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2002 RCDC Financial and Compliance ReportI I I I I 1 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION FINANCIAL AND COMPLIANCE REPORT JUNE 30, 2002 p I ' CONTENTS ' INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FINANCIAL STATEMENTS 2 and 3 Combined balance sheet —all fund types and account groups Combined statement of revenues, expenditures and changes in fund balances— all governmental fund types Combined statement of revenues, expenditures and changes in fund balances— budget and actual —all governmental fund types Notes to financial statements 4 and 5 1 1 P SUPPLEMENTARY INFORMATION ' Combining balance sheet — special revenue funds 20 Combining statement of revenues, expenditures and changes in fund balances— special revenue funds 21 Computation of low- moderate income housing excess /surplus funds 22 and 23 ' INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ' ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GO VERNMENTA UDITING STANDARDS 24 and 25 1 1 P I `, McGLADREY& PULLEN, LLP MM ® Certified Public Accountants nternational INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION To the Governing Board Rosemead Community Development Commission Rosemead, California We have audited the accompanying general - purpose financial statements of the Rosemead Community Development Commission (the Commission), a component unit of the City of Rosemead, California, as of and for the year ended June 30, 2002, as listed in the table of contents. These general - purpose financial statements are the responsibility of the Commission'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 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 1 1 1 I F 1 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 Commission as of June 30, 2002, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated October 3, 2002 on our consideration of the Commission's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts 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. Our audit was made for the purpose of forming an opinion on the general - purpose financial statements taken as a whole. The combining fund statements and the computation of low - moderate housing excess /surplus funds listed in the table of contents as supplementary information are presented for purposes of additional analysis and are not a required part of the general - purpose financial statements of the Commission. Such information has been subjected to the auditing procedures applied in the audit of the general - purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general - purpose financial statements taken as a whole. �c�/ /keg Z_ L� Pasadena, California October 3, 2002 McGladrey & Pullen, LLP is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms. I j II i I' I I THIS PAGE IS INTENTIONALLY LEFT BLANK 1 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS June 30, 2002 Governmental Fund Assets and Other Debits Special Revenues Debt Service Capital Projects Assets Cash and investments $ 1,541,989 $ - $ 10,720,678 Receivables 3,564 32,833 141,076 Restricted cash and investment - 2,322,025 - Prepaid expenditures 4,000 - - Due from other funds 307,334 Property and equipment - - - Other Debits Amount available in Debt Service Fund - - - Amount to be provided for retirement of general long -term debt - - - Total assets and other debits $ 1,856,887 $ 2,354,858 $ 10,861,754 Liabilities, Eauitv and Other Credits Liabilities Accounts payable and accrued liabilities $ 839,931 $ - $ 1,105,705 Due to other funds 307,334 - Tax allocation bonds - - Total liabilities 1,147,265 1,105,705 Equity and Other Credits Investment in general fixed assets Fund balances: Reserved for Debt Service Reserved for Low - Moderate Income Housing Reserved for prepaid items Unreserved, designated for redevelopment projects Total equity and other credits Total liabilities, equity and other credits See Notes to Financial Statements. - 2,354,858 696,354 - 4,000 9,268 - 9,756,049 709,622 2,354,858 9,756,049 $ 1,856,887 $ 2,354,858 $ 10,861,754 P] 1 1 1 1 1 t 0 t Account Groups Totals (Memorandum Only) General General 34,255,000 34,255,000 34,625,000 Fixed Assets Long -term Debt 2002 2001 - 2,354,858 2,356,167 696,354 6,136,067 $ $ - $ 12,262,667 $ 20,232,690 $ 20.113.289 $ 34.255.000 $ 69.441,788 $ - 177,473 281,669 - 2,322,025 2,323,333 - 4,000 - - 307,334 5 20,113,289 - 20,113,289 10,940,994 - 2,354,858 2,354,858 2,356,167 - 31,900,142 31,900,142 32,268,833 $ 20,113,289 $ 34,255,000 $ 69,441,788 $ 68,403,691 $ $ $ 1,945,636 $ 468,157 307,334 - 34,255,000 34,255,000 34,625,000 34,255,000 36,507,970 35,093,157 20,113,289 - 20,113,289 10,940,994 - 2,354,858 2,356,167 696,354 6,136,067 - 9,765,317 13,877,306 20,113,289 - 32,933,818 33,310,534 $ 20.113.289 $ 34.255.000 $ 69.441,788 $ 68.403,691 k;, ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES Year Ended June 30, 2002 Special Revenue Debt Service Capital Projects ' ' Revenues: Property tax increment $ - $ - $ 3,197,754 ' Intergovernmental - - - Use of money and property Other 227,965 58,346 135,101 - 496,307 - , Total revenues 286,311 135,101 3,694,061 Expenditures: Current: , Improvements to project area - - 3,102,198 . Operating 246,123 - - Professional fees 14,692 - 73,308 ' City administrative services 90,000 - 1,023,695 Facility charge paid to City 60,000 - - Capital outlay 6,782,411 - - ' Debt service: Principal - 370,000 - Interest - 1,902,057 - Total expenditures 7,193,226 2,272,057 4,199,201 ' Revenues(under)expenditures (6,906,915) (2,136,956) (505,140) Other financing sources (uses): ' Operating transfers: From other funds 7,807,190 2,135,647 (To) other funds (6,657,334) - (3,285,503) Total other financing sources (uses) 1,149,856 2,135,647 (3,285,503) ' Revenues and other financing sources (under) expenditures and other financing sources (uses) (5,757,059) (1,309) (3,790,643) ' Fund balance, beginning 6,466,681 2,356,167 13,546,692 Fund balance, ending $ 709,622 $ 2,354,858 $ 9,756,049 ' See Notes to Financial Statements. ' I L_' 1 1 1 1 1 1 1 1 Totals (Memorandum Only) 2002 2001 246,123 677,773 $ 3,197,754 $ 2,945,877 - 55,795 859,373 1,731,581 58,346 7,232 4,115,473 4,740,485 3,102,198 875,320 246,123 677,773 88,000 73,341 1,113,695 1,126,458 60,000 60,000 6,782,411 502,979 370,000 345,000 1,902,057 1,922,847 13,664,484 5,583,718 (9,549,011) (843,233) 9,942,837 3,170,951 (9,942,837) (3,170,951) (9,549,011) (843,233) 22,369,540 23,212,774 $ 12,820,529 $ 22,369,541 5 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL GOVERNMENTAL FUND TYPES Year Ended June 30, 2002 Expenditures: Current: Improvement to project area Operating Professional fees City administrative services Facility charge paid to City Capital outlay Debt service: Principal Interest Total expenditures Revenues(under)expenditures Other financing sources (uses): Operating transfers: From other funds (To) other funds Total other financing sources (uses) Revenues and other financing sources (under) expenditures and other financing uses 460,100 246,123 213,977 Special Revenue Funds 14,692 (2,092) 90,000 90,000 60,000 Variance 7,435,000 6,782,411 652,589 Favorable Budget Actual (Unfavorable) Revenues: Property tax increment $ - $ - $ - Intergovernmental - - - Use of money and property 215,450 227,965 12,515 Other 5,000 58,346 53,346 Total revenues 220,450 286,311 65,861 Expenditures: Current: Improvement to project area Operating Professional fees City administrative services Facility charge paid to City Capital outlay Debt service: Principal Interest Total expenditures Revenues(under)expenditures Other financing sources (uses): Operating transfers: From other funds (To) other funds Total other financing sources (uses) Revenues and other financing sources (under) expenditures and other financing uses 460,100 246,123 213,977 12,600 14,692 (2,092) 90,000 90,000 60,000 60,000 - 7,435,000 6,782,411 652,589 8,057,700 7,193,226 864,474 (7,837,250) (6,906,915) 930,335 8,676,822 7,807,190 (869,632) (7,650,430) (6,657,334) 993,096 1,026,392 1,149,856 123,464 $ (6,810,858) (5,757,059) $ 1,053,799 Fund balance, beginning Fund balance, ending See Notes to Financial Statements. 6,466,681 $ 709,622 R 1 1 t 1 Debt Service Funds Capital Project Funds Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ $ $ $ 2,900,000 $ 3,197,754 $ 297,754 - - - 2,716,250 - (2,716,250) 135,000 135,101 101 250,000 496,307 246,307 135,000 135,101 101 5,866,250 3,694,061 (2,172,189) 6,568,083 3,102,198 3,465,885 135,500 73,308 62,192 957,000 1,023,695 (66,695) 370,000 370,000 2,135,647 2,135,647 6,869,550 2292. R40 (7.462532 (6,869,550) 4,177,029 $ (4,430,680) (1,309) $ 4,429,371 $ (2,387,315) (3,790,643) $ (1,403,328) 2,356,167 13,546,692 $ 2,354,858 $ 9,756,049 7 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL GOVERNMENTAL FUND TYPES, CONTINUED Year Ended June 30, 2002 Totals Variance Favorable Budget Actual (Unfavorable) Revenues: Property tax increment Intergovernmental Use of money and property Other Total revenues Expenditures: Current: Improvement to project area Operating Professional fees City administrative services Facility charge paid to City Capital outlay Debt service: Principal Interest Total expenditures Revenues (under) expenditures Other financing sources (uses): Operating transfers: From other funds (To) other funds Total other financing sources (uses) Revenues and other financing sources (under) expenditures and other financing uses $ 2,900,000 $ 3,197,754 $ 297,754 2,716,250 - (2,716,250) 600,450 859,373 258,923 5,000 58,346 53,346 6,221,700 4,115,473 (2,106,227) 6,568,083 3,102,198 3,465,885 460,100 246,123 213,977 148,100 88,000 60,100 1,047,000 1,113,695 (66,695) 60,000 60,000 - 7,435,000 6,782,411 652,589 370,000 370,000 - 1,912,840 1,902,057 10,783 18,001,123 13,664,484 4,336,639 (11,779,423) (9,549,011) 2,230,412 15,546,372 9,942,837 (5,603,535) (17,395,802) (9,942,837) 7,452,965 (1,849,430) 1,849,430 $ (13,628,853) (9,549,011) $ 4,079,842 Fund balance, beginning Fund balance, ending 22,369,540 $ 12,820,529 See Notes to Financial Statements. I ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ' NOTES TO FINANCIAL STATEMENTS I Note 1. Nature of Operations, Reporting Entity, Fund Accounting and Significant Accounting and Reporting Policies ' Nature of operations: The Rosemead Redevelopment Agency was established in June 1972 pursuant to State of California Health and Safety Code Section 33000 entitled Community Redevelopment Law. The Agency's name was changed to the Rosemead Community Development Commission (the Commission) in January 2002. Its purpose is to finance street, park and utility improvements. It also acquires and constructs major capital facilities all within the Rosemead Project Area No. 1. The Commission is a component unit of the City of Rosemead (the City), California, and is included in the general - purpose ' financial statements of the City. The Commission has the same fiscal year as the City. The financial statements contain information for the Commission only. The City financial statements can be obtained from the Finance Department of the City. ' Reporting entity: As required by accounting principles generally accepted in the United States of America (GAAP), these financial statements present the government and its component unit, an entity for which the government is considered to be financially accountable. A blended component unit, although a ' legally separate entity, is in substance, part of the government's operations and, therefore, data from this unit is combined with data of the primary government. ' The blended component unit included in the Commission's reporting entity is the Rosemead Housing Development Corporation (the Corporation). The Corporation is a California nonprofit public benefit corporation organized under Section 501(c)(3) of the Internal Revenue Code. The Corporation accounts for the construction, financing and operations of low- moderate income housing. The Corporation's financial statements can be obtained from the Finance Department of the City. ' Fund accounting: The accounts of the Commission 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 that comprise its assets, liabilities, equity, revenues and expenditures. The financial statements of the Commission have been prepared in ' conformity with GAAP as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard - setting body for establishing governmental accounting and financial reporting principles. ' The various funds and account groups are presented as follows: Governmental fund types: The Special Revenue Funds account for the proceeds of specific revenue resources (other than major e capital projects) that are legally restricted to expenditures for specified purposes. The Special Revenue Funds and their purposes are as follows: ' Low- Moderate Income Housing Set -Aside Fund — Accounts for the 20% of gross property tax increment revenue received by the Commission to fund future projects involving the replacing or rehabilitation of low- moderate income housing within City limits. Rosemead Housing Development Corporation— Accounts for the construction and financing of low - moderate income housing. 1 1 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS Note 1. Nature of Operations, Reporting Entity, Fund Accounting and Significant Accounting and Reporting Policies, Continued The Debt Service Fund accounts for the accumulation of resources for the payment of general long- term debt principal, interest and related costs. The Capital Projects Fund accounts for the financial resources to be used for the improvement and rehabilitation of the community redevelopment project areas and acquisition or construction of major capital facilities within the Commission. Account groups: The General Fixed Assets Account Group accounts for all Commission general fixed assets. The General Long -term Debt Account Group accounts for the outstanding principal balances of all Commission long -term debt expected to be financed from Governmental Fund Types. The following is a summary of the significant accounting and reporting policies: Basis of accounting: 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, if measurable, except expenditures for debt service on long -term obligations, which are recognized when due. 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. Cash and investments: The Commission pools cash and investment resources of some of its funds in order to facilitate the management of cash. Cash applicable to a particular fund is readily identifiable. The balance in the pooled cash accounts is available to meet current operating requirements. Investments are stated at fair value. The fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced liquidation. The fair value of the investments is generally based on published market prices and quotations from major investment firms. Investment earnings are allocated based on the source of funds. Receivables: Property taxes attach as an enforceable lien on property as of March 1. Taxes are levied on July 1 and are payable in two installments, on December 10 and April 10. The County of Los Angeles bills and collects the property taxes and remits them to the Commission in installments during the year. Property taxes received within 60 days after the Commission's fiscal year end are considered "measurable" and "available" and are accrued in the Commission's financial statements. All other receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. 10 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ' NOTES TO FINANCIAL STATEMENTS Note 1. Nature of Operations, Reporting Entity, Fund Accounting and Significant Accounting and Reporting Policies, Continued ' Property and equipment: All property and equipment of the Commission are accounted for in the General Fixed Assets Account Group. Property and equipment items acquired or constructed for 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 that 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. Fund balances: The reserved portion of the fund balances represents that amount which has been legally ' identified for the specific purpose or it represents that amount which is not available to liquidate current liabilities. The unreserved portion represents the amount available for future appropriations. Designated fund balances represent tentative plans for future use of financial resources. Budget matters: Budgets presented in this report for comparison to actual amounts are presented in accordance with GAAP. The modified accrual basis of accounting is employed in the preparation of the ' budget. Reported budget amounts represent the original adopted budget as amended. The legal level of budgetary control is at the department level. Expenditures did not exceed appropriations for any department for the fiscal year ended June 30, 2002. The governing council made two significant ' budgetary appropriations throughout the year totaling approximately $227,000. Unexpended budgeted amounts lapse at the end of the budget year. ' "Memorandum Only" total 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 2001 totals presented in the "Memorandum Only" columns are included to provide a summarized comparison with comparable 2002 amounts and are not intended to present all information necessary for a fair presentation of financial position and results of operations in accordance with accounting principles generally accepted in the United States of America. I I1 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS Note 2. Cash and Investments The components of cash and investments at June 30, 2002 are as follows: Cash: Cash $ 967,386 Time certificates of deposit 2,034,525 Cash total 3,001,911 Investments Debt securities investments 2,322,025 Investment in State Treasurer's Investment Pool 9,260,756 Investments total 11,582,781 Cash and investments total $ 14,584,692 Cash: The Commission maintains cash and investment pools that are available for use by all funds. Each fund's or fund type's share of the pool balance is reported in the financial statements as cash and cash investments. Earnings from the pooled investments are allocated monthly to each participating fund based on a formula that takes into consideration each fund's average investment in the pool. At year end the carrying amount of the Commission's deposits was $3,001,911 and the bank balance was $3,053,755. Of the bank balance, $470,905 was covered by federal depository insurance or by collateral held in the Commission's name, and $2,582,850 was collateralized by depository collateral pools as described in the following paragraph. In accordance with state statutes, the Commission 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 a Commission'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. Category 1 2 3 Total Cash $ 370,905 $ 648,580 $ $ 1,019,485 Time certificates of deposit 100,000 1,934,270 2,034,270 $ 470,905 $2,582,850 $ $ 3,053,755 12 1 I ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS ' Note 2. Cash and Investments, Continued Investments: State statutes authorize the Commission to invest any available funds in securities issued or ' guaranteed by the United States Treasury or agencies of the United States, bank certificates of deposit, bankers acceptances, negotiable certificates of deposit, the State Treasurer's Investment Pool (LAIF), repurchase agreements, commercial paper and bonds, and registered warrants or treasury notes of the ' State of California and its local agencies. An advisory board has been established to monitor LAIF's compliance with regulations and investment alternatives established by the State. ' The Commission participates in a voluntary external investment pool, LAIF, which is managed by the State Treasurer. LAIF has oversight provided by the Local Agency Investment Advisory Board. The Board consists of five members as designated by State statute. The Chairman of the Board is the State Treasurer or his designated representative. The fair value of the Commission's shares in the pool approximates the fair value of the position in the pool. At June 30, 2002, the Commission's pooled investments in LAIF in the amount of $9,260,756 are not ' subject to custodial credit risk categorization. The total estimated fair value invested by all public agencies in LAIF is $48,082,558,174. Of that amount, 100% is invested in nonderivative financial products. 1 Restricted cash and investments: All restricted cash and investments of the Commission are held by trustees or an escrow agent. The California Government Code provides that these funds, in the absence of specific governing provisions to the contrary, may be invested in accordance with the resolutions or indentures that specify the allowable investment of bond proceeds and funds earmarked for bond repayment. The Commission's investments, including restricted cash and investments, as of June 30, 2002, are categorized in the following schedule to give an indication of the level of risk assumed by the entity at year end: ' Investment Investment in State Treasurer's Investment ' Pool Restricted cash and investments, guaranteed investment contract Total investments 1 Category 1 2 3 Balance $ 9,260,756 $ 9,260,756 2,322,025 2,322,025 $ $ $ $11,582,781 $ 11,582,781 1 13 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS Note 2. Cash and Investments, Continued The three preceding risk description categories are defined as follows: Category Descripti Investments that are insured, registered or for which the securities are held by the Commission or its agent in the Commission's name. Uninsured and unregistered investments for which the securities are held by the counterparty's Trust Department (if a bank) or agent in the Commission's name. Uninsured and unregistered investments for which the securities are held by the counterparty's Trust Department (if a bank) or agent, but not in the Commission's name. Note 3. Reimbursement Agreements and Related -party Transactions The Commission has entered into various reimbursement agreements with the City which require the City to install certain public improvements for the benefit of the Rosemead Redevelopment Commission Project Area No. 1. In addition, the Commission reimburses the City for administrative services, facilities and other operating services, which totaled $1,097,500 for the fiscal year ended June 30, 2002. The Commission and City are commonly controlled by the City Council. Note 4. Property and Equipment During the year ended June 30, 2002, the changes in the general fixed assets were as follows: Balance Land Buildings and improvements Furniture and fixtures Construction in progress Balance July 1, 2001 Acquisitions June 30, 2002 $ 2,555,737 $ 65,000 $ 2,620,737 6,241,811 - 6,241,811 938,682 8,520 947,202 1,204,764 9,098,775 10,303,539 $ 10,940,994 $ 9,172,295 $ 20,113,289 In 1998 the Commission 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 Commission 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 Commission for $1.66 million, of which $1.0 million was reimbursed to the Commission by the City's Federal HOME funds. The costs incurred on this project will be allocated between the Corporation (Senior Citizen Housing project), the Commission and the City (Community Center). 14 ' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ' NOTES TO FINANCIAL STATEMENTS ' Note 4. Property and Equipment, Continued The Senior Citizen Housing project construction was started during the fiscal year ended June 30, 2001, ' whereby approximately $7,316,000 of costs was incurred through June 30, 2002. The total estimated costs to complete the Senior Citizen Housing project as of June 30, 2002 is approximately $121,000. ' The Community Center project construction began during the fiscal year ended June 30, 2001. Of the $5,369,000 in costs incurred through June 30, 2002, the Commission and the City paid for approximately $2,987,000 and $2,382,000, respectively. The total estimated cost to complete the Community Center ' project as of June 30, 2002 is approximately $394,000. Note 5. Long -term Debt ' The following is a summary of general long -term debt transactions for the year ended June 30, 2002: ' Tax Allocation Tax Allocation Bonds Bonds Series 1993A Series 1993B Total ' Balance, July 1, 2001 $ 34,275,000 $ 350,000 $ 34,625,000 Payments of principal (20,000) (350,000) (370,000) ' Balance, June 30, 2002 $ 34,255,000 $ - $ 34,255,000 In November 1993, the Commission issued tax allocation bonds amounting to $34,275,000 (Series ' 1993A) and taxable tax allocation refunding bonds amounting to $2,435,000 (Series 1993B) to finance a portion of the cost of the redevelopment area known as Project Area No. 1. The bonds bear interest ranging from 4.6% to 5.6% and 5.2% to 5.9% for Series 1993A and B, respectively. Series 1993A bonds ' mature after October 1, 2001 and before October 1, 2033, and Series 1993B bonds matured on October 1, 2001. ' In addition, the 1993 Series A bond issue reallocated $6,813,850 of proceeds from the 1991 bond issue deposited in the Low - Moderate Income Housing Set -Aside Fund in October 1991. The reallocation had the effect of satisfying the present value effect of the $423,574 borrowed from the Educational Revenue ' Augmentation Fund (ERAF) in fiscal year ended June 30, 1993 and satisfying the present value effect of the set -aside requirements as follows: $812,342 for fiscal year ended June 30, 1992, $847,147 for fiscal year ended June 30, 1993 and $469,142 for each of the fiscal years ended June 30, 1997 through June 30, 2022. Additional low- moderate income housing set -aside commitments are addressed in Note 7. 1 1 1 15 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS Note 5. Long -term Debt, Continued The annual requirements, principal and interest to amortize the outstanding debt as of June 30, 2002 are as follows: During the Years Series 1993A Bonds Ending June 30, Principal Interest Total 2003 $ 425,000 $ 1,881,072 $ 2,306,072 2004 445,000 1,859,747 2,304,747 2005 465,000 1,836,765 2,301,765 2006 490,000 1,812,168 2,302,168 2007 515,000 1,785,909 2,300,909 Years thereafter 31,915,000 29,725,291 61,640,291 $ 34,255,000 $ 38,900,952 $73,155,952 Tax allocation bonds, Series 1993A and B: The Tax Reform Act instituted certain arbitrage restrictions with respect to the issuance of tax - exempt bonds. Arbitrage regulations deal with the investment of all tax - exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not paid to the federal government at least every five years. During the current year, the Commission performed calculations of excess investment earnings on various bonds and financings in accordance with arbitrage regulations. The Commission has determined that no arbitrage rebate liability exists as of June 30, 2002. Note 6. Risk Management The Commission is exposed to various risks of loss related to torts; thefts of, damage to and destruction of assets; errors and omissions; and natural disasters. The Commission, through the City, carries commercial liability insurance coverage. The Commission carries no insurance coverage for natural disasters. Since the Commission does not have any employees (it uses employees from the City), it is not liable for injury to employees, workers' compensation, or employee health and accident insurance. The City has had no reductions in insurance coverage nor did the City have any settlements that were in excess of insurance coverage in any of the three preceding years. Note 7. Commitments and Contingent Liabilities Low - Moderate Income Housing Set -Aside Fund: Under State law, the Commission is required to set aside a portion of its property tax increment revenue for low- moderate income housing. The Commission has made findings that, for the years ended June 30, 1986 through June 30, 1991, it was allowed to defer funding of the set - aside. The set -aside amounts incurred during the fiscal year ended June 30, 1994, 1995, 1996, 1997 and 1998 were also deferred until the fiscal year ending June 30, 2023, as provided by the Commission's adoption of the housing deficit repayment plan. As of June 30, 2002, the accumulated set - aside amount not yet funded was approximately $4,947,000. As required by law, the Commission devised a plan to fund the accumulating amount. 16 ' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ' NOTES TO FINANCIAL STATEMENTS ' Note 7. Commitments and Contingent Liabilities, Continued To help fund the completion of the Senior Citizen Housing project construction (see Note 4), the Capital ' Projects Fund transferred an additional $849,863 to the Low - Moderate Income Housing Set -Aside Fund during the fiscal year ended June 30, 2002, over and above the 20% requirement of $299,993. This additional amount, which is considered an advance on future set -aside requirements, will be deducted ' from future transfers for the set -aside over the next three years. Advance agreement: In February 1995, the Commission approved an agreement with a local utility ' company to advance the utility company $117,600 required to install water distribution mains within the Commission redevelopment area. The agreement remains on hold by the Commission as of October 3, 2002. Note 8. Property Management and Operations ' The Commission, through 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, 2002. I Note 9. Commitment to Purchase Furniture ' In June 2002, the Commission and Corporation entered into a contract to purchase furniture, fixtures and equipment for the Senior Citizen Housing and Community Center projects. As of June 30, 2002, no costs were incurred on the contract. The total estimated cost of purchase is approximately $243,000. Of this amount, the Commission and the Corporation will pay for $117,000 and $126,000, respectively. Note 10. Subsequent Event ' In August 2002, the Corporation entered into a 55 -year lease agreement with the City for the land on which the Garvey Senior Citizen Housing facility is located, expiring August 2056. The Corporation will ' pay $72,000 annually for the lease. Total lease commitments as of August 2002 are $3,960,000. Note 11. Pronouncements Issued but Not Yet Adopted Governmental Accounting Standards Board Statement No. 34: Beginning with the fiscal year ending June 30, 2003, the Commission will adopt 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 Commission 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. 17 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION NOTES TO FINANCIAL STATEMENTS Note 11. Pronouncements Issued but Not Yet Adopted, Continued 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 Commission'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 Commission'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 Commission (government and business -type activities). The Commission will report all capital assets in the government -wide statement of net assets and report depreciation expenses —the cost of "using up" capital assets —in the statement of activities. The net assets of the Commission will be broken down into three categories: (1) invested in capital assets, net of related debt, (2) restricted and (3) unrestricted. Statement of activities: The government -wide statement of activities will report expenses and revenues in a format that focuses on the cost of each of the Commission's functions. The expense of individual functions is compared to the revenue generated directly by the function. Accordingly, the Commission will be recording capital and certain other long -term assets and liabilities in the statement of net assets, and report all revenues and the cost of providing services under the accrual basis of accounting in the statement of activities. Governmental Accounting Standards Board Statement No. 37: Beginning with the fiscal year ending June 30, 2003, the Commission will also be adopting 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 the GASB believes may have unintended consequences in some circumstances. Accordingly, the City will consider the effects of this Statement when adopting the provisions of GASB Statement No. 34, as previously described. Governmental Accounting Standards Board StatementlNo. 38: Beginning with the fiscal year ending June 30, 2003, the Commission will also be adopting 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. In ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION 1 NOTES TO FINANCIAL STATEMENTS Note 11. Pronouncements Issued but Not Yet Adopted, Continued Governmental Accounting Standards Board Interpretation No. 6: Beginning with the fiscal year ' ending June 30, 2003, the Commission will also be adopting 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 Commission 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, 2002. 1 1 1 1 11 0 1 19 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMBINING BALANCE SHEET SPECIAL REVENUE FUNDS June 30, 2002 Liabilities and Eauit Liabilities, accounts payable, accrued liabilities and deposits $ - S 839,931 $ 839,931 $ 173,959 Due to other funds 307,334 - 307,334 - Totalliabilities 307,334 839,931 1,147,265 173,959 Equity Fund balances: Reserved for: Low- moderate income housing Prepaid items Unreserved, designated for redevelopment projects Total equity Total liabilities and equity 696,354 - 696,354 6,136,067 4,000 4,000 20 Rosemead Low - Moderate Housing Income Housing Development Totals Assets Set -Aside Fund Corporation 2002 2001 Cash and investments $ 1,000,124 $ 541,865 $ 1,541,989 $ 6,567,512 Receivables 3,564 - 3,564 73,128 Due from other funds - 307,334 307,334 - Prepaid expenditures - 4,000 4,000 - Total assets S 1,003,688 $ 853,199 $ 1,856,887 $ 6,6 40,640 Liabilities and Eauit Liabilities, accounts payable, accrued liabilities and deposits $ - S 839,931 $ 839,931 $ 173,959 Due to other funds 307,334 - 307,334 - Totalliabilities 307,334 839,931 1,147,265 173,959 Equity Fund balances: Reserved for: Low- moderate income housing Prepaid items Unreserved, designated for redevelopment projects Total equity Total liabilities and equity 696,354 - 696,354 6,136,067 4,000 4,000 20 I 1 1 1 1 1 �1 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES SPECIAL REVENUE FUNDS Year Ended June 30, 2002 Rosemead Low- Moderate Housing Income Housing Development Set -Aside Fund Corporation Revenues: Use of money and property Other Total revenues Expenditures: Current Operating Professional fees City administrative services Facility charge paid to the City Capital outlay Total expenditures Revenues over (under) expenditures Other financing sources (uses): Operating transfers: From other funds (To) other funds Total other financing sources (uses) Revenues and other financing sources over (under) expenditures and other financing uses Fund balance, beginning Fund balance, ending Totals 2002 2001 $ 67,765 $ 160,200 $ 227,965 S 497,070 - 58,346 58,346 7,232 67,765 218,546 286,311 504,302 - 246,123 246,123 174,794 - 14,692 14,692 23,513 - 90,000 90,000 90,000 - 60,000 60,000 60,000 - 6,782,411 6,782,411 502,979 67,765 (6,974,680) (6,906,915) (346,984) 1,149,856 6,657,334 7,807,190 1,040,409 (6,657,334) - (6,657,334) (800,000) (5,507,478) 6,657,334 1,149,856 240,409 (5,439,713) (317,346) (5,757,059) (106,575) 6,136,067 330,614 6,466,681 6,573,256 $ 696,354 $ 13,268 $ 709,622 $ 6,466,681 1 21 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMPUTATION OF LOW - MODERATE INCOME HOUSING EXCESS /SURPLUS FUNDS Year Ended June 30, 2002 Area 1 Fund Balance— Beginning of Year $ 6,136,067 Adjustments Less unavailable funds— included in beginning fund balance: Land held for resale - Rehabilitation loans - ERAF loan receivable - Set -aside deferrals - Unspent bond proceeds (5,209,528) Total unavailable funds (5,209,528) Available Fund Balance— Beginning of Year 926,538 Current year proceeds /uses (actual plus changes in unavailable): Proceeds 1,217,621 Uses (6,657,334) Changes in unavailable amounts 4,513,175 Available Fund Balance —End of Year Encumbrances Unspent bond proceeds present Land sales —HS 33334.12(g)(3)(A) Available Fund Balance —for Excess Surplus Does available fund balance for excess /surplus exceed $1,000,000? If so, enter available fund balance and evaluate that amount against tax increment. If less, enter zero. Does available fund balance for excess /surplus exceed the greater of prior four years' set -aside deposits or $1,000,000? Tax increment set -aside amounts: Fiscal year 1997 -98 Fiscal year 1998 -99 Fiscal year 1999 -00 Fiscal year 2000 -01 Total set -aside deposited into fund Excess /Surplus Funds Greater of available fund balance for excess /surplus or prior four years' tax increment set -aside deposits $ - 1 691,181 708,027 ' 705,661 709,551 2,814,420 , 2 $ 1 22 1 1 1 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION COMPUTATION OF LOW- MODERATE INCOME HOUSING EXCESS /SURPLUS FUNDS, CONTINUED Year Ended June 30, 2002 Reconciliation to Ending Fund Balance Ending GAAP fund balance Available fund balance —end of year above Add unavailable funds —end of year Land held for resale Rehabilitation loans ERAF loan receivable Set -aside deferrals Other: Unspent bond proceeds Total unavailable funds 23 Area I $ 696,354 696,354 696,354 $ 696,354 THIS PAGE IS INTENTIONALLY LEFT BLANK I I. 1 1 1 ` `� McGLADUY& PULLEN, LLP ® Certified Public Accountants 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 To the Governing Board Rosemead Community Development Commission Rosemead, California inter national t'4�J V L We have audited the general - purpose financial statements of the Rosemead Community Development Commission (the Commission), a component unit of the City of Rosemead, California, as of and for the year ended June 30, 2002, and have issued our report thereon dated October 3, 2002. 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 1 1 1 1 I 1 As part of obtaining reasonable assurance about whether the Commission's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. This included those provisions of laws and regulations identified in the Guidelines for Compliance Audits of California Redevelopment Agencies, issued by the State Controller and as interpreted in the Suggested Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies issued by the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants. 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 Commission'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 as defined above. VJ McGladrey & Pullen, LLP is an independent member firm of ' RSM International, an affiliation of independent accounting and consulting firms. I This report is intended for the information of the Governing Board and management of the Commission and is not intended to be and should not be used by anyone other than those specified parties. Pasadena, California ' October 3, 2002 1 l__I C I ' 25 .1