735 E. Carnegie Dr. Suite I 00
San Bernardino , CA 92408
909 889 0871 T
909 889 5361 F
ramscpa .net
PARTNERS
Terry P Shea. CPA
Scott W Manno, CPA. CGMA
Leena Shanbhag, CPA. MST. CGMA
Bradferd A Weleb,r. CPA. MBA. CGMA
Jenny W Liu, CPA. MST
Gardenya Duran, CPA. CGMA
Brianna Schultz, CPA. CGMA
Brenda L. Odle, CPA. MST (Partner Emeritus)
MANAGERS/ STAFF
Seong-Hyea Lee, CPA. MBA
Evelyn Mo, entin-Barcena, CPA
Veronica Hernandez, CPA
Laura Arvizu, CPA
John Maldonado, CPA. MSA
Julia Rodnguez Fuentes. CPA. MSA
Dem, Hite. CPA
Jeffrey McKennan. CPA
MEMBERS
Amencan lnslltute of
Certified Public Accountants
PCPS Tlie A/CPA All,ance
for CPA Fmns
Governmental Aud,1
Qua/11y Cenre,
California Society of
Cert1f1ed Public Accountants
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ROGERS , ANDERSON , MALODY & SCOTT , LLP
CERTIFIED PUBLIC ACCOUNTANTS. SINCE 1948
STABILITY . ACCURACY . TRUST.
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January 9, 2024
To the Honorable Mayor and Members of the City Council
City of San Marcos
San Marcos, California
We have audited the financial statements of the City of San Marcos, California, (the City) as of and for the year ended June 30, 2023 , and have issued our report thereon dated January 9, 2024. Professional standards require that we advise you of the following matters relating to our audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter dated April 24, 2023, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are fr ee of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.
Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to you.
To the Honorable Mayor and Members of the City Council
City of San Marcos
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Compliance with All Ethics Requirements Regarding Independence
The engagement team, others in our firm, as appropr iate, and our firm have complied with all relevant ethical requirements regarding independence.
Significant Risks
We have identified the possibility of the following significant risks:
Management's override of internal controls over financial reporting : Management override of internal controls is the intervention by management in handling financial information and making decisions contrary to internal control policy.
Revenue recognition: Revenue recognition is a generally accepted accounting principle that refers to the conditions under which an entity can recognize a transaction as revenue. Auditing standards indicate that recognizing revenue is a presumed fr aud risk and usually classified as a significant risk in most audits.
These significant risks are presumptive in most audits and merit attention by the auditors due to the direct impact over financial reporting and internal control processes. Although identified as significant risks, we noted no matters of management override of controls or deviations from generally accepted accounting principles which caused us to modify our audit procedures or any related matters which are required to be communicated to those charged with governance due to these identified risks.
Qualitative Aspects of the City’s Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. The City adopted the GASB Statement No. 96, Subscription-based Information Technology Arrangements , during fiscal year 2023. No matters have come to ou r attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controve rsial or emerging areas for which there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assump tions about future events. Certain accounting estimates are particularly sensitive because of thei r significance to the financ ial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are:
Management’s estimate of fair market value of investments based on market values provided by outside sources. We evaluated the key factors and assumptions used to develop the fair market value of investments in determining that it is reasonable in relation to the financial statements taken as a whole.
Management’s estimate of depreciation expense is based on the useful lives of acquired assets. We evaluated the key factors and assumptions used to develop depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole.
To the Honorable Mayor and Members of the City Council
City of San Marcos
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Management’s estimate of claims payable is based on claims loss reports from third party claims management companies. We evaluated the key fact ors and assumptions used to develop the claims payable estimate in determining that is reasonable in relation to the financial statements taken as a whole.
The estimate of the net pension liability and the related deferred amounts is based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the statements taken as a whole.
The estimate of the net OPEB liability and the rela ted deferred amounts is based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the statements taken as a whole.
Management’s estimate of lease/SBITA liabilities, right-to-use assets, and asset amortization is based on present value calculations using certain terms and assumptions in the lease/SBITA agreements and estimated useful lives of assets in accordance with generally ac cepted accounting principles. We evaluated the key factors and assumptions used to develop the lease/SBITA related estimates in determining that it is reasonable in relation to the financial statements taken as a whole.
Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the City’s financial statements relate to:
The disclosure of fair value of investments in the notes to the financial statements represents amounts susceptible to market fluctuations.
The disclosure of capital assets ( and related accumulated depreciation) in the notes to the financial statements is based on historical in formation which could differ from actual useful lives of each capitalized item.
The disclosure of claims payable in the notes to the financial statements is based on claims loss reports from third party claims management companies. Actual future liabilities may vary from disclosed estimates.
The disclosure of net pension liability and the relate d deferred amounts in the notes to the financial statements is based on actuarial assumptions. Act ual future liabilities may vary from disclosed estimates.
The disclosure of net OPEB liability and the rela ted deferred amounts in the notes to the financial statements is based on actuarial assumptions. Act ual future liabilities may vary from disclosed estimates.
The disclosure of lease/SBITA li abilities, right-to-use assets, and asset amortization in the basic financial statements is based on certain terms and assumptions in the lease/SBITA agreements which could differ from actual amounts.
The financial statement disclosures are neutral, consistent, and clear.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing wi th management relating to the performance of the audit.
To the Honorable Mayor and Members of the City Council
City of San Marcos
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Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the aud it, other than those that we belie ve are trivial, and communicate them to the appropriate level of management. Furthe r, professional standards require us to also communicate the effect of uncorrect ed misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. None of the misstatements identified by us as a result of our audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit.
Representations Requested from Management
We have requested certain written representations from management, which are included in the attached letter dated January 9, 2024.
Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the ri sks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City’s auditors.
Other Information in Included in Annual Reports
Pursuant to professional standards, our responsibilit y as auditors for other information in documents containing the City’s audited financial statements does not extend beyond the financial information identified in the audit report, and we are not required to perform any procedures to corroborate such other information.
However, in accordance with such standards, we ha ve applied certain limited procedures to the required supplementary information (RSI) that supplement s the basic financial statements. Our procedures consisted of inquiries of managem ent regarding the methods of prepari ng 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
To the Honorable Mayor and Members of the City Council
City of San Marcos
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We were engaged to report on the supplementary information, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accept ed in the United States of America, the method of preparing it has not changed from the prior period, and the information 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.
Management is responsible for the introductory and statistical sections included in the annual comprehensive financial report but does not incl ude the financial statements and our auditor's report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connec tion with our audit of the financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financ ial statements, or the other in formation otherwise appears to be materially misstated. If, based on the work perfor med, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent wi th the information, or m anner of its presentation, appearing in the financial statements.
This information is intended solely for the use of t he 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.
San Bernardino, CA