Auditor issues clean opinion; Chino council receives fiscal 2025 annual comprehensive financial report

The Chino City Council received and filed the city's annual comprehensive financial report for the fiscal year ended June 30, 2025, after a presentation by Ahmed Badawi of Badawi and Associates, who reported an unmodified (clean) audit opinion and summarized the audit's scope, risks, and findings.

"We have issued an unmodified opinion, and that's in simple terms means it's a clean opinion," Badawi told the council. He said the firm was engaged to opine on the city's basic financial statements (the annual comprehensive financial report), perform the single audit of federal grants, audit certain district procedures, and file required reports with the state controller's office.

Badawi outlined the audit methodology (planning, interim control assessment, year-end validation and reporting) and said the audit required roughly 600 hours of work. He identified primary audit risks: management override of controls, improper revenue recognition, and accounting estimates (including fair value of investments, pension obligations, retiree medical benefits and claims liabilities). To address those risks, the firm used experienced staff, unpredictable procedures, journal-entry and estimate reviews, third-party confirmations, substantive analytics and testing of proprietary funds such as utility billings.

On liquidity, Badawi said the city's general fund unrestricted balance compared to annual expenditures would likely allow "about five months" of operations if revenues stopped, while cautioning that this estimate excludes transfers the city normally budgets and that including transfers would likely reduce that duration. He said the city's pension liability is "about $59,300,000" and emphasized that estimates are sensitive to the discount rate; he described a potential fluctuation range based on a 1% change in the discount rate as roughly "$6,000,000 to $124,000,000," a sensitivity characterization provided by the auditor.

Badawi also discussed independence and timing: he acknowledged that preparing (compiling) the financial statements on the city's behalf can impair auditor independence without safeguards, and said the firm used an independent reviewer not involved in the audit as a safeguard, consistent with professional guidance. He reported the audit was not completed in the originally communicated timeframe and attributed some delay to city staff turnover, but said the city is making progress toward timely issuance in future cycles. Badawi told council there were no unusual transactions and that the city complied with two new accounting standards during the fiscal year; he said staff were cooperative and responsive and the firm encountered no difficulties.

The council recorded the report as received and filed.