Loading...
2001 RHDC Financial and Compliance ReportI I I 1 1 1 I ROSEMEAD HOUSING DEVELOPMENT CORPORATION FINANCIAL AND COMPLIANCE REPORT JUNE 30, 2001 I C 1 ' CONTENTS INDEPENDENT AUDITOR'S REPORT ON THE ' FINANCIAL STATEMENTS I FINANCIAL STATEMENTS Balance sheet - governmental fund type and general fixed assets account group 2 Statement of revenues, expenditures and changes in fund balance - governmental fund type, general fund 3 Statement of revenues, expenditures and changes in fund balance - budget and actual - governmental fund type, general fund 4 Notes to financial statements 5-9 ' INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED ' IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS 10 and 1 I I Id I ' ``~®McGLADREY&PULLEN,LLP 1 1 I Certified Public Accountants INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS RSM international ' To the Governing Board Rosemead Housing Development Corporation ' Rosemead, California We have audited the accompanying general purpose financial statements of the Rosemead Housing Development Corporation (the Corporation), a component unit of the Redevelopment Agency of the City ' of Rosemead, California, as of and for the year ended June 30, 2001. These general purpose financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these general purpose 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 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 general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of June 30, 2001, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. u H i 1 In accordance with Government Auditing Standards, we have also issued a report dated October 16, 2001 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 and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Pasadena, California October 16, 2001 1 ROSEMEAD HOUSING DEVELOPMENT CORPORATION BALANCESHEET GOVERNMENTAL FUND TYPE AND GENERAL FIXED ASSETS ACCOUNT GROUP June 30, 2001 Governmental Fund Type Account Group Totals General (Memorandum Only) Assets General Fund Fixed Assets 2001 2000 Cash $ 504,573 $ - $ 504,573 $ 234,321 Property and Improvements - 4,037,480 4,037,480 3,469,867 Total assets $ 504,573 $ 4,037,480 $ 4,542,053 $ 3,704,188 Liabilities, Equity and Fund Balance Liabilities Accounts payable $ 159,629 $ $ 159,629 $ 5,063 Deposits 14,330 14,330 14,790 Total liabilities 173,959 173,959 19,853 Equity and Fund Balance Investment in general fixed assets - 4,037,480 4,037,480 3,469,867 Fund balance, unreserved 330,614 - 330,614 214,468 Total equity and fund balance 330,614 4,037,480 4,368,094 3,684,335 Total liabilities, equity and fund balance $ 504,573 $ 4,037,480 $ 4,542,053 $ 3,704,188 See Notes to Financial Statements. 2 1 t 1 ROSEMEAD HOUSING DEVELOPMENT CORPORATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND TYPE, GENERAL FUND Year Ended June 30, 2001 Rental income intergovernmental - Rosemead Redevelopment Agency Other Total revenues Expenditures: Operating City administrative services Facility charges paid by city Total expenditures Revenues (under) expenditures Fund balance, beginning Fund balance, ending See Notes to Financial Statements. 3 2000 (Memorandum 2001 Only) $ 160,200 S 160,200 800,000 - 7,232 4,190 967,432 164,390 701,286 150,091 90,000 90,000 60,000 60,000 851,286 300,091 116,146 (135,701) 214,468 350,169 $ 330,614 S 214,468 1 1 1 1 1 1 ROSEMEAD HOUSING DEVELOPMENT CORPORATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GOVERNMENTAL FUND TYPE, GENERAL FUND Year Ended June 30, 2001 Revenues: Rental income intergovernmental - Rosemead Redevelopment Agency Other Total revenues Expenditures: Current: Operating City administrative services Facility charges paid to city Total expenditures Revenues over (under) expenditures Fund balance, beginning Fund balance, ending See Notes to Financial Statements. 4 Over (Under) Budget Actual Budget $ 161,350 $ 160,200 $ (1,150) 4,962,170 800,000 (4,162,170) 5,000 7,232 2,232 5,128,520 967,432 (4,161,088) 5,173,540 701,286 (4,472,254) 90,000 90,000 60,000 60,000 5,323,540 851,286 (4,472,254) $ (195,020) 116,146 $ 311,166 214,468 $ 330,614 ' 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 Redevelopment Agency (the Agency) to account for the construction, financing and operations of low-moderate income housing ' for the benefit of the City of Rosemead (the City). The Corporation is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and applicable State statutes. 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 ' Agency and the Council members also serve as the Board of Directors of the Corporation, the Agency and the City, in effect, have the ability to influence and control operations. Therefore, the Agency 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 Agency and the City's financial ' report. The Corporation has the same fiscal year as the City and the Agency. These financial statements contain ' information for the Corporation only. The City and the Agency financial reports may be obtained by contacting the Financial Department of the City. ' The financial statements of the Corporation have been prepared in conformity with generally accepted accounting principals as applied to government units. The GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Funds and account group The accounts of the Corporation are organized on the basis of funds or account groups, each of which is ' considered to be a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts which comprise its assets, liabilities, equity, revenue and expenditures. The various funds and account groups are presented as follows: ' Governmental Fund Type, General Fund: All receipts are allocated to this fund. The primary sources of revenue are contributions from the Agency and rental income from tenants of the senior housing units. General operating expenses are paid out of this fund. Account Group: The General Fixed Assets Account Group accounts for all Corporation general fixed ' assets. 11 I 1 1 1 I accounted for in the General Fixed Assets Account Group. Property items acquired or constructed for 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 The following is a summary of the significant accounting and reporting policies: Basis of accounting and change in accounting policy: Governmental Fund Types are accounted for using the modified accrual basis of accounting. Revenue is recognized in the accounting period in which it becomes both measurable and available to finance the expenditures of the current period. "Measurable" means the amount of the transaction can be determined. "Available" means collectible within the current period or soon enough thereafter to pay current liabilities. Expenditures are generally recognized in the accounting period in which the fund liability is incurred and measurable. Beginning July 1, 2000, the Corporation adopted GASB Statement No. 33, Accounting and Financial Reportingfor Nonexchange Transactions. GASB Statement No. 33 requires that governments record and report assets, liabilities, revenues and expenditures for the four types of nonexchange transactions and restate prior financial information. The type of nonexchange revenues prevalent in the Corporation are "voluntary nonexchange." Voluntary Nonexchange Transactions are legislative or contractual agreements, other than exchanges, entered into willingly by the parties to the agreement (example: certain grants and private donations). Assets are recognized when all applicable eligibility requirements are met or resources are received, whichever occurs first. Revenues are recognized when all applicable eligibility requirements are met and resources are available. There was no effect on the Corporation's beginning fund balance as a result of the adoption of this standard and, therefore, no change in fund balance was recorded as of June 30, 2000. Property and improvements: All property, building and leasehold improvements of the Corporation are general governmental operations are recorded as expenditures in the fund making the expenditure and capitalized in the General Fixed Assets Account Group. ' All general fixed assets which were purchased or constructed are stated at cost. Assets acquired by gift or bequest are recorded at their fair market value at the date of transfer. No depreciation is recorded on general fixed assets. Income taxes: The Corporation is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and a similar exemption under State law. ' Fund balances: Unreserved fund balance represents the amount available for future appropriations. 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. 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 ' "Memorandum Only" columns: Included on the combined financial statements are total columns captioned "Memorandum Only" to indicate that they are presented only for informational purposes. ' Adjustments to eliminate interfund transactions have not been recorded in arriving at such amounts and the memorandum totals are not intended to fairly present the financial position or results of operations of the reporting entity taken as a whole. ' Additionally, the 2000 totals presented in the "Memorandum Only" columns are included to provide a summarized comparison with comparable 2001 amounts and are not intended to present all information necessary for a fair presentation of financial position and results of operations in accordance with ' generally accepted accounting principles. Budget matters: Budgets presented in this report for comparison to actual amounts are presented in accordance with generally accepted accounting principles. Reported budget amounts represent the original adopted budget as amended. ' Unexpended budgeted amounts lapse at the end of the budget year. The legal level of budgetary control is at the entity level. I Note 2. Cash Cash at June 30, 2001 consisted of cash in bank. The carrying amount of the Corporation's deposits was ' $504,573 and the bank balance was $777,670. 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 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 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 one includes deposits that are insured or collateralized with securities held by the entity or by its agent in the entity's name; Category two includes deposits that are collateralized with securities held by the pledging ' financial institution's Trust Department or agent in the entity's name; Category three includes deposits that are uncollateralized. ' Bank Category 1 Category 2 Category 3 Balance ' Cash deposits $ 205,132 $ 572,538 $ - $ 777,670 1 I ROSEMEAD HOUSING DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS 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 has also entered into a 55-year lease agreement with the City for the Angelus Senior Housing facility, expiring June 2047. The Corporation paid $90,000 for administrative services and $60,000 in lease payments to the City during the year ended June 30, 2001. ' Total lease commitments remaining are $2,760,000 at June 30, 2001. The Corporation is funded, in part, by advances from the Agency. LI 1 Note 4. Property and Improvements During the year ended June 30, 2001, the changes in the general fixed assets were as follows: Balance 1 Land 1 1 1 Building Construction in progress Balance July 1, 2000 Acquisitions June 30, 2001 3,469,867 3,469,867 - 567,613 567,613 $ 3,469,867 $ 567,613 $ 4,037,480 In 1998 the Redevelopment Agency entered into a ground lease with the Army Corp of Engineers to provide for parking and access adjacent to the Rio Hondo Flood Control Channel in order for the Agency to proceed with the construction of a second Senior Citizen Housing project, which will consist of 72 housing units, and an adjacent 20,000 square foot Community Center. The property for this project was purchased years ago by the Agency for $1.66 million, of which $1.0 million was reimbursed to the Agency by Federal HOME funds. The costs incurred on this project will be allocated between the Corporation (Senior Citizen Housing project) and the Agency (Community Center). The project construction was started during the fiscal year ended June 30, 2001, whereby approximately $568,000 of costs was incurred on Senior Citizen Housing project through that date. The total estimated cost to complete the Senior Citizen Housing project, including the costs already incurred, as of June 30, 2001 is approximately $7.2 million. 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 which were in excess of insurance coverage in any of the three preceding years. 1 n 1 1 1 1 1 1 1 I ROSEMEAD HOUSING DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS Note 6. Property Management and Operations The Corporation has an agreement with a management company, dated July 1994, to operate the development housing. This agreement is 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 during fiscal year ended June 30, 2001. Note 7. Pronouncements Issued but Not Yet Adopted In June 1999, the GASB issued Statement of Governmental Accounting Standards No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. This Statement establishes a new financial reporting model for state and local governments. In addition, the Corporation will be required to disclose the details about the full cost of providing government services and to allocate expenses and revenue to allow calculation of net costs program by program. The Corporation will also need to report all capital assets, including infrastructure assets, and begin to track depreciation on these items year to year. The Corporation will be required to implement the new financial model for its fiscal year ending June 30, 2003. However, for purposes of the retroactive reporting of major networks and subsystems of general infrastructure assets, the Corporation will be required to implement this reporting as of fiscal year ending June 30, 2007. The Corporation has not completed its assessment of the effect that the adoption of Statement No. 34 will have on its financial statements. Note 8. Property Acquisition In July 2001, the Corporation acquired a parcel of land from the County of Los Angeles for approximately $65,000 for public use of removing a blighted residential lot. The Corporation purchased the parcel for the construction of two single-family detached homes on the property and will subsequently sell the homes through the City's first-time homebuyer program. I McGLADREY& PULLEN, LLP RSM ' `I® Certified Public Accountants international I ' ' S REPORT ON COMPLIANCE AND ON INDEPENDENT AUDITOR INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED ' IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS ' To the Governing Board ' Rosemead Housing Development Corporation Rosemead, California We have audited the general purpose financial statements of the Rosemead Housing Development ' Corporation (the Corporation), a component unit of the Redevelopment Agency of the City of Rosemead, California, as of and for the year ended June 30, 2001, and have issued our report thereon dated October 16, 2001. We conducted our audit in accordance with auditing standards generally accepted in ' the United States 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 component 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. 1 10 I 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. I ' Pasadena, California October 16, 2001 I I I I I W Q 0 I I 0 11 I