TO: Mayor and City Council
FROM: Philippe Eskandar, City Manager
BY: Hillary Guirola-Leon, Finance Director
DATE: December 10, 2025
SUBJECT: RECEIVE AND FILE ANNUAL COMPREHENSIVE
FINANCIAL REPORT (ANNUAL AUDIT) FOR THE FISCAL
YEAR ENDED JUNE 30, 2025
STRATEGIC PLAN CRITICAL SUCCESS FACTORS
Efficient, Responsive, and Effective City Services
Fiscally Responsible and Transparent City Government
BACKGROUND
The Annual Comprehensive Financial Report (ACFR) is used to communicate the City’s financial condition and activity in a transparent and organized manner. The ACFR presents historical and comparative information that can be useful to City Staff, elected officials, and external users, such as businesses, other public agencies and the City’s residents. As required by the Citywide Financial Policies, the ACFR is prepared by the City and audited by independent auditors who are contracted through a competitive procurement process.
LSL conducted the audit in accordance with the Generally Accepted Auditing Standards, whereby an audit plan was prepared and followed to obtain reasonable assurance that the City’s financial statements were free from material misstatements. The audit included a review, on a test basis, of documents supporting the amounts and disclosures in the financial statements. The audit also assessed the accounting principles used and significant estimates made by management, as well as evaluated the overall general-purpose financial statement presentation. Fiscal Year 2024-25 represents the fifth year that the City has created an ACFR in accordance with standards prescribed by the Government Finance Officers Association (GFOA).
Gretchen Shepherd Romey, Mayor
Tony Chou, Vice Mayor
Hunter Chang, Council Member
John Chou, Council Member
Calvin Lo, Council Member
This was an objective that the Finance Department previously disclosed as one of its goals during the FY 2021-22 budget process and continues to be one of the Department’s core goals moving forward. In addition to the financial statements and required supplementary information which were provided in the past, the ACFR also provides a letter of transmittal and a statistical section detailing information about the City that external users can use to see tenyear trends of the City. The FY 2023-24 ACFR received the City’s third Certificate of Achievement for Excellence in Financial Reporting. This year’s ACFR will be submitted once again to the GFOA as part of their Certificate of Achievement for Excellence in Financial Reporting awards programs.
The City Council’s Alternate Finance Liaison, Council Member John Chou also participated in the auditor’s exit interview along with City staff. The exit interview provided an opportunity for Council Member Chou, City staff, and LSL discuss the audit at a high level and answer any questions.
DISCUSSION
The attached ACFR (Attachment 1) for the fiscal year ended June 30, 2025, received an unqualified/unmodified “clean” audit opinion letter. A clean opinion communicates to users that the financial statements are fairly presented and that the information used in the statements is reliable. The recent history of findings is displayed below:
Fiscal Year
(FY)
Number of Material
Weaknesses
Number of Significant
Deficiencies
FY 2015 6 1
FY 2016 2 1
FY 2017 0 1
FY 2018 1 1
FY 2019 0 0
FY 2020 0 0
FY 2021 0 0
FY 2022 0 0
FY 2023 0 0
FY 2024 0 0
FY 2025 0 0
In the Statement of Auditing Standards Statement (SAS) 114 letter (Attachment 2), the letter details the scope of audit procedures performed, significant findings, and other information, such as disagreements with management, audit adjustments and significant estimates, that are not communicated in the audited financial statements.
In the past, the City had a history of material weaknesses and significant deficiencies that suggested fundamental operational problems that were reported by the auditors. In the Statement of Auditing Standards Statement (SAS) 115 letter (Attachment 3), LSL did not identify any deficiencies in internal controls that they consider as material weaknesses or significant deficiencies that require corrective action by the City.
The City’s General Fund had a net change of $1,533,064 for the year ended June 30, 2025. The General Fund’s unassigned fund balance as of June 30, 2025, is $19.07 million. This represents a reserve ratio of 52% measured against annual General Fund revenues. The City’s Financial Policies specify that the General Fund unassigned fund balance shall be approximately 40% of General Fund revenues. On November 12, 2025, Council approved a transfer from the General Fund to the Capital Projects Fund in the amount of $2,300,000 for FY 2025-26.
Management’s Discussion and Analysis section (MD&A) of this report (pages 5 through 11) provides an overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2025. The MD&A also provides an overview of each major section of the report and provides a comparison to prior year.
The format and content of the ACFR are largely prescribed in order to meet governmental accounting standards. The City’s ACFR includes the following major sections and information:
Introductory Section
● Letter of Transmittal
● Organizational Chart
● List of Elected and Administrative Officials
● Certificate of Achievement for Excellence in Financial Reporting for Fiscal Year Ended June 30, 2024
Financial Section
● Independent Auditors’ Report: the City’s report card on the content of the Financial Statements
● Management’s Discussion and Analysis (MD&A): provides an analytical overview of the City’s financial status
● Governmental-Wide Financial Statements: show finances at a point in time (assets – liabilities) and throughout the year (revenues – expenditures), budget to actual revenues and expenditures, and cash flows ● Fund Financial Statements: a detailed look at funds, showing Balance Sheet and Statement of Revenues, Expenditures, Changes in Fund Balance, and Net Position
● Notes to the Financial Statements: a narrative explanation that accompanies the Basic Financial Statements
● Budget to Actual Comparisons: General Fund and other select major funds ● Pension Information: 10 years of pension funding information ● Other Post-Employment Benefits (OPEB) Information: 7 years of OPEB funding information
● Breakout of Individual Funds: presented in a cumulative manner in the Financial Section
Statistical Section
● Financial Trends
● Revenue Capacity
● Debt Capacity
● Demographic and Economic Information
● Operating Information
FISCAL IMPACT & PROCUREMENT REVIEW
The receiving and filing of the City’s financial statements possesses no fiscal impact and requires no procurement review.
LEGAL REVIEW
The City Attorney's office has reviewed and approved as to form.
RECOMMENDATION
Staff recommends that this annual financial statement be received and filed.
If the City Council concurs with staff’s recommendation, an appropriate motion would be:
“I move to receive and file the audited financial statements for the fiscal year ended June 30, 2025.”
ATTACHMENTS
1. City of San Marino Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025
2. Auditor’s Communication Letter (SAS 114) for the Fiscal Year Ended June 30, 2025
3. Auditor’s Report on Internal Controls (SAS 115) for the Fiscal Year Ended June 30, 2025