1. Port of Redwood City Presentation to The Board of Commissioners Port of Redwood City Presentation to The Board of Commissioners December 12, 2012 Presented by: Ahmed Badawi, CPA Partner

2. Badawi & Associates Audit of the Port of Redwood City 1

3. Agenda About the Firm Engagement Team Deliverables and Scope of the Audit Areas of Primary Emphasis Auditors Report and Financial Statements Required Communications New Accounting Standards Conclusion & Discussion/Questions 2

4. About the Firm Badawi & Associates Formed in February 2012 Located in Oakland, CA Specialized in auditing governmental agencies, including cities, counties, special districts and transportation agencies Over 15 years of auditing governmental agencies 3

5. Engagement Team 4

6. Engagement Partner Ahmed Badawi, CPA Engagement Partner Ahmed Badawi, CPA Quality Control Partner Jack Georger, CPA Quality Control Partner Jack Georger, CPA Staff John Neal Staff John Neal Senior Cathy Zhai Senior Cathy Zhai Manager Jennifer, Ye CPA Manager Jennifer, Ye CPA Information Technology Robert Wucher CISA, CISM, CRISC Information Technology Robert Wucher CISA, CISM, CRISC 5

7. Deliverables and Scope of the Audit Report of Independent Auditors on Port of Redwood City Basic Financial Statements 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 Communications With Those Charged With Governance Letter used to summarize communication of various significant matters to those charged with governance. Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 (To be issued) 6

8. Areas of Primary Audit Emphasis Revenues & Receivables: Improper revenue recognitions Test receivables & test revenues/billings Review the allowance for doubtful accounts: ratio analysis & review the aged trial balance with subsequent collections, credit memos, and write-offs Capital assets: repair/maintenance expenditures may be capitalized Test of additions to capital assets Test of significant deletions to capital assets 7

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10. Auditors Report Unqualified opinion Audit performed in accordance with Generally Accepted Auditing Standards and Government Auditing Standards Financial statements are fairly presented in all material respects Significant accounting policies have been consistently applied Estimates are reasonable Disclosures are properly reflected in the financial statements 9

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12. 11 Port of Redwood City

13. 12 Port of Redwood City

14. 13 Port of Redwood City

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16. Port of Redwood City 15

17. Port of Redwood City Expense Coverage 16

18. Other Financial Information Port’s Annual Pension Cost 17 The Port’s retirement plan is part of the City of Redwood City’s retirement plan. Information on the funding progress of this plan can be obtained from the City’s Comprehensive Annual Financial Report.

19. Other Financial Information Port’s Annual Pension Contribution Rates 18

20. Other Financial Information Port’s Annual OPEB Cost 21

21. Other Financial Information Port’s Annual OPEB Contribution Rate 22

22. Other Financial Information 23

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24. Required Communications Our Responsibility Under U.S GAAS Expression of an opinion on whether financial statements are fairly stated in accordance with U.S GAAP Evaluate internal control over financial reporting Evaluate compliance with laws, contract and grants Evaluate the tone at the top Ensure financial statements are clear and transparent Communicate with the governing body 25

25. Required Communications Management Responsibility Management is responsible for the financial statements Establish and maintain internal control over financial reporting Making all financial records available to us Adjust the financial statements to correct material misstatements Establish internal control to prevent and detect fraud Inform us of all known and suspected fraud Comply with laws and regulations Take correction action on audit findings 26

26. Required Communications Independence Timing of the Audit It is our responsibility to maintain independence We will maintain our independence by strict adherence to the AICPA and the Board of Accountancy rules and regulations No other services performed that could affect our independence Audit was performed in the time frame communicated to the Port in our engagement letter 27

27. Required Communications Significant Accounting Policies and Unusual Transactions Management Judgment and Accounting Estimates There were no changes to significant accounting policies for the year ended June 30, 2012 Significant management estimates impacting the financial statements include the following: Useful lives of Capital Assets Valuation of Investments OPEB Obligation 28

28. Required Communications Required Communications Sensitive Disclosures Difficulties Encountered in Performing the Audit The most sensitive disclosures affecting the Port’s financial statements are as follow: Summary of Significant Accounting Policies Cash and Investments Capital Assets Pension and OPEB No difficulties were encountered during our audits 29

29. Required Communications Required Communications Significant Audit Adjustments and Unadjusted Differences Considered by Management to be Immaterial Potential Effect on the Financial Statements of Any Significant Risks and Exposures There were no adjustments and reclassifying entries during the course of the audit. No significant risks or exposures were identified. Legal matters and potential liabilities are disclosed in the financial statements 30

30. Required Communications Required Communications Disagreement with Management Deficiencies in Internal Control We are pleased to report that there were no disagreements with management No significant or material weaknesses identified during our audits 31

31. Required Communications Required Communications Representations Requested of Management Management Consultation with Other Accountants Management representation letter have been provided to management for review and signature (see attached) We are not aware of any significant accounting or auditing matters for which management consulted with other accountants 32

32. Required Communications Required Communications Other Material Written Communications Material Uncertainties Related to Events and Conditions Fraud and Illegal Acts Other than the engagement letter and management representation letter, there have been no other significant communications There were no material uncertainties relating to events and conditions We have not become aware of any instances of fraud or illegal acts 33

33. New Accounting Standards 2012 Statement 57-Agent OPEB Plans Statement 64-Derivative Terminations 2013 Statement 60-Service Concession Arrangements Statement 61-Reporting Entity Statement 62-Codification of AICPA and FASB Statement 63-Deferrals Presentation 2014 Statement 65-Assets and Liabilities— Reclassification and Recognition Statement 66-Technical Corrections Statement 67-Financial Reporting for Pension Plans 2015 Statement 68-Accounting and Financial Reporting for Pensions 34

34. Questions Ahmed M. Badawi abadawi@b-acpa.com 35

35. Thank You For Allowing Us to Provide Audit Services to the Port of Redwood City 36