2010 RRA Financial ReportI
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ROSEMEAD COMMUNITY DEVELOPMENT
COMMISSION
FINANCIAL STATEMENTS
Fiscal Year Ended June 30, 2010
' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
FINANCIAL STATEMENTS
' Fiscal Year Ended June 30, 2010
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TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
' Government -wide Financial Statements
Statement of Net Assets
' Statement of Activities
Fund Financial Statements
Balance Sheet - Governmental Funds
' Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Assets
Statement of Revenues, Expenditures and Changes in Fund
' Balances - Governmental Funds
Reconciliation of Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
' Statement of Activities
Notes to the Basic Financial Statements
' REQUIRED SUPPLEMENTARY INFORMATION
' Notes to Required Supplementary Information
Low - Moderate Income Housing Set -Aside Schedule of Revenues,
Expenditures and Changes in Fund Balances — Budget and Actual
Rosemead Housing Development Corporation Schedule of Revenues,
Expenditures and Changes in Fund Balances — Budget and Actual
Supplementary Information:
Computation of Low /Moderate Housing Fund — Excess Surplus
' Report on Compliance and Other Matters and on Internal Control Over
Financial Reporting Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
' Schedule of Findings and Recommendations
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' Mayer Hoffman McCann P.C.
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Board of Directors
' Rosemead Community Development Commission
Rosemead, California
INDEPENDENT AUDITORS' REPORT
' We have audited the accompanying financial statements of the governmental activities and
each major fund 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,
2010, which collectively comprise of the Commission's basic financial statements as listed in the
table of contents. These financial statements are the responsibility of the Commission's
' management. Our responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
' States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit
_ also includes assessing the accounting principles used and significant estimates made by
' management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinions.
' In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities and each major fund of the
Commission as of June 30, 2010, and the respective changes in financial position thereof for
' the year then ended, in conformity with accounting principles generally accepted in the United
States of America.
' The Commission has not presented management's discussion and analysis which according to
accounting principles generally accepted in the United States of America is necessary to
supplement, although not required to be part of, the basic financial statements.
' The information identified in the accompanying table of contents as required supplementary
information is not a required part of the basic financial statements but is supplementary
information required by accounting principles generally accepted in the United States of
' America. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion
on it
An Independent CPA Firm
2301 Dupont Drive, Suite 200
t
Irvine, California 92612
949- 474 -2020 ph
949 - 263 -5520 fx
'
www.mhm- pc.com
INDEPENDENT AUDITORS' REPORT
' We have audited the accompanying financial statements of the governmental activities and
each major fund 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,
2010, which collectively comprise of the Commission's basic financial statements as listed in the
table of contents. These financial statements are the responsibility of the Commission's
' management. Our responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
' States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit
_ also includes assessing the accounting principles used and significant estimates made by
' management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinions.
' In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities and each major fund of the
Commission as of June 30, 2010, and the respective changes in financial position thereof for
' the year then ended, in conformity with accounting principles generally accepted in the United
States of America.
' The Commission has not presented management's discussion and analysis which according to
accounting principles generally accepted in the United States of America is necessary to
supplement, although not required to be part of, the basic financial statements.
' The information identified in the accompanying table of contents as required supplementary
information is not a required part of the basic financial statements but is supplementary
information required by accounting principles generally accepted in the United States of
' America. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion
on it
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Board of Directors
Rosemead Community Development Commission
Page Two
Our audit was conducted for the purpose of forming opinions on the financial statements that
' collectively comprise the Rosemead Community Development Commission's basic financial
statements. The supplementary information is presented for purposes of additional analysis and
is not a required part of the basic financial statements. The supplementary information has
' been subjected to the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report dated
December 20, 2010 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,
' grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on the internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing
Standards and should be considered in assessing the results of our audit.
�p 6f h °� 4 W.0 AC 1 I' (.
' Irvine, California
December 20, 2010
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Statement of Net Assets
June 30, 2010
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Assets
Cash and investments (note 2)
Receivables:
Accounts
Accrued interest
Due from City of Rosemead
Land held for resale
Deferred charges
Capital assets, net (note 5)
Land
Other capital assets, net
Total assets
Liabilities and Net Assets
Liabilities:
Accounts payable
Deposits payable
Due to City of Rosemead
Accrued interest payable
Noncurrent liabilities (note 6):
Due within one year
Due in more than one year
Total liabilities
Net assets:
Restricted for:
Low - moderate income housing
Unrestricted
Total net assets
See accompanying notes to the basic financial statements.
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$ 10,986,838
539,293
27,740
728,728
4,407,616
420,835
2,425,898
13,222,983
32,759,931
446,913
36,180
1,309,283
595,826
994,802
36,230,740
39,613,744
6,462,434
(13,316,247)
$ (6,853,813)
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Statement of Activities
Fiscal Year ended June 30, 2010
General revenues:
Program Revenues
Property taxes
4,806,091
Operating Capital
121,136
Other general revenues
18,746
Charges for _ Contributions Contributions
Governmental
Change in net assets
Expenses
Services and Grants and Grants
Activities
Governmental activities:
$ (6,853,813)
Community development
$ 4,603,129
, 420,006`
(4,183,123)
Interest expense
1,491,717
-
(1,491,717)
Total governmental
activities
$ 6,094,846
420,006
(5,674,840)
General revenues:
Taxes:
Property taxes
4,806,091
Investment income
121,136
Other general revenues
18,746
Total general revenues
4,945,973
Change in net assets
(728,867)
Net assets at beginning of year
(6,124,946)
Net assets at end of year
$ (6,853,813)
See accompanying notes to the basic financial statements.
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Balance Sheet - Governmental Funds
June 30, 2010
Low - Moderate
Rosemead
1,984,489
78,416 - 2,062,905
-
Income
Housing
- - 1,092,150 1.092 150
6,462,434
78,416 2,803,908 5,499,766 14,844,524
Housing
Development
Debt
Capital
Set -Aside
Corporation
Service
Projects
Total
$ 1,289,449
101,396
7,187,527
2,408,466
10,986,838
-
13,777
468,654
56,862
539,293
2,474
-
16,626
8,640
27,740
718,929
-
9,799
726,728
-
4,407,616
4,407,616
4,477,945
-
4,477,945
$ 6,488,797
115,173
7,672,807
6,891,383
21,168,160
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Assets:
Cash and investments
Receivables:
Accounts
Accrued interest
' Due from City of Rosemead
Land held for resale
Advances to other funds (note 4)
' Total assets
' Liabilities and Fund Balance
Liabilities:
Accounts payable
' Deposits payable
Due to City of Rosemead
Deferred revenue
' Advances from other funds (note 4)
Total liabilities
' Fund balance:
Reserved for:
Land held for resale
' Advances to other funds
Unreserved, reported in:
Special revenue funds
Debt service funds
Capital projects funds
Total fund balance
t Total liabilities and fund balance
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$ 2,696 577 390,954 52,686 446,913
- 36,180 - - 36,180
23,667 - 1,285,616 1,309,283
- - 53,315 53,315
4,477,945 - 4,477,945
26,363 36,757 4,868,899 1,391,617 6,323,636
4,407,616 4,407,616
4,477,945
- 4,477,945
1,984,489
78,416 - 2,062,905
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- 2,803,908 - 2,803,908
-
- - 1,092,150 1.092 150
6,462,434
78,416 2,803,908 5,499,766 14,844,524
$ 6,488,797
115,173 7,672,807 6,891,383 21,168,160
See accompanying notes to the basic financial statements.
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Governmental Funds
'
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets
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June 30, 2010
I Fund balances of governmental funds $ 14,844,524
t Amounts reported for governmental activities in the statement of
net assets are different because:
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Capital assets, net of depreciation, have not been included
as financial resources in governmental fund activity.
Capital assets
22,246,786
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Accumulated depreciation
(6,597,905)
Long -term debt has not been included in the governmental fund activity.
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Advances from City
(2,497,920)
Bonds payable
(34,490,000)
Unamortized bond premiums
(237,622)
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Cost associated with the issuance of debt are capitalized and amortized in the
statement of net assets and expensed in the governmental funds.
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Deferred charges
420,835
Accrued interest payable for the current portion of interest due on
t bonds
payable has not been reported in the governmental funds.
(595,826)
Revenues that are measurable but not available. Amounts are recorded
as deferred revenue under the modified accrual basis of accounting.
53,315
Net assets of governmental activities
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Statement of Revenues, Expenditures and Changes in Fund Balances -
Governmental Funds
Fiscal Year ended June 30, 2010
Revenues:
Taxes
Rental income
Investment income
Other
Total revenues
Expenditures:
Current:
General government
Public safety
Public works
Community development
Debt service:
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of
revenues over (under)
expenditures
Other financing sources (uses):
Transfers in (note 4)
Transfers out (note 4)
Transfers to City of Rosemead
Total other financing
sources (uses)
Change in fund balances
Fund balances at beginning
of year
Fund balances at end of year
Low - Moderate
Rosemead
1,857,285
3,032,766
Income
Housing
(2,782,766)
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(3,032,766)'
Housing
Development
Debt
Capital
(245,260)
Set -Aside
Corporation
Service
Projects
Total
$
-
6,243,948
1,612,025
6,243,948
-
420,006
-
-
420,006
10,308
66
67,878
42,884
121,136
-
-
78,416
18,746
18,746
10,308
420,072
6,311,826
61,630
6,803,836
731,839 106,884 1,452,328 2,291,051
- 975,509 - 975,509
- 1,687,774 1,687,774
189,359 - 189,359
945,000 945,000
- - 1,501,667 - 1,501,667
189,359 731,839 3,529,060 3,140,102 7,590,360
(179,051) (311,767) 2,782,766 (3,078,472) (786,524)
925,481
250,000
1,857,285
3,032,766
(250,000)
-
(2,782,766)
-
(3,032,766)'
-
(245,260)
(245,260)
675,481
250,000
(2,782,766)
1,612,025
(245,260)
496,430
(61,767)
-
(1,466,447)
(1,031,784)
5,966,004
140,183
2,803,908
6,966,213
15,876,308
$ 6,462,434
78,416
2,803,908
5,499,766
14,844,524
See accompanying notes to the basic financial statements.
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Net changes in fund balances of governmental funds $ (1,031,784)
Amounts reported for governmental activities in the statement of
' activities is different because:
Governmental funds report capital outlay as expenditures. However, in
' the statement of activities, the cost of those assets is allocated over their
estimated useful lives as depreciation expense. This is the amount by which
' capital outlays exceeded depreciation in the current period.
Depreciation expense (705,348)
Bond issuance costs, premiums, discounts, and similar items are recorded
as expenditures in governmental funds when debt is first issued, whereas
ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
these amounts are deferred and amortized in the statement of activities.
Governmental Funds
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Reconciliation of the Statement of Revenues, Expenditures,
'
and Changes in Fund Balances of Governmental Funds
Repayment of bond principal is an expenditure in the governmental funds,
to the Statement of Activities
'
Fiscal Year ended June 30, 2010
Net changes in fund balances of governmental funds $ (1,031,784)
Amounts reported for governmental activities in the statement of
' activities is different because:
Governmental funds report capital outlay as expenditures. However, in
' the statement of activities, the cost of those assets is allocated over their
estimated useful lives as depreciation expense. This is the amount by which
' capital outlays exceeded depreciation in the current period.
Depreciation expense (705,348)
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' See accompanying notes to the basic financial statements.
Bond issuance costs, premiums, discounts, and similar items are recorded
as expenditures in governmental funds when debt is first issued, whereas
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these amounts are deferred and amortized in the statement of activities.
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This amount is the net offset of the differences.
32,372
Repayment of bond principal is an expenditure in the governmental funds,
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but the repayment reduces long -term liabilities in the statement of net assets.
945,000
The statement of net assets includes accrued interest on long term debt.
(22,422)
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Revenues that are measurable but not available. Amounts are not recorded
as revenue under the modified accrual basis of accounting.
53,315
Change in net assets of governmental activities
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' See accompanying notes to the basic financial statements.
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Notes to the Basic Financial Statements
' Fiscal Year ended June 30, 2010
t (1) Summary of Significant Accounting Policies
(a) Reporting Entity
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 blended component unit of the City of Rosemead, California,
(the City) and is included in the basic financial statements of the City. The
financial statements contain information for the Commission only. The City's
financial statements can be obtained from the Finance Department of the City.
' Governmental Accounting Standards Board (GASB) Statement No. 14. The
Financial Reporting Entity, defines the reporting entity as the primary government
' and those component units for which the primary government is, or has the
potential to be, financially accountable. Financial accountability is defined as
appointment of a voting majority of the component unit's Board and either (a) the
' primary government has the ability to impose its will or (b) the possibility that the
component unit will provide a financial benefit to, or impose a financial burden
on, the primary government.
' Based upon the above criteria, the Rosemead Housing Development Corporation
(the Corporation), is a blended component unit of the Commission as the
Commission's governing board serves as the governing board of the
' Corporation.
Since the City Council of the City also serves as the Board of Directors of the
' Commission, the City, in effect, has the ability to influence and control
operations. Therefore, the City has oversight responsibility for the Commission.
Accordingly, the Commission is a blended component unit of the City.
' (b) Basis of Accounting and Measurement Focus
The basic financial statements of the Commission are composed of the following:
Government -wide financial statements
Fund financial statements
' . Notes to the basic financial statements
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
' (Continued)
' (1) Summary of Significant Accounting Policies, (Continued)
' (b) Basis of Accounting and Measurement Focus, (Continued)
Government -wide Financial Statements
' Government -wide financial statements display information about the reporting
government as a whole, except for its fiduciary activities. These statements
' include separate columns for the governmental and business -type activities of
the primary government (including its blended component units), as well as its
discreetly presented component units. The Community Development
' Commission of the City of Rosemead has no business -type activities or
discretely presented component units. Eliminations have been made in the
Statement of Activities so that certain allocated expenses are recorded only once
(by the function to which they were allocated). However, general government
expenses have not been allocated as indirect expenses to the various functions
of the Commission.
' Government -wide financial statements are presented using the economic
resources measurement focus and the accrual basis of accounting. Under the
economic resources measurement focus, all (both current and long -term)
' economic resources and obligations of the reporting government are reported in
the government -wide financial statements. Basis of accounting refers to when
revenues and expenditures are recognized in the accounts and reported in the
' financial statements. Under the accrual basis of accounting, revenues, expenses,
gains, losses, assets, and liabilities resulting from exchange and exchange -like
transactions are recognized when the exchange takes place. Revenues,
expenses, gains, losses, assets, and liabilities resulting from nonexchange
' transaction are recognized in accordance with the requirements of GASB
Statement No. 33.
' Program revenues include charges for services and payments made by parties
outside of the reporting government's citizenry if that money is restricted to a
particular program. Program revenues are netted with program expenses in the
' statement of activities to present the net cost of each program.
Amounts paid to acquire capital assets are capitalized as assets in the
government -wide financial statements, rather than reported as expenditure.
' Proceeds of long -term debt are recorded as a liability in the government -wide
financial statements, rather than as other financing source. Amounts paid to
reduce long -term indebtedness of the reporting government are reported as a
I reduction of the related liability, rather than as an expenditure
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Notes to the Basic Financial Statements
1 (Continued)
1 (1) Summary of Significant Accounting Policies, (Continued)
1 (b) Basis of Accounting and Measurement Focus, (Continued)
Fund Financial Statements
1 The underlying accounting system of the Commission is organized and operated
on the basis of separate funds, each of which is considered to be a separate
1 accounting entity. The operations of each fund are accounted for with a separate
set of self - balancing accounts that comprise its assets, liabilities, fund equity,
revenues and expenditures or expenses, as appropriate. Governmental
1 resources are allocated to and accounted for in individual funds based upon the
purposes for which they are to be spent and the means by which spending
activities are controlled.
1 Fund financial statements for the primary government's governmental,
proprietary, and fiduciary funds are presented after the government -wide
financial statements. These statements display information about major funds
1 individually and nonmajor funds in the aggregate for governmental and enterprise
funds. Fiduciary statements include financial information for fiduciary funds and
similar component units. Fiduciary funds primarily represent assets held by the
1 Commission in a custodial capacity for other individuals or organizations. The
Commission has no enterprise funds or fiduciary funds.
Governmental Funds
1 In the fund financial statements, governmental funds and agency funds are
presented using the modified - accrual basis of accounting. Their revenues are
recognized when they become measurable and available as net current assets.
Measurable means that the amounts can be estimated, or otherwise determined.
Available means that the amounts were collected during the reporting period or
1 soon enough thereafter to be available to finance the expenditures accrued for
the reporting period. The Commission uses a sixty day availability period.
Revenue recognition is subject to the measurable and available criteria for the
1 governmental funds in the fund financial statements. Exchange transactions are
recognized as revenues in the period in which they are earned (i.e., the related
goods or services are provided). Locally imposed derived tax revenues are
1 recognized as revenues in the period in which the underlying exchange
transaction upon which they are based takes place. Imposed non - exchange
transactions are recognized as revenues in the period for which they were
imposed. If the period of use is not specified, they are recognized as revenues
1 when an enforceable legal claim to the revenues arises or when they are
received, whichever occurs first. Government - mandated and voluntary non -
exchange transactions are recognized as revenues when all applicable eligibility
i requirements have been met
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
(Continued)
Summary of Significant Accounting Policies. (Continued)
(b) Basis of Accounting and Measurement Focus, (Continued)
Governmental Funds, (Continued)
In the fund financial statements, governmental funds are presented using the
current financial resources measurement focus. This means that only current
assets and current liabilities are generally included on their balance sheets. The
reported fund balance (net current assets) is considered to be a measure of
"available spendable resources." Governmental fund operating statements
present increases (revenues and other financing sources) and decreases
(expenditures and other financing uses) in net current assets. Accordingly, they
are said to present a summary of sources and uses of "available spendable
resources' during a period.
Non- current portions of long -term receivables due to governmental funds are
reported on their balance sheets in spite of their spending measurement focus.
Special reporting treatments are used to indicate, however, that they should not
be considered "available spendable resources," since they do not represent net
current assets. Recognition of governmental fund type revenues represented by
noncurrent receivables are deferred until they become current receivables.
Noncurrent portions of other long -term receivables are offset by fund balance
reserve accounts.
Because of their spending measurement focus, expenditure recognition for
governmental fund types excludes amounts represented by noncurrent liabilities.
Since they do not affect net current assets, such long -term amounts are not
recognized as governmental fund type expenditures or fund liabilities.
Amounts expended to acquire capital assets are recorded as expenditures in the
year that resources were expended, rather than as fund assets. The proceeds of
long -term debt are recorded as an other financing source rather than as a fund
liability. Amounts paid to reduce long -term indebtedness are reported as fund
expenditures.
When both restricted and unrestricted resources are combined in a fund,
expenses are considered to be paid first from restricted resources, and then from
unrestricted resources.
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' ROSEMEAD COMMUNITY- DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
(Continued)
(1) Summary of Significant Accounting Policies, (Continued)
(c) Property Taxes
Real property taxes are levied for the period from July 1 to June 30 against
' property owners of record on March 1. The taxes are due in two installments, on
December 10 and April 10, and become delinquent after December 10 and April
10, respectively. Under the provisions of NCGA Interpretation 3, property tax
t revenue is recognized in the fiscal year for which the taxes have been levied,
provided it is collected within sixty days of the end of the fiscal year in the fund
financial statements.
t (d) Major Funds
' The Commission reports the following major governmental funds:
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 replacement or rehabilitation of low- and moderate - income
housing within City limits.
' Rosemead Housing Development Corporation (the Corporation) — Accounts for
the construction and financing of low- and moderate - income housing.
' Debt Service Fund — Accounts for the accumulation of resources for the payment
of principal, interest and related costs associated with all long -term debt of the
Commission.
' 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.
(e) Cash and Investments
' Cash includes amounts in demand and time deposits. Investments are reported
in the accompanying balance sheet at fair value, except for certain money market
' contracts that are reported at cost because they are not transferable and they
have terms that are not affected by changes in market interest rates.
Changes in fair value that occur during a fiscal year are recognized as
' investment income reported for that fiscal year. Investment income includes
interest earnings, changes in fair value and any gains or losses realized upon the
liquidation, maturity or sale of investments.
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
' (Continued)
(1) Summary of Significant Accounting Policies (Continued)
' (f) Capital Assets
' Capital assets, which include land, buildings, equipment and infrastructure assets
(e.g., roads, bridges, traffic signals and similar items), are reported in the
government -wide financial statements. Capital assets are defined by the
Commission as assets with an initial individual cost of more than $10,000 and an
estimated useful life in excess of one year. Such assets are recorded at historical
cost or estimated historical cost if purchased or constructed. Donated capital
assets are recorded at estimated fair market value at the date of donation.
' The cost of normal maintenance and repairs that do not add to the value of an
asset or materially extend an asset's useful life are not capitalized. Construction
' in progress costs are transferred to their respective fixed asset category upon
completion.
' Depreciation is charged to operations using the straight -line method based on
the estimated useful life of an asset. The estimated useful lives of depreciable
assets are as follows:
' Buildings 50 years
Improvements other than buildings 15 years
' Furniture and office equipment 7 years
Streets 30 years
Sidewalks 40 years
Vehicles 5 years
(g) Long -term Obligations
' Long -term debt and other long -term obligations are reported as liabilities in the
applicable governmental activities statement of net assets. Bond premiums,
discounts and issuance costs are deferred and amortized over the life of the
' bonds. Bonds payable are reported net of the applicable bond premium or
discount. Bond issuance costs are reported as deferred charges and amortized
over the term of the related debt.
' In the fund financial statements, governmental fund types recognize bond
premiums, discounts and issuance costs during the current period, the face
' amount of debt issued is reported as other financing sources. Premiums received
on debt issuances are reported as other financing sources, while discounts on
debt issuances are reported as other financing uses. Issuance costs, whether or
not withheld from the actual debt proceeds received, are reported as debt service
' expenditures.
1 14
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' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
(Continued)
(1) Summary of Significant Accounting Policies, (Continued
(h) Fund Equity
t In the fund financial statements, governmental funds report reservations of fund
balances for amounts that are not available for appropriation or are legally
' restricted by outside parties for use for a specific purpose. Designations of fund
balances represent tentative management plans and are subject to change.
' (i) Low - Moderate Income Housing Set -Aside
On October 9, 1991 the Commission prepaid its housing obligation in the amount
of $6,813,850 from proceeds from its 1987 tax allocation notes. This pre-
' payment was restructured in 1993 along with the 1993 series tax allocation
bonds. As a result, the Commission's housing obligation has been reduced by
$469,142 per year until the 2021 -22 fiscal year.
' (j) Use of Estimates
' The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
(k) Land Held for Resale
' Land acquired by the Commission for future development and sale is valued at
the lower of cost or net realizable- value and is offset by a reservation of fund
balance to indicate that the assets do not constitute available spendable
resources.
(2) Cash and Investments
' Cash and investments as of June 30, 2010 are classified in the accompanying financial
statements as follows:
Statement of net assets:
Cash and investments $10,986,838
' Total cash and investments $10 986 838
Cash and investments as of June 30, 2010 consist of the following:
' Deposits with financial institutions $ 423,860
Investments 10,562,978
' Total cash and investments $10 986 838
' 15
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
(Continued)
(2) Cash and Investments, (Continued)
Investments Authorized by the California Government Code and the Citv's Investment
Policy
The table below identifies the investment types that are authorized for the City by the
California Government Code and the City's investment policy. The table also identifies
certain provisions of the California Government Code (or the City's investment policy, if
more restrictive) that address interest rate risk, credit risk, and concentration of credit
risk. This table does not address investments of debt proceeds held by bond trustee that
are governed by the provisions of debt agreements of the City, rather than the general
provisions of the California Government Code or the City's investment policy.
* Based on state law requirements or investment policy requirements, whichever is more
restrictive.
16
Authorized by
Maximum
Maximum
Investment Types
Investment
Maximum
Percentage
Investment
Authorized by State Law
Policy
Maturity*
of Portfolio*
In One Issuer*
Local Agency Bonds
No
5 years
None
None
U.S. Treasury Obligations
Yes
5 years
None
None
U.S. Agency Securities
Yes
5 years
None
None
Banker's Acceptances
Yes
180 days
40%
30%
Commercial Paper
Yes
270 days
25%
10%
Negotiable Certificates of Deposit
Yes
1 year
30%
None
Repurchase Agreements
No
1 year
None
None
Reverse Repurchase Agreements
No
92 days
20% of base value None
Medium -Term Notes
Yes
5 years
10%
None
Mutual Funds
Yes
N/A
20%
10%
Money Market Mutual Funds
Yes
N/A
20%
10%
Mortgage Pass- Through Securities
No
5 years
20%
None
County Pooled Investment Funds
No
N/A
None
None
Local Agency Investment Fund
Yes
N/A
None
None
JPA Pools (other investment pools)
No
N/A
None
None
* Based on state law requirements or investment policy requirements, whichever is more
restrictive.
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' (2) Cash and Investments, (Continued)
ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
'
(Continued)
' (2) Cash and Investments, (Continued)
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Investments Authorized by Debt Agreements
Investment of debt proceeds held by bond trustee are governed by provisions of the debt
agreements, rather than the general provisions of the California Government Code or the
'
City's investment policy. The table below identifies the investment types that are
authorized for investments held by bond trustee. The table also identifies certain
provisions of these debt agreements that address interest rate risk, credit risk, and
'
concentration of credit risk.
Maximum Maximum
Authorized Maximum Percentage Investment
'
Investment Type Maturity Allowed In One Issuer
Local Agency Bonds None None None
'
U.S. Treasury Obligations None None None
U.S. Agency Securities None None None
Banker's Acceptances 1 year None None
Commercial Paper 1 year None 10%
Repurchase Agreements 30 days None None
Money Market Mutual Funds N/A 20% 10%
Local Agency Investment Fund N/A None None
'
Investment Agreements N/A None None
Certificates of Deposits 1 year None None
'
Disclosures Relating to Interest Rate Risk
'
Interest rate risk is the risk that changes in market interest rates will adversely affect the
fair value of an investment. Generally, the longer the maturity of an investment, the greater
the sensitivity of its fair value to changes in market interest rates. One of the ways that the
Agency manages its exposure to interest rate risk is by purchasing a combination of
'
shorter term and longer term investments and by timing cash flows from maturities so that
a portion of the portfolio is maturing or coming close to maturity evenly over time as
'
necessary to provide the cash flow and liquidity needed for operations.
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' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
' (Continued)
1
(2) Cash and Investments, (Continued)
' Disclosures Relating to Interest Rate Risk, (Continued)
' Information about the sensitivity of the fair values of the Agency's investments (including
investments held by bond trustee) to market interest rate fluctuations is provided by the
following table that shows the distribution of the Agency's investments by maturity:
' Remaining Maturing (in Months)
12 Months 13 to 24 25 to 60 More Than
' Investment Type Or Less Months Months 60 Months
State investment pool $ 9,419,924 9,419,924 -
Held by bond trustee:
' Investment agreement 1,143,054 - 1,143,054
Total $10,562 4�1 92 1 4
' Disclosures Relating to Credit Risk
' Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to
the holder of the investment. This is measured by the assignment of a rating by a
nationally recognized statistical rating organization. Presented below is the minimum rating
' required by (where applicable) the California Government Code, the City's investment
policy, or debt agreements, and the actual rating as of year end for each investment type.
' Minimum Exempt Rating as of Year End
Legal From Not
' Investment Type Rating Disclosure AAA Rated
State investment pool $ 9,419,924 N/A 9,419,924
Held by bond trustee:
' Investment agreement 1,143,054 N/A 1,143,054
Total $10 10.562.978
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' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
1 (Continued)
' (2) Cash and Investments (Continued)
' Concentration of Credit Risk
The investment policy contains no limitations on the amount that can be invested in any
' one issuer beyond that stipulated by the California Government Code. Investments in any
one issuer (other than U.S. Treasury securities, mutual funds, and external investment
pools) that represent 5% or more of total Agency investments are as follows:
' Issuer Investment Type Reported Amount
AIG Match Funding Corp Investment agreement $ 1,143,054
Custodial Credit Risk
' Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able
to recover collateral securities that are in the possession of an outside party. The custodial
t credit risk for investments is the risk that, in the event of the failure of the counterparty
(e.g., broker - dealer) to a transaction, a government will not be able to recover the value of
its investment or collateral securities that are in the possession of another party. The
California Government Code and the City's investment policy do not contain legal or policy
' requirements that would limit the exposure to custodial credit risk for deposits or
investments, other than the following provision for deposits: The California Government
Code requires that a financial institution secure deposits made by state or local
' governmental units by pledging securities in an undivided collateral pool held by a
depository regulated under state law (unless so waived by the governmental unit). The
market value of the pledged securities in the collateral pool must equal at least 110% of
the total amount deposited by the public agencies. California law also allows financial
' institutions to secure Agency deposits by pledging first trust deed mortgage notes having a
value of 150% of the secured public deposits. As of June 30, 2010, the Commission had
no deposits with financial institutions in excess of federal depository insurance limits.
' For investments identified herein as held by bond trustee, the bond trustee selects the
investment under the terms of the applicable trust agreement, acquires the investment,
' and holds the investment on behalf of the reporting government.
Investment in State Investment Pool
' The Agency is a voluntary participant in the Local Agency Investment Fund (LAIF) that is
regulated by the California Government Code under the oversight of the Treasurer of the
State of California. The fair value of the Agency's investment in this pool is reported in the
' accompanying financial statements at amounts based upon the Agency's pro -rata share of
the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized
cost of that portfolio). The balance available for withdrawal is based on the accounting
' records maintained by LAIF, which are recorded on an amortized cost basis.
1 19
1
Amount
1
1
$ 925,481 (A)
1
Debt Service Fund
(3)
Low - Moderate Income
Housing Set -Aside
250,000
1
$ 3.032.766
' (4)
1
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
(Continued)
Operating Lease
The Corporation entered into a 55 -year lease agreement with the City for the use of the
Angelus Senior Housing facility for $60,000 annually, expiring June 2047. Total lease
commitments remaining are $2,220,000 for the Angelus Senior Housing facility at June
30, 2010. The Corporation also entered into a 55 -year lease agreement with the City
for use of the Garvey Senior Housing facility for $72,000 annually, expiring November
2057. Total lease commitments remaining are $3,414,000 for the Garvey Senior
Housing facility at June 30, 2010. The Corporation paid $60,000 and $72,000 in lease
payments to the City during the year ended June 30, 2010 for the Angelus and Garvey
Senior Housing facilities, respectively.
Interfund Activity
Noncurrent Interfund Receivable and Payable Balances
Under State law, the Commission is required to set aside a portion of its property tax
increment revenue for low -and moderate - income housing. The Commission has made
findings that, for the years ended June 30, 1986 through 1991, it was allowed to defer
funding of the set - aside. The set -aside amounts incurred during the fiscal years ended
June 30, 1994, 1995 and 1996 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, 2010, the accumulated set -aside amount not yet funded was
approximately $4,477,945. As required by law, the Commission devised a plan to fund
the accumulating amount.
Interfund transfers were as follows for the year ended June 30, 2010:
Transferin
Low - Moderate Income
Housing Set -Aside
Redevelopment Agency
Capital Projects Fund
Rosemead Housing
Development Corporation
Transfer Out
Amount
Redevelopment Agency
Debt Service Fund
$ 925,481 (A)
Redevelopment Agency
Debt Service Fund
1,857,285 (B)
Low - Moderate Income
Housing Set -Aside
250,000
Total
$ 3.032.766
The following describes the significant transfers in and transfers out included in the
financial statements:
(A) To record the low and moderate income housing set -aside for the year ended
June 30, 2010.
(B) To transfer remaining tax increment net of pass through payments, 20% set
aside and debt service payments to the Capital Projects Fund.
20
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
(Continued)
(5) Capital Assets
Capital asset activity for the year ended June 30,
2010 is as follows:
Balance at
Balance at
June 30, 2009
Increases Decreases
June 30, 2010
Governmental activities:
Capital assets not being
depreciated:
Land
$ 2,425,898
2,425,898
Total capital assets, not
being depreciated
2,425,898
2,425,898
Capital assets being depreciated:
Buildings and improvements
18,273,719
18,273,719
Vehicles
93,280
93,280
Furniture and office equipment
1,453.889
1,453,889
Total capital assets being
depreciated
19,820,888
19,820,888
Less accumulated depreciation for:
Buildings and improvements
(4,415,776)
(655,397)
(5,071,173)
Vehicles
(89,076)
(4,204)
(93,280)
Furniture and office equipment
(1,387,705
4( 5,747
(1,433,452
Total accumulated
depreciation
(5.892,557
(705,348)
(6,597.905
Total capital assets being
depreciated, net
13.928,331
(705,348)
13,222,983
Governmental activities
capital assets, net
$16.354.229
70 34)
15.648.881
Depreciation expense was charged entirely to the community development function
of the Commission for the year ended June 30, 2010.
21
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' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
' (Continued)
(6) Long -Term Debt
' Long -term debt consists of the following at June 30, 2010:
Balance at Balance at Due within Due Beyond
June 30, 2009 Additions Reductions June 30. 2010 One Year One Year
Governmental activities:
' Advances from City $ 2,497,920 - - 2,497,920 - 2,497,920
Tax allocation bonds,
Series 2006A 11,570,000 870,000 10,700,000 900,000 9,800,000
Tax allocation bonds,
' Series 2006B 23,865,000 - 75,000 23,790,000 75,000 23,715,000
Unamortized bond
premiums 257,424 - 19,802 237,622 19.802 217,820
838 190 344
—96A&0-2 37 225 542 994,802 36 230 740
Advances from City
In November 2007 the City of Rosemead's General Fund advanced to the Rosemead
Community Development Commission $2,497,920 at an interest rate of 5.25% to be
' paid back over 20 years. Accrued interest is payable in annual installments of
$131,141 beginning on September 28, 2008, and continuing until September 28, 2027,
at which time the remaining principal and interest shall be due in full. The amount
' outstanding at June 30, 2010 is $2,497,920.
Tax Allocation Bonds, Series 2006A
' On March 9, 2006, the Commission issued tax allocation bonds in the amount of
$14,005,000 (Series 2006A) to: (1) refund a portion of the Commission's outstanding
Series 1993A bonds and (2) to finance redevelopment activity in Redevelopment
' Project Area No.1. The bonds bear interest ranging from 3.25% to 5.00% and mature in
annual installments of $780,000 to $1,250,000 on various dates through October 1,
2022. The Commission purchased a surety bond in lieu of cash reserve in the amount
of $1,323,238. Portions of the bonds are subject to early redemption, at the option of
' the Commission, beginning October 1, 2017. Bond premiums are amortized over the
life of the bonds. The unamortized balance as of June 30, 2010 was $237,622. A
surety bond has been acquired to satisfy the reserve requirements. As of June 30,
' 2010 the outstanding balance was $10,700,000.
Tax Allocation Bonds, Series 2006B
' In December 2006, the Commission issued $24,230,000 in Project Area No. 1 Tax
Allocation Bonds. The bonds mature in amounts ranging from $70,000 to $1,430,000
with interest rates ranging from 3.25% to 4.25% through October 1, 2025. The net
' proceeds were used to refund the remaining $23,095,000 amount outstanding on the
1993 Tax Allocation Bonds. The securities were deposited in an irrevocable trust with
an escrow agent to provide for all future debt service payments on the 1993 Bonds. As
' a result, the entire 1993 Bonds are considered to be defeased and the liability for those
bonds has been removed from the government -wide financial statements.
22
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to the Basic Financial Statements
(Continued)
Long -Term Debt (Continued)
A surety bond has been acquired to satisfy the reserve requirements. As of June 30,
2010, $23,790,000 of the bonds are outstanding.
At June 30, 2010, debt service requirements to maturity for governmental activities long-
term debt are as follows:
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.
Subsequent Event
In July 2010 the Commission issued tax allocation bonds in the amount of $11,230,000.
The bonds were issued to provide funds to finance the costs of certain redevelopment
projects within the Merged Project Area including infrastructure improvements, and the
acquisition of land. Principal and interest payments are due on June 1 and December 1
each year until the bonds mature in 2023.
23
2006A Tax Allocation Bonds
2006B Tax Allocation Bonds
Year Ending June 30
Principal
Interest
Principal
Interest
2011
$ 900,000
449,856
75,000
1,035,049
2012
930,000
419,481
80,000
1,032,336
2013
965,000
386,931
80,000
1,029,536
2014
1,000,000
353,156
85,000
1,026,649
2015
1,035,000
313,156
85,000
1,023,674
2016 -2020
4,965,000
768,155
1,500,000
5,046,903
2021 -2023
905,000
75,694
6,360,000
4,181,211
2025 -2029
-
-
7,850,000
2,646,266
2030 -2034
-
7,675,000
701,955
X10.700.000
2.766 429
23 790.000
17,723 579
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.
Subsequent Event
In July 2010 the Commission issued tax allocation bonds in the amount of $11,230,000.
The bonds were issued to provide funds to finance the costs of certain redevelopment
projects within the Merged Project Area including infrastructure improvements, and the
acquisition of land. Principal and interest payments are due on June 1 and December 1
each year until the bonds mature in 2023.
23
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Required Supplementary Information
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Notes to Required Supplementary Information
Fiscal Year Ended June 30, 2010
(1) Budgetary Information
Annual budgets are adopted on a basis consistent with accounting principles generally
accepted in the United States of America for the governmental fund. All annual
appropriations lapse at fiscal year end.
On or before the last day in March of each year, the Commission submits a request for
appropriations to the City Manager so that a budget may be prepared. Before the first
Thursday of June 30, the proposed budget is presented to the Commission's governing
board for review. The governing board holds public hearings and a final budget must be
prepared and adopted no later than June 30.
The appropriated budget is prepared by fund, function and department. The
Commission's department heads, with approval of the Finance Director and City
Manager, may make transfers of appropriations within a department and between
departments within a fund. Transfers of appropriations between funds must be approved
by the governing board. The legal level of budgetary control (i.e., the level at which
expenditures may not legally exceed appropriations) is the fund level. The governing
board made several supplemental budgetary appropriations throughout the year. The
supplemental budgetary appropriations made in the governmental funds are detailed in
the required supplementary information.
Encumbrance accounting is employed in the governmental funds. Encumbrances (e.g.,
purchase orders, contracts) outstanding at each year end are reported as reservations of
fund balances and do not constitute expenditures or liabilities because the commitments
will be re- appropriated and honored during the subsequent year.
25
' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Low- Moderate Income Housing Set -Aside
' Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Fiscal Year ended June 30, 2010
11
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Revenues:
Investment income
Total revenues
Expenditures:
Current:
Community development
Total expenditures
Excess (deficiency) of
revenues over
(under) expenditures
Other financing sources (uses):
Transfers in
Transfers out
Total other financing
sources (uses)
Change in fund balances
Fund balance at beginning of year
Fund balance at end of year
Variance
Final Positive
Budget Actual (Negative)
$ 10,308 10,308
10,308 10,308
354,339 189,359 164,980
354,339 189,359 164,980
(354,339) (179,051) 175,288
925,481 925,481
(250,000) (250,000) -
(250,000)
675,481 925,481
(604,339)
496,430 1,100,769
5,966,004
5,966,004
$ 5,361,665
6,462,434 1,100,769
26
' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Rosemead Housing Development Corporation
' Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Fiscal Year ended June 30, 2010
1
'
Revenues:
(88,900)
Intergovernmental
140,183
Interest income
'
Total
revenues
Expenditures:
'
Current:
General government
'
Total expenditures
Excess (deficiency) of
'
revenues over
(under) expenditures
'
Other financing sources (uses):
Transfers in
E
1
1
Total other financing
sources (uses)
Change in fund balances
Fund balance at beginning of year
Fund balance at end of year
Variance
Final Positive
Budget Actual (Negative
$,422,300 420,006 (2,294)
66 66
422,300 420,072 (2,228)
761,200 731,839 29,361
761,200 731,839 29,361
(338,900) (311,767) 27,133
250,000 250,000
250,000
250,000 -
(88,900)
(61,767) 27,133
140,183
140,183 -
$ 51,283
78,416 27,133
27
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Computation of Low /Moderate Housing Fund - Excess Surplus
June 30, 2010
Fund Balance - June 30, 2010 $ 6,462,434
Less Unavailable Amounts:
Advances to Other Funds (4,477,945)
Available Low /Moderate Income Housing Funds 1,984,489
Limitation (Greater of $1,000,000 or Four Years Set - Aside):
Set -aside for last four years
2009-2010 925,481
2008-2009 928,000
2007-2008 985,195
2006-2007 1,019,082
Total set -aside for last four years 3,857,758
Base limitation 1,000,000
Greater Amount 3,857,758
Computed Excess Surplus - June 30, 2010 $
28
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Mayer Hoffman McCann P.C.
An Independent CPA Firm
2301 Dupont Drive, Suite 200
Irvine, California 92612
949- 474 -2020 ph
949 - 263 -5520 fx
www.mhm- pc.conn
Board of Directors
Community Development Commission of the City of Rosemead
Rosemead, California
REPORT ON COMPLIANCE AND OTHER MATTERS AND ON INTERNAL CONTROL OVER
FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
We have audited the financial statements of the Community Development Commission of the
City of Rosemead (Commission), as of and for the year ended June 30, 2010, which collectively
comprise the Commission's basic financial statements and have issued our report thereon
dated December 20, 2010. We conducted our audit in accordance with auditing standards
generally accepted in the United States of America and the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Commission's financial
statements are free of material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts and grant agreements, noncompliance with which
could have a direct and material effect on the determination of financial statement amounts.
Such provisions included those provisions of laws and regulations identified in the Guidelines for
Comptroller 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 result of our tests disclosed no instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards. However, we noted an other
matter involving compliance with respect to the items tested, the Commission complied, in all
material respects, with the provisions referred to in the preceding paragraph, except for the
instance that is described as follows: Health & Safety Code §33080.1 requires Agencies to
annually report on their Low and Moderate Income Housing Fund and housing activities. During
our review of this annual report it was noted that certain amounts being reported for fiscal year
ended June 30, 2009 materially did not agree to the Commissions' audited financial statements.
29
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' Board of Directors
Community Development Commission of the City of Rosemead
Rosemead, California
' Page Two
' Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Commission's internal control over
' financial reporting as a basis for designing our auditing procedures for the purpose of
expressing our opinions on the financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the Commission's internal control over financial reporting.
Accordingly, we do not express an opinion on the effectiveness of the Commission's internal
' control over financial reporting.
Our consideration of internal control was for the limited purpose described in the preceding
' paragraph and was not designed to identify all deficiencies in internal control that might be
deficiencies, significant deficiencies, or material weaknesses and therefore there can be no
assurance that all such deficiencies have been identified.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct misstatements on a timely basis. A material weakness is a
' deficiency, or combination of deficiencies, in internal control, such that there is a reasonable
possibility that a material misstatement of the entity's financial statements will not be prevented,
or detected and corrected on a timely basis. We did not identify any deficiencies in internal
' control that we consider to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is
' less severe than a material weakness, yet important enough to merit attention by those charged
with governance. We consider the items that have been described in the accompanying
schedule of findings and recommendations to be significant deficiencies in internal control over
' financial reporting.
The City's written responses to the matters communicated herein have not subjected to the
auditing procedures applied in the audit of the financial statements and, accordingly, we express
' no opinion on it.
This report is intended solely for the information and use of the Board of Directors,
management, and the State Controller and is not intended to be and should not be used by
anyone other than these specified parties.
IVct4gnn /_? 1 (7 .
Irvine, California
' December 20, 2010
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' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
' Schedule of Findings and Recommendations
Fiscal Year Ended June 30, 2010
' (2010 -01) Establishment of System Access Rights
During our review of the internal control structure of the City, we noted that all finance
personnel have the ability to perform the following functions:
• Establish vendors and process invoices for payment
1 • Make changes to the payroll master file (adding and deleting employees, making
pay rate changes, etc.)
• Process payroll
' • Post adjustments to the general ledger
Recommendation
' We recommend that the City restrict system access rights for each individual in the
Finance Department with respect to that individual's capability to process invoices, make
changes to payroll and post adjustments to the general ledger, in order to adequately
' safeguard City assets.
Management's Corrective Actions Planned
' In January 2011 the City will begin implementing a new finance software system.
Defining access rights, along with work -flow authorizations is an integral part of the
overall finance system implementation; it has been in the planning stage for the past
' year and is a high priority with staff. Full implementation, including the auditor's
recommendations, is expected to be complete by July 2011.
' (2010 -02) Adjustments Detected Through the Audit Process
Auditing standards require that the auditor include in the report of deficiencies any
' material adjustments detected by the audit process. For the year ended June 30, 2010,
material adjustments detected by the audit process were as follows:
t • An adjustment to properly record a new capital lease agreement entered into by
the City during the current year.
' • An adjustment to remove an interfund borrowing established between two special
revenue funds that had not been approved by the City Council.
' • An adjustment to record construction in progress for the year ended June 30,
2010.
• An adjustment to correct accumulated depreciation.
' • An adjustment to move CDBG activity recorded in a capital projects fund into the
City's CDBG fund.
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' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
' Schedule of Findings and Recommendations
(Continued)
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(2010 -02) Adjustments Detected Through the Audit Process, (Continued)
Recommendation
' We recommend that the City develop and implement procedures to assist Finance
Department staff in the process of closing the accounting records at the end of each
fiscal year to ensure all material accounting entries have been prepared prior to the
' auditors conducting the audit. These procedures could involve checklists of processes
to be completed and accounts to be reviewed and /or analyzed.
Management's Corrective Actions Planned
' Staff will increase the comprehensiveness of existing checklists and exercise greater
' diligence at following them. Errors to accumulated depreciation will be resolved by the
use of the capital asset module in the new finance system.
' (2010 -03) Need for Improved Accounting Over Capital Assets
During our testwork over the City's capital asset records for the year ended June 30,
' 2010, the following discrepancies were noted:
Construction in progress in the amount of $383,536 was not recorded by the City
in the capital asset spreadsheet. This amount reflects capital projects that were
in progress and not yet completed as of June 30, 2010.
• Additions to the City's infrastructure in the amount of $125,670 were not recorded
' by the City in the capital asset spreadsheet. This amount represents capital
projects that had been completed during fiscal year ended June 30, 2010, but
had not been recorded by the City.
' • The City's schedule to track accumulated depreciation contained several errors
within the formulas that included over depreciating City assets.
Recommendation
' We recommend that the Finance Department review all capital outlay expenditures each
year to determine if any of the projects should be capitalized.
' Management's Corrective Actions Planned
The City's new financial software, which will be implemented in January 2011, includes a
capital asset module. Capital assets are flagged as a capital asset at the time they are
' purchased and that information flows to the capital asset module. This reduces the
likelihood of not posting a capital asset in the capital assets module. Further, proven
depreciation formulas are hardcoded into the capital asset module and will be tested for
' accuracy at the time of implementation.
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ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION
Schedule of Findings and Recommendations
(Continued)
(2010 -04) Community Development Commission Allocations
Total Community Development Commission (CDC) expenditures are approximately 20%
of total City expenditures. However, administrative salaries charged for certain
individuals are up to 55% of those individual's total salary. The City provided explanation
of duties performed to justify these charges; however these allocations were based on
estimates of time spent working on CDC activities, not actual time spent.
Recommendation
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Health & Safety Code §33334.6 states "The Agency shall determine annually that the
planning and administrative expenses are necessary for the production, improvement or
preservation of low -and moderate - income housing." The code also says "Planning and
general administrative costs which may be paid with moneys from the Low and
Moderate Income Housing Fund are those expenses incurred by the Agency which are
directly related to the programs and activities authorized under the Code."
We recommend that the City personnel perform
employees that charge time directly to the CDC
employees to track their time on timesheets and
time incurred.
Management's Corrective Actions Planned
a time study of those administrative
to support future charges or require
record direct charges based on actual
During the next budget preparation cycle staff will take into consideration the time
worked to be allocated to the CDC. Also, included with the new financial software is an
employee self service feature which will permit staff to input hours worked to the
appropriate cost center.
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