HomeMy WebLinkAboutItem 6f. FY 2024-25 Financial Statements
Whale Rock Commission Report
Whale Rock Commission Meeting – May 28, 2025
Agenda Item 6f – FY 2024-25 Financial Statements
FROM: Shawna Scott, Assistant Director of Utilities
PREPARED BY: Mychal Boerman, Utilities Deputy Director – Water
Tavy Garcia – Senior Accountant
SUBJECT: FY 2024-25 Financial Statements
RECOMMENDATION
Receive and file Fiscal Year 2024-25 Whale Rock Financial Statements
DISCUSSION
Summary
Each year the City receives an independent audit of the Whale Rock Commission’s
financial statements. The Whale Rock Commission 2024-25 Financial Statements,
as well as the auditor’s reports, are provided in Attachment A of this report.
This audit provides an opinion as to whether the financial statements are prepared,
in all material respects, in accordance with accounting principles generally accepted
in the United States of America. For the 2023-24 fiscal year, the auditors have issued
a “clean” opinion, meaning that the financial statements are presented fairly in all
material respects.
The Management’s Discussion and Analysis section includes financial and
operational highlights for the fiscal year and summary information on the
Commission’s financial position at year end.
As in prior years, the auditors have also provided a report on the internal controls
over financial reporting and, consistent with the findings for the City’s Annual
Comprehensive Financial Report, identified two areas of improvement, with one
being a material weakness related to journal entry posting, and the other being a
significant deficiency related to payroll module implementation. These findings, along
with the City’s responses are incorporated into the last section of the audited financial
statements (Attachment A, Whale Rock Commission Financial Statements, pages
39-40). The City’s Finance Department will work to correct these two issues over the
next year.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommended action,
because the action does not constitute a “Project” under CEQA Guidelines Sec.
15278.
Page 33 of 103
FISCAL IMPACT
The proposed action would not result in fiscal impacts to the Whale Rock Commission
member agencies.
ALTERNATIVES
The commission could choose to request modifications to the financial statements if
an error is identified with the statements included in Attachment A.
ATTACHMENT
A – 2024-25 Whale Rock Commission Financial Statements for Fiscal Years ended
June 30, 2025, and 2024
Page 34 of 103
Whale Rock Commission
Financial Statements
For the Fiscal Years ended June 30, 2025 and 2024
Page 35 of 103
Page 36 of 103
Whale Rock Commission
Fiscal Years Ended June 30, 2025 and 2024
Table of Contents
Independent Auditor’s Report 1-3
Management’s Discussion and Analysis 5-15
Basic Financial Statements
Government-wide Financial Statements:
Statements of Net Position 21
Statements of Activities 22
Fund Financial Statements
Balance Sheets 25
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 26
Statements of Revenues, Expenditures, and Changes in Fund Balance 27
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance
of Governmental Funds to the Statement of Activities 28
Notes to the Financial Statements 29-32
Required Supplementary Information
Budgetary Comparison Schedule 35
Notes to Required Supplementary Information 36
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 37-38
Schedule of Findings and Responses 39-40
Status of Prior Year Findings 41-42
Page 37 of 103
This page intentionally left blank.
Page 38 of 103
INDEPENDENT AUDITOR’S REPORT
To the Members
of the Whale Rock Commission
San Luis Obispo, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the governmental activities and general fund of the
Whale Rock Commission (Commission), as of and for the year ended June 30, 2025, and the related notes to the
financial statements, which collectively comprise the Commission’s basic financial statements as listed in the
table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective
financial position of the governmental activities and general fund information of the Commission, as of June 30,
2025, and the respective changes in financial position for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America
(GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by
the Comptroller General of the United States. Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to
be independent of the Commission and to meet our other ethical responsibilities, in accordance with the relevant
ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements
The Commission’s management is responsible for the preparation and fair presentation of the financial statements
in accordance with accounting principles generally accepted in the United States of America, and for the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the Commission’s ability to continue as a going
concern for twelve months beyond the financial statement date, including any currently known information that
may raise substantial doubt shortly thereafter.
Page 39 of 103
To the Members
of the Whale Rock Commission
San Luis Obispo, California
Page 2
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee
that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control. Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, and design and perform audit procedures responsive to those risks. Such procedures include
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Commission’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise
substantial doubt about the Commission’s ability to continue as a going concern for a reasonable period
of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit, significant audit findings, and certain internal control–related matters that we
identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis and budgetary comparison information on pages 5-15 and 35-36 be presented to
supplement the basic financial statements. Such information, although not a part of the basic financial statements,
is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the required supplementary information in accordance with
auditing standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during
our audit of the basic financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any assurance.
2
Page 40 of 103
To the Members
of the Whale Rock Commission
San Luis Obispo, California
Page 3
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 6, 2026, on our
consideration of the Commission’s internal control over financial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that
report is solely to describe the scope of our testing of internal control over financial reporting and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial
reporting or on compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the Commission’s internal control over financial reporting and compliance.
Badawi & Associates, CPAs
Emeryville, California
April 6, 2026
3
Page 41 of 103
This page intentionally left blank.
4
Page 42 of 103
Management’s Discussion & Analysis
This section provides a narrative overview and analysis of the financial activities of the Whale Rock Commission for the
fiscal years ended June 30, 2025 and 2024. It should be read in conjunction with the accompanying basic financial
statements.
Overview of the Financial Statements
The financial statements are presented in accordance with Governmental Accounting Standards Board Statement No. 34.
The basic financial statements are comprosed of three components:
1. Government-wide financial statements
2. Fund financial statements and
3. Notes to the financial statements.
Government-Wide Financial Statements
This set of statements is designed to provide readers with a broad overview of the Commission’s finances, in a manner
similar to a private-sector business.
The Statement of Net Position presents information on all the Commission’s assets and liabilities, with the differnce reported
as net position. Over time, increases or decreases in net position may serve as an indicator of whether the finacial position
of the Commission is improving or declining.
The Statement of Activities presents information showing how the Commission’s net position changed during the most
recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs.
Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal
periods.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific
activites or objectives. The Commission, like other state and local governments, uses fund accounting to ensure and
demonstrate compliance with finance-related legal requirements. However, unlike the government-wide financial
statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well
as on balances of spendable resources available at the end of the fiscal year. Such information reflects financial resources
available in the near future to finance the Whale Rock Fund. All of the activities of the Commission are accounted for in
one fund.
Whale Rock Commission
The Whale Rock Fiduciary (Custodial) fund is used to account for the Commission’s ongoing operating activities.
Ownership in the Reservoir is as follows: 55.05%, City of San Luis Obispo; 33.71%, California Polytechnic State
University; and 11.24%, California Men’s Colony. The City’s share of the Commission’s expenses is recorded as expenses
of the Water Enterprise Fund. All receipts and disbursement of the Commission are included in the fiduciary fund.
5
Page 43 of 103
Management’s Discussion & Analysis
Financial Highlights
The following outlines financial highlights for the year:
The assets of the Commission exceeded its liabilities at June 30, 2025, by $7.2 million (net position). The
Commission’s unrestricted net position increased by just over $1 million compared with FY 2023-24.
Total assets increased by $990,000 or 15%, to just over $7.4 million during FY 2024-25. This increase was primarily
attributable to higher balances in total cash and accounts receivable at June 30, 2025, which were $570,000 and
$392,000 higher, respectively, compared with balances at the end of the prior year. These increases reflect stable
service revenue, within 1.6% year over year, combined with significatnly less capital project activity during FY
2024-25. Capital activity is dependent on Whale Rock’s capital improvement plan and can therefore flutuate
significantly from year to year.
For FY 2024-25, total program revenues, including basic operating charges and water distribution income,
amounted to nearly $2.1 million, which was consistent with totals from the prior year. Meanwhile, general revenues
including investment earnings, Capital Improvement Plan (CIP) contributions, and other revenues totaled
approximately $1.04 million. This represents increases of 0.2% and 8.1% respectively.
Water Distribution revenues decreased from $834,000 in FY 2023-24 to $772,000 in FY 2024-25. The stronger
distribution revenues in the prior year were due to increased demand while the Naciemento pipepline was down for
repairs. This pipeline has since been reopened via a temporary pipleline bypass while repairs continue into FY 2024-
25.
Use of money and property revenues increased by $47,000 to nearly $315,000 for FY 2024-25, representing a 17.5%
increase due to favorable market conditions that supported strong interest earnings on the Commission’s invested
cash during the fiscal year.
Total expenses of $2.1 million were lower in FY 2024-25 and represented a decrease of $589,000 compared with
the prior year. As noted above, this decrease was primarily driven by the timing of project-related expenditures,
including major maintenance activities, as well as an decreases in electric service needs following the reopening of
the Naciemento pipeline during the fiscal year. Depreciation meanwhile, remained consistent with the prior year.
6
Page 44 of 103
Management’s Discussion & Analysis
Operational Highlights
During FY 2024-25, Whale Rock staff maintained the reservoir and related facilities, delivered water, and participated in
long-term capital improvement projects. The following are the operational highlights that occurred during the fiscal year.
Intake Structure Inspection
Intake valves allow the highest quality water to enter the pipeline from a
selected depth. Whale Rock has five intake valves, and intake valve four
ceased to function in the closed position. Intake valve four is located
under 110 feet of water. Inspecting and repairing the valve presents
challenges in a hazardous environment.To facilitate access, staff may
drain the intake structure to allow a human to enter. The downside of this
action is that Whale Rock cannot deliver water while the intake structure
is drained. Additionally, the hazards of confined space and engulfment
(drowning) are associated with humans working inside this structure. To
mitigate the safety hazards associated with entering the intake structure,
staff worked with AQUEOS to operate a remotely operated vehicle
(ROV) to inspect the malfunctioning valve underwater. AQUEOS staff
provided a video inspection of intake valve four. With the assistance of
air introduced to the plumbing, air bubbles led the ROV operator to a
broken pipe fitting. The fractured pipe fitting prevented the valve control
system from operating intake valve four. The ROV inspection was a
success, as staff identified the problem, and will develop a project to
repair the pipe fitting. The project may utilize divers to make repairs at
depth, or a scheduled Whale Rock shutdown could allow the intake structure to be drained of water so that people can
enter and make repairs.
Cathodic Protection Survey of the Whale Rock Pipeline
Cathodic protection is a method used in various industries
that uses a low electrical current to prevent corrosion of
metal structures such as pipelines, tanks, steel-pier piles,
and offshore oil platforms. Cathodic protection has been
used to protect pipelines since the 1930s. In January, staff
worked with a cathodic protection consultant to
understand Whale Rock’s cathodic protections system
(CPS) condition. The consultant is authoring a report
describing the condition of the reservoir’s CPS. The
report may include recommendations for improving the
CPS to achieve the maximum service life of the Whale
Rock pipeline.
ROV PRE-INSPECTION
CATHODIC PROTECTION TEST STATION FOR THE WHALE ROCK PIPELINE
7
Page 45 of 103
Management’s Discussion & Analysis
Drain Pluming Improvements
The dam and the hillside adjacent to the spillway have drains installed to remove water pressure that may build up
within the dam. During the early 1980s, staff recorded higher than anticipated pressures inside the northern portion
of the Dam. The Commission’s geoloic consultant
recommended that drains be installed to reduce the water
pressure and to maintain the safety of the Dam’s structure.
Since the drains were installed in the 1980s, staff have
recorded the water flow of the drain as part of weekly
observations of the dam. Over the years, the plumbing of
the drain systems has aged, and staff recognized the
opportunity to make improvements to the drain systems.
Staff have installed new piping and outlet works on one of
the drain systems. The team replaced the aging pipe
supports and piping on the second drain system. The
team’s efforts have resulted in a drainage system that
promotes accurate water measurements and will serve the
Whale Rock facility for many years.
New John Deere Tractor at Whale Rock
Staff team recently took delivery of a new John Deere utility
tractor. Whale Rock staff uses the tractor to mow and maintain
dirt roads and trails of the public access area and
approximately three miles of reservoir access road that is
closed to the public. Other uses include pipeline easement
clearing and general grading work to repair erosion or build up
access roads. The new tractor replaces a similar John Deer
machine that has been in service since 2004. We look forward
to using the new tractor to maintain the facility for the next
twenty years.
“S” DRAIN IMPROVEMENTS
WHALE ROCKS NEW JOHN DEER TRACTOR
8
Page 46 of 103
Management’s Discussion & Analysis
Exposed Pipeline Recoating
The Whale Rock Pipeline has "crossing" sections that
are not buried and need to be recoated to reduce
corrosion and provide maximum service life. During
2024, staff recoated many of the above-grade crossing
pipe sections. In December, staff completed recoating
the crossing at the San Luis Obispo Water Treatment
Plant. This pipe section houses the Whale Rock water
meter, shown on the left side of the picture, and an
interior pipeline access point on the right of the image.
The interior pipeline access point was installed to
extract pipeline inspection tools during the 2018
Pipeline Condition Analysis. Staff plans to recoat the
remaining crossings this spring.
Door Maintenance at Pump Stations
Whale Rock's two pump stations have multiple steel doors. The doors are
used for human access, and one large set of doors is used to remove and
replace the 200-horsepower motors that operate the water pumps. Since the
pump stations were constructed in 1993, years of use and corrosion have
rendered some doors inoperable. In February, Western Prehung worked at
both pump stations to make repairs to the doors. The most extensive work
effort occurred at Pump Staton A, where the marine environment had
caused the double door frame to corrode and fail. Western Prehung staff
replaced the steel double-door frame, restoring the door's functionality.
RECOATED WHALE ROCK PIPELINE AT THE SLO WATER TREATMENT PLANT
WESTERN PREHUNG STAFF REPLACING A DOUBLE
DOOR FRAME AT PUMP STATION A
9
Page 47 of 103
Management’s Discussion & Analysis
Termite Fumigation
The Whale Rock shop and office are wood buildings and can
attract termites. The Whale Rock team has noted termite
droppings inside the shop. To remedy the termites, Whale
Rock staff worked with Terminix to fumigate the facility.
Terminix tarped the structure and applied fumigant on a
Thursday. The tarps were removed on Saturday, with normal
operations resuming on Monday morning. A five-year
warranty against termite infestation covers the shop and office.
Pressure Relief Valve Maintenance
High water pressure in the Whale Rock pipeline contributes to
water leaks and reduces the pipeline's lifespan. Whale Rock's
five pressure relief valves detect water pressure higher than
desired in the pipeline and release water to lower the water
pressure. Reducing excess water pressure in the pipeline helps
to prevent pipeline failures. Staff rebuilt Whale Rock's five
pressure relief valves to ensure proper pressure relief valve
operation
WHALE ROCK SHOP/OFFICE TENTED FOR FUMIGATION
STAFF REBUILDING A PRESSURE RELIEF VALVE
10
Page 48 of 103
Management’s Discussion & Analysis
Mowing The Dam's Face
The best management practice for earthen dams is to
maintain a low vegetation level to allow visual inspection of
the Dam's surface. Continuous surveillance of the Dam
allows staff to recognize unusual conditions that may
indicate a developing problem. Some level of vegetation
reduces erosion on the face of the Dam and is desirable. The
Whale Rock team mows the Dam annually to keep the
vegetation at a low level, allowing observation of the face of
the Dam. A tracked mower was used for three days to
increase staff safety while mowing the steep area. The rental
machine is more stable than our wheeled tractor mower and
does a great job, safely reducing the height of the grass on
the Dam.
Pump Station Maintenance
The Whale Rock delivery system uses ten pumps to supply water to Commission members. Earlier this year, one of these
pumps started leaking, indicating worn-out ceramic seals. The Whale Rock team installed new ceramic seals and bearings
in the pump and put it back into service. In June, the team removed corrosion from the pump and prepared it for recoating.
In this picture, the pump has been recoated and is ready to deliver water over the summer months.
ANNUAL MOWING OF THE DAM’S FACE
REBUILT AND RECOATED DELIVER PUMP
11
Page 49 of 103
Management’s Discussion & Analysis
Electric Motor Rebuild
In February, pump five at Pump Station A failed to start, activating alarms in our pump control system. Alpha Electric
came onsite to diagnose the motor's failure. Alpha Electric's staff determined that the motor had an internal issue, causing
the inability to start and subsequent alarms. The Whale Rock team removed the motor and delivered it to Electric Motor
Works for servicing. The motor was disassembled, serviced, and reinstalled by Whale Rock staff. In the first week of
March, Alpha Electric will come onsite and connect the motor's electrical wiring, putting it back in service. Each pump
station has five pumps and motors that provide redundancy and allow us to remove a pump or motor for repairs without
impacting water deliveries.
The Notes to the Financial Statements provide additional information that is essential to the reader for a full
understanding of the data provided in the Commission’s financial statements.
PUMP 5 MOTOR INSTALLED AFTER SERVICEING
12
Page 50 of 103
Management’s Discussion & Analysis
Financial Analyisis
Net position may serve, over time, as an indicator of a government’s financial position. As noted above, assets exceeded
liabilities by $7.2 million at June 30, 2025.
At the end of the current fiscal year, the Commission continues to report a positive net position.
Information about changes in net position resulting from operations is summarized below:
STATEMENT OF ACTIVITIES
Government Wide
Whale Rock FY2024-25 FY2023-24
Revenues:
Charges for services 2,813,357$ 2,770,405$
Other revenues 1,872 8,108
Use of money and property 314,857 267,853
Total Revenues 3,130,086 3,046,366
Expenses:
Operations 1,695,309 1,771,627
Capital projects 86,748 577,105
General government 252,099 274,372
Depreciation 63,283 63,283
Total expenses 2,097,439 2,686,387
Increase (decrease) in net position 1,032,647 359,979
Net position, beginning 6,215,428 5,855,449
Prior year restatement - -
Net position, beginning of year, as restated 6,215,428 5,855,449
Net position, ending 7,248,075$ 6,215,428$
13
Page 51 of 103
Management’s Discussion & Analysis
Commission Contributions
Members contribute for both operating and maintenance activities as well as Capital Improvement Plan (CIP) projects
which may also include contributions toward the CIP reserve. Total contributions by member are show below.
Budgetary Highlights
A budgetary comparison schedule for the year ended June 30, 2025 is presented as part of the required supplementary
information. The following summarizes the original and final budget compared with actual results for FY 2024-25. The
variance column reflects the differences between the actual amounts realized and the final budget amounts. While revenues
came in above budget, expenditures came in significantly under due to budgeted project activity that did not happen during
the year.
Capital Assets
Capital assets, including infrastructure, are those assets that are used in the performance of the Commission’s functions and
reservoir. As of June 30, 2025, the Commission’s capital assets increased by $24,000 from $663,000 in the prior year to
$688,000 (net of accumulated depreciation).
More information on the Commission’s capital assets can be found in Note 3 of these financial statements.
14
Page 52 of 103
Management’s Discussion & Analysis
Request for Additional Information
This finacial report is designed to provide a general overview of the Commision’s finances for all those with an interest in
the finances. Questions concerning any of the information provided in this report or requests for additional financial
information should be addressed to the City of San Luis Obispo, Department of Finance, 990 Palm Street, San Luis Obispo,
California, 93401.
15
Page 53 of 103
This page intentionally left blank.
16
Page 54 of 103
BASIC FINANCIAL STATEMENTS
17
Page 55 of 103
This page intentionally left blank.
18
Page 56 of 103
GOVERNMENT-WIDE FINANCIAL STATEMENTS
19
Page 57 of 103
This page intentionally left blank.
20
Page 58 of 103
2025 2024
ASSETS
Cash and investments 6,284,413$ 5,713,938$
Accrued interest receivable 29,615 26,605
Accounts receivables 409,558 17,775
Nondepreciable capital assets 1,381 -
Capital assets, net of accummlated depreciation 686,180 663,072
Total assets 7,411,147 6,421,390
LIABILITIES
Accounts payable 94,014 135,422
Accrued salaries 18,397 17,087
Other liabilities 50,661 53,453
Total liabilities 163,072 205,962
Net Position
Net investment in capital assets 687,561 663,072
Unrestricted 6,560,514 5,552,356
Total Net Position 7,248,075$ 6,215,428$
Whale Rock Commission
Statements of Net Position
June 30, 2025 and 2024
The accompanying notes are an integral part of these financial statements.
21
Page 59 of 103
2025 2024
Expenses
Reservoir operations 1,695,310$ 1,771,627$
General government 252,099 274,372
Capital projects 86,748 577,105
Depreciation 63,282 63,283
Total expenses 2,097,439 2,686,387
Program Revenues
Charges for services:
Basic operating charges 1,310,027 1,242,781
Water distribution 771,824 834,074
Total program revenues 2,081,851 2,076,855
Net expense and program revenues (15,588) (609,532)
General Revenues and Transfers
Use of money and property 314,857 267,853
CIP Contributions 731,506 693,550
Other revenues 1,872 8,108
Total general revenues and transfers 1,048,235 969,511
Increase in Net Position 1,032,647 359,979
Net Position - beginning of year 6,215,428 5,855,449
Net Position - end of year 7,248,075$ 6,215,428$
Whale Rock Commission
Statements of Activities
For the Years Ended June 30, 2025 and 2024
The accompanying notes are an integral part of these financial statements.
22
Page 60 of 103
FUND FINANCIAL STATEMENTS
23
Page 61 of 103
This page intentionally left blank.
24
Page 62 of 103
803--807--809
2025
Assets
Cash and investments 6,284,413$ 5,713,938$
Accrued interest receivable 29,615 26,605
Accounts receivables 409,558 17,775
Total assets 6,723,586 5,758,318
Liabilities and Fund Balance
Liabilities
Accounts payable 94,014 135,422
Accrued salaries 18,397 17,087
Other liabilities 50,661 53,453
Total liabilities 163,072 205,962
Fund Balance
Assigned for reservoir operations 389,482 409,199
Assigned for CIP 3,953,849 3,309,091
Unassigned 2,217,183 1,834,066
Total fund balance 6,560,514 5,552,356
Total Liabilities and Fund balance 6,723,586$ 5,758,318$
2024
Whale Rock Commission
Balance Sheets
June 30, 2025 and 2024
The accompanying notes are an integral part of these financial statements.
25
Page 63 of 103
2025
Total Fund Balances - governmental funds 6,560,514$
Capital assets at estimated historical cost 1,931,976$
Accumulated depreciation (1,244,415)
687,561
Total net position - governmental activities 7,248,075$
Capital assets used in governmental activities are not financial resources and therefore
are not reported in the fund.
Whale Rock Commission
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
For the year ended June 30, 2025
The accompanying notes are an integral part of these financial statements.
26
Page 64 of 103
2025 2024
REVENUES:
Use of money and property 314,857$ 267,853$
CIP Contributions 731,506 693,550
Other revenue 1,872 8,108
Services:
Basic operating charges 1,310,027 1,242,781
Water distribution 771,824 834,074
Total services 2,081,851 2,076,855
Total revenues 3,130,086 3,046,366
EXPENDITURES:
Current:
Reservoir operations 1,695,310 1,771,627
General government 252,099 274,372
Capital projects 174,519 577,105
Total curent expenditures 2,121,928 2,623,104
Total expenditures 2,121,928 2,623,104
Excess of revenues over expenditures 1,008,158 423,262
FUND BALANCES:
Beginning of year 5,552,356 5,129,094
End of year 6,560,514$ 5,552,356$
803--807--809
Whale Rock Commission
Statements of Revenues, Expenditures and Changes in Fund Balances
For the years ended June 30, 2025 and 2024
The accompanying notes are an integral part of these financial statements.
27
Page 65 of 103
2025
Total excess of revenues over expenditures - governmental funds 1,008,158$
Expenditure for capital outlay 86,390$
Construction in progress deletion 1,381
Depreciation expense (63,282)
24,489
Total increase in net position - governmental activities 1,032,647$
Capital outlay net of depreciation expenses and disposal
Whale Rock Commission
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities
For the year ended June 30, 2025
The accompanying notes are an integral part of these financial statements.
28
Page 66 of 103
Whale Rock Commission
Notes to Financial Statements
June 30, 2025
Note 1: Summary of Significant Accounting Policies
Description of the Reporting Entity
The Whale Rock Commission (Commission) was established as a joint venture on December 12, 1960 to oversee, in a
fiduciary capacity, the operations and routine maintenance of the Whale Rock Reservoir (Reservoir). The Commission
is composed of six voting members and two non-voting members. Three voting members are appointed by the City of
San Luis Obispo (City); one by the California Polytechnic State University; one by the California Men's Colony; and
one by the Director of Finance, State of California. The two non-voting members are position appointments: the Director
of Water Resources, State of California; and the Water Superintendent, City of San Luis Obispo. The Commission is
authorized to establish policies for the operation of the Reservoir, to contract for the sale of excess water, and to approve
its annual budget.
The City, in accordance with established policies of the Commission, operates and maintains the Reservoir; prepares
and recommends the annual budget; and maintains the fiscal records and moneys of the Commission. Ownership in the
Reservoir is as follows: 55.05%, City of San Luis Obispo; 33.71%, California Polytechnic State University; and 11.24%,
California Men's Colony.
Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report
information on all of the activities of the Commission.
The statement of activities demonstrates the degree to which the direct expenses are offset by program revenues. Direct
expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges
to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given
function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements
of a particular function or segment.
Separate fund financial statements are also provided.
Measurement Focus, Basis of Accounting and Basis of Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the accrual
basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred,
regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility
requirements imposed by the provider have been met.
Fund financial statements are reported using the current financial resources measurement focus and the modified accrual
basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered
to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. For this purpose, the Commission considers revenues to be available if they are collected within 60 days
of the end of the current fiscal period. The Commission considers interest earned but not received and billings to
participating agencies earned but not received as susceptible to accrual. Expenditures generally are recorded when a
liability is incurred, as under accrual accounting. The focus of financial measurement is upon available resources rather
than net income determination.
29
Page 67 of 103
Whale Rock Commission
Notes to Financial Statements
June 30, 2025
Note 1: Summary of Significant Accounting Policies, (Continued)
Measurement Focus, Basis of Accounting and Basis of Presentation, (Continued)
The accounting policies of the Commission conform to generally accepted accounting principles. The accounts of the
Commission are presented in the fund financial statements as a Governmental Fund. As the City maintains the accounting
records and moneys of the Commission in a fiduciary capacity, the Commission's operating activities are accounted for
in a separate fiduciary fund type (Custodial Fund) in the City's Annual Comprehensive Financial Report (ACFR). The
operations of the fund are accounted for with a set of self-balancing accounts that comprise the Commission's assets,
liabilities, fund equity, revenues, and expenditures. Commission resources are allocated to, and accounted for, as assets
of the fund and equity to the participating agencies.
Budgets and Budgetary Accounting
As provided under the Whale Rock Agreement, the Commission has the sole responsibility for the adoption of the budget
and may amend or supplement the budget at any time after its adoption. The budget is legally adopted prior to the
commencement of the fiscal year and is prepared in accordance with generally accepted accounting principles. The
Director of Finance of the City has the authority to make or approve administrative adjustments to the budget as long as
those changes will not have a significant policy impact nor affect budgeted year- end fund balances. Appropriations
lapse at year-end unless such amounts are encumbered and reappropriated in the next fiscal year.
Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets are reported as part of the Commission.
Capital assets are defined by the Commission as assets with an initial, individual cost of more than $25,000 and an
estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if
purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of assets or materially
extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are
constructed. The Commission does not have any intangible assets. Detailed information on the Commission’s capital
assets can be found in Note 3.
City of San Luis Obispo Services
Because the City accounts for the activities of the Commission, other services such as workforce and risk management
are also provided by the City. The City’s ACFR fully discusses pooled and self-insurance and how the City manages the
risk of the Commission.
New Pronouncements
In 2025, the Commission adopted new accounting standards in order to conform to the following Governmental
Accounting Standards Board Statements:
GASB Statement No. 102 – Certain Risk Disclosures – The primary objective of this Statement is to provide
users of government financial statements with essential information about risks related to a government’s
vulnerabilities due to certain concentrations or constraints.
30
Page 68 of 103
Whale Rock Commission
Notes to Financial Statements
June 30, 2025
Note 1: Summary of Significant Accounting Policies, (Continued)
New Pronouncements, (Continued)
The Commission is currently analyzing its accounting practices to determine the potential impact on the financial
statements for the following GASB Statements:
GASB Statement No. 103 – Financial Reporting Model Improvements - The primary objective of this Statement
is to improve key components of the financial reporting model to enhance its effectiveness in providing
information that is essential for decision making and assessing a government’s accountability. This Statement
also addresses certain application issues.
GASB Statement No. 104 – Disclosure of Certain Capital Assets – The primary objective of this Statement is to
provide users of governmental financial statements with essential information about certain types of capital
assets.
Note 2: Cash and Investments
The Commission's cash and investments are pooled with those of the City. As provided for by the California Government
Code, the cash balances of substantially all funds held by the City are pooled and invested by the City Treasurer for the
purpose of increasing interest earnings through investment activities. The Commission's share of the aggregate pooled
cash and investments are recorded at fair value and included in the accompanying balance sheet under the financial
statement caption cash and investments. Interest earned on pooled investments is allocated quarterly to the Commission
based upon the Commission's average cash balance during the allocation period. Refer to Note 2 of the Notes to the
Financial Statements of the City of San Luis Obispo as contained in the City's ACFR for further discussion of the nature
of the City's pooled cash and investments and all related fair value disclosures.
Note 3: Capital Assets
Governmental Accounting Standards Board (GASB) standards require that the Commission report in the government-
wide statements the value of all capital assets net of accumulated depreciation, including infrastructure assets, in
accordance with U.S. Generally Accepted Accounting Principles (GAAP). Infrastructure assets are defined as long- lived
capital assets that are stationary in nature and normally can be preserved for a significantly greater number of years than
most capital assets.
The minimum requirement for compliance with GASB standards is to provide infrastructure valuations for all assets
constructed, acquired, or placed into service on or after July 1, 1980. Relevant assets for the Commission were valued
at one of two dates: 1) the original date of construction, if available, or 2) the incorporation date of the Commission.
Each asset was reviewed to determine the adequacy of the data to value to asset prior to July 1, 1980 using historical
cost or estimated historical cost.
31
Page 69 of 103
Whale Rock Commission
Notes to Financial Statements
June 30, 2025
Note 3: Capital Assets, (Continued)
Capital assets activity for the fiscal year ended June 30, 2025 was as follows:
Capital assets activity for the fiscal year ended June 30, 2024 was as follows:
Balance Decreases/ Balance
June 30, 2024 Increases Transfers June 30, 2025
Capital assets not being depreciated:
Construction in progress -$ 87,771$ (86,390)$ 1,381$
Total capital assets not
being depreciated - 87,771 (86,390) 1,381
Capital assets being depreciated:
Infrastructure 588,106 - - 588,106
Buildings and improvements 1,092,285 - 13,068 1,105,353
Equipment 191,830 - 45,006 236,836
Accum. Depreciation (1,209,149) (63,283) 28,316 (1,244,115)
Total capital assets being
depreciated, net 663,072 (63,283) 86,390 686,180
Capital assets, net 663,072$ 24,488$ -$ 687,561$
Balance Decreases/ Balance
June 30, 2023 Increases Transfers June 30, 2024
Capital assets not being depreciated:
Construction in progress -$ -$ -$ -$
Total capital assets not
being depreciated - - - -
Capital assets being depreciated:
Infrastructure 588,106 - - 588,106
Buildings and improvements 1,092,285 - - 1,092,285
Equipment 195,456 - (3,626) 191,830
Accum. Depreciation (1,149,492) (63,283) 3,626 (1,209,149)
Total capital assets being
depreciated, net 726,355 (63,283) - 663,072
Capital assets, net 726,355$ (63,283)$ -$ 663,072$
32
Page 70 of 103
REQUIRED SUPPLEMENTARY INFORMATION
33
Page 71 of 103
This page intentionally left blank.
34
Page 72 of 103
Variance
Positive
Original Budget Final Budget Actual (Negative)
Revenues
Use of money and property 1,000$ 1,000$ 314,857$ 313,857$
CIP Contributions 624,958 624,958 731,506 106,548
Other revenues 6,000 6,000 1,872 (4,128)
Services:
Basic operating charges 1,297,986 1,297,986 1,310,027 12,041
Water distribution 588,940 888,940 771,824 (117,116)
Total services 1,886,926 2,186,926 2,081,851 (105,075)
Total Revenues 2,518,884 2,818,884 3,130,086 311,202
Expenditures
Current:
Reservoir operations 1,624,616 1,951,282 1,695,310 255,972
General government 255,805 255,805 252,099 3,706
Capital projects 2,507,849 2,593,688 174,519 2,419,169
Total Expenditures 4,388,270 4,800,775 2,121,928 2,678,847
Excess (Deficiency) of Revenues and Other
Sources Over (Under) Expenditures and Other Uses (1,869,386) (1,981,891) 1,008,158 2,990,049
Commission Equity - beginning of year 5,552,356 5,552,356 5,552,356 -
Commission Equity - end of year 3,682,970$ 3,570,465$ 6,560,514$ 2,990,049$
Whale Rock Commission
Budgetary Comparison Schedule
Fiscal Year Ended June 30, 2025
35
Page 73 of 103
Budgetary Comparison Schedule
Whale Rock Commission
Notes to Required Supplementary Information
June 30, 2025
1. The budget is prepared using the modified accrual basis of accounting consistent with U.S.
generally accepted accounting principles.
2. Outstanding encumbrances from the prior fiscal year are not reflected in the original budget
column but are included in the final budget amounts.
36
Page 74 of 103
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
Independent Auditor’s Report
To Members of the Whale Rock Commission
San Luis Obispo, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller
General of the United States, the financial statements of the governmental activities and general fund information of
the Whale Rock Commission (Commission), as of and for the year ended June 30, 2025, and the related notes to the
financial statements, which collectively comprise the Commission’s basic financial statements and have issued our
report thereon dated April 6, 2026.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Commission’s internal control
over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Commission’s internal control. Accordingly, we do not express an
opinion on the effectiveness of the Commission’s internal control.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been
identified. However, as described in the accompanying schedule of findings and responses, we did identify certain
deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will
not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies described in the
accompanying schedule of findings and responses as item 2025-001 to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance. We consider the
deficiencies described in the accompanying schedule of findings and responses as item 2025-002 to be significant
deficiency.
Page 75 of 103
To the Members of the Whale Rock Commission
San Luis Obispo, California
Page 2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Commission’s financial statements are free from material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements, noncompliance with which could have a direct and material effect on the financial statements. However,
providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do
not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards.
Whale Rock Commission’s Response to Findings
The Commission’s response to the findings identified in our audit is described in the accompanying schedule of
findings. Commission’s response was not subjected to the auditing procedures applied in the audit of the financial
statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in
considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
Badawi & Associates, CPAs
Emeryville, California
April 6, 2026
38
Page 76 of 103
Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2025
Section I – Current Year Findings
A. Financial Statement Audit Finding
2025-001 Journal Entries Posting (Material Weakness)
Criteria: The access to post journal entries in the general ledger should be restricted. Journal entries should be
independently prepared, reviewed before being posted to the general ledger.
Condition: During the review of the City’s journal entry approval matrix and JE testing, we noted the posting from the
subledger to GL do not require approvals at the general ledger level nor at the subledger level. Considering the number
of employees who can post entries through subledger without review and the fact that corrections to payroll, payable,
revenue/receivables, cash management, capital assets all can be posted through subledger and do not require approval,
it increased the risk of unauthorized or incorrect journals get posted into general ledger.
Cause: The City didn’t have control in place to ensure all journal entries are properly reviewed before posting.
Effect: Journal entries recorded in the City’s accounting system may be inaccurate, unapproved, or unsupported.
Recommendation: We recommend that the City limit the number of employees who can post journal entries in the
subledger and general ledger, and implement system control to ensure all journal entries are reviewed before posting.
Management’s response:
City management agrees with the recommendation and continues working with the internal IT team and consultants to
explore modifications to the Oracle ERP system’s workflow to include approval for system-generated adjusting
entries, which are currently posted automatically.
Approval for manually generated journal entries was implemented in FY 2021-22 and remains in place. While the City
has approval controls for manual entries, a solution for system-generated adjustments is still in progress. In the interim,
the City has limited the number of employees that can post journal entries and has developed reports that are generated
each week to detect changes or adjustments to payables transactions. These reports, along with procedural changes are
intended to mitigate risk of inaccurate, unapproved or unsupported entries posting to the general ledger until a system
solution is identified. This goal is considered partially implemented by the City.
39
Page 77 of 103
Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2025
Section I – Current Year Findings, continued
A. Financial Statement Audit Finding, continued
2025-002 Payroll Module Implementation (Significant Deficiency)
Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal
control system over payroll requires timely and accurate payroll processing.
Condition: During the performance of the audit, we noted that –
The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually
track the payroll in a spreadsheet and correct the error as it occurs since the implementation.
The configuration of payroll journal entries posting was implemented incorrectly which caused the variance
between the bank record and the City’s general ledger.
Cause: The Oracle payroll module has not been implemented correctly.
Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed.
Recommendation: We recommend the City to work with the third-party vendor to correct the implementation of
payroll module.
Management’s Response:
City Management agrees with the finding and has engaged a consultant to reconfigure the payroll module to correct
overtime calculations. Significant progress has been made in identifying and testing solutions as of June 30, 2025, with
full implementation occurring in October 2025. Manual intervention in the calculation of overtime is no longer
required as of the implementation.
In the interim, the City continued to monitor payroll, manually correcting overtime issues each pay period. To enhance
accuracy, staff has delivered comprehensive training on timecard entry and created Oracle Guided Learnings (OGLs)
for real-time payroll module training. Additionally, the City has implemented the mandatory "Redwood" Oracle user
interface upgrade, improving usability and time-tracking accuracy.
Configuration of the payroll journal entries was a one-time occurrence that has since been corrected.
40
Page 78 of 103
Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2025
Section II – Prior Year Findings
A. Financial Statement Audit Finding
2024-001 Journal Entries Posting (Material Weakness)
Criteria: The access to post journal entries in the general ledger should be restricted. Journal entries should be
independently prepared, reviewed before being posted to the general ledger.
Condition: During the review of the City’s journal entry approval matrix and JE testing, we noted the posting from the
subledger to GL do not require approvals at the general ledger level nor at the subledger level. Considering the number
of employees who can post entries through subledger without review and the fact that corrections to payroll, payable,
revenue/receivables, cash management, capital assets all can be posted through subledger and do not require approval,
it increased the risk of unauthorized or incorrect journals get posted into general ledger.
Cause: The City didn’t have control in place to ensure all journal entries are properly reviewed before posting.
Effect: Journal entries recorded in the City’s accounting system may be inaccurate, unapproved, or unsupported.
Recommendation: We recommend that the City limit the number of employees who can post journal entries in the
subledger and general ledger, and implement system control to ensure all journal entries are reviewed before posting.
Status: Partially implemented, see current year finding 2025-001.
41
Page 79 of 103
Whale Rock Commission
Schedule of Findings and Responses
For the year ended June 30, 2025
Section II – Prior Year Findings, continued
A. Financial Statement Audit Finding, continued
2024-002 Payroll Module Implementation (Significant Deficiency)
Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal
control system over payroll requires timely and accurate payroll processing.
Condition: During the performance of the audit, we noted that –
The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually
track the payroll in a spreadsheet and correct the error as it occurs since the implementation.
The configuration of payroll journal entries posting was implemented incorrectly which caused the variance
between the bank record and the City’s general ledger.
Cause: The Oracle payroll module has not been implemented correctly.
Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed.
Recommendation: We recommend the City to work with the third-party vendor to correct the implementation of
payroll module.
Status: Partially implemented, see current year finding 2025-002.
42
Page 80 of 103