CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
FOR THE YEAR ENDED JUNE 30, 2025 AUDIT REPORT
CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
Audit Report
For the Year Ended June 30, 2025
CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
Audit Report
For the Year Ended June 30, 2025
Table of Contents
Page
Number
Independent Auditors’ Report ..................................................................................................................................... 1 Financial Statements
Balance Sheet/Statement of Net Position .................................................................................................................. 4 Statements of Revenues, Expenditures and
Changes in Fund Balance/ Statement of Activities ...........................................................................................5 Notes to Financial Statements ............................................................................................................................. 6 Required Supplementary Information
Budgetary Comparis on Schedule ........................................................................................................................ ......8 Independent Auditors’ Report on Compliance with Applicable Requirements and on Internal Control Over Compliance .......................................................................................... 9 Report on 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 .......................................................... 11
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INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the Air Quality Management District special revenue fund (the “Fund”) of the City of Fullerton, California (the “City”), as of and for the year ended June 30, 2025, and the related notes to the financial statements, as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund of the City, as of June 30, 2025, and the changes in its financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. 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 City 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 opinions.
Emphasis of Matter
As discussed in Note 1, the financial statements present only the Fund and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2025, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with 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 accounting principles generally accepted in the United States of America, and 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.
To the Hon
orable Mayor and Members of the City Council
City of Fullerton, California
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 opinions.
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 generally accepted auditing standards and Government Auditing Standards 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 generally accepted auditing standards and Government Auditing Standards, 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 d
esign 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 of internal control relevant to the audit in order to design audit procedures that are approp
riate in the circumstances, but not for the purpose of expressing an opinion on the effectivene ss of the City’
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.
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.
Required Supplementary Information
Acco
unting principles generally accepted in the United States of America require that the budgetary comparison information, as listed on the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Management has omitted management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. 2 To the Hon
orable Mayor and Members of the City Council
City of Fullerton, California
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 23, 2025, on our consideration of the City’s internal control over the Fund’s financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over the Fund’s financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over the Fund’s financial reporting and compliance.
Irvine, California
De
cember 23, 2025
3 CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
Balance Sheet / Statement of Net Position
June 30, 2025
Reclassification
Governmental and Statement
Funds Eliminations of Net Position
Assets:
Cash 790,554$ - $ 790,554$
Accrued interest 3,387 - 3,387
Capital assets, net of depreciation - 38,548 38,548
Total Assets 793,941$ 38,548$ 832,489$ Fund Balance/Net Position:
Invested in Capital Assets -$ 38,548$ 38,548$ Restricted for AQMD activities 793,941 - 793,941 Total Fund Balance/Net Position 793,941$ 38,548$ 832,489$ 4 CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
Statement of Revenues, Expenditures and
Changes in Fund Balance / Statement of Activities
For the Year Ended June 30, 2025
Governmental Statement
Funds Adjustments of Activities
Revenues:
Intergovernmental 186,252$ - $ 186,252$
Use of money and property 42,172 - 42,172
Total Revenues 228,424 - 228,424
Expenditures:
Community development 4,316 4,283 8,599
Contributions to City of Fullerton 472,958 - 472,958 Total Expenditures 477,274 4,283 481,557
Net Change in Fund Balance/Net Position (248,850) (4,283) (253,133) Fund Balance/Net Position - Beginning 1,042,791 42,831 1,085,622 Fund Balance/Net Position - Ending 793,941$ 38,548$ 832,489$ 5 CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
Notes to Financial Statements
For the Year Ended June 30, 2025
NOTE
1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis
of Accounting
T
he accompanying financial statements for the Air Quality Improvement Trust Fund of the City of Fullerton, California (the “City”) have been prepared on the modified accrual basis of accounting. Generally, revenues are recognized when they become "susceptible to accrual", that is, measurable and available to finance expenditures of the current period. Revenues susceptible to accrual include motor vehicle fees and interest earnings on investments received within 60 days of year end. Expenditures are recognized when the fund liability is incurred, if measurable.
B. Me
asurement Focus
T
he Air Quality Improvement Trust Fund is accounted for on a spending or "financial flow" measurement focus. This means that generally only current assets and current liabilities are included on the balance sheet/statement of net position. The statement of revenues, ex penditures and changes in fund balance/statement of activities for the Air Quality Improvement Trust Fund generally presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.
C.
Air Quality Improvement Trust Fund
Californi
a Assembly Bill 2766 (SHER) authorizes air pollution control districts to levy fees on motor vehicles. Fees are to be used to reduce air pollution. Under this program, the Department of Motor Vehicles collects the fees and subvenes the amounts to the South Coast Air Quality Management District for vehicles registered in the South Coast District. Forty cents of every dollar subvened to SCAQMD is allocated to the cities and counties in the South Coast Air District proportionately based upon population. The amounts attributable to the City are maintained in a special revenue fund administered by the City.
The accompanying financial statements present only the Air Quality Improvement Trust Fund of the City and do not include any other funds of the City. The City has issued its Basic Financial Statements under a separate cover and are available at City Hall.
D. Fu
nd Balance
F
und balance is reported by the following fund balance classifications:
Nonspendable include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.
Res
tricted include amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors, or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation.
Committed include amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority, City Council. The formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is resolution or ordinance.
Assigned include amounts that are constrained by the government’s intent to be used for specific purposes but are neither restricted nor committed. The Director of Administrative Services is authorized to assign amounts to a specific purpose, which was established by the governing body in resolution. 6 CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
Notes to Financial Statements
For the Year Ended June 30, 2025
NOTE
1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Unassigned include the residual amounts that have not been restricted, committed, or assigned to specific purposes.
Th
e entire fund balance/net position of the Air Quality Improvement Trust Fund has been classified as restricted fund balance since the external resource provider, SCAQMD, requires the motor vehicle fees to be used only to reduce air pollution.
NOTE 2: STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Violations of Legal or Contractual Provisio
ns
E
xpenditures exceeded appropriations for contributions to the City of Fullerton in the amount of $472,958.
NOTE 3: CASH AND INVESTMENTS
The Air Quality Improvement Trust Fund cash balance is pooled with the City’s cash and investment in order to generate optimum interest income. Each fund's share of the pooled cash account is separately accounted for, and investment income is allocated to all participating funds based on the relationship of their average daily cash balances to the total of the pooled cash and investments. Information regarding the authorized types of deposits and investments, the type of risks (i.e. credit, interest rate, custodial, etc.) and other disclosures associated with the City's pooled cash and investments is included in the City's basic financial statements.
NOTE 4: CAPITAL ASSETS
Capital assets activity for the year ended June 30, 2025, was as follows:
Beginning Ending
Balanc
e Increase Decrease Balance
Capital assets being depreciated:
Improvements other than buildings 152,287$ -$ -$
152,287$
Total Capital Assets
Being Depreciated 152,287 - - 152,287
Less accumulated depreciation for:
Improvements other than buildings 109,456 4,283 - 113,739 Total Accumulated
Depreciation 109,456 4,283 - 113,739
Governmental Activities
Capital Assets, Net 42,831$ (4,283)$ - $ 38,548$ 7 CITY OF FULLERTON, CALIFORNIA
AIR QUALITY IMPROVEMENT TRUST FUND
Budgetary Comparison Schedule
For the Year Ended June 30, 2025
Variance with
Final Budget
Budget Amounts Actual Positive
Original Final Amounts (Negative)
Revenues:
Intergovernmental 181,000$ 181,000 $ 186,252 $ 5,252$ Use of money and property 15,600 15,600 42,172 26,572
Total Revenues 196,600 196,600 228,424 31,824 Expenditures:
Community development 21,000 21,000 4,316 16,684
Contributions to City of Fullerton - (265,000) 472,958 (737,958) Capital outlay 265,000 265,000 - 265,000
Total Expenditures 286,000 21,000 477,274 (456,274) Net Change in Fund Balance (89,400)$ (89,400)$ (248,850) (159,450)$ Fund Balance - Beginning 1,042,791
Fund Balance - Ending 793,941$
8
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INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE
AND ON INTERNAL CONTROL OVER COMPLIANCE
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
Report on Compliance
Opinion
We have audited the City of Fullerton, California (the “City”)’s compliance with the types of compliance requirements identified as subject to audit in California Assembly Bill 2766, Chapter 1705 (44220 through 44247) (“AB 2766”) and the AB 2766 Subvention Fund Program Resource Guide (the “Guide”) that could have a direct and material effect on the City’s AB 2766 Subvention Fund Program (the “Program”) for the year ended June 30, 2025.
In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the Program for the year ended June 30, 2025.
Basis for Opinion
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of AB 2766 and the Guide. Our responsibilities under those standards, AB 2766, and the Guide are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with 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 opinion on compliance for the Program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Program.
Auditors’ Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. 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 generally accepted auditing standards, Government Auditing Standards, AB 2766, and the Guide will always detect material noncompliance when it exists.
The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of the Program as a whole.
To the Hon
orable Mayor and Members of the City Council
City of Fullerton, California
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, AB 2766, and the Guide, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. •
Identify and assess the risks of material noncompliance, 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 City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit pro
cedures that are appropriate in the circumstances and to test and repo rt on internal control over compli
ance in accordance with AB 2766 and the Guide, but not for the purpose of expressing an opinio n on the effectiven
ess of the City’s internal control over compliance. Accordingly, no su ch opinion is exp
ressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Report on Internal Control over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of the Program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of the Program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of the Program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the Auditors’ Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
Purpose of this Report
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of AB 2766 and the Guide.
Accordingly, this report is not suitable for any other purpose.
Irvine, California
December 23, 2025
10 LSLCPAS.COM
INDEPENDENT AUDITORS’ REPORT ON 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
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Air Quality Management District special revenue fund (the :”Fund”) of the City of Fullerton, California (the “City”), as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Fund’s basic financial statements, and have issued our report thereon dated December 23, 2025.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over the Fund’s financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Fund’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, including the requirements of California Assembly Bill 2766, Chapter 1705 (44220 through 44247), noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
To the Honorable Mayor and Members of the City Council
City of Fullerton, California
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
December 23, 2025
12