CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
FOR THE YEAR ENDED JUNE 30, 2025
FINANCIAL STATEMENTS
WITH REPORT ON AUDIT
BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Financial Statements
With Report on Audit
By Independent
Certified Public Accountants
For the Year Ended June 30, 2025
CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Financial Statements
With Report on Audit
By Independent
Certified Public Accountants
For the Year Ended June 30, 2025
Table of Contents
Page
Number
FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT ................................................................................................................... 1
BASIC FINANCIAL STATEMENTS
GOVERNMENT - WIDE FINANCIAL STATEMENTS
Statement of Net Position ...................................................................................................................................... 4 Statement of Activities ........................................................................................................................................... 5
FUND FINANCIAL STATEMENTS
Balance Sheet – Governmental Fund ................................................................................................................... 6 Reconciliation of the Balance Sheet - Governmental Fund to the Statement of Net Position .................................................................................................................. 7 Statement Of Revenues, Expenditures and Changes In
Fund Balance – Governmental Fund: .......................................................................................................... 8 Reconciliation of the Statement of Revenues
Expenditures and Changes in Fund Balances of Governmental Fund to the Statement of Activities ....................................................................................................................... 9 Notes to Financial Statements ................................................................................................................................ 10
REQUIRED SUPPLEMENTARY INFORMATION
Budgetary Comparison Schedule ........................................................................................................................... 1 Note to Required Supplementary Information ................................................................................................... 1
OTHER REPORT
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 ........................................................................................................... 1
LSLCPAS.COM
INDEPENDENT AUDITORS’ REPORT
To the Honorable Members of the City Council
City of Orange, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the governmental activities and the governmental fund of the Air Pollution Reduction Fund (hereafter, the Fund) a special revenue fund of the City of Orange, California (hereafter, the City) as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Fund’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund as of June 30, 2025, and the changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
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 opinion.
Emphasis of Matter
Fund Reporting
As discussed in Note 1, the financial statements present only the 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.
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.
To the Honorable Members of the City Council
City of Orange, California
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 auditors’ 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. 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
Accounting principles generally accepted in the United States of America require that the budgetary comparison information as listed on the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about 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 knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Management has omitted the 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 To the Honorable Members of the City Council
City of Orange, California
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 26, 2026, on our consideration of the City’s internal control over the Fund’s financial reporting 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 the Fund’s financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over the Fund’s financial reporting and compliance.
Irvine, California
January 26, 2026
3 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Statement of Net Position
Governmental
Activities
ASSETS
Cash and investments 330,023$
Receivables (net of uncollectibles):
Accrued interest 2,585
Capital assets (net of accumulated depreciation/amortization) 136,985 Total assets 469,593
NET POSITION
Invested in capital assets 136,985
Restricted for air pollution reduction projects 332,608 Total net position 469,593$
June 30, 2025
See Notes to Financial Statements.
4 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Statement of Activities
For the Year Ended June 30, 2025
Operating Capital
Charges for Contributions Contributions Governmental
Expenses Services and Grants and Grants Activities
Functions/Programs:
Primary government:
Governmental activities:
General government 92,207$ -$ 183,306$ -$ 91,099$ Public safety 9,179 -
-
- (9,179)
Total governmental activities 101,386$ -$ 183,306$ -$ 81,920$ General revenues:
General revenues:
Use of money and property 16,120
Total general revenues 16,120
Change in net position 98,040
Net position-beginning 371,553
Net position-ending 469,593$
Program Revenues
Net (Expenses)
Revenues and
Changes in Net
Position
See Notes to Financial Statements.
5 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Balance Sheet - Governmental Fund
June 30, 2025
ASSETS
Cash and investments 330,023$
Receivables (net of allowance for uncollectible):
Accrued interest 2,585
Total assets 332,608$
FUND BALANCE
Restricted for air pollution remediation projects 332,608$ Total fund balance 332,608$
See Notes to Financial Statements.
6 AIR POLLUTION REDUCTION FUND
Reconciliation of the Balance Sheet of Governmental Fund to the Statement of Net Position
June 30, 2025
Amounts reported for governmental activities in the Statement of Net Position are different because:
Total fund balances of governmental fund 332,608$
136,985
Net position of governmental activities 469,593$
CITY OF ORANGE, CALIFORNIA
Capital assets, net of accumulated depreciation, used in governmental activities are not financial resources and, therefore, are not reported in the funds.
See Notes to Financial Statements.
7 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Statement of Revenues, Expenditures, and
Changes in Fund Balance - Governmental Fund
For the Year Ended June 30, 2025
REVENUES
Intergovernmental 183,306$
Use of money and property 16,120
Total revenues 199,426
EXPENDITURES
Current:
General government 64,035
Public safety 9,179
Total expenditures 73,214
Net change in fund balances 126,212
Fund balances -beginning 206,396
Fund balances -ending 332,608$
See Notes to Financial Statements.
8 AIR POLLUTION REDUCTION FUND
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Fund to the Statement of Activities For the Year Ended June 30, 2025
Amounts reported for governmental activities in the Statement of Activities are different because:
Net change in fund balances - Governmental Fund: 126,212$ Depreciation expense (28,172)
Change in net position of governmental activities 98,040$
CITY OF ORANGE, CALIFORNIA
Governmental funds report capital outlays are expenditures. However, in the Statement of Activities, the cost of these assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation/amortization expense in the current period.
See Notes to Financial Statements.
9 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 1: GENERAL
The financial statements are intended to reflect the financial position and changes in the financial position attributable to the Air Pollution Reduction Special Revenue Fund (AQMD) of the City of Orange, California (the City). These financial statements are exclusively for AQMD and do not purport to, and do not, present fairly the financial position and changes in the financial position for the City.
Assembly Bill 2766 authorizes the South Coast Air Quality Management District (SCAQMD) to impose an annual vehicle registration fee and to distribute a portion of the collected revenues to all local jurisdictions within the South Coast Air Basin. These revenues are to be used solely to reduce air pollution from motor vehicles by implementing new programs and studies necessary for the implementation of the California Clean Air Act.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of the Reporting Entity
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity with a self-balancing set of accounts. Monies received under Assembly Bill 2766 are recorded in a Special Revenue Fund, the Air Pollution Reduction Fund, which is used to account for the proceeds of revenue to be used for the purpose of implementing the California Clean Air Act.
B. Basis of Presentation
The Air Pollution Reduction Fund’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The Governmental Accounting Standards Board (GASB) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America.
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the fund. The AQMD has no fiduciary activities.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
Program revenues include (1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be 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, deferred inflows of resources, fund equity, revenues and expenditures or expenses, as appropriate. Governmental 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.
While separate government-wide and fund financial statements are presented, they are interrelated. 10 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting . Under the economic resources measurement focus, all (both current and long term) economic resources and obligations are included in the accompanying statement of net position. Under 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. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting . Under the current financial resources measurement focus, only current assets and liabilities are generally included on the balance sheet. Under the modified accrual basis of accounting, revenues are recognized as soon as 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. The city uses an availability period of 60 days for all revenues. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.
Intergovernmental and interest revenues associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the AQMD.
D. Cash and Investments
Investments are reported in the accompanying financial statements at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Changes in fair value that occur during a fiscal year are recognized as interest income for that fiscal year. Use of money and property includes interest earnings, changes in fair value (realized/unrealized), gains or losses realized upon the liquidation, maturity or sale of investments and rental income.
Cash and investments are pooled with other City funds for investment purposes, with interest being allocated monthly to various funds based on each fund’s prior month-end cash and investment balance.
E. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (expense/expenditure) until that time. The AQMD has items related to the pension and OPEB plans that qualify for reporting in this category.
In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and will not be recognized as an inflow of resources (revenue) until that time. The AQMD has items related to the pension and OPEB plans that qualify for reporting in this category. 11 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Net Position Flow Assumption
Sometimes the AQMD will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the AQMD’s policy to consider restricted net position to have been depleted before unrestricted net position is applied.
G. Fund Balance Flow Assumptions
Sometimes the AQMD will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the AQMD’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.
H. Fund Equity
In the fund financial statements, government funds report the following fund balance classification:
Nonspendable includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The Air Pollution Reduction Fund did not have a nonspendable fund balance as of June 30, 2025.
Restricted includes amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation.
Committed includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority, the City Council. The formal action that is required to be taken to establish, modify or rescind a fund balance commitment is a resolution. The AQMD did not have any committed fund balance as of June 30, 2025.
Assigned includes amounts that are constrained by the government’s intent to be used for specific purposes but are neither restricted nor committed. The AQMD did not have any assigned fund balance as of June 30, 2025.
Unassigned includes the residual amounts that have not been restricted, committed or assigned to specific purposes. The AQMD did not have any unassigned fund balance as of June 30, 2025.
I. Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets, deferred outflows of resources, liabilities and deferred inflows of resources at the reporting date.
Accordingly, actual results could differ from those estimates. 12 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Capital Assets
Capital assets (including infrastructure) are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Contributed capital assets are valued at their acquisition value at the date of contribution. Generally, capital asset purchases in excess of $10,000 are capitalized if they have an expected useful life of two years or more.
Capital assets include additions to public domain (infrastructure), certain improvements including pavement, curb and gutter, sidewalks, traffic control devices, streetlights, sewers, storm drains, bridges, right-to-use leased assets and right-of-way within the City.
Capital assets used in operations are depreciated/amortized over their estimated useful lives using the straight-line method in the Government-wide Financial Statements and in the Fund Financial Statements of the Enterprise Funds. Depreciation/amortization is charged as an expense against operations and accumulated depreciation is reported on the respective balance sheets. The lives used for depreciation/amortization purposes for each capital asset class are:
Structures and improvements 20-50 years
Infrastructure 30-65 years
Wells, reservoirs and tanks 40 years
Reservoirs and tanks 60 years
Water lines/pipelines 60 years
Pumps & booster pumps 60 years
Vehicles and other equipment 2-25 years
NOTE 3: CASH AND INVESTMENTS
A. Equity in the Cash and Investment Pool of the City of Orange The AQMD has no separate bank accounts or investments other than its equity in the cash and investment pool managed by the City. The AQMD is a voluntary participant in that pool. This pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The AQMD has not adopted an investment policy separate from that of the City. The fair value of the AQMD’s investment in this pool is reported in the accompanying financial statements at amounts based upon the AQMD’s pro rata share of the fair value calculated by the City for the entire City portfolio. The balance available for withdrawal is based on the accounting records maintained by the City, which are recorded at the estimated fair value.
B. Disclosures Relating to the Investment Policy, Interest Rate Risk, Credit Risk and Custodial Credit Risk Additional disclosures related to the investment policy, interest rate risk, credit risk and custodial credit risk are available in the City of Orange’s Annual Comprehensive Financial Report.
C. Fair Value Measurements
The AQMD categorizes its fair value measurement within the fair value hierarchy established by accounting principles generally accepted in the United States of America. The hierarchy is based on the relative inputs used to measure the fair value of the investments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The AQMD’s investment in the City investment pool is not subject to the fair value hierarchy.
13 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Notes to the Financial Statements
For the Year Ended June 30, 2025
NOTE 4: CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2025 was as follows:
Depreciation for the current year is broken down as follows:
NOTE 5: AVAILABILITY OF OTHER INFORMATION
Copies of separate progress reports filed with the SCAQMD Board of Directors, which detail the accomplishments during the fiscal year ended June 30, 2025, are available at the Orange City Hall.
NOTE 6: SUBSEQUENT EVENTS
In preparing these financial statements, the City has evaluated events and transactions for potential recognition or disclosure through January 26, 2025, the date the financial statements were available to be issued.
Balance Balance
June 30, 2024 Additions Deletions Transfers June 30, 2025 Governmental activities:
Capital assets, being depreciated
Vehicles 201,784 $ - $ - $ - $ 2 0 1 , 7 8 4 $ Total capital assets, being depreciated 201,784 - - - 201,784 Less accumulated depreciation
Vehicles 36,627 28,172 - - 64,799
Total accumulated depreciation 36,627 28,172 - - 64,799 Total capital assets, being depreciated, net 165,157 (28,172) - - 136,985 Total governmental activities capital assets 165,157$ (28,172) $ - $ - $ 1 3 6 , 9 8 5 $ General government 28,172 $
Total depreciation expense 28,172 $
14 Variance with
Final Budget
Budget Amounts Actual Positive
Original Final Amounts (Negative)
REVENUES
Intergovernmental 181,700$ 181,700 $ 183,306 $ 1,606$ Use of money and property 2,200 2,200 16,120 13,920 Total revenues 183,900 183,900 199,426 15,526
EXPENDITURES
Current:
General government 77,778 77,778 64,035 13,743 Public safety 10,000 10,000 9,179 821 Total expenditures 87,778 87,778 73,214 14,564 Net change in fund balance 96,122 $ 96,122 $ 126,212 30,090 $ Fund balance-beginning 206,396
Fund balance-ending 332,608$
CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Budgetary Comparison Schedule
For the Year Ended June 30, 2025
15 CITY OF ORANGE, CALIFORNIA
AIR POLLUTION REDUCTION FUND
Notes To Required Supplementary Information
For the Year Ended June 30, 2025
NOTE 1: BUDGETARY ACCOUNTING
The budget for the Air Pollution Reduction Special Revenue Fund is formally adopted annually and is prepared in accordance with accounting principles generally accepted in the United States of America. The budget is monitored to ensure compliance with legal provisions embodied in the appropriated budget as approved or amended by the City Council throughout the year. Department heads are responsible for monitoring their department’s appropriated budget. The legal level of budgetary control is at the fund level. The City’s management may transfer resources between operating line items within a department in the same fund as they see appropriate. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end are reported as restriction of fund balance since they do not constitute expenditures or liabilities.
16
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 Honorable Members of the City Council
City of Orange, California
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 Air Pollution Reduction special revenue fund (hereafter, the Fund) of the City of Orange, California (hereafter, the City), as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated January 26, 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 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 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, including the requirements of California Assembly Bill 2766, Chapter 1705 (44220 through 44247), 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.
To the Honorable Members of the City Council
City of Orange, 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.
Irvine, California
January 26, 2026
18