To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Trish Muller, CPA, Finance Director
Title
Presentation of the 2025 Annual Comprehensive Financial Report (ACFR) and 2025 Popular Annual Financial Report (PAFR)
Body
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Executive Summary
Colorado state law and the Town of Castle Rock Home Rule Charter require an annual audit of the Town’s financial statements. The goal of an audit is to provide reasonable assurance that the financial statements of the Town are presented in conformity with generally accepted accounting principles. An independent firm of licensed certified public accountants must perform the audit. In accordance with these requirements, staff submits the Town’s Annual Comprehensive Financial Report (ACFR) for the year ended December 31, 2025, for Council’s information and review (Attachment B).
Annual Audit Process
Eide Bailly, LLP issued an unmodified opinion on the Town’s financial statements for the year ended December 31, 2025. In other words, the Town’s financial statements appear fairly stated in all material respects, in accordance with generally accepted accounting principles (GAAP).
2025 was the first year Eide Bailly, LLP performed the financial audit for the Town of Castle Rock. The Town commends them on their thoroughness and their high level of professionalism.
The Uniform Guidance requires a Single Audit when federal expenditures exceed $1,000,000 during the fiscal year. Eide Bailly, LLP performed the Single Audit (Attachment C) for the Town for the year ended December 31, 2025.
Annual Comprehensive Financial Report (ACFR)
For the year ended December 31, 2025, the Town reported an increase in net position at the government-wide level.
The Town continued to experience growth in its major revenue sources during 2025. Sales tax revenue increased by 15% compared with the prior year; however, impact fee and use tax revenues experienced modest declines due to a reduction in building permit activity.
The Castle Rock Urban Renewal Authority and the Festival Park Commons General Improvement District are included as blended component units, and the Castle Rock Downtown Development Authority and Miller’s Landing Business Improvement District are included as discretely presented component units.
The Town elected not to record certain audit adjustments in the 2025 ACFR because they were determined to be immaterial, both individually and in the aggregate, to the financial statements as a whole. These adjustments are noted in the Governance Letter (Attachment A) in the Schedule of Uncorrected Misstatements.
Staff will submit the Annual Comprehensive Financial Report to the Government Finance Officers Association for consideration of the Certificate of Achievement for Excellence in Financial Reporting.
Report to Governance
As part of the 2025 financial statement audit, Eide Bailly, LLP reviewed the Town's internal control structure, as well as various policies and procedures. Auditors issue three levels of comments:
• Material Weaknesses - The most severe level of finding, indicating that internal controls may not be sufficient to prevent or detect material misstatements or fraud on a timely basis.
• Significant Deficiencies - Less severe than a material weakness but important enough to merit attention by those charged with governance.
• Advisory Comments - Recommendations intended to enhance existing controls, processes, or procedures.
Eide Bailly, LLP identified a Material Weakness related to year-end financial statement preparation and the classification of interfund activity across multiple funds. Town staff identified the matter prior to the 2025 audit and communicated it to Eide Bailly, LLP. The matter originated in the prior year's audited financial statements. The resulting corrections have been reflected, as applicable, through a restatement of beginning net position or fund balance in the 2025 financial statements. This matter is discussed in the Governance Letter (Attachment A).
Eide Bailly, LLP also identified a Significant Deficiency in internal control over compliance as a result of their testing of federal funds, specifically the reporting for the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) passed through to the Town from Douglas County. The required reporting did not include evidence of review and approval, so the auditors could not attest to the existence of the internal control. Town management has begun to document the review and approval of the reporting required under the grant.
Popular Annual Financial Report (PAFR)
The PAFR (Attachment E) provides an overview of the Town’s financial position as reported in the 2025 ACFR.
Finance staff prepares this report as a concise and accessible summary of the Town's financial condition for residents and other interested stakeholders.
Staff recognizes the Finance Department team for its dedication and professionalism in preparing the Town’s financial statements and supporting the annual audit process.
Attachments
Attachment A: 2025 Governance Letter
Attachment B: 2025 Annual Comprehensive Financial Report (ACFR)
Attachment C: 2025 Single Audit Report
Attachment D: 2025 Auditors Report
Attachment E: 2025 Popular Annual Financial Report (PAFR)
The Annual Comprehensive Financial Report (ACFR) and Popular Annual Financial Report (PAFR) for the year ended December 31, 2025, will be available on the Town’s website at: <http://CRgov.com/FinancialReports>