CC - Item 4B - Attachment A Rosemead Housing Development Corp Final 12.13.18
ROSEMEAD HOUSING
DEVELOPMENT CORPORATION
FISCAL YEAR ENDED JUNE 30, 2018
BASIC FINANCIAL STATEMENTS
(WITH SUPPLEMENTARY
INFORMATION)
AND INDEPENDENT
AUDITORS’ REPORT
ROSEMEAD HOUSING
DEVELOPMENT CORPORATION
A COMPONENT UNIT OF
THE CITY OF ROSEMEAD, CALIFORNIA
BASIC FINANCIAL STATEMENTS
(WITH SUPPLEMENTARY INFORMATION)
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2018
ROSEMEAD HOUSING
DEVELOPMENT CORPORATION
A COMPONENT UNIT OF
THE CITY OF ROSEMEAD, CALIFORNIA
BASIC FINANCIAL STATEMENTS
(WITH SUPPLEMENTARY INFORMATION)
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2018
TABLE OF CONTENTS
Page
Number
INDEPENDENT AUDITORS’ REPORT .................................................................................................. 1
BASIC FINANCIAL STATEMENTS
Statements of Net Position ............................................................................................................... 4
Statements of Activities .................................................................................................................... 5
Balance Sheet .................................................................................................................................. 6
Reconciliation of the Balance Sheet of Governmental Fund
to the Statement of Net Position ....................................................................................................... 7
Statement of Revenues, Expenditures and Changes in Fund Balance ........................................... 8
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balance of Governmental Fund to the
Statement of Activities ...................................................................................................................... 9
Notes to Financial Statements ........................................................................................................ 10
REQUIRED SUPPLEMENTARY INFORMATION
Notes to Required Supplementary Information .............................................................................. 17
Budgetary Comparison Schedule ................................................................................................... 18
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS .................................................. 19
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors
Rosemead Housing Development Corporation
Rosemead, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities and
General Fund of the Rosemead Housing Development Corporation (the Corporation), a component unit
of the City of Rosemead, California, as of and for the year ended June 30, 2018, and the related notes to
the financial statements, which collectively comprise the Corporation’s basic financial statements as listed
in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and
fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America 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 from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
203 N. Brea Blvd., Suite 203 Brea, CA 92821 Phone: 714.672.0022
An Association of Independent Accounting Firms
To the Board of Directors
Rosemead Housing Development Corporation
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 the major fund, of the Corporation, as of
June 30, 2018, and the respective changes in financial position for the year then ended in accordance
with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1, the financial statements present only the Rosemead Housing
Development Corporation and do not purport to, and do not present fairly the financial position of the
City of Rosemead, California, as of June 30, 2018, the changes in its financial position, or, where
applicable, its cash flows for the year then ended in accordance with accounting principles generally
accepted in the United States of America. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the budgetary
comparison information for the General Fund be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Management has omitted management discussion and analysis that accounting principles generally
accepted in the United States of America require to be presented to supplement the basic financial
statements. Such missing information, although not a part of the basic financial statements, is required by
the Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical
context. Our opinion on the basic financial statements is not affected by this missing information.
2
To the Board of Directors
Rosemead Housing Development Corporation
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
December 13, 2018 on our consideration of the Corporation’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is solely 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 effectiveness of the Corporation’s internal controls over financial reporting
or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the Corporation’s internal control over financial
reporting and compliance.
Brea, California
December 13, 2018
3
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
STATEMENT OF NET POSITION
Governmental
Activities
Assets:
Cash and investments 317,086$
Accounts receivable 9,091
Capital assets, net of depreciation 7,107,762
Total Assets 7,433,939
Liabilities:
Deposits payable 39,529
Total Liabilities 39,529
Net Position:
Investment in capital assets 7,107,762
Unrestricted 286,648
Total Net Position 7,394,410$
JUNE 30, 2018
The notes to financial statements are an integral part of this statement. 4
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2018
Net (Expenses)
Revenues and
Changes in
Net Position
Operating Capital
Charges for Contributions Contributions Governmental
Expenses Services and Grants and Grants Activities
Functions/Programs
Governmental Activities:
General Government 1,057,843$ 468,969$ 420,478$ -$ (168,396)$
Total Governmental Activities 1,057,843$ 468,969$ 420,478$ -$ (168,396)
General Revenues:
Investment Income 27
Other 4,974
Total General Revenues 5,001
Change in Net Position (163,395)
Net Position at the Beginning of the Year 7,557,805
Net Position at the End of the Year 7,394,410$
Program Revenues
The notes to financial statements are an integral part of this statement. 5
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
BALANCE SHEET
GOVERNMENTAL FUND
JUNE 30, 2018
Assets:
Cash and investments 317,086$
Accounts receivable 9,091
Total Assets 326,177$
Liabilities and Fund Balance:
Liabilities:
Deposits payable 39,529$
Total Liabilities 39,529
Fund Balances:
Unassigned 286,648
Total Fund BalancesTotal Fund Balances 286,648
Total Liabilities and Fund Balance 326,177$
General Fund
The notes to financial statements are an integral part of this statement. 6
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
JUNE 30, 2018
Fund balances of governmental funds 286,648$
Amounts reported for governmental activities in the statement of net position are
different because:
Capital assets net of depreciation have not been included as financial resources
in governmental fund activity.7,107,762
Net Position of Governmental Activities 7,394,410$
The notes to financial statements are an integral part of this statement. 7
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUND
FOR THE YEAR ENDED JUNE 30, 2018
Revenues:
Intergovernmental 420,478$
Rental Income 468,969
Investment Income 27
Other 4,974
Total Revenues 894,448
Expenditures:
Current:
Operating 422,282
Administrative services paid to City of Rosemead 229,387
Facility rent paid to City of Rosemead 183,400
Total Expenditures 835,069
Net Change in Fund Balance 59,379
Fund Balance at the Beginning of the Year 227,269
Fund Balance at the End of the Year 286,648$
General Fund
The notes to the financial statements are an integral part of this statement. 8
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2018
Net change in fund balances - total governmental funds 59,379$
Amounts reported for governmental activities in the statement of activities are
different because:
Governmental funds report capital outlays as expenditures. However, in the statement
of activities, the costs 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.(222,774)
Change in Net Position of Governmental Activities (163,395)$
The notes to financial statements are an integral part of this statement. 9
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies
a. Reporting Entity
The Rosemead Housing Development Corporation (the Corporation) is a nonprofit
corporation whose purpose is to provide assistance to the Rosemead Community
Development Commission (the Commission) to account for the construction, financing and
operations of low- and moderate-income housing for the benefit of the City of Rosemead
(the City). The Corporation currently maintains the Angelus and Garvey Senior Housing
facilities. The Corporation is exempt from income taxes under Section 501 (c)(3) of the
Internal Revenue Code (IRC) and applicable state statutes.
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 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
exists that the component unit will provide a financial benefit to or impose a financial burden
on the primary government. Since the Board of Directors of the Commission and the
Council members also serve as the Board of Directors of the Corporation, the Commission
and the City, in effect, have the ability to influence and control operations. Therefore, the
City has oversight responsibility for the Corporation. Accordingly, in applying the criteria of
GASB Statement No. 14, the financial statements of the Corporation are included in the
City's financial reports.
The Corporation has the same fiscal year as the City. These financial statements contain
information for the Corporation only. The City's financial report may be obtained by
contacting the Financial Department of the City.
As a result of the Assembly Bill X1 26 signed into law as part of the State of California’s
budget package on June 29, 2011, the Rosemead Community Development Commission
ceased to exist as of February 1, 2012. On January 10, 2012, the City Council elected to
serve as the successor agency to the Commission and retain the housing assets and
functions previously held and performed by the Commission.
b. Basis of Accounting and Measurement Focus
The basic financial statements of the Corporation are composed of the following:
Government-wide financial statements
Fund financial statements
Notes to the basic financial statements
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 discretely presented component units. The
Corporation has no business-type activities or discretely presented component units.
10
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
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 transactions
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 expenditures. Proceeds of long-term debt
are recorded as a liability in the government-wide financial statements, rather than as an
other financing source. Amounts paid to reduce long-term indebtedness of the reporting
government are reported as a reduction of the related liability, rather than as an
expenditure.
Fund Financial Statements
The underlying accounting system of the Corporation is organized and operated on the
basis of separate funds, each of which is considered to be a separate accounting entity.
The operations of each fund are accounted for with a separate set of self-balancing
accounts that comprise its assets, liabilities, fund balance, revenues and expenditures or
expenses, as appropriate. Governmental 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.
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 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 Corporation in a custodial capacity for other individuals or
organizations. The Corporation has no enterprise funds or fiduciary funds.
Governmental Funds
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. Measurable means that the amounts can be estimated,
or otherwise determined. Available means that the amounts were collected during the
reporting period or soon enough thereafter to be available to finance the expenditures
accrued for the reporting period. The Corporation uses a sixty day availability period.
11
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Revenue recognition is subject to the measurable and available criteria for the
governmental funds in the fund financial statements. Exchange transactions are
recognized as revenues in the period in which they are earned (i.e., when the related goods
or services are provided). Locally imposed derived tax revenues are 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 when an enforceable legal claim to the revenues arises or when
they are received, whichever occurs first. Government-mandated and voluntary
nonexchange transactions are recognized as revenues when all applicable eligibility
requirements have been met.
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.
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.
c. Major Fund
The Corporation reports the General Fund as its only major fund.
12
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
d. Cash and Investments
Cash includes amounts in demand and time deposits. Investments, if any, are reported in
the accompanying balance sheet at fair value, except for certain money market and
investment contracts that are reported at cost because they are not transferable, and they
have terms that are not affected by changes in market interest rates.
Changes in fair value that occur during a fiscal year are recognized as income from
property and investments reported for that fiscal year. Income from property and
investments includes interest earnings, changes in fair value, any gains or losses realized
upon the liquidation, maturity or sale of investments, property rentals, and the sale of
City-owned property.
e. Capital Assets
Capital assets, which include buildings and improvements, and furniture and equipment,
are reported as part of governmental activities in the government-wide financial
statements. Capital assets are defined by the Corporation as assets with an initial,
individual cost of more than $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 acquisition value at the date
of donation.
The cost of normal maintenance and repairs that do not add to the value of an asset or
materially extend an asset’s useful life are not capitalized.
Costs associated with construction in progress are recorded in their respective capital
assets category upon approval by the Corporation's governing board, which approximates
the completion date.
Depreciation is charged to operations using the straight-line method based on the
estimated useful life of an asset. The estimated useful lives of depreciable assets are
as follows:
Buildings 50 years
Improvement 15 years
Furniture and equipment 7 years
f. Income Taxes
The Corporation is exempt from federal income taxes under Section 501(c)(3) of the
IRC and a similar exemption under state law.
g. Fund Balance
The Corporation reports fund balance in classifications that describe the relative strength
of the spending constraints placed on the purposes for which resources can be used:
Nonspendable – amounts that are not in a spendable form (such as inventory) or are
required to be maintained intact.
13
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Restricted – amounts constrained to specific purposes by their providers
(such as grantors, bondholders and higher levels of government), through
constitutional provisions or by enabling legislation.
Committed – amounts constrained to specific purposes by a government itself, using
the highest level of decision-making authority; to be reported as committed, amounts
cannot be used for any other purpose unless the government takes the same highest
level action to remove or change the constraint.
Assigned – amounts a government intends to use for a specific purpose; intent can
be expressed by the governing body or by an official or body to which the governing
body delegates the authority.
Unassigned – amounts that are for any purpose; positive amounts are reported only
in a general fund.
The Board of Directors establishes (and modifies or rescinds) fund balance commitments
by passage of an ordinance or resolution. The Board designates the Finance Committee
and City Manager as the Corporation officials to determine, define, and make the
necessary account or fund transfers for the amounts to those components of fund balance
that are classified as “Assigned Fund Balance.”
When both restricted and unrestricted resources are available for use when an expenditure
is incurred, it is the Corporation’s policy to use restricted resources first, then unrestricted
resources as they are needed. It is the Corporation’s policy to consider committed amounts
as being reduced first, followed by assigned amounts, and then unassigned amounts when
expenditures are incurred for purposes for which amounts in any of those unrestricted fund
balance classifications could be used.
h. Rental Income
A management company collects rent payments on the first day of the month and the
corporation recognizes revenue in the month due. Monthly rental income per unit ranges
from $250 to $450 and is approved by the annual budget.
i. 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.
14
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments
Cash and investments at June 30, 2018 consisted of demand deposits with financial institutions
and the Corporation’s share in the pooled cash of the City of Rosemead’s investments. The
carrying amount and the bank balance of the Corporation's demand deposits was $52,538.
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in 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 Corporation maintains
its bank accounts at financial institutions that are collateralized with securities held by the
pledging financial institution, or by its Trust Department or agent, but not in the Corporation's
name. The primary difference between the carrying amount and the bank balance are deposits
in transit and outstanding checks. In accordance with state statutes, the Corporation maintains
deposits at those depository institutions insured by the FDIC. The California Government Code
(the Code) requires California banks and savings and loan associations to collateralize the
deposits of governmental entities by pledging government securities as collateral. The market
value of pledge securities must equal at least 110% of those deposits. California law also allows
financial institutions to secure the deposits of governmental entities by pledging first trust deed
mortgage notes having a collateral value of 150% of a corporation's total deposits. As of
June 30, 2018, the Corporation had no deposits with financial institutions in excess of federal
depository insurance limits.
Note 3: Reimbursement Agreements and Related Party Transactions
The Corporation has entered into a reimbursement agreement with the City for the
Corporation's administrative services. The Corporation paid $229,387 for administrative
services to the City during the year ended June 30, 2018. The Corporation is funded, in part,
by advances from the Commission.
The Corporation has also entered into a 55-year lease agreement with the City for the Angelus
Senior Housing facility at $60,000 annually, expiring June 2047. Total lease commitments
remaining are $1,521,904 for the Angelus Senior Housing facility at June 30, 2018. The
Corporation has also entered into a 55-year lease agreement with the City for the Garvey
Senior Housing facility at $72,000 annually, expiring November 2057. Total lease commitments
remaining are $2,696,907 for the Garvey Senior Housing facility at June 30, 2018. The
Corporation paid $91,200 and $92,200 in lease payments to the City during the year ended
June 30, 2018 for the Angelus and Garvey Senior Housing facilities, respectively.
15
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 4: Capital Assets
During the year ended June 30, 2018, the changes in capital assets were as follows:
Balance at Balance at
June 30, 2017 Additions Deletions June 30, 2018
Governmental Activities:
Capital assets being depreciated:
Building and improvements 11,042,597$ -$ -$ 11,042,597$
Furniture and equipment 128,544 - - 128,544
Total Capital Assets,
Being Depreciated 11,171,141 - - 11,171,141
Less accumulated depreciation:
Building and improvements (3,712,061) (222,774) - (3,934,835)
Furniture and equipment (128,544) - - (128,544)
Total Accumulated
Depreciation (3,840,605) (222,774) - (4,063,379)
Governmental Activities
Capital Assets, Net 7,330,536$ (222,774)$ -$ 7,107,762$
Depreciation expense is allocated to the general government function in the statement
of activities.
Note 5: Risk Management
The Corporation is exposed to various risks of loss related to torts, thefts of, damage to and
destruction of assets, errors and omissions, and natural disasters. The Corporation, through
the City, carries commercial liability insurance coverage. The Corporation carries no insurance
coverage for natural disasters. Since the Corporation does not have any employees
(it uses employees from the City), it is not liable for injury to employees, workers' compensation,
or employee health and accident insurance. The City has had no reduction in insurance
coverage, nor did the City have any settlements that were in excess of insurance coverage in
any of the three preceding years.
Note 6: Property Management and Operations
The Corporation has two agreements with a management company, dated July 1994 and
April 2002, to operate the development housing. These agreements are automatically renewed
for successive periods of one year, unless terminated by the Corporation. The management
company is responsible for collecting rents and receipts, employing an on-site manager and
maintaining financial records. Total fees paid to the management company were $25,092 for
the Angelus Senior Housing facility and $35,424 for the Garvey Senior Housing facility during
fiscal year ended June 30, 2018.
16
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2018
Note 1: Budgetary Information
Annual budgets are adopted on a basis consistent with accounting principles generally
accepted in the United States of America for the governmental fund. All annual appropriations
lapse at fiscal year end.
On or before the last day in March of each year, all agencies of the government submit requests
for appropriations to the government's manager so that a budget may be prepared. Before the
first Thursday of June, the proposed budget is presented to the Corporation's governing board
for review. The governing board holds public hearings and a final budget must be prepared
and adopted no later than June 30.
The appropriated budget is prepared by fund, function and department. The Corporation's
department heads, with approval of the Finance Director and City Manager, may make
transfers of appropriations within a department and between departments within a fund.
Transfers of appropriations between funds must be approved by the governing board. The
legal level of budgetary control (i.e., the level at which expenditures may not legally
exceed appropriations) is the fund level.
Encumbrance accounting is employed in governmental funds. Encumbrances
(e.g., purchase orders, contracts) outstanding at year end do not constitute expenditures
or liabilities because the commitments will be re-appropriated and honored during the
subsequent year.
17
ROSEMEAD HOUSING DEVELOPMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF ROSEMEAD, CALIFORNIA
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED JUNE 30, 2018
Variance with
Final Budget
Budget Amounts Actual Positive
Original Final Amounts (Negative)
Budgetary Fund Balance, July 1 227,269$ 227,269$ 227,269$ -$
Resources (Inflows):
Intergovernmental - - 420,478 420,478
Rental income 444,000 444,000 468,969 24,969
Investment income - - 27 27
Miscellaneous 2,500 2,500 4,974 2,474
Amounts Available for Appropriations 673,769 673,769 1,121,717 447,948
Charges to Appropriations (Outflows):
Operating costs 444,900 444,900 422,282 22,618
Administrative services paid to City of Rosemead 226,200 226,200 229,387 (3,187)
Facility rent paid to City of Rosemead 183,400 183,400 183,400 -
Total Charges to Appropriations 854,500 854,500 835,069 19,431
Budgetary Fund Balance (Deficit), June 30 (180,731)$ (180,731)$ 286,648$ 467,379$
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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
To the Board of Directors
Rosemead Housing Development Corporation
Rosemead, California
We have audited, in accordance with the 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, the financial statements of the governmental
activities and the General Fund of the Rosemead Housing Development Corporation (the Corporation), a
component unit of the City of Rosemead, California, as of and for the year ended June 30, 2018, and the
related notes to the financial statements, which collectively comprise the Corporation’s basic financial
statements, and have issued our report thereon dated December 13, 2018.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Corporation’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in
the circumstances 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 Corporation’s internal control. Accordingly, we
do not express an opinion on the effectiveness of the Corporation’s internal control.
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 a 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. 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.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Corporation’s financial statements are free
from 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. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
203 N. Brea Blvd., Suite 203 Brea, CA 92821 Phone: 714.672.0022
An Association of Independent Accounting Firms
To the Board of Directors
Rosemead Housing Development Corporation
Rosemead, California
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the Corporation’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the Corporation’s internal control and compliance.
Accordingly, this communication is not suitable for any other purpose.
Brea, California
December 13, 2018
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