LSLCPAS.COM
January 26, 2026
To the Honorable Mayor and Members of the City Council
City of Orange, California
We have audited the financial statements of the governmental ac tivities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Orange, California (hereafter, the City) for the year ended June 30, 2025. Professional standards require that w e provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated May 5, 2025. Professional standards also require that we communicate to you the following information related to our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. As described in Note 1 to the financial statements, the City changed accounting policies related to com pensated absences by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 101, Compensated Absences, in fiscal year 2025.
Accordingly, the cumulative effect of the accounting change as of the beginning of the year is reported in the Statement of Activities. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial stat ements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City’s financial statements were:
Management’s estimates of the net pension liability, net other post-employment benefits liability, and claims and judgments liability are based on actuarial valuations. We evaluated the methods, assumptions, and data used to develop the net pension liability, net other post-employment benefits liability, and claims and judgments liability in determining that they are reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and l ikely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management.
To the Honorable Mayor and Members of the City Council
City of Orange, California
Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, eit her individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our s atisfaction, that could be sign ificant to the financial statements or the auditors’ report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter dated January 26, 2026.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professi onal standards require the con sulting accountant to check with us to determine that the consultant has all the re levant facts. To our knowledg e, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior t o retention as the City’s audi tors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to management’s discussio n and analysis, the budgetary comparison schedules for the General Fund and major special revenue funds, and the required pension and other post- employment benefits schedules, which are required supplementar y information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other k nowledge we obtained during ou r audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on the combining and individual fund statements and schedules which accompany the financial statements but are not RSI. With respect to this supp lementary information, we made certain inquiries of management and evaluated the form, content, and methods of prep aring the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the inf ormation is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
We were not engaged to report on the introductory and statistical sections of the Annual Comprehensive Financial Report, which accompany the financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
To the Honorable Mayor and Members of the City Council
City of Orange, California
Future GASB Pronouncements
The following Government Accounting Standards Board (GASB) pronouncements will be effective for the following fiscal years’ audits and should be reviewed for proper implementation by management:
Fiscal Year 2025-2026
GASB Statement No. 103, Financial Reporting Model Improvements.
GASB Statement No. 104, Disclosure of Certain Capital Assets.
Future Projects
Comprehensive Project, Revenue and Expense Recognition.
Major Project, Going Concern Uncertainties and Severe Financial Stress.
Major Project, Infrastructure Assets.
Practice Issue, Subsequent Events.
Restriction on Use
This information is intended solely for the information and use of city council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Irvine, California