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DISCUSSION
City of San Bernardino
Request for Council Action
Date: August 19, 2026
To: Honorable Mayor and City Council Members
From: Tarik Rahmani, Director of Finance
Department: Finance & Management Services Department
Subject: Shandin Hills Golf Club Management Agreement -Audit Status Update (Ward 5)
Recommendation:
It is recommended that the Mayor and City Council receive and file this status report on the independent, agreed-upon audit of the Shandin Hills Golf Club Management Agreement. If the City Council chooses to add scope to the audit staff can amend the scope of work.
City Manager's Comments
This item is intended to provide the City Council the current scope of work for the specific audit of the golf course. This also provides an opportunity for the City Council to amend the scope. The City has not been allocating funds for the golf course over the past recent years. At the conclusion of the audit, staff will bring back a budget appropriation and projected revenues. The City has fronted payroll over the last month in order to maintain operations. This will all be reconciled as part of the appropriation brought forward. In addition, there were informal agreements at the time of the contract to share equipment. This was discontinued in August and will only occur with written confirmation if it occurs. In addition, this has recently over the last 6 months taken on significant staff resources.
Executive Summary
The City owns Shandin Hills Golf Club. Local Golf Management, LLC (LGM) operates the course under a five-year Management Agreement effective June 1, 2023. The agreement places daily operations with LGM, while the City retains approval, funding, account-control, inspection, and audit rights.
Eadie & Payne LLP is conducting an agreed-upon audit procedures engagement for June 1, 2023 through May 31, 2026. This work is commonly called the Shandin Hills 3 5
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audit, but it is not a financial-statement audit. The auditor will perform the procedures selected by the City and report the factual results. The work is intended to give the City a verified record of course revenue and spending, bank activity, cash calls, management fees, required plans and reports, contract approvals, internal controls, and the status of the control matters reported in 2024. No preliminary exceptions or conclusions are presented in this staff report.
The May 20, 2026, engagement letter anticipated a report by the end of July. That date has passed. The accountant's current completion target is the second week of September. Staff is targeting the second regular meeting in September for the next public update. If the final report has not been issued by then, staff will report what remains open and the revised issuance date.
Background
On May 3, 2023, the City Council adopted Resolution No. 2023-058, approving Amendment No. 3 to the interim management agreement with CF Shandin Hills Arcis LLC. On May 17, 2023, the Council adopted Resolution No. 2023-063, approving the current Management Agreement with LGM. The current agreement took effect June 1, 2023, and runs through May 31, 2028, unless ended earlier under its terms or continued month-to-month by mutual agreement.
The agreement provides for a $180,000 annual management fee, paid at $15,000 per month and adjusted annually by the Consumer Price Index (CPI). LGM must operate under a City-approved Annual Plan, maintain the operating account required by Section 6.1.1, provide monthly and annual reports, notify the City of projected overruns, and maintain a five-year capital plan. Section 6.3 makes the City responsible for approved working capital and operating needs under the agreement and Annual Plans.
That funding responsibility is real, but it does not replace Council appropriation, an approved plan, or supporting records. Article 10 treats major capital improvements costing more than $25,000 separately and leaves them within the City's control and discretion.
The December 13, 2024, report covered selected activity from June 1, 2023, through June 30, 2024. It was a limited-scope examination, not a full financial audit. The report concluded that LGM followed the agreement in all material respects for the elements examined, and it identified four control matters: no City signer had been added to the operating account; merchant-processing statements were not reconciled to deposits; only one person had the safe combination and there was no backup access procedure; and inventory counts were not performed monthly. The present engagement includes procedures to determine the current status of those matters.
On August 16, 2023, the Council approved future consideration of a review of contracts for City-owned revenue-producing properties, including Shandin Hills. The current review follows that accountability objective and uses the independent-review right in Section 6.8 of the Management Agreement.
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Discussion
What the current review is designed to establish.
The City needs supportable records of the course's financial activity and of each party's performance under the 2023 agreement. The signed scope in the Eadie & Payne engagement letter for the current audit is broader than the work that was examined in the prior 2024 report. It is designed to answer four practical questions:
•Can course revenue be traced from point-of-sale records and merchant statements to bank deposits, the operating records, and the City's general ledger?
•Are purchases, payroll-related costs, management fees, cash calls, and other disbursements supported, correctly coded, approved, and permitted by the Management Agreement?
•Were the required bank-account controls, Annual Plans, monthly and annual reports, City approvals, insurance, licenses, capital plans, and overrun notices in place for the period reviewed?
•Have the four control matters reported in 2024 been corrected, and are the present controls operating as described?
The procedures include interviews and control walkthroughs, reconciliation of bank and accounting records, review of detailed revenue and expense data, tests of 40 sales transactions and 40 purchases, review of all cash calls in the period, and verification of specified contract requirements. The attached engagement letter is the authorized scope. Any material expansion should be put in writing with the additional procedures, fee, and schedule before the work proceeds.
Status and reporting discipline.
The engagement remains active. The auditor must complete the agreed procedures and document the factual results before issuing its report. Staff will not characterize work in process as a finding and will not ask the Council to act on an unverified conclusion. The final report will be provided to the Council when issued, together with staff's response and specific corrective actions where needed.
Bank-account authority and what Resolution No. 2026-121 accomplished.
The 2024 report stated that the City had not added a City signer to the Shandin Hills operating account. Section 6.1.1 requires the account to be in the City's name, at a City-approved institution, with signers approved by the City and LGM, and subject to City control, audit, and inspection.
On July 15, 2026, the Council adopted Resolution No. 2026-121. For the Shandin Hills operating accounts, the resolution authorized Bank of America as the depository and designated City officers to act as authorized signers. That action supplied the formal City authorization needed to address the signer gap. It did not, by itself, prove that the bank completed every account change, that the account title is correct, or that prior activity reconciles. Finance is confirming bank acceptance, account title, signer access, 3 5
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and the accounting reconciliation through the present review.
Department responsibility.
The City Manager has overall responsibility for administration of City contracts and direction of department heads under San Bernardino Municipal Code Section 2.02.060.
Within that structure, Economic Development is the lead department for administration of the LGM Management Agreement. Economic Development is responsible for the operating relationship, review of Annual Plans and required reports, coordination of City approvals, and preparation of the course operating and ordinary-maintenance forecast.
Finance and Management Services is responsible for the independent review, bank controls, reconciliation to City records, accounting treatment, funding-source review, and validation of any budget amendment. This division follows the functions assigned to Economic Development and Finance under Municipal Code Sections 2.83.020 and
2.10.030. It also keeps contract administration with the operating department while preserving an independent financial check.
Separate budget amendment after the records are complete.
No operating appropriation is requested with this status report. Staff will return with a separate budget amendment after the audit and reconciliation are complete and Economic Development has prepared a current operating and maintenance forecast through June 30, 2027. The final request must show the amount needed, the period it covers, the available funding source, and the records supporting the request.
The budget item will separate course operations, ordinary maintenance, the management fee, and major capital work. It will also reconcile actual cash, bank balances, unpaid obligations, revenue, and prior City funding. A recent cash call can establish an immediate need; it is not, by itself, a full-year budget. Completing the independent audit first will allow the Council to consider a supported amount instead of a temporary estimate and will avoid mixing operating costs with capital decisions reserved to the City under Article 10.
Strategic Goals and Priorities
This work supports Financial Stability and Operational Excellence. It establishes a reliable record, assigns responsibility clearly, and gives the Council a documented basis for corrective action and future funding decisions.
Fiscal Impact
No additional appropriation is requested with this item. The signed Eadie & Payne engagement is not to exceed $35,000. Section 6.8 of the Management Agreement treats the independent accountant's fees as an operating expense of the facility. Any additional operating, maintenance, or capital appropriation is not yet known and will be presented separately after the review, reconciliation, and current forecast are complete Conclusion
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Staff recommends that the Council receive and file this status report. The present report states the approved scope, the work still to be completed, the current schedule, the effect and limits of the July bank resolution, and the departments responsible for the next steps. Staff will return at the second regular meeting in September with the final report if it has been issued, or with a direct status report and revised date if it has not. A separate, supported budget amendment will follow.
Attachments
Attachment 1 - Management Agreement between the City of San Bernardino and Local Golf Management, LLC, effective June 1, 2023
Attachment 2 - Independent Auditor's Report dated December 13, 2024 Attachment 3 - Eadie & Payne LLP Agreed-Upon Procedures Engagement Letter Ward:
Fifth Ward
Synopsis of Previous Council Actions:
May 3, 2023 Adopted Resolution No. 2023-058 approving Amendment No. 3 to the interim management agreement with CF
Shandin Hills Arcis LLC.
May 17, 2023 Adopted Resolution No. 2023-063 approving the Management Agreement with Local Golf Management, LLC.
August 16, 2023 Approved future consideration of a review of contracts for City-owned revenue-producing properties, including Shandin Hills Golf Club.
July 15, 2026 Adopted Resolution No. 2026-121 authorizing Bank of America and designated City officers for the Shandin Hills operating accounts.
CC
Eric Levitt, City Manager