Napa City

CITY OF NAPA Final Audit Report SPECIAL GAS TAX STREET FUND AND ROAD MAINTENANCE AND REHABILITATION PROGRAM July 1, 2023, through June 30, 2024 M ALIA M. C OHEN C S C ALIFORNIA TATE ONTROLLER October 2025 S25-GTA-0011 STATE CONTROLLER’S OFFICE | DIVISION OF AUDITS Post Office Box 942850 | Sacramento, CA 94250 Sacramento Office: 3301 C Street, Suite 700 | Sacramento, CA 95816 | 916-324-8907 Monterey Park Office: 901 Corporate Center Drive, Suite 200 | Monterey Park, CA 91754 | 323-981-6802 www.sco.ca.gov MALIA M. COHEN CALIFORNIA STATE CONTROLLER October 27, 2025 Mr. Paul Phangureh, Deputy Finance Director City of Napa 955 School Street Napa, CA 94559 Dear Mr. Phangureh: The State Controller’s Office audited the City of Napa’s (the city) Special Gas Tax Street Fund and the city’s Road Maintenance and Rehabilitation Program (RMRP) for the period of July 1, 2023, through June 30, 2024. Our audit found that the city accounted for and expended its Special Gas Tax Street Fund and its RMRP funds in compliance with requirements. Additionally, the city complied with its RMRP maintenance-of-effort requirements. If you have any questions regarding this report, please contact Efren Loste, Chief, Local Government Audits Bureau, by telephone at 916-324-7226 or email at eloste@sco.ca.gov. Thank you. Sincerely, Original signed by Kimberly A. Tarvin, CPA Chief, Division of Audits MAILING ADDRESS P.O. Box 942850, Sacramento, CA 94250 SACRAMENTO 3301 C Street, Suite 700, Sacramento, CA 95816 | 916.324.8907 LOS ANGELES 901 Corporate Center Drive, Suite 200, Monterey Park, CA 91754 | 323.981.6802 Mr. Paul Phangureh October 27, 2025 Page 2 of 2 Copy: The Honorable Scott Sedgley, Mayor City of Napa Steve Potter, City Manager City of Napa MAILING ADDRESS P.O. Box 942850, Sacramento, CA 94250 SACRAMENTO 3301 C Street, Suite 700, Sacramento, CA 95816 | 916.324.8907 LOS ANGELES 901 Corporate Center Drive, Suite 200, Monterey Park, CA 91754 | 323.981.6802 Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 CONTENTS SUMMARY 1 BACKGROUND 1 AUDIT AUTHORITY 2 OBJECTIVES, SCOPE, AND METHODOLOGY 2 CONCLUSION 5 FOLLOW-UP ON PRIOR AUDIT FINDINGS 5 VIEWS OF RESPONSIBLE OFFICIALS 5 RESTRICTED USE 6 SCHEDULE—RECONCILIATION OF FUND BALANCE 7 Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 SUMMARY The State Controller’s Office (SCO) audited the City of Napa’s (the city) Special Gas Tax Street Fund and the city’s Road Maintenance and Rehabilitation Program (RMRP) for the period of July 1, 2023, through June 30, 2024. Our audit found that the city accounted for and expended its Special Gas Tax Street Fund and RMRP funds in compliance with requirements. Additionally, the city complied with its RMRP maintenance-of-effort (MOE) requirements. BACKGROUND The State apportions funds monthly from the Highway Users Tax Account (HUTA) in the Transportation Tax Fund to cities and counties for the construction, maintenance, and operation of local streets and roads. The highway users taxes derive from state taxes on the sale of motor vehicle fuels. In accordance with Streets and Highways Code, cities must establish individual Special Gas Tax Street Funds for the deposit of their HUTA apportionments. Additionally, cities must expend their HUTA apportionments only for street- related purposes in accordance with Article XIX of the California Constitution and Streets and Highways Code. Senate Bill 1 (Chapter 5, Statutes of 2017), known as the Road Repair and Accountability Act of 2017, created the RMRP to address deferred maintenance on the state highway system and the local street and road systems. RMRP funds from the Road Maintenance and Rehabilitation Account of the State Transportation Fund are apportioned by formula to eligible cities and counties pursuant to Streets and Highways Code (SHC) section 2032. Article XIX of the California Constitution and SHC sections 2030 through 2038 provide the requirements for RMRP funding. -1- Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 AUDIT AUTHORITY We conducted this audit in accordance with Government Code section 12410, which provides the SCO with general authority to audit the disbursement of state money for correctness, legality, and sufficient provisions of law for payment. OBJECTIVES, SCOPE, AND METHODOLOGY We audited the city’s Special Gas Tax Street Fund and the city’s RMRP for the period of July 1, 2023, through June 30, 2024. Our audit objectives were to determine whether the city: • Accounted for and expended the Special Gas Tax Street Fund and RMRP funds in compliance with Article XIX of the California Constitution, Streets and Highways Code, and Government Code; and • Was in compliance with the RMRP MOE requirements. To achieve our objectives, we completed the following procedures: • We obtained an understanding and evaluated the effectiveness of the city’s internal controls that are significant to the audit objectives by reviewing policies and procedures, interviewing key personnel, completing an internal control questionnaire, reviewing the city’s organization chart, and inspecting documents and records. • We assessed the reliability of computer-processed data by reviewing existing information about the data and the system that produced it; by interviewing city officials knowledgeable about the data; and by tracing data to source documents, based on auditor judgment and non-statistical sampling. We determined that the data was sufficiently reliable for the purposes of achieving our audit objectives. -2- Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 • We conducted a risk assessment to determine the nature, timing, and extent of substantive testing. • We performed analytical procedures to identify and explain the existence of unusual or unexpected account balances. • We verified the accuracy of fund balances by performing a fund balance reconciliation for the period of July 1, 2004, through June 30, 2024; by recalculating the Special Gas Tax Street Fund trial balance for the period of July 1, 2023, through June 30, 2024; and by recalculating the RMRP trial balance for the period of July 1, 2017, through June 30, 2024. • We verified that the components of and changes to fund balances were properly computed, described, classified, and disclosed by scheduling and analyzing account balances. • We reconciled the revenues recorded in the city’s ledger to the balance reported in the SCO’s apportionment schedule for the period of July 1, 2023, through June 30, 2024, to determine whether the city completely accounted for HUTA and Road Maintenance and Rehabilitation Account apportionments that it received. • We reviewed the city’s Special Gas Tax Street Fund and RMRP assets to ensure that they were properly recorded and identified. • We analyzed the system used to allocate interest and determined whether the interest revenue allocated to the Special Gas Tax Street Fund and the RMRP was fair and equitable by interviewing key personnel and recalculating all interest allocations for the audit period. • We reviewed the fund cash and receivables accounts for unauthorized borrowing to determine whether unexpended funds were available for future street-related expenditures and protected from impairment. -3- Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 • We compared the city’s RMRP project list with the list submitted to the California Transportation Commission to verify that actual RMRP expenditures were for RMRP projects approved by the California Transportation Commission. • We verified that the city is in compliance with RMRP MOE requirements by recalculating the city’s MOE contributions and judgmentally selecting non-statistical samples of transactions to ensure that the MOE expenditures were street-related, properly supported, and incurred in the proper period. • We verified that the expenditures incurred during the audit period were supported by proper documentation and eligible in accordance with the applicable criteria, by testing all expenditure transactions that were equal to or greater than the significant item amount (calculated based on materiality threshold), and judgmentally selecting non-statistical samples of other transactions for the following categories. No errors were found: o Special Gas Tax Street Fund ▪ Transfers – We tested $364,737 of $1,453,000. o RMRP ▪ Transfers – We tested $1,147,688 of $1,971,525. We did not audit the city’s financial statements. We limited our audit scope to planning and performing audit procedures necessary to obtain reasonable assurance that the city accounted for and expended its Special Gas Tax Street Fund and its RMRP funds in accordance with the criteria. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. -4- Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 CONCLUSION Our audit found that the city accounted for and expended its Special Gas Tax Street Fund and its RMRP funds in compliance with Article XIX of the California Constitution, Streets and Highways Code, and Government Code for the period of July 1, 2023, through June 30, 2024. Additionally, the city complied with its RMRP MOE requirements. FOLLOW-UP ON PRIOR AUDIT FINDINGS Our prior audit report on the city for the period of July 1, 2003, through June 30, 2004, issued on April 12, 2006, disclosed no findings. VIEWS OF RESPONSIBLE OFFICIALS We discussed the audit results with the city’s representative during an exit conference conducted on September 15, 2025. At the exit conference, the city’s representative agreed with the audit results. -5- Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 RESTRICTED USE This report is solely for the information and use of the city and the SCO; it is not intended to be, and should not be, used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record and is available on the SCO website at www.sco.ca.gov. Original signed by Kimberly A. Tarvin, CPA Chief, Division of Audits October 27, 2025 -6- Office of the State Controller | City of Napa Special Gas Tax Street Fund and RMRP Final Audit Report October 2025 SCHEDULE—RECONCILIATION OF FUND BALANCE July 1, 2023, through June 30, 2024 Cities receive apportionments from the State HUTA, pursuant to SHC sections 2103, 2105, 2106, 2107, and 2107.5. The basis of the apportionments varies, but the funds may be used for any street-related purpose. SHC section 2107.5 restricts apportionments to administration and engineering expenditures, except for cities with populations of fewer than 10,000 inhabitants. Those cities may use the funds for rights-of-way and for the construction of street systems. Cities must establish individual Special Gas Tax Street Funds for the deposit of their HUTA apportionments. As participants in the RMRP, cities also receive apportionments from the Road Maintenance and Rehabilitation Account, pursuant to SHC section 2032(h). These RMRP funds may be used for basic road maintenance, rehabilitation, and critical safety projects on local street and road systems. SHC section 2036 establishes the MOE requirements that cities must meet annually in order to remain eligible for an allocation or apportionment of funds. The city’s required MOE contribution is $3,786,272. The following table shows the beginning and ending balances for the city’s Special Gas Tax Street Fund and RMRP: Special Gas Tax Road Maintenance Total Reconciliation of Fund Balance Street Fund Rehabilitation Account Amount Beginning fund balance, per city $4,874,781 $823,172 $5,697,953 Revenues 2,085,823 2,022,402 4,108,225 Total funds available 6,960,604 2,845,574 9,806,178 Less: Expenditures 1,457,565 1,987,059 3,444,624 Ending fund balance, per city 5,503,039 858,515 6,361,554 Audit adjustment 0 0 0 Ending fund balance, per audit $5,503,039 $858,515 $6,361,554 End of Report -7-