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2003 RHDC Financial and Compliance Report,i D Q ■ Rosemead Housing Development Corporation Financial and Compliance Report June 30, 2003 McGladrey& Pullen Certified Public Accountants McGladrey 8 Pullin, ur is a member fin of RSM International, an affiliation of separate and independent legal enfifies. ■ ■ ■ ■ ontents ® Section I-Financial Section ® Independent Auditors Report on the Financial Statements and Supplementary Information 1 and 2 Basic Financial Statements Government-wide Financial Statements 0 Statement of net assets-governmental activities 3 Statement of activities-govemmental activities 4 ® Fund Financial Statements Balance sheet-governmental fund-general fund 5 ® Reconciliation of total governmental fund balance to net assets of governmental activities in the 6 statement of net assets Statement of revenues, expenditures and changes in fund balance-governmental fund- general fund 7 0 Reconciliation of the statement of revenues, expenditures and changes in fund balance of the governmental fund to the statement of activities 8 Notes to financial statements 9-15 Required Supplementary Information Statement of revenues, expenditures and changes in fund balance-budgetary comparison- general fund 16 Notes to required supplementary information 17 Section II-Compliance Section ® Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements ® Performed in Accordance with Government Auditing Standards 18 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ B B ■ ■ ■ ■ ■ ■ ■ s ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ FINANCIAL SECTION ■ McGladrey&Pullen Certified Public Accountants Independent Auditor's Report on the Financial Statements and Supplementary Information To the Goveming Board Rosemead Housing Development Corporation ■ Rosemead, California We have audited the accompanying 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, 2003, which 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 0 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities of the general fund as of June 30, 2003, and the changes in financial position thereof 0 for the year then ended, in conformity with accounting principles generally accepted in the United States of America. 0 As described in Note 1, the Corporation has implemented a new financial reporting model, as required by the ■ provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis-for State and Local Governments, as of June 30, 2003. 0 The Corporation has not presented a Management's Discussion and Analysis required by GASB Statement No. 34 0 that the GASB has determined is necessary to supplement, although not required to be part of, the basic financial statements. In accordance with Govemment Auditing Standards, we have also issued our report dated September 19, 2003 on our consideration of the Corporation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulation, contracts and grants. That report is an integral part of an audit performed in B accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. a e 0 McGladrey 8 Pullen, LLe is a member firm of RSM International, O an affiliation of separate and independent legal entities. 8 1 ■ ■ ■ ■ Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Corporation's basic financial statements. The budgetary comparison schedule is presented for purposes of ■ additional analysis and is not a required part of the basic financial statements. The budgetary comparison schedule has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, ■ accordingly, we express n/o opinion on it. c ■ Pasadena, California ■ September 19, 2003 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 2 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ s ■ ■ Rosemead Housing Development Corporation Statement of Net Assets-Governmental Activities June 30, 2003 Cash and Investments $ 778,467 Receivables 11,872 Prepaid Items 3,000 Property and Improvements 10,609,487 Total assets $ 11,402,826 Liabilities Accounts Payable $ 6,341 Deposits Payable 35,620 Total liabilities $ 41,961 Net assets Invested in Capital Assets Unrestricted Total net assets See Notes to Financial Statements. 3 $ 10,609,487 751,378 $ 11,360,865 Rosemead Housing Development Corporation Statement of Activities-Governmental Activities Year Ended June 30, 2003 Program Revenues Net(Expense) Revenue Changes for and Changes in Functions/Programs Expenses Services Net Assets Governmental activities, general government Total primary government $ 675,614 $ 264,969 $ (410,645) $ 675,614 $ 264,969 (410,645) General revenue, property taxes Change in net assets Net assets, beginning of year Net assets, end of year See Notes to Financial Statements. 1,392,666 982,021 10,378,844 $ 11,360,865 4 ■ e ■ ■ ■ ■ e ■ e ■ ■ ■ ■ e ■ e e ■ ■ ■ e ■ e ■ e ■ e 0 e ■ ■ ■ Rosemead Housing Development Corporation Balance Sheet--Governmental Fund-General Fund June 30, 2003 Assets Cash and Investments Receivables Prepaid Items Total assets Liabilities and Equi $ 778,467 11,872 3,000 $ 793,339 Liabilities Accounts payable and accrued liabilities $ 6,341 Refundable deposits 35,620 Total liabilities 41,961 Equity Fund balance: Reserved for prepaid items 3,000 Unreserved 748,378 Total equity 751,378 Total liabilities and equity $ 793,339 See Notes to Financial Statements. 5 i Rosemead Housing Development Corporation Reconciliation of Total Governmental Fund Balance to Net Assets of Governmental Activities in the Statement of Net Assets June 30, 2003 Total fund balance, governmental fund. $ 751,378 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental fund. 10,609,487 Net assets of governmental activities $ 11,360,865 See Notes to Financial Statements. 6 ■ ■ Rosemead Housing Development Corporation ■ Statement of Revenues, Expenditures and Changes in Fund Balance-Governmental Fund- General Fund Year Ended June 30, 2003 ■ ■ ® Revenues: Rental income $ 264,969 ■ Intergovernmental, Rosemead Community Development Commission 1,392,666 Total revenues 1,657,635 ■ ■ Expenditures: Operating 269,541 ■ City administrative services 154,800 Facility charges paid by City 110,400 ■ Capital outlay 384,784 Total expenditures 919,525 ■ Revenues over expenditures 738,110 ■ Fund balance, beginning 13,268 ■ Fund balance, ending $ 751,378 ■ See Notes to Financial Statements. ■ e ■ e ■ ■ ■ ■ a ■ ■ ■ ■ ■ ■ i 7 Rosemead Housing Development Corporation Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities Year Ended June 30, 2003 Net change in fund balance. Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of capital assets recorded in the current period. Depreciation expense on capital assets is reported in the govemment-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. Change in net assets of governmental activities See Notes to Financial Statements. ■ ■ ■ ■ ■ ■ $ 738,110 ■ ■ 384,784 ■ ■ ■ ■ (140,873) ■ $ 982,021 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 8 ■ ■ ® Rosemead Housing Development Corporation Notes to Financial Statements Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Group, 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. Description and scope of the reporting entity: Government 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 Rosemead Community Development Commission (the 8 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 0 responsibility for the Corporation. Accordingly, in applying the criteria of GASB Statement No. 14, the financial 0 statements of the Corporation are included in the Commission and the City's financial report. The Corporation has the same fiscal year as the City and the Commission. These financial statements contain information for the Corporation only. The City and the Commission financial reports may be obtained by contacting the Financial Department of the City. ® Government-wide and fund financial statements: The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on the activities of the Corporation. 0 There were no interfund activities to be eliminated. Governmental activities are primarily supported by revenues received from the Commission. • The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable to a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use or directly benefit from, goods, services or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly classified as program revenues are reported as general revenues. 0 Measurement focus, basis of accounting and financial statement presentation: The government-wide financial ■ statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing ■ of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements of the provider have been met. Amounts reported as program revenues include (1) charges to customers or applicants ■ for goods, services or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Net assets are reported as restricted when constraints placed on their use are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or imposed by law through local enabling legislation. When both restricted and unrestricted resources are available for use, it is the Corporation's policy to use ® restricted resources first, then unrestricted resources as they are needed. 0 Rosemead Housing Development Corporation Notes to Financial Statements Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Group, and Significant Accounting Policies, Continued Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. Revenues that are accrued generally include interest. The Corporation reports the general fund as its only major governmental fund. Governmental fund type, general fund: All receipts are allocated to this fund. The primary sources of revenue are contributions from the Commission and rental income from tenants of the senior housing units. General operating expenses are paid out of this fund. Management has the ultimate responsibility for the appropriateness of the accounting policies and procedures used by the Corporation. Implementation of new accounting principles: GASB Statement No. 34: The Corporation adopted the provisions of GASB Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments. This Statement affects the manner in which the Corporation records transactions and presents financial information. State and local governments have traditionally used a financial reporting model substantially different from the one used to prepare private-sector financial reports. GASB Statement No. 34 establishes new requirements and a new reporting model for the annual financial reports of state and local governments. The Statement was developed to make annual reports of state and local governments easier to understand and more useful to the people who use governmental financial information to make decisions. Management's discussion and analysis: GASB Statement No. 34 requires that financial statements be accompanied by a narrative introduction and analytical overview of the Corporation's financial activities in the form of "management's discussion and analysis" (MD&A). This analysis is similar to the analysis provided in the annual reports of private-sector organizations. Government wide financial statements: The reporting model includes financial statements prepared using full accrual accounting for all of the Corporation's activities. This approach includes not just current assets and liabilities, but also capital and other long-term assets as well as long-term liabilities. Accrual accounting also reports all of the revenues and costs of providing services each year, not just those received or paid in the current year or soon thereafter. Statement of net assets: The statement of net assets is designed to display the financial position of the City (government and business-type activities). The Corporation now reports all capital assets in the government-wide statement of net assets and reports depreciation expenses-the cost of "using up" capital assets-in the statement of activities. The net assets of the Corporation are broken down into three categories: (1) invested in capital assets, net of related debt; (2) restricted; and (3) unrestricted. 10 ■ ® Rosemead Housing Development Corporation Notes to Financial Statements Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Group, and Significant Accounting Policies, Continued Statement of activities: The govemment-wide statement of activities reports expenses and revenues in a format that focuses on the cost of each of the Corporation's functions. The expense of individual functions is compared to the revenue generated directly by the function. • Accordingly, the Corporation has recorded capital and certain other long-term assets and liabilities in the statement of net assets, and has reported all revenues and the cost of providing services under the accrual basis of accounting in the statement of activities. GASB Statement No. 37: The Corporation adopted the provisions of GASB Statement No. 37, Basic Financial ® Statements-and Management's Discussion and Analysis-for State and Local Governments: Omnibus. This Statement amends GASB Statement No. 34 to either (1) clarify certain provisions or (2) modify other provisions that 0 the GASB believes may have unintended consequences in some circumstances. Accordingly, the Corporation considered the effects of this Statement when adopting the provisions of GASB Statement No. 34, as previously described. GASB Statement No. 38: The Corporation adopted the provisions of GASB Statement No. 38, Certain Financial . Statement Note Disclosures. This Statement modifies, establishes and rescinds certain financial statement disclosure requirements. Accordingly, certain footnote disclosures have been revised to conform to the provisions of GASB Statement No. 38. GASB Statement No. 41: The Corporation adopted the provisions of GASB Statement No. 41, Budgetary Comparison Schedules-Perspective Differences. This Statement amends GASB Statement No. 34 to clarify the budgetary presentation requirements for governments with significant budgetary perspective differences that result in their not being able to present budgetary comparison information for their general fund and major special revenue funds. These governments are required to present budgetary comparison schedules as required supplementary information (RSI) based on the fund, organization or program structure that the government uses for its legally adopted budget. Accordingly, the Corporation considered the effects of this Statement when adopting the provisions of GASB Statement No. 34 for the fiscal year ended June 30, 2003. GASB Interpretation No. 6: The Corporation adopted the provisions of GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. This Interpretation clarifies the application of standards for modified accrual recognition of certain liabilities and expenditures in areas ® where differences have arisen, or could arise, in interpretation and practice. This Interpretation impacts the fund level financial statements (governmental funds only, not proprietary or fiduciary funds) required by GASB Statement No. 34 but has no direct impact on the government-wide financial statements. Accordingly, the Corporation has not recognized the current portion of certain long-term liabilities and related expenditures in the governmental fund financial statements for amounts not considered to be due and payable as of June 30, 2003. 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 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. W O 11 ■ Rosemead Housing Development Corporation Notes to Financial Statements Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Group, and Significant Accounting Policies, Continued 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. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Capital assets: Capital assets, which include land, buildings 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 $5,000 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. Costs associated with construction in progress are recorded in their respective fixed asset category upon approval by the City Council, which approximates the completion date. 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 15 Furniture and equipment 7 Income taxes: The Corporation is exempt from federal income taxes under Section 501(c)(3) of the IRC and a similar exemption under state 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. Rental income: The management company collects rent payments on the first day of the month and recognizes revenue in the month due. Monthly rental income per unit ranges from $250 to $300 and is approved by the annual budget. Budget matters: Budgets presented in this report for comparison to actual amounts are presented in accordance with accounting principles generally accepted in the United States of America. Reported budget amounts represent the original adopted budget as amended. ■ 0 12 ■ ® Rosemead Housing Development Corporation Notes to Financial Statements B Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Group, and Significant Accounting Policies, Continued ® Unexpended budgeted amounts lapse at the end of the budget year. The legal level of budgetary control is at the entity level. Note 2. Cash 0 Cash at June 30, 2003 consisted of cash in bank. The carrying amount of the Corporation's deposits was $778,467 ® and the bank balance was $792,434. 0 In accordance with state statutes, the Corporation maintains deposits at those depository institutions insured by the Federal Deposit Insurance Corporation. The California Government Code requires California banks and savings and 0 loan associations to collateralize the deposits of governmental entities by pledging government securities as collateral. The market value of pledged securities must equal at least 110% of those deposits. California law also S allows financial institutions to secure the deposits of governmental entities by pledging first trust deed mortgage notes having a collateral value of 150% of an agency's total deposits. The cash deposits are classified in three categories of credit risk as follows: Category 1 includes deposits that are insured or collateralized with securities held by the entity or by its agent in the entity's name; Category 2 includes deposits that are collateralized with securities held by the pledging financial institution's Trust Department or agent in the entity's name; Category 3 includes deposits that are uncollateralized. Bank Category 1 Category 2 Category 3 Balance Cash deposits $ 203,11 $ 589,322 $ - $ 792,434 Note 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 $154,800 for administrative services to the City during the year ended June 30, 2003. 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 $2,640,000 for the Angelus Senior Housing facility at June 30, 2003. 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 June 2057. Total lease commitments remaining are $3,909,600 for the Garvey Senior Housing facility at June 30, 2003. The Corporation paid $60,000 and $50,400 in lease payments to the City during the year ended June 30, 2003 for the Angelus and Garvey Senior Housing facilities, respectively. 0 0 0 13 ■ Rosemead Housing Development Corporation Notes to Financial Statements Note 4. Capital Assets During the year ended June 30, 2003, the changes in the general fixed assets were as follows: Governmental Activities Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated 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 capital assets being depreciated, net Governmental activities capital assets, net Balance Balance July 1, 2002 Increases Reclassification June 30, 2003 $ 65,000 $ - $ - $ 65,000 7,316,490 256,240 (7,572,730) 7,381,490 256,240 (7,572,730) 65,000 3,469,867 - 7,572,730 11,042,597 - 128,544 - 128,544 3,469,867 128,544 7,572,730 11,171,141 485,781 122,510 608,291 - 18,363 18,363 485,781 140,873 626,654 2,984,086 (12,329) 7,572,730 10,544,487 $ 10,365,576 $ 243,911 $ - $ 10,609,487 Depreciation expense is allocated to the general government function in the statement of activities. Note 5. 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. ■ E 14 ■ ■ Rosemead Housing Development Corporation ■ Notes to Financial Statements ■ ■ Note 6. 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 $18,600 for ■ the Angelus Senior Housing facility and $16,567 for the Garvey Senior Housing facility during fiscal year ended June 30, 2003. ■ ■ Note 7. Subsequent Event ■ In October 2003, the Corporation sold land with a carrying value of $65,000 for approximately $256,000. ■ ■ Note 8. Pronouncements Issued but Not Yet Adopted ■ GASB Statement No. 39: In May 2002, the GASB issued Statement No. 39, Determining Whether Certain Organizations are Component Units. This Statement amended GASB Statement No. 14 to provide additional ■ guidance to determine whether certain organizations for which the primary government is not financially accountable should be reported as component units based on the nature and significance of their relationship with the primary ■ government. Generally, it requires reporting as a component unit, an organization that raises and holds economic resources for the direct benefit of a governmental unit. The Corporation will be required to implement this Statement ■ for the fiscal year ending June 30, 2004. The Corporation does not believe implementation of this Statement will materially impact the Corporation's financial statements. ■ GASB Statement No. 40: Beginning with the fiscal year ending June 30, 2005, the Corporation will be adopting the ■ provisions of GASB Statement No. 40, Deposit and Investment Risk Disclosures. This Statement amends GASB Statement No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse ■ Repurchase Agreements, to address common deposit and investment risks related to credit risk, concentration of credit risk, interest rate risk and foreign currency risk. As an element of interest rate risk, this Statement requires ■ certain disclosures of investments that have fair value that are highly sensitive to changes in interest rates. Deposit and investment policies related to the risks identified in this Statement also should be disclosed. Accordingly, the ■ Corporation has not yet revised the cash and investments footnote disclosure to conform to the provisions of GASB Statement No. 40. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 15 ■ ■ ■ ■ a ■ ■ ■ a ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ a ■ ■ ■ ■ a 0 ■ ■ ■ ■ ■ ■ REQUIRED SUPPLEMENTARY INFORMATION ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Rosemead Housing Development Corporation Statement of Revenues, Expenditures and Changes in Fund Balance-Budgetary Comparison- General Fund For the Year Ended June 30, 2003 General Fund Budgeted Amounts Actual Variance Original Final Amounts Final Budget Fund balance, July 1, 2002 Resources (inflows): Rental income Intergovernmental, Rosemead Community Development Commission Amount available for appropriations $ 3,015 $ 3,015 $ 13,268 $ 10,253 327,200 327,200 264,969 (62,231) 1,445,000 1,445,000 1,392,666 (52,334) 1,772,200 1,772,200 1,657,635 (114,565) Charges to appropriations (outflows): Operating City administrative servcies Facility charges paid by City Capital outlay Total charges to appropriations Excess of resources over (under) charges to appropriations Fund balance, June 30, 2003 1,024,016 1,024,016 269,541 754,475 219,600 219,600 154,800 64,800 146,400 146,400 110,400 36,000 384,784 384,784 384,784 - 1,774,800 1,774,800 919,525 855,275 (2,600) (2,600) 738,110 740,710 $ 415 $ 415 $ 751,378 $ 750,963 ■ 16 Rosemead Housing Development Corporation Notes 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 government's Council for review. The Council 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. Transfers of appropriations between departments must be approved by the City Council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the department level. 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. 17 ■ ■ ■ ■ e a 0 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 0 0 0 a ■ ■ ■ ■ ■ ■ ■ COMPLIANCE SECTION ■ M o McGladrey&Pullen O Certified Public Accountants e Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements 0 Performed in Accordance with Government Auditing Standards Q To the Governing Board Rosemead Housing Development Corporation Rosemead, California We have audited the financial statements 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, 2003, and have issued our report thereon dated September 19, 2003. 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 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 grants, 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 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 in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to ■ provide assurance on internal control over financial reporting. Our consideration of internal control over financial reporting would not necessarily disclose all matters in internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control and its operations that we consider to be material weaknesses. This report is intended for the information and use of the Governing Board and management of the Corporation, and is not intended to be, and should not be, used by anyone other than those specified parties. Pasadena, California September 19, 2003 McGladrey 8 Pullen, uP is a member firm of RSM Intemafional, . an affiliafion of separate and independent legal entities. 18