October 13, 2026
Agenda Item No. 14
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
Jason Al-Imam, Administrative Services Director/Treasurer – 949-644-3126, [email protected]
PREPARED BY:
Jason Al-Imam, Administrative Services Director/Treasurer TITLE:
Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure Report ABSTRACT:
In accordance with reporting requirements of the City of Newport Beach’s (City) agreement with Visit Newport Beach, Inc (VNB) entered into on January 1, 2025, VNB’s audited financial statements and compliance expenditure report for the fiscal year ended June 30, 2026, are attached for the City Council’s review.
RECOMMENDATIONS:
Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and Receive and file.
DISCUSSION:
On January 1, 2025, the City entered into a new agreement with VNB to provide destination marketing services, following the expiration of the previous agreement on December 31, 2024. A key component of the new agreement focused on ensuring transparency when it comes to the use of public funds. To help streamline reporting and increase transparency, VNB agreed to restructure its organization by consolidating Visit Newport Beach, Inc. and Newport Beach & Company into one company. Newport Beach & Company formally dissolved on June 30, 2025, with all business operations ceasing and all assets and liabilities transferred to VNB. VNB continues the operational activity of the consolidated organization.
The agreement requires VNB to submit audited financial statements to the City by September 30 of each year for its most recently ended fiscal year, including any management letter associated with those audited financial statements. VNB submitted audited financial statements for the fiscal year ended June 30, 2026, to the City on September 23, 2026. The audited financial statements are attached for the City Council’s review.
The agreement also requires VNB to submit an expenditure report to the City by September 30 of each year. The expenditure report must be certified by VNB and a Certified Public Accountant to the effect that the funds received pursuant to the agreement were expended in accordance with the agreement in the previous fiscal year for authorized purposes. This report must include reasonable detail in support of the certification, including expenditures or contributions to special events and not-for-profit organizations in Newport Beach. VNB submitted the expenditure report for the fiscal year ended June 30, 2026, to the City on September 23, 2026.
The audited financial statements and expenditure report for the fiscal year ended June 30, 2026, were audited and examined, respectively, by the independent audit firm Crowe LLP. The independent auditor’s report within VNB’s audited financial statements reflects an unmodified or “clean” audit opinion, meaning that the financial statements are presented fairly, in all material respects, and in conformity with generally accepted accounting principles. The audit report includes an emphasis-of-matter paragraph regarding significant transactions with related nonprofit organizations; however, the auditor’s opinion is not modified with respect to this matter. No audit findings or internal control recommendations were identified, and no management letter was issued in connection with the audit. The firm’s examination of the required expenditure report indicates that VNB’s assertion that it complied with the applicable provisions of the agreement with the City is fairly stated in all material respects.
Because the Fiscal Year 2025-26 financial statements are presented on a comparative basis alongside the prior year, the FY 2024-25 comparative amounts should be viewed in the context of the consolidation. During FY 2024-25, VNB paid Newport Beach & Company for marketing and promotion services before its dissolution, and those costs were reported as marketing expenses in VNB’s financial statements. Following the consolidation, costs that were previously incurred through Newport Beach & Company, including salaries, benefits and certain administrative costs, are reported directly by VNB. Accordingly, certain comparative line items may differ significantly because of the change in organizational structure and financial statement presentation.
FISCAL IMPACT:
Under the current agreement, VNB receives 23% of the City’s Transient Occupancy Tax (TOT) revenue generated by hotel stays and does not receive a share of TOT revenue generated by short-term lodging rentals. Under the previous agreement, through December 31, 2024, VNB received 18% of the City’s gross TOT revenue from both hotel stays and short-term lodging rentals.
VNB reported $7.4 million in service fee revenue from the City in FY 2025-26 to fund destination marketing services and activities. VNB recognizes service fee revenue when it receives payment from the City because it is not entitled to its share of TOT before receipt. Accordingly, a payment made near fiscal year-end may be reflected in different fiscal years in VNB’s financial statements and the City’s disbursement records.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A – Visit Newport Beach Audited Financial Statements for the Year Ended June 30, 2026 Attachment B – Visit Newport Beach Expenditure Compliance Report for the Year Ended June 30, 2026 Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure Report October 13, 2026
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