends
2. Revenue Capacity
3. Debt Capacity
4. Demographic and Economic Information
5. Operating Information
These schedules, covering a ten-year period, provide operating context for the financial data presented in the financial section of the ACFR.
Other Independent Auditor’s Reports
Included within the financial statements at pages 175-177 Chavan and Associates, llp has provided the, Independent Auditors Report in Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. This report details what internal controls are and what material weaknesses or significant deficiencies are in internal controls. The auditors did not identify any deficiencies in internal control over financial reporting; however, there may be control deficiencies which were not identified.
The ACFR is available on the City’s Financial Information webpage and attached to this staff report. Copies can be made available for review in the City Manager’s Office and in the Administrative Services Office.
Financial Highlights
Chavan and Associates, llp, the independent auditor, has issued the City a clean audit opinion. This independent audit includes an evaluation of the appropriateness of accounting policies used by the City, evaluation of any significant accounting estimates made by City management as well as verification that the financial statements are free from material misstatement. The attached ACFR has no material misstatements. The “corrected misstatements” on the Letter to those Charged with Governance relate to correcting the recording of the new debt for the pension and street project as well as correcting the deferred loss on the same refunding.
Additionally for the government-wide statements and fund financial statements there is a prior year adjustment posted for $1.0M due to the removal of previously recorded interfund debt service between the general fund and the enterprise funds, see footnote 16 on ACFR page 92. This correction to the government-wide prior year statement is a conversion entry for financial reporting from the modified accrual basis to the full accrual basis and as such does not impact the prior year fund financial statements. Due to this adjustment, comparison numbers to the prior year have been adjusted to reflect the corrected prior year basis.
Government-Wide Financial Statements (ACFR pages 37 - 40) At the close of the fiscal year, the assets and deferred outflows of the City exceeded liabilities and deferred inflows of resources by $55.9 million (Total net position in the government-wide) compared to $56.0 million in FY 2023/24. The two significant contributing factors to the change in fund balance are as follows:
Net decrease of approximately $2.6 million, or 5.7% decrease in net investment in capital assets was due to slowdown in cost of expenditures for capital improvements over prior years while completing some significant Capital in Progress leading to historically higher depreciation versus new assets. Additionally, there were disposals of approximately $400K in assets no longer in service. Restricted Net Position of $6.4 million represents resources that are subject to external restrictions on their use, or by enabling legislation. Restricted net position is comprised of amounts restricted for housing ($4.8 million or 75.6%) capital, street and park projects ($1.5 million or 23.7%), and other restricted ($0.4 million, or 0.7%). Restricted net position decreased by $3.6 million, or 36.0%, primarily due to use of $2.5 million of funds held for public safety in the prior year related to reserves for emergency operations which is now reclassed as unrestricted, $0.5 million in funds held in the street bonds project funding and reserved to pay for improvements in future streets as well as completion of major construction for the Park and Ride lot which held $0.7 million in restricted funds for the prior year. Unrestricted Net Position in the amount of $6.7 million, an increase of $6.1 million or 1,023% from the prior year, represents a net position of the City that is not restricted for any project or purpose. The increase of $6.1 million, or 1,023%, was primarily due to the reclassification of the funds held for emergency from restricted to unrestricted from the prior year, as well as increased net position overall for the business type activities due to excess revenues over expenditures as we try to improve the health of the funds overall for future capital infrastructure maintenance.
As of June 30, 2025, the City’s governmental activities reported a net position of approximately $40.4 million compared to an adjusted $40.5 million in FY 2023/24, a $0.1 million or less than 0.3% decrease.
As of June 30, 2025, the City’s business-type activities reported a net position of $15.5 million compared to $15.5 million in FY 2023/24. This shows steady increasing revenues that are just meeting the expenses for the year.
Fund Financial Statements (ACFR pages 41 - 55)
As of the close of the current fiscal year, the City’s Governmental Funds reported a combined ending fund balance of approximately $12.5 million, a $2.0 million decrease from the prior year. This change is primarily due to flat revenues and increasing operational expenses as well as continued work on capital projects. Within the governmental funds ending fund balance, $1.4 million was restricted for capital projects including streets and parks, $3.6 million is reserved for housing, and $4.5 million is unassigned.
As of the close of the current fiscal year, the City’s General Fund reported an ending fund balance of $7.0 million compared to $9.0 million in FY 2023/24, a $2.0 million net change. The City’s General Fund continued to maintain a significant balance above the 25% required reserve.
The Popular Annual Financial Report (PAFR) statements derive core basic financial statement information and are reframed with the goal of simplifying the information to increase awareness throughout the community of the City’s finances. The report provides a brief analysis of the City’s revenue sources, where those dollars are spent, and an overview of the City’s financial condition. It is our goal that this report is easy to read and understand.
Though the intent of the PAFR is to provide a basic summary of the financial information, it is a focused subset of the financial information provided within the audited ACFR. As such, it is noted throughout the report to find the detailed financial reports within the City’s ACFR, which can be viewed at City Hall or on the City’s website at cotaticity.gov. The ACFR is a more complete, independently audited financial presentation, prepared in accordance with Generally Accepted Accounting Principles (GAAP).
Consistent with the prior year, the Administrative Services Department will provide the PAFR both in physical documents, available at City Hall, the Police Department, and the Chamber of Commerce, as well as digital copies available on the City Website. With the next City newsletter, we will also provide a notice to the public about the availability of both the PAFR as well as the ACFR online and at City Hall.
Financial Considerations
The audit report included at ACFR pages 19-21 provides reasonable assurance that the financial statements are free of any material misstatements and find no material weaknesses. This report signals the City’s quality of accounting and financial reporting and is an indication that City funds are being spent appropriately and as intended by the City Council, grantor agencies, and federal and State laws. It also helps maintain the City’s favorable bond ratings.
No financial considerations are applicable to the filing of the Popular Annual Financial Report.
This report is a summarization of the financial information provided within the audited ACFR which is available for review online or at City Hall.
Environmental Issues
The creation of the Annual Consolidated Financial Reporting document is not a project under the California Environmental Quality Act (CEQA), per the definition of a project identified in Section 15378 of CEQA in that there will be no direct, or reasonably foreseeable indirect physical change in the environment.