COMMITTEE RECOMMENDATION:
This project was presented to Audit Committee on April 23, 2025 and was recommended to forward to Council for review and comment.
FISCAL IMPACT:
None.
RECOMMENDED COUNCIL ACTION:
Motion accepting the FY25-26 Internal Audit Work Plan.
Approved by:
Colleen Rozillis, City Auditor
Attachments:
1. FY25-26 Internal Audit Work Plan
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CITY OF MODESTO
I. PROJECT UNDERSTANDING
The City of Modesto engaged Moss Adams LLP to provide internal and performance audit consulting services. Based on the current status of the City’s internal audit function, we propose three performance projects and two internal controls projects for FY 25-26, as well as establishing a validation process, and ongoing program management. The proposed scopes, timing, and budgets are described below.
II. PROPOSED PROJECTS
Enterprise Risk Assessment
Scope: Conduct a point in time assessment of risk across City operations. Identify, analyze, and measure risks by the level of inherent vulnerability, the level of preparedness to mitigate them, and the impact such negative events could have on the City should they occur. ● Review documentation, including policies and procedures, organization charts, asset inventories, internal control listings, strategic business and financial plans, capital projects, contracts and litigation, and others
● Conduct interviews with leadership team, selected City staff, and City Council ● Administer a confidential, online survey to gain inputs from all staff, with internal logic designed to capture information based on their role
● Assess risks according to the COSO enterprise risk framework ● Compile results of assessment, recommendations for mitigating actions, and a description of the risk condition, including likelihood, trajectory, and preparedness ● Present results to leadership team and City Council
Timing: July-October
Fees: $45,000
IT Policy Review
Scope: Review IT Department policies, identify gaps and opportunities for improvement, and support the Department during the policy update process.
● Review current policies and provide a memo detailing gaps and opportunities for improvement ● Review policy drafts for alignment with best practices ● Provide policy examples upon request
Timing: September-February
Fees: $25,000
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City of Modesto Internal Audit Work Plan | 2
II. PROPOSED PROJECTS
Cash Handling Internal Controls Testing
Scope: Test internal controls related to cash handling activities across the City. ● Identify cash handling controls
● Review policies and procedures and relevant documentation in support of select key controls ● Perform control walkthroughs to observe the design of key controls and understand workflow processes ● Conduct transaction testing for adherence to cash handling policies, procedures, and controls ● Based on results of testing, recommend opportunities for improvement to controls and processes Timing: September-December
Fees: $30,000
Homelessness Response Performance Audit
Scope: Assess the economy, efficiency, and effectiveness of the City’s response to homelessness in the community. Compare City practices to industry best practices. ● Compile and analyze the regional homelessness response ecosystem and the City’s current role ● Assess response compared to best practices across City departments, including Police, Fire, PRN, and Public Works
● Assess grantmaking and contracting for efficiency and alignment with best practices ● Benchmark spending and activities to similarly-situated cities and leading practices Timing: October-February
Fees: $40,000
Fee Benchmarking and Cost Recovery Audit
Scope: Review the City’s fee schedule, compare fees to peers, and assess the extent to which fees cover costs.
● Benchmark current fees against peer cities
● Assess cost recovery of current fees
● Compare fee setting and cost recovery methodologies with industry best practice ● Recommend updates to the City’s cost recovery framework and fee schedule in alignment with the City’s strategic goals
Timing: January-May
Fees: $40,000
Parks, Recreation and Neighborhoods Department Performance Audit Scope: Assess economy, efficiency, and effectiveness of departmental operations and compare to industry best practices.
● Conduct interviews and walkthroughs with staff
● Review staffing levels, structure, and capacity
● Review documentation including policies and procedures, workflows, and customer/resident feedback ● Assess the alignment of City practices with best practices and benchmark relevant information from peer cities
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City of Modesto Internal Audit Work Plan | 3
II. PROPOSED PROJECTS
● Identify opportunities for improvement in service delivery, organization, operations, process efficiency, and customer service
Timing: February-June
Fees: $35,000
Ongoing Recommendation Validation
Scope: Track, report on, and validate implementation status of Internal Audit recommendations ● Inventory ongoing internal and external audit recommendations ● Validate implementation of internal and external audit recommendations ● Present quarterly results to Audit Committee
Timing: Ongoing
Fees: $10,000
Ongoing Program Management
Scope: City Auditor activities including overseeing the internal audit program and managing the fraud, waste, and abuse hotline.
● Conduct bi-weekly status calls with the City’s project manager ● Manage the program and perform quality assurance
● Manage the City’s FWA hotline
● Support the Audit Committee and City Manager’s Office by conducting research, surveys, analysis, and other on-call consulting
● Present project plans and results to the Audit Committee and City Council Timing: Ongoing
Fees: $25,000
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CITY OF MODESTO
COUNCIL AGENDA REPORT
DATE OF MEETING:
May 6, 2025
Date: April 28, 2025
TO: Mayor and City Council
THROUGH: Joseph P. Lopez, City Manager
FROM: Steve Christensen, Office of Performance Management and Budget Director SUBJECT: Fiscal Year 2025-26 Mayor’s Final Budget Modifications Message CONTACT: Steve Christensen, Office of Performance Management and Budget Director, [email protected], 209-577-5390
DESCRIPTION:
Consider receiving Mayor Sue Zwahlen’s Fiscal Year 2025-26 Final Budget Modifications Message per Charter Section 1303 for the Fiscal Year 2025-26 budget year. (Funding Source:
All City Funds)
STRATEGIC PLAN ELEMENT:
This item supports the City of Modesto 2020-2025 Strategic Plan focus on Governance and Service Delivery under Goal H: Achieve Financial Sustainability.
BACKGROUND:
According to the City of Modesto’s Charter, there are specific steps to adopt a Final Budget.
Initial steps include the compilation and review of the City Manager’s Draft Budget. The Draft Budget is then submitted to the City Council’s Finance Committee for review at the Committee’s public budget workshops. These workshops occurred on April 14th, April 15th, and April 16th, 2025. The City Manager’s Draft Budget totals approximately $626.7 million in operating expenditures, of which $199.8 million is in the General Fund and $54.9 million is in the Measure H Sales Tax Fund. The public received notice of these workshops through the City’s website, social media, and agenda postings from the City Clerk’s Office.
In accordance with Section 1303 of the City of Modesto Charter, the Mayor is to prepare and deliver final modifications, if any, to the Draft Budget at least forty-five (45) days prior to the new fiscal year.
DISCUSSION:
Per the City Charter, Section 1303, the Mayor is required to provide the City Council with her final budget modifications, if any, to the fiscal year budget that is being proposed to be adopted.
For the Fiscal Year 2025-26 Operating, Capital Improvement and Multi-Year Budget, Mayor #23..
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City Council, May 6, 2025
Fiscal Year 2025-26 Mayor’s Final Budget Modifications Message
Zwahlen is not proposing any budget modifications to the budget that was presented to the Finance Committee during the budget workshops that took place during the week of April 14, 2025. The Mayor has prepared her Final Budget Modification Message letter, attached to this agenda report, and has provided it to the City Council via email which satisfies City Charter requirement.
FISCAL IMPACT:
As the Mayor has made no additional budget modifications per her Fiscal Year 2025-26 Mayor’s Final Budget Modifications Message, there is no fiscal impact per the acceptance of the message.
COMMITTEE RECOMMENDATION:
The Finance Committee considered the Draft Budget at its budget hearings, which completes the Committee review step in the budget adoption process. Modesto City Charter Section 1303 requires that “at least 45 days prior to the new fiscal year, the Mayor shall prepare and deliver to the Council the Mayor’s Final Budget Modifications on the draft budget.” This item satisfies that requirement.
RECOMMENDED COUNCIL ACTION:
Staff Recommendations:
Motion receiving Mayor Sue Zwahlen’s Fiscal Year 2025-26 Final Budget Modifications Message per Charter Section 1303 for the Fiscal Year 2025-26 budget year.
Approved by:
Steve Christensen, Office of Performance
Management and Budget Director
Joseph P. Lopez, City Manager
Attachments:
1. Fiscal Year 2025-26 Mayor’s Final Budget Modifications Message #23..
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Sue Zwahlen, Mayor
City of Modesto
1010 Tenth Street, Suite 6100
Modesto, CA 95354
[email protected]
P.O. Box 642, Modesto, CA 95353 www.modestogov.com Phone: (209) 571-5169 • Fax: (209) 571-5128 MAYOR’S FINAL BUDGET MODIFICATIONS MESSAGE - FY 2025-2026 MAY 6, 2025
To the Residents of Modesto and the Members of the City Council:
It is with great honor and respect that I present for your consideration the Proposed FY 2025-26 Operating, Capital Improvement and Multi-Year Project Budget for the City of Modesto.
This budget reflects a coordinated effort between staff, our City Manager, and the City Council, and is guided by the policies and priorities set forth in the new Two-Year Strategic Plan.
Through earnest and meticulous planning, the proposed budget for FY 2025-26, reflects our commitment to fiscal responsibility with the uncertainty of future economic times while also planning for continued improvement of services for the residents of Modesto.
The approved funding in the Fiscal Year 2024-25 Measure H Spending Plan continues to make lasting improvements across our City. Park improvements continue to be made. Public Safety is being supported with additional positions and resources added to the Police Department. The Fire Department continues to improve their ability to save lives with advances in their Emergency Medical Services (EMS) with additional funding for LifePaks and Lucas Devices, as well as replacement of overextended fire apparatus. Forestry continues to reduce the City’s pruning cycle, work on the removal of tree stumps as well as work on the reforestation of the many trees that make Modesto a “City of Trees”. Progress is being made in the City’s homelessness efforts with critical funding for the Downtown Streets Team and multiple housing opportunities. All these exceptional improvements would not be possible without the funding approved by you, the residents of Modesto through Measure H.
With the continued voter approved Measure H funding, the Fiscal Year 2025-26 Measure H Spending Plan looks to continue the efforts listed above and provide additional improvements to City services. The Measure H Spending Plan that is proposed with this Operating Budget, includes $13.7 million in spending on new programs as well as $25.7 million on spending for previously approved Measure H programs. New funding in the spending plan will go towards the following:
• Parks Deferred Maintenance - $2.1 M • MLK Park Renovation Project - $7.9 M • Public Safety - $3.4 M • Rentable Community Stage - $260 K • Forestry Equipment - $60 K
The items listed above will add to the already expansive list of improvements that the City of Modesto has been able to achieve, as we strive to enhance the quality of life for all residents. #23..
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Sue Zwahlen, Mayor
City of Modesto
1010 Tenth Street, Suite 6100
Modesto, CA 95354
[email protected]
P.O. Box 642, Modesto, CA 95353 www.modestogov.com Phone: (209) 571-5169 • Fax: (209) 571-5128 The Proposed Budget continues to address needed infrastructure improvements around the City.
Street work will continue for the current backlog of sidewalk repairs, and we will see work continue towards the completion of the César E. Chávez Park renovation towards the end of 2025-26. The park projects represent a significant investment into providing recreational opportunities for our residents to enjoy year-round.
While Measure H continues to provide service advancements and infrastructure improvements for the public, the City’s General Fund continues to be impacted by the external pressures of the economy as some major revenues continue to decline while many expenditures are beginning to see the impacts of prolonged inflation. Overall, the General Fund is facing a budget deficit, with expenditures exceeding revenues by $19.6 million. The most recent decline in sales tax revenues is heavily impacting the current fiscal year and projections for the proposed FY 2025-26 budget year. Measure H has helped to ease the burden of the ongoing budget deficit, and staff continues to heavily scrutinize the General Fund operating budgets to minimize the impact of the ongoing structural budget deficit.
As Mayor, the Charter dictates that I prepare and deliver to the Council any Final Budget Modifications to the Draft Budget. At this time, I have no modifications and recommend that the Draft Budget be moved forward for approval by the Council in June as the Proposed Budget.
In times of uncertainty, I take solace in the knowledge that many individuals and organizations across the City, as well as my fellow Councilmembers, continue to work together to address important topics like public safety, homelessness, economic development, and blight. Together, we address these complicated topics knowing that the goal is worth all the effort, planning, and difficult conversations. The City will continue to do its part to push forward and make innovative ideas a reality for the deserving residents of Modesto.
I would like to thank our community, staff, and Council for the support I have received as Mayor. The push to improve the quality of life in Modesto is possible because we work together.
I sincerely appreciate you all. I am excited for what the future holds for our city. Let’s continue to build that future together, fostering innovation with integrity.
Sue Zwahlen
Mayor
City of Modesto
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