Westminster City Council/Successor Agency to the Westminster Redevelopment Agency
SUBJECT
Title
Receipt of the Fiscal Year 2024-2025 Annual Comprehensive Financial Report (ACFR) and Related Statements.
End
From: Erin Backs, Finance Director
Requested by: Administration
Prepared by: Jennifer Anderson, Assistant Finance Director
____________________________________________________________
RECOMMENDED ACTION
Recommendation
A. Accept the financial reports for the fiscal year ended June 30, 2025;
B. Transfer $1,590,524, 20% of the General Fund (100) fiscal year ended June 30, 2025 audited surplus to the PARS Pension 115 Trust; and
C. Transfer $795,262, 10% of the General Fund (100) fiscal year ended June 30, 2025 audited surplus to the Other Post Employment Benefits 115 Trust.
end
BACKGROUND
The City is required to undergo an annual audit conducted by an independent accounting firm. The firm of Clifton Larson Allen LLP (CLA) conducted the audit for fiscal year ended June 30, 2025. The City issued a Request for Proposal (RFP) for audit services in March 2021 and CliftonLarsonAllen LLP was selected for a period of three years with two option years.
The FY 2024-2025 annual audit started in June 2025 and ended with the issuance of the financial reports in February 2026. Based on the audit, CliftonLarsonAllen LLP granted the City an unmodified opinion that the City’s financial statements for the fiscal year ended June 30, 2025 are fairly presented in conformity with GAAP. This is the most favorable conclusion and is commonly known as an “unmodified” or “clean” opinion.
A summary of the reports attached to this staff report are as follows:
1. Annual Comprehensive Financial Report. This is the primary financial report for the City and all its component units. The auditors have issued an unmodified opinion that the financial statements are fairly stated in accordance with generally accepted accounting principles. The transmittal letter and Management’s Discussion and Analysis sections found in the beginning of the report offer readers of the City’s financial statements a narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2025, along with comparisons to the fiscal year ended June 30, 2024.
2. Appropriations Limit Worksheet. This report tests the staff’s calculation of the GAAN appropriations limit for fiscal year 2024-2025.
3. Auditor Communication Letter. This letter communicates certain audit findings and other matters to the City Council and would note any serious failure of management’s policies or practices. The auditors noted no difficulties dealing with management nor any disagreements with management. The city changed accounting policies by adopting Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences, in fiscal year 2024-2025. This did not significantly impact the City’s financial statements.
4. 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 (City of Westminster). This report would note any deficiencies in the City’s internal control over financial reporting and any noncompliance which would have a direct and material effect on the determination of financial statement amounts. No deficiencies were identified.
5. Air Quality Management District (AQMD) Special Revenue Fund - Financial Statements. An audit was required of the separate financial statements for the Air Quality Management District Special Revenue Fund because the City received more than $100,000 in AQMD funds this past year. The auditor’s reports indicated that the financial statements are fairly stated in accordance with generally accepted accounting principles and that they noted no material weaknesses in internal control over financial reporting, nor any instances of noncompliance with program requirements.
ACFR Highlights
Government-Wide:
• The City’s net position was $223.9 million, an increase of $14.4 million.
• The net position of business-type activity increased by $3.1 million, primarily due to approved water increases.
• The net position of governmental activities increased by $11.2 million.
• Total revenues were $144.2 million, and expenditures were $129.8 million. Revenues increased by $18.2 million due to increases in charges for services, unrestricted taxes and as well as investment earnings revenue, and expenses increased by $6.5 million primarily due to increases in public safety, water enterprise and community development expenses.
General Fund:
|
Revenue |
$94,967,740 |
|
Expenditures |
85,685,619 |
|
Revenue over Expenditures |
9,282,121 |
|
Net Other Sources/Uses |
(16,358) |
|
Net Change in Fund Balance |
9,265,763 |
|
Fund Balance on July 1, 2024 |
53,866,123 |
|
Fund Balance on June 30, 2025 |
$63,131,886 |
The City changed accounting policies related to changes in the financial reporting entity (accounting changes) by adopting Statement of Governmental Accounting Standards Board (GASB) Statement No. 100, Accounting Changes and Error Corrections, in fiscal year 2023-2024. The General Fund now includes funds 100 - general fund and 3 capital project funds, 403 - general city projects, 404 - police projects and 411 - community development projects. The ending balance of $63.1 million combines the general fund balance of $52.3 million and capital project balance of $10.8 million. The general fund and capital projects funds will continue to be accounted for separately but will be combined for financial reporting presentation purposes only.
General Funds (separated by fund type):
|
|
Fund 100 |
Funds 403,404,411 |
Total |
|
Revenue |
$94,860,449 |
$107,291 |
$94,967,740 |
|
Expenditures |
(83,891,471) |
(1,794,148) |
(85,685,619) |
|
Revenue over Expenditures |
10,968,978 |
(1,686,857) |
9,282,121 |
|
|
|
|
|
|
Net Other Sources/Uses |
(3,016,358) |
3,000,000 |
(16,358) |
|
Net Change in Fund Balance |
7,952,620 |
1,313,143 |
9,265,763 |
|
Fund Balance on July 1, 2024 |
44,347,681 |
9,518,442 |
53,866,123 |
|
Fund Balance on June 30, 2025 |
$52,300,301 |
$10,831,585 |
$63,131,886 |
|
|
|
|
|
• The General Fund ended the year with a $9.3 million increase and a $63.1 million fund balance (reserve). This was due to a combination of additional revenue and reduced expenditures. Savings of $1.3 million resulted from several vacant positions. Sales tax receipts were up $1 million. Variances for ambulance revenue and expenditures totaled $2.1 million. Additionally, return on investment and year end adjustment to market value increased revenue $3.8 million.
• Of the $63.1 million fund balance, $33 million is unassigned of which $24.9 million is available to spend at the City Council’s discretion, and $10.8 million is allocated to capital projects. $27.4 million of the fund balance is committed ($14.6 million or 17% for emergency/contingency reserve, $4.3 million or 5% for infrastructure, and $8.6 million or 10% for a budget uncertainty reserve) in accordance with the City’s updated reserve policy approved on June 25, 2025.
• Revenues totaled $95 million, an increase of $10.5 million over FY 2023-2024. The largest increases were $8.2 million in taxes primarily related to the Measure ½ cent transaction use tax that began collections July 2024, $432 thousand in investment and rentals, and $830 thousand in charges for service.
• Transaction Use Tax revenue totaled $22.9 million.
• Expenses and transfers out totaled $85.7 million, up $8.3 million from FY 2023-2024. 73% of expenses were on public safety, 8% on public works, 8% on general government, 5% on community development, 5% on community services, and 1% capital outlay.
• Other Post Employment Benefits (OPEB) liability is $34.2 million (Section 115 trust cash balance at 6/30/25 was $6.9 million).
• Pension liability is $145.4 million (Section 115 trust cash balance at 6/30/25 - $6.5 million).
Enterprise Fund (Water Utility):
• The Water Utility Funds ended the year with $2.8 million gain and $46.9 million net position.
• Revenues totaled $22.3 million, an increase of $2.3 million from the prior year.
• Total expenses were $20.5 million, an increase of $1.7 million from the prior year.
• Purchased water costs decreased by $500 thousand.
• Pump and basin costs increased by $1.7 million.
• OPEB liability is $3.9 million.
• Pension liability is $4.5 million.
• Water rates increased in January 2025.
Internal Service Funds:
• Ended the year with a $4.8 million gain and a net position of $12.8 million.
• All internal service funds have achieved the unrestricted fund balance policy goal of $500 thousand per fund except the Compensation Benefits Fund.
• Risk Management claims payable was $2.5 million (same as prior year).
• Compensation/Benefits claims payable $9.9 million ($10.5 million prior year).
Capital Projects Fund:
• The $12.9 million ending fund balance includes $11 million for the Economic Development Fund and $1.9 million for vehicle, information technology, and city building projects.
Special Revenue Funds:
• Gas tax and Street Improvements fund balance $14.2 million.
• Parks Dedication ending fund balance $2.5 million.
• Municipal Lighting ending fund balance $11.9 million.
• Special Police Services ending fund balance $1.6 million.
• Housing and Community Development ending fund balance $658 thousand.
• Westminster Housing Authority ending fund balance $24.2 million.
• $8.6 million of American Rescue Plan funds spent.
FY 2025-26 Reserve Allocation
In addition to the increase in General Fund contingency reserves, the updated Fund Balance Policy approved by the City Council on June 25, 2025 recommends allocating a portion of surplus funds to the City’s 115 trust accounts. Using the $7,952,619 audited surplus for the General Fund (Fund 100), the policy recommends:
• 20% ($1,590,524) to the PARS Pension Section 115 Trust.
• 10% ($795,262) to the OPEB Section 115 Trust.
This transfer would occur in FY 2025-2026 and would need the City Council to approve the budget adjustment as recommended. The 115 Trusts can only be used to pay future pension and OPEB costs.
FISCAL IMPACT
There is no fiscal impact associated with acceptance of the financial statements.
If the City Council chooses to follow the fund balance policy recommendation of General Fund surplus contributions to the pension and OPEB section 115 trust accounts, the following budget adjustments would be needed:
• $1,192,893 increase to General City - Transfers Out (account 20000-91000),
• $1,192,893 increase to Retirement Benefits - Transfers In (account 14350-81000),
• $1,192,893 increase to Retirement Benefits - 115 Trust Contributions (account 14350-41007).
This transfer would reduce General Fund (100) Unassigned Reserves and increase Compensation/Benefits Fund (740) Restricted Reserves in FY 2025-2026.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
The audited financial statements for the fiscal year ended June 30, 2025 show a positive net change to the General Fund’s fund balance of $9.3 million, resulting in an overall ending fund balance of $63.1 million. Overall, the city had revenues of $144.2 million and expenses of $129.8 million resulting in a $14.4 million increase in net position.
ATTACHMENTS
1. Annual Comprehensive Financial Report
2. Appropriations Limit Worksheet
3. Auditor Communication Letter
4. 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 (The City of Westminster)
5. Air Quality Management District - Financial Statements
REVIEWED BY
Erin Backs, Finance Director
City Attorney’s Office
Christine Cordon, City Manager