Agenda packet — Audit Committee, April 22, 2026

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www.modestogov.com
AGENDA
City of Modesto

SPECIAL AUDIT COMMITTEE

COUNCIL WORKSHOP
2001-40 Del Puerto Room
Tenth Street Place, 1010 10th Street
Modesto, California
Wednesday, April 22, 2026 at 4:00 PM
Roll Call: Sue Zwahlen, Chair
Rosa Escutia-Braaton, Vice-Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
Alternates: Eric Alvarez, Nick Bavaro, Chris Ricci, Jeremiah Williams Council has not delegated directive or final approval authority to the Committees.

Committee actions are recommendations to the full City Council, not final decisions on an issue. * Public Comment will only be in-person. Members of the public who wish to address the Committee, by providing public comment, during the meeting must do so in-person in the 2001-40 Del Puerto Room. As an alternative, members of the public may also provide written public comment submitted via email as indicated in the Submitting Comments by Email instructions on this agenda. Zoom will still be available for viewing and Wordly translation. * Members of the public will be allowed to provide public comment through Zoom if a Councilmember is participating remotely pursuant to the provisions of California Government Code section 54953.8.3.
*If a technical issue arises with Zoom or the phone dial-in option, the Council meeting will continue unless the meeting is being held pursuant to the provisions of Senate Bill 707, California Government Code section 54953.8.3. Alternative viewing options are listed below, and the meeting is physically open to the public.
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“Wordly” can translate into 25+ different languages! To access written translation during the meeting, please scan the QR Code or click this link https://attend.wordly.ai/join/RJDY-6364.
"Wordly" puede traducir a más de 25 idiomas diferentes! Para acceder a la traducción durante la reunión, por favor escanee el código QR o haga clic en el enlace https://attend.wordly.ai/join/RJDY-6364.

You may observe a livestream of the meeting at http://media.modestogov.com. You may also view or listen to the meeting as indicated below.

THE MEETING CAN BE VIEWED BY ZOOM VIDEO

CONFERENCING OR TELEPHONE
Joining the Committee meeting via Zoom
The City of Modesto is now offering the ability to view Committee meetings via telephonic conferencing via “Zoom” video conferencing computer technology. The meeting may be accessed through the use of Zoom using the following options:
• Enter the following link into an Internet Browser
https://us02web.zoom.us/j/95895497651
• Enter the following link into an Internet Browser https://zoom.us/ and using the Webinar ID: 958 9549 7651
• Passcode: 84326
To use Zoom, please visit: https://zoom.us/ and either sign-up for a free Zoom account or continue as a guest. Once you have downloaded the app onto your mobile device, joined from your web browser, or downloaded the Zoom software on your computer you will be ready for the upcoming Committee meeting.

Joining the Committee meeting via Telephone
If you don’t have a smart phone or computer to access the meeting via Zoom, you can listen by phone, by calling 1-877-853-5257 (Toll Free) or 1-888-475-4499 (Toll Free) and enter the Webinar ID: 958 9549 7651 Passcode: 84326

PUBLIC COMMENT PERIOD
Three-minute time limit per speaker.

Only interested persons in the audience may present these matters. Under State law, Committee Members may respond to matters being presented under this item only as follows:
a. Briefly respond to statements made or questions raised. b. Ask a question for clarification.
c. Provide a reference to staff or other resources for factual information. d. Request staff to report back at a subsequent meeting. e. Finally, a Committee Member or the Committee itself may take action to direct staff to place a matter of business on a future agenda.
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SUBMITTING COMMENTS BY E-MAIL
Written comments may be submitted via email to: [email protected] (include Agenda Item Number in the subject line). All comments will be shared with the Committee Members and placed in the record but will not be read aloud during the meeting.

Written comments must be received two hours before the meeting.

This Agenda is on file in the City Clerk’s Office, Sixth Floor, 10th Street Place, Posting Board at entry of 10th Street Place, and is available on the City’s Web site at www.modestogov.com.

Materials related to an item on this Agenda submitted to the Council after distribution of the agenda packet are available for public inspection in the Clerk’s office during normal business hours. Such documents are also available online, subject to staff’s ability to post the documents before the meeting, at the following website www.modestogov.com/councilmeetings.

In accordance with the requirements of Title II of the Americans with Disabilities Act (“ADA”) of 1990, the Fair Employment & Housing Act (“FEHA”), the Rehabilitation Act of 1973 (as amended), Government Code section 11135 and other applicable codes, the City of Modesto (“City”) will not discriminate against individuals on the basis of disability in the City’s services, programs, or activities. For more information, please visit the City of Modesto website at https://www.modestogov.com/865/Americans-with-Disabilities-Act-ADA In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk (209) 577-5396. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting
Any and all of the following agenda items are subject to action by the Modesto City Council.

CONSENT ITEMS – ROLL CALL VOTE REQUIRED:

Information concerning the consent items listed below has been forwarded to each Committee Member prior to this meeting for study. Unless some member of the audience or Committee Member has a question concerning an item and asks that it be withdrawn from the consent list, the Committee approves the items at one time. The action taken by the Committee in approving consent items is set forth in the explanation of this individual item.

NEW BUSINESS

1. Consider the Homelessness Performance Audit Report dated April 3, 2026 (Funding Source: Not Applicable)
• Motion to receive the Homelessness Performance Audit report and forwarding to Council for acceptance.

CITY AUDITOR; Colleen Rozillis, 206-302-6795, [email protected]

2. Consider the Fiscal Year 2025-26 Internal Audit Status Report dated April 1, 2026. (Funding Source: Not Applicable)
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• Motion to receive and file the Internal Audit Status Report dated April 1, 2026.

CITY AUDITOR; Colleen Rozillis, 206-302-6795, [email protected]

3. Consider the Audit Finding Validation Report dated April 1, 2026. (Funding Source:

Not Applicable)
• Motion to receive and file the quarterly Audit Findings Validation Report.

CITY AUDITOR; Colleen Rozillis, 206-302-6795, [email protected]

4. Consider the Cash Handling Internal Controls Testing Report dated March 26, 2026 and forwarding to Council for acceptance. (Funding Source: Not Applicable) • Motion to receive the Cash Handling Internal Controls Testing Report dated March 26, 2026 and forwarding to Council for acceptance.

CITY AUDITOR; Colleen Rozillis, 206-302-6795, [email protected]

5. Consider reviewing and providing comments on the Fiscal Year 2026-27 Internal Audit Work Plan and forwarding to Council for review and comments. (Funding Source: Not Applicable)
• Review and provide comments on the proposed Fiscal Year 2026-27 Internal Audit Work Plan and forwarding to Council for review and comments.

CITY AUDITOR; Colleen Rozillis, 206-302-6795, [email protected]

6. Consider an Ordinance amending the Modesto Municipal Code section related to the “Office of the City Clerk and City Auditor” to create separate sections for the Office of the City Clerk and the Office of the City Auditor consistent with the Modesto City Charter and forwarding to Council for approval. (Funding Source: Not Applicable) • Motion recommending an Ordinance repealing Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 3, “Office of the City Clerk and Auditor,” of the Modesto Municipal Code; adding Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 3, “Office of the City Clerk,” to the Modesto Municipal Code to establish the Office of the City Clerk as a standalone position; and adding Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 20, “City Auditor,” to the Modesto Municipal Code to establish the Office of the City Auditor as a standalone position, consistent with the Modesto City Charter, and forwarding to Council for approval.

CITY CLERK; Diane Nayares-Perez, 209-577-5396, [email protected]

7. Consider the Auditors’ Reports and Schedule of Measure L Program Revenues and Expenditures for Fiscal Year Ended June 30, 2025, and forwarding to Council for approval. (Funding Source: Not Applicable)
• Motion recommending the Fiscal Year 2024-2025 Auditor’s Report on Compliance of the Measure L Local Roads First Transportation Funding Measure and forwarding to Council for approval.

FINANCE DEPARTMENT; Maria Garnica, 209-577-5249,
[email protected]
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ADJOURNMENT
Posted pursuant to Government Code Section 54954.2 on the bulletin board at Tenth Street Place on at by
date time signature
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

April 22, 2026
Date: April 1, 2026
TO: Audit Committee
Sue Zwahlen, Chair
Rosa Escutia-Braaton, Vice Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
FROM: Colleen Rozillis, City Auditor
SUBJECT: Receipt of the Homelessness Performance Audit report CONTACT: Colleen Rozillis, City Auditor, [email protected], 206-302- 6795
DESCRIPTION:

Consider the Homelessness Performance Audit Report dated April 3, 2026. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

The recommended action supports the City’s 2025-2026 Strategic Plan Goal J: Build a high-performance organization.

BACKGROUND:

City Council approved a Homelessness Performance Audit as part of the Fiscal Year (FY) 2025-2026 Internal Audit work plan.

DISCUSSION:

The performance audit evaluates the City’s response to homelessness in the community, specifically evaluating its organizational structure, service delivery, and participation in regional initiatives. This included an evaluation of performance reporting and communication, as well as a calculation of total expenditures on homelessness prevention and response in FY 2024-25. The report contains three (3) recommendations for operational improvements:
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Receipt of the Homelessness Performance Audit Report

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• Funding Sustainability and Service Capacity: Although the City has demonstrated leadership in pursuing funding opportunities and supporting nonprofit partners that deliver homelessness services, many community programs continue to operate near capacity and rely on uncertain funding sources. The City should continue to support nonprofit capacity development and can consider establishing flexible funding mechanisms to help stabilize services. • Data Systems and Integration: Regional homelessness-related data is collected through multiple systems that are used by the City, community organizations, and other regional partners. However, differences in reporting requirements and limited integration across platforms make it difficult to develop a comprehensive view of system-wide outcomes and trends.
• Reporting and Communication: The City has established a strong foundation for reporting and communicating information about homelessness initiatives through formal reports, dashboards, and community engagement. Opportunities exist to improve clarity and consistency by consolidating information across programs and expanding the use of outcome-focused reporting.

This performance audit was completed under Generally Accepted Government Auditing Standards (GAGAS).

FISCAL IMPACT:

This review is completed quarterly and budgeted annually in the amount of $40,000 and is anticipated to be delivered within budget. This audit amount was funded as part of the General Fund budget.

CEQA/NEPA REQUIREMENTS:

This item does not constitute a “project” within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 and requires no environmental review.

RECOMMENDED COMMITTEE ACTION:

Motion to receive the Homelessness Performance Audit report and forwarding to Council for acceptance.

Approved by:

Colleen Rozillis, City Auditor
Joseph P. Lopez, City Manager
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Receipt of the Homelessness Performance Audit Report

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Attachments:

1. Homelessness Performance Audit Report 04-03-26.
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City of Modesto
Homelessness Response Performance Audit
April 7, 2026
Baker Tilly US, LLP
999 Third Avenue, Suite 2800
Seattle, WA 98104
(206) 302-6500
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Table of Contents
Executive Summary 1
Introduction 1
Conclusions 1
Summary of Findings and Recommendations 2
Introduction 4
Background 4
Scope and Methodology 4
Statement of Compliance with GAGAS 6
Commendations 7
City Approach to Homelesness Response 9
The Camp2Home Program 9
Programs and Partnerships Supporting Homelessness Response 10 City Expenditures on Homelessness Response 13
Findings and Recommendations 16
Funding Sustainability and Service Capacity 16
Data Systems and Integration 20
Reporting and Communication 24
Appendix A: Management Response 29
Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to #1..
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its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. #1..
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EXECUTIVE SUMMARY

INTRODUCTION
The City of Modesto (the City, Modesto) engaged its internal auditor, Baker Tilly, to conduct a performance audit of the City’s homelessness response as part of the fiscal year (FY) 2025-26 internal audit program. The purpose of this engagement is to provide findings and recommendations that celebrate successes as well as identify opportunities for improvement within the City’s purview and ability to prevent and respond to homelessness-related issues in its community. Supplemental to this audit, the City has contracted with Homebase, a mission-driven nonprofit organization, to assess and propose solutions related to provider capacity, access to funding, and resource alignment to further meet community needs related to homelessness.

Baker Tilly performed this engagement between October 2025 and March 2026. To complete the engagement, we conducted interviews, document and data analysis, and industry best practices research.

CONCLUSIONS
Overall, the City has established a coordinated and collaborative approach to addressing homelessness, supported by a functional organizational structure, strong partnerships, and a comprehensive service delivery model. The Community and Economic Development Department (CED) serves as the central coordinating entity, while multiple City departments contribute through outreach, public safety, and operational support.

The City’s approach integrates City-led outreach efforts with services delivered by nonprofit partners, allowing the City to expand service capacity while leveraging community expertise. Through initiatives such as the Camp2Home program, the City coordinates outreach, shelter access, employment services, and housing assistance to support individuals transitioning from homelessness to stable housing.

In addition, the City demonstrates strong collaboration with Stanislaus County (the County) agencies, nonprofit service providers, and regional organizations to align funding, coordinate services, and support housing development efforts. These partnerships, along with the City’s proactive pursuit of funding opportunities and #1..
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emphasis on community engagement, provide a solid foundation for addressing homelessness and responding to community needs.

SUMMARY OF FINDINGS AND RECOMMENDATIONS
Our findings and recommendations are summarized below. Further details on findings and recommendations are detailed the Findings and Recommendations section of this report.

Findings and Recommendations
Finding 1 Although the City has demonstrated leadership in pursuing funding opportunities and supporting nonprofit partners that deliver homelessness services, many community
programs continue to operate near capacity and rely on
uncertain funding sources. These conditions create
challenges for long-term program sustainability and limit the system’s ability to consistently meet community needs.

Recommendation 1 The City should continue building on its existing efforts to strengthen long-term sustainability for homelessness
programs by:

1. Formalizing and expanding support for nonprofit
capacity development

2. Developing and documenting a coordinated multi-year
funding strategy

3. Establishing or assessing flexible funding mechanisms to help stabilize services and leverage additional
external funding
Finding 2 Regional homelessness-related data is collected through multiple systems that are used by the City, community
organizations, and other regional partners. However,
differences in reporting requirements and limited
integration across platforms make it difficult to develop a comprehensive view of system-wide outcomes and trends.

Recommendation 2 The City should continue building on its existing efforts to strengthen coordination across homelessness-related data systems by:
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1. Establishing and documenting consistent data
definitions and reporting expectations in coordination
with regional partners

2. Developing and implementing a process to regularly
compile and analyze key data elements across
systems (e.g., HMIS, ESRI, Neighborly, and program
dashboards)

3. Aligning operational data systems with existing
performance indicators to support consistent, systemwide reporting and analysis Finding 3 The City has established a strong foundation for reporting and communicating information about homelessness
initiatives through formal reports, dashboards, and
community engagement. Opportunities exist to improve
clarity and consistency by consolidating information across programs and expanding the use of outcome-focused
reporting.

Recommendation 3 The City should continue building on its existing reporting framework by:

1. Enhancing and maintaining a consolidated reporting
format or dashboard that integrates key information
across homelessness programs and data systems

2. Standardizing and documenting a core set of
performance indicators to be used consistently across
reports and dashboards

3. Establishing and applying consistent reporting
practices that include analysis and clear explanation of key trends, program outcomes, and how programs and
investments contribute to community-level results
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INTRODUCTION

BACKGROUND
Homelessness response is a highly complex challenge that involves multiple jurisdictions and community groups. Individuals experiencing homelessness often face a range of challenges, including housing instability, unemployment, health conditions, and other barriers that require coordinated services and long-term support. As a result, effective homelessness response typically involves collaboration among local governments, counties, nonprofit organizations, and regional planning bodies.

Within Modesto, several departments support efforts to address homelessness. CED serves as the City’s primary coordinating entity for homelessness response activities.

However, other departments including Police; Fire; Parks, Recreation and Neighborhoods (Parks); Public Works; and the City Manager’s Office (CMO), also contribute through outreach, public safety response, encampment management, and coordination of services. Together, these departments support a range of programs and partnerships intended to address both immediate needs and longer-term housing solutions for individuals experiencing homelessness.

Additionally, the City is partnering with Homebase, a mission-driven nonprofit organization, to provide technical assistance to nonprofit providers to build capacity for implementing CalAIM Community Supports, including developing policies, improving billing and reporting processes, and strengthening provider readiness to secure and manage funding. Homebase is also developing a data-driven strategic roadmap that analyzes homelessness trends, evaluates existing programs and housing resources, and identifies gaps and opportunities across the City’s homelessness response system.

Together, these efforts support a coordinated and sustainable approach to homelessness by strengthening provider capacity, improving access to funding, and aligning resources with community needs to enhance system-wide outcomes.

SCOPE AND METHODOLOGY
This work is intended to support future strategic planning that will guide the City’s homelessness efforts. Our audit objectives considered:
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● How effective is the City’s organizational structure, service delivery approach (contracted versus in-house), and participation in regional initiatives supporting its homelessness response?
● How well do the City’s performance reporting and communication practices provide accurate, complete, and useful information to City Council and the community? ● What are total expenses and their related funding sources (e.g., entitlement funding, state funds, grants) to support City interventions toward homelessness? This performance audit was conducted between October 2025 and March 2026 and was carried out across the following four phases:

Project Phases
Phase
No. Phase Description
1 Startup and
Management
Phase 1 consisted of collaborative project planning with CED leadership, including determining who would be interviewed, what documents would be reviewed, when and how results
would be shared, and how to report on project status.

We conducted project management for the duration of the engagement, including providing regular status updates to CED leadership and developing draft deliverables for
discussion.
2 Fact-Finding The second phase focused on execution of planned activities, as outlined below. We obtained the most current information available and insights from City personnel and selected stakeholders.

Documentation Review: We gathered relevant
documentation for review including homelessness strategic and action plans, homelessness data and metrics, lists of regional partners and service providers, policies and
procedures, and relevant performance measures.

Interviews: We conducted interviews with City leadership, staff, and community and regional stakeholders to gather insight into current homelessness prevention efforts.

Stakeholders included Stanislaus County, Stanislaus
Community System of Care (CSOC), and Modesto Gospel
Mission, and the Salvation Army leadership and staff.
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Phase
No. Phase Description
3 Analysis Industry Best Practices: We conducted research into industry best practices related to community partner capacity building and funding diversity, governance and City
participation in regional initiatives, homelessness data collection and system practices, and homelessness
performance measurement, reporting, and communication
practices.

Expenses and Funding Sources: We analyzed City direct
and indirect expenses and related funding sources dedicated to homeless response in FY 2024-25
Based on the information gained during our fact-finding and analysis phases, we conducted and consolidated research on relevant industry standards and best practices. Based on this research, we identified potential areas for improvement and developed practical recommendations.
4 Reporting During the fourth phase, we communicated the results of our analysis with findings and recommendations presented first in a draft report. The draft report was reviewed with City leadership to confirm the practicality and relevance of recommendations before finalizing.

STATEMENT OF COMPLIANCE WITH GAGAS
We conducted this performance audit in accordance with generally accepted government auditing standards (GAGAS). GAGAS requires that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
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COMMENDATIONS
It is important to note the areas of strength and existing good practices that can be leveraged for further improvement within the City. The Baker Tilly team would like to note the following commendations:
● Effective Organizational Structure: According to staff, the City has a functional and collaborative organizational structure for homelessness response. Leadership roles coordinate across departments, such as CED, Police, Fire, Parks, and Public Works, to oversee homelessness response activities. CED serves as the primary coordinator for homelessness efforts, managing grant applications, funding allocation, and program oversight. Staff also noted close collaboration with nonprofit partners like Modesto Gospel Mission and the Salvation Army to support service delivery aligned with City goals.
● Maximizing Efforts: As highlighted by City staff, County officials, and community partners, the City employs a multifaceted, comprehensive, and collaborative approach to addressing homelessness. Through strong leadership commitment and strategic coordination, the City mobilizes resources and programs that span housing development, outreach services, public safety, and community partnerships. Based on interviews and document review, the City is addressing homelessness on multiple fronts:
○ Housing Development: Pursuing various housing projects, including innovative tiny home communities and low-barrier shelters co-located with supportive services to provide emergency shelter, transitional housing, permanent supportive housing, and affordable housing options.
○ Outreach and Engagement: Operating the Community Health and Assistance Team (CHAT) program embedded within the Police Department to provide specialized, compassionate outreach that connects unsheltered individuals to services while reducing law enforcement burdens.
○ Collaborative Partnerships: Maintaining strong, decade-long partnerships with County and nonprofit providers, such as Modesto Gospel Mission and the Salvation Army, and regional entities including the CSOC and the Stanislaus Homeless Alliance, to coordinate funding, services, and strategic planning. #1..
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○ Funding and Financial Stewardship: Managing diverse federal, state, and local funding streams to advance both infrastructure and operational needs, while supporting nonprofit funding and advocating for sustainable funding solutions. ○ Public Safety and Community Services: Coordinating across City departments including Police, Fire, Parks, and Public Works to address homelessness-related public safety, blight abatement, and community impacts focused on enforcement, outreach, and support.
○ Community Engagement and Communication: Proactively sharing information with the public, elected officials, and stakeholders through dashboards, regular meetings, and collaborative forums to ensure accountability and responsiveness. ● Strong Relationships: Staff, County officials, and nonprofit leaders consistently highlighted the City’s open, transparent, and solution-focused communication style that facilitates effective coordination across multiple agencies and service providers.

Regular meetings, timely information sharing, and responsive engagement have created a foundation of trust and mutual respect. Community partners such as Modesto Gospel Mission and the Salvation Army praised the City’s accessibility and partnership spirit, while County leaders emphasized the decade-long, cooperative relationship that enables joint initiatives like low-barrier shelters and navigation centers.
● Point-in-Time Count: While official results are not yet publicly available, staff reported that the Point-in-Time count in January 2026 demonstrated a 13% decrease for people experiencing homelessness. This decrease is notable given that many communities continue to experience increases in homelessness, suggesting that the City’s coordinated approach and investments may be contributing to improved outcomes.
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CITY APPROACH TO HOMELESNESS RESPONSE
The City has established an organizational structure and service delivery approach that supports coordination of homelessness response efforts across departments and with community partners. CED provides overall coordination, while other City departments contribute through outreach, public safety response, and operational support.

The City’s service delivery model combines City-operated programs with services provided by nonprofit partners, expanding the range of available services and housing resources. In addition, the City participates in regional initiatives and collaborates with the County and nonprofit organizations to coordinate services and housing development efforts. Together, these structures and partnerships support the City’s efforts to address homelessness within the community.

THE CAMP2HOME PROGRAM
The City utilizes a service delivery approach that combines City-operated programs with services provided through nonprofit partners. Central to this approach is the Camp2Home program, which is designed to provide a pathway from homelessness to stable housing and self-sufficiency through coordinated services. The model includes five integrated components: outreach, shelter, job training, employment, and housing.

Area Details
Outreach The outreach component focuses on identifying and engaging individuals experiencing homelessness and connecting them with available services. The City’s CHAT, which operates within the Police Department, conducts outreach and provides immediate support and referrals to shelter and service providers. This approach allows unsheltered individuals to connect with services while reducing the need for sworn officers to respond to homelessness-related calls.

Shelter The shelter component provides temporary housing options through partnerships with nonprofit providers. The Access Center Emergency Shelter (ACES), established in partnership with the County and nonprofit organizations, operates alongside the Salvation Army’s Berberian Shelter. These facilities provide temporary shelter beds and access to supportive services.
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Area Details
Job Training
and
Employment
Employment and job training services are provided through HopeWorks, a transitional employment program operated by Modesto Gospel Mission in partnership with the City and United Way of Stanislaus County. The program provides work opportunities, case management, and support services to help participants develop job skills and transition into permanent employment.

Housing The final component focuses on rapid rehousing assistance, which connects employed individuals to permanent housing through financial support such as security deposits, utility deposits, and shortterm rental assistance. These supports are intended to help individuals transition from homelessness to stable housing.

PROGRAMS AND PARTNERSHIPS SUPPORTING HOMELESSNESS

RESPONSE
The City’s homelessness response relies on a combination of direct outreach efforts and partnerships with nonprofit service providers that deliver shelter, housing, and supportive services. The City’s primary direct service role is through outreach and coordination, while nonprofit partners operate many of the core shelter and housing programs within the community.

Direct outreach efforts by the City include:
● CHAT Outreach Team: CHAT serves as the City’s primary outreach unit and works closely with service providers to connect individuals experiencing homelessness with shelter and other resources. The team consists of unsworn outreach specialists with experience in social services, crisis intervention, and mental health support. CHAT operates seven days per week during daytime hours and coordinates with other City departments when responding to homelessness-related calls. ● Park Rangers: Park Rangers support the City and interact with individuals experiencing homelessness in public spaces within parks and coordinate with CHAT and Public Works on encampment cleanup and public space maintenance.

City Facilitated Services
Beyond direct outreach, the City works with nonprofit organizations to expand service capacity and coordinate homelessness response activities. City staff described their role #1..
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as facilitating partnerships, aligning funding with community needs, and assisting with the development of programs operated by nonprofit service providers. The City develops scopes of work and agreements with service providers, identifies partners capable of delivering specific services, and monitors programs to ensure services are delivered as intended. Through these activities, the City helps coordinate service delivery while nonprofit partners operate many of the direct service programs. ● Modesto Gospel Mission: Modesto Gospel Mission operates multiple programs that support individuals experiencing homelessness, including emergency shelter, transitional housing, and recovery services. The organization also operates HopeWorks, a transitional employment and case management program that provides paid work opportunities and supportive services to individuals working toward housing stability and self-sufficiency. In addition, the Mission operates a bridge housing program supported through Encampment Resolution Funding, which provides temporary housing for individuals transitioning from encampments into more stable housing.
● The Salvation Army: The Salvation Army operates several shelter and service programs in Modesto, including the Berberian Shelter and ACES, a low-barrier emergency shelter that allows individuals to access shelter with fewer restrictions than traditional programs. The Salvation Army also operates a Day Center that provides daytime services such as meals, showers, and laundry. While the City does not operate these facilities, City staff have supported service providers in securing funding and piloting programs intended to expand service capacity, including initiatives such as the Day Center and other stabilization services. ● Turning Point Community Programs: Turning Point Community Programs provides coordinated entry and housing navigation services through the Housing Assessment Team (HAT). HAT conducts assessments and enrollments into the coordinated entry system, including the use of the VI-SPDAT assessment tool to help prioritize individuals for housing resources. Turning Point also partners with the City to administer the Motel Voucher Program, which provides temporary emergency shelter for individuals while they transition into more stable housing placements.

The City is also a partner in supporting affordable housing development. Through CED, the City administers programs that support housing development, infrastructure financing, and homelessness initiatives in partnership with nonprofit developers and other agencies.
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Participation in Regional Initiatives
Addressing homelessness in Modesto involves coordination with regional partners, including the County, nonprofit service providers, and regional planning bodies. The City participates in several regional initiatives intended to align services, coordinate funding, and expand housing opportunities for individuals experiencing homelessness.

City staff work closely with the County on homelessness response activities, including coordination of shelter operations and joint planning efforts. Representatives from the City also participate in regional governance bodies such as the CSOC and the Stanislaus Housing Authority, where they contribute to discussions related to funding allocation, program planning, and data sharing.

In addition, the City collaborates with nonprofit organizations that provide shelter, outreach, employment services, and housing programs within the community. These partnerships support the City’s ability to expand service capacity and coordinate resources across multiple agencies involved in homelessness response. #1..
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CITY EXPENDITURES ON HOMELESSNESS

RESPONSE
The City utilizes a combination of federal, state, and local funding sources to support programs and services addressing homelessness. These resources support a range of activities, including emergency shelter operations, housing development, rapid rehousing, outreach, and supportive services.

At the federal level, the City receives funding through programs administered by the U.S. Department of Housing and Urban Development (HUD), including Community Development Block Grant, Emergency Solutions Grant, HUD entitlement funds, and the HOME Investment Partnerships Program. These programs provide funding for housing development, homelessness prevention, shelter operations, and other community development activities that support individuals experiencing homelessness.

The City also leverages several state-administered funding programs to support homelessness initiatives and housing development. These include Homeless Housing, Assistance and Prevention funds, the Homekey Program, Permanent Local Housing Allocation (PLHA), Encampment Resolution Funding, and other grants administered through the California Department of Housing and Community Development.

In addition to federal and state funding, the City uses local revenue sources to support homelessness response efforts. Measure H, a voter-approved one-cent sales tax, provides funding for general quality-of-life City services, including efforts to address homelessness and maintain public spaces. According to City staff, these local revenues supplement general fund allocations and help support both operational and infrastructure needs related to homelessness response.

To understand the City’s overall investment in homelessness response, we analyzed primary and secondary costs across City departments associated with homelessnessrelated programs, services, and activities. For this analysis, costs were identified as either primary or secondary costs.
● Primary Costs: Direct expenditures for homelessness services and programs, including both contracted and City-operated programs.
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● Secondary Costs: Estimates of expenditures on general City services (e.g., Police, Fire, Parks, Public Works, CMO) that can be attributed to homelessness response based on available data and staff expertise.

In FY 2024-25, the City spent over $18 million on primary costs (direct homelessness services and programs) for homelessness-related services. About half of these primary costs ($5.9 million) were funded through City funds and other grant funds.

Modesto Homelessness Response Primary Costs by Source of Funds Source Cost
City Funds $2,901,463
Other Grant Funds* $6,625,298
Pass-Through HUD Funds $5,482,990
Total Primary Costs $15,009,752
Note: Amounts may be slightly different due to rounding. *Other Grant Funds include sources of funds such as PLHA, HOME, and American Rescue grants
In addition to these costs which are directly attributable to homelessness-related programs, the City also had indirect costs within supporting departments that contribute to homelessness response. Secondary costs are expenses that are not designated for homelessness but end up being used in the City’s homelessness response efforts.

Unlike primary costs that are identified through financial records and contracts, secondary costs are estimated using available data and staff expertise. Because City systems are not set up to track homelessness response costs, estimating secondary costs comes with some uncertainty—true secondary costs could be higher or lower than the estimated in the following table.
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Primary and Secondary Homelessness Response Costs – FY 2024-25 Funding Source Cost Type
Department City Funds
Other Grant
Funds
Pass-Through
HUD Funds
Primary Costs
Total
Secondary
Cost Estimates
All Costs
Total
CED $3,495,714 $6,264,805 $5,482,990 $15,295,992 - $15,295,992 Police $9,541,501 - - $2,340,867 $7,200,633 $9,541,501
Fire $5,210,752 - - - $5,210,752 $5,210,752
Parks $832,488 - - - $832,488 $832,488
Public Works $51,070 $360,493 - $410,493 $1,070 $411,563 CMO $20,902 - - - $20,902 $20,902
Total $19,152,427 $6,625,298 $5,482,990 $18,047,352 $13,265,845 $31,313,197 Note: Amounts may be slightly different due to rounding. #1..
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FINDINGS AND RECOMMENDATIONS

FUNDING SUSTAINABILITY AND SERVICE CAPACITY
Finding 1 Although the City has demonstrated leadership in pursuing funding opportunities and supporting nonprofit partners that deliver homelessness services, many community
programs continue to operate near capacity and rely on
uncertain funding sources. These conditions create
challenges for long-term program sustainability and limit the system’s ability to consistently meet community needs.

Recommendation 1 The City should continue building on its existing efforts to strengthen long-term sustainability for homelessness
programs by:

1. Formalizing and expanding support for nonprofit
capacity development

2. Developing and documenting a coordinated multi-year
funding strategy

3. Establishing or assessing flexible funding mechanisms to help stabilize services and leverage additional
external funding
The City has demonstrated a proactive approach to addressing homelessness by pursuing diverse funding opportunities, coordinating partnerships, and intervening when funding gaps threaten essential services. Through the Camp2Home program framework and related initiatives, the City leverages both in-house teams and nonprofit partners to deliver outreach, shelter access, housing development, and supportive services.

Stakeholders consistently described the City as proactive and solutions-oriented in identifying funding opportunities, supporting nonprofit providers, and coordinating services across departments.

Despite these efforts, several challenges affect the long-term sustainability of homelessness programs in the community, including funding uncertainty, limited service capacity, and structural constraints within the broader system. City staff and community partners reported that demand for outreach and shelter services frequently exceeds available resources. CHAT now provides seven-day coverage and plays a central role in connecting unsheltered individuals to services. However, stakeholders reported that #1..
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additional staffing and service capacity would be required to expand outreach hours and opportunities.

Shelter providers similarly reported high utilization rates and noted that expanding services would require additional staffing and operating funds. Interviews also highlighted challenges in maintaining continuity of services after individuals are connected through outreach, particularly when case management resources are limited.

Capacity challenges are also influenced by variations in nonprofit provider resources.

Interviews suggested that while some providers maintain diversified funding sources, others relied more heavily on temporary pandemic-era funding and have faced challenges replacing those resources as those funding sources expire. This variability can create uneven service capacity and increase pressure on the City to help stabilize programs when funding gaps occur.

Funding stability is a significant factor affecting service capacity. Interviews indicated that operating funds for shelters, staffing, and supportive services are often more difficult to secure than capital funding for housing development or facilities. As a result, the City has sometimes intervened when funding shortfalls threatened essential services, including helping extend existing funding or pursuing alternative grant opportunities to prevent disruptions to shelter operations.

At the same time, the supply of affordable and permanent housing continues to lag behind demand. CED staff reported ongoing efforts to secure federal, state, and local funding to support housing production, rehabilitation programs, and permanent supportive housing. While these efforts have resulted in new housing units and innovative housing solutions, interviews across departments and partner organizations indicated that the overall supply of affordable housing remains insufficient to meet community needs. Limited housing availability can create bottlenecks in the homelessness response system, as individuals may remain in shelter longer while waiting for permanent housing opportunities.

Best practices identified by HUD and the United States Interagency Council on Homelessness indicate that sustainable homelessness response systems require reliable and diversified operating funding, adequate service capacity across outreach, shelter, and housing programs, and coordinated pathways that connect individuals from #1..
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outreach and shelter to permanent housing1. These practices emphasize the importance of long-term planning for program sustainability and sufficient service capacity to meet community needs.

Several factors contribute to the sustainability and capacity challenges observed. Many homelessness programs rely on short-term or grant-based funding sources, which can create uncertainty when funding cycles change or temporary funding programs expire.

Stakeholders noted that pandemic-era funding supported significant service expansion, but some providers have faced difficulty replacing those resources as they phase out.

Additionally, operating funds for shelters, outreach staff, and supportive services are often more limited than capital funding for housing development projects. This imbalance can create challenges in sustaining day-to-day program operations even when new housing development projects are underway. Differences in nonprofit organizational capacity can also affect the ability of providers to compete for and manage external funding opportunities, as some organizations may have fewer administrative resources to pursue grants or manage complex funding requirements.

Funding instability and service capacity limitations create risks for the long-term effectiveness and stability of the homelessness response system. When programs operate near capacity or depend on uncertain funding sources, providers may focus on maintaining current operations rather than expanding services or improving outcomes.

Outreach teams may also encounter situations where individuals are ready to accept services but appropriate options are not immediately available. Limited housing availability can further contribute to bottlenecks within the system, as individuals remain in shelters or temporary programs while waiting for permanent housing opportunities.

Without continued planning for long-term funding stability and service capacity, programs may remain vulnerable to funding disruptions or may be unable to expand services to meet growing community needs.

Recommendation
The City should continue building on its existing efforts to strengthen the long-term sustainability of homelessness programs and the capacity of community partners that 1 U.S. Department of Housing and Urban Development, Continuum of Care Program Interim Rule, 24 CFR Part 578; United States Interagency Council on Homelessness, An Effective Homelessness Crisis Response System.
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deliver services. Interviews indicate that the City already plays a significant role in identifying funding opportunities, supporting nonprofit partners, and coordinating initiatives across departments. Expanding these efforts could help further stabilize key programs and reduce reliance on short-term funding solutions.

Strengthening Service Capacity
The City has already provided technical assistance and support to nonprofit partners to help them navigate funding opportunities and maintain services. These efforts could be expanded by encouraging and supporting providers in pursuing grants that strengthen their organizational infrastructure.

In addition to service funding, many federal and philanthropic programs support investments in technology systems, data infrastructure, compliance and reporting capacity, leadership development, and grant management. Strengthening these internal systems can help organizations operate more efficiently and compete more effectively for external funding while improving their ability to deliver services.

Strengthening Funding Sustainability
The City has demonstrated success in identifying and pursuing federal and state funding opportunities to support housing and homelessness initiatives. Building on this work, the City could help coordinate the development of a multi-year funding strategy that aligns anticipated funding opportunities with community needs and program priorities based on the analysis completed by Homebase.

Under this approach, the City would serve as a convener by working with nonprofit providers, regional partners, and other stakeholders to identify expected funding cycles, estimate operating and capital needs for key programs, and align potential funding sources with those needs. While the City can help organize and guide these discussions, successful implementation will rely on continued participation and leadership from nonprofit providers and regional partners responsible for applying for and managing many of these funding sources.

The City could explore establishing a small flexible funding pool or homelessness innovation fund that could be used to stabilize programs when funding gaps occur, provide matching funds required for competitive grants, or support pilot programs that test new service models. Even relatively modest local funds can help leverage larger #1..
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federal or state grants and allow the City and its partners to respond more quickly when urgent service needs arise.

Together, these actions could help the City build on its existing leadership in homelessness response while improving long-term funding stability, strengthening provider capacity, and ensuring that programs remain sustainable as funding conditions evolve.

DATA SYSTEMS AND INTEGRATION
Finding 2 Regional homelessness-related data is collected through multiple systems that are used by the City, community
organizations, and other regional partners. However,
differences in reporting requirements and limited
integration across platforms make it difficult to develop a comprehensive view of system-wide outcomes and trends.

Recommendation 2 The City should continue building on its existing efforts to strengthen coordination across homelessness-related data systems by:

1. Establishing and documenting consistent data
definitions and reporting expectations in coordination
with regional partners

2. Developing and implementing a process to regularly
compile and analyze key data elements across
systems (e.g., HMIS, ESRI, Neighborly, and program
dashboards)

3. Aligning operational data systems with existing
performance indicators to support consistent, systemwide reporting and analysis The City uses several data systems and collaborative processes to collect information about homelessness services and program outcomes. These systems support day-today operations, grant compliance, and program monitoring across departments and partner organizations. Interviews indicated that while these tools provide useful information for managing individual programs, the use of multiple platforms and differing reporting requirements creates challenges in integrating data and producing a comprehensive view of homelessness services and outcomes. #1..
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Effective homelessness response systems rely on coordinated data collection practices, consistent definitions, and the ability to integrate information across programs so jurisdictions can measure performance and identify service gaps. National homelessness policy guidance emphasizes that when communities track common indicators and align data across programs, they are better able to evaluate system performance and guide strategic decision-making2.

Several systems are used to collect and manage homelessness-related data in Modesto. The Homeless Management Information System (HMIS) serves as the primary repository for client-level data across programs throughout Stanislaus County.

The system is administered regionally by the County’s Community Services Agency and is used by many service providers to track client interactions, housing placements, and program participation. Since early 2025, the City’s outreach teams, including CHAT, have increased their use of HMIS, improving the representation of outreach activity in Modesto within the regional system.

The City also uses additional systems to support program operations. CHAT records outreach interactions in ESRI, a geographic information system that allows staff to map service activity and identify areas with higher concentrations of outreach contacts. This information is used to develop heat maps that help guide resource deployment. In addition, CED uses the Neighborly system to manage public service contracts, process invoices, and track performance measures required by federal grant programs. Program dashboards are used to monitor specific initiatives, including outreach and job training components of the Camp2Home program.

The City and the regional CSOC body already identify and report several homelessness performance indicators through federally required planning documents. For example, the City’s Consolidated Plan includes indicators related to the number of persons and households assisted through programs, exits from homelessness programs, returns to homelessness after six, 12, and 24 months, and Point-in-Time counts of sheltered and unsheltered individuals. Additional indicators include subpopulation counts such as veterans, families, and individuals experiencing chronic homelessness, as well as measures such as the length of time individuals experience homelessness and the 2 National Alliance to End Homelessness, What Gets Measured Gets Done: Using Data to Improve Homelessness System Performance, 2024.
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number of individuals exiting programs to permanent housing. These indicators align with system performance measures established by HUD’s Continuum of Care Program.

However, these indicators rely on data collected across multiple systems, including HMIS, ESRI, Neighborly, and program-specific dashboards. Because these systems are not fully integrated, compiling information needed to analyze these indicators across programs often requires manual coordination and interpretation of data from multiple sources. Interviews indicated that this fragmentation makes it difficult to track how individuals move through the homelessness response system from outreach to shelter and ultimately to stable housing.

Several factors contribute to these challenges. Many of the systems used by the City and its partners are tied to specific funding programs with unique reporting requirements and definitions. These differences can result in inconsistencies in how homelessness is defined or measured across programs. In addition, regional policies governing some systems can affect data completeness. For example, interviewees noted that the HMIS coordinated entry system automatically removes clients from the active list if their housing status is not updated within a defined period. While intended to maintain accurate records, this policy can lead to incomplete tracking when service providers are unable to update records consistently.

As a result, the City may face challenges developing a complete picture of how individuals move through programs or identifying system-wide trends and gaps across services. Limited integration across systems can also make it more difficult to analyze outreach activity, shelter utilization, housing placements, and long-term outcomes.

Strengthening coordination across data systems could improve the City’s ability to evaluate homelessness response efforts and support data-informed decision-making.

Recommendation
The City should continue working with regional partners and internal departments to strengthen coordination across data systems and improve its ability to analyze homelessness services and outcomes.

This effort should focus on improving consistency, integration, and accessibility of key data elements across programs. Because some systems, such as HMIS, are managed regionally, the City’s role will primarily involve coordinating with the County and service providers to improve data entry practices, definitions, and reporting expectations. #1..
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Continued collaboration can help ensure that information collected across programs supports both operational needs and regional reporting requirements.

Internally, the City could improve how information from ESRI, Neighborly, program dashboards, and other operational systems is organized and analyzed so that it more directly supports the homelessness indicators presented in the Consolidated Plan.

While the indicators are already defined, the underlying data are currently stored across multiple systems. Developing a process to periodically compile and review these data together could make it easier for staff to analyze trends related to outreach activity, shelter utilization, housing placements, and long-term outcomes.

By better aligning operational data with the indicators already used for community reporting, the City can strengthen its ability to evaluate system performance, identify service gaps, and support data-informed decision-making. #1..
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REPORTING AND COMMUNICATION
Finding 3 The City has established a strong foundation for reporting and communicating information about homelessness
initiatives through formal reports, dashboards, and
community engagement. Opportunities exist to improve
clarity and consistency by consolidating information across programs and expanding the use of outcome-focused
reporting.

Recommendation 3 The City should continue building on its existing reporting framework by:

1. Enhancing and maintaining a consolidated reporting
format or dashboard that integrates key information
across homelessness programs and data systems

2. Standardizing and documenting a core set of
performance indicators to be used consistently across
reports and dashboards

The City uses several mechanisms to report on homelessness initiatives and communicate progress to City Council, community stakeholders, and the public. These include federally required reports, program dashboards, public meetings, and stakeholder communications. Interviews indicated that these efforts provide a solid foundation for transparency and accountability.

Clear and consistent reporting helps decision-makers and the public understand how homelessness programs operate, how resources are used, and whether initiatives are producing intended outcomes. National homelessness policy guidance emphasizes that communities should present performance data in a consistent and accessible manner so that stakeholders can interpret trends, understand progress over time, and use the information to inform policy and program decisions.

The City currently reports homelessness-related information through several channels.

The Annual Action Plan, the Consolidated Plan, and federal grant reports describe program activities, funding allocations, and progress toward strategic goals. Program #1..
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dashboards present data on initiatives such as outreach and job training under the Camp2Home program, and a housing dashboard is currently under development to provide additional information about housing production and funding sources. In addition, the City communicates updates through public hearings, stakeholder listservs, and social media channels.

While these efforts provide multiple avenues for sharing information, interviews identified opportunities to improve how homelessness data are presented and interpreted. Much of the existing reporting focuses on individual programs rather than providing a consolidated view of system-wide outcomes. As a result, stakeholders may find it difficult to understand how different initiatives work together or how individuals progress through the homelessness response system. Interviewees also noted that some dashboards and reporting tools have not been updated regularly, which can limit their usefulness for operational decision-making.

Interviewees further noted that definitions and performance measures can vary across programs and funding sources. Because many initiatives operate under different reporting frameworks, metrics are not always comparable across programs. This variation can make it more challenging to clearly communicate results to decisionmakers and the public. For example, recent results from the annual Point-in-Time count highlight the importance of providing context when reporting community trends.

Preliminary Point-in-Time data indicate that the number of individuals experiencing homelessness decreased by approximately 13% compared with the prior year. While the Point-in-Time count provides an important snapshot of homelessness trends, it does not on its own explain the factors contributing to these changes. Interviews indicated that clearer explanations of how various programs, partnerships, and investments relate to broader community trends could help stakeholders better interpret these results.

Finally, several interviewees noted that placing greater emphasis on outcome-based reporting could strengthen the City’s communication efforts. While many reports track program participation and service delivery, fewer measures focus on longer-term outcomes such as housing retention or housing stability. Expanding reporting in these areas could help the City better evaluate program effectiveness and communicate progress over time.
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Recommendation
The City should continue building on its existing reporting framework to improve the clarity, consistency, and usefulness of information shared with City Council, community stakeholders, and the public. One approach would be to develop a more consolidated reporting format that brings together information from multiple programs and data systems into a single summary. This could take the form of an annual homelessness report or centralized dashboard that highlights key activities, funding levels, and outcomes across initiatives. Presenting this information in one place would help stakeholders better understand how programs work together and how resources are being used.

Several jurisdictions have implemented similar approaches that may be instructive. The King County Regional Homelessness Authority (KCRHA)3 maintains a comprehensive data system that integrates HMIS and related data to track population trends, system flow, and program outcomes through publicly available dashboards. These dashboards allow users to explore trends over time and across subpopulations, supporting deeper analysis of system performance and equity. Similarly, the City of Seattle’s homelessness dashboard4 emphasizes real-time operational and outcome metrics, including outreach activity, shelter placements, and changes in unsheltered homelessness, to support transparency and ongoing performance monitoring. The dashboard is updated regularly and is designed to communicate progress on key initiatives in a clear and accessible format for both decision-makers and the public.

Examples of core performance indicators used by these jurisdictions align closely with data the City is already collecting and reporting through existing dashboards.

Organizing these indicators into a consistent and easy-to-understand framework could improve clarity and usability for decision-makers and the public. This could include the following:
3 https://kcrha.org/regional-homelessness-data/
4 https://experience.arcgis.com/experience/af548fd66fc94e98a5067b299b7d1209/ ?block_id=home-layout-large_block_48
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● System Flow and Utilization:
○ Number of households experiencing homelessness (served) ○ Number of households entering the system
○ Number of households exiting the system
● Housing Outcomes:
○ Number of people placed into shelter or housing
○ Percentage of exits to permanent housing
○ Returns to homelessness
● Timeliness and System Performance:
○ Average length of time experiencing homelessness or in program ○ Time from system entry to housing placement
● Outreach and System Engagement:
○ Number of outreach engagements
○ Shelter referral acceptance rate
● Unsheltered Homelessness and System Impact:
○ Number of encampments or unsheltered locations addressed ○ Point-in-Time count or other measures of unsheltered homelessness ● Affordable Housing and System Capacity:
○ Number of affordable housing units created, preserved, or in development ○ Number of housing units dedicated to people experiencing homelessness ○ Changes in total housing inventory over time
● Funding and Resource Allocation:
○ Total funding allocated to homelessness programs (by source) ○ Funding by program type (e.g., outreach, shelter, housing) ○ Spending rates and percent of funds expended
○ Funding per household or per outcome (e.g., cost per housing placement) Presenting these indicators in a standardized format, with consistent definitions and regular updates, would improve the accessibility and reliability of existing reporting and make it easier to understand system performance over time. #1..
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Building on these examples, the City could further strengthen reporting by presenting key system indicators, including program outcomes, system flow, housing capacity, and resource allocation, in a consistent and accessible format across reports and dashboards. Providing a clear summary of major indicators and trends would help decision-makers and the public more easily understand how different programs contribute to overall homelessness response efforts. Improving the accessibility of public-facing dashboards may further strengthen transparency. Ensuring that dashboards are updated regularly, clearly labeled, and accompanied by explanations of key indicators can help residents and stakeholders better understand the data being presented. Finally, the City may benefit from additional analysis when communicating community-level indicators such as the Point-in-Time count. Working with regional partners, researchers, or evaluators, including continuing collaboration with Homebase as an established technical assistance partner, to review available data, could help provide context for changes in homelessness trends and support clearer communication about what the data indicates over time. This could include developing more standardized approaches to interpreting and presenting trends, as well as incorporating comparative or historical benchmarks to help stakeholders better understand whether observed changes reflect meaningful shifts or normal variation. The City can build on the foundation established through Homebase’s work by continuing to integrate crosssystem data (e.g., HMIS, housing inventory, and administrative datasets), regularly evaluating program effectiveness and outcomes across service areas, and maintaining and expanding the use of interactive dashboards to support ongoing monitoring and data-informed decision-making.
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APPENDIX A: MANAGEMENT RESPONSE
Recommendation Responsible
Party Management’s Response/Implementation Plan
1 Finding 1:

Although the City has
demonstrated leadership in
pursuing funding opportunities
and supporting nonprofit partners
that deliver homelessness
services, many community
programs continue to operate
near capacity and rely on
uncertain funding sources. These
conditions create challenges for
long-term program sustainability
and limit the system’s ability to
consistently meet community
needs.

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

The City appreciates the recognition of current efforts to coordinate initiatives and secure funding. While the City has established a strong foundation, the City has relied on State and Federal funding programs subject to
approval by the legislature which yields reactive
initiatives. The City acknowledges that it will benefit from a proactive, multi-year strategic framework that
would serve as an essential tool for the long-term health of our homelessness response system.

Recommendation 1.1:

The City should continue building
on its existing efforts to
strengthen long-term
sustainability for homelessness
programs by:

Implementation Date: Q4 2027
Action Plan:

1.1 Enhancing Service Provider Capacity
Alongside key partners such as the County and
Community System of Care, the City will work toward
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Recommendation Responsible
Party Management’s Response/Implementation Plan
Formalizing and expanding
support for nonprofit capacity
development
moving beyond basic technical assistance to building
long-term capacity. The City will work with key partners to formalize training that is available to nonprofits. Local nonprofits are leveraging funds from the City, County,
and CSOC and are on the front-line of advancing
community goals and can benefit from periodic critical
training from each of these agencies.

Finding 1:

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

Recommendation 1.2:

The City should continue building
on its existing efforts to
Implementation Date: Q2 2027
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Recommendation Responsible
Party Management’s Response/Implementation Plan
strengthen long-term
sustainability for homelessness
programs by:

Developing and documenting a
coordinated multi-year funding
strategy
Action Plan:

1.2. Strategic Multi-Year Funding Alignment
Integrated Funding Roadmap: Building on the analysis
by Homebase, the City will develop a Three-Year
Funding Plan. This plan will map out anticipated
state/federal grant cycles against the specific capital and operating needs of our local providers.

Finding 1:

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

Recommendation 1.3: Implementation Date: Q2 2027
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Recommendation Responsible
Party Management’s Response/Implementation Plan
The City should continue building
on its existing efforts to
strengthen long-term
sustainability for homelessness
programs by:

Establishing or assessing flexible
funding mechanisms to help
stabilize services and leverage
additional external funding
Action Plan:

1.3. Exploring Flexible Funding & Innovation
The City is committed to exploring the creation of a
Homelessness Innovation & Stabilization Fund that
would serve as a "bridge" to prevent service
interruptions during grant transitions.
2 Finding 2:

Regional homelessness-related
data is collected through multiple
systems that are used by the City,
community organizations, and
other regional partners. However,
differences in reporting
requirements and limited
integration across platforms make
it difficult to develop a
comprehensive view of systemwide outcomes and trends.

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

The City agrees with the audit finding regarding the
need for enhanced data integration and regional
coordination. We recognize that while robust data is
being collected across various platforms, the
fragmentation of these systems limits the ability to view the homelessness response system holistically.

Recommendation 2.1:

The City should continue building
on its existing efforts to
strengthen coordination across
Implementation Date: Q2 2028
Action Plan:
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Recommendation Responsible
Party Management’s Response/Implementation Plan
homelessness-related data
systems by:

Establishing and documenting
consistent data definitions and
reporting expectations in
coordination with regional
partners

2.1. Data Standardization and Reporting Processes
The City will serve as a partner to support and
encourage data quality and uniformity to help meet the
needs of the various funding agencies that align with
HMIS.
• As a funding agency, the City will partner with the
County to prepare a data glossary, outline data
entry methods and reporting expectations and
establish an annual review of these practices to
improve data quality.

Finding 2:

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

Recommendation 2.2: Implementation Date: Q2 2028
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Recommendation Responsible
Party Management’s Response/Implementation Plan
The City should continue building
on its existing efforts to
strengthen coordination across
homelessness-related data
systems by:

Developing and implementing a
process to regularly compile and
analyze key data elements across
systems (e.g., HMIS, ESRI,
Neighborly, and program
dashboards)
Action Plan:

2.2. Aligning Operational Systems with Performance
Indicators
To resolve the silos internally, the City will align ESRI (geographic/outreach data), Neighborly (grant
management), and internal dashboards, to measure
consistent data and improve upon reporting methods.

The City will build a comprehensive dashboard that is
supported by HMIS that can report real-time data to the community. The consolidation will measure consistent
performance indicators and will support system-wide
reporting and analysis
Finding 2:

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

FOR INTERNAL USE OF CITY OF MODESTO ONLY
Recommendation Responsible
Party Management’s Response/Implementation Plan
Recommendation 2.3:

The City should continue building
on its existing efforts to
strengthen coordination across
homelessness-related data
systems by:

Aligning operational data systems
with existing performance
indicators to support consistent,
system-wide reporting and
analysis
Implementation Date: Q2 2028
Action Plan:

2.3. Aligning Operational Systems with Performance
Indicators
To resolve the silos internally, the City will align ESRI (geographic/outreach data), Neighborly (grant
management), and internal dashboards, to measure
consistent data and improve upon reporting methods.

FOR INTERNAL USE OF CITY OF MODESTO ONLY
Recommendation Responsible
Party Management’s Response/Implementation Plan
3 Finding 3:

The City has established a strong
foundation for reporting and
communicating information about
homelessness initiatives through
formal reports, dashboards, and
community engagement.

Opportunities exist to improve
clarity and consistency by
consolidating information across
programs and expanding the use
of outcome-focused reporting.

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

The City agrees with this audit finding and
recommendation regarding the need for a more
integrated and outcome-oriented reporting framework.

The City recognizes that the lack of a consolidated,
system-wide view can make it difficult for the public and decision-makers to assess the true impact of
homelessness programs.

Recommendation 3.1:

The City should continue building
on its existing reporting framework
by:

Enhancing and maintaining a
consolidated reporting format or
dashboard that integrates key
information across homelessness
programs and data systems
Implementation Date: Q1 2027
Action Plan:

3.1. Unified System-Wide Reporting
• Consolidated Dashboard: The City will merge
data from internal disparate sources from all
departments (Camp2Home, housing production,
and outreach) into a single, public-facing portal.

This will allow stakeholders to see how an
individual moves from initial outreach through
shelter and into permanent housing.
#1..
- 47 -
Homelessness Response Performance Audit Report | Page 37

FOR INTERNAL USE OF CITY OF MODESTO ONLY
Recommendation Responsible
Party Management’s Response/Implementation Plan
• Regular Update Cadence: the City will establish
the public dashboards and ensure it is updated at
least annually, ensuring the data remains a
reliable tool for operational decision-making.

Finding 3:

The City has established a strong
foundation for reporting and
communicating information about
homelessness initiatives through
formal reports, dashboards, and
community engagement.

Opportunities exist to improve
clarity and consistency by
consolidating information across
programs and expanding the use
of outcome-focused reporting.

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

The City agrees with this audit finding and
recommendation regarding the need for a more
integrated and outcome-oriented reporting framework.

The City recognizes that the lack of a consolidated,
system-wide view can make it difficult for the public and decision-makers to assess the true impact of
homelessness programs.

Recommendation 3.2:

The City should continue building
on its existing reporting framework
by:

Standardizing and documenting a
core set of performance indicators
to be used consistently across
reports and dashboards
Implementation Date: Q4 2027
Action Plan:

3.2. Standardizing Key Metrics and Priorities
The City will incorporate the listed key performance
indicators and standardize and document this among
other established KPIs from other Departments as a
#1..
- 48 -
Homelessness Response Performance Audit Report | Page 38

FOR INTERNAL USE OF CITY OF MODESTO ONLY
Recommendation Responsible
Party Management’s Response/Implementation Plan
core set of performance indicators to be used
consistently across reports and dashboards.

Finding 3:

The City has established a strong
foundation for reporting and
communicating information about
homelessness initiatives through
formal reports, dashboards, and
community engagement.

Opportunities exist to improve
clarity and consistency by
consolidating information across
programs and expanding the use
of outcome-focused reporting.

Edgar Garcia,
Community
Development
Manager
☒ Agree
☐ Disagree
Response:

The City agrees with this audit finding and
recommendation regarding the need for a more
integrated and outcome-oriented reporting framework.

The City recognizes that the lack of a consolidated,
system-wide view can make it difficult for the public and decision-makers to assess the true impact of
homelessness programs.

Recommendation 3.3:

The City should continue building
on its existing reporting framework
by:

Establishing and applying
consistent reporting practices that
include analysis and clear
explanation of key trends,
program outcomes, and how
programs and investments
Implementation Date: Q1 2027
Action Plan:

3.3. Communicating Outcomes
Communicating Outcomes: Develop a coordinated plan
among other departments to capture key data, trends,
and clear explanations of outcomes within the
comprehensive dashboard with accompanying
testimonials and success stories to the City Manager’s
#1..
- 49 -
Homelessness Response Performance Audit Report | Page 39

FOR INTERNAL USE OF CITY OF MODESTO ONLY
Recommendation Responsible
Party Management’s Response/Implementation Plan
contribute to community-level
results.

Office at minimum on an annual basis so these stories
may be shared on social media and other mediums.
#1..
- 50 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

April 22, 2026
Date: April 1, 2026
TO: Audit Committee
Sue Zwahlen, Chair
Rosa Escutia-Braaton, Vice Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
FROM: Colleen Rozillis, City Auditor
SUBJECT: Receipt of the Fiscal Year 2025-26 Internal Audit Status Report CONTACT: Colleen Rozillis, City Auditor, [email protected], 206-302-6795 DESCRIPTION:

Consider the Fiscal Year 2025-26 Internal Audit Status Report dated April 1, 2026. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

The recommended action supports the City’s 2025-2026 Goal J: Build a highperformance organization.

BACKGROUND:

City Council approved seven (7) projects for Fiscal Year (FY) 2025-26’s Internal Audit work plan, plus program management. All projects are currently within budget and on track for delivery within the planned timeline. The attached report details the status of projects in progress.

DISCUSSION:

Internal Audit projects are proceeding as planned.

FISCAL IMPACT:

None.
#2..
- 51 -
Audit Committee, April 22, 2026
Receipt of the Fiscal Year 2025-26 Internal Audit Status Report

Page 2 of 2 ends

CEQA/NEPA REQUIREMENTS:

This item does not constitute a “project” within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 and requires no environmental review.

RECOMMENDED COMMITTEE ACTION:

Motion to receive and file the Internal Audit Status Report dated April 1, 2026.

Approved by:

Colleen Rozillis, City Auditor
Joseph P. Lopez, City Manager
Attachments:

1. Internal Audit Status Report dated 04-01-26.
#2..
- 52 -
CITY OF MODESTO INTERNAL AUDIT STATUS REPORT 04-01-26
April 1, 2026
To: City of Modesto Audit Committee
From: Baker Tilly Advisory Group, LP
Subject: Internal Audit Status Report December 31, 2025 through April 1, 2026 _____
FY 25-26 INTERNAL

AUDIT PROJECTS

RECOMMENDATION VALIDATION

PROCESS IT POLICY REVIEW HOMELESSNESS RESPONSE PERFORMANCE AUDIT

FEE BENCHMARKING & COST

RECOVERY AUDIT

CASH HANDLING INTERNAL

CONTROLS TESTING

PARKS, RECREATION &

NEIGHBORHOOD

PERFORMANCE AUDIT
Schedule July 2025 – June 2026 August 2025 – June 2026 October 2025 – March 2026 January – June 2026 December 2025 – March 2026 February – June 2026 Budget Status: Total
Budget and % Expended
through 12/31
$10,000
100%
$25,000
7%
$40,000
95%
$40,000
8%
$30,000
97%
$35,000
3%
Project Description Continue to track and validate
recommendation implementation.

Review IT Department policies,
identify gaps and opportunities for
improvement, and support the
Department during the policy update
process.

Assess the efficiency and
effectiveness of the City’s response
to homelessness and compare City
practices to industry best practices.

Review the City’s fee schedule,
compare fees to peers, and assess
the extent to which fees cover costs.

Test internal controls related to cash
handling activities across the City.

Assess economy, efficiency, and
effectiveness of departmental
operations and compare to industry
best practices.

Activities for This
Period
Continue to close findings based on
submitted documentation.

Initiated project, conducted reviews
of select policies, and provided
feedback for updates to the policies.

Completed analysis, developed draft
and final reports.

Define audit scope and objectives,
completed fieldwork.

Completed onsite fieldwork, drafted
and finalized report. Defined audit scope and objectives.

Activities for Next
Period
Continue to close findings based on
submitted documentation.

Continue to review and provide
feedback as policies are developed
and revised.

None.

Conduct peer benchmarking and
analysis, develop draft and final
reports.

None.

Conduct fieldwork, including
document review, interviews, and
preliminary analysis.

Issues None. Schedule delays. None. None. None. None.

BASIC INTERNAL

AUDITOR SERVICES

ONGOING INTERNAL AUDIT

SERVICES

ETHICS HOTLINE STATISTICS
Schedule July 2025 through June 2026 Complaint Type Complaints Received During the Period
Under Review Referred to Appropriate City
Official(s)
Closed
Budget Status: Total
Budget and %
Expended
$25,000
88%
Compliance & Ethics 6 0 6 6
Fraud 0 0 0 0
Employment Matters 0 0 0 0
#2..
- 53 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

April 22, 2026
Date: April 1, 2026
TO: Audit Committee
Sue Zwahlen, Chair
Rosa Escutia-Braaton, Vice Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
FROM: Colleen Rozillis, City Auditor
SUBJECT: Receipt of the Audit Findings Validation report CONTACT: Colleen Rozillis, City Auditor, [email protected], 206-302-6795 DESCRIPTION:

Consider the Audit Finding Validation Report dated April 1, 2026. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

The recommended action supports the City’s 2025-2026 Goal J: Build a highperformance organization.

BACKGROUND:

City Council approved an ongoing project to validate the corrective actions of audit findings and recommendations issued since 2016.

DISCUSSION:

The review incorporates all audit findings and recommendations dating back to 2016, a total of 282 findings. In the last quarter, Baker Tilly was able to verify that 9 findings have been closed. To date, Baker Tilly has verified that 239 findings have been closed, indicating that the issue is resolved.
#3..
- 54 -
Audit Committee, April 22, 2026
Receipt of the Audit Findings Validation Report

Page 2 of 2 ends

FISCAL IMPACT:

This review is completed quarterly and budgeted annually in the amount of $10,000 and is anticipated to be delivered within budget. This audit amount was funded as part of the General Fund budget.

CEQA/NEPA REQUIREMENTS:

This item does not constitute a “project” within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 and requires no environmental review.

RECOMMENDED COMMITTEE ACTION:

Motion to receive and file the quarterly Audit Findings Validation Report.

Approved by:

Colleen Rozillis, City Auditor
Joseph P. Lopez, City Manager
Attachments:

1. Audit Finding Validation Report 04-01-26

2. Audit Validation - Open Recommendations (Detail)- April 2026 #3..
- 55 -
City of Modesto - Audit Recommendations Tracking Report 3/27/2026
Reports
Total Recommendations Open Recommendations
(Not Yet Completed by City)
Validated Recommendations
(By Baker Tilly)
Reportable Recommendations
(Newly validated since last
summary)
Single Audit Report - 2017 (17-SAR ) 4 0 4 0
Single Audit Report - 2018 (18-SAR ) 3 0 3 0
Single Audit Report - 2019 (19-SAR ) 1 0 1 0
Single Audit Report - 2020 (20-SAR ) 1 0 1 0
Single Audit Report - 2021 (21-SAR ) 1 0 1 0
2018-2019 Stanislaus County Civil Grand Jury (18_19-SCCGJ ) 8 0 8 0 2022-2023 Stanislaus County Civil Grand Jury Final Report (22_23-SCCGJ ) 5 0 5 0 2021-2022 Stanislaus County Civil Grand Jury Final Report (21_22-SCCGJ ) 7 0 7 0 2024- FORESTRY AND SOLID WASTE EFFICIENCY STUDY UPDATE (24-FASWES ) 20 3 17 3 2024- PROCUREMENT PERFORMANCE AUDIT (24-PPA ) 11 2 9 2
2016- Solid Waste Efficiency Study (16-SWES ) 12 1 11 1 2016-WATER AND WASTEWATER EFFICIENCY STUDY UPDATE (16-WWE ) 14 1 13 0 2017- BILLING AND ACCOUNTS RECEIVABLE REVIEW (17-BAR ) 4 0 4 0 2017- FLEET SERVICES EFFICIENCY STUDY (17-FSE ) 27 1 26 0 2017- INTERNAL CONTROLS TESTING: PROCUREMENTCARDS (17-ICTPC ) 19 0 19 0 2017-INTERNAL CONTROLS TESTING: TRAVEL EXPENSES (17-ICTTE ) 17 0 17 0 2017- INTERNAL SERVICE FUND REVIEW (17-ISF ) 18 7 11 1
2018- Fleet Utilization Study (18-FUS ) 13 4 9 0
2018- PERMITTING EFFICIENCY STUDY (18-PES ) 10 0 10 0
2016 INTERNAL CONTROLS TESTING: CASH HANDLING (16-ICTCH ) 42 0 42 0 2025 Employment After Retirement Review (25-EARR ) 4 0 4 0 2025 Payroll Internal Controls Review (25 -PICR ) 5 0 5 1 2025 Water and Wastewater Utilities Fiscal Review (25-WWUFR ) 9 7 2 0 2025 Accounts Receivable Internal Controls Review (25-ARICR ) 7 1 6 0 2025 Capital Improvement Program Assessment (25-CIP ) 9 8 1 0 2025 Permitting Efficiency Study Update (25-PES2 ) 11 8 3 1 Total 282 43 239 9
Legend:

Total Recommendations = number of recommendations in the report Open Recommendations = number of recommendations not yet completed by City Validated Recommendations = number of recommendations validated by Moss Adams as completed and adequately addresses the finding Reportable Recommendations = number of recommendations validated since last summary report for Audit Committee

Page 1 ends

#3..
- 56 -
ID
Finding
Number
from
Report
Report
Year
Report
Code
Auditin
g Entity Finding Recommendation Baker Tilly Determination Notes 39 8 2024 24-FASWE MA
The City has significant tree-related risks and potential liability. Continue to take measures to address the tree maintenance backlog to reduce tree-related risks.

The City provided data on the number of trees pruned and stumps removed. They also provided details indicating that they have decreased the pruning cycle from 13 years to 8.5 years. They also reported that they previously estimated a backlog of between 3,000 and 4,000 stumps and have reduced that number to fewer than 1,600. 47 5 2024 24-PPA MA
Expectations between Purchasing and departments are not always clear because Purchasing has not established clear service level standards.

Establish service level standards to clarify expectations between Purchasing and other City departments.

The City provided the updated purchasing manual, which states, “If all the necessary supporting documentation is attached to the RX, the requisition should be converted to a PO within 2–3 business days.” It also outlines the process for urgent requests that require completion in less than 2–3 business days.

The City also provided, through its website, data on the average number of days it takes to go from approving a purchase requisition to approving a purchase order. The data shows a decrease in processing time year over year, and the current average is 0.44 days for FY25–26.
53 4 2016 16-SWES MA
Employee turnover has averaged 8% per year over the past three fiscal years, primarily due to retirements, and 27% of the current workforce has more than 20 years of service with the City.

Continue to take measures to retain and develop the existing workforce and attract qualified staff.

The City provided us with hiring data from CY21 through YTD CY26 for Solid Waste and Forestry. The data shows that they have taken measures to attract qualified staff. From CY24 through YTD CY26, Solid Waste has hired for 15 positions, and only two positions remain vacant. For the same time period, Forestry has hired for 12 positions, with one pending and one position remaining vacant.
232C 6C 2025 25-PES2 MA
Although eTRAKiT has significantly streamlined and modernized the permitting and plan review process, there are some challenges related to the system's governance and capabilities that are causing issues for staff. In addition, the lack of automated phone and messaging systems is impeding efficiency in some areas.

Consider offering expanded eTRAKiT trainings to staff and customers The City provided a screenshot of its training portal confirming that it offers five TRAKiT trainings: Intro to TRAKiT, TRAKiT Lookup Basics, TRAKiT for Admin Users, TRAKiT for Code Enforcement, and TRAKiT Review KPIs. They also provided an adenga for a TRAKiT Admin Training that was offered Jan, 30 , 2026.
40A 9A 2024 24-FASWE MA
The divisions have begun to address equipment replacement needs, but equipment needs persist and there is no formal equipment asset management strategy.

Conduct an asset inventory and condition assessment. The City provided screenshots of the asset inventory, lifecycle status code IDs, and documentation on the anticipated lifecycle expectancy by vehicle type. The documentation includes the years and mileage for each specific vehicle type. 155 14 2030 17-ISF MA
N/A Develop a comprehensive deferred maintenance plan. The City provided screenshots of asset maintenance tasks assigned by department, by system type, and the overall five-year plan by fund.
204 1 2025 25 -PICR MA
During our testing procedures and interviews with the PD and FD, it was discovered that each department utilizes its own unique timekeeping systems from which they have to extra reports to send to City Payroll for processing. The PD and FD have much more complex scheduling and timekeeping needs compared to other City departments, which necessitates the separate systems. These systems differ from the one used by City Payroll (Oracle) to record time for all other departments, and these systems do not automatically integrate with Oracle. The use of different systems creates additional manual work for both the FD and PD, as well as for City Payroll, which increases the risk of payroll errors or inconsistencies.

Although PD and FD have distinct timekeeping systems given their unique scheduling and timekeeping needs, the City should consider utilizing timekeeping systems that automatically integrate with Oracle to alleviate the burdens of the manual processes that the City currently performs. Based on the PD's and FD's scheduling and timekeeping needs, the City should contact Oracle to explore the compatibility of its systems...Alternative to adopting new timekeeping systems, the City should consider whether it can develop automated workflows to integrate the current PD and FD timekeeping systems with Oracle. This might entail using automated data transfer tools that can facilitate a seamless transfer of timekeeping data from the PD and FD systems into Oracle.

The City provided us with a demonstration of the newly implemented First Due Timekeeping system. They walked us through the processes for entering time, validating time, the email receipts generated for time entries, and the payroll report used to download data from First Due. They also explained their auditing process to confirm the data is accurate and that there are no duplications.

Once completed, the report is sent to the City’s payroll team, where it is reviewed and audited again before being uploaded into Oracle. The City confirmed that this process has reduced many of the manual tasks that existed in the previous system and processes. 43B 1B 2024 24-PPA MA
High turnover in fiscal years 2022 and 2023 reduced Purchasing’s capacity, which impacted operations and services to other departments.

Continuously monitor and assess staffing and workload needs to anticipate any potential issues and proactively address concerns.

The City provided the the results of staff feedback survey. The City has also made adjustments to the organizational structure to support workload by adding 1 FTE Buyer in FY 24–25 to assist Fleet and Utilities due to capacity needs; introducing a part-time intern in FY 25–26 to provide administrative support to Buyers, particularly the Senior Buyer and Buyer (MPD/MFD); redistributing the Public Works division across multiple departments rather than assigning it to a single Buyer; and having Senior Buyers share workload responsibilities during capacity constraints, especially related to OpenGov. 42C 11C 2024 24-FASWE MA
Procurement delays are still impacting Forestry and Solid Waste’s ability to obtain necessary equipment, likely due to limited central procurement capacity and supply chain issues.

As noted in Equipment, develop backup inventory over time for all major equipment to prevent procurement challenges from majorly impacting operations in the future.

The City provided a report that includes major equipment, Life cycle status, last serivce date, and planned retirement date.

Page 2 ends

#3..
- 57 -
ID
Finding
Number
from
Report
Report
Year
Report
Code
Auditin
g Entity Finding Recommendation Department Assigned Expected Completion Date 95 17 2017 17-FSE MA
Vehicle and equipment project replacement cost calculations are missing important elements.

Revise the fleet replacement cost methodology to include surplus values, annual inflation rates, auction fees, and make-ready costs. PW QTR2 2026 211A 3A 2025 25-WWUF MA
The City's storm drain budget is projected to decline over the next five years, impacting the City's ability to maintain the program that helps prevent flooding and protects the City's water quality.

Evaluate reallocating storm drain fees, establishing development impact fees, and levying special taxes to fund the storm drain program more effectively over time. UTL QTR3 2026 211A 3B 2025 25-WWUF MA
The City's storm drain budget is projected to decline over the next five years, impacting the City's ability to maintain the program that helps prevent flooding and protects the City's water quality.

Consider reallocating street sweeping expenditures to be financed by a different fund than the storm drain fund. CED QTR3 2026
37 6 2024 24-FASWE MA
The City’s Tree Ordinance can be strengthened in several areas. Update the Tree Ordinance based on International Society of Arborists (ISA) best practice guidance. PW QTR3 2026
44 2 2024 24-PPA MA
Despite appropriate staffing when compared to peers, some Purchasing staff reported high workloads and limited capacity. This is likely due to unbalanced workloads across buyers, recent turnover, and process and system inefficiencies.

In addition to implementing other recommendations throughout this report related to turnover and process efficiency, perform a workload analysis to support balancing workloads appropriately across Purchasing buyers. Finance QTR2 2026 49 7 2024 24-PPA MA
Purchasing lacks comprehensive standard operating procedures (SOPs), which are important to promote staff knowledge, consistency, and accountability; and reduce risk.

Develop comprehensive procurement SOPs to guide staff on procurement processes. Finance QTR2 2026
55 6 2016 16-SWES MA The City’s Tree Ordinance can be strengthened in several areas. Update the Tree Ordinance based on ISA best practice guidance. PW QTR3 2026 66 5B 2016 16-WWE MA
The SCADA function is understaffed and disconnected from the Wastewater Division by reporting to the Information Technology (IT) Department.

Prioritize and address SCADA staffing and system needs.

UTL QTR3 2026
142 1 2017 17-ISF MA
N/A Establish a risk management funding and reserve policy to fully fund each years’ liability program costs, plus estimated claims at a flexible confidence range of 75 to 85 percent. OPMB QTR2 2026
143 2 2018 17-ISF MA N/A Develop a plan to repay the existing deficit over 10 years. OPMB QTR2 2026 150 9 2025 17-ISF MA N/A Continue to fund fleet maintenance utilizing actual costs. PW QTR2 2026 151 10 2026 17-ISF MA
N/A Revise fleet ISF replacement cost methodology to include surplus values, annual inflation rates, auction fees, and make-ready costs. PW QTR2 2026 156 15 2031 17-ISF MA
N/A Establish a capital funding policy and renewal reserve funded by annual distributions. OPMB QTR2 2026
157 16 2032 17-ISF MA
N/A Continue to seek alternative funding for critical facilities capital needs.

OPMB QTR2 2026
159 18 2034 17-ISF MA
N/A Consider establishing a reserve level maximum valued at three to six months’ operating costs, plus amortized equipment costs, and reallocating any additional funds to address other General Fund capital needs. OPMB QTR2 2026 160 1 2018 18-FUS MA
N/A Update the utilization analysis six months after initial recommendations have been implemented to reestablish a baseline and complete a utilization analysis every two years thereafter. PW QTR4 2026
City of Modesto: Listing of Open Audit Findings March 27, 2026 1 #3..
- 58 -
ID
Finding
Number
from
Report
Report
Year
Report
Code
Auditin
g Entity Finding Recommendation Department Assigned Expected Completion Date 162 3 2018 18-FUS MA
N/A Right-size the fleet based on results of the utilization analysis, which identified 45 units as potential candidates for reduction, reassignment, or pooling.

PW QTR4 2026
171 12 2018 18-FUS MA
N/A Expand the existing Wastewater Operations Pool at the Sutter Treatment Plant from 2 to 8 vehicles, using underutilized units from other Utility Divisions at the plant. PW QTR2 2026
172 13 2018 18-FUS MA
N/A Revise the current vehicle take-home policy to add specific criteria relating to takehome and standby vehicle assignments. Review all vehicle take-home and current standby authorizations and justify approvals based on the new vehicle take-home policy.

PW QTR4 2026
209 1 2025 25-WWUF MA
The Department lacks a systematic approach to tracking total anticipated project costs within its Capital Improvement Program (CIP), leading to large fluctuations in project costs and raising potential transparency and cash flow issues.

Clearly document total project anticipated costs, update totals as new projects are added, and evaluate project budget versus actuals to assess trends. OPMB QTR1 2026 212 4 2025 25-WWUF MA
Although water and wastewater rates have increased in recent years, the City has not adjusted related fees in over a decade, which may result in insufficient revenue to cover costs.

Evaluate water and wastewater fees to ensure costs are adequately covered.

UTL QTR4 2026
213 5 2025 25-WWUF MA
Despite grant opportunities, the Utilities Department lacks the capacity to pursue and manage grants effectively due to the absence of a dedicated grants management position.

Consider establishing a dedicated grants management position (potentially as a shared resource for City departments) to streamline the grant application process and reduce the workload on existing staff. UTL QTR3 2026 220 7 2025 25-ARICR MA
It was noted that discrepancies and exceptions flagged by the billing system from customer accounts are reviewed by the Senior Account Clerk or Account Technician.

However, according to discussions with the Director of Finance, the current billing system does not capture or display the actions taken by the employee during the review and approval of these exceptions.

As the City implements the new accounts receivable system, which includes an audit log captures all employee actions such as the review of billing exceptions, we recommend leveraging this functionality to maintain detailed records of the review process, such as timestamps, reviewer identities, and decisions made. This system capability supports strong accountability and control over billing exceptions.

Finance QTR3 2026
221 1 2025 25-CIP MA
The City does not currently have a uniform methodology across its departments for estimating and reporting project budgets which could lead to a reliance on initial costs rather than comprehensive project cost estimates. This creates an increased risk of inadequate funding for projects, as full estimated costs may not be consistently reported during the project design phase, leading to potential risks of financial shortfalls later in the construction phase, as wlel as reduced transparency within the CIP book's reporting.

To ensure accurate budgeting and long-term planning, the City should develop comprehensive cost estimates for upcoming projects, such as implementing GFOA and other industry standard best practices, that encompass the full scope of expenses, rather than just initial costs, and ensure that the costs for the full project lifecycle are included in the CIP book reporting. OPMB QTR1 2026 223 3 2025 25-CIP MA
The City has some documented policies and procedures guiding capital planning and project management, but they are outdated and there are key gaps. This makes it difficult to ensure continuity of operations in an environment with personnel turnover.

The City should establish a comprehensive and up-to-date set of capital planning policies and procedures informed by best practices, including project management resources that provide standardized templates, checklists, and forms.

OPMB QTR3 2026
226 6 2025 25-CIP MA
The CIP book aligns with a number of industry best practices, but there are opportunities to improve public transparency, process descriptions, and financial and project data.

The City should update the CIP book with best practice elemments, including expanding on the planning and prioritization process descriptions, adding more detail to financial and project data, and providing a holistic narrative about the City's capital activities.

OPMB QTR2 2026 - Initial Changes
QTR2 2027 - Final Changes
228 2 2025 25-PES2 MA
The City's current fee structure may not adequately cover the cost of all phases of development review and permitting activities, which could result in te subsidization of these activities.

The City should prioritize conducting a fee study and establish clear cost recovery goals for development and permitting activities. CED
Task Force Reconvened by Summer 2026;
completing this recommendation will at least
be a two-year process (est. end of 2028)
City of Modesto: Listing of Open Audit Findings March 27, 2026 2 #3..
- 59 -
ID
Finding
Number
from
Report
Report
Year
Report
Code
Auditin
g Entity Finding Recommendation Department Assigned Expected Completion Date 229 3 2025 25-PES2 MA
The CED Deapartment has established performance measures related to permitting activites, although these metrics are largely volume-based.

To enhance customer service delivery, the CED Department should develop additional performance measures related to customer experience and timeliness.

CED QTR1 2027
210A 2A 2025 25-WWUF MA
The City lacks key maintenance data, an asset management system, and staff capacity to effectively address utility-related maintenance needs.

Collect and track maintenance data including installation dates, renewal periods, and estimated costs.

UTL QTR1 2028
210B 2B 2025 25-WWUF MA
The City lacks key maintenance data, an asset management system, and staff capacity to effectively address utility-related maintenance needs.

Utilize Lucity as an asset management system, or explore other systems to track asset management data more effectively and efficiently. UTL QTR1 2028 222A 2A 2025 25-CIP MA
The City's capital planning and project prioritization efforts are oftentimes conducted on a decentralized and somewhat subjective basis, which creates risks that capital project prioritization and funding are not transparent or consistently aligned with specific City priorities.

The City should adopt prioritization criteria that appropriately weight critical maintenance needs and support clear communication.

OPMB QTR3 2026
222B 2B 2025 25-CIP MA
The City's capital planning and project prioritization efforts are oftentimes conducted on a decentralized and somewhat subjective basis, which creates risks that capital project prioritization and funding are not transparent or consistently aligned with specific City priorities.

The City should maintain an Unfunded Project list in priority order to identify critical project needs if alternative funding sources become available.

OPMB QTR2 2026
222C 2C 2025 25-CIP MA
The City's capital planning and project prioritization efforts are oftentimes conducted on a decentralized and somewhat subjective basis, which creates risks that capital project prioritization and funding are not transparent or consistently aligned with specific City priorities.

The City should consider reestablishing the CIP task force.

OPMB QTR3 2026
224A 4A 2025 25-CIP MA
The City's CIP processes lack modern technology solutions deliberately designed for capital projects and is largely decentralized between different systems and departments, which makes it difficult to track and report on project status on a standardized basis.

The City should establish a formalized project-tracking methodology.

OPMB QTR3 2026
224B 4B 2025 25-CIP MA
The City's CIP processes lack modern technology solutions deliberately designed for capital projects and is largely decentralized between different systems and departments, which makes it difficult to track and report on project status on a standardized basis.

The City should develop regular reporting on key financial and project data to keep all stakeholders up-to-date.

OPMB TBD
227A 1A 2025 25-PES2 MA
Due to growth in permitting activities, workloads for staff involved in the permitting and building inspection processes have increased, although capacity to manage the workload is low, likely due to low staffing levels.

As resources allow, prioritize hiring for critical positions that will alleviate the most significant workload pressures, including Building Inspectors (particularly staff dedicated to code enforcement) and Development Services Technicians (in both Building and Planning).

CED QTR4 2027
227B 1B 2025 25-PES2 MA
Due to growth in permitting activities, workloads for staff involved in the permitting and building inspection processes have increased, although capacity to manage the workload is low, likely due to low staffing levels.

Review workloads throughout outside departments involved in the plan review process after implementing process improvements recommended in the Plan Review Timelines finding. CED QTR1 2027
227C 1C 2025 25-PES2 MA
Due to growth in permitting activities, workloads for staff involved in the permitting and building inspection processes have increased, although capacity to manage the workload is low, likely due to low staffing levels.

Review workloads at the Reception Counter after implementing system upgrades recommended in the Automated Phone and Messaging Systems finding.

CED End of QTR4 2026 / Beginning of QTR1 2027
230A 4A 2025 25-PES2 MA
Plan review timelines may be difficult for some departments to meet due to limited staff capacity, variation in project complexity, and a lack of consistent procedures across departments for timely review of plans.

To help manage the plan review timelines across departments and address the limited staff capacity, the City should consider implementing differentiated timelines based on project complexity and type. CED QTR1 2027 City of Modesto: Listing of Open Audit Findings March 27, 2026 3 #3..
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ID
Finding
Number
from
Report
Report
Year
Report
Code
Auditin
g Entity Finding Recommendation Department Assigned Expected Completion Date 230B 4B 2025 25-PES2 MA
Plan review timelines may be difficult for some departments to meet due to limited staff capacity, variation in project complexity, and a lack of consistent procedures across departments for timely review of plans.

To help manage the plan review timelines across departments and address the limited staff capacity, the City should implement a standardized procedure for staff to perform an initial completeness check upon receiving an application and before initial review is started.

CED QTR3 2026
232A 6A 2025 25-PES2 MA
Although eTRAKiT has significantly streamlined and modernized the permitting and plan review process, there are some challenges related to the system's governance and capabilities that are causing issues for staff. In addition, the lack of automated phone and messaging systems is impeding efficiency in some areas.

To improve the customer experience, limit staff confusion, and reduce plan review time, the CED Department should implement a nested question feature to guide applicants to the correct application forms for their project. CED QTR3 2026 38B 7B 2024 24-FASWE MA
Current staffing and equipment levels are not sufficient to address the City’s tree maintenance backlog and maintain a tree pruning cycle aligned with best practices.

Consider adding additional Forestry staff and equipment to reach a five- to sixyear pruning cycle. PW QTR3 2026 42A 11A 2024 24-FASWE MA
Procurement delays are still impacting Forestry and Solid Waste’s ability to obtain necessary equipment, likely due to limited central procurement capacity and supply chain issues.

Work with Purchasing to establish service level standards and performance targets that will support efficient operations in Forestry and Solid Waste.

PW QTR3 2026
City of Modesto: Listing of Open Audit Findings March 27, 2026 4 #3..
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

April 22, 2026
Date: April 1, 2026
TO: Audit Committee
Sue Zwahlen, Chair
Rosa Escutia-Braaton, Vice Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
FROM: Colleen Rozillis, City Auditor
SUBJECT: Receipt of the Cash Handling Internal Controls Testing report CONTACT: Colleen Rozillis, City Auditor, [email protected], 206-302- 6795
DESCRIPTION:

Consider the Cash Handling Internal Controls Testing Report dated March 26, 2026 and forwarding to Council for acceptance. (Funding Source: Not Applicable) STRATEGIC PLAN ELEMENT:

The recommended action supports the City’s 2025-2026 Goal J: Build a highperformance organization.

BACKGROUND:

City Council approved a Cash Handling Internal Controls Testing as part of the Fiscal Year (FY) 2025-26 Internal Audit work plan.

DISCUSSION:

The internal control review evaluated the City’s cash handling processes. The review focused on controls related to cash receipts, deposit preparation, physical security, storage, safeguarding of funds, reconciliations, segregation of duties, and the recording and documentation of transactions. The report contains three (3) recommendations for the City’s cash handling internal control framework:
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Audit Committee, April 22, 2026
Receipt of the Cash Handling Internal Controls Testing Report

Page 2 of 2 ends

• Counterfeit Currency Detection: We recommend the City standardize counterfeit detection practices by enforcing the requirement to verify all currency of $5 and above and by providing updated, documented training for all cash handling staff.
• Safeguarding of Assets: The City should ensure that all cash and checks are secured in a locked location at all times, even when stored in restricted or camera‑monitored areas.
• Unsecured Storage of Cash Deposits: The City should store all cash in a locked, access-restricted drawer or safe in accordance with GFOA best practices and City policy. The City should also update procedures to prohibit unsecured storage and ensure staff consistently follow secure cash-handling practices.

This internal control review was completed under Generally Accepted Government Auditing Standards (GAGAS).

FISCAL IMPACT:

This review is completed quarterly and budgeted annually in the amount of $30,000 and is anticipated to be delivered within budget. This audit amount was funded as part of the General Fund budget.

CEQA/NEPA REQUIREMENTS:

This item does not constitute a “project” within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 and requires no environmental review.

RECOMMENDED COMMITTEE ACTION:

Motion to receive the Cash Handling Internal Controls Testing Report dated March 26, 2026 and forwarding to Council for acceptance.

Approved by:

Colleen Rozillis, City Auditor
Joseph P. Lopez, City Manager
Attachments:

1. Cash Handling Internal Controls Testing Report 03-26-26. #4..
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As of June 3, 2025, Moss Adams LLP has merged with Baker Tilly.

FINAL REPORT

CASH HANDLING INTERNAL CONTROLS REVIEW
March 26, 2026
Baker Tilly Advisory Group, LP
999 Third Avenue, Suite 2800
Seattle, WA 98104
(206) 302-6500
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Cash Handling Internal Controls Review Report

FOR INTERNAL USE OF CITY OF MODESTO ONLY
Table of Contents
I. Executive Summary 1
A. Introduction 1
B. Summary of Findings 1
II. Scope and Methodology 3
A. Procedures Performed 3
B. Statement of Compliance with Generally Accepted Government Auditing Standards (GAGAS) 4
III. Commendations 5
A. Modesto PD and Building Safety 5
B. Cashiering Division 5
C. Creekside Pro Shop 6
D. City Clerk – Passport Area 6
IV. Findings and Recommendations 7
A. Counterfeit Currency Detection 7
B. Safeguarding of Assets 9
C. Unsecured Storage of Cash Deposits 11
V. Process Improvement Opportunities 13
A. Safeguarding of Cash 13
B. Deposits by Satellite Locations 14
C. Bait Money 14
D. Change Fund Reconciliation 15
E. Cash Drawer Daily Close 16
Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. #4..
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I. Executive Summary
A. Introduction
As part of the Fiscal Year 2025 - 2026 Internal Audit Program, the Modesto City Auditor, Baker Tilly, conducted an internal controls review of the City of Modesto’s (the City) cash-handling processes. On January 14 and 15, 2026, we performed unannounced, in-person cash counts and walkthroughs at selected City locations that handle cash, change funds, or petty cash drawers. These City locations included:
 Creekside Pro Shop
 Modesto Police Department (PD)
 City Clerk – Passport Area
 Building Safety
 Cashiering Division
 Parks and Recreation
 Senior Center (satellite location of Parks and Recreation)  Mary Grogan Park (satellite location of Parks and Recreation) The purpose of these cash counts was to evaluate the design and operating effectiveness of key internal controls over cash handling at each City location. The review focused on controls related to cash receipts, deposit preparation, physical security, storage, safeguarding of funds, reconciliations, segregation of duties, and the recording and documentation of transactions. By conducting unannounced visits, the review aimed to observe real-time practices, identify gaps that may not be evident during scheduled reviews, and assess whether procedures are consistently followed across locations.

B. Summary of Findings
Based on the procedures performed, we identified three findings related to the City’s cash handling internal control framework. A summary of these findings is included below.

1. Finding Counterfeit currency detection practices are not applied consistently across City locations, as different locations use varying thresholds for verifying bills. These inconsistencies indicate that staff are not uniformly following the City’s established policy requirements.

Recommendation We recommend the City standardize counterfeit detection practices by enforcing the requirement to verify all currency of $5 and above and by providing updated, documented training for all cash handling staff. This training should also be incorporated into onboarding to ensure consistent compliance across all locations.
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2. Finding During our remote interviews with the Finance Department, we inquired about any concerns related to current practices surrounding asset safeguarding.

Finance Department reported that the City’s Cashiering Division leaves checks unattended in a secured, badge-access area monitored by cameras. They also noted that change fund drawers remain unattended for approximately 30 minutes in an area not directly covered by camera surveillance, both at the end of the day before being taken to the vault and in the morning when drawers are removed from the vault and placed out for staff to retrieve.

Recommendation During our cash count, we inspected the location where these drawers are kept and confirmed that cash remains unsecured at the end of the day and in the morning, with no camera surveillance covering the specific area where the change fund drawers sit. Additionally, we observed that checks received at the customer service window were left on top of the desk instead of being placed in a locked drawer, and undeposited mailed checks were left on employees’ desks while staff were away for breaks or lunch.

3. Finding Golf cart rental cash deposits are being stored in an unsecured, unlocked drawer, leaving the funds vulnerable to loss, theft, or misuse and failing to comply with required cash safeguarding practices established by the Government Finance Officers Association (GFOA) and the City’s internal Cash Handling Policy.

Recommendation The City should store all cash in a locked, access-restricted drawer or safe in accordance with GFOA best practices and City policy. The City should also update procedures to prohibit unsecured storage and ensure staff consistently follow secure cash-handling practices.
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II. Scope and Methodology
The scope of the cash counts focused on evaluating key internal controls over cash handling. To gain an understanding of the City’s processes, controls, and overall management of cash-handling activities, we conducted remote interviews with the Finance Department and on-site interviews with City employees involved in cash handling, reviewed the City’s current Cash Handling Policy and other petty cash/change fund procedures, and performed unannounced cash counts at selected locations.

A total of eight City locations were selected for on-site cash counts. Four locations were selected by the City based on their assessment of locations that pose the highest risk, and the remaining four locations were judgmentally selected by Baker Tilly based on feedback obtained during our virtual interviews.

A. Procedures Performed
The procedures performed included determining the following based off best practices and the City’s current Cash Handling Policy and other petty cash/change fund procedures:

CASH DRAWER SECURITY AND ACCESS CONTROLS
 Cash drawers were locked whenever cash handlers were away from their workstations.  Keys and safe combinations were properly secured and maintained separately from cash drawers.
 Each cash handler was assigned their own cash drawer.  The number of individuals with access to change or petty cash drawers was reasonable and appropriately limited.

SAFEGUARDING OF CASH AND CHECKS
 Cash and checks were stored in a locked, fire-resistant, or otherwise secured location.  Checks were restrictively endorsed immediately upon receipt.  Cashiers had access to counterfeit detection pens and marked bills of $5 or greater.  Bait money ($3) was included in drawers for locations with customer-facing windows.

CASH HANDLING AND TRANSACTION PROCESSING
 Cashiers confirmed base funds when opening and closing registers.  Receipts were provided to customers for every transaction.  The City’s system retained an electronic copy of each customer receipt.  Voided transactions and refunds were properly documented and approved by supervisors or managers.
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RECONCILIATIONS AND BALANCING
 Cash on hand reconciled to the cash receipt system.
 Overages or shortages were supported with documentation and explanations.  Change and petty cash drawers were reconciled bi-weekly per policy.  Deposits were logged and accounted for.
 Closing reports from the prior business day were approved by a second reviewer.

DEPOSITS AND DOCUMENTATION
 Supporting documentation for all deposits submitted to the Cashiering Division was properly retained.
 The Cashiering Division independently recalculated and logged all deposits received from other locations.
 The Cashiering Division’s most recent bank deposit complied with the City’s daily deposit policy.

In addition to the above procedures, we performed a walkthrough over seized cash at the Modesto PD Seized Asset Division. The walkthrough and procedures performed included the following:
 We verified that seized cash was being stored and safeguarded in a locked and restricted area.  We confirmed that all seized cash was logged and properly accounted for.  We reviewed the most recently issued documentation for cash authorized for deposit to the Cashiering Division to ensure the required reviews and approvals were in place.  We verified that all seized cash was inventoried consistently, including documentation for counts, discrepancies, or losses.
 We selected a sample of five selections from floor to sheet to ensure cash located in the vault was being properly tracked and accounted for.
 We assessed whether comprehensive policies existed regarding the retention policy for seized cash and confirmed that such expectations were documented.  Statement of Compliance with GAGAS
B. Statement of Compliance with Generally Accepted Government Auditing Standards (GAGAS)
We conducted this cash handling internal controls review in accordance with Generally Accepted Government Auditing Standards (GAGAS). Those standards require that we plan and perform the internal controls review to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our objectives. The internal controls review, control objectives, control issues, recommendations, and conclusions on the likelihood and impact of occurrence are included in this report.

This internal controls review did not constitute an audit of financial statements in accordance with GAGAS. Baker Tilly was not engaged to, and did not, render an opinion on the City’s internal controls or over financial management systems.
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III. Commendations
Although the focus of this review was to identify opportunities for improvement, it is important to note the areas of commendable operations. The City should be commended for the following accomplishments:

A. Modesto PD and Building Safety
Both locations demonstrated strong and reliable performance across all major cash-handling procedures performed. Cash was safeguarded through proper single-control custody, locked drawers, secure dual-custody key practices, and locked, fire-resistant storage. Cash balances remained within assigned limits, receipts were retained, customer receipts appeared to be consistently issued, and cash reconciled accurately with system records. Access to cash funds was appropriate, and counterfeit-prevention practices were fully in place, including the use of counterfeit detection pens and proper documentation for any suspected counterfeit bills. Cash reconciliation procedures, including the review and approval of any overage or shortage activity, were followed as required.

Building Safety was one of the few locations that maintained bait money within its drawer, as it operates a customer-facing window. Overall, these locations demonstrated comprehensive and disciplined adherence to cash handling, reconciliation, and oversight standards.

In addition, the Modesto PD walkthrough of seized cash demonstrated strong documentation and a well-controlled process. Seized cash was securely stored, accurately logged, and consistently inventoried with appropriate supporting documentation. We reviewed recent authorization records for deposits to the Cashiering Division and confirmed that reviews and approvals were properly completed. We also selected five items from the vault and successfully traced each one to the system records, confirming complete tracking and accountability. Guidance on cash retention and deposit requirements was clearly documented and understood. Overall, no issues were identified, and Modesto PD demonstrated reliable adherence to established seized cash controls.

B. Cashiering Division
The Cashiering Division demonstrated good control over its cash-handling activities, supported by secure dual-custody key practices, locked and fire-resistant storage, and drawers being secured in the vault overnight. Cash balances remained within assigned limits, receipts were retained, and staff ensured appropriate access to change funds. Counterfeit-prevention procedures were followed, including the use of counterfeit detection pens and the required documentation when counterfeit bills were identified. Change-fund reconciliation and overage/shortage review processes were completed as required. Daily operational controls were also effective, including timely deposits, proper review of reconciliation and closing reports, and second-level oversight. Additionally, the Cashiering Division maintains thorough deposit documentation, including a log for all deposits received from other City locations. For these deposits, the division performs accurate recalculations and retains supporting documentation, including evidence of second-level review. Additionally, this division maintained bait money within its drawers, as it operates a customer-facing window. Overall, the division maintained disciplined and well-documented cash-handling and oversight practices. #4..
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Employees from the Finance Department accompanied us during cash counts at all locations to observe the process firsthand and gain a broader understanding of cash-handling practices across the City. Through these cash counts, the employees demonstrated a strong willingness to learn from the project and showed genuine interest in identifying opportunities for improvement and offering recommendations based on the observations made. Their active engagement reflects a commendable commitment to strengthening and enhancing cash-handling practices Citywide.

In addition to their engagement during the cash counts, we also reviewed the Cashiering Teams internal site audit reports on cash handling. These reviews showed a clear level of thoroughness and consistency in their approach, as well as an overall understanding of the City’s Cash Handling Policy and related best practices.

C. Creekside Pro Shop
The site demonstrated good performance across nearly all procedures performed, including proper locking of change fund drawers (with the exception of deposit money not being kept in a locked area as documented under finding number three), cash levels remaining within assigned limits, strong dual-custody key management, accurate reconciliations, consistent receipt issuance, and proper restrictive check handling. Petty cash/change fund reconciliations were performed. Deposit-related controls such as a second-level review were in place.

D. City Clerk – Passport Area
The City Clerk’s office maintained good control over its cash-handling activities. Cash was properly secured (with the exception of the observation noted in finding number three), stored safely, and kept within assigned limits, with receipts retained and customer receipts consistently issued. Access to funds was appropriate, and check-handling and counterfeit-prevention practices were followed.

Deposit procedures were also well-executed through timely deposit review and second-level oversight, and were well-documented.
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IV. Findings and Recommendations
A. Counterfeit Currency Detection

The City’s Cash Handling Policy requires that “all currency in the amount of five dollars and above shall be checked” for counterfeit. This standard is intended to provide consistency across all locations, ensure thorough detection, and safeguard City revenues from counterfeit-related losses.

During the cash count, we observed that counterfeit currency detection practices were not applied consistently across City locations. Specifically, some locations, such as Mary Grogan Park and Parks and Recreation, only check bills of $20 and above for counterfeit indicators. Additionally, the Creekside Pro Shop only verifies bills of $50 and above. These practices differ significantly from one another and depart from the City’s Cash Handling Policy.

The inconsistency in counterfeit screening practices appears to result from the following factors:
 Informal Local Practices: Individual locations have adopted their own thresholds (e.g., $20+ and $50+), creating inconsistent and unsupported standards.  Insufficient Policy Reinforcement: Staff and supervisors may not be aware of the $5+ requirement or may have deprioritized it based on perceived low risk.  Limited Training: Cash-handling staff vary across locations, and new or part-time staff may not receive consistent onboarding related to counterfeit detection.

Failure to follow the established counterfeit detection requirement exposes the City to several financial and operational risks:
 Financial Loss Exposure: Accepting counterfeit bills, especially in common denominations such as $5, $10, or $20, can result in direct, unrecoverable losses to the City.  Operational Inconsistency: Varied practices across locations weaken internal controls and lead to confusion among staff regarding correct procedures.
 Increased Vulnerability: Counterfeiters often target lower denominations, as they receive less scrutiny; inconsistent practices could make certain locations more susceptible. #4..
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We recommend the City strengthen and standardize counterfeit detection procedures by reinforcing the requirement that all currency of $5 and above be checked for authenticity and by providing updated, documented training to all cash-handling staff on proper counterfeit detection techniques and device usage. This training should also be incorporated into onboarding for new employees to ensure consistent compliance across all locations.

Management’s Response
The City is committed to maintaining strong internal controls and accurate financial reporting, and we appreciate the opportunity to address this observation.

The City’s Cash Handling Policy requires that all currency in the amount of $5 and above be checked for counterfeit. This requirement is already included in the City’s established training for all cash-handling staff and their supervisors. In-person training is provided to employees after employment begins, and supervisors are responsible for notifying the Finance Department when a new cash handler is onboarded so that training can be scheduled. All cash-handling employees are also required to complete the annual cash-handling training video and read and attest to the City’s Cash Handling Administrative Directive, which is deployed annually through the policy management software, PolicyTech.

City staff recognize that some divisions may have adopted informal or unapproved thresholds for counterfeit screening, resulting in the inconsistencies noted in the finding. This reflects lapses in compliance with existing policy rather than gaps in policy or training.

It is also important to note that counterfeit detection pens are not reliable for bills that have been bleached and reprinted as higher denominations. For this reason, the City also relies on visual inspection and cash counters equipped with counterfeit-detection features.

Because the training, policy, and tools for counterfeit detection already exist, adding additional onboarding steps would duplicate current processes. To improve consistency and reinforce compliance, the Finance Department will implement quarterly reminders to all cash-handling staff and their supervisors reiterating the requirement to check all currency of five dollars and above and encouraging continued adherence to established best practices. #4..
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B. Safeguarding of Assets

2. Finding During our remote interviews with the Finance Department, we inquired about any concerns related to current practices surrounding asset safeguarding. Finance Department reported that the City’s Cashiering Division leaves checks unattended in a secured, badge-access area monitored by cameras. They also noted that change fund drawers remain unattended for approximately 30 minutes in an area not directly covered by camera surveillance, both at the end of the day before being taken to the vault and in the morning when drawers are removed from the vault and placed out for staff to retrieve.

During our cash count, we inspected the location where these drawers are kept and confirmed that cash remains unsecured at the end of the day and in the morning, with no camera surveillance covering the specific area where the change fund drawers sit. Additionally, we observed that checks received at the customer service window were left on top of the desk instead of being placed in a locked drawer, and undeposited mailed checks were left on employees’ desks while staff were away for breaks or lunch.

Recommendation The City should ensure that all cash and checks are secured in a locked location at all times, even when stored in restricted or camera-monitored areas.

The GFOA advises that all cash, checks, and other receipts must be stored in a secure, locked location at all times prior to deposit, emphasizing that safeguarding undeposited funds is a critical internal control to prevent theft, loss, misuse, or unauthorized access. Consistent with this guidance, GFOA’s Revenue Control Policy requires governments to implement physical security procedures for any funds that have not yet been deposited, ensuring that cash and checks are protected from unauthorized access and reducing opportunities for fraud or misappropriation. To support the GFOA’s safeguarding of assets, the City’s Cash Handling Policy states, “Mailed-in or hand-delivered checks shall be (…) securely stored in a locked place until deposited.” Additionally, it states, “Physical protection of funds until deposited with the city bank facilities with vault, locked cash boxes, or locked drawers shall be practiced at all times.”
During our cash count, we identified the following inconsistencies to best practices with how the City’s Cashiering Division safeguards checks and cash during daily cashiering operations:
 Checks received at customer-facing windows are endorsed and left in open, unsecured areas on the countertop throughout the day.
 Mailed checks are opened, sorted, and placed on an Accounting Technician’s desk before being logged in the system, and these checks may remain unattended when staff step away for lunch or bathroom breaks.
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 Change fund drawers are staged on a cart in an open area for approximately 30 minutes at the end of the day before the cart is rolled into the large safe. The following morning, an Accounting Technician brings the cart out and places it in the same open area for cashiering staff to retrieve their change fund drawers, a process that can also take up to 30 minutes. While badge access controls restrict entry to the main office area, there is no surveillance camera coverage over the staging area, and multiple staff members are present in the main office area during this time, granting them access to the change fund drawers. These practices create periods during which both checks and change fund drawers are exposed, unmonitored, and not under secure custody, increasing the vulnerability of these assets.

Existing policies do not provide clear requirements for immediate logging and secure interim storage of checks, continuous supervision or secure placement of change fund drawers during staging, and surveillance monitoring of high-risk cash-handling areas. While GFOA guidance establishes the need for safeguarding, fraud prevention, and strong internal controls over receipting, these expectations have not been fully translated into detailed operational procedures or consistently implemented security practices.

These findings collectively increase the City’s exposure to the following risks:
 Financial and Fraud Risk: Unsecured checks and change fund drawers may be stolen, altered, or misappropriated without detection.
 Operational Risk: Unprotected instruments can be misplaced or incorrectly handled, leading to reconciliation discrepancies, delays, and customer service issues.  Accountability and Auditability Risk: When checks and change fund drawers are left unattended or unmonitored, the City lacks verifiable assurance of who had custody at any given time.
 Compliance Risk: Failure to secure negotiable instruments is inconsistent with GFOA standards, potentially resulting in audit findings.

To strengthen internal controls and align with GFOA best practices, the City should ensure that all checks and change fund drawers are secured in locked, access-restricted locations when not in active use. A designated senior staff member or Accounting Technician should assume responsibility for collecting each cashier’s change fund drawer immediately after end-of-day closing, transporting it directly to the large safe, and securely returning change fund drawers to staff the following morning through a documented handoff process. Formalizing these custody procedures, along with providing staff training on updated expectations, will improve chain-of-custody controls, enhance segregation of duties, reduce exposure to unsecured areas, and mitigate the risk of loss, error, or unauthorized access.

Management’s Response
During the auditor’s interviews with Finance Department staff, the Cashiering Manager and Accounting Technician proactively raised concerns regarding the practice of leaving checks and change fund drawers unattended in the secured, badge-access-only cashiering area and at window workstations under video surveillance. Staff noted that while the area is restricted, this practice did not align with the best practices outlined in the City’s Cash Handling Policy, which requires cash and checks to be securely locked when not in active use. Because the Cashiering Division instructs other departments to follow these best practices during cash-handling audits, staff wanted to ensure the same standards were consistently applied within the division. #4..
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As soon as the recommendation was made, the Cashiering Division immediately strengthened its procedures. Checks are now secured in a locked location whenever staff step away from their workstation for breaks or lunch. Change fund drawers are no longer staged on a cart before being moved to the vault. Instead, each drawer is physically transported directly to the vault at the end of the day by authorized staff, and the transfer is recorded on a tracking sheet. These changes ensure that cash and checks remain secured at all times and align with the City’s Cash Handling Policy as well as the guidance provided to departments Citywide.

C. Unsecured Storage of Cash Deposits

3. Finding Golf cart rental cash deposits are being stored in an unsecured, unlocked drawer, leaving the funds vulnerable to loss, theft, or misuse and failing to comply with required cash safeguarding practices established by the GFOA and the City’s internal Cash Handling Policy.

The GFOA advises that cash should be stored in a secure and locked location at all times, emphasizing that safeguarding funds is a critical internal control necessary to prevent theft, loss, misuse, or unauthorized access. In alignment with this guidance, the City’s Cash Handling Policy requires all cash to be stored in a locked cash box or locked drawer to ensure proper protection of assets.

During the cash count at the Creekside Pro Shop we observed that cash collected from golf cart rentals deposits ($5 per cart) is stored in an unlocked drawer located adjacent to the locked primary change fund cash drawer. There are a total of 49 golf carts that may be rented all at one time; therefore, up to $245 in cash could be stored in the unlocked drawer.

This finding mainly exists due to a lack of adhering to the City’s Cash Handling Policy, allowing staff to rely on convenience rather than proper safeguarding.

Storing cash in an unlocked drawer increases the risk of loss or misappropriation. It also weakens internal controls, limits management’s ability to identify responsibility in the event of discrepancies, and exposes the City to reputational, operational, and audit risks despite the small dollar amounts involved.

The City should ensure that all golf cart deposit cash is stored in a sealed envelope and placed with the locked change fund drawer at all times to prevent deposits from being mixed with the change fund. Cash-handling procedures should be updated to prohibit unsecured storage and require staff training on secure expectations over cash handling. Supervisors should periodically monitor compliance to reinforce safeguarding practices and maintain alignment with GFOA best practices and the City’s Cash Handling Policy.
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Management’s Response
Creekside management staff were notified of the finding and recommendation, and corrective action was implemented immediately. Staff were instructed to ensure that all golf cart rental cash deposits are securely stored in accordance with the City’s Cash Handling Policy and GFOA best practices.

The site has since adopted the required procedure: cash deposits collected for golf cart keys are now placed in a separate envelope and stored in a locked cash drawer at all times.

To verify compliance, the Cashiering Division conducted an unannounced site visit on March 17, 2026. During this visit, staff confirmed that the cash-deposit envelope was properly secured in the locked drawer and reviewed the log used to track the issuance and return of the key used for the drawer. This updated process ensures that cash deposits related to golf cart rentals remain secured, access-restricted, and fully aligned with established safeguarding requirements. #4..
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FOR INTERNAL USE OF CITY OF MODESTO ONLY
V. Process Improvement Opportunities
The following process improvement opportunities are provided for locations where we identified one or two areas needing enhancement. Each opportunity is organized by observation category.

A. Safeguarding of Cash
SENIOR CENTER AND CITY CLERK – PASSPORT AREA
Keys used to access cash storage areas, including safes, cash drawers, and the rooms where these assets are secured, are being stored in unlocked or unsecured locations accessible to multiple staff members who are not directly responsible for cash-handling duties. In both locations, key storage practices are not consistently enforced, and there is limited or no monitoring (e.g., locked storage or surveillance) over where the keys are kept.

Storing cash-related keys in unsecured or unmonitored areas increases the risk of unauthorized access, theft, tampering, or misappropriation of cash assets. Additionally, the lack of consistent oversight reduces the likelihood that inappropriate access or cash-handling irregularities would be detected in a timely manner.

We recommend the City implement stronger controls over key storage and access by ensuring keys are kept in locked and secured locations at all times. Access should be restricted to only those personnel with designated cash-handling responsibilities, and monitoring mechanisms (e.g., surveillance or controlled access points) should be considered to further enhance security.

Management’s Response
The City acknowledges the importance of strong controls over key storage and agrees that current practices should be strengthened. In response to this finding, the Finance Department will conduct a review of the Cash Handling Policy to ensure key control requirements are clearly defined and aligned with best practices. This review will include developing more specific procedures for securing keys used to access safes, cash drawers, and cash storage rooms, including requirements for locked storage and restricted access.

In addition, Finance staff will work with the affected departments to implement best practices, including establishing consistent key control procedures, improving oversight of key access, and evaluating the need for enhanced monitoring measures such as secured key cabinets or surveillance cameras if resources are available.

Training and communication will be provided to ensure staff understand and comply with the updated requirements.

Finance staff will perform periodic reviews during cash handling site visit audits to confirm that controls are operating effectively and consistently across all applicable areas. #4..
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B. Deposits by Satellite Locations

SENIOR CENTER AND MARY GROGAN PARK
Both of these locations operate as satellite locations of Parks and Recreation and deliver cash deposits. Deposits are transported by staff; however, no formal deposit log or delivery confirmation is completed at the time deposits are received by Parks and Recreation. In the absence of documented acknowledgment, there is an increased risk that deposits could be lost, delayed, or mishandled without a clear audit trail or accountability between the Parks and Recreation and its satellite locations.

The City should implement a formal, documented deposit chain-of-custody process for all satellite locations by using pre-numbered, tamper-evident deposit bags to track deposits from preparation through delivery, and requiring dual signatures from both the sender and receiver at each custody transfer. Each deposit should be logged using a standardized log or electronic form that captures key information such as the deposit bag number, amount sealed, date and time of delivery, staff involved in the handoff, and acknowledgment by the receiving staff member. Additionally, management should perform monthly reviews to identify any gaps in the deposit bag sequence to ensure that all deposits issued are properly accounted for.

Management’s Response
Management agrees with the recommendation to strengthen controls over the deposit chain-ofcustody process for satellite locations, including the Senior Center and Mary Grogan Park, and recognizes the importance of maintaining a clear and accountable audit trail for all cash deposits.

Corrective actions have already begun. Mary Grogan Park has implemented the use of tamperevident deposit bags, and the Senior Center has begun utilizing a deposit log when delivering funds to Parks and Recreation. To fully address the recommendation, Cashiering will assign pre-numbered tamper-evident deposit bags to the Senior Center to ensure consistency across all satellite locations.

Additionally, the Cashiering Division will work with Parks and Recreation staff to standardize the deposit log process to ensure it captures all required information, including deposit bag numbers, amounts, dates and times of transfer, and signatures from both sending and receiving personnel.

Finance staff will communicate the requirement for Parks and Recreation management to implement procedures to reconcile deposit bag numbers and perform periodic reviews, including monthly monitoring, to identify and address any gaps in missing or out-of-sequence bag numbers.

C. Bait Money

SENIOR CENTER, CREEKSIDE PRO SHOP, AND PARKS AND RECREATION The Finance Department requires all cashier locations to maintain $3 single dollar bills as a form of bait money in each drawer that is located next to a customer-facing window. The serial numbers of the bait money bills are recorded and tracked by the Finance Department so they can be identified if the bills are stolen. During our cash count, we noted that these locations had a customer-facing window and they did not contain the required bait money. Bait money is a key deterrent and investigative control intended to assist law enforcement in the event of theft or robbery. Failure to #4..
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Cash Handling Internal Controls Review Report | 15

FOR INTERNAL USE OF CITY OF MODESTO ONLY
maintain bait money reduces the City’s ability to trace stolen cash and weakens overall physical security controls. We recommend that these locations include bait money in their drawers.

Management’s Response
Management acknowledges the importance of maintaining bait money as a deterrent and investigative control at all applicable cashiering locations. Finance staff will work with the Senior Center, Creekside Pro Shop, and Parks and Recreation to ensure that bait money is properly secured in each applicable cash drawer. Finance staff will record the serial numbers and site locations of the bait money bills on the existing tracking list, which will be maintained in an electronic format and updated as necessary.

Additionally, Finance staff will provide guidance to affected personnel on the purpose of bait money, emphasizing that it is not to be used for transactions or provided as change under any circumstances.

These actions will help strengthen compliance and enhance the City’s overall cash handling security controls.

D. Change Fund Reconciliation

MARY GROGAN PARK
Based on a review of reconciliation records comparing the change fund drawer balance to the authorized limit of $1,400, it was noted that no reconciliations were performed for extended periods, including the timeframe between April 2024 and April 2025. It was noted that six specialists (due to them being part-time employees) have access to the vault and may access the office regardless of whether a tournament is occurring. Infrequent reconciliations increase the risk that errors, shortages, or misappropriation may go undetected for long periods of time.

We recommend that this location reconcile its change fund drawer on a bi-weekly basis to ensure timely detection of discrepancies and to align with the Mary Grogan Change Fund Check Procedure.

CITY CLERK – PASSPORT AREA
During our cash count, we noted that change fund drawer reconciliations are reportedly completed on a weekly basis. Staff indicated that each new reconciliation form replaces the previous week’s form.

When the January 9th reconciliation was requested, which would have been the most recent, it could not be located. As a result, there was no confirmation of when the last reconciliation occurred or whether the change fund was properly balanced against the City’s authorized change fund limit. The absence of retained documentation creates a gap in the audit trail and prevents verification of reconciliation activity, supervisory review, and compliance with established policy.

The City should establish a formal retention requirement for all change fund reconciliation forms and maintain them in a secure, centralized filing system for a defined retention period and ensure staff are trained on these updated practices.
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Management’s Response
Management agrees with the recommendation and recognizes the importance of timely reconciliations and proper retention of supporting documentation to ensure accountability and a complete audit trail.

Corrective actions have already been implemented at Mary Grogan Park. Reconciliations are now being performed on a bi-weekly basis in accordance with the recommendation, and Standard Operating Procedures have been provided to the Finance Department for review.

For the City Clerk – Passport Area, Finance staff will formalize the requirement to perform weekly reconciliations and ensure that all reconciliation documentation is properly maintained.

Additionally, for both locations, a formal retention policy will be established requiring that all reconciliation supporting documentation be retained for a period of two years and stored in a secure and accessible location. Finance staff will be trained on these updated requirements to ensure consistency and compliance.

E. Cash Drawer Daily Close

CASHIERING DIVISION
During cash count procedures, we identified a minor $0.30 cash shortage resulting from a coin roll that was assumed to be intact and recorded at face value without being individually counted. While the discrepancy was immaterial and isolated, reliance on assumed accuracy of coin rolls may result in recurring discrepancies and inaccurate cash balances if not consistently counted.

We recommend that all coin rolls that seem to be open and not full be counted as part of the daily close.

Management’s Response
Management acknowledges the finding and agrees that relying on the assumed accuracy of rolled coin may result in minor discrepancies.

The City’s current practice is to presume that rolled coin received from the bank is accurate. This approach is based on a cost-benefit assessment, as the staff resources required by the Cashiering Division to verify large volumes of rolled coin would be significant while posing minimal risk of material discrepancy. Additionally, when customers pay with coin, staff document the customer’s account number to allow for follow-up should a discrepancy be identified. Staff will continue this practice.

To further strengthen controls, staff will implement the recommendation that any coin rolls that appear open, damaged, or not fully intact be individually counted as part of the daily close process. This will help ensure the accuracy of cash balances while maintaining operational efficiency. #4..
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

April 22, 2026
Date: April 1, 2026
TO: Audit Committee
Sue Zwahlen, Chair
Rosa Escutia-Braaton, Vice Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
FROM: Colleen Rozillis, City Auditor
SUBJECT: Approval of the Fiscal Year 2026-27 Internal Audit work plan CONTACT: Colleen Rozillis, City Auditor, [email protected], 206-302- 6795
DESCRIPTION:

Consider reviewing and providing comments on the Fiscal Year 2026-27 Internal Audit Work Plan and forwarding to Council for review and comments. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

The recommended action supports the City’s 2025-2026 Goal J: Build a highperformance organization.

BACKGROUND:

Each year, the City Auditor develops a proposed work plan to address internal controls, compliance, risk, and performance. In accordance with section 902.1 of the Modesto City Charter, “At the beginning of each fiscal year, the Auditor shall submit a one (1) to five (5) year audit schedule to the Audit Committee and Council for review and comment. The schedule shall include the proposed plan, and the rationale for the selections, for auditing departments, offices, boards, activities, subcontractors, and agencies for the period. This schedule may be amended after review with the Audit Committee and Council, but the Auditor shall have final authority to select the audits planned.” #5..
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Audit Committee, April 22, 2026
Approval of the Fiscal Year 2026-27 Internal Audit Work Plan

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DISCUSSION:

This year’s work plan was informed by the 2024 Internal Controls Review, 2026 Enterprise Risk Assessment, and discussions with Council and management. The City Auditor proposes the following projects for Fiscal Year (FY) 2026-27:
• Risk Management Operational Review
• Measure H Performance Audit
• Revenue Recovery Operational Review
• Traffic Safety Performance Audit
• Inventory Management Internal Controls Review
• Ongoing Internal Audit services
FISCAL IMPACT:

None.

CEQA/NEPA REQUIREMENTS:

This item does not constitute a “project” within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 and requires no environmental review.

RECOMMENDED COMMITTEE ACTION:

Review and provide comments on the proposed Fiscal Year 2026-27 Internal Audit Work Plan and forwarding to Council for review and comments.

Approved by:

Colleen Rozillis, City Auditor
Joseph P. Lopez, City Manager
Attachments:

1. Internal Audit FY26-27 Work Plan presentation dated 4-1-26. #5..
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FY26-27 INTERNAL

AUDIT WORK PLAN
Audit Committee Meeting
April 22, 2026
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● The City retained Baker Tilly to serve as the designated Internal Auditor and conduct projects focusing on:
○ Risks
○ Internal controls
○ Efficiency and effectiveness
○ Best practices
○ Compliance
● Work is being completed under appropriate industry standards (IIA,

GAGAS, AICPA)
Internal Audit Overview
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Holistic Internal Audit Program Approach
Tracking &
Reporting A Program Inputs B Opportunities C
• Enterprise
Assessments
• Employees and
Community
• Performance
Metrics
• Risks
• Controls
• Compliance
• Performance
• Findings &
Recommendations
• Fraud, Waste, and
Abuse Hotline
• Corrective Actions
• Implementation
• Validation
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Internal Audit Program Review
5 Focus Accomplishments
Enterprise Risk Assessments 2022*, 2026
Enterprise Internal Controls Review 2024
Internal Controls Projects 5
Performance Projects 7
Recommendations Validated Implemented & Tracked 239/282 Ethics Hotline Statistics Over 230 reports since 2016
*conducted prior to Baker Tilly contract
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Internal Audit Program Review
5 0
1 2
3 4
5 6
7 8
Establishment Controls Performance Finance Policy
Project Types
#5..
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Internal Audit Program Review
Department Project Department Project
Community & Economic
Development Permitting (25) Information Technology Policy Review (26) Engineering Services Parks, Recreation, and
Neighborhoods Performance Audit (26)
Finance
Procurement (24), Payroll
(25), AR (25), Cash
Handling (26)
Police
Fire Public Works Fleet Controls (24), Solid
Waste & Forestry (24)
Human Resources Utilities Fiscal Review (25)
Citywide Projects
Internal Controls Review (24), FWA Policy & Training (24), Property Management (24), Capital Program (25), Risk Assessment (26), Homelessness (26), Fee Benchmarking (26)
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Performance projects:
● Traffic safety performance audit
● Measure H performance audit
● Risk management operational review
● Workforce planning performance audit
● Fleet efficiency study update
● Airport administration operational review
● Code enforcement efficiency study
Internal controls and compliance projects:
● Revenue collections & compliance internal
controls review
● Inventory management internal controls review
● Cybersecurity controls review
● Contract audit
● P-card internal controls testing
● Travel expense internal controls review & testing
Program management:
● Recommendation validation
● Ongoing internal audit program management
Potential FY26-27 Internal Audit Projects
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● Revenue recovery operational review: Assess revenue recovery processes and policies for alignment with best practices and peer cities.
● Traffic safety performance audit: Assess economy, efficiency, and effectiveness and compare City practices to industry best practices.
● Measure H performance audit: Assess the City’s performance toward achieving Measure H outcomes.

Assess economy, efficiency, and effectiveness and compare City practices to industry best practices. ● Inventory management internal controls review: Review the City’s control environment for effectiveness and alignment with best practices and conduct targeted testing. ● Risk management operational review: Review the City’s risk management functions for opportunities for improvement in efficiency and alignment with best practices. ● Ongoing internal audit program management: City Auditor activities including overseeing the internal audit program, recommendation validation, annual check register and payroll testing, and managing the fraud, waste, and abuse hotline.

Recommended FY26-27 Internal Audit Program
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Recommended Internal Audit Program
Project Budget 7-9/26 10-12/26 1-3/27 4-6/27
Risk Management Operational Review $35,000
Measure H Performance Audit $50,000
Revenue Recovery Operational Review $45,000
Traffic Safety Performance Audit $40,000
Inventory Management Internal Controls Review $40,000
Ongoing Internal Audit Services $40,000
Total $250,000
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

April 22, 2026
Date: February 18, 2026
TO: Audit Committee
Sue Zwahlen, Chair
Rosa Escutia-Braaton, Vice-Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
THROUGH: Joseph P. Lopez, City Manager
FROM: Diane Nayares-Perez, City Clerk
Colleen Rozillis, City Auditor
SUBJECT: Amendment of Modesto Municipal Code section related to the “Office of the City Clerk and City Auditor” to create separate sections for the Office of the City Clerk and the Office of the City Auditor
CONTACT: Diane Nayares-Perez, City Clerk, [email protected], 209-577-5396
DESCRIPTION:

Consider an Ordinance amending the Modesto Municipal Code section related to the “Office of the City Clerk and City Auditor” to create separate sections for the Office of the City Clerk and the Office of the City Auditor consistent with the Modesto City Charter and forwarding to Council for approval. (Funding Source: Not Applicable) STRATEGIC PLAN ELEMENT:

This recommended action supports the City’s 2025-2026 strategic commitment to:
“Build community trust in City government through responsive, transparent and efficient service delivery.”
BACKGROUND:

Historically, the Modesto Municipal Code included provisions establishing a combined Office of the City Clerk and City Auditor. Over time, City operations and best practices have evolved, and the City Charter now clearly distinguishes between the roles, authorities, and responsibilities of the City Clerk and the City Auditor. #6..
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Audit Committee, April 22, 2026
Amendment of Modesto Municipal Code section related to the “Office of the City Clerk and City Auditor” to create separate sections for the Office of the City Clerk and the Office of the City Auditor

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The City Clerk is primarily responsible for legislative administration, records management, elections, and compliance with public transparency requirements. The City Auditor, as established by the City Charter, is responsible for independent financial and performance audits, oversight, and accountability.

Maintaining a combined office no longer reflects the City’s organizational structure or contemporary governance standards. Separating the positions aligns the Municipal Code with the Charter, improves clarity, and reinforces the independence of the City Auditor’s oversight function.

DISCUSSION:

Staff recommends the adoption of an ordinance to ensure consistency between the Modesto City Charter and Municipal Code, The Ordinance will reflect current positions and responsibilities.

The Ordinance repeals the existing Municipal Code provisions that established the combined City Clerk and Auditor position. This repeal is necessary to eliminate outdated and conflicting references within Article 3, “Office of the City Clerk and Auditor” of Title 2, “Administration.”
The Ordinance also creates sections related to the Office of the City Clerk, clarifying that this is a standalone position within Title 2, Chapter 3, Article 3 of the Modesto Municipal Code. It codifies the City Clerk’s duties and responsibilities consistent with the City Charter and applicable State law.

Finally, the Ordinance creates sections related to the Office of the City Auditor, clarifying that this is a standalone position. Placing the City Auditor in a separate Article reflects the City’s current structure, reinforces the independence of the Office and avoids confusion.

The Ordinance aligns the Municipal Code with the City Charter and current positions and operational practices.

FISCAL IMPACT:

There is no direct fiscal impact associated with the introduction of this Ordinance. The proposed changes are organizational and structural in nature and do not create new positions or additional staffing costs because the City currently has an auditor under contract.

CEQA/NEPA REQUIREMENTS:

This item does not constitute a “project” within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 and requires no environmental review. #6..
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Audit Committee, April 22, 2026
Amendment of Modesto Municipal Code section related to the “Office of the City Clerk and City Auditor” to create separate sections for the Office of the City Clerk and the Office of the City Auditor

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RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion recommending an Ordinance repealing Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 3, “Office of the City Clerk and Auditor,” of the Modesto Municipal Code; adding Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 3, “Office of the City Clerk,” to the Modesto Municipal Code to establish the Office of the City Clerk as a standalone position; and adding Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 20, “City Auditor,” to the Modesto Municipal Code to establish the Office of the City Auditor as a standalone position, consistent with the Modesto City Charter, and forwarding to Council for approval.

Approved by:

Diane Nayares-Perez, City Clerk
Colleen Rozillis, City Auditor
Joseph P. Lopez, City Manager
Attachments:

1. Proposed Ordinance
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ORDINANCE NO. _____
AN ORDINANCE REPEALING TITLE 2, “ADMINISTRATION,” CHAPTER 3, “ADMINISTRATIVE DEPARTMENTS,” ARTICLE 3, “OFFICE OF THE CITY CLERK AND AUDITOR,” OF THE MODESTO MUNICIPAL CODE; ADDING TITLE 2, “ADMINISTRATION,” CHAPTER 3, “ADMINISTRATIVE
DEPARTMENTS,” ARTICLE 3, “OFFICE OF THE CITY CLERK,” TO THE

MODESTO MUNICIPAL CODE TO CLARIFY THE OFFICE OF THE CITY CLERK AS A STANDALONE POSITION; AND ADDING TITLE 2, “ADMINISTRATION,” CHAPTER 3, “ADMINISTRATIVE DEPARTMENTS,” ARTICLE 20, “CITY AUDITOR,” TO THE MODESTO MUNICIPAL CODE TO ESTABLISH THE

OFFICE OF THE CITY AUDITOR AS A STANDALONE POSITION IN

CONSISTENT WITH THE MODESTO CITY CHARTER
WHEREAS, the Modesto Municipal Code currently contains provisions establishing a combined office of City Clerk and City Auditor in Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 3, “Office of the City Clerk and Auditor”; and
WHEREAS, the City Charter separately establishes the offices and functions of the City Clerk and the City Auditor; and
WHEREAS, the City Council desires to repeal the combined City Clerk and City Auditor provisions to reflect current positions and operational practices, clarifying that each office is a standalone position; and WHEREAS, the City Charter establishes the Office of the City Clerk and authorizes the City Council to prescribe the Clerk’s duties by ordinance; and WHEREAS, the City Council desires to codify the duties and authority of the City Clerk as a standalone Charter office within Title 2, Chapter 3, Article 3 of the Modesto Municipal Code; and
WHEREAS, Section 902.1 of the City Charter establishes the Office of the City Auditor and defines the Auditor’s powers and duties; and #6..
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WHEREAS, the City Council desires to codify the City Auditor’s Charterbased authority in a separate article of the Modesto Municipal Code to reinforce independence and clarity.

NOW, THEREFORE, the City Council of the City of Modesto does ordain as follows:

SECTION 1. REPEAL OF COMBINED OFFICE
Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 3, “Office of the City Clerk and Auditor;” of the Modesto Municipal Code, including Section 2-3.301, and any other provisions establishing or describing a combined City Clerk and City Auditor, insofar as such provisions establish or describe a combined office, is hereby repealed.

SECTION 2. ADDITION OF OFFICE OF THE CITY CLERK
Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 3, “Office of the City Clerk,” is added to the Modesto Municipal Code to read as follows:

Article 3. - Office of the City Clerk
§ 2-3.301 – City Clerk
The office of the City Clerk is hereby established. This office is an administrative division under the direct control of the City Clerk. The City Clerk shall perform the duties and exercise such authority as prescribed by the Charter, this Code, and the laws of the State of California.
§ 2-3.302 – Powers and Duties
The City Clerk shall perform all duties and exercise all powers prescribed by the Charter and by ordinance, including:
(a) Attending all meetings of the City Council and maintaining a full and accurate record of Council proceedings.
(b) Serving as custodian of City records and the City seal. (c) Maintaining ordinances, resolutions, contracts, and official City documents. (d) Administering oaths and certifying official records. (e) Conducting City elections as required by law.
(f) Publishing official City notices.
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(g) Performing such other duties as may be required by the City Council or prescribed by law.
§ 2-3.303 – Acting City Clerk
In case of absence or disability of the City Clerk, the Council shall appoint an Acting City Clerk.

SECTION 3. ADDITION OF OFFICE OF THE CITY AUDITOR
Title 2, “Administration,” Chapter 3, “Administrative Departments,” Article 20, “City Auditor,” is added to the Modesto Municipal Code to read as follows:

Article 20 – City Auditor
§ 2-3.2001 – City Auditor
The Office of the City Auditor is established by the Charter. The office is an administrative division under the direct control of the City Auditor. The City Auditor shall exercise all authority and perform all functions prescribed by the Charter, this Code, and the laws of the State of California. § 2-3.2002 – Powers and Duties
In addition to the duties set forth in Charter Section 902.1, the City Auditor shall:
(a) Conduct financial and performance audits of all City departments, offices, boards, activities, agencies, and programs in accordance with generally accepted government auditing standards.
(b) Conduct special audits and investigations as requested by the City Council, as defined in Charter Section 902.1(c)(2).
(c) Have access to City records necessary to perform authorized audits, and City officers and employees shall fully cooperate.
(d) In consultation with the City Attorney, seek City Council authorization to issue administrative subpoenas and recommend enforcement actions as permitted by law.
(e) Monitor the City’s fraud, waste, and abuse hotline and report quarterly to the Audit Committee.
(f) Perform such other duties as may be required by the City Council. § 2-3.2003 – Acting City Auditor
In case of absence or disability of the City Auditor, the Council shall appoint an Acting City Auditor.
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SECTION 4. SEVERABILITY
If any provision of this Ordinance or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of this Ordinance which can be given effect without the invalid provision or application, and to this end, the provisions of this Ordinance are severable. This City Council declares that it would have adopted this Ordinance irrespective of the invalidity of any particular portion thereof and intends that the invalid portions should be severed and the balance of the Ordinance be enforced.

SECTION 5. CALIFORNIA ENVIRONMENTAL QUALITY ACT
The proposed Ordinance is exempt from the California Environmental Quality Act (CEQA) under the general rule in CEQA Guidelines Section 15061(b)(3), that CEQA only applies to projects that have the potential for causing a significant effect on the environment.

SECTION 6. EFFECTIVE DATE
This Ordinance shall go into effect and be in full force and operation from and after thirty (30) days after its final passage and adoption.

SECTION 7. PUBLICATION
At least two (2) days prior to its final adoption, copies of this Ordinance shall be posted in at least three (3) prominent and distinct locations in the City; and a notice shall be published once in The Modesto Bee, the official newspaper of the City of Modesto, setting forth the title of this Ordinance, the date of its introduction and the places where this Ordinance is posted. #6..
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The foregoing Ordinance was introduced at a regular meeting of the Council of the City of Modesto held on the __ day of ____________, 2026, by Councilmember ____________, who moved its introduction and passage to print which motion being duly seconded by Councilmember ____________, was upon roll call carried and ordered printed and published by the following vote:

AYES:

Councilmembers:

NOES:

Councilmembers:

ABSENT:

APPROVED: __________________________
SUE ZWAHLEN, Mayor
ATTEST:

By: _________________________________
DIANE NAYARES-PEREZ, City Clerk
(SEAL)

APPROVED AS TO FORM
By: _________________________________
JOSE M. SANCHEZ, City Attorney
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FINAL ADOPTION CLAUSE
The foregoing ordinance, having been published as required by the Charter of the City of Modesto, and coming on for final consideration at the regular meeting of the Council of the City of Modesto held on the ____ day of April, 2026, _____________ moved its final adoption, which motion being duly seconded by Councilmember ____________, was upon roll call carried and the ordinance adopted by the following vote:

AYES: Councilmembers: Name, Name, Name, Name, Name, Name, Mayor Name
NOES: Councilmembers: None
ABSENT: Councilmembers: None
APPROVED:_________________________
SUE ZWAHLEN, Mayor
ATTEST: _____________________________
DIANE NAYARES-PEREZ, City Clerk
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

April 22, 2026
Date: March 25, 2026
.

TO: Audit Committee
Sue Zwahlen, Chair
Rosa Escutia Braaton, Vice-Chair
David Wright, Member
Camille Garcia, Public Member
Thomas Orosco, Public Member
THROUGH: Joseph P. Lopez, City Manager
FROM: DeAnna Christensen, Director of Finance
SUBJECT: Fiscal Year 2024-2025 Auditor’s Report on Compliance of the Measure L:

Local Roads First Transportation Funding Measure
CONTACT: Maria Garnica, Accounting Manager (209) 577-5249; [email protected]
DESCRIPTION:

Consider the Auditors’ Reports and Schedule of Measure L Program Revenues and Expenditures for Fiscal Year Ended June 30, 2025, and forwarding to Council for approval. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

This item supports the City of Modesto 2025-2026 Strategic Plan focus of Governance and Service Delivery under Goal H: Achieve Long-Term Financial Sustainability.

BACKGROUND:

In November of 2016, the voters of Stanislaus County approved of the county wide, 25- year, half-cent sales tax increase known as Measure L. As part of the safeguards built into the expenditure plan an annual independent audit and annual reporting must be completed. On page 8 of the expenditure plan, the ordinance states “Annual fiscal and compliance audits will be conducted by a CPA, to assure that the revenues expended are necessary and reasonable.” The ordinance also requires an audit annually to ensure that administrative expenses were no more than 1% of revenues expended and that the jurisdiction meets its maintenance of effort.
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Audit Committee, April 22, 2026
Fiscal Year 2024-2025 Auditor’s Report on Compliance of the Measure L: Local Roads First Transportation Funding Measure

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On December 12, 2017, per Resolution 2017-505, Council approved the Measure L Master Funding Agreement with the Stanislaus Council of Governments (StanCOG) which expired on June 30, 2020. On May 26, 2020, by Resolution 2020-228, a new Measure L Master Funding Agreement with StanCOG was approved by for the period of July 1, 2020, through June 30, 2025, which aligns with this audit period. The agreement states in Article II: Funding Prerequisites and Requirement that the recipient shall annually submit to StanCOG, “An annual independent audit of all of recipients Measure L accounts which audit shall be conducted at recipient’s sole cost and expense.” For the audit related to Fiscal Year (FY) 2024-2025, the City received information from StanCOG that they would be continuing to conduct the annual audit and that it would be at the expense of StanCOG as part of the 1% allowable administrative expenses within the Measure L ordinance. The accounting firm of LSL LLP was selected by StanCOG to conduct the FY 2024-2025 financial audit report.

DISCUSSION:

As part of the City’s FY 2024-2025 Measure L Program Audit, the accounting firm verified the revenues and expenditures, fund balances, and that the Maintenance of Effort requirement was met.

In order to complete the audit, the City provided the following information to the firm:
• Receipt of payment for all cash received from StanCOG • Details of all payroll charges and expenditures supporting documentation • Copies of completed monthly reports submitted to StanCOG • Revenue and Expenditure General Ledger detail and the trial balance for all Measure L funds
• Copy of the certification for the maintenance of effort • List of all Measure L projects and a copy of the Strategic Plan After all the information was provided, staff worked closely with the firm to ensure that any requested documents and questions asked were addressed in a timely manner.

On March 27, 2026, LSL LLP, issued the final independent auditor’s report of the Measure L program for the fiscal year ending on June 30, 2025, the firm issued the letter to the Policy Board of Stanislaus Council of Governments with the final report. The final report did not have any findings for the year ending June 30, 2025.

FISCAL IMPACT:

While the information contained in this report discloses the financial performance for the City, there is no direct fiscal impact.
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Audit Committee, April 22, 2026
Fiscal Year 2024-2025 Auditor’s Report on Compliance of the Measure L: Local Roads First Transportation Funding Measure

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CEQA/NEPA REQUIREMENTS:

This item does not constitute a “project” within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 and requires no environmental review.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion recommending the Fiscal Year 2024-2025 Auditor’s Report on Compliance of the Measure L Local Roads First Transportation Funding Measure and forwarding to Council for approval.

Approved by:

DeAnna Christensen, Director of Finance
Joseph P. Lopez, City Manager
Attachments:

1. Independent Auditors’ Reports and Schedule of Measure L Revenues and Expenditures for Fiscal Year Ended June 30, 2025.
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
FOR THE YEAR ENDED JUNE 30, 2025 INDEPENDENT AUDITORS’ REPORT, MEASURE L FINANCIAL STATEMENTS,

SUPPLEMENTARY INFORMATION, AND COMPLIANCE REPORT
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
Independent Auditors’ Report, Measure L Financial Statements, Supplementary Information, and Compliance Report
For the Year Ended June 30, 2025
Table of Contents
Page
Number
INDEPENDENT AUDITORS’ REPORT....................................................................................................... 1 FINANCIAL STATEMENTS:

Balance Sheet and Statement of Net Position -
Governmental Fund and Governmental Activities. .................................................................................. 4 Statement of Revenues, Expenditures, and Changes in Fund Balance and Statement of Activities - Governmental Fund and Governmental Activities ....................................... 5 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual (GAAP) ................................................................................................................... 6 Notes to the Financial Statements................................................................................................................. 7 SUPPLEMENTARY I NFORMATION:

Schedule of Expenditures by Project. ................................................................................................ 11 OTHER REPORTS:

Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards ............................................................ 1 Independent Auditors’ Report on Measure L Compliance ................................................................. 1 #7..
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LSLCPAS.COM
INDEPENDENT AUDITORS’ REPORT
To the Policy Board
Stanislaus Council of Governments
Stanislaus County, California
To the City of Modesto’s Measure L Committee Member
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the Measure L Fund of the City of Modesto, California (the “City”) pertaining to certain provisions of Measure L; Local Road First Transportation Funding Measure (the Measure L Program), issued by the Stanislaus Council of Governments acting as the Stanislaus County Transportation Authority as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Measure L Fund’s basic financial statements as listed in the table of contents.

In our opinion, based on our audit and the report of the City’s auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities related to Measure L, and the Measure L Fund of the City, as of June 30, 2025, respective changes in financial position, and the budgetary comparison of the Measure L Fund for the year then ended, in accordance with accounting principles generally accepted in the United States of America.

We did not audit the financial statements of the City, which were relied upon for assurance over the cash balances and related investment income represented within the Measure L Fund as of June 30, 2025. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinions, insofar as it relates to the amounts included for cash balances and investment income, are based solely on the report of the other auditors.

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 Auditors’ 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 Measure L 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. #7..
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To the Policy Board To the City’s Measure L Committee Member Stanislaus Council of Governments
Stanislaus County, California
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.

Auditors’ 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 design 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 appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control as it relates to the Measure L Fund. 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
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 #7..
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To the Policy Board To the City’s Measure L Committee Member Stanislaus Council of Governments
Stanislaus County, California
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Measure L Fund’s basic financial statements. The accompanying schedule of expenditures by project (supplementary information) is presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 27, 2026, on our consideration of the City’s internal control over financial reporting, as it relates to the Measure L Fund, 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 financial reporting or on compliance, as it relates to the Measure L Fund. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance as it relates to the Measure L Fund.

Sacramento, California
March 27, 2026

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Stanislaus Council of Governments
Measure L - City of Modesto
Balance Sheet and Statement of Net Position
Governmental Fund and Governmental Activities
June 30, 2025
Reclassifications Governmental
Measure L Fund and Eliminations Activities
ASSETS
Cash and investments $ 51,435,515 $ - $ 51,435,515
Accounts receivable 246,397 - 246,397
Due from primary government 3,777,773 - 3,777,773
Total assets $ 55,459,685 $ 55,459,685 - $

LIABILITIES
Accounts payable $- 70,492 $ $ 70,492
Retainage Payable 10,976 - 10,976
Total liabilities 81,468 81,468 -

FUND BALANCE/NET POSITION
Restricted 55,378,217 - 55,378,217
Total fund balance/net position 55,378,217 55,378,217 - Total liabilities and fund balance/net position $ 55,459,685 $ 55,459,685 - $ See Notes to Financial Statements. 4
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Stanislaus Council of Governments
Measure L - City of Modesto
Statement of Revenues, Expenditures, and Changes in Fund Balance and Statement of Activities Governmental Fund and Governmental Activities
For the Year Ended June 30, 2025
Reclassifications Governmental
Measure L Fund and Eliminations Activities

REVENUES
Measure L funds/capital grants and contributions $ 13,930,022 - $ 13,930,022 Investment earnings (loss) 2,804,024 - 2,804,024
Total revenues 16,734,046 16,734,046 -

EXPENDITURES/EXPENSES
Public ways and facilities 446,227 - 446,227
Total expenditures/expenses 446,227 446,227 -
Net change in fund balance/net position 10,093,838 10,093,838 -

OTHER FINANCING SOURCES (USES)
Transfers Out 6,193,981 - 6,193,981
Total other financing sources (uses) 6,193,981 6,193,981 - Fund balance/net position-beginning 45,284,379 45,284,379 Fund balance/net position-ending $ 55,378,217 $ 55,378,217 - $ See Notes to Financial Statements. 5
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 1: ORGANIZATION
The City of Modesto, California (the “City”)’s, Measure L Fund is a special revenue fund of the City. Stanislaus Council of Governments (StanCOG) is the regional transportation planning agency and the metropolitan planning organization of Stanislaus County, which oversees the Measure L Initiative. Measure L provides for the implementation of the Expenditure Plan as approved and adopted by StanCOG, which provides funding for countywide local street and road improvements, arterial street widening, signalization, pedestrian, bicyclist, and driver safety improvements. These needed improvements are funded by Measure L, the one-half of one percent tax on retail transactions and use tax established for a twenty-five-year period, April 1, 2017 – March 31, 2042. The revenues will be deposited in a special fund, used solely for the transportation projects, improvements, and programs described in the Expenditure Plan which is considered a part of the Measure L Initiative, and incorporated into the Measure L Policies and Procedures.

The City’s Department of Public Works and Planning staff provides the necessary services such as maintenance and accounting to the Measure L Fund on a reimbursement basis with no allocation of payroll expenses.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
The financial statements of the Measure L Fund have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to government units (hereinafter referred to as generally accepted accounting principles (GAAP)). The Governmental Accounting Standards Board (GASB) is the accepted standardǦsetting body for establishing governmental accounting and financial reporting principles. The Measure L Fund’s significant accounting policies are described below.

B. Reporting Entity
The accompanying financial statements present only the City’s Measure L Fund and are not intended to present fairly the financial position, changes in financial position, or cash flows of the City as a whole in accordance with accounting principles generally accepted in the United States of America.

C. Basis of Presentation – Government-wide Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the Measure L Fund activities. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported as general revenues.

D. Basis of Presentation – Fund Financial Statements
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

The Measure L Fund is a governmental fund specifically categorized as a special revenue fund. Special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes.

E. Measurement Focus and Basis of Accounting
The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of recognition in the financial statements of various kinds of transactions or events.
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they have been earned and they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Property taxes are recorded as revenues in the fiscal year in which they are levied, provided they are collected in the current period or within sixty days thereafter. A one-year availability period is used for all other revenues. Interest on invested funds is recognized when earned. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.

G. Assets, Liabilities, and Net Position/Fund Balance

1. Cash and investments
In order to maximize the flexibility of its investment program and to aid in cash budgeting, the City pools the cash of all funds, except for monies deposited with fiscal agents in accordance with related bond indentures. The cash and investments balance in each fund represents that fund’s equity share of the City’s cash and investment pool, as the City places no restrictions on the deposit account for the participating funds. Interest income earned on pooled cash and investments is allocated quarterly. Interest income on restricted cash and investments with fiscal agents is credited directly to the related fund. Information regarding categorization of investments can be found in the City's financial statements.

2. Accounts Receivable
The Measure L Fund utilizes the allowance method of accounting for and reporting uncollectible or doubtful accounts. At June 30, 2025, management considered all accounts to be fully collectible and, therefore, no allowance was recorded in the accompanying financial statements.

3. Accounts Payable
Certain costs are incurred by the Measure L Fund during the current reporting period but are not paid until after the beginning of the next fiscal period. These costs are reported as accounts payable in the financial statements.

4. Net Position
For governmentǦwide reporting, the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources is called net position. Net position is comprised of two components, as the Measure L Fund has no capital assets: restricted, and unrestricted. • Restricted net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Assets are reported as restricted when constraints are placed on asset use either by external parties or by law through constitutional provision or enabling legislation. • Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that does not meet the definition of the two preceding categories.

The Measure L Fund’s policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. 8 #7..
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

5. Fund Balance
In governmental fund types, the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources is called “fund balance.” The Measure L Fund reports the following categories of fund balance, based on the nature of any limitations requiring the use of resources for specific purposes. • Restricted fund balance includes amounts that can be spent only for the specific purposes stipulated by external resource providers such as grantors or enabling federal, state, or local legislation. Restrictions may be changed or lifted only with the consent of the resource providers. • Unassigned fund balance represents the residual amount for the general fund that is not contained in the other classifications. The general fund is the only fund that reports a positive unassigned fund balance. Additionally, any deficit fund balance within the other governmental fund types is reported as unassigned.

The Measure L Fund establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy. This is typically done through adoption and amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved contracts. Assigned fund balance is established by the Measure L Fund through adoption or amendment of the budget, or future year budget, plan as intended for a specific purpose.

The Measure L Fund’s policy is to first apply restricted, committed, or assigned resources when an expense is incurred for purposes for which both restricted, committed or assigned and unassigned fund balance is available.

6. Implementation of Governmental Accounting Standards Board (GASB) Pronouncements During the year ending June 30, 2025, the Measure L Fund implemented the following standards:

GASB Statement No. 101, Compensated Absences
The requirements of this Statement will improve financial reporting by implementing a unified recognition and measurement model that will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. Establishing the unified model will result in consistent application to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave. This Statement will also result in a more robust estimate of the amount of compensated absences that a government will pay or settle, which will enhance the relevance and reliability of information about the liability for compensated absences.

GASB Statement No. 102, Certain Risk Disclosures
The requirements of this Statement will improve financial reporting by providing users of financial statements with essential information that currently is not often provided. The disclosures will provide users with timely information regarding certain concentrations or constraints and related events that have occurred or have begun to occur that make a government vulnerable to a substantial impact. As a result, users will have better information with which to understand and anticipate certain risks to a government’s financial condition.

NOTE 3: CASH AND CASH EQUIVALENTS
Cash and investments held by the City within the Measure L Fund amounted to $51,435,515 as of June 30, 2025.

NOTE 4: RISK MANAGEMENT
The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City provides coverage for these losses through commercial insurance policies and/or through participation in the City program. Refer to the City’s Annual Financial Report for additional information.
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 5: COMMITMENTS AND CONTINGENCIES
Commitments and contingencies of the City, undeterminable in amount, include normal recurring pending claims and litigation. In the opinion of management, there is no pending litigation which is likely to have a material adverse effect on the financial position of the Measure L Fund.

NOTE 6: SUBSEQUENT EVENTS
The City evaluated subsequent events for recognition and disclosure through March 27, 2026, the date on which these financial statements were available to be issued. Management concluded that no material subsequent events have occurred since June 30, 2025 related to the Measure L Fund, that required recognition or disclosure in these financial statements.
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
Schedule of Expenditures by Project
For the Year Ended June 30, 2025
Category
Project Number Project Name
Expense Budget - Local Control Measure L
FY 24-25 Local Control Measure L Expenses
Project to Date Measure L Local Control Expenses through 6/30/2025 Budget Remaining for Future Fiscal Years
Local Streets & Roads 100806 2016 Pavement Rehab Project $ 176,106 $ - $ 176,106 $ - Local Streets & Roads 100942 Paradise Road Improvements $ 45,156 $ - $ 45,156 $ - Local Streets & Roads 100966 Pelandale from Sisk to Dale $ 487,249 $ - $ 487,249 $ - Local Streets & Roads 101036 Carpenter Street Improvements 2,628,392 $ $ - 2,628,392 $ $ -Local Streets & Roads 101037 Lakewood Street Improvements 2,365,558 $ $ - 2,365,558 $ $ -Local Streets & Roads 101038 Wylie,Floyd,Carver Improvements 2,250,469 $ $ - 2,250,469 $ $ -Local Streets & Roads 101042 Paradise Road ATP - Construction Portion 7,212,561 $ 2,131,113 $ 5,837,036 $ $ 1,375,525 Local Streets & Roads 101088 Standiford Avenue Pavement Rehab 2,788,144 $ $ - 2,788,144 $ $ -Local Streets & Roads 101118 Claus Road Pavement Rehab 1,183,203 $ $ - 1,183,203 $ $ -Local Streets & Roads 101120 Village One Slurry Seal 2,554,544 $ $ - 2,554,544 $ $ -Local Streets & Roads 101141 Downtown Master Plan 108,450 $ $ - 108,450 $ $ -Local Streets & Roads 101157 Tuolumne Blvd. Pavement Rehab 2,502,283 $ 194,225 $ 194,225 $ $ 2,308,058 Local Streets & Roads 101168 Scenic Dr Pavement Rehab Phase 1 (Lakewood to Claus) 1,243,944 $ $ - 1,243,944 $ $ -Local Streets & Roads 101169 Scenic Dr Pavement Rehab Phase 2 (Downey to Lakewood) 7,722,545 $ 1,002,992 $ 1,684,857 $ $ 6,037,688 Local Streets & Roads 101170 Tully Road Pavement Rehab 2,011,496 $ $ - 2,011,496 $ $ -Local Streets & Roads 101171 Coffee Road Pavement Rehab Phase 1 3,186,604 $ $ - 3,186,604 $ $ -Local Streets & Roads 101214 Granger Neighborhood Pavement Rehabilitation 360,000 $ $ - 299,839 $ $ 60,161 Local Streets & Roads 101245 2020 Pvmnt Condition Survey 189,180 $ $ - 189,180 $ $ -Local Streets & Roads 101246 Briggsmore-McHenry to Oakdale 5,374,090 $ 11,788 $ 5,360,455 $ $ 13,635 Local Streets & Roads 101248 Orangeburg Ave. Pvmt Rehab Ph1 3,121,267 $ 80 $ 3,019,945 $ $ 101,322 Local Streets & Roads 101249 Pelandale Nghbrhd Pvmt Maintenance 1,552,471 $ 336 $ 1,495,338 $ $ 57,133 Local Streets & Roads 101269 Pelandale Ave. Rehabilitation 800,000 $ 358,199 $ 474,487 $ $ 325,513 Local Streets & Roads 101295 9th St Corridor Improvements 7,113,408 $ $ - $ - $ 7,113,408 Local Streets & Roads 101314 Coffee Road Pavement Rehab Phase 2 2,748,500 $ 71,135 $ 143,597 $ $ 2,604,903 Local Streets & Roads 101315 Dale Road Pavement Rehabilitation 2,185,000 $ 5,341 $ 32,158 $ $ 2,152,842 Local Streets & Roads 101392 Orangeburg Ave. Pvmt Rehab Ph2 4,436,960 $ 245,589 $ 346,395 $ $ 4,090,565 Local Streets & Roads 101486 Lakewood and Scenic Improvements 2,990,000 $ - $ - $ $ 2,990,000 Local Streets & Roads 101578 Claus Road Complete Street Grant 50,000 $ - $ 43,852 $ $ 6,148 Local Streets & Roads 101595 7th and I St. Bike Path Improvements 3,000,000 $ - $ - $ $ 3,000,000 Local Streets & Roads 101627 Kansas Ave. Pavement Rehabilitation 1,612,575 $ 294,009 $ 294,009 $ $ 1,318,566 Total Local Streets and Roads 74,000,155 $ 4,314,807 $ 40,444,688 $ 33,555,467 $ Traffic Management 100634 Upgrade Traffic Signals - 2013 169,432 $ $ - 169,432 $ $ -Traffic Management 100719 Traffic Signals 2013 (Ros/Bel) - $ $- - $ $-Traffic Management 100720 Traffic Signals 2013 (Pres/Mt. Vrn) 122,080 $ $ - 122,080 $ $ -Traffic Management 100884 Emergency Vehicle Pre-Emption 61,500 $ $ - 61,500 $ $ -Traffic Management 100940 Synchronize Traffic Signals Downtown 2015 45,548 $ (857) $ 45,548 $ $-Traffic Management 100990 System Safety Analysis Program 32,500 $ 582 $ 32,477 $ $ 23 Traffic Management 101039 Task Force for School Safety 46,187 $ $ - 46,187 $ $ -Traffic Management 101040 Orville Wright Elementary Improve. 540,195 $ $ - 540,195 $ $ - 11 #7..
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STANISLAUS COUNCIL OF GOVERNMENTS
MEASURE L – CITY OF MODESTO
Schedule of Expenditures by Project
For the Year Ended June 30, 2025
Category
Project Number Project Name
Expense Budget - Local Control Measure L
FY 24-25 Local Control Measure L Expenses
Project to Date Measure L Local Control Expenses through 6/30/2025 Budget Remaining for Future Fiscal Years
Traffic Management 101043 Replace Traffic Controllers 584,437 $ $ - 584,437 $ $ -Traffic Management 101066 New Signal Oakdale/Claratina 110,000 $ $ - 61,354 $ $ 48,646 Traffic Management 101089 Tully Road Safety Improvement 881,183 $ $ - 41,241 $ $ 839,942 Traffic Management 101122 Install 2 Flashing Beacons 9,970 $ $ - 9,970 $ $ -Traffic Management 101123 Fiber Drop Traffic Signal Cabinet 240,321 $ $ - 240,321 $ $ -Traffic Management 101124 Replace 35 Traffic Controllers 177,705 $ $ - 177,705 $ $ -Traffic Management 101125 Traffic Signal Analysis Study 243,270 $ $ - 243,270 $ $ -Traffic Management 101128 Synchronize Traffic Signals Outside Downtown 46,190 $ $ 46,190 243,270 $ $ (197,080)Traffic Management 101157 Tuolumne Blvd. Pavement Rehab 1,023,610 $ - $ - $ $ 1,023,610 Traffic Management 101172 School Safety Program Study 250,000 $ 44 $ 250,711 $ $ (711)Traffic Management 101173 School Area All Stop Beacon 48,000 $ $ - 48,000 $ $ -Traffic Management 101174 Advance School Zone Beacons at 13 Schools 129,983 $ $ - 129,983 $ $ -Traffic Management 101175 School Crosswalk Beacon 1,061,316 $ $ - 980,010 $ $ 81,306 Traffic Management 101176 Upgrade Crosswalk to RRFB 37,456 $ $ - 37,456 $ $ -Traffic Management 101177 Upgrade RRFB - Elliot School 19,670 $ $ - 19,670 $ $ -Traffic Management 101178 Neighborhood Traffic Calming 1,550,000 $ 434,453 $ 713,876 $ $ 836,124 Traffic Management 101179 HAWK System at Hetch-Hetchy on Tully and Prescott 25,846 $ $ - 25,846 $ $ -Traffic Management 101192 Upgrade ATMS - 2019 439,628 $ (218) $ 215,535 $ $ 224,093 Traffic Management 101221 School Safety Program Study - Projects 1,125,000 $ 926 $ 12,601 $ $ 1,112,399 Traffic Management 101242 Install Video Detection 399,971 $ $ - 399,971 $ $ -Traffic Management 101247 Virginia Corridor Trail Maintenance 58,900 $ $ - 53,380 $ $ 5,520 Traffic Management 101295 9th St Corridor Improvements 1,089,968 $ $ - - $ $ 1,089,968 Traffic Management 101316 Adaptive Traffic Control Software 350,000 $ - $ 78,150 $ $ 271,850 Traffic Management 101317 Fiber Drop Carpenter/Prescott/Maze 70,000 $ 3,827 $ 49,132 $ $ 20,868 Traffic Management 101318 Fiber Drop Downtown Corridors - G St. and H St. 1,108,747 $ 8,487 $ 37,299 $ $ 1,071,448 Traffic Management 101322 Claus Road Signal Coordination 301,873 $ 17,320 $ 93,503 $ $ 208,370 Traffic Management 101323 Scenic Drive Signal Coordination 331,877 $ 7,290 $ 240,475 $ $ 91,402 Traffic Management 101333 Install RRFB at 10 Locations 150,000 $ - $ - $ $ 150,000 Traffic Management 101383 Oakdale Road Improvement 116,390 $ 181 $ 6,870 $ $ 109,520 Traffic Management 101384 Sylvan/Standiford PHB's 111,150 $ 24,259 $ 111,150 $ $ -Traffic Management 101394 All-Way Stop Beacons 45,379 $ $ - 45,379 $ $ -Traffic Management 101395 Traffic Safety Analysis 195,000 $ $ - 72,942 $ $ 122,058 Traffic Management 101397 Fiber Drop Sisk Road 30,000 $ 16,778 $ 30,838 $ $ (838)Traffic Management 101482 SS4A Action Plan 250,000 $ $ 112,202 112,324 $ $ 137,676 Traffic Management 101496 Upgrade Traffic Signals 2023 675,000 $ $ 9,801 9,801 $ $ 665,199 Traffic Management 101572 HAWK 16th at H and I 500,000 $ 332,996 $ 336,454 $ $ 163,546 Traffic Management 101573 Advance School Beacon Installation 200,000 $ 34,786 $ 34,786 $ $ 165,214 Traffic Management 101581 Ethernet Switches 550,460 $ 57 $ 57 $ $ 550,403 Traffic Management 101587 ATP - Cycle 7 25,000 $ 926 $ 16,256 $ $ 8,744 Traffic Management 101595 7th and I St. Bike Path Improvements 1,000,000 $ - $ - $ $ 1,000,000 Total Traffic Management 16,580,742 $ 1,050,030 $ 6,781,441 $ 9,799,300 $ Bike and Pedestrian 100882 MJC Bike Path Phase 2 202,047 $ 202,047 $ $-Bike and Pedestrian 101041 Active Transportation Plan 300,000 $ 11,729 $ 288,156 $ $ 11,844 Bike and Pedestrian 101042 Paradise Road ATP 465,718 $ - $ 25,000 $ $ 440,718 Bike and Pedestrian 101073 Carver/Bangs-Pelandale/Snyder Bike Trail System 405,591 $ $ - - $ $ 405,591 Bike and Pedestrian 101126 Dry Creek Trail Maintenance 651,261 $ $ - 651,261 $ $ -Bike and Pedestrian 101180 Dry Creek Trail Pavement Rehab & ADA Upgrade Phase II 1,459,173 $ 1,005,928 $ 1,083,326 $ $ 375,847 Bike and Pedestrian 101247 Virginia Corridor Trail Maintenance 825,163 $ 241 $ 742,277 $ $ 82,886 Bike and Pedestrian 101250 Neighborhood ADA Program 695,534 $ $ - 617,059 $ $ 78,475 Bike and Pedestrian 101295 9th St Corridor Improvements 850,057 $ - $ - $ $ 850,057 Bike and Pedestrian 101391 Nghbrhd ADA Imp Program II 743,794 $ 257,473 $ 258,719 $ $ 485,075 Bike and Pedestrian 101587 ATP - Cycle 7 25,000 $ - $ 15,330 $ $ 9,670 Bike and Pedestrian 101595 7th and I St. Bike Path Improvements 1,000,000 $ - $ - $ $ 1,000,000 Total Bike and Pedestrian 7,623,338 $ 1,275,371 $ 3,883,176 $ 3,740,162 $ Grand Total 98,204,235 $ 6,640,208 $ 51,109,305 $ 47,094,930 $ 1
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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 Policy Board
Stanislaus Council of Governments
Stanislaus County, California
To the City of Modesto’s Measure L Committee Member
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 Measure L Fund of the City of Modesto, California (the “City”) pertaining to certain provisions of Measure L; Local Road First Transportation Funding Measure (the “Measure L Program”), issued by the Stanislaus Council of Governments acting as the Stanislaus County Transportation Authority as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Measure L Fund basic financial statements, and have issued our report thereon dated March 27, 2026.

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 Measure L 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 Measure L 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, 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. #7..
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To the Policy Board To the City’s Measure L Committee Member Stanislaus Council of Governments
Stanislaus County, 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.

Sacramento, California
March 27, 2026
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LSLCPAS.COM
INDEPENDENT AUDITORS’ REPORT ON MEASURE L:

LOCAL ROAD FIRST TRANSPORTATION FUNDING MEASURE COMPLIANCE To the Policy Board
Stanislaus Council of Governments
Stanislaus County, California
To the City of Modesto’s Measure L Committee Member
Report on Compliance with Measure L Program Compliance
Opinion on Measure L Program Compliance
We have audited the City of Modesto, California (the “City”)’s compliance with certain provisions of the Measure L:

Local Road First Transportation Funding Measure (the “Measure L Program”), issued by the Stanislaus Council of Governments (“StanCOG”) acting as the Stanislaus County Transportation Authority, requirements that funds allocated to and received by the City were expended in conformance with applicable statutes, rules, and regulations of the Measure L Program; per the Measure L Master Funding Agreement (the “Master Agreement”) between StanCOG and the City, during 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 Measure L Program reported within the Measure L Fund of the City 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 in Government Auditing Standards, issued by the Comptroller General of the United States; the applicable statutes, rules, and regulations of the Measure L Program per the Master Agreement. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of Compliance section of our report.

We are required to be independent of the City and StanCOG, 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. 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 Measure L Program requirements applicable to the City’s Measure L Fund.
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To the Policy Board To the City’s Measure L Committee Member Stanislaus Council of Governments
Stanislaus County, California
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 GAAS; Government Auditing Standards; the applicable statutes, rules, and regulations of the Measure L Program as required by the Master Agreement, 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 Measure L Program requirements that funds allocated to and received by the City were expended in conformance with applicable statutes, rules, and regulations of the Measure L Program, of the Stanislaus Council of Governments as required by the Master Agreement.

In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, the applicable statutes, rules, and regulations of the Measure L Program, of the Stanislaus Council of Governments as required by the Master Agreement, 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, as it relates to the Measure L Fund, in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the applicable statutes, rules, and regulations of the Measure L Program, of the Stanislaus Council of Governments as required by the Master Agreement, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance.

Accordingly, no such opinion is expressed.

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.
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To the Policy Board To the City’s Measure L Committee Member Stanislaus Council of Governments
Stanislaus County, California
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 compliance is solely to describe the scope of our testing of compliance and the results of that testing. Accordingly, this report is not suitable for any other purpose.

Sacramento, California
March 27, 2026
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Audit CommitteeApril 22, 2026

Audit Committee
April 22, 2026