Agda Pkt 2026.07.27 Joint SA PFA

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Page 6 of 8 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org Total expenditures were $25.8 million, of which $18.9 million met the criteria for capitalization. The remaining balance was expended on non-capitalized projects (capital-type projects that cost less than $100,000) to support various initiatives throughout the City, including $6.1 million on transportation and other public facility-related projects. Fund Balance On June 30, 2025, unassigned fund balance of the general fund was $34.0 million, an increase of $3.4 million from the prior fiscal year balance of $30.6 million. Total fund balance decreased to $125.6 million, a reduction of $2.3 million from the prior year’s restated balance of $127.9 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 18.3 percent of total fund expenditures, while total fund balance represents 67.6 percent of that same amount. Pursuant to the City Council Reserve Policy, the City maintains a General Fund reserve of 15% of estimated General Fund revenues in the following year. Special Revenue Funds and Capital Project Funds are also included in the ACFR and are highlighted in the Management’s Discussion and Analysis section of the ACFR. Auditor’s Internal Control Findings In conjunction with the preparation of the ACFR, The Pun Group also prepared the required communications regarding significant audit matters and the City's internal controls over financial reporting in accordance with generally accepted auditing standards, based on its audit of the City's financial statements. As part of the audit, The Pun Group identified two findings for FY 2024-25: 1. The first finding, defined as a significant deficiency, is the delay in financial reporting. The auditors noted that the City experienced significant delays in completing the year-end close process and issuing its financial statements and Single Audit due to staffing changes, significant workload demands, and the challenge of balancing day-to-day operations with year-end reporting requirements. 2. The second finding, defined as a material weakness, relates to internal controls over financial reporting. The auditors identified deficiencies in the City's year-end closing process and financial reporting controls that resulted in numerous audit adjustments, prior period corrections, and post- closing journal entries. The auditors also noted that additional review procedures, reconciliations, and stronger internal controls are needed to improve the accuracy and timeliness of financial reporting. It is important to note that the auditors issued an unmodified opinion on the City's FY 2024-25 financial statements, concluding that the financial statements are fairly presented in accordance with generally accepted accounting principles. While the audit identified one significant deficiency and one material weakness related to financial reporting processes and internal controls, the City has already begun implementing corrective actions to address these issues. 7.C. - Page 6 of 269 25