Honorable Mayor and City Council
City of Huntington Beach
Huntington Beach, California
We have audited the financial statements of the governmental activities, the business -
type activities, and the aggregate remaining fund information of the
City of Huntington
Beach (the “City”)
as of and for the year ended
June 30, 202
5 ,
and have issued our
report
thereon
dated December
31 , 202
5 . Professional
standards require that we advise
you of the following matters relating to our audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter
,
our responsibility, as described by professional
standards, is to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.
Accordingly, as part of our audit, we considered the internal control of the City
solely for the
purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to you.
Compliance with All Ethics Requirements Regarding Independence
The engagement team, others in our firm,
and
our firm, have complied with all relevant
ethical requirements regarding independence under the American Institute of Certified Public Accountants (“AICPA”) independence standards, contained in the Code of Professional Conduct.
We identified self
-
review threats to independence as a result of non
-
attest services
provided. Those non
-
attest services included
proposing
journal entries detected during the
audit process
.
To mitigate the risk, management has
reviewed and approved journal entries
that were
detected
during the audit process.
Additionally, we utilize a quality control reviewer to perform a second review of journal entries
. We believe these safeguards are sufficient to reduce the independence threats to an acceptable level.
Significant Risks Identified
We have identified the following significant risks:
Implementation of Governmental Accounting Standards Board (GASB) No. 101 –
Compensated Absences due to the complexity of the standard and being the first year of implementation.
Compliance with Federal grant requirements
Qualitative Aspects of the Entity’s Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies.
The
City
changed the accounting policies related to compensated absences by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 101, Compensated Absences, and risk disclosures related to government vulnerabilities due to concentrations and constraints by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 102, Certain Risk Disclosures, in
the fiscal year ended
June 30, 2025.
No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are:
Judgments relating to the collectability of accounts and notes receivable. We evaluated management’s judgments for reasonableness.
Judgments with respect to recording claims payable. We evaluated management’s judgments for reasonableness.
Judgments involving calculation of the pension
obligations
. We evaluated the
actuarial valuation report supporting the calculations.
Judgments involving the calculation of the other post
-
employment benefit
(OPEB)
obligation
. We evaluated the actuarial valuation report supporting the calculations.
We evaluated the key factors and assumptions used to develop the estimates and determined that it is reasonable in relation to the financial statements taken as a whole
and
in relation to the applicable opinion units.
Financial Statement Disclosures
Certain financial statement disclosures
involve significant judgment and
are particularly
sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the
City’s
financial statements were:
The disclosure of
p
ension
s
in note 6 to the financial statements.
The disclosure of OPEB in note
8 to the financial statements.
The financial statement disclosures are neutral, consistent, and clear.
Significant Difficulties Encountered during the Audit
We encountered no difficulties in dealing with management relating to the performance of the audit.
Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards also require us to accumulate all
known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management.
Further,
professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion
.
There was one uncorrected misstatement
to rest
ate beg
inning fund b
alance and
correct rev
e
nues for monies received related
to the prior fiscal year
.
The
effect in the
current and prio
r
pe
r
iod, as determined by manage
ment, is immaterial
to the financial
statements as a whole.
Uncorrected
misstatements or matters underlying those uncorrected
misstatements could potentially cause future
-
period financial statements to be materially
misstated, even though the uncorrected misstatements are immaterial to the financial statements currently under audit.
In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures.
There was one material misstatement to correct
a
receivable and
associated
unavailable revenue in the Grants Special Revenue fund.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City’
s financial statements or
the auditor’s report. No such disagreements arose during the course of the audit.
Representations Requested from Management
We have requested certain written representations from management, which are included in the attached
letter dated
December
31 , 202
5 .
Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the City
, we generally discuss a
variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the
City
’s auditors.
Other Information Included in Annual Comprehensive Financial Report
Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the
City
’s annual reports, does not extend
beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have read the information and considered whether such information, or the manner of its presentation, was materially inconsistent with its presentation in the financial statements.
Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements.
This report is intended solely for the information and use of the City Council
and
management of the
City
and is not intended to be and should not be used by anyone other than these specified parties.
Irvine, California
December
31 , 202
5 Independent Auditor’s Report on
Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of the Air Quality
Special Revenue Fund
Performed
in Accordance
w
ith
Government Auditing Standards
City Council
City of Huntington Beach
Huntington Beach, 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
Air Quality
Special Revenue
Fund of the City of
Huntington Beach
, California
, as of and for the
year ended
June 30, 20
2 5
, and the related notes to the financial
statements, which collectively comprise
the Air Quality
Special Revenue
Fund of the City of
Huntington Beach
’s basic financial
statements, and have issued our report thereon
dated
December
31 , 202
5 .
Report on
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Air Quality
Special Revenue
Fund
's internal control over 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 Air Quality
Special Revenue
Fund's
internal control.
Accordingly, we do not express an opinion on t
he effectiveness of
the
Air Quality
Special
Revenue
Fund'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 deficienc
y
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 th ese 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 have
not been identified.
R
eport on
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Air Quality
Special Revenue
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 applicable provisions of Assembly Bill 2766 (AB2766) Chapter 1705 (Health and Safety Code Sections 44220 through 44247),
noncompliance with which could have a direct
and material effect on the financial statement
s
. 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 t
o be reported under
Government Auditing Standards
.
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 entity’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 entity’s
internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
December
31 , 202
5 INDEPENDENT ACCOUNTANT
’
S REPORT
The Honorable Mayor and City Council
City of
Huntington Beach
, California
We have
performed
the procedures enumerated below
on the
City of
Huntington Beach
,
California
(City)
appropriations limit worksheets
for compliance with
the requirements of
Section 1.5 of Article XIIIB of the California Constitution
for
the year ended June 30,
20 2
5 .
The City is responsible for compliance with
Section 1.5 of Article XIIIB of the California
Constitution
.
The
City
has agreed to and acknowledged that th
ese procedures
are appropriate to meet
the intended purpose of evaluating compliance with
the requirements of
Section 1.5 of
Article XIIIB of the California Constitution and the League of California Cities publication entitled
Article XIIIB
Appropriations Limitation Uniform Guidelines
for the ye
ar ended June
30, 20
2 5
. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.
The procedures
and the associated findings are
as follows:
1. We obtained the worksheets referred to above and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote.
Results: No exceptions were noted as a result of our procedures.
2. We recalculated the mathematical computations reflected in the City ’s
worksheets.
Results: No exceptions were noted as a result of our procedures.
3. We compared the current year information used to determine the current year limit and agreed
it
to worksheets prepared by the City and to information
provided by the State Department of Finance.
Results: No exceptions were noted as a result of our procedures.
4. We compared the amount of the prior year appropriations limit presented in the worksheets to the amount adopted by the City Council for the prior year.
Results: No exceptions were noted as a result of our procedures.
The Honorable Mayor and City Council
City of
Huntington Beach
, California
Page Two
We were engaged by the City to perform this
agreed
-
upon procedures
engagement and
conducted our engagement i
n accordance with standards established by the American Institute of Certified Public Accountants. W
e were not engaged to and did
not
conduct
an
examination or review
, the objective of which would be the expression of an opinion
or
conclusion, respectively
on the worksheets referred to above. Accordingly, we do not express such an opinion
or conclusion
. Had we performed additional
procedures
,
other
matters might have come to our attention that would have been reported to you.
No
procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by the League publication entitled
Article XIIIB
Appropriations
Limitation Uniform Guidelines
.
We are required to be independent of the
City
and to meet our other ethical responsibilities,
in accordance with the relevant ethical requirements related to our agreed -
upon procedures
engagement.
This report is intended solely for the information and use of the Management of the
City of
Huntington Beach
, California and is not intended to be, and should not be, used by anyone other than the specified part
y
.
Irvine, California
December
31 ,
202
5