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2007 RCDC Financial Report(D ~J (D ID G O O 4) ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION FINANCIAL STATEMENTS Fiscal Year ended June 30, 2007 Conrad Government Services Division Mayer Hoffman McCann P.C. An Independent CPA Firm 4) • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSK 0 FINANCIAL STATEMENTS Fiscal Year ended June 30, 2007 0 TABLE OF CONTENTS Page 0 INDEPENDENT AUDITORS' REPORT FINANCIAL STATEMENTS Government-wide Financial Statements r Statement of Net Assets 3 Statement of Activities 4 Fund Financial Statements Balance Sheet - Governmental Funds 5 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 6 Statement of Revenues, Expenditures and Changes in Fund Balances-Governmental Funds 7 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 8 Notes to Financial Statements 9 REQUIRED SUPPLEMENTARY INFORMATION / Low-Moderate Income Housing Set-Aside Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 23 Rosemead Housing Development Corporation Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 24 Notes to Required Supplementary Information 25 Report on Compliance and Other Matters and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 26 Ui 0 Mayer Hoffman McCann P.C. An Independent CPA Firm Conrad Government Services Division 2301 Dupont Drive, Suite 200 Irvine, California 92612 949-4742020 ph 949-263-5520 fx www.mhm-pc.com 0 Board of Directors Rosemead Community Development Commission Rosemead, California • INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the governmental activities and each major fund of the Rosemead Community Development Commission (the Commission), a blended component unit of the City of Rosemead, California, as of and for the year ended June 30, 2007, which collectively comprise the Commission's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Commission's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit r also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Commission as of June 30, 2007, and the respective changes in financial position thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The Commission has not presented Management's Discussion and Analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. The information identified in the accompanying table of contents as required supplementary information is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 0 • • Board of Directors Rosemead Community Page Two Development Commission In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2007 on our consideration of the Commission's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is 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 internal control over the financial reporting or on compliance. That report is an integral part of an audit performed in accordance with • Government Auditing Standards and should be considered in assessing the results of our audit. • • C Irvine, California December 20, 2007 0 • • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Statement of Net Assets June 30, 2007 Assets • Cash and investments (note 2) Receivables: Accounts Accrued interest Deferred charges Capital assets, net (note 5) • Total assets Liabilities and Net Assets Liabilities: Accounts payable Deposits payable Accrued interest payable Noncurrent liabilities (note 5): Due within one year • Due in more than one year Total liabilities Net assets: • Invested in capital assets, net of related debt Restricted for: Low-moderate income housing Unrestricted Total net assets :7 9 See accompanying notes to the basic financial statements. $ 13,635,307 178,989 158,335 1,527,568 18.289.537 33,789,736 122,017 35,792 397,210 1,124,802 36,627,226 38,307,047 1,111,574 (5, 628, 885) $ (4,517,311) 3 • • • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Statement of Activities Fiscal Year ended June 30, 2007 Program Revenues Operating Capital Charges for Contributions Contributions Governmental Expenses Services and Grants and Grants Activities Governmental activities: Community development Interest expense Total governmental activities • • • 40 $ 2,882,247 1,721,127 $ 4,603,374 General revenues: Taxes: Property taxes Investment income Other general revenues Total general revenues and transfers Change in net assets Net assets at beginning of year, as restated (note 8) Net assets at end of year See accompanying notes to the basic financial statements. (2,882,247) (1,721,127) (4,603,374) 4,029,714 902,775 352 4,932,841 329,467 (4,846,778) $ (4,517,311) O 4 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Balance Sheet - Governmental Funds June 30, 2007 49 . Assets: Cash and investments Receivables: Accounts Accrued interest Advances to other funds (note 4) Total assets Liabilities and Fund Balance Liabilities: Accounts payable Deposits payable Advances from other funds (note 4) Total liabilities Fund balance: Reserved for: Advances to other funds Debt service requirements Unreserved, reported in: Special revenue funds O Debt service funds Capital projects funds Total fund balance Total liabilities and fund balance 0 0 Low-Moderate Rosemead Income Housing Housing Development Debt Capital Set-Aside Corporation Service Projects Total $ 1,111,574 381,948 552 12,141,233 13,635,307 - 14,180 - 164,809 178,989 - - 158,335 158,335 4,947,087 4,947,087 $ 6,058,661 396,128 552 12,464,377 18,919,718 $ - 2,181 35,792 37,973 119,836 122,017 - 35,792 4,947,087 4,947,087 5,066,923 5,104,896 4,947,087 - 4,947,087 - - 1,148,305 1,148,305 1,111,574 358,155 - - 1,469,729 - - 552 - 552 - 6,249,149 6,249,149 6,058,661 358,155 552 7,397,454 13,814,822 $ 6,058,661 396,128 552 12,464,377 18,919,718 See accompanying notes to the basic financial statements. G 5 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION • Governmental Funds Reconcilation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2007 • • 0 Fund balances of governmental funds Amounts reported for governmental activities in the statement of net assets are different because: Capital assets, net of depreciation, have not been included as financial resouces in governmental fund activity. Capital assets Accumulated depreciation Long-term debt has not been included in the governmental fund activity. Bonds payable Q Cost associated with the issuance of debt are capitalized and amortized in the statement of net assets and expensed in the governmental funds. Deferred charges Accrued interest payable for the current portion of interest due on U bonds payable has not been reported in the governmental funds. Net assets of governmental activities A • 0 See accompanying notes to the basic financial statements. $ 13,814,822 23,079,940 (4,790,403) (37,752,028) 1,527,568 (397,210) $ (4,517,311) 6 0 0 0 0 0 0 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Fiscal Year ended June 30, 2007 Revenues: Taxes Rental income Investment income Other Total revenues Expenditures: Current: General government Public works Community services Capital outlay Debt service: Principal Interest and fiscal charges Payment to bond escrow agent Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Transfers to the City of Rosemead Proceeds of bonds Payment to bond escrow agent Total other financing sources (uses) Change in fund balances Fund balances at beginning of year, as restated (note 8) Fund balances at end of year Low-Moderate Rosemead Income Housing Housing Development Debt Capital Set-Aside Corporation Service Projects Total $ - 4,029,714 4,029,714 - 409,520 - 409,520 45,385 - 441,824 487,209 - 6,046 352 6,398 45,385 415,566 4,471,890 4,932,841 316,849 - 1,480,714 1,797,563 - - 179,810 179,810 - - 80,367 80,367 - - 585,862 585,862 - 780,000 - 780,000 - 1,505,781 1,006,944 2,512,725 1,323,238 1,323,238 316,849 3,609,019 3,333,697 7,259,565 45,385 98,717 (3,609,019) 1,138,193 (2,326,724) 1,019,082 401,600 24,342,791 25,763,473 (50,000) - - (25,713,473) (25,763,473) (351,600) - - (351,600) - 24,230,000 24,230,000 (22,075,305) (22,075,305) 969,082 50,000 2,267,486 (1,483,473) 1,803,095 1,014,467 148,717 (1,341,533) (345,280) (523,629) 5,044,194 209,438 1,342,085 7,742,734 14,338,451 $ 6,058,661 358,155 552 7,397,454 13,814,822 See accompanying notes to the basic financial statements. a 7 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Governmental Funds Reconcilation of the Statement of Revenues, Expenditures, • and Changes in Fund Balances of Governmental Funds to the Statement of Activities Fiscal Year ended June 30, 2007 Net changes in fund balances of governmental funds $ (523,629) Amounts reported for governmental activities in the statement of activities is different because: r Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlay 430,994 Depreciation expense (318,039) Proceeds from the issuance of debt is reported as other financing sources in governmental funds. The issuance of bonds increases liabilities in the statement • of net assets, but does not result in an increase in net assets in the statement of activities. (24,230,000) Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. 23,894,802 The statement of net assets includes accrued interest on long term debt. 98,094 • • • Cost associated with the issuance of debt are capitalized and amortized in the statement of net assets and expensed in the governmental funds. 977,245 Change in net assets of governmental activities $ 329,467 See accompanying notes to the basic financial statements. 0 s • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION • NOTES TO FINANCIAL STATEMENTS Fiscal Year ended June 30, 2007 • • a • (1) Summary of Significant Accounting Policies Nature of operations - The Rosemead Redevelopment Agency was established in June 1972 pursuant to State of California Health and Safety Code Section 33000 entitled Community Redevelopment Law. The Agency's name was changed to the Rosemead Community Development Commission (the Commission) in January 2002. Its purpose is to finance street, park and utility improvements. It also acquires and constructs major capital facilities all within the Rosemead Project Area No. 1. The Commission is a blended component unit of the City of Rosemead, California, (the City) and is included in the basic financial statements of the City. The financial statements contain information for the Commission only. The City's financial statements can be obtained from the Finance Department of the City. Description and scope of the reporting entity - Governmental Accounting Standards Board (GASB) Statement No. 14. The Financial Reporting Entity, defines the reporting entity as the primary government and those component units for which the primary government is, or has the potential to be, financially accountable. Financial accountability is defined as appointment of a voting majority of the component unit's Board and either (a) the primary government has the ability to impose its will or (b) the possibility that the component unit will provide a financial benefit to, or impose a financial burden on, the primary government. Based upon the above criteria, the Rosemead Housing Development Corporation (the Corporation), is a blended component unit of the Commission as the Commission's governing board serves as the governing board of the Corporation. Since the City Council of the City also serves as the Board of Directors of the Commission, the City, in effect, has the ability to influence and control operations. 111110 Therefore, the City has oversight responsibility for the Commission. Accordingly, the Commission is a blended component unit of the City. Basis of Accounting and Measurement Focus O The basic financial statements of the Commission are composed of the following: • Government-wide financial statements • Fund financial statements V . Notes to the basic financial statements 0 9 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION f NOTES TO FINANCIAL STATEMENTS • (1) Summary of Significant Accounting Policies (Continued) Government-wide Financial Statements - Government-wide financial statements display information about the reporting government as a whole, except for its fiduciary activities. These statements include separate columns for the governmental and business-type activities of the primary government (including its blended component units), as well as its discreetly presented component units. The Community Development Commission of the City of Rosemead has no business-type activities or discretely presented component units. Eliminations have been made in the Statement of Activities so that certain allocated expenses are recorded only once (by the function to which they were allocated). However, general government expenses have not been allocated as indirect expenses to the various functions of the Commission. O Government-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government-wide financial statements. Basis of accounting refers to when revenues and expenditures are • recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets, and liabilities resulting from nonexchange transaction are recognized in accordance with the requirements of GASB • Statement No. 33. Program revenues include charges for services and payments made by parties outside of the reporting government's citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as expenditure. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than as other financing source. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reductiori of the related liability, rather than as an U expenditure. j Fund Financial Statements - The underlying accounting system of the Commission is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, Q revenues and expenditures or expenses, has appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by whilch spending activities are controlled 10 0 0 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS 4 (1) Summary of Significant Accounting Policies (Continued) Fund financial statements for the primary government's governmental, proprietary, and fiduciary funds are presented after the government-wide financial statements. These statements display information about major funds individually and nonmajor funds in the aggregate for governmental and enterprise funds. Fiduciary statements include financial information for fiduciary funds and similar component units. Fiduciary funds primarily represent assets held by the Commission in a custodial capacity for other individuals or organizations. The Commission has no enterprise funds or fiduciary funds. Governmental Funds - In the fund financial statements, governmental funds and agency funds are presented using the modified-accrual basis of accounting. Their ! revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The Commission uses a sixty day availability period. Revenue recognition is subject to the measurable and availability criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed non-exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government-mandated and voluntary non- exchange transactions are recognized as revenues when all applicable eligibility requirements have been met. ! In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Non-current portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered "available spendable resources," since they do not represent net current assets. Recognition of governmental fund type revenues represented by noncurrent receivables are deferred until they become current receivables. Noncurrent portions of other long-term receivables are offset by fund balance reserve accounts. S 11 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION • NOTES TO FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (Continued) Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as r governmental fund type expenditures or fund liabilities. • Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as an other financing source rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures. When both restricted and unrestricted resources are combined in a fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources. Property Taxes - Real property taxes are levied for the period from July 1 to June 30 against property owners of record on March 1. The taxes are due in two installments, on December 10 and April 10, and become delinquent after December 10 and April 10, respectively. Under the provisions of NCGA Interpretation 3, property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided it is collected within 60 days of the end of the fiscal year in the fund financial statements. Major Funds - The Commission reports the following major governmental funds: The Low-Moderate Income Housing Set-Aside Fund is used to account for the 20% of gross property tax increment revenue received by the Commission to fund future projects involving the replacement or rehabilitation of low- and moderate- income housing within City limits. The Rosemead Housing Development Corporation (the Corporation) is used to account for the construction and financing of low- and moderate-income housing. The Debt Service Fund is used to account for the accumulation of resources for • the payment of principal, interest and related costs associated with all long-term debt of the Commission. The Capital Projects Fund is used to account for the financial resources to be used for the improvement and rehabilitation of the community redevelopment project areas and acquisition or construction of major capital facilities within the Commission. 0 12 • • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS • (1) Summary of Significant Accounting Policies (Continued) Cash and investments - Cash includes amounts in demand and time deposits. Investments are reported in the accompanying balance sheet at fair value, except for certain money market contracts that are reported at cost because they are not transferable and they have terms that are not affected by changes in market interest • rates. Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year. Investment income includes interest earnings, changes in fair value and any gains or losses realized upon the liquidation, maturity or • sale of investments. Capital assets - Capital assets, which include land, buildings, equipment and infrastructure assets (e.g., roads, bridges, traffic signals and similar items), are reported in the government-wide financial statements. Capital assets are defined by the • Commission as assets with an initial individual cost of more than $500 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. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of an asset or • materially extend an asset's useful life are not capitalized. Construction in progress costs are transferred to their respective fixed asset category upon completion. Depreciation is charged to operations using the straight-line method based on the estimated useful life of an asset. The estimated useful lives of depreciable assets are as . follows: Years Buildings 50 Improvements other than buildings 15 • Furniture and office equipment 7 Streets 30 Sidewalks 40 Vehicles 5 0 • 13 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION • C 0 NOTES TO FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (Continued) Long-tern obligations - Long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities statement of net assets. Bond premiums, discounts and issuance costs are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums, discounts and issuance costs during the current period, the face amount of debt issued • is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund equity - In the fund financial statements, governmental funds report reservations of fund balances for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balances represent tentative management plans and are subject to change. (2) Cash and Investments Cash and investments as of June 30, 2007 consist of the following: Deposits $ 5,734,841 Investments 7.900.466 Total cash and investments 13.635.307 Investments Authorized by the California Government Code and the City's Investment Policy - The table below identifies the investment types that are authorized for the City by the California Government Code and the City's investment policy. The table also identifies certain provisions of the California Government Code (or the City's • investment policy, if more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy. 0 • 14 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION e • NOTES TO FINANCIAL STATEMENTS (2) Cash and Investments (Continued) Authorized by Maximum Maximum Investment Types Investment Maximum Percentage Investment Authorized by State Law Policy Maturi * of Portfolio* In One Issuer* • Local Agency Bonds No 5 years None None U.S. Treasury Obligations Yes 5 years None None U.S. Agency Securities Yes 5 years None None Banker's Acceptances Yes 180 days 40% 30% Commercial Paper Yes 270 days 25% 10% Negotiable Certificates of Deposit Yes 1 year 30% None • Repurchase Agreements No 1 year None None Reverse Repurchase Agreements No 92 days 20% of base value None Medium-Term Notes Yes 5 years 10% None Mutual Funds Yes N/A 20% 10% Money Market Mutual Funds Yes N/A 20% 10% Mortgage Pass-Through Securities No 5 years 20% None • County Pooled Investment Funds No N/A None None Local Agency Investment Fund Yes N/A None None JPA Pools (other investment pools) No N/A None None * Based on state law requirements or investment policy requirements, whichever is more • restrictive. Investments Authorized by Debt Agreements - Investment of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by bond • trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity Allowed In One Issuer • Local Agency Bonds None None None U.S. Treasury Obligations None None None U.S. Agency Securities None None None Banker's Acceptances 1 year None None Commercial Paper 1 year None 10% • Repurchase Agreements 30 days None None Money Market Mutual Funds N/A 20% 10% Local Agency Investment Fund N/A None None Investment Agreements N/A None None Certificates of Deposits 1 year None None O 15 • 0 • • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS (2) Cash and Investments (Continued) Disclosures Relating to Interest Rate Risk - Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Agency manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the Agency's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the Agency's investments by maturity: Remainina Maturina (in Months) O Investment Type State investment pool Held by bond trustee: Repurchase agreement • Total 12 Months 13 to 24 25 to 60 More Than Or Less Months Months 60 Months $6,752.161 6,752,161 1,148.305 1,148.305 $7.900.466 Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a 0 nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City's investment policy, or debt agreements, and the actual rating as of year end for each investment type. Minimum Exempt Rating as of Year End O Legal From Not Investment Type Ratina Disclosure AAA Aa Rated State's investment pool $6,752,161 N/A - 6,752,161 Held by bond trustee: Repurchase agreement 1,148.305 N/A 1,148.305 - Total 7.900.466 148.305 6152.161 0 16 0 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS 0 (2) Cash and Investments (Continued) Concentration of Credit Risk - The investment policy contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or more of total Agency investments are as follows: Issuer InvestmentType Reported Amount AIG Match Funding Corp Repurchase agreement $ 1,148,305 0 Custodial Credit Risk - Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be O able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a O depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure Agency deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. 0 For investments identified herein as held by bond trustee, the bond trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government. Investment in State Investment Pool - The Agency is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the Agency's investment in this pool is reported in the accompanying financial statements at amounts based upon the Agency's pro-rata share of the fair value provided by LAW for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. 0 17 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION O O O O NOTES TO FINANCIAL STATEMENTS (3) Operating Lease The Corporation entered into a 55-year lease agreement with the City for the use of the Angelus Senior Housing facility for $60,000 annually, expiring June 2047. Total lease commitments remaining are $2,400,000 for the Angelus Senior Housing facility at June 30, 2007. The Corporation also entered into a 55-year lease agreement with the City for use of the Garvey Senior Housing facility for $72,000 annually, expiring November 2057. Total lease commitments remaining are $3,630,000 for the Garvey Senior Housing facility at June 30, 2007. The Corporation paid $60,000 and $72,000 in lease payments to the City during the year ended June 30, 2007 for the Angelus and Garvey Senior Housing facilities, respectively. (4) Advances To/From Other Funds Under State law, the Commission is required to set aside a portion of its property tax increment revenue for low- and moderate-income housing. The Commission has made O findings that, for the years ended June 30, 1986 through 1991, it was allowed to defer funding of the set-aside. The set-aside amounts incurred during the fiscal years ended June 30, 1994, 1995 and 1996 were also deferred until the fiscal year ending June 30, 2023, as provided by the Commission's adoption of the housing deficit repayment plan. As of June 30, 2007, the accumulated set-aside amount not yet funded was approximately $4,947,000. As required by law, the Commission devised a plan to fund O the accumulating amount. (5) Capital Assets O Capital asset activity was as follows for the year ended June 30, 2007: Balance at Balance at June 30, 2006" Increases Decreases June 30, 2007 Governmental activities: Capital assets not being O depreciated: Land $ 2,410,308 - 2,410,308 Construction in progress 793,221 430,994 1,224,215 Total capital assets, not 0 being depreciated 3,203,529 430,994 3,634,523 0 18 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS • (5) Capital Assets, (Continued) Balance at Balance at June 30, 2006* Increases Decreases June 30, 2007 Capital assets being depreciated: • Buildings and improvements 17,980,438 17,980,438 Vehicles 11,090 11,090 Furniture and office equipment 1,453,889 1,453,889 Total capital assets being depreciated 19,445,417 19,445,417 • Less accumulated depreciation for : Buildings and improvements 3,248,004 241,925 3,489,929 Vehicles 4,436 2,218 6,654 Furniture and office equipment 1,219,924 73,896 1,293,820 • Total accumulated depreciation 4,472,364 318,039 4,790,403 Total capital assets being depreciated, net 14,973,053 (318,039) 14,655,014 • Governmental activities capital assets, net $18.176.582 112.955 11 .289 537 * The balance at June 30, 2006 has been restated to eliminate Infrastructure assets • since the ongoing management of the assets resides with the City of Rosemead. Depreciation expense was charged entirely to the Community development function of the Commission for the year ended June 30, 2007. • • 0 19 • • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS (6) Long-Term Debt • Long-term debt consists of the following at June 30, 2007: Balance at Balance at Due within June 30. 2006 Additions Reductions June 30, 2007 One Year Governmental activities: Tax allocation bonds, Series 1993A $23,095,000 23,095,000 Tax allocation bonds, Series 2006A 14,005,000 780,000 13,225,000 810,000 Tax allocation bonds, Series 2006B - 24,230,000 - 24,230,000 295,000 Unamortized bond premiums 316,830 - 19.802 297.028 19,802 • 37.416.830 24.230.000 23 894 802 37.752.028 1 124.802 Tax Allocation Bonds, Series 2006A - On March 9, 2006, the Commission issued tax allocation bonds in the amount of $14,005,000 (Series 2006A) to: (1) refund a portion of the Commission's outstanding Series 1993A bonds and (2) to finance redevelopment • activity in Redevelopment Project Area No.1. The bonds bear interest ranging from 3.25% to 5.00% and mature in annual installments of $780,000 to $1,250,000 on various dates through October 1, 2022. The Commission purchased a surety bond in lieu of cash reserve in the amount of $1,323,238. Portions of the bonds are subject to early redemption, at the option of the Commission, beginning October 1, 2017. A surety bond has been acquired to satisfy the reserve requirements. As of June 30, 2007 the outstanding balance was $13,225,000. Tax Allocation Bonds, Series 2006B - In December 2006, the Commission issued $24,230,000 in Project Area No. 1 Tax Allocation Bonds. 'The bonds mature in • amounts ranging from $70,000 to $1,430,000 with interest rates ranging from 3.25% to 4.25% through October 1, 2025. The net proceeds were used to refund the remaining $23,095,000 amount outstanding on the 1993 Tax Allocation Bonds. The securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1993 Bonds. As a result, the entire 1993 Bonds are considered to be defeased and the liability for those bonds has been removed from the • government-wide financial statements. • 20 • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION • • • NOTES TO FINANCIAL STATEMENTS (6) Long-Term Debt (Continued) The advance refunding resulted in an economic gain of $2,600,000 and a difference between the reacquisition price and the net carrying amount of the old debt of $1,527,568. This difference, reported in the accompanying financial statement as a deduction from bonds payable, is being charged to operations through the year 2022. The unamortized balance as of June 30, 2007 was $1,527,568. A surety bond has been acquired to satisfy the reserve requirements. As of June 30, 2007, $24,230,000 of the bonds are outstanding. • At June 30, 2007, debt service requirements to maturity for governmental activities long- term debt are as follows: 2006A Tax Allocation Bonds 2006B Tax Allocation Bonds Year Ending June 30 Principal Interest Principal Interest • 2008 $ 810,000 1,815,114 295,000 817,327 2009 845,000 1,785,183 70,000 1,041,261 2010 870,000 1,757,314 75,000 1,038,986 2011 900,000 1,727,989 75,000 1,036,361 2012 930,000 419,481 80,000 1,033,736 2013-2017 5,235,000 1,521,555 430,000 5,125,365 2018-2022 3,320,000 362,542 3,715,000 4,911,918 2023-2027 315,000 12,994 6,890,000 3,774,336 2028-2032 - - 8,595,000 2,091,625 2033-2034 4,005,000 268.406 13.225.000 .4~ 4.2~ 22 .1 A s • 0 21 • • • • • • • • • • • ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS (7) Risk Management The Commission is exposed to various risks of loss related to torts; thefts of, damage to and destruction of assets; errors and omissions; and natural disasters. The Commission, through the City, carries commercial liability insurance coverage. The Commission carries no insurance coverage for natural disasters. Since the Commission does not have any employees (it uses employees from the City), it is not liable for injury to employees, workers' compensation, or employee health and accident insurance. The City has had no reductions in insurance coverage, nor did the City have any settlements that were in excess of insurance coverage in any of the three preceding years. (8) Restatement of Net Assets/Fund Balance The June 30, 2006 net assets in the government-wide financial statements have been restated as follows: Net assets at June 30, 2006, as previously reported . $ 2,605,522 To eliminate infrastructure assets since ongoing management resides with the City of Rosemead (7,452,300) Net assets (deficit) at June 30, 2006, as restated $(4.846.7781 The June 30, 2006 fund balances in the fund financial statements have been restated as follows: Low-Moderate Income Housing Capital Set-Aside Fund Projects Fund Fund balance at June 30, 2006, as previously reported $ 870,799 11,916,129 To reflect prior year's advance from the Capital Projects Fund to the Low- Moderate Income Housing Set-Aside (773,692) 773,692 To reflect the advance to the Capital Projects Fund for the deferral of the 20% set-aside tax increment 4,947,087 (4,947.087) Fund balance at June 30, 2006, as restated 5.044.194 .742734 22 • • • C ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Low-Moderate Income Housing Set-Aside Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Fiscal Year ended June 30, 2007 Revenues: Investment income Total revenues Expenditures: • Current: General government Total expenditures • Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): • Transfers in Transfers out Total other financing sources (uses) • Change in fund balances Fund balances at beginning of year, as restated • Fund balances at end of year • Variance Original Final Positive Budget Budget Actual (Negative) $ 26,000 26,000 45,385 19,385 26,000 26,000 45,385 19,385 250,000 250,000 250,000 250,000 250,000 250,000 (224,000) (224,000) 45,385 269,385 1,019,082 1,019, 082 (50,000) (50,000) 969,082 969,082 (224,000) (224,000) 1,014,467 1,238,467 5,044,194 5,044,194 5,044,194 $ 4,820,194 4,820,194 6,058,661 1,238,467 See accompanying notes to the required supplementary information. • 23 • • • Revenues: • Rental income Other Total revenues • • Excess (deficiency) of revenues over (under) expenditures ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Rosemead Housing Development Corporation Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Fiscal Year ended June 30. 2007 Expenditures: Current: General government Total expenditures Variance Original Final Positive Budget Budget Actual (Negative) $ 406,500 406,500 409,520 3,020 6,100 6,100 6,046 (54) 412,600 412,600 415,566 2,966 795,900 795,900 316,849 479,051 795,900 795.900 316,849 479,051 (383,300) (383,300) 98,717 482,017 • • Other financing sources (uses): Transfers in 250,000 250,000 401,600 151,600 Transfers to the City of Rosemead - (351,600) 35( 1,600) Total other financing sources (uses) 250,000 250,000 50,000 20( 0,000) Change in fund balances • • Fund balances at beginning of year Fund balances at end of year (133,300) (133,300) 148,717 282,017 209,438 209,438 209,438 - $ 76,138 76,138 358,155 282,017 See accompanying notes to the required supplementary information. 24 0 C ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION • NOTES TO REQUIRED SUPPLEMENTARY INFORMATION Fiscal Year ended June 30, 2007 • (1) Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the governmental fund. All annual appropriations lapse at fiscal year end. • On or before the last day in March of each year, the Commission submits a request for appropriations to the City Manager so that a budget may be prepared. Before the first Thursday of June 30, the proposed budget is presented to the Commission's governing board for review. The governing board holds public hearings and a final budget must be • prepared and adopted no later than June 30. The appropriated budget is prepared by fund, function and department. The Commission's department heads, with approval of the Finance Director and City Manager, may make transfers of appropriations within a department. Transfers of appropriations between departments must be approved by the governing board. The • legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the department level. The governing board made several supplemental budgetary appropriations throughout the year. The supplemental budgetary appropriations made in the governmental funds are detailed in the required supplementary information. • Encumbrance accounting is employed in the governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at each year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. • (2) Excess Expenditures over Appropriations Expenditures exceeded appropriations in the Rosemead Housing Development Corporation by $23,776. • • 0 25 • Mayer Hoffman McCann P.C. An Independent CPA Firm Conrad Government Services Division 2301 Dupont Drive, Suite 200 Irvine, California 92612 • - 949-474-2020 ph 949-263-5520 fx www.mhm-pc.com • Board of Directors Community Development Commission of the City of Rosemead Rosemead, California REPORT ON COMPLIANCE AND OTHER MATTERS AND ON INTERNAL CONTROL OVER • FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the financial statements of the Community Development Commission of the City of Rosemead (Commission), as of and for the year ended June 30, 2007, which collectively comprise the Commission's basic financial statements and have issued our report thereon • dated December 20, 2007. We conducted our audit in accordance with 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. Compliance and Other Matters • As part of obtaining reasonable assurance about whether the Commission's financial statements are free of 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 determination of financial statement amounts. 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. Internal Control Over Financial Reportin • In planning and performing our audit, we considered the Commission's internal control over financial reporting as a basis for designing our auditing procedures 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 over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Commission's internal control over financial reporting. • A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Commission's ability to initiate, authorize, record, process, or report financial data reliably in accordance with • generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Commission's financial statements that is more than inconsequential will not be prevented or detected by the Commission's internal control. • 26 • Board of Directors Community Development Commission of the City of Rosemead Rosemead, California Page Two A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements A will not be prevented or detected by the Commission's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the Board of Directors, management, and the State Controller and is not intended to be and should not be used by anyone other than these specified parties. 0 /&Voote4 14#)V ;,WW to P. Irvine, California December 20, 2007 • 0 • • 0 0 27 • • • • • • • • • • 0