Finance & Management Committee
February 10, 2026
RECOMMENDATION
AGENDA REPORT
Staff Recommends That The City Council Receive The Annual Comprehensive Financial Report (ACFR) And The Auditor’s Required Communication To City Council (Management Letter) For The Year Ended June 30, 2025.
EXECUTIVE SUMMARY
The Finance Department is pleased to present the attached independent annual audit to the City Council, referred to as the Annual Comprehensive Financial Report (ACFR), and the auditor’s required communication to the City Council, also known as the Management Letter.
The audit report incorporates management’s discussion and analysis of the City’s financial position, basic financial statements, notes to basic financial statements, and the independent auditor’s 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.
Macias, Gini & O’Connell, the City’s external auditor, audited the City’s financial statements for the year ending June 30, 2025 (Attachment A). The auditor’s unmodified opinion letter for the ACFR affirms that the basic financial statements contained therein accurately represent the financial condition of the City of Oakland as of June 30, 2025. The auditor expressed an opinion that the City’s financial statements are fairly stated and in accordance with accounting principles generally accepted in the United States.
The Fiscal Year (FY) 2024-25 ACFR provides relevant financial information to the City Council, residents and businesses of Oakland, creditors, investors, and other interested parties. This report also fulfills the City Council’s responsibilities under Section 809 of the City Charter, which states in part, “The Council shall engage during the first month of each fiscal year an independent certified public accountant who shall examine and report to the Council on the annual financial statement of the City.”
TO: Jestin D. Johnson FROM: Bradley Johnson
City Administrator Finance Director
SUBJECT: Annual Comprehensive Financial
Report and Management Letter
DATE: January 7, 2026
City Administrator Approval Date:
Jestin Johnson (Jan 29, 2026 18:41:51 PST)
01/29/2026
Jestin D. Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 7, 2026 Page 2
Finance & Management Committee
February 10, 2026
BACKGROUND / LEGISLATIVE HISTORY
The Annual Comprehensive Financial Report
The FY 2024-25 ACFR provides a description of the City’s financial activities for the period of July 1, 2024, through June 30, 2025, and is divided into the following major sections:
• Introductory Section: This section intends to familiarize the reader with the organizational structure of the City, the scope of City services, and the City’s general government operations. This section also highlights the Government Finance Officers Association’s (GFOA) Certificate of Achievement for Excellence in Financial Reporting award for the previous fiscal year;
• Financial Section: This section contains the City’s audited financial statements, notes to the basic financial statements, the Independent Auditor’s Report, and Management’s Discussion and Analysis (MD&A); and
• Statistical Section: This section provides ten years of summary financial data, as well as demographic, economic, and statistical information related to the City and its operations.
The auditor’s opinion contained in the Financial Section of the ACFR represents their unmodified opinion that the City’s financials are presented fairly and in conformity with Generally Accepted Accounting Principles (GAAP).
The Management Letter or Auditor’s Required Communication to City Council
The Management Letter (Attachment B) is a required communication and recommendation by Statement on Auditing Standards (SAS) No. 114. The letter outlines the auditor’s responsibility, planned scope, and timing of the audit, and provides advice on accounting policies, evaluates accounting estimates, proposes audit adjustments, and notes significant audit findings, the status of prior years’ recommendations, corrected and uncorrected misstatements, disagreements with management, management representations, and any major difficulties encountered in performing the audit.
The Management Letter is intended solely for the information and use of the City Council, the Finance and Management Committee, Federal grantor agencies, and the management of the City.
ANALYSIS AND POLICY ALTERNATIVES
The FY 2024-25 ACFR provides a comprehensive review of the City’s financial operations. The ACFR is submitted to the City Council for review and to provide relevant financial information to the residents of Oakland, creditors, investors, and other interested parties. This document includes an opinion from the City’s external auditor that the City’s financial statements for FY 2024-25 are fairly stated in conformity with accounting principles generally accepted in the United States. This is the most favorable conclusion and is commonly known as an Jestin D. Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 7, 2026 Page 3
Finance & Management Committee
February 10, 2026
"unmodified" or "clean" opinion. The independent auditor’s report is included in the Financial Section of the ACFR.
Acceptance of this report supports the citywide priority of responsive, trustworthy government through the disclosure of timely and detailed information on the City’s financial condition.
Financial Highlights
For the fiscal year ending June 30, 2025, total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $1.4 billion. This result compares to a net position of $982.8 million as of June 30, 2024, and reflects a $414.7 million improvement on a government-wide basis, as detailed in Table 1.
Of the $414.7 million improvement in net position, $188.4 million is attributable to a required accounting reclassification of employee benefit liabilities and the implementation of GASB Statement No. 101. This change reflects updated accounting presentation and did not result from the change in City’s financial position. The remaining $226.3 million improvement in net position reflects results of current year operations derived mostly from increase in revenues including $85.3 million in operating grants stemming from growth and timing of affordable housing and Caltrans grants, $35.6 million in real estate transfer tax resulting from a one-time boost from PG&E property sale, and $9.3 million in legal settlements, offset by a decline of $70.8 million in property tax due to a lower PFRS liability rate. $37.6 million is due to reduction in expenditure to address the budget deficit.
The City’s net position of $1.4 billion incorporates a $0.9 billion deficit in unrestricted net position primarily resulting from the historical underfunding of pension and OPEB liabilities. The net pension liability accounts for $1.8 billion of this deficit, and the net OPEB liability accounts for $0.6 billion. The City’s unrestricted net deficit remains substantial but declined by $0.3 billion in the fiscal year ended June 30, 2025.
Capital assets such as buildings, land, and equipment, less any related outstanding debt, account for $1.3 billion of the City’s net position. These capital assets are used to provide services to residents and are not available for future spending.
Resources subject to restrictions on their use, such as bond proceeds or grant funds, contribute an additional $930.5 million to the net position and are available to meet the City’s ongoing obligations for specific programs. Of this amount, $460.7 million is restricted for Housing and Community Development programs, $359.6 million pertains to Low and Moderate Income Housing Redevelopment, and $41.3 million is restricted for debt service.
The total fund balance for the City's governmental funds increased by 8.8 percent, or $132.6 million, ending the year at $1.6 billion. The increase in fund balance is primarily due to a required accounting reclassification at the beginning of the year. Under governmental fund accounting, which focuses on short-term financial resources, certain employee benefit amounts must be reported as committed fund balance rather than as liabilities. This change reflects how the information is presented under accounting rules and does not represent new revenue, reduced costs, or a change in the City’s financial obligations.
Jestin D. Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 7, 2026 Page 4
Finance & Management Committee
February 10, 2026
Excluding the non-operational accounting change, the total fund balance in the consolidated General Fund increased by 12.6 percent, or $81.1 million as a result of current-year activities.
The operational growth reflects higher revenues, several one-time receipts, and expenditure reductions implemented to address the City’s budget challenges.
As of June 30, 2025, the General Purpose Fund Emergency Reserve, a subfund of the General Fund, had a balance of $63.8 million. In addition, the General Purpose Fund has an unassigned fund balance of $34.6 million. In combination, these reserves totaled $98.4 million, exceeding the amount required under the City’s Consolidated Fiscal Policy of 7.5 percent of FY 2024-25 General Purpose Fund appropriations, or $59.9 million.
Table 1: Consolidated Statements of Net Position June 30, 2025 and 2024 (in thousands):
Governmental Activities Business-Type
Activities
Total
2025 2024 2025 2024 2025 2024
Assets
Current and other assets $2,808,845 $2,764,316 $137,344 $118,968 $2,946,189 $2,883,284 Capital assets 1,598,234 1,528,586 246,166 251,139 1,844,400 1,779,725 Total Assets 4,407,079 4,292,902 383,510 370,107
4,790,589 4,663,009
Deferred outflows of resources
Loss on refunding of debt 7,288 8,533 - - 7,288 8,533 Pensions 411,626 547,002 8,185 12,232 419,811 559,234 OPEB 126,973 174,814 2,376 3,208 129,349 178,022
Total Outflows 545,887 730,349 10,561 15,440 556,448 745,789
Liabilities
Long-term liabilities 1,102,532 1,179,526 14,307 17,510 1,116,839 1,197,036 Other liabilities 288,885 500,824 2,707 3,409 291,592 504,233 Net pension liability 1,728,216 1,834,077 46,394 48,568 1,774,610 1,882,645 Net OPEB liability 545,291 539,538 9,638 9,438 554,929 548,976 Total Liabilities 3,664,924 4,053,965 73,046 78,925 3,737,970 4,132,890
Deferred inflows of resources
Gains on refunding of debt 1,821 2,062 158 197 1,979 2,259 Leases 43,706 40,104 - - 43,706 40,104
Pensions 17,854 19,033 186 522 18,040 19,555
OPEB 144,130 225,883 3,658 5,264 147,788 231,147
Total deferred inflows 207,511 287,082 4,002 5,983 211,513 293,065
Net Position
Net investment in cap. assets 1,089,717 1,074,554 231,701 233,432 1,321,418 1,307,986 Restricted 930,515 838,677 - - 930,515 838,677
Unrestricted (deficit) (939,701) (1,231,028) 85,322 67,203 (854,379) (1,163,825) Total net position $1,080,531 $682,203 $317,023 $300,635 $1,397,554 $982,838
PUBLIC OUTREACH / INTEREST
This item did not require any additional public outreach other than the required posting on the City’s website.
Jestin D. Johnson, City Administrator
Subject: Annual Comprehensive Financial Report and Management Letter Date: January 7, 2026 Page 5
Finance & Management Committee
February 10, 2026
Bradley Johnson (Jan 27, 2026 16:48:21 PST)
COORDINATION
This report was prepared by the Finance Department and incorporates financial data for all City departments and the Port of Oakland.
SUSTAINABLE OPPORTUNITIES
Economic: There are no direct economic opportunities associated with this informational report.
Environmental: There are no direct environmental opportunities associated with this informational report.
Race & Equity: There are no direct race or equity opportunities associated with this informational report.
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That The City Council Receive The Annual Comprehensive Financial Report (ACFR) And The Auditor’s Required Communication To City Council (Management Letter) For The Year Ended June 30, 2025.
For questions regarding this report, please contact Pooja Shrestha, Controller, at (510) 238- 6776.
Respectfully submitted,
BRADLEY JOHNSON
Finance Director
Finance Department
Prepared by:
Pooja Shrestha, Controller
Controller’s Bureau
Attachments (2):
A: Annual Comprehensive Financial Report For the Year Ended June 30, 2025 B: Auditor’s Required Communication to City Council (Management Letter)