2007 RHDC Financial and Compliance ReportU
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
FINANCIAL AND COMPLIANCE REPORT
Fiscal Year Ended June 30, 2007
Conrad Government Services Division
Mayer
Hoffman
McCann P.C.
An Independent CPA Firm
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
FINANCIAL AND COMPLIANCE REPORT
Fiscal Year Ended June 30, 2007
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
a Government-wide Financial Statements
Statement of Net Assets
' Statement of Activities
Fund Financial Statements
Balance Sheet
Reconciliation of the Fund Balance of Governmental Funds
to the Statement of Net Assets
Statement of Revenues, Expenditures and Changes in Fund
' Balances
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances to the Statement of Activities
' Notes to Financial Statements
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures and Changes in Fund
Balances - Budget and Actual
' Note to Required Supplementary Information
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
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Mayer Hoffman McCann P.C.
An Independent CPA Firm
2301 Dupont Drive. Suite 200
Irvine. California 92612
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949-474-2020 ph
949-263-5520 fx
www.mhm-pc.com
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' Rosemead Housing Development Corporation
Board of Directors
City of Rosemead, California
I INDEPENDENT AUDITORS' REPORT
We have audited the accompanying financial statements of the governmental activities and the
major fund of the Rosemead Housing Development Corporation (the Corporation), a blended
component unit of the Community Development Commission of the City of Rosemead,
California, as of and for the year ended June 30, 2007, which collectively comprise the
Corporation's basic financial statements as listed in the table of contents. These financial
statements are the responsibility of the Corporation's management. Our responsibility is to
express opinions 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
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 opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities and the major fund of the
Corporation 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 Corporation has not presented Management's Discussion and Analysis as required by
Governmental Accounting Standards Board (GASB) Statement No. 34 that the GASB has
determined is necessary to supplement, although not required to be part of, the basic financial
statements.
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Rosemead Housing Development Corporation
Board of Directors
Page Two
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 accounting principles generally accepted in the United States of
America. 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.
In accordance with Government Auditing Standards, we have also issued our report dated
February 22, 2008 on our consideration of the Corporation'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.
llt~r Aqe5;a~ A?.
Irvine, California
February 22, 2008
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
Statement of Net Assets
June 30. 2007
Assets
Cash and investments (note 2)
Receivables
Capital assets, net (note 4)
Total assets
Liabilities and Net Assets
Liabilities:
Accounts payable and accrued liabilities
Refundable deposits
Total liabilities
Net assets:
Invested in capital assets
Unrestricted
Total net assets
Governmental
Activities
$ 381,948
14,180
9,739,082
10,135,210
2,181
35,792
37.973
9,739,082
358,155
$ 10,097,237
See accompanying notes to the basic financial statements.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
Statement of Activities
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Fiscal Year Ended June 30, 2007
Program Revenues
Net (Expense)
Operating
Revenue and
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Charges for Contributions
Changes in
Expenses Services and Grants
Net Assets
Governmental activities:
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General government $ 756,209 415,566 401,600
60,957
Total governmental
activities $ 756,209 415,566 401,600
60,957
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Net assets at end of year
$ 10,097,237
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See accompanying notes to the basic financial statements.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
Governmental Funds
Balance Sheet
June 30. 2007
General
Fund
Assets:
Cash and investments $ 381,948
Other receivables 14,180
Total assets
$ 396,128
Liabilities and Fund Balance
Liabilities:
Accounts payable and accrued liabilities
$ 2,181
Refundable deposits
35,792
Total liabilities
37,973
Fund balance, unreserved
358,155
Total liabilities and fund balance
$ 396,128
See accompanying notes to the basic financial statements.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
Governmental Funds
Reconcilation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets
June 30, 2007
Fund balances of governmental funds $ 358,155
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 11,171,141
Accumulated depreciation (1,432,059)
Net assets of governmental activities $ 10,097,237
See accompanying notes to the basic financial statements.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
Fiscal Year Ended June 30, 2007
General
Fund
Revenues:
Rental income $ 415,566
Total revenues 415,566
Expenditures:
Operating 316,849
Admin services paid to City of Rosemead 219,600
Facility rent paid to City of Rosemead 132,000
Total expenditures 668,449
Excess (deficiency) of revenues over
(under) expenditures (252,883)
Other financing sources (uses):
Transfers from Rosemead Community
Development Commission 401,600
Change in fund balance 148,717
Fund balance at beginning of year 209,438
Fund balance at end of year $ 358,155
See accompanying notes to the basic financial statements.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
' 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 $ 148,717
Amounts reported for governmental activities in the statement of
activities is different because:
Depreciation expense on capital assets is reported in the government-wide
statement of activities and changes in net assets, but they do not require the
use of current financial resources. Therefore, depreciation expense is not
' reported as expenditures in the governmental fund.
Depreciation expense (87,760)
I Change in net assets of governmental activities
$ 60,957
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See accompanying notes to the basic financial statements.
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' ROSEMEAD HOUSING DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
Fiscal Year Ended June 30. 2007
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(1) Nature of operations, reporting entity, description of funds and account grou
and significant accounting policies
Nature of operations - The Rosemead Housing Development Corporation (the
Corporation) is a nonprofit corporation whose purpose is to provide assistance to the
Rosemead Community Development Commission (the Commission) to account for the
construction, financing and operations of low- and moderate-income housing for the
' benefit of the City of Rosemead (the City). The Corporation currently maintains the
Angelus and Garvey Senior Housing facilities. The Corporation is exempt from income
taxes under Section 501(c)(3) of the Internal Revenue Code (IRC) and applicable state
statutes.
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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 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. Since the
Board of Directors of the Commission and the Council members also serve as the Board
of Directors of the Corporation, the Commission and the City, in effect, have the ability to
influence and control operations. Therefore, the Commission has oversight responsibility
for the Corporation. Accordingly, in applying the criteria of GASB Statement No. 14, the
financial statements of the Corporation are included in the Commission's and the City's
financial reports.
The Corporation has the same fiscal year as the City and the Commission. These
financial statements contain information for the Corporation only. The City's and the
Commission's financial reports may be obtained by contacting the Financial Department
of the City.
Basis of Accounting and Measurement Focus
The basic financial statements of the Corporation are composed of the following:
• Government-wide financial statements
• Fund financial statements
• Notes to the basic financial statements
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
' (1) Nature of operations, reporting entity, description of funds and account group,
and 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 Corporation 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.
1 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 reduction of the related liability, rather than as an
expenditure.
Fund Financial Statements - The underlying accounting system of the Corporation 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,
revenues and expenditures or expenses, as 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 which spending activities are controlled.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
' NOTES TO FINANCIAL STATEMENTS
' (1) Nature of operations, reporting entity, description of funds and account group,
and 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 Corporation in a custodial capacity for other individuals or
' organizations. The Corporation 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.
1 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 Corporation 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 fax 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.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
' NOTES TO FINANCIAL STATEMENTS
(1) Nature of operations, reporting entity, description of funds and account group,
and significant accounting policies (Continued)
' 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.
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
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.
' Major fund - The Corporation reports the General Fund as its only major fund.
Cash and investments - Cash includes amounts in demand and time deposits.
Investments, if any, are reported in the accompanying balance sheet at fair value, except
for certain money market and investment 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 income from
property and investments reported for that fiscal year. Income from property and
investments includes interest earnings; changes in fair value; any gains or losses
realized upon the liquidation, maturity or sale of investments; property rentals; and the
sale of City-owned property.
' Capital assets - Capital assets, which include buildings and improvements, and
furniture and equipment, are reported as part of governmental activities in the
government-wide financial statements. Capital assets are defined by the Corporation 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.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
1 (1)
' 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.
Costs associated with construction in progress are recorded in their respective capital
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assets category upon approval by the Corporation's governing board, which
approximates the completion date.
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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
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Buildings 50
Improvements 15
Furniture and equipment 7
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B Statement No. 42, Accounting and Financial Reporting for Impairment of Capital
Assets and for Insurance Recoveries, was adopted during the year ended June 30,
2007. Statement No. 42 requires an evaluation of prominent events or changes in
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circumstances to determine whether an impairment loss should be recorded and
whether any insurance recoveries should be offset against the impairment loss. The
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effect of the implementation of GASB Statement No. 42 was not significant to the
Corporation net assets or changes in net assets for the
ear ended June 30
2007
y
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Income taxes - The Corporation is exempt from federal income taxes under Section
501(c)(3) of the IRC and a similar exemption understate law.
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.
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e management company collects rent payments on the first day of
the month and recognizes revenue in the month due. Monthly rental income per unit
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ranges from $250 to $450 and is approved by the annual budget.
(2) Cash and investments
Cash at June 30, 2007 consisted of cash in bank. The carrying amount of the
' Corporation's deposits was $381,948 and the bank balance was $732,391.
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' ROSEMEAD HOUSING DEVELOPMENT CORPORATION
' NOTES TO FINANCIAL STATEMENTS
' (2) Cash and investments (Continued)
Custodial credit risk (deposits) - Custodial credit risk for deposits is the risk that, in
' 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 Corporation maintains its bank accounts at financial
institutions that are collateralized with securities held by the pledging financial institution,
or by its Trust Department or agent, but not in the Corporation's name. The primary
difference between the carrying amount and the bank balance are deposits in transit and
outstanding checks. In accordance with state statutes, the Corporation maintains
deposits at those depository institutions insured by the FDIC. The California Government
Code (the Code) requires California banks and savings and loan associations to
' collateralize the deposits of governmental entities by pledging government securities as
collateral. The market value of pledge securities must equal at least 110% of those
deposits. California law also allows financial institutions to secure the deposits of
' governmental entities by pledging first trust deed mortgage notes having a collateral
value of 150% of a corporation's total deposits; however, the collateralized securities are
not held in the name of the Corporation. Of the bank balance noted above, $200,000 is
federally insured and the balance is collateralized in accordance with the Code.
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(3) Reimbursement agreements and related-party transactions
' The Corporation has entered into a reimbursement agreement with the City for the
Corporation's administrative services. The Corporation paid $219,600 for administrative
services to the City during the year ended June 30, 2007. The Corporation is funded, in
part, by advances from the Commission.
The Corporation has also entered into a 55-year lease agreement with the City for the
Angelus Senior Housing facility at $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 has also entered into a 55-year lease agreement with the City
for the Garvey Senior Housing facility at $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.
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
Capital assets
During the year ended June 30, 2007, the changes in capital assets were as follows:
Governmental activities:
Capital assets being depreciated:
Buildings and improvements
Furniture and equipment
Total capital assets being
depreciated
Less accumulated depreciation for:
Buildings and improvements
Furniture and equipment
Total accumulated
depreciation
Total governmental activities
capital assets, net
Balance Balance
June 30. 2006 Additions Deletions June 30, 2007
$11,042,597 11,042,597
128,544 128.544
11,171141 - 11,171,141
1,270,847 69,397 1,340,244
73.452 18.363 91.815
1,344,299 87,760 1,432.059
$ 9,826,842
7 760) 9.739.082
Depreciation expense is allocated to the general government function in the statement of
activities.
Risk management
The Corporation 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 Corporation,
through the City, carries commercial liability insurance coverage. The Corporation
carries no insurance coverage for natural disasters. Since the Corporation 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 reduction in insurance coverage, nor did the City have any settlements that were in
excess of insurance coverage in any of the three preceding years.
Property management and operations
The Corporation has two agreements with a management company, dated July 1994
and April 2002, to operate the development housing. These agreements are
automatically renewed for successive periods of one year, unless terminated by the
Corporation. The management company is responsible for collecting rents and receipts,
employing an on-site manager and maintaining financial records. Total fees paid to the
management company were $28,356 for the Angelus Senior Housing facility and
$40,515 for the Garvey Senior Housing facility during fiscal year ended June 30, 2007.
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Required Supplementary Information
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ROSEMEAD HOUSING DEVELOPMENT CORPORATION
Rosemead Housing Development Corporation
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Fiscal Year Ended June 30, 2007
Revenues:
Rental income
Other
Total revenues
Original Final
Budget Budget
$ 406,500 406,500
6,100 6,100
412,600 412,600
Variance-
Positive
Actual (Negative)
415,566 9,066
6,100
415,566 2,966
Expenditures:
Current:
Operating
Admin services paid to City of Rosemead
Facility rent paid to City of Rosemead
Total expenditures
Excess (deficiency) of revenues over
(under) expenditures
Other financing sources (uses):
Transfers from Rosemead Community
Development Commission
Change in fund balance
Fund balance at beginning of year
Fund balance at end of year
340,625 340,625
219,600 219,600
132.000 132.000
692.225 692.225
(279,625) (279,625)
250.000 250,000
(29,625)
209,438
$ 179,813
(29,625)
209,438
179,813
316,849 23,776
219,600 -
132,000 -
668,449 23,776
(252.883) 26,742
401,600 151.600
148,717 178,342
209,438
358,155 178,342
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' ROSEMEAD HOUSING DEVELOPMENT CORPORATION
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
' 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, all agencies of the government submit
requests for appropriations to the government's manager so that a budget may be prepared.
Before the first Thursday of June, the proposed budget is presented to the Corporation'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 Corporation's
' department heads, with approval of the Finance Director and City Manager, may make
transfers of appropriations within a department and between departments within a fund.
Transfers of appropriations between funds 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 fund level. Actual expenditures did not exceed budgeted expenditures for
the fiscal year ended June 30, 2007, The supplemental budgetary appropriations made in the
' governmental fund are detailed in the required supplementary information.
Encumbrance accounting is employed in governmental funds, Encumbrances (e.g., purchase
orders, contracts) outstanding at year end are reported as reservations of fund balances and
do not constitute expenditures or liabilities because the commitments will be reappropriated
and honored during the subsequent year.
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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
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' 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
Board of Directors
' Rosemead Housing Development Corporation
We have audited the financial statements of the governmental activities and the governmental
fund of the Rosemead Housing Development Corporation (the Corporation), a component unit
' of the Community Development Commission of the City of Rosemead, California, as of and for
the year ended June 30, 2007, which collectively comprise the Corporation's basic financial
statements and have issued our report thereon dated February 22, 2008. 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 Corporation'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 Reporting
In planning and performing our audit, we considered the Corporation'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 Corporation's internal control over financial reporting.
Accordingly, we do not express an opinion on the effectiveness of the Corporation'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
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Rosemead Housing Development Corporation
Page Two
deficiency, or combination of control deficiencies, that adversely affects the Corporation'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 Corporation's financial statements that is more than inconsequential will not
be prevented or detected by the Corporation's internal control.
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
will not be prevented or detected by the Corporation'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.
We noted certain matters we reported to the management of the Corporation's in a separate
letter dated February 22, 2008.
This report is intended solely for the information and use of the Board of Directors, and
management of the Corporation's and is not intended to be and should not be used by anyone
other than these specified parties.
Irvine, California
February 22, 2008
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