TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: Ashley Lopez, Accounting Manager
SUBJECT:
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Presentation and Review of the City of Murrieta’s Fiscal Year 2024/25 Annual Comprehensive Financial Report and Single Audit Report
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ABSTRACT
The City of Murrieta has prepared its Annual Comprehensive Financial Report (Financial Statements) and Single Audit Report on Federal Awards for the Fiscal Year ending June 30, 2025. The independent auditing firm of Rogers, Anderson, Malody, and Scott, LLP (RAMS) has issued an unmodified (clean) opinion on the City’s financial statements and Single Audit.
RECOMMENDATION
recommendation
Receive and file the Fiscal Year 2024/25 Annual Comprehensive Financial and Single Audit Reports.
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PRIOR ACTION/VOTE
On April 18, 2023, the City Council awarded an agreement to Rogers, Anderson, Malody, and Scott, LLP for independent audit services (Vote: 4-0-1).
On April 2, 2024, the Fiscal Year 2022/23 Annual Comprehensive Financial Report and Single Audit Report were received and filed with the City Council (Vote: 5-0).
On August 20, 2024, the City Council approved the first amendment to the agreement with Rogers, Anderson, Malody, and Scott, LLP (Vote: 5-0).
On January 21, 2025, the Fiscal Year 2023/2024 Annual Comprehensive Financial Report and Single Audit Report were received and filed with the City Council (Vote: 5-0).
STRATEGIC ALIGNMENT
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
DISCUSSION
The City of Murrieta (City) has completed the annual independent audit and prepared its Financial Statements for the Fiscal Year ending June 30, 2025 (Attachment 1). The independent auditing firm of Rogers, Anderson, Malody, and Scott, LLP (RAMS) has issued an unmodified (clean) opinion on the City’s financial statements, indicating they are free from material misstatement and present fairly the financial position and results of operations of the various funds and account groups of the City. The financial statements were completed on December 15, 2025.
In addition to the annual independent audit of the City’s financial statements, the City is required to complete a Single Audit (Attachment 2) as a condition of spending federal assistance in excess of $750,000.
As a result of their annual independent audit of the City’s financial records and statements, the audit firm has rendered an unmodified (or clean) opinion on the City’s financial statements. That is, RAMS believes the financial statements are fairly presented in accordance with generally accepted accounting principles. With this item, staff brings forward the City’s audited financial position for Fiscal Year 2024/25 in the form of the financial statements.
Financial Statements
The government-wide financial statements (Statement of Net Position and Statement of Activities) report information on all activities of the City and its component units. The statement of net position presents information on all of the City of Murrieta’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the City of Murrieta's financial position is improving or deteriorating.
The City’s combined net position as of June 30, 2025, was $594,141,046. The City’s net position increased by $19,039,660 compared to the prior fiscal year. The increase in the City’s net position is primarily due to a rise of $6,609,750 in total assets, net of deferred outflows of resources, and a decrease of $12,429,910 in total liabilities, net of deferred inflows of resources. The most substantial growth was seen in the unrestricted net position, which rose by $17,935,018, while the net investment in Capital Assets increased by $2,861,176. The restricted net position decreased by $1,756,534.
Current assets increased by $14,105,455, or 4.3%, compared to the prior year's balance. The increase is primarily attributable to an increase in cash and investments of $18,050,123, resulting from funds being held in interest-bearing accounts with favorable interest rates and revenues exceeding expenditures during the fiscal year. This increase was offset by a decrease in the sum of all receivables totaling $4,218,017, mainly due to a timing difference in receiving an Educational Revenue Augmentation Fund (ERAF) tax payment compared to the prior year.
The capital assets net of accumulated depreciation have increased by $2,660,889. The increase represents the difference between additions, deletions, and depreciation in the current year. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.
Changes in the various components associated with Governmental Accounting Standards Board (GASB) statement 68 Accounting and Financial Reporting for Pension, statement 75 Accounting and Financial Reporting for Postemployment Benefits Other than Pension (OPEB), and statement 87 Leases impacted deferred outflows and inflows, and changes in pension, OPEB, and leases liabilities for the year. GASB 68 and GASB 75 pronouncements required the City to record the net pension and OPEB liabilities on the books. The deferred outflows of resources increased by $10,156,594, while the deferred inflows of resources decreased by $1,604,686.
Current liabilities decreased by $1,903,535, or 3.9%. The decrease is primarily attributable to a decrease of $4,937,540 in unearned revenue, resulting from the recognition of grant revenue from the American Rescue Plan Act. A reduction of $63,276 in accrued interest and an increase of $24,122 in long-term liabilities due within one year contributed to the overall decrease in current liabilities, as higher portions of debt payments were applied to principal. This decrease was offset by an increase in accounts payable and accrued liabilities of $2,046,724 and $649,543, respectively. Another contributing factor to offsetting the decrease was a $376,892 increase in deposit payables, which is due to an increase in Development Services projects requiring a refundable cash deposit.
Long-term liabilities, including outstanding debt, leases, employee benefit accruals, claims and judgments, and OPEB liability, decreased by $8,921,689, representing a decrease of 4.8% from the prior year. The most significant decrease is attributable to the principal payments made towards bonded debt of $6,131,955. Net pension liability claims and judgements, and OPEB liability decreased by $1,463,160, $732,888, and $944,164, respectively. Some notable offsetting increases were from additions of public safety-related software licenses and leases for public safety radios and equipment, totaling $1,696,776. Compensated absences had a net increase of $565,219. The remaining decrease of $1,911,517 is due to principal payments made during the year for notes payable, leases, and subscriptions.
Approximately 73.3% of the City's net position consists of a net investment in capital assets (i.e., land, construction in progress, buildings, land & building improvements, parkland improvements, vehicles, equipment, and infrastructure), less any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; therefore, these assets are not available for future spending.
The restricted net position represents resources subject to external restrictions and earmarked for a specific purpose. The unrestricted net position represents the resources that may be used to meet the government's ongoing obligations to creditors and services to residents.
Governmental Funds
For financial statement presentation purposes, the City maintains twenty-nine (29) individual governmental funds. As of the end of the current fiscal year, the City of Murrieta’s governmental funds reported combined ending fund balances of $283,501,861, an increase of $7,402,179 or approximately 2.68% compared to last year's governmental funds balance.
The other net changes in fund balances in the governmental funds include a decrease of $865,529 for the Fire District fund, an increase of $411,662 for the Other Grants fund (which was reclassified this fiscal year to a Major Fund), an increase of $1,876,208 in the Development Impact Fee fund, and a reduction of $4,951,978 for the Non-Major Governmental Funds. The Non-Major Governmental Fund includes the Federal Grants fund, reported in prior fiscal years as a Major fund.
In accordance with GASB Statement No. 54 (thoroughly discussed in the notes to the financial statements, Note 9 - Fund Balance), the combined ending fund balance of $283,501,861 is broken down as follows:
General Fund
For the financial statement presentation, the General Fund column includes the following funds: General Fund, Measure T Fund, General Capital Fund, Traffic Safety Fund, Crime Prevention Fund, and Vehicle Replacement Fund. At the end of the fiscal year, the General Fund’s revenues exceeded expenditures, including other financing sources (uses) by $10,931,816, thereby increasing the General Fund balance at the end of June 30, 2025, to $153,861,121. The change in fund balance for the General Fund column is broken down by fund as follows:
General Fund revenues increased by $5,004,275 to $111,593,957, including transfers, when compared to the prior year. The increase is primarily attributable to a $2,352,131 increase in Taxes, a $877,833 increase in Intergovernmental Revenues, a $634,458 increase in Miscellaneous Revenues, a $421,509 increase in the Use of Money and Property, and a $34,941 increase in Sales of Capital Assets. Conversely, other revenue types decreased compared to the prior year: Charges for Services decreased by $476,600, License and Permits decreased by $263,026, Transfers In decreased by $225,012, and Fines & Forfeitures decreased by $96,444.
The increase in the Use of Money & Property is due to two factors. The first is an increase in investment income associated with the City’s investment portfolio and short-term investment through the City’s sweep account. The investment income increase is $834,973. The other component is related to the accounting required by GASB 31 to recognize unrealized gain or loss of securities that were not sold or matured at year-end. The change in recognition of unrealized gain or loss of securities accounts over the prior year is a decrease of $459,322. While the recognition of unrealized gain was less than in the preceding year, it still represented a gain of approximately $3.28 million, indicating that the value of the City’s securities has increased.
General Fund expenditures increased by $10,213,241 to $100,662,142, which included transfers out and other financing uses. Public Safety operations and services accounted for 57.5% of the expenditure increase, amounting to $5,872,125. Of the $5,872,125 increase, personnel-related expenditures accounted for $4,656,807, while the remaining $1,215,318 is related to operating costs.
Capital Outlay increased by $1,630,985, due to reclassification of a prior year subscription valued at $1,744,485. Had this reclassification not occurred, Capital Outlay would have been $113,500 less than the preceding year. Transfers Out had a net increase of $1,312,983. The category provides funding to special revenue funds that have operating shortfalls. The Fire Fund required $1,359,312 more financial support than the prior year due to higher workers’ compensation costs. The balance of Transfers Out totaled a decrease of $46,328. Community Development and Public Works increased by $701,090 and $418,233, respectively. All other expenditure categories had a net increase of $277,828.
Capital Assets
At the end of FY 2024/25, the City had capital assets (net of accumulated depreciation) of $445,132,400, including land, construction in progress (CIP), buildings and improvements, improvements to land, parkland improvements, equipment (including vehicles), infrastructure, leased assets, and right-to-use subscriptions. Current year additions to all asset categories totaled $18,354,557, while deletions totaled $2,872,158. The accumulated depreciation increased by $16,337,175 net of deletions. Capital assets with the most significant increase were those in Parkland Improvements, at $4,763,029. The asset class with the next most significant increase was Construction in Progress with $3,809,020. The capital asset category with the most significant decrease net of depreciation was Infrastructure, at $8,723,980, followed by Building & Improvements, at $635,961, and then Equipment, at $280,229. The remaining categories had an overall increase of $3,729,010. The increases were primarily due to the completion of multiple tot lot replacement projects and the reclassification of a piece of land that was previously held for resale.
Long-Term Debt
At the end of the current fiscal year, the City had outstanding bonded debt and leases, along with liability for claims and judgments, an obligation for employee post-employment benefits OPEB, compensated absences payable, and Net Pension liabilities totaling $194,216,335. The total outstanding debt decreased by approximately 4.4% or $8,897,567 during FY 2024/25. The most significant decrease is related to the CFD debt, resulting from principal payments made against the bonded debt.
The pension (CalPERS) liability decreased by $1,43,160 due to changes in assumptions, differences between expected and actual experiences, differences between projected and actual investment earnings, differences between employer’s contributions and proportionate share of contributions, and changes in the employer’s proportion of costs.
The decrease in OPEB liability of approximately $944,164 is attributed to an increase in the discount rate from 5.06% to 5.34%, changes in assumptions, and differences between expected and actual experiences. Claims and Judgments related to the City for general liability and workers’ compensation decreased by $732,888 due to the actuarial valuation of future liability. Compensated absences increased by $565,219, due to an increase in the number of employees and increases in the salary and compensation schedules. The remaining outstanding debt items, including notes payable, leases, and subscriptions, decreased due to principal payments made against each debt, with no significant additions to the debt.
Audit Findings
The Fiscal Year 2024/25 Financial Statement Audit and Single Audit Report have no findings.
Award
For Fiscal Year 2023/24, the City’s Financial Statements were awarded the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada (GFOA). This prestigious national award recognizes the City’s use of the highest standards in preparing the annual financial report. This certificate of achievement is valid for a period of one year only. Staff believes the financial statements for Fiscal Year 2024/25 continue to meet the program’s requirements, and they have submitted to GFOA for award consideration.
FISCAL IMPACT
No fiscal impact is associated with accepting and filing this item.
ATTACHMENTS
ATT 1 - Annual Comprehensive Financial Report for Fiscal Year ending June 30, 2025
ATT 2 - Single Audit Report for Fiscal Year ending June 30, 2025