Agenda Item No: L.1
AGENDA REPORT
DATE: January 20, 2026
TO: Mayor and Council
FROM: David Gassaway, City Manager
SUBJECT: Resolution 2026 -09 FN Fiscal Year 2024 -2025 Annual Comprehensive Financial Report and the Draft Schedule of Expenditures for Federal Awards Report
Approving the Fiscal Year 2024 -2025 Annual Comprehensive Financial Report and the Draft Schedule of Expenditures for Federal Awards Report (Single Audit) and Other Reports
Funding Source: N/A
Contact: John Furtado, (707) 428-7629
RECOMMENDED ACTION
Adopt resolution.
STATEMENT OF ISSUE
City council is being asked to approve the Annual Comprehensive Financial Report (ACFR) for fiscal year (FY) 2024-2025, as well as the draft Schedule of Expenditures for Federal Awards Report (Single Audit). The FY 2024-2025 ACFR indicates the City’s financial condition as of June 30, 2025, and has been audited by The Pun Group LLP, an independent audit firm of Certified Public Accountants. The FY 2024-2025 draft Schedule of Expenditures for Federal Awards Report is expected to comply app licable to major federal programs and will be audited in February of this year. Staff will bring forward for approval a revised report if there are any changes to the current draft, and at this time staff is not anticipating any changes to occur.
DISCUSSION
Each year, an independent Certified Public Accounting (CPA) firm audits the City’s financial statements (ACFR) and federal grants (Single Audit) in accordance with Generally Accepted Auditing Standards (GAAS).
The ACFR provides a detailed overview of t he City's financial position, covering all funds. It is prepared in conformity with Generally Accepted Accounting Principles (GAAP) and designed as a general-purpose report, meeting the informational needs of a wide range of stakeholders.
The Schedule of E xpenditures of Federal Awards (SEFA) report, detailing federal grant expenditures, was prepared by City management and will undergo auditing in February 2026 as part of the Single Audit process. The Single Audit evaluates compliance with the Federal Office of Management and Budget (OMB) comp liance supplement requirements for federal grant recipients.
The auditors have issued an unmodified opinion on the ACFR, the highest level of assurance, indicating that the financial statements fairly represent the City of Fairfield’s financial position.
For further details, refer to the Auditor’s Opinion on page 1 of the ACFR.
A concise summary of the City's financial condition can be found in:
Transmittal Letter and Management’s Discussion and Analysis (MD&A) sections of the ACFR.
Popular Annual Financi al Report (PAFR) for FY 2024 -2025, included in this submission.
The PAFR is a simplified, unaudited version of the ACFR that highlights key financial information for ease of understanding.
Additional insights and supporting details are available in the Notes to the Financial Statements within the ACFR.
The following section outlines key financial positions and highlights the City’s major funds:
Government-Wide: As of the close of FY 2024 -25, the City’s assets plus deferred outflows exceeded its liabilities plus deferred inflows, resulting in a net position of $672 million. Key components of this figure include:
Unrestricted Net Position: A deficit of -$41 million, primarily influenced by:
o The City’s net pension liability, which stands at $249 million. o Increases in compensated absences and claim liabilities. Total Long-Term Liabilities: These decreased by $6 million, primarily due to scheduled debt service payments on the City’s Pension Obligation and Utility Revenue Bonds.
By fiscal year-end, the City’s governmental funds reported a combined ending fund balance of $256 million, underscoring the City's overall short -term financial stability while acknowledging ongoing challenges tied to long-term obligations.
The City’s governmental funds reported a combined ending fund balance of $256 million, an increase of $6 million or 2.4% over the prior year. Total fund balances include cash and non-cash assets (such as receivables and land assets). A notable change in governmental fund balances in FY 2025 was an increase in the non-major governmental funds of $10.0 million, which was due to gas tax and development taxes received that will be used to fund Capital Projects.
The General Fund balance remained largely unchanged from the prior year, with a modest reduction of $58,000, bringing the ending balance to $57.3 million . General Fund revenues exceeded the final budget by $5.8 million (4.1%), driven primarily by higher collections in sales and property taxes, intergovernmental revenue, and other miscellaneous revenues.
Key Revenue Highlights
1. Property Taxes
o Increased by $2.2 million (4.9%), primarily due to:
New development and rising property values.
A significant adjustment by the County, correcting prior -year uncollected taxes in the assessed rolls.
2. Sales Taxes
o Rose by $731,882 (2.3%) owing to renewed economic activity, particularly in:
Building and construction.
Restaurant sales within the city.
3. Charges for Services
o Increased by $698,252 reflecting:
Growth in planning and building -related fees that fell sl ightly below projections due to staffing shortages impacting review processes. Recovery of prior year Fire emergency response and first responder fees.
Despite revenue challenges in some areas, the City demonstrated fiscal resilience, with key revenue streams outperforming expectations and offsetting shortfalls.
General Fund Expenses including transfers out were under budget by $1.9 million or 1.3% after eliminating capital outlay, mainly due to the City-wide effort to reduce expenditures to offset the ongoing budget deficit the City still is reflecting.
Internal Service Fund Liabilities: As shown in the transmittal letter, the table below shows some of the key liabilities of the internal service funds and their associated levels of funding:
The City’s Worker’s Compensation and General Liability funding needs significantly increased due to the number and size of claims and settlements. The General Liability Fund specifically was impacted by the performance of the City’s insurance pool, which also saw an increased number and size of claims and settlements that resulted in a one -time assessment and increased premiums to address the funding needs. The City’s Compensated Absences liability also continues to grow due to the addition of more staffing , compounded by labor contract cost of living adjustment increases applied to those outstanding balances.
Workers'
Compensation
General
Liability
Other Post-
Employment
Benefits
(OPEB) (1,2)
Compensated
Absences Combined
Cash Reserve (3)
7,253,005$ 1,152,219$ 330,156$ 11,518,984$ 20,254,364$ Actuarial Liability 13,328,000$ 6,783,000$ 162,648$ 23,534,120$ 43,807,768$ % of Liability Funded 54% 17% 203% 49% 46%
Intra-governmental Loan Fund: The Intra-governmental Loan Fund balance decreased by $1.3 million, dropping from $37.4 million to $36.1 million during FY 2024 -2025. This change was driven by the following factors:
Transfers Out:
o $1.6 million transferred to the Capital Projects Fund, to fund the Downtown Streetscape project.
Expenditures:
o $0.7 million was paid to the Housing Fund, funded by loan repayments received from the former redevelopment agency.
Water Funds: The net position of the Water Funds decreased by $1.4 million during FY 2024 - 2025 from $83.9 to $82.5 million. This was mainly due to the water rates that have not been adjusted since 2021 which resulted in an operating deficit of $4.2 million. The City currently can pay the short -term payments and will be increasing water rates starting January 1 , 2026, to restore financial sustainability.
Golf Funds: The Golf Funds show an accumulated net position of $14.6 million, mainly consisting of the net capital assets of the golf courses themselves of $13.4 million. The courses have become more self-sustaining since costs (excluding depreciation) have not exceeded revenues and for the fifth consecutive year, the courses did not require additional support from the City.
Transit: The net position of the Transportation Funds increased by $1 million during FY 2024 - 2025. This was primarily due to the addition of multiple new buses to the fleet with total net fixed assets increasing by $700,000. California’s farebox recovery requirements of 20% have been deferred due to the COVID -19 pandemic with no set date for reinstatement. The total farebox recovery for transit in FY 2024-2025 was 3.48%.
CalPERS and Net Pension Liability : As of June 30, 2025, the City’s combined total Net Pension Liability (NPL) is approximately $249 million, which showed no change from last year due to higher than anticipated earn ings. The NPL is a result of comparing total pension plan assets of $621 million to the total pension liability of $870 million, which reflects that approximately 71.4% of the pension liability has been funded through June 30, 2024, the date of the most r ecent pension actuarial report provided by CalPERS. This compares to a 69.9% funding level in the prior year. The City’s net liability was impacted by a 9.3% investment return for CalPERS in FY 2023- 2024, which exceeded the target of 6.8% rate of return. T his caused the City’s NPL to remain unchanged since the liability and rate of return offset each other. Of the total NPL, $21 million was allocated to the Water fund; $7 million to the North Bay Regional Water Treatment Plan (NBR) Fund; and $3 million to the Transit Fund based upon Full-Time Equivalent Employees (FTEs) allocated to these funds. The remaining NPL relates to the General Fund and other governmental funds ($218 million) and is accounted for in the Government-Wide Statement of Net Position.
Other Reports
Measure P Compliance report: The City’s independent auditors have completed a Transactions and Use Tax Ordinance Compliance and Internal Control Audit Report. The City is found to comply with the Ordinance (Attachment 9)
User Utility Tax Compliance Report: The City’s municipal code requires that Independent auditors perform a Compliance and Internal Control Audit Report. The City is found to comply with the Ordinance (Attachment 10)
Transportation Development Act (TDA) Audit:- The California Code of Regulations, requires each transportation planning agency, to transmit to the State Controller annually and within 12 months of the end of the fiscal year, a report of an audit of its accounts and records by the appropriate c ounty auditor, a certified public accountant, or a public accountant pursuant to Sections 6505 and 26909 of the Government Code. The audit report is attached (Attachment 11).
Audit Findings: For the ACFR, the auditor had no findings in the current year.
Summary: The City received an unmodified opinion and received positive feedback once again from the auditors for the work performed and reports prepared by the City’s Accounting Division.
This is also demonstrated by the fact that the City was awarded th e Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association (GFOA) for the 37 th year for FY 2023 -2024. In addition, the City has also been awarded the Triple Crown, having achieved all three of GFOA’s t op certifications including the Popular Annual Financial Reporting Award and the Distinguished Budget Presentation Award.
FINANCIAL IMPACT
The cost of the audit of the City’s ACFR is included as part of the General Fund budget (Fund 101, Division and Responsibility Code 24001). There is no financial impact resulting from the acceptance of the report.
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
On January 12, the City Council’s Aud it Committee met with the independent auditors and reviewed and received the attachments to this report.
ALTERNATIVE ACTION
The council may choose not to approve the resolution and the acceptance of the ACFR for the FY ending on June 30, 2025. However, it should be noted that any changes to the report at this point would result in additional costs incurred by the City.
COORDINATED WITH
N/A
STAFF CONTACT
John Furtado, Director of Finance
(707) 428-7629
[email protected]
ATTACHMENTS
Attachment 2: Proposed Resolution
Attachment 3: Annual Comprehensive Financial Report (ACFR) Attachment 4: Draft Schedule of Expenditures for Federal Awards Report Attachment 5: Letter from Auditors to City Council on Governance Attachment 6: Auditor’s Report on Internal Control
Attachment 7: Popular Annual Financial Report Fiscal Year 2024-2025 Attachment 8: GANN Appropriations Limit Calculation for 2024-2025 Attachment 9: Measure P Compliance Report for 2024-2025 Attachment 10: User Utility Tax Compliance Report for 2024-2025 Attachment 11: Transportation Development Act (TDA) Audit 2024-2025