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1991 City Compliance ReportsH 1 I CITY OF ROSEMEAD, CALIFORNIA COMPLIANCE AND FINANCIAL REPORT JUNE 30, 1991 I CONTENTS I SECTION I - GENERAL PURPOSE FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REPORT ON THE GENERAL PURPOSE FINANCIAL STATEMENTS F I 1 GENERAL PURPOSE FINANCIAL STATEMENTS Combined balance sheet, all fund types and account groups 2 Combined statement of revenues, expenditures and changes in fund balances, all governmental fund types 3 Combined statement of revenues, expenditures and changes in fund balances - budget and actual - general, special revenue and debt service fund types 4 Statement of revenues, expenses and changes in fund balance, pension trust fund 5 Statement of cash flows, pension trust fund 6 Notes to financial statements 7-20 INDEPENDENT AUDITORS' REPORT ON THE SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE 21 SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE 22 I ' C O N T E N T S, Continued SECTION II - COMPLIANCE MATTERS AND INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS REPORTS REQUIRED BY THE GOVERNMENTAL ' AUDITING STANDARDS Independent auditors' report on: ' Compliance with applicable laws and regulations based on an audit of the general purpose financial statements 23 and 24 Internal control structure 25 and 26 ' REPORTS REQUIRED BY THE SINGLE AUDIT ACT AND OMB CIRCULAR A-128 ' ' report on: Independent auditors Specific compliance requirements applicable to major federal financial assistance programs 27 and 28 Compliance with the general requirements applicable to ' federal financial assistance programs Internal accounting and administrative control systems 29 and 30 used to administer federal financial assistance programs 31 - 33 1 SECTION I - GENERAL PURPOSE FINANCIAL STATEMENTS I 1 L u LNNI McGLADREY & PULLEN Certified Public Accountants and Consultants INDEPENDENT AUDITORS' REPORT ON THE GENERAL PURPOSE FINANCIAL STATEMENTS To the Honorable Mayor and Members of the City Council City of Rosemead Rosemead, California We have audited the accompanying general purpose financial statements of the City of Rosemead, California, as of and for the year ended June 30, 1991, as listed in the table of contents. These general purpose financial statements are the responsibility of the City'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 generally accepted auditing standards. 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 City of Rosemead, California, as of June 30, 1991, and the results of its operations and cash flows of its pension trust fund for the year then ended in conformity with generally accepted accounting principles. u p C 6 )Y-A~ " tea~ Pasadena, California September 13, 1991 - 1 - CITY OF ROSEMEAD, CALIFORNIA COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS June 30, 1991 ASSETS Cash and cash investments Cash and investments with fiscal agent Other investments investments in deferred compensation plans Investments in annuity contracts Receivables Due from other funds Property and equipment Amount available in debt service fund Amount to be provided for retirement of general long-term debt Total assets LIABILITIES AND MUNICIPAL EQUITY LIABILITIES Accounts payable and accrued liabilities Due to other funds Due to other governmental agencies Refundable deposits Deferred compensation Tax allocation notes Accrued vacation pay and compensatory time Total liabilities MUNICIPAL EQUITY Investment in general fixed assets Fund balance: Reserved: Long-term receivable Debt service Employees retirement Unreserved: Designated for capital projects Undesignated Total municipal equity and other credits Total liabilities, municipal equity and other credits See Notes to Financial Statements. Governmental Fund Types Special Capital General Revenue Proiects $ 1,663,683 $ 1,443,850 $ 3,157,519 4,685,872 7,123,147 1,459,626 382,454 320,810 419,920 - - 8,229,101 $ 1,826,304 $ 10.601476 $ 1,294,279 $ 185,330 $ 992,225 - 249,986 169,934 243,836 - 10.911 $ 1.305.190 $ 679.152 $ 1.162.159 626,008 - 9,439,317 6.297.903 1.147.152 $ 6.921911 $ 1.147.152 $ 9.439317 $ 8.229.101 $ 1.826304 $ 10.601.476 2- I Governmental Fiduciary Total Fund Types Fund Types Account Groups (Memorandum Only) ' Trust General General Debt and Fixed Long-Term Service Agency Assets Debt 1991 1990 ' $ $ 101,243 $ $ $ 6366.295 $ 8,651,658 2,668,179 - - 2,668,179 2,973,099 ' _ _ 145,016 - 11,809,019 145,016 13,264,580 98,963 894,927 - 894,927 720,335 106,027 - - 2,268,917 2,495,868 419,920 355,868 8,356,624 8,356,624 7,588,261 - 2,774,206 2,774,206 3,079,126 _ _ - 7.678.283 7,678.283 8.983303 $ 2.774.206 $ 1,141,186 $ 8,356,624 $ 10,452,489 $ 43,381,386 $ 48211.061 I $ $ $ $ $ 2,471,834 $ 1,664,595 419,920 355,868 243,836 324,867 78,204 78,204 78,209 168,055 168,055 123,539 10,365,000 10,365,000 11,995,000 87.489 98,400 77587 t $ $ 246,259 $ - $ 10.452.489 $ 13,845.249 $ 14.619.665 $ $ - $ 8,356,624 $ - $ 8,356,624 $ 7,588,261 _ 626,008 626,486 2,774,206 2,774,206 3,079,126 894,927 - 894,927 720,335 ' _ _ _ 9,439,317 12,623,923 7.445.055 8.953.265 $ 2,774,206 $ 894 927 $ 8,356-624 $ - $ 29536.137 $ 33.591.396 $ 2.774.206 $ 1,141 186 $ 8 356 624 $ 10,452,489 $ 43381386 $ 48.211.061 CITY OF ROSEMEAD, CALIFORNIA COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES Year Ended June 30, 1991 REVENUE Property tax increment and special assessments Other taxes Licenses and permits Intergovernmental Charges for services Fines, forfeitures and penalties Use of money and property Other EXPENDITURES Current: General government Public safety Public works Public health Public recreation Community service Capital outlay Debt service: Principal Interest Revenue over (under) expenditures OTHER FINANCING SOURCES (USES) Operating transfers: From other funds (To) other funds Revenue and other financing sources over (under) expenditures and other financing uses FUND BALANCE, BEGINNING FUND BALANCE, ENDING See Notes to Financial Statements. Governmental Fund Types Special Capital General Revenue Projects $ - $ 347,061 $ 3,059,892 4,245,201 - - 479,084 - 2,763,673 1,793,837 228,615 - 270,466 84,581 - 679,484 79,681 817,037 56,605 95,169 $ 8,723,128 $ 2305.160 $ 3972,098 $ 1,579,042 $ 80,845 $ 556,025 3,659,871 334,350 - 1,033,173 756,734 4,585,062 1,014,349 - - 1,804,330 34,163 - 1,230,417 849,305 - 127,984 32,413 - $ 10,449,166 $ 2,087,810 $ 5,141,087 $ (1,726,038) $ 217,350 $ (1,168,989) $ 87,816 $ 20,209 $ (20,209) (87,816) (2,015,617) $ 67,607 $ (67,607) $ (2,015,617) $ (1,658,431) $ 149,743 $ (3,184,606) 8,582,342 997,409 12,623,923 $ 6,923,911 $ 1,147,152 $ 9,439.317 -3- I Governmental Total Fund Tvoes (Memorandum Only) Debt Service 1991 1990 $ $ 3,406,953 $ 3,507,606 - 4,245,201 4,176,257 - 479,084 533,050 - 4,557,510 3,725,299 - 228,615 284,851 355,047 524,001 268,350 1,844,552 2,389,057 13,463 165,237 191,389 281,813 $ 15,282,199 $ 15,331510 $ $ 2,215,912 $ 1,712,102 3,994,221 3,809,631 6,374,969 8,536,328 1,014,349 856,298 ' 1,838,493 1,775,194 2,079,722 1,510,545 160,397 123,443 1 I 1,630,000 1,630,000 1,516,728 972,350 972,350 U01,811 $ 2,602,350 $ 20,280,413 $ 20,942,080 $ (2,320,537) $ (4 998114) $ (5,610,570) $ 2,015,617 $ 2,123,642 $ 2,540,339 - (2,123,642) (2,540339) $ 2,015,617 $ $ $ (304,920) $ (4,998,214) $ (5,610,570) 3,079,126 25,282,800 30,893,370 $ 2,774,206 $ 20,284,586 $ 25,282,800 CITY OF ROSEMEAD, CALIFORNIA COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL, SPECIAL REVENUE AND DEBT SERVICE FUND TYPES Year Ended June 30, 1991 REVENUE Property taxes and special assessments Other taxes Licenses and permits intergovernmental Charges for services Fines, forfeitures and penalties Use of money and property Other EXPENDITURES Current: General government Public safety Public works Public health Public recreation Community service Capital outlay Debt service: Principal Interest Revenue over (under) expenditures OTHER FINANCING SOURCES (USES) Operating transfers: From other funds (To) other funds Revenue and other financing sources over (under) expenditures FUND BALANCE, BEGINNING FUND BALANCE, ENDING See Notes to Financial Statements. General Fund Over (Under) Budget Actual Budget 4,077,000 4,245,201 168,201 551,500 479,084 (72,416) 3,654,100 2,763,673 (890,427) 349,075 228,615 (120,460) 300,000 270,466 (29,534) 730,800 679,484 (51,316) 26.500 56.605 30.105 $ 9,688,975 $ 8.721128 $ (965.847) $ 1,672,057 $ 1,579,042 $ (93,015) 3,634,430 3,659,871 25,441 2,003,210 1,033,173 (970,037) 1,044,480 1,014,349 (30,131) 1,788,317 1,804,330 16,013 1,174,950 1,230,417 55,467 129,955 127,984 (1,971) $ 11,447,399 $10,449,166 . $ (998,233) $(1.758.424) $ (1.726.038) $ 32.386 $ 296,200 $ 87,816 $ (208,384) - (20,209) (20,209) $ 296,200 $ 67,607 $ (228.593) 1 462 224 $ (1,658,431) $ (196.2071 8.582.342 $ 6.923.911 -4- L 1 J 1 Special Revenue Debt Service Over Over (Under) (Under) Budget Actual Bud et Budget Actual Budget $ 311,200 $ 347,061 $ 35,861 $ $ $ 2,402,740 1,793,837 (608,903) 180,000 84,581 (95,419) 60,000 79,681 19,681 241,000 268,350 27,350 13.463 13.463 $ 2,953940 $ 2,305,160 $ (648,780) $ 241,000 $ 281,813 $ 40,813 $ 130,290 $ 80,845 $ (49,445) $ - $ - $ - 475,000 334,350 (140,650) - 894,910 756,734 (138,176) - 175,300 34,163 (141,137) 1,295,030 849,305 (445,725) 26,250 32,413 6,163 - - - - - 1,630,000 1,630,000 972,350 972,350 $ 2.996380 $ 2,087.810 $ (908,970) $ 2,602,350 $ 2,602,350 $ $ (42,840) $ 217,350 $ 260,190 $ (2,361,350) $ (2,320,537) $ 40,813 $ $ 20,209 $ 20,209 $ 2,602,350 $ 2,015,617 $ (586,733) 8)7,816) (87,816) - $ $ (67,607) $ (67,607) $ 2602350 $ 2,015,617 $ (586333) $ (42,8401 $ 149,743 $ 192583 $ 241,000 $ (304,920) (545.9201. 997,409 3,079,126 1147152 $ 2,774.206 1 ' CITY OF ROSEMEAD, CALIFORNIA ' STATEMENT OF REVENUE, EXPENSES AND CHANGES IN FUND BALANCE ' PENSION TRUST FUND Year Ended June 30, 1991 Operating revenue: Contributions Interest and other investment income Operating expenses: Administrative fees Pension benefits Net income FUND BALANCE, BEGINNING FUND BALANCE, ENDING See Notes to Financial Statements. 1 $ 137,411 61.493 $ 198.904 $ 4,866 19.446 $ 24.312 $ 174,592 720.335 894.927 1 -5- 1 CITY OF ROSEMEAD, CALIFORNIA STATEMENT OF CASH FLOWS PENSION TRUST FUND Year Ended June 30, 1991 CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: Interest income Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of annuity contracts Proceeds from the sale and maturity of annuity contracts Interest received on annuity contracts Net cash (used in) investing activities CASH AND CASH EQUIVALENTS, beginning CASH AND CASH EQUIVALENTS, ending See Notes to Financial Statements. -6- $ 174,592 (61.4 $ 113.099 $ (198,904) 24,312 61.493 $ (113.099) I CITY OF ROSEMEAD, CALIFORNIA I NOTES TO FINANCIAL STATEMENTS Note L Reporting Entity, Nature of Operations, Description of Funds and Account Groups and Significant Accounting Policies ' Reporting entity The criteria of oversight responsibility, special financing relationships and scope of public service was used in determining the agencies or entities which comprise the City of ' Rosemead, California (the City) for financial reporting purposes. Oversight responsibility is determined by the extent of financial interdependency, control over the selection of the governing authority and management, ability to significantly influence operations, and accountability for fiscal matters. Based on these criteria, the Rosemead Redevelopment Agency (the Agency) is included in the combined financial statements of the City. Nature of operations City of Rosemead ' The City provides a broad range of services to its citizens, including general government, public safety, streets, sanitation and health, cultural and park facilities and social services. ' Many of the functions often provided by municipal government are, in the City provided by special districts. Examples of some of these special districts, which usually encompass areas larger than the City itself, are the Fire Protection District, the Library District and the County Flood Control District. Certain other governmental functions are paid for by the City but performed by Los Angeles County departments under contract. Some of the contracts now in effect are for police, street maintenance and animal control. Rosemead Redevelopment Agency The Agency finances street, park and utility improvements within the Rosemead Project Area No. 1. Description of funds and account groups The accounts of the reporting entity are organized on the basis of funds or groups of accounts, 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: 1 7 1 I NOTES TO FINANCIAL STATEMENTS ' Note 1. Reporting Entity, Nature of Operations Description of Funds and Account Groups and Significant Accounting Policies, Continued ' Governmental Fund Types The General Fund accounts for all financial resources except those required to be accounted for in another fund. These resources are devoted to financing the general services that the City performs for its citizens. ' Special Revenue Funds account for the proceeds of specific revenue sources (other than special assessments, expendable trusts and major capital projects) that are legally restricted to expenditures for specified purposes. The Special Revenue Funds and their purposes are ' as follows: The Tn7jTw Safety Fund accounts for the receipt of vehicle code fines which are expended ' for traffic safety enforcement. The State Gas Tax Fund accounts for funds collected from the State of California which ' are used for street construction, street maintenance, engineering and administrative costs. The County Aid to Cities Fund accounts for funds received from the County of Los ' Angeles for street construction and maintenance projects. ' The Local Transportation Fund accounts for state grants used to finance the construction of bikeways and sidewalks. The Public Transportation Fund accounts for the City's share of additional sales tax collected in the County of Los Angeles as a result of Proposition A. The funds are used to finance public transportation projects. The Community Development Block Grant Fund accounts for Community Development Block Grants received from the United States Department of Housing and Urban Development. The 1976 Community Parklands Grant Fund accounts for funds to be used for park ' projects. The Street Lighting Fund accounts for the operation of street lights within the City. ' The Narcotics Seizure Fund accounts for the funds received from the County of Los Angeles from the confiscation of cash and other valuables seized during drug related ' police raids. The funds are used to further enhance the City's drug related crime prevention and detection programs. 1 8 I NOTES TO FINANCIAL STATEMENTS Note 1. Reporting Entity, Nature of Operations, Description of Funds and Account Groups and SWn*ant Accounting Policies, Continued The R. Z'Berg/Harrir Grant Fund accounts for a state grant for preapproved park projects. The California Wildlife Grant Fund accounts for a state grant for preapproved specified ' park projects. Capital Projects Fund (Redevelopment Fund) accounts for financial resources to be used for ' the acquisition or construction of major capital facilities within the Agency. The Debt Service Fund accounts for the accumulation of resources for the payment of ' general long-term debt principal, interest and related costs. Fiduciary Fund Types The Pension Trust Fund accounts for the activity of the retirement plan for employees of the City. The Agency Fund accounts for the assets held in a trustee capacity or as an agent. The cash being held primarily represents amounts placed on deposit for refundable permits and ' performance bonds and deferred compensation plans for qualified employees. Account Groups ' The General Fixed Assets Account Group accounts for all property and equipment except for public domain fixed assets (e.g., streets, bridges, sidewalks, curbs, gutters and storm drainage systems). The General Long-Term Debt Account Group accounts for the outstanding principal balances of all long-term debt expected to be financed from governmental fund types. Significant accounting policies Basis of accounting Governmental fund types, the expendable trust fund (Pension Trust Fund) and agency funds are accounted for using the modified accrual basis of accounting. Revenue is recognized in the accounting period in which it becomes both available and measurable. Available ' means collectible within the current period or soon enough thereafter to pay current liabilities. 1 -9- I 1 I I NOTES TO FINANCIAL STATEMENTS Note L Reporting Entity, Nature of Operations, Description of Funds and Account Groups and Significant Accounting Poticie; Continued Property taxes that have been levied and are due on or before year end are recognized as revenue if they have been collected within sixty days after year end. Sales taxes are considered to be measurable when they have been collected by the City and are recognized as revenue at that time. Special assessments are recognized as revenue at the time individual installments come due. In determining when to recognize intergovernmental revenues (grants, subsidies and shared revenues), the legal and contractual requirements of the individual programs are used as guidance. There are, however, essentially two bases for this revenue recognition. In one, monies must be expended on the specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures recorded. In the other, monies are virtually unrestricted as to purpose of expenditure and nearly irrevocable, i.e., revocable only for failure to comply with prescribed compliance requirements, e.g., equal employment opportunity. These resources are reflected as revenues at the time of receipt or earlier if they meet the criterion of availability. Other major revenues that are determined to be susceptible of accrual include taxes and interest. Major revenues that are determined to not be susceptible of accrual because they are either not available soon enough to pay liabilities of the current period or are not objectively measurable include hotel occupancy taxes, licenses, permits, fines and forfeitures. Expenditures are recorded when the liability is incurred, except for interest on long-term debt and sick pay, which are recorded when paid. Vacation pay is recorded as an expenditure in the year it is earned to the extent it is paid in that year or within ninety days after year end; otherwise, it is recorded as an expenditure when it is paid. The accrual basis of accounting is used for the Pension Trust Fund. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when incurred. Investment earnings are accrued. Cash investments and other investments The City pools cash and investment resources of its various 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. All investments are stated at cost or amortized cost except those of the Deferred Compensation Plan which are stated at market value. No loss is recognized when market values decline below costs since it is generally the policy of the City to hold such investments until they mature. Investment earnings are allocated based on the source of funds. -10- i 1 I I 1 NOTES TO FINANCIAL STATEMENTS Note 1. Reporting Entity, Nature of Operations, Description of Funds and Account Groups and Sigrditcant Accounting Policies, Continued Receivables Property taxes receivable represent the uncollected March 1, 1991 levy which is due to the City at June 30, 1991. Property taxes attach as an enforceable lien on property as of March 1, and are due and payable in two equal installments on the following November 1 and February 1. Unpaid taxes become delinquent on December 10 and April 10. An allowance based on historical collection experience is provided for uncollectible taxes. All other receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. Property and equipment All property and equipment of the City are accounted for in the general fixed assets account group. Public domain (infrastructure) general fixed assets consisting of certain improvements other than buildings, such as roads, sidewalks and bridges, are not capitalized. Property and equipment 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 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. Fund balances I 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 budgeting future operations. Vacation pay and compensatory time City employees accumulate vacation hours which may be paid upon termination, death or retirement. Employees can accumulate up to three weeks of accrued vacation per year depending on the length of employment. Employees can accumulate up to 160 hours of sick leave. Any hours in excess of 160 are considered to be vested and are paid to the employee based on a vesting schedule. In addition, employees can accrue up to 240 hours of compensatory time. Any hours in excess of 240 are paid to the employee. - 11 - I 1 1 1 1 1 1 1 NOTES TO FINANCIAL STATEMENTS Note L Reporting Entity, Nature of Operations, Description of Funds and Account Groups and Significant Accounting Policies, Continued The vested portion of vacation and sick leave by employees at June 30, 1991 that is expected to be paid within one year is included in accrued liabilities in the General Fund. The amount not expected to be repaid within one year is included in the General Long-Term Debt Account Group. Memorandum totals Total columns on the combined financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations in conformity with generally accepted accounting principles. Interfund transactions have not been eliminated in arriving at these amounts. Note 2 Budget Matters The annual budget adopted by the City Council provides for the general operation of the City. It includes proposed expenditures and estimated revenues for all governmental fund types except the Capital Projects Fund. Actual expenditures may not exceed appropriations at the department level. The City Manager is authorized to transfer budgeted amounts between funds. Budget amendments were nominal for the year. Budget-to-actual comparisons are not presented for the Capital Projects Fund since the budget relates to all future appropriations as well as current appropriations. Budgets presented in this report for comparison to actual amounts are presented in accordance with generally accepted accounting principles. The modified accrual basis of accounting is employed in the preparation of the budget. Reported budget amounts represent the original adopted budget as amended. In all budgeted funds, unexpended budgeted amounts lapse at the end of the budget year. 1 -12- i NOTES TO FINANCIAL STATEMENTS Note 3. Cash and Investments The components of cash and cash investments at June 30, 1991 are as follows: t Cash in bank $ 976,295 Time certificates of deposit 5.390.000 6.366.295 ' The City and the Agency maintain 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 City and the Agency's deposits were $6,366,295 (cash in bank above) and the bank balance was $6,745,367. A summary of collateralization of the bank balances is presented below: Insured or collateralized with securities held by the City or its agent in the City's name $ 976,044 Uncollateralized (in accordance with GASB 3), this category includes any bank balance that is collateralized with securities held by the pledging financial institution or by its trust department or agent but not in the City's name although balances so collateralized meet the requirements of state law 5.769.323 6,745.367 ' Annuity contracts and cash in bank include $145,016 and $23,039, respectively, in the City's deferred compensation plan as of June 30, 1991. The annuity contracts are recorded at market value. ' State statutes authorize the City and the Agency 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, repurchase agreements, commercial paper and bonds, registered warrants or treasury notes of the State of California and its local agencies. -13- I I I 11 1 I NOTES TO FINANCIAL STATEMENTS Note 3. Cash and Investment., Confirmed Other investments are categorized in the following schedule to give an indication of the level of risk assumed by the entity at year end. Catmorv Carrying Market Investment Type 1 2 3 Amount Value U.S. government and government agency securities State and municipal bonds Corporate bonds Investment in mutual fund Investment in State Treasurer's Investment Pool Total other investments $ 420,940 $ - $ $ 420,940 $ 430,783 193,300 - 193,300 200,680 - 6,764374 6,764,774 6370,409 $ 614,240 $ - $ 6,764,774 $ 7,379,014 $ 7,401,872 450,005 417,166 3.980.000 3.980.000 111.809.019 $11.799.038 The three preceding risk description categories are defined as follows: Category Description 1 Investments that are insured, registered or for which the securities are held by the City or its agent in the City's name 2 Uninsured and unregistered investments for which the securities are held by the financial institution or by its trust department or agent in the City's name 3 Uninsured and unregistered investments for which the securities are held by the financial institution, broker or dealer, or by its trust department or agent but not in the City's name -14- NOTES TO FINANCIAL STATEMENTS Note 4. Receivables ' Receivables as of June 30, 1991 consist of the following: ' Special Capital Debt General Revenue Proiects Service Total ' Property tax increment $ - $ _ $ 200,217 $ - $ 200,217 Accrued interest 89,591 120,593 106,027 316,211 Due from local utility companies (A) 626,008 - 626,008 Due from other governmental agencies 547,000 382,454 929,454 Transient occupancy tax 142,109 142,109 Other 54-918 - - 54.918 St 459.626 $ 382,454 1 320.810 $ 106,027 $2.268,917 (A) During the year ended June 30, 1990, the Agency approved a reimbursement agreement with a local utility company, advancing the utility company funds required to replace various water mains. The total amount advanced under this agreement was $334,705. The Agency then contributed this receivable to the City. The City is to collect this receivable from the utility company in fifteen noninterest-bearing annual installments of $35,987, with the final installment due June 30, 2005. Also, during the year ended June 30, 1987, the Agency approved a similar reimbursement agreement with a local utility company, advancing the utility company funds required to install a water line and a water main extension. The total amount advanced was $493,801. The Agency then contributed the receivable to the City at the present valued amount. The City is to collect this receivable from the utility company in forty annual installments of $12,345, with the final installment due June 30, 2027. I ' 15- I NOTES TO FINANCIAL STATEMENTS I Note 5 Interfund Receivables and Payables Interfund receivables and payables as of June 30, 1991 are as follows: Funds General Fund Special Revenue Funds: ' Traffic Safety Community Development Block Grant I Capital Projects Fund Interfund Receivables Payables $ 429.294 $ $ $ 6,423 252.937 $ $ 259.360 $ $ 169.934 $ 429.294 $ 429.294 I I I I Note 6 Property and Equipment Changes in property and equipment during the year ended June 30, 1991 were as follows: Balance Balance June 30, June 30, 1990 Acquisitions 1991 Land $ 2,715,734 $ 177,500 $ 2,893,234 Buildings and improvements 2,955,316 466,051 3,421,367 Vehicles 253,872 7,219 2619091 Furniture and office equipment 473,133 94,493 567,626 Special equipment and machinery 447,107 17,707 464,814 Other improvements 743,099 5.393 748,492 $ 7,588,261 $ 768,363 $ 8,356,624 1 -16- I NOTES TO FINANCIAL STATEMENTS Note 7. Pension Plan and Deferred Compensation Agreements The City has a defined contribution pension plan. The plan covers substantially all employees and is funded by a group annuity insurance contract. Employees eligible for the plan are vested 100% upon completion of five years of full-time employment. Employees are not vested before five years. The contributions to the plan are at the discretion of the ' City Council. This plan does not allow for employee contributions. The total payroll for employees covered by this plan for the calendar year ended December 31, 1990 was $957,249. The total payroll for all employees for the calendar year ended December 31, ' 1990 was $1,507,396. The total pension contribution for the year ended fiscal June 30, 1991 was $137,411. The value of the annuity contract was $894,927 as of June 30, 1991. The City has a deferred compensation plan which is organized under Internal Revenue Code 457. The plan allows eligible employees to tax defer a portion of their gross income to future years not to exceed the lesser of $7,500 or 25% of the participant's includible compensation. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The deferred compensation and accumulated earnings thereon totaled $242,262 at June 30, 1991. The deferred compensation plan is fully funded by the City as the deferred compensation is earned by the employees. Plan assets and the related liability to employees are accounted for in an agency fund at the current market value of the annuity contracts and time certificates of deposits. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of benefits under the plan), subject only to the claims of the City's general creditors. Participants' rights under the plan ' are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. I Note & Long Term Debt Tax Allocation Notes Series 1987 In August 1987, $14,930,000 of bonds were issued by the Agency to finance public improvements within the Agency's Project Area No. 1. The bonds outstanding bear interest from 7.75% to 9.20% with interest payable semiannually on September 1 and March 1. Principal matures annually on September 1 through 1995. Payment of the bonds is I collateralized by a pledge of tax revenues to be received by the Agency. 1 -17- ' NOTES TO FINANCIAL STATEMENTS Note & Long-Term Debt, Continued Compensated absences t That portion of the liability for the vested compensated abs ences totalling $87,489 which is not expected to be paid from available resources is reporte d in the genera l long-term debt ' account group. The following is a summary of the general long-term debt transactions for the year ended ' June 30, 1991. Tax Accrued ' Allocation Notes Vacation and Sick Series 1987 Leave Total Balance, June 30, 1990 $ 11,995,000 $ 67,429 $ 12,062,429 Increase - 20,060 20,060 Decrease (1630000) - (1,630,000) Balance, June 30, 1991 $ 10,365,000 $ 87,489 $ 10.452,489 The annual requirements, principal and i nterest, to amortize the outstanding debt as of June 30, 1991 are as follows: Tax Years Allocation Ending Notes June 30, Series 1987 Interest Total 1992 $ 1,760,000 $ 828,617 $ 2,588,617 1993 1,900,000 669,813 2,569,813 1994 2,055,000 496,781 2,551,781 1995 2,230,000 309,312 2,539,312 1996 2,420,000 105,875 2,525,875 $10,365,000 $ 2,410,398 $12,775,398 I 1 ' -18- ' NOTES TO FINANCIAL STATEMENTS Note 9 Budget OvereWenditures Expenditures exceeded appropriations for the year ended June 30, 1991 in the following special revenue fund: Amount of Over- Appropriation Expenditures expenditures Narcotics Seizure Fund $ - $ 2,121 $ 2,121 r The budget overexpenditures were due to the margin of error in estimating appropriations based on the best known facts at the time the budgets were adopted. The effect on the 1 financial statements caused by these overexpenditures was not considered material as the actual revenue of these funds was also more than the estimated revenue used in preparing the budgets. Note 10. Commitments and Contingent Liabilities Under state law, the Agency is required to set aside a portion of its property tax increment revenue for low and moderate income housing. The Agency has made findings that, for the year ended June 30, 1991, it was allowed to defer funding of the set aside. As of June 30, 1991, the accumulated set aside amount not yet funded was approximately $3,650,000. The law requires the Agency to devise a plan to fund the accumulating amount and to begin funding it by 1996. The City is a defendant in a lawsuit along with 26 other cities for reimbursement of landfill cleanup costs of hazardous waste dumped between 1948 and 1984. The plaintiffs claim that the cities either accepted for transport or arranged for disposal or treatment municipal waste which contained hazardous materials. The plaintiffs also claim that these materials have been released from the landfill into the environment. A trial date has been set for February 4, 1992. The City intends to defend the case vigorously and may assert claims for indemnity against other third-party defendants which, if successfully litigated, would offset, at least partially, any recovery against the City. The parties have engaged in settlement negotiations but no agreement has yet been reached. r In a separate action, the City has been named as a defendant along with 80 other governmental entities in Southern California for a variety of damages resulting from the release of hazardous substances into the ocean waters around Los Angeles. The amount of damages to be claimed is unknown at this time. 0 1 B - 19 - I 1 1 L 1 1 1 I NOTES TO FINANCIAL STATEMENTS Note IL Subsequent Event The City is expected to issue $11,725,000 of Subordinate Lien Tax Allocation Bonds, during October 1991. These bonds are being issued to provide funds for the acquisition, construction, improvement and financing of improvements contemplated by the Redevelopment Plan for the Agency's Redevelopment Project Area No. 1. The principal amount is expected to be repaid starting October 1996 through October 2002. The bonds would be subordinated to the payment of the Tax Allocation Notes as explained in Note 8 to the financial statements. 20- MCGLADREY & PULLEN Certified Public Accountants and Consultants ' INDEPENDENT AUDITORS' REPORT ON THE ' SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE ' To the Honorable Mayor and Members of the City Council 1 City of Rosemead Rosemead, California We have audited the general purpose financial statements of the City of Rosemead, California as of and for the year ended June 30, 1991 and have issued our report thereon dated September 13, 1991. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. e We conducted our audit in accordance with generally accepted auditing standards and the standards for financial audits contained in the "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. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the City of Rosemead, California taken as a whole. The accompanying schedule of federal financial assistance is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in that ' schedule 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. Pasadena, California 1 September 13, 1991 ' -21- ' 1 ' CITY OF ROSEMEAD, CALIFORNIA SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE Year Ended June 30, 1991 Catalog of Federal Domestic Assistance Federal Grantor /Pass-Through Grantor /Program Title Number penditures U.S. Department of Housing and Urban Development: ' Passed through Los Angeles County Community Development Commission - Community Development Block Grant Program - Entitlement Grants 14.218 $ 518,683 ' U.S. Department of Transportation: Passed through the State of California Department of ' Transportation - Federal Aid Highway Program 20.205 711.642 1.230.325 t -22- r 1 SECTION II - COMPLIANCE MATTERS AND INTERNAL ACCOUNTING AND ' ADMINISTRATIVE CONTROLS 1_] I 1 McGLADREY & PULLEN Certified Public Accountants and Consultants INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS ' BASED ON AN AUDIT OF THE GENERAL PURPOSE FINANCIAL STATEMENTS To the Honorable Mayor and ' Members of the City Council City of Rosemead Rosemead, California We have audited the general purpose financial statements of the City of Rosemead, ' California, as of and for the year ended June 30, 1991, and have issued our report thereon dated September 13, 1991. ' We conducted our audit in accordance with generally accepted auditing standards and "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. Compliance with laws, regulations, contracts, and grants applicable to the City of Rosemead, ' California, is the responsibility of the City's management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, ' contracts and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. ' The results of our tests indicate that, with respect to the items tested, the City of Rosemead, California, complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those provisions. 1 -23- l\ This report is intended for the information of management of the City of Rosemead, California, the United States Department of Housing and Urban Development via the Los ' Angeles County Community Development Commission, the United States Department of Transportation via the State of California Department of Transportation, and California State Controller's Office (Division of Audits and Division of Local Government Fiscal Affairs). This restriction is not intended to limit the distribution of this report, which is a matter of public record. LIP I ' Pasadena, California September 13, 1991 F I 24- MCGLADREY & PULLEN Certified Public Accountants and Consultants INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE I To the Honorable Mayor and ' Members of the City Council City of Rosemead Rosemead, California We have audited the general purpose financial statements of the City of Rosemead, ' California, as of and for the year ended June 30, 1991, and have issued our report thereon dated September 13, 1991. We conducted our audit in accordance with generally accepted auditing standards and "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. In planning and performing our audit of the financial statements of the City of Rosemead, California for the year ended June 30, 1991, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. The management of the City of Rosemead, California is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation ' of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. -25- ' For the purpose of this report, we have classified the significant internal control structure policies and procedures in'the following categories: • Revenue; fee, service and miscellaneous sources • Receipts • Expenditures/expenses - Purchasing - Acquisition and disposal of fixed assets ' - Cash disbursements Payroll • Financing Investments Debt issuance • Financial Reporting ' For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities 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 the internal control structure and its operation that we consider to be material weaknesses as defined above. This report is intended for the information of management of the City of Rosemead, ' California, the United States Department of Housing and Urban Development via the Los Angeles County Community Development Commission, the United States Department of Transportation via the State of California Department of Transportation, and California State Controller's Office (Division of Audits and Division of Local Government Fiscal Affairs). This restriction is not intended to limit the distribution of this report, which is a matter of public record. ' Pasadena, California September 13, 1991 -26- McGLADREY & PULLEN Certified Public Accountants and Consultants INDEPENDENT AUDITORS' REPORT ON SPECIFIC COMPLIANCE REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the Honorable Mayor and Members of the City Council ' City of Rosemead Rosemead, California We have audited the City of Rosemead, California, compliance with the requirements governing types of services allowed or unallowed; matching, level of effort, and/or earmarking; reporting; special tests and provisions for 14.218 - Community Development Block Grant Program and for 20.205 - Federal Aid Highway Program; claims for advances and reimbursements; and amounts claimed or used for matching that are applicable to both major federal financial assistance programs, which are identified in the accompanying schedule of federal financial assistance, for the year ended June 30, 1991. The management of the City is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. ' We conducted our audit in accordance with generally accepted auditing standards, "Government Auditing Standards" issued by the Comptroller General of the United States, and OMB Circular A-128, "Audits of State and Local Governments." Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures disclosed no instances of noncompliance with the requirements referred to above. In our opinion, the City of Rosemead, California complied in all material respects with the requirements governing types of services allowed or unallowed; matching, level of effort, and/or earmarking; reporting; special tests and provisions for 14.218 - Community Development Block Grant Program and for 20.205 - Federal Aid Highway Program; claims for advances and reimbursements; and amounts claimed or used for matching that are applicable to both major federal financial assistance programs for the year ended June 30, 1991. -27- 1 i i 1 1 1 1 1 1 Pasadena, California September 13, 1991 1 1 i i 1 1 1 1 1 1 This report is intended for the information of management of the City of Rosemead, California, the United States Department of Housing and Urban Development via the Los Angeles County Community Development Commission, the United States Department of Transportation via the State of California Department of Transportation, and California State Controller's Office (Division of Audits and Division of Local Government Fiscal Affairs). This restriction is not intended to limit the distribution of this report, which is a matter of public record. ~'le 0" 1 -28- MCGLADREY & PULLEN Certified Public Accountants and Consultants ' INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH THE GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the Honorable Mayor and Members of the City Council City of Rosemead Rosemead, California We have applied procedures to test the City of Rosemead, California compliance with the ' following requirements applicable to its federal financial assistance programs, which are identified in the schedule of federal financial assistance, for the year ended June 30, 1991: Political activity Davis-Bacon Act • Civil rights • Cash management • Relocation assistance and real property management • Federal financial reports • Allowable costs/costs principles • Drug-free workplace • Administrative requirements Our procedures were limited to the applicable procedures described in the Office of ' Management and Budget's "Compliance Supplement for Single Audits of State and Local Governments." Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City of Rosemead, California's compliance ' with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. ' With respect to the items tested, the results of those procedures disclosed no instances of noncompliance with the requirements listed in the first paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Rosemead, California had not complied, in all material respects, with those requirements. L 1 -29- ' This report is intended for the information of management of the City of Rosemead, California, the United States Department of Housing and Urban Development via the Los Angeles County Community Development Commission, the United States Department of Transportation via the State of California Department of Transportation, and California State Controller's Office (Division of Audits and Division of Local Government Fiscal Affairs). This restriction is not intended to limit the distribution of this report, which is a matter of public record. F Pasadena, California I September 13, 1991 1 11 I I ' -30- McGLADREY & PULLEN Certified Public Accountants and Consultants ' INDEPENDENT AUDITORS' REPORT ON INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROL SYSTEMS USED TO ADMINISTER FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the Honorable Mayor and Members of the City Council City of Rosemead Rosemead, California We have audited the general purpose financial statements of the City of Rosemead, California as of and for the year ended June 30, 1991, and have issued our report thereon ' dated September 13, 1991. As part of our audit, we made a study and evaluation of the internal control systems, including applicable internal administrative controls, used in administering federal financial assistance programs to the extent we considered necessary to evaluate the systems as required by generally accepted auditing standards, "Government Auditing Standards," issued by the Comptroller General of the United States, the Single Audit Act of 1984, and the provisions of the Office of Management and Budget Circular A- 128, "Audits of State and Local Governments." For the purpose of this report, we have classified the significant internal accounting and administrative controls used in ' administering federal financial assistance programs in the following categories: Internal Accounting Controls ' • Revenue; fee, service and miscellaneous sources • Receipts • Expenditures/expenses - Purchasing - Acquisition and disposal of fixed assets - Cash disbursements - Payroll • Financing Investments Debt issuance • Financial Reporting ' -31- I Admi Gene I nistrative Controls ral requirements: Political activity Davis-Bacon Act Civil rights Cash management Relocation assistance and real property management Federal financial reports Allowable costs/costs principles Drug-free workplace Administrative requirements Specific requirements: Types of services allowed and unallowed Eligibility Reporting • Cost allocation The management of the City of Rosemead, California is responsible for establishing and maintaining internal control systems used in administering federal financial assistance of programs. In fulfilling that responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control systems used in administering federal financial assistance programs are to provide management with reasonable, but not absolute, assurance that, with respect to federal financial assistance programs, resource use is consistent with laws, regulations and policies; resources are safeguarded against waste, loss and misuse; and reliable data are obtained, maintained and fairly disclosed in reports. Because of inherent limitations in any system of internal accounting and administrative controls used in administering federal financial assistance programs, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the systems to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. Our study included all of the applicable control categories listed above. During the year ended June 30, 1991, the City of Rosemead, California expended its total federal financial assistance under two major federal financial assistance programs. With respect to internal control systems used in administering these major federal financial assistance programs, our study and evaluation included considering the types of errors and irregularities that could occur, determining the internal control procedures that should prevent or detect such errors and irregularities, determining whether the necessary procedures are prescribed and are being followed satisfactorily, and evaluating any weaknesses. -32- I 1 Our study and evaluation was more limited than would be necessary to express an opinion on the internal control systems used in administering the federal financial assistance 1 program of the City of Rosemead, California. Accordingly, we do not express an opinion on the internal control systems used in administering the federal financial assistance program of the City. 1 However, our study and evaluation and our audit disclosed no condition that we believe to be a material weakness in relation to the federal financial assistance program of the City of Rosemead, California. This report is intended for the information of management of the City of Rosemead, 1 California, the United States Department of Housing and Urban Development via the Los Angeles County Community Development Commission, the United States Department of Transportation via the State of California Department of Transportation, and California 1 State Controller's Office (Division of Audits and Division of Local Government Fiscal Affairs). This restriction is not intended to limit the distribution of this report, which is a matter of public record. 1 ~.GUC~.~c, i 1 Pasadena, California September 13, 1991 1 i 1 i 1 1 1 -33-