CITY OF FREMONT, CALIFORNIA
Report to Those Charged With Governance
For the Year Ended June 30, 2025
w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
1 December 19, 2025
To the Honorable Mayor and Members
of the City Council of the City of Fremont
Fremont, California
We are pleased to present this report related to our audit of the governmental activities, each major fund, and the aggregate remaining fund information of the C ity of Fremont (City), as of and for the year ended June 30, 2025. This report summarizes certain ma tters required by professional standards to be communicated to you in your oversight responsibility for the City’s financial reporting process.
In addition to the City's basic financial statements, we audit and separately report on the following financial statements or schedules as of and for the year ende d June 30, 2025. These components are included in the City’s basic financial statements:
Alameda County Transportation Commission – Measure B Funds Alameda County Transportation Commission – Measure BB Funds Alameda County Transportation Commission – Measure F Funds Pedestrian/Bicycle Facilities Grant funded by Transportation Development Act Funds This report is intended solely for the information and use of the City Council and management, and is not intended to be, and should not be, used by anyone other than these specified parties. It will be our pleasure to respond to any questions you have about this report. We appreciate the opportunity to continue to be of service to the City.
Walnut Creek, California
2 TABLE OF CONTENTS
Required Communications ....................................................................................................... 3 Exhibit:
Exhibit A—Recent Accounting Pronouncements ............................................................. 8
3 REQUIRED COMMUNICATIONS
Auditing standards generally accepted in th e United States of America (AU-C 260, The Auditor’s Communication With Those Charged With Governance ) require the auditor to promote effective two-way communication between the auditor and those charged with governance. Consistent with this requirement, the following summarizes our responsibilities rega rding the financial statement audits as well as observations arising from our audits that are significan t and relevant to your responsibility to oversee the financial reporting process.
Our Responsibilities With Regard to the Financial Statement Audit Our responsibilities under auditing standards genera lly accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States have been described to you in our arrangement letter dated June 27, 2025. Our audit of the City’s financial statements does not relieve management or those charged with governance of their responsibilities, which are also described in that letter.
Overview of the Planned Scope and Timing of the Financial Statement Audits We conducted our audits c onsistent with the planned scope and timing in our arrangement letter dated June 27, 2025.
Accounting Policies and Practices
Preferability of Accounting Policies and Practices
Under accounting principles generally accepted in the United States of America, in certain circumstances, management may select among altern ative accounting practices. In our view, in such circumstances, management has selected the preferable accounting practice.
Adoption of, or Change in, Accounting Policies
Management has the ultimate responsibility for the ap propriateness of the accounting policies used by the City. A summary of the significant policies adopted by the City is included in note 1 to the basic financial statements. As described in note 1 to the basic fina ncial statements, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences, and Statement No. 102, Certain Risk Disclosures. The implementation of Statement No. 101 resulted in modifications to the City’s policies for estimating compensated absences, but did not have a significant impact on financial reporting for the year ended June 30, 2025. The implementa tion of GASB 102 did not have a significant impact on the City’s financial statements for the fiscal year ended June 30, 2025.
Significant Accounting Policies
We did not identify any significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
Significant Unusual Transactions
We did not identify any significant unusual transactions.
4 Management’s Judgments and Accounting Estimates
Accounting estimates are an integral part of the pr eparation of financial statements and are based upon management’s current judgment. The process u sed by management encompasses their knowledge and experience about past and current events, and certain assumptions about future events. You may wish to monitor throughout the year the process used to determine and record these accounting estimates.
The following is summary information about the process used by manageme nt in formulating particularly sensitive accounting estimates and about our conclusions regarding the reasonableness of those estimates:
Significant Accounting Estimates
Measurement of
investments at fair value
The City’s investments are account ed for in accordance with the provisions of GASB Statement No. 72, Fair Value Measurement and Application, and accordingly, its fair value measurements are categorized within the fair value hierarchy established by the standard.
The following levels indicate the hi erarchy of inputs used to measure fair value and the primary valuation methodologies used for financial instruments measured at fair value on a recurring basis:
o Level 1 – Investments whose valu es are based on quoted prices (unadjusted) for identical assets in active markets that a government can access at the measurement date.
o Level 2 – Investments whose values are based on inputs – other than quoted prices including prices included within level 1 – that are observable for an asset, either directly or indirectly. o Level 3 – Investments whose values are based on unobservable inputs for an asset and may require a degree of professional judgment.
All the City’s investments are measured using level 2 inputs, except for investments in U.S Treasuries which are measured using level 1 inputs, and California Local Agency Investment Fund, money market mutual funds, and equity mutual funds, which are not subject to fair value hierarchy.
MGO compared investment values from quoted market information and using pricing applications and m odels obtained from custodian bank, fiscal agents or other sources and determined that they were reasonable.
Depreciation and
amortization of capital
assets, including
depreciation/amortization
methods and useful lives
assigned to
depreciable/amortizable
property
Useful lives, or in the case of inta ngible right-to-use SBITA assets, the shorter of useful lives or the subscription term, for
depreciable/amortizable capital assets were determined by management based on the nature of the capital asset. Depreciation/amortization was calculated based on the straight-line method.
MGO assessed the reasonableness of the useful lives based on the nature of the capital assets and performed substantive analytical procedures on depreciation/amortization expense a nd determined the estimates were reasonable.
5 Significant Accounting Estimates
Estimated allowance for
losses on notes and loans
receivable
The allowance for losses on notes an d loans receivable was based on management’s estimate regarding the likelihood of collectability.
MGO assessed the reasonableness of the allowances based on the nature of the notes and loans receivable and performed substantive analytical procedures on the balances and determined the estimates were reasonable.
Accrual of compensated
absences
The accruals of compensated absence s are based on accrued eligible hours of vacation and other compensat ed leave for eligible employees and the employees’ pay rates at year-end and includes the City’s share of social security and Medicare payments made on behalf of employees.
The City estimates the amount of leave that is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means based on historical information about the use, payment, or forfeiture of compensated absences.
MGO assessed the reasonableness of the accrual based on the nature of the compensated absences and perfo rmed substantive analytical procedures on the balances and determined the accrual was reasonable.
Net pension and Other Post-
Employment Benefits
(OPEB) liabilities,
contributions, expenses, and
other related balances
The pension balances are based on act uarial valuations performed by the California Public Employees’ Retirement System’s independent actuaries. The OPEB balances are based on actuarial valuations performed by the City’s OPEB actuary. The City apportions the resulting total balances across its departments on the basis of contributions.
MGO agreed the calculations to the actuarial valuations developed through CalPERS and Foster & Foster and assessed the reasonableness of the actuarial methodologies and assumptions and allocations to various City funds.
Claims loss reserve The City is exposed to a variety of risks of loss due to general liability, workers’ compensation and other cl aims, and records an estimate of these losses based on actuarial st udies performed by third-party actuaries. These studies are prepared based on the City’s prior claims history, which is used as a basis for extrapolating losses for known and incurred but not reported claims. Actual loss experience may vary from these estimates.
MGO reviewed the actuarial valuations and the related assumptions used in the City’s calculations for these liabilities, and determined them to be reasonable.
6 Significant Accounting Estimates
Pollution remediation
obligations
The accruals of pollution remediation obligations are based on analyses performed by the City’s management.
MGO assessed the reasonableness of the accrual based on the nature of the remediation projects and performed substantive analytical procedures on the balances and determined the accruals were reasonable.
Discount rate used for the
calculation of lease liability,
lease receivable, and SBITA
liability
The discount rates for the calculation of the lease receivable are based on the City’s bank prime loan rate in effect on the lease inception date as shown in the Federal Reserve Board Selected Interest Rates – H.15 report.
The discount rates for the calculati on of the SBITA liability are based on the money market update (MMD) tax-exempt General Obligation rates at SBITA inception date.
MGO evaluated the City’s methodology and assumptions used to develop the estimates and verified on a test-basis that the discount rates had been appropriately applied in the City’s calculation of the lease and SBITA balances.
Audit Adjustments and Uncorrected Misstatements
There were no uncorrected or corrected misstatements that were material to the financial statements.
Departure From the Auditor’s Standard Report
There were no departures from the Auditor’s Standard Report.
Other Information Included in Annual Reports
Our responsibility for other information included in annua l reports is to read the information and consider whether its content or the manner of its presentation is materially inconsistent with the financial information covered by our auditor’s report, whet her it contains a material misstatement of fact or whether the other information is otherwise misleading. We read the Introductory Section and Statistical Section of the City’s Annual Comprehensive Financial Report (ACFR) for the year ended June 30, 2025 and reviewed the content for inconsistencies with the audited financial statements in the Financial Section of the ACFR. We did not identify material inconsistencies with the audited financial statements.
Observations About the Audit Process
Disagreements With Management
We encountered no disagreements with manageme nt over the application of significant accounting principles, the basis for management’s judgments on any significant matters, the scope of the audit or significant disclosures to be included in the City’s financial statements.
7 Consultations With Other Accountants
We are not aware of any consultations management had with other accountants about accounting or auditing matters.
Significant Issues Discussed With Management
No significant issues arising from the audit were di scussed or were the subject of correspondence with management.
Significant Difficulties Encountered in Performing the Audit We did not encounter any significant difficulties in dealing with management during the audit.
Shared Responsibilities for Independence
Independence is a joint responsibility and is managed most effectively when management, audit committees (or their equivalents), and audit firms work together in considering compliance with American Institute of Certified Public Accountants (AICPA) and Government Accountability Office (GAO) independence rules.
For MGO to fulfill its professional responsibility to maintain and monitor independence, management, the Board of Commissioners, and MGO each play an important role.
Our Responsibilities
1. AICPA and GAO rules require independence both of mind and in appearance when providing audit and other attestation services. MGO is to ensure that the AICPA and GAO’s General Requirements for performing non-attest services are adhered to and included in all letters of engagement.
2. Maintain a system of quality management over compliance with independence rules and firm policies.
The City’s Responsibilities
1. Timely inform MGO, before the effective date of transactions or other business changes, of the following:
a. New affiliates, directors, or officers.
b. Changes in the organizational structure or th e reporting entity impacting affiliates such as subsidiaries, partnerships, related entities, i nvestments, joint ventures, component units, and jointly governed organizations.
2. Provide necessary affiliate information such as new or updated structure charts, as well as financial information required to perform materiality calculations needed for making affiliate determinations.
3. Understand and conclude on the permissibility, prior to the City and its affiliates, officers, directors, or persons in a decision-making capacity, engaging in business relationships with MGO.
4. Not entering into arrangements of nonaudit servi ces resulting in MGO being involved in making management decisions on behalf of the City.
5. Not entering into relationships resulting in cl ose family members of MGO covered persons, temporarily or permanently acting as an officer, director, or person in an accounting, financial reporting or compliance oversight role at the City.
8 EXHIBIT A
Recent Accounting Pronouncements
9 RECENT ACCOUNTING PRONOUNCEMENTS
The following accounting pronouncements have been issued as of the date of this communication but are not yet effective and may affect the future financial reporting by the City.
Pronouncement Summary
GASB Statement No. 103,
Financial Reporting Model
Improvements
The objective of this statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This Statement also addresses certain application issues.
Statement No. 103 is effective for the City’s fiscal year ending June 30, 2026.
GASB Statement No. 104,
Disclosure of Certain
Capital Assets
The objective of this statement is to establish requirements for certain types of capital assets to be discl osed separately for purposes of note disclosures, and to establish requirements for capital assets held for sale and note disclosures for those capital assets.
Statement No. 104 is effective for the City’s fiscal year ending June 30, 2026.
GASB Statement No. 105,
Subsequent Events
The primary objective of this statem ent is to improve the financial reporting requirements for subseque nt events, thereby enhancing consistency in their application and better meeting the information needs of financial statement users.
Statement No. 105 is effective for the City’s fiscal year ending June 30, 2027.