What's actually in the 158-page Finance packet

Start here: the five-minute version

If you read nothing else, read these nine sentences.

• Richardson & Company, LLP will present the June 30, 2023 and June 30, 2024 audits together — two fiscal years audited concurrently to catch up a backlog. pp. 2–14
• Every audit document in the packet carries a "DRAFT — SUBJECT TO CHANGE" watermark, and every signature date is a blank line reading __________, 2026. pp. 17, 19, 57
• The Water and Sewer funds again received a qualified (modified) opinion, because the District still has not verified that all developer-donated infrastructure and easements are on its books. p. 17
• Three prior-year material weaknesses remain open; no new ones were found, and four older findings were resolved. pp. 11, 56, 58–59
• The management letter notes the investment policy has not been updated since 2016 despite an annual review requirement, and reserve balances don't match the reserve policy. The District's written responses: "No change" and "No comment." pp. 110–111
• FY2025 and FY2026 are still not audited. FY25 prep began end of July 2026; FY26 prep began mid-August 2026 with bank reconciliations about 30% done. pp. 140, 142
• Preliminary FY2026 shows a $819,316 operating loss, turned into a $170,601 positive result only by $989,917 of property tax revenue. pp. 145, 154
• Total expenses came in at 107% of budget — $637,000 over — with individual lines at 268%, 301%, 469%, 627% and 3,370%. pp. 146–151
• Staff floats moving ~$2.6 million from restricted investment accounts into the unrestricted operating account to hit a six-month reserve target of roughly $5 million. p. 158

The agenda, item by item

Seven lines on one page. Four of them are informational presentations; none of them is a vote.

Because this is a special meeting, the agenda carries the Government Code §54957.5 language about late-distributed writings, and the posting note states the agenda was posted at the District Office on August 21, 2026 at 3:00 p.m. p. 1 Accommodation requests go to the District Office at 916-354-3700 or dfleet@rmcsd.com.

Why these audits say DRAFT

The audits are being presented, not issued. That distinction matters for how much weight the numbers can carry.

Every page of the FY24 report, the FY23 report, the internal control report, the required communications letter, the management letter, and both CFD reports is stamped DRAFT — SUBJECT TO CHANGE down the side of the page. The auditor's report itself ends with an unfilled date line: "___________, 2026." p. 19 The internal control report and the management letter do the same. p. 57 p. 111

The required communications letter records that the engagement letter for these audits was dated April 9, 2025, and that the management representation letter date is also still blank. p. 105 p. 107 A management representation letter is one of the last things signed before an auditor releases an opinion.

One more thing the auditor flagged

Under "Other Matters," the auditor states that management omitted the Management's Discussion and Analysis that generally accepted accounting principles require to accompany the basic financial statements. The auditor notes the omission does not affect the opinions, but GASB considers MD&A an essential part of financial reporting. p. 19 MD&A is the narrative section where a district explains its own results in plain language — the part a resident would most likely read.

The qualified opinion on Water & Sewer

Three of five funds got a clean opinion. Two did not, for the same reason as in prior years.

The auditor issued a qualified opinion on the Water and Sewer funds and unmodified (clean) opinions on the Drainage, Solid Waste and Security funds. p. 17

The stated reason: in past years management had not adopted a methodology for verifying that easements and developer-donated infrastructure were recorded in the Water and Sewer funds, so the completeness of capital assets has not been verified. Recording those assets would increase assets and investment in capital assets and change depreciation expense in both funds. p. 17 The auditor adds that the amount of the effect has not been determined. p. 18

The District is not standing still on this. In its response to the related finding, the District says it has begun evaluating developer-donated infrastructure, recorded identified contributions and related depreciation in both the general ledger and the fixed asset subledger for FY2023 and FY2024, and expects to finish identifying all such assets in later fiscal years. p. 59 The auditor's own status line is blunter: this issue still exists, though donated infrastructure was properly recorded in FY2023 and FY2024. p. 59

FY2024 and FY2023 by the numbers

Two years side by side, as presented in the auditor's slides and the draft statements behind them.

Pension and OPEB

Net pension liability at June 30, 2024 was $4,963,825, based on the 2022 CalPERS valuation and up roughly $351,000 due to differences between actual and projected experience. Net OPEB liability was $2,636,958, based on a 2023 actuarial valuation, up $959,000. pp. 9–10, 21 The slides note no contributions were made to the OPEB trust in FY2022/23 or FY2023/24, though benefit payments of $288,000 and $297,000 were made. p. 10 Pension is Note 8; OPEB is Note 9. pp. 41–48

The custodial fund

The CFD custodial fund shows net position of $1,086,260, revenue exceeding expenses by $44,800, and $5.1 million of debt. pp. 9, 27–28 More on that in section 08.

Three material weaknesses, still open

No new findings this cycle. The three that carried over are the ones that explain why the audits are late.

The internal control report identifies material weaknesses as items 2022-001, 2021-001 and 2021-002, and reports no instances of noncompliance requiring disclosure under Government Auditing Standards. pp. 56–57 The auditor's slide summary: no current-year findings, three prior-year material weaknesses in process, no significant deficiencies, and four prior-year findings resolved. p. 11

The District's own response to 2022-001 is the most concrete progress marker in the packet: monthly payroll entries, cash receipts and revenue transactions have been brought current; beginning January 2026 preliminary financial reports were presented to the Finance Committee and Board; and as of August 2026 the District is finalizing accounting records through July 31, 2026. p. 58

Audit adjustments and unadjusted differences

Management corrected 4 audit adjustments for FY2024 and 7 for FY2023 — described by the auditor as a significant reduction compared with past audits. p. 106 Two uncorrected differences remain, each judged immaterial: an unaccrued invoice of $18,353 in FY2024 (plus accrued payroll understated by $11,011) and an unaccrued invoice of $18,381 in FY2023. pp. 108–109 The auditor identified management override of controls and revenue recognition as required significant risks, and reports no such issues were noted. pp. 105–106

The management letter: reserves & investments

Four recommendations — two new, two carried over. The two carried-over items are the ones with the shortest District responses.

New this cycle

• Document retention. The District could not access certain billing records after migrating from the Utility Star billing system to Tyler during the FY23 audit; transaction data imported, but some customer invoices could not be retrieved in original format. Under Tyler the District now prints and retains all customer invoices monthly. p. 110
• Check generation. Voided checks were not maintained in an organized manner and checks were not consistently pre-numbered, making completeness and sequence hard to verify. Beginning FY27 the District will run a monthly voided check report from Great Plains, file voided checks, and issue checks in sequential order. pp. 110–111

Carried over from past audits

These two items sit directly upstream of the cash discussion in section 12: a reserve policy that doesn't match the ledger, and an investment policy a decade old, are the governing documents for any decision about moving $2.6 million between accounts.

CFD 2014-1, the Mello-Roos component unit

Roughly 60 pages of the packet are a separate audit of a separate entity that shares the District's board.

Community Facilities District No. 2014-1 (Rancho North / Murieta Gardens) was formed September 5, 2014 to finance water facilities supporting development on approximately 828 acres. On January 29, 2015 special tax bonds of $5,960,000 were issued under the Mello-Roos Community Facilities Act of 1982; a special tax approved by voters has been levied since the 2016-17 tax year to repay them. pp. 49, 119

FY25 and FY26: how far behind

A one-page memo from the Director of Finance is the entire backup for agenda item 4. It is the most operationally revealing page in the packet.

The memo is dated August 12, 2026, from Cecilia Min, Director of Finance and Administration, to the Finance Committee and Board of Directors. p. 140

FY2026 preliminary: the $819,000 operating loss

Twelve months ended June 30, 2026 — explicitly labeled preliminary and subject to change.

Staff's own caveat leads the section: these figures will be subject to change after bank and balance sheet reconciliations, which will be completed in later months after the past audit years are finished. Monthly expenses are not consistent because coding was not consistent in those months, and negative amounts in certain months are reclassifications correcting year-to-date miscoding. p. 144

By fund

The headline "net income" of $5.4 million

Below the operating lines, the statement reports net income of $5,428,358 against a budget of $2,819,636 — 193%. p. 152 That figure is built mainly from items that are not operating cash:

• $3,405,961 of donated infrastructure — Riverview Phase 2 infrastructure accepted per Resolution 2025-12, split Water $1,340,110 / Wastewater $905,061 / Drainage $1,160,791. pp. 149, 152
• $2,001,490 of reserve revenue — capital replacement, augmentation, impact and debt service fees, at 110% of budget. p. 152
• $989,917 of property tax revenue, received in irregular lumps: $489,219 in February, $416,286 in May. p. 154
• Offset by ($129,717) in other items, including $122,331 paid for groundwater well studies. pp. 149, 152

Where the budget broke

Total expenses were $637,153 over budget. The composition is more interesting than the total.

Lines significantly under budget

The repairs & maintenance story, month by month

Staff itemizes the operating repairs line pp. 146–147: July — lift repairs $30k and annual gas feeder service $11k (the lift work is the Alameda rehab CIP project, to be reclassified; gas feeders serve the wastewater plant chlorine system). August — asphalt patch $9k. October — $17k motor replacement at the Granlees lift station, $13k lake maintenance for quarterly water testing. November — $31k vacuum truck rental for the 6B lift station flooding event, $12k asphalt/concrete, $11k equipment calibrations. December — $15k aquatic weed harvesting, $13k vacuum truck, $12k basin analyzer for the wastewater EQ basin. January — $16k generator rental while the wastewater plant generator was repaired. February — $23k algae cleanup. March — $18k lift and generator repairs, $13k vacuum truck. May — $19k Cal Fire crew for November emergency work. June — $57k pond work, $16k equalization basin repair and installation, $12k water treatment plant repairs, $11k air compressor maintenance.

Cash, reserves, and the $2.6M transfer idea

The last three pages of the packet contain the single most consequential proposal in it — and it arrives as a suggestion, not a recommendation for action.

Staff attributes the year-over-year decline primarily to Capital Improvement Project spending paid directly out of the Banner operating account, without corresponding transfers from CAMP and CA CLASS to reimburse those capital expenditures. p. 158

The reserve target and the proposed transfer

Under the District's Operating Fund and Reserve Fund Policy, the target is enough cash to fund roughly six months of operating expenditures — estimated at approximately $5 million based on the June 2026 statements. Unrestricted funds stood at about $2.4 million. Staff writes that to reach the target it "may be appropriate to transfer approximately $2.6 million from the restricted investment accounts to the unrestricted Banner account," which would reduce restricted balances to about $7.9 million. The final amount will not be known until the annual audits are completed and year-end balances finalized. p. 158

An oddity in the yield table

The average yield rows show CAMP and CA CLASS at 3.1%–3.9% for January through April 2026, then jumping to 7.5% and 7.4% in May and 8.1% and 7.4% in June; the 2025 rows show a similar jump to 8.8% and 8.7% in May and June 2025. p. 157 Yields at that level are not typical for California local government investment pools. This looks like a reporting or annualization artifact rather than actual earnings, and it is a fair, low-stakes clarifying question. Note that investment earnings for the year totaled $82,973 against a $97,000 budget p. 150 — consistent with ordinary pool yields, not 8%.

Settlements and contracts after year-end

Note 14 of the FY24 statements discloses three items that happened after June 30, 2024 but before the audit was drafted.

• A legal claim settled in May 2025 for $375,000, of which the District is responsible for $200,000 and insurance covers the remainder. p. 50
• In November 2024, a construction agreement for the Wastewater Treatment Facility Sodium Hypochlorite Improvements / Chlorine Contact Basin Expansion – Phase 1 Project in the amount of $2,402,558. p. 50
• In May 2025, a construction agreement for the Equestrian Access Culvert Project in the amount of $343,000. p. 50

Commitments and contingencies

Note 13 records the solid waste agreement with California Waste Recovery System, entered in 2023 and running to June 30, 2035 with an option to extend, with rates rising annually by CPI capped at 5.5% per year. p. 50 It also records that $540,000 of landowner funding originally reserved for Phase 2 of the water treatment plant expansion was used to cover Phase 1 cost overruns; if Phase 2 ever proceeds, the District must provide that $540,000 within 12 months of notification. As of June 30, 2024 the landowners had not moved forward and the funding remains with the District. p. 50

Insurance is through the Golden State Risk Management Authority pool: $350,000 GSRMA / $1,000,000 commercial for general and auto liability, up to $25,000,000 commercial for property damage, $10,000,000 for employee coverage, and statutory workers' compensation above a $300,000 GSRMA layer. p. 49

Navigation gotchas in the packet

Four small things that will cost you time if nobody warns you.

• Two page-numbering systems. Each audit report carries its own internal page numbers in the center footer (1, 2, 3…) and the packet's running number in the bottom-right corner. When the slides say "Note 7, pages 32 to 36," those are internal report pages, not packet pages. Use the bottom-right number for anything cited in this guide.
• Note numbers on the slides don't match the statements. The presentation refers to the pension plan as Note 7 and OPEB as Note 8 pp. 9–10, but in both the FY23 and FY24 draft statements pension is Note 8 pp. 41, 86 and OPEB is Note 9 pp. 44, 90. The required communications letter uses the statement numbering. p. 106
• A label appears to be transposed on one slide. The second Statement of Net Position slide lists liabilities and totals the column as "Total Assets $11,419 / $10,015." p. 6 The audited statements show that figure as total liabilities and deferred inflows, not assets. p. 21 Total assets are $48,489 thousand.
• Two pages are effectively blank — pages 141 and 159 — so a jump of one page in the middle of the memo isn't a missing exhibit.

The packet was revised on Aug 21

Two versions of the same packet circulated. The later one is longer, and the difference is substantive.

An earlier PDF of this packet runs 153 pages; the later PDF runs 158 pages. Both carry the same agenda page and the same posting note. The difference is entirely inside the auditor's opening presentation:

Questions worth asking

Each of these is answerable from the packet's own contents, and each is neutral on its face. Public comment comes at item 2, before the presentations.

1. When will the FY23 and FY24 audits be signed and issued?Every audit document in the packet is a draft with a blank date line. pp. 19, 57, 107, 111
2. What is the target date for completing the FY25 audit, and the FY26 audit?FY25 prep began end of July 2026 with four months of FY25 accounting still to be entered; FY26 bank reconciliations are about 30% done. pp. 140, 142
3. Will the Board see a schedule for finishing the developer-donated infrastructure inventory?Finding 2021-002 dates to 2020, references a transaction from 2007, and the auditor says the issue still exists. It is the sole reason for the qualified opinion. pp. 17, 59
4. When will the investment policy come to a Board agenda?Last updated 2016; annual Board review is required by the Government Code; District response was "No change." p. 111
5. What is the plan for the reserves carrying negative balances?The Water Capital Improvement Fee Reserve and Security Capital Improvement Fee Reserve are named; District response was "No comment." p. 111
6. Which specific reserves would the $2.6 million transfer draw from, and does the reserve policy permit it?The proposal appears once, in a staff summary paragraph, without a fund-level breakdown. p. 158
7. Is the $2.6 million a reimbursement of CIP spending already made from Banner, or a net reduction in capital reserves?Staff says CIP was paid from Banner without reimbursing transfers — which frames it as reimbursement — but the two readings have different implications for capital replacement capacity. p. 158
8. Will MD&A be included when the audits are issued?The auditor notes management omitted it. It is the narrative section residents can actually read. p. 19
9. How much of the $268,000 paid to Domenichelli & Associates, and the $270,484 in legal fees, will be reclassified to developer activity?Staff says both are under review for reclassification, which would move them out of ratepayer-funded operating expense. pp. 147–148
10. Will the FY27 budget be rebuilt for the lines that were structurally under-budgeted?Staff describes training, telecommunications, travel, OPEB, tools and supplies, and HR recruitment as under-budgeted rather than overspent. pp. 146–149
11. Will residential fee revenue be budgeted on invoices rather than connections going forward?Staff identifies this as the reason revenue came in at 96% of budget. p. 146
12. What explains the 7–8% average yields shown for CAMP and CA CLASS in May and June?Total investment earnings of $82,973 for the year suggest ordinary pool yields. pp. 150, 157
13. Is the Alameda rehab lift station work being properly capitalized as CIP?Staff flags it as needing reclassification out of repairs and maintenance. p. 147
14. Will a preventive maintenance and asset replacement schedule come back to this committee?Repairs and maintenance ran 268% of budget on largely reactive work. pp. 146–147, 150

Full page index

Type a topic to filter. Page numbers are the packet's own bottom-right numbers in the 158-page version.

Plain-English glossary

Terms used in this packet that mean something specific in government accounting.

Unmodified (clean) opinion

The auditor found the statements fairly presented with no exceptions.

Qualified (modified) opinion

Fairly presented except for one identified issue. Here, unverified developer-donated infrastructure in Water and Sewer.

Material weakness

An internal control gap serious enough that a material misstatement could go undetected. The most severe of the three finding levels; a "significant deficiency" is the middle level.

Net position

The government equivalent of equity: assets plus deferred outflows, minus liabilities and deferred inflows.

Unrestricted net position

The portion not tied up in capital assets or legally restricted. RMCSD's is negative, largely because pension and OPEB liabilities are counted here.

OPEB

Other Post-Employment Benefits — retiree health and similar benefits other than pension. RMCSD's net OPEB liability at June 30, 2024 was $2,636,958.

Operating vs. nonoperating

Operating is the day-to-day business of delivering water, sewer, drainage, solid waste and security. Nonoperating includes property taxes, interest, grants and capital contributions.

Donated / contributed infrastructure

Pipes, mains and facilities built by a developer and deeded to the District. Recorded as a non-cash capital contribution — it increases assets and net position without generating cash.

Custodial / fiduciary fund

Money the District holds on behalf of someone else. The CFD's bond funds sit here; the District is the agent, not the debtor.

Component unit

A legally separate entity for which the District's board is financially accountable — here, CFD 2014-1, audited separately in the same packet.

Mello-Roos / CFD

A Community Facilities District, formed under the 1982 Mello-Roos Act, that levies a special tax on parcels inside its boundary to repay bonds that funded infrastructure.

Restricted vs. unrestricted cash

Restricted funds are limited by law, bond covenant or Board policy to particular uses, typically capital. Unrestricted is available for operations. Which reserves are which is defined by the District's reserve policy — the document the auditor says doesn't currently match the ledger.

CAMP / CA CLASS

California Asset Management Program and California CLASS — pooled investment programs used by California local agencies. RMCSD holds most of its restricted cash in these.

MD&A

Management's Discussion and Analysis — a required narrative in which management explains its own financial results. Omitted from these draft statements.

Prop 218

The 1996 constitutional amendment governing how property-related fees such as water and sewer rates may be set and protested.

Reclassification ("reclass")

Moving an already-recorded amount from one account to another so it lands in the right category. Several FY26 figures in this packet are marked for reclassification.

Special meeting

A meeting called outside the regular schedule. Under the Brown Act it requires 24 hours' notice and the agenda may not be added to at the meeting.

Sources & links

Everything in this guide comes from the primary documents below. Read them yourself; the page numbers are all here.

• RMCSD — August 24, 2026 Finance Committee Special MeetingAgenda, packet, and (after the meeting) audio and minutes
• Special Finance Committee Agenda Packet, Aug 24, 2026 — 158 pp.Primary source for every page citation in this guide. Prepared by Rancho Murieta CSD; audit sections prepared by Richardson & Company, LLP.
• RMCSD — Board of Directors meetingsWhere audits and policies would return for Board action
• Rancho Murieta Community Services District15160 Jackson Road, Rancho Murieta, CA 95683 · 916-354-3700
• Ralph M. Brown Act — Gov. Code §54950 et seq.Special meeting notice, agenda posting, and public comment rules
• Governmental Accounting Standards BoardThe body whose standards require MD&A and govern these statements
• CalPERSSource of the pension and OPEB actuarial valuations cited in Notes 8 and 9
• California Asset Management Program (CAMP) · California CLASSThe two pooled investment programs holding the District's restricted cash
• Sacramento County Grand JuryPrior reports on the District provide context on the audit backlog