Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Program’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, 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.
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 result of that testing, and not to provide an opinion on the effectiveness of the Program’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 Program’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Badawi & Associates, CPAs
Emeryville, California
November 13, 2025
20 City of
Waterford
Transportation Development
Act Fund
Waterford, California
Financial Statements and
Independent Auditors’ Reports
For the year ended June 30, 2025
City of Waterford’s Transportation Development Act Fund Financial Statements
For the year ended June 30, 2025
Table of Contents
Page
Independent Auditors’ Report ................................................................................................................................. 1 Financial Statements:
Balance Sheet .......................................................................................................................................................... 5 Statement of Revenues, Expenditures and
Changes in Fund Balances ............................................................................................................................. 6 Notes to Financial Statements ............................................................................................................................. 7 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 ............................................................. 9 Independent Auditors’ Report on Transportation Development Act Funds Compliance ........................... 11 This page intentionally left blank
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of Waterford
Waterford, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the Transportation Development Act Fund (TDA Fund) of the City of Waterford, California, as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise TDA Fund’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the TDA Fund, as of June 30, 2025, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) 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 Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Authority 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 opinions.
Responsibilities of Management for the Financial Statements The City’s 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 Mayor and Members of the City Council
of the City of Waterford
Waterford, California
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s 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 auditor’s 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 GAAS 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 GAAS, 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 Authority’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.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for a reasonable period of time.
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
Management has omitted 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 2 To the Honorable Mayor and Members of the City Council of the City of Waterford
Waterford, California
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.
Emphasis of Matter
As discussed in Note 1, the financial statements present only the TDA Fund and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2025, and the changes in its financial position, for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 13, 2025 on our consideration of the Authority’s internal control over 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance.
Badawi & Associates, CPAs
Emeryville, California
November 13, 2025
3 This page intentionally left blank
4 City of Waterford
Transportation Development Act Fund
Balance Sheet
June 30, 2025
ASSETS
Cash and investments $ -
Total assets $ -
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES, AND FUND BALANCE
Liabilities:
Accounts payable $ -
Total liabilities -
Deferred inflows of resources:
Unavailable revenue -
Total deferred inflows of resources -
Fund Balances:
Unassigned -
Total liabilities, deferred inflows of
resources, and fund balances $ -
See accompanying Notes to Financial Statements.
5 City of Waterford
Transportation Development Act Fund
Statement of Revenues, Expenditures and Changes in Fund Balances For the year ended June 30, 2025
Revenues:
Intergovernmental $ 20,099
Interest 224
Total Revenues 20,323
Expenditures:
Streets and drainage operations 20,323
Total Expenditures 20,323
Net change in fund balances -
Fund Balances:
Beginning of year -
End of year $ -
See accompanying Notes to Financial Statements.
6 City of Waterford’s Transportation Development Act Fund Notes to Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The City of Waterford (City) accounts for California Transportation Development (Act) monies in the Local Transportation Special Revenue Fund (Fund). This fund is part of the City and not a separate legal entity. The financial statements are intended to present the TDA Fund, and not the financial position and the changes in fund balances of the City as a whole.
B. Basis of Accounting and Measurement Focus
The accompanying financial statements are prepared on the modified accrual basis of accounting.
Revenues are generally recorded when measurable and available (generally 60 days after year-end), and expenditures are recorded when the related liabilities are incurred.
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus, wherein only current assets and current liabilities generally are included on the balance sheet.
Operating statements of governmental funds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.
C. Cash and Investments
The City pools cash resources from all funds in order to facilitate the management of cash and achieve the goal of obtaining the highest yield with the greatest safety and least risk. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms.
D. Fund Accounting
The operations of the TDA Fund are accounted for in the City’s LTF Fund. The fund is a separate accounting entity with a set of self-balancing accounts which comprise its assets, liabilities, fund equity, revenues, and expenses.
E. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. 7 City of Waterford’s Transportation Development Act Fund Notes to Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued F. Fund Balance
The TDA fund balance is restricted by law to be used in accordance with the Transportation Development Act.
2. CASH AND INVESTMENTS
The Fund maintains all of its cash with the City’s cash and investment pool. The pool interest earned is allocated to the funds based on the monthly cash and investment balances in those funds.
The City of Waterford manages credit risk by limiting their investments by category to those that exceed minimum rating organizations in accordance with California State Code. Interest rate risk is managed by purchasing a combination of shorter and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.
For additional information, the City of Waterford’s financial statements may be obtained by contacting the City of Waterford Finance Officer, 101 E Street, Waterford, CA 95386. 8 INDEPENDENT AUDITOR’S 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 Mayor and Members of the City Council
of the City of Waterford
Waterford, 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 Transportation Development Act Fund (TDA Fund) of the City of Waterford, California (City), as of and for the year ended June 30, 2025, and the related notes to the financial statements, and have issued our report thereon dated November 13, 2025.
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 financial reporting (internal control) to determine the 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 may exist that have not been identified.
To the Honorable Mayor and Members of the City Council
of the City of Waterford
Waterford, California
Page Two
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the TDA 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, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. 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.
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 entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Badawi & Associates, CPAs
Emeryville, California
November 13, 2025
10 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL
OVER COMPLIANCE FOR TRANSPORTATION DEVELOPMENT ACT FUNDS Independent Auditor’s Report
To the Honorable Mayor and Members of the City Council
of the City of Waterford
Waterford, California
Report on Compliance for Transportation Development Act Fund Opinion on Compliance for Transportation Development Act Fund We have audited City of Waterford’s (City) compliance with the types of compliance requirements described in the Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) applicable to the City’s Transportation Development Act Fund (TDA Fund) for the year ended June 30, 2025.
In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its TDA Fund for the year ended June 30, 2025.
Basis for Opinion on TDA Fund
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act). Our responsibilities under those standards and are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with 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 opinion on compliance for the City’s TDA Fund. Our audit does not provide a legal determination of the TDA Fund compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the City’s TDA Fund.
To the Honorable Mayor and Members of the City Council
of the City of Waterford
Waterford, California
Auditor’s Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the TDA Fund’s compliance based on our audit. 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 GAAS, Government Auditing Standards, and Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the TDA Fund’s compliance with the requirements of the Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act).
In performing an audit in accordance with GAAS, Government Auditing Standards, and Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act), we:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material noncompliance, 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 TDA Fund’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.
Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act), but not for the purpose of expressing an opinion on the effectiveness of City’s internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. 12 To the Honorable Mayor and Members of the City Council of the City of Waterford
Waterford, California
Report on Internal Control over Compliance
Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined below. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of the Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of the Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of the Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act). Accordingly, this report is not suitable for any other purpose.
Badawi & Associates, CPAs
Emeryville, California
November 13, 2025
13 City of
Waterford
Waterford, California
Independent Accountants’ Report
For the year ending June 30, 2026
City of Waterford
Appropriations Limit Schedule
For the year ending June 30, 2026
Table of Contents
Page
Independent Accountants’ Report .......................................................................................................................... 1 Appropriations Limit Schedule ............................................................................................................................... 3 Notes to Appropriations Limit Schedule .............................................................................................................. 4 This page intentionally left blank.
INDEPENDENT ACCOUNTANTS’ REPORT
To the Honorable Mayor and City Council
of the City of Waterford
Waterford, California
We have performed the procedures enumerated below on the accompanying Appropriations Limit Schedule of the City of Waterford (City) for the fiscal year ending June 30, 2026. The City’s management is responsible for the accompanying Appropriations Limit Schedule.
The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of the requirements of Section 1.5 of Article XIII-B of the California Constitution. Additionally, the League of California Cities (as presented in the publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution) has agreed to and acknowledged that the procedures performed are appropriate for their purposes. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.
The procedures performed and our findings are described below:
1. We obtained the completed worksheets used by the City to calculate its appropriations limit for the fiscal year ending June 30, 2026, and determined that the limit and annual calculation factors were adopted by resolution of City Council. We also determined that the population and inflation options were selected by a recorded vote of City Council.
Finding: No exceptions were noted as a result of our procedures.
2. For the accompanying Appropriations Limit Schedule, we added the prior year’s limit to the total adjustments, and agreed the resulting amount to the current year’s limit.
Finding: No exceptions were noted as a result of our procedures.
3. We agreed the current year information presented in the accompanying Appropriations Limit Schedule to corresponding information in worksheets used by the City.
Finding: No exceptions were noted as a result of our procedures.
4. We agreed the prior year appropriations limit presented in the accompanying Appropriations Limit Schedule to the prior year appropriations limit adopted by the City Council during the prior year.
Finding: No exceptions were noted as a result of our procedures.
To the Honorable Mayor and Members of City Council
of the City of Waterford
Waterford, California
We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the AICPA. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying Appropriation Limit Schedule. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.
This report is intended solely for the information and use of the 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. However, this report is a matter of public record, and its distribution is not limited.
Badawi & Associates, CPAs
Emeryville, California
November 13, 2025
2 City of Waterford
Appropriations Limit Schedule
For the year ending June 30, 2026
Amount Source
A. Appropriations limit for the year ended June 30, 2025 $ 3,617,062 Prior year schedule B. Calculation factors:
1. Population increase % 1.0644 State Department of Finance
2. Inflation increase % 1.0009 State Department of Finance
3. Total adjustment factor % 1.0654 B1 * B2
C. Annual adjustment increase $ 236,404 [(B3-1)*A)]
D. Other adjustments:
Loss responsibility (-) - N/A
Transfers to private (-) - N/A
Transfers to fees (-) - N/A
Assumed responsibility (+) - N/A
E. Total adjustments 236,404 (C+D)
F. Appropriations limit for the year ending June 30, 2026 $ 3,853,466 (A+E) 3 City of Waterford
Notes to Appropriations Limit Schedule
For the year ending June 30, 2026
1. PURPOSE OF LIMITED PROCEDURES REVIEW
Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), California governmental agencies are restricted as to the amount of annual appropriations from proceeds of taxes.
Effective for years beginning on or after July 1, 1990, under Section 1.5 of Article XIIIB, the annual calculation of the appropriations limit is subject to this agreed upon procedures engagement.
2. METHOD OF CALCULATION
Under Section 10.5 of Article XIIIB, for fiscal years beginning on or after July 1990, the appropriations limit is required to be calculated based on the limit for the fiscal year 1986-1987, adjusted for the inflation and population factors discussed in Notes 3 and 4 below.
3. INFLATION FACTORS
A California governmental agency may use as its inflation factor either the annual percentage change in the 4th quarter per capita personal income (which percentage is supplied by the State Department of Finance), or the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction. The factor adopted by the City of Waterford for the fiscal year 2025-2026 represents the change in per capita income in the State of California.
4. POPULATION FACTORS
A California governmental agency may use as its population factor either the annual percentage change of the jurisdiction’s own population, or the annual percentage change in population in the County where the jurisdiction is located. The factor adopted by the City of Waterford for fiscal year 2025-2026 represents the percentage change of the City’s population.
5. OTHER ADJUSTMENTS
A California government agency may be required to adjust its appropriations limit when certain events occur, such as the transfer of responsibility for municipal services to, or from, another government agency or private entity. The City had no such adjustments for the fiscal year ending June 30, 2026. 4 City of
Waterford
Waterford, California
Auditor’s Communication with
Those Charged with Governance
For the year ended June 30, 2025
November 13, 2025
To the Honorable Mayor and Members
of the City Council of the City of Waterford
Waterford, California
We have audited the financial statements of the City of Waterford (City) as of and for the year ended June 30, 2025, and have issued our report thereon dated November 13, 2025. 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 May 22, 2025, our responsibility, as described by professional standards, is to form and express an opinion 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 free of material misstatement. An audit of financial statements includes consideration of the system 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 system of 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.
Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm, have complied with all relevant ethical requirements regarding independence.
To the Honorable Mayor and Members
of the City Council of the City of Waterford
Waterford, California
Significant Risks Identified
We have identified the following significant risks:
Risk of Management Override of Internal Controls – A risk of management override of internal controls exists at any entity where management can change or decide not to perform that entity’s internal controls.
Revenue Recognition Risk – Errors in revenue recognition can affect bond covenant ratios and the net position of the City.
Qualitative Aspects of the Entity’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.
There have been no initial selection of accounting policies and no changes in significant accounting policies or their application during the year ended June 30, 2025. No matters have come to our 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 controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates and Related Disclosures Accounting estimates and related disclosures 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 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 markedly from management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are capital asset depreciation and useful life and pension plan assumptions.
Management’s estimate of capital assets depreciation and useful life, and pension assumptions are based on historical useful lives of such assets, and actuarial assumptions, respectively. We evaluated the key factors and assumptions used to develop the estimate of capital assets depreciation and useful life, and pension plan assumptions and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.
To the Honorable Mayor and Members
of the City Council of the City of Waterford
Waterford, California
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:
Summary of Significant Accounting Policies
Cash and Investments
Long-term Debt
Capital Assets
Employee Retirement Plans
Commitments and Contingencies
Prior Period Adjustments
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the performance of the audit.
Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards also require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected 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.
In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures.
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 or applicable opinion units.
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 November 13, 2025.
To the Honorable Mayor and Members
of the City Council of the City of Waterford
Waterford, California
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 risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City’s auditors.
Required Supplementary Information
We applied certain limited procedures to the required supplementary 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 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.
Supplementary Information
We were engaged to report on the combining nonmajor governmental fund financial statements and nonmajor governmental fund budgetary comparison schedules 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 accepted 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.
This report is intended solely for the information and use of the 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.
Badawi & Associates, CPAs
Emeryville, California
November 13, 2025
11/25/2025
1 CITY OF WATERFORD
Presentation of Financial Statement Audit
June 30, 2025
Presented By: Tina Envia, Finance Manager
December 4th, 2025
Audit process and results
• Planning and Risk Assessment
• Fieldwork and Testing
• Evaluating Internal Controls
• Substantive Testing
• Analyzing Financial Statements
• External Confirmation
• Reporting and Conclusion
• Unqualified Opinion
• Qualified Opinion
• Adverse Opinion
November 13th, 2025 Badawi & Associates
issued an Unqualified Opinion
on the City’s Financial Statements
1 2
11/25/2025
2 Reports covered by the Audit – June 30, 2025
1. City of Waterford Basic Financial Statements
2. Appropriation’s Limit Schedule
3. Transpor tation Development Act Fund
4. Abandoned Vehicle Abatement Program
5. Waterford Public Financial Authority
General Fund Highlights
Audited June 30, 2025 General Fund
(includes Fund 2290 Parks & Recreation Programs)
Beginning Fund Balance $3,981,397
Revenues & Transfers In 4,348,083
Expenditures & Transfers Out 4,667,400
($319,317) Revenues Over (Under)
Expenditures
End of Year Fund Balance $3,662,080
Reserve % (Projected at Mid Year 68%) 78%
3 4
11/25/2025
3 Other Governmental Funds
• City Impact Fee Fund $1,474,612
• Community Development Fund
$1,543,654 (Loans $1,122,279)
• All Other Non-major Governmental
Funds $1,115,687
Wastewater Fund
(Rates adjusted 25% 7/1/2024 with a 10% rate adjustment on 7/1/2025) Cash ($142,527 unspent FEMA funds) $285,527
Cash in CIP Reserves $495,545
Net Position Unrestricted $349,379
Change in Net Position $725,598
Acquisition of Capital Assets $745,113
Principal and Interest on Long Term Debt $308,874
Net Investment in Capital Assets $4,183,417
5 6
11/25/2025
4 Water Fund
Cash $318,727
Cash in CIP Reserves $400,432
Net Position Unrestricted ($22,369)
Change in Net Position ($185,728)
Acquisition of Capital Assets $590,836
Principal and Interest on Long Term Debt $284,570
Net Investment in Capital Assets $9,620,326
Major Financial Items
• Spent $566,538 on the
Community Center Rehab for a
total of $1,745,939
• Tennis Cour ts lights and
drinking fountain $65,810
• Completed Tim Bell Water & Sewer
Project $2,537,080 (ARPA Funds)
• Completed Wastewater Treatment Plant
Road Storm Damage $758,223 (FEMA)
• Hickman System Pigging $208,323
• Diesel Generator $29,265
• Monitoring Well $59,500
• Biosolids Removal $550,306
General Fund Enterprise Funds
7 8
11/25/2025
5 QUESTIONS
Tina Envia
Finance Manager
9 Informational Items 8
December 4, 2025
Patricia Krause, City Clerk / Administrative Services Director City Council Staff Report
Informational Items.
SUMMARY:
Items included in this section provide City Council with updates on business not requiring a full report.
FISCAL IMPACT:
N/A
ANALYSIS:
All items under this category are considered for informational purpose only.
ENVIRONMENTAL REVIEW:
N/A
ALTERNATIVES:
N/A
ATTACHMENTS:
8a: City Project List
8b: My Waterford Report
Streets
Name Owner Priority Estimated Cost Update
Yosemite Ave. Pedestrian Project (Caltrans) Michael Pitcock Lonnie Statzer High $6,000,000 (SHOPP) Complete
F Street Overlay Michael Pitcock
Lonnie Statzer High $1,500,000 (Measure L) Complete
F Street Improvements at Western Michael Pitcock
Lonnie Statzer High $300,000 (STBG and CMAQ) Complete
Dorsey, Pecan and Western Pedestrian and Roadway Improvements Michael Pitcock Lonnie Statzer High $300,000 (CDBG) Complete
Yosemite Pedestrian Improvements Reinway to Eucalyptus Michael Pitcock Lonnie Statzer High $946,000 (ATP) In Construction
Yosemite at Pasadena Signal Improvements Michael Pitcock Lonnie Statzer High $600,000 (CMAQ) In Construction
Skyline Road Improvements Michael Pitcock
Lonnie Statzer High $450,000 (STBG) Complete
E Street Improvements Michael Pitcock
Lonnie Statzer High $600,000 (SB1) In Construction
G Street Improvements Michael Pitcock
Lonnie Statzer High $600,000 (CDBG) Complete
Measure L Cape Seal Project Michael Pitcock
Lonnie Statzer High $960,000 (Measure L Complete
Tim Bell Pedestrian Improvements Michael Pitcock
Lonnie Statzer High $1,993,000 (ATP) Grant was approved/awarded to Waterford Housing Development
Name Owner Priority Estimated Cost Update
Bentley Estates Michael Pitcock High NA Property was listed for sale.
Reinway North of Moon School Annexation Michael Pitcock High NA Application received. The developer is looking at a potential 98 homes
Waterstone A Michael Pitcock High NA Final Map for 27 Single Family Homes Approved. Homes in Construction
City Projects
Waterstone C Michael Pitcock High NA
Tentative Map Approve for 52 Single Family
Homes. Public Improvements are in
Construction
Waterstone D Michael Pitcock High NA Tentative Map Application received for 37 Single Family Homes
Waterstone E Michael Pitcock High NA Tentative Map Application received for 19 Single Family Homes
Moe Jawad Michael Pitcock High NA Tentative Map for 53 Single Family Homes Approved
Lake Pointe Michael Pitcock High NA Application for Phase 1 received. The developer is looking at a potential 217 homes
Economic Development
Name Owner Priority Estimated Cost Update
F St and Yosemite Fuel Station Michael Pitcock High N/A Complete E Street Public Storage Michael Pitcock High N/A In Construction Facilities / Property
Name Owner Priority Estimated Cost Update
ADA Transition Plan Implementation Lonnie Statzer Low Varies Ongoing Local Hazardous Mitigation Plan Update Lonnie Statzer Low N/A Complete Council Chambers Equipment Upgrade Patricia Krause High $52,000 Complete Public Safety
Name Owner Priority Estimated Cost Update
License Plate Reader Program Michael Pitcock High
$10,000 up front and $3,300
monthly for maintenance and
monitoring.
Complete
Utilities
Name Owner Priority Estimated Cost Update
Water Rate Study Lonnie Statzer
Tina Envia High $40,000 In Progress
WWTP Biosolids Screening Upgrade - Self Help Enterprises Grant
Michael Pitcock
Lonnie Statzer High $500,000 Unfunded On Hold
Water System Consolidation - Hickman Michael Pitcock
Lonnie Statzer High $3,000,000 Unfunded City approved a $1.2 million loan with Ibank and awarded a construction contract.
Biosolids Removal 2024 Michael Pitcock
Lonnie Statzer High $250,000 Complete
Drying Bed Monitoring Well Michael Pitcock
Lonnie Statzer High $50,000 Complete
Tim Bell Water and Sewer Extension to Vineyard Michael Pitcock Lonnie Statzer High $2,500,000 (ARPA) Complete
WWTP Road Repair Michael Pitcock
Lonnie Statzer High $1,100,000 (FEMA) Complete
Parks and Trails
Name Owner Priority Estimated Cost Update
Triangle Parcel - Neighborhood Park Lonnie Statzer Low Unknown Application Submitted S. Reinway Sports Complex Lonnie Statzer Low Unfunded On hold (No Funding) Dog Park (Prop 68 Per Capita Grant) Lonnie Statzer High $250,000 Grant and Park Impact Fees Complete
Beard Park Improvements (Prop 68 Competitive Grant) Lonnie Statzer Low $1,000,000 Million Unfunded Grant Denied. Waiting to see if another cycle to apply is available.
Tennis (Pickle Ball) Court Remodel Lonnie Statzer High $200,000 Budgeted Construction to begin in December/January Community Center Remodel Michael Pitcock
Lonnie Statzer High $800,000 (General Fund) Complete
Other Projects
Name Owner Priority Estimated Cost Update
Adding Cameras at Community Center Lonnie Statzer High Undetermined at this time Complete Request # Topic Status Date Entered Description
442 Water - Other Issue Closed 11/14/2025 Please confirm meter read to correct billing issue. Thank you! 443 Water leaks Closed 11/17/2025
Resident states that there is a severe leak by the meter boxes along Yosemite (along fence). Also requested to not use sand to cover hole in future.
444 Facility / Park Maintenance Closed 11/17/2025 Water damage in back conference room has caused ceiling tiles to crumble and fall onto table and floor 445 Water - Other Issue Closed 11/17/2025
customer came in and wants his address checked for leaks, his usage was up much higher when compared to past readings.
446 Potholes Closed 11/17/2025
customer called and states the pothole that has been filled in before several times has gotten even bigger. 447 Water - Other Issue Closed 11/17/2025 community member shared their street is flooded 448 Storm drains Closed 11/17/2025 please come clear the drain ASAP!! 449 Sewer Open 11/17/2025
unlawfully connection toilet sewage to kitchen waste to bathtub feces leaking to bottom floor. stealing of mailbox key relocation of ups app access. 4/8/2025 discount plummmbing stated a cost of $3,553 in repairs no explanation had discount come out before. $3,553 is the amount owed by employer in 2021 taxes. arrested for FTA tenants related and other issues destroying my property. code inspector did not come out 11/17/2025
450 Storm drains Closed 11/18/2025 still clogged; please resolve this today 451 Storm drains Closed 11/18/2025 Resident stated that street is still floooded and would like help getting it drained. 452 Water leaks Closed 11/19/2025 Customer called in and said water in the meter box. Meter# 34683724 Brianna Lemos (209)595-8553 453 Water leaks Closed 11/19/2025 Customer called in water coming up from green lid in yard. Meter #33089268 Wesly (209)606-5897 454 Water - Other Issue Open 11/20/2025
Owner came in and said there was dirt in the meter box at her rental. Meter#232375638 Customer: Tatiana (209)449-5996
455 Water leaks Closed 11/21/2025
customer called and noticed his bill was very high, could you guys double check for leaks and let me know the current read. thank you. J.D. Barnes (209) 303-2269 456 Street lighting (Metal Poles) Closed 11/21/2025
RESIDENT CALLED TO REPORT A LIGHT GOING OUT DIRECTLY IN FRONT OF HIS HOME AT 12116 KADOTA AVE. THANK YOU!
457 Sewer Open 11/21/2025
Resident, Luis (209)225-8257 called: Said his sewer line is backed up, he was digging and says his line is capped. Called Steph, she spoke with resident and will send Caleb out. Thank you!