Fremont receives clean audit but flagged new GASB rule, auditor and finance director say

The City of Fremont’s independent auditor issued a clean opinion on the city’s financial statements for the year ended Sept. 30, 2025, while calling attention to the city’s implementation of a new accounting standard on compensated absences, city finance staff said.

Colby, director of audit for Forvis Mazars, told the City Council that the firm issued an unmodified opinion and a separate single-audit clean opinion on the city’s major federal award program — the Coronavirus State and Local Fiscal Recovery Funds — and found no reportable internal control deficiencies. “There is an emphasis of matter paragraph,” Colby said, describing implementation of GASB Statement No. 101 related to compensated absences and the related adjustment to the financial statements.

Finance Director Jennifer Nabb said the audit reflects choices the city made for FY25, including planned use of reserves and certain one-time investments. Nabb said the city expended about $3.1 million of its federal SLFRF monies, representing roughly 78% of the city’s federal expenditures that were subject to single-audit requirements.

Council members pressed staff about a $938,876 amount described in the statements as a ‘‘misstatement.’’ Colby and Nabb explained the amount was a classification difference tied to internal service fund allocations for employee benefit pools (health care funds) and how those costs were reported between the city’s governmental funds and the utilities. “It is truly a misstatement between the classification of what's being reported as city funds versus utility funds,” Colby said, adding that the amount is not missing cash but rather a reporting allocation the city elected not to separate for administrative efficiency.

The audit identified several adjustments recorded by management, including an arbitrage rebate liability reclassification, adjustment for compensated absences to implement the new GASB guidance, proper reporting of airport loan proceeds, and recognition of grant revenue at the fund level. One proposed adjustment related to an internal service fund allocation was not recorded by management because it was not considered material and would impose administrative burdens.

Nabb reviewed operational takeaways for the council, warning that the city’s planned use of reserves reduces budgetary flexibility going forward. She reported that governmental operating expenses increased 5.878% year over year, program revenues declined 2.4%, and utility expenses rose about 10% while utility revenues rose 6.5%. Bond ratings were maintained at AA for the city and double-A minus for the utilities.

After the presentation and a brief public-comment period (none), Councilman Horner moved to receive the audited financial statements; Councilman Johnson seconded and the motion carried 8–0.

What’s next: staff said it will post the full audit and the 81-page financial statements to the city website and continue planned utility rate studies and financial planning work as reserves are used.