HomeMy WebLinkAboutAudited Financial Reports - MEASURE A Fund FY Ending 06/30/2004X /4
City of Palm Desert
STAFF REPORT
Council Meeting of January 13, 2005
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: PAUL S. GIBSON, DIRECTOR OF FINANCE/CITY TREASURER
SUBJECT: City of Palm Desert Audited Financial Reports for the Measure A Fund
for the Fiscal Year Ending June 30, 2004
DATE: January 13, 2005
RECOMMENDATION:
By Minute Motion, receive and file the audited financial statements of the Measure A Fund
for the City of Palm Desert for the fiscal year ending June 30, 2004.
BACKGROUND:
The Measure A Fund is a special revenue fund that was created to keep track of funds
received by the Riverside County Transportation Commission. In 1988, Riverside County
voters approved a half cent sales tax, known as Measure A, to fund a variety of highway
improvement, local street and road maintenance, commuter assistance and specialized
transit projects.
We received an unqualified opinion which is the highest opinion that an audit firm can issue.
This indicates that in the auditor's opinion, the financial statements are presented fairly, in all
material respects, the financial position of the Measure A Fund. In conducting the audit, the
auditors are also required to test the internal control of the City. Their report showed no
instance of noncompliance or material weaknesses.
Staff recommends that the City Council receive and file the audited financial statements for
the Measure A Fund for the fiscal year ending June 30, 2004.
Respectfully submitted,
PAUL S. GIBSON,
DIRECTOR OF FINANCE/TREASURER
Hf Acctg04W udit041staffreportmeasurea2004audit.wpd
Reviewed and concur,
CARLOS L. TEGA,
CITY MANAGER
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City of
Palm Desert
Measure A Transportation Fund
Palm Desert, California
Financial Statements and
Independent Auditors' Reports
For the years ended June 30, 2004 and 2003
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C&L
Caporicci & Larson
Certified Public Accountants
City of Palm Desert Transportation Fund
Table of Contents
Page
Independent Auditors' Report 1
Financial Statements
Balance Sheets 2
Statements of Revenues, Expenditures and Changes in Fund Balances 3
Statements of Revenues, Expenditures and Changes in Fund Balance -
Budget and Actual - For the year ended June 30, 2004 4
Statements of Revenue, Expenditures and Changes in Fund Balance -
Budget and Actual - For the year ended June 30, 2003 5
Notes to the Financial Statements 6
Independent Auditors' Report on Compliance and on Internal Control
Over Financial Reporting of the Measure A Transportation Fund based on
an Audit of the Measure A Transportation Fund's Financial Statements in
Accordance with Government Auditing Standards 10
IL
i
CAL
Caporicci & Larson
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and Members of the City Council
of the City of Palm Desert
Palm Desert, California
We have audited the accompanying financial statements of the Measure A Transportation Fund
(Transportation Fund) of the City of Palm Desert, California (City), as of and for the years ended JUtie 30, 2004
and 2003, as listed in the table of contents. These financial statements are the responsibility of the City's
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in the United States and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audits 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 audits
provide a reasonable basis for our opinion.
As described in Note 1, the financial statements present only the Transportation Fund and are not intended
to, and do not, present fairly the financial position of the City as of June 30, 2004 and 2003, and the change
financial position thereof for the years then ended in conformity with generally accepted accounting
principles in the United States.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Transportation Fund of the City, as of June 30, 2004 and 2003, and the changes in financial
position for the years ,then ended in conformity with generally accepted accounting principles in the United
States.
In accordance with Government Auditing Standards, we have also issued our report as of and for the year
ended June 30, 2004, dated October 15, 2004, on our consideration of the City's internal control over financial
reporting of the Transportation Fund and our tests of its compliance with certain provisions of laws,
regulations, contracts and grants. That report is an integral part of an audit performed in accordance with
Government Auditing Standards and should be read in conjunction with this report in considering the results
of our audit.
Costa Mesa, California
October 15, 2004
Toll Free Ph: (877) 862-2200 Toll Free Fax: (866) 436-0927
Oakland Orange County Sacramento San Diego
180 GrandAve., Suite 1365 3184-D Airway Avenue 777 Campus Commons Rd., Suite 200 600 'B" Street, Suite 1900
Oakland, California 94612 Costa Mesa, California 92626 Sacramento, California 95825 San Diego, California 92101
City of Palm Desert Transportation Fund
Balance Sheets
June 30, 2004 and 2003
ASSETS
Cash and investments
Accounts receivable
Due from other governmental agencies
Total assets
LIABILITIES
AND FUND BALANCES
Liabilities:
Accounts payable
Retentions payable
Total liabilities
Fund Balances:
Reserved for continuing appropriations
Reserved for encumbrances
Designated for future projects
Total fund balances
Total liabilities and fund balances
Measure A
2004
$ 4,063,811
587,788
4,651,599
$ 261,912
462,491
724,403
2,802,428
860,125
264,643
3,927,196
$ 4,651,599
2003
6,213,022
6,321
1,428,788
7,648,131
$ 311,801
154,661
466,462
6,821,564
297,665
62,440
7,181,669
$ 7,648,131
See accompanying Notes to the Financial Statements.
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City of Palm Desert Transportation Fund
Statements of Revenues, Expenditures and Changes in Fund Balances
For the years ended June 30, 2004 and 2003
REVENUES:
Intergovernmental allocations:
Measure A
State Transportation Improvement Program
Reimbursements from other agencies
Interest income
Other revenue
Total revenues
EXPENDITURES:
Construction and maintenance
Total expenditures
REVENUES OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES):
Sale of Measure A funded property
Total other financing sources (uses)
REVENUES AND OTHER FINANCING SOURCES (USES) OVER
(UNDER) EXPENDITURES
FUND BALANCE:
Beginning of year
End of year
Measure A
2004 2003
$ 2,260,912
1,091,870
60,651
300
2,177,816
1,500,846
998,870
111,400
1,840
3,413,733 4,790,772
6,668,206 4,235,698
6,668,206 4,235,698
(3,254,473) 555,074
42,705
42,705
(3,254,473) 597,779
7,181,669 6,583,890
$ 3,927,196 $ 7,181,669
See accompanying Notes to the Financial Statements.
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City of Palm Desert Transportation Fund
Statements of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the year ended June 30, 2004
Measure A
Budget
REVENUES:
Variance
Favorable
Actual (Unfavorable)
Intergovernmental allocations:
Measure A $ 2,100,000 $ 2,260,912 $ 160,912
State Transportation Improvement Program - _
Reimbursements from other agencies 1,954,000 1,091,870 (862,130)
Interest income 44,678 60,651 15,973
Other revenue - 300 300
Total revenues 4,098,678 3,413,733 (684,945)
EXPENDITURES:
Construction and maintenance 10,921,186 6,668,206 4,252,980
Total expenditures 10,921,186 6,668,206 4,252,90
REVENUES OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES):
Sale of Measure A funded property
Total other financing sauces (uses)
REVENUES AND OTHER FINANCING SOURCES (USES)
OVER (UNDER) EXPENDITURES
FUND BALANCE:
Beginning of year
End of year
(6,822,508) (3,254,473) 3,568,035
$ (6,822,508) (3,254,473) $ 3,568,03 5
7,181,669
$ 3,927,196
See accompanying Notes to the Financial Statements.
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City of Palm Desert Transportation Fund 1
Statements of Revenues, Expenditures and Changes in Fund Balance Budget and Actual
For the year ended June 30, 2003
REVENUES:
Intergovernmental allocations:
Measure A
State Transportation Improvement Program
Reimbursements from other agencies
Interest income
Other income
Total revenues
EXPENDITURES:
Construction and maintenance
Total expenditures
REVENUES OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES):
Sale of Measure A funded property
Total other financing sources (uses)
REVENUES AND OTHER FINANCING SOURCES (USES)
OVER (UNDER) EXPENDITURES
FUND BALANCE:
Beginning of year
End of year
Measure A
Budget
$ 2,100,000
365,000
2,465,000
16,983,874
16,983,874
(14,518,874)
$ (14,518,874)
Variance
Favorable
Actual (Unfavorable)
2,177,816
1,500,846
998,870
111,400
1,840
4,790,772
4,235,698
4,235,698
555,074
42,705
42,705
$ 77,816
1,500,846
998,870
(253,600)
1,840
2,325,772
12,748,176 '
12,748,176
15,073,948
42,705
42,705
597,779 $ 15,116,653
6,583,890
$ 7,181,669
See accompanying Notes to the Financial Statements.
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City of Palm Desert Transportation Fund
Notes to Financial Statements
For the years ended June 30, 2004 and 2003
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reporting Entity
The Measure A Transportation Fund's (Transportation Fund) financial statements are intended to
present the financial position and change in financial position of only those transactions
attributable to the Riverside County Transportation Commission Transportation Expenditure Plan
and Retail Transaction and Use Tax Ordinance (Measure A) funds administered and dikbursed by
the City of Palm Desert, California (City).
The Riverside County Transportation Commission (RCTC) allocated Measure A funds to the City
to supplement the City's existing local street and road improvements program.
The accounting policies of the Transportation Fund of the City are in conformity with generally
accepted accounting principles in the United States applicable to governmental units. The
Governmental Accounting Standards Board (GASB) is the accepted standard -setting body for
establishing accounting and financial reporting principles. The following is a summary of the
more significant accounting policies.
Fund Accounting
The accounts of the City are organized on the basis of funds which are considered to be separate
accounting entities. The operations of the Transportation Fund are accounted for in a separate set
of self -balancing accounts that comprise its assets, liabilities, fund balance, and revenues and
expenditures. Government resources are allocated to and for individual funds based on the
purposes for which they are spent and means by which spending activities are controlled. The
fund represented in the Transportation Fund financial statements is a special revenue fund type.
The Transportation Fund accounts for the City's share of the County of Riverside's additional 1/2%
sales tax allocations. This fund is legally restricted for specific purposes and is included in the basic
financial statements of the City.
Basis of Accounting
The accounting and financial reporting treatment applied to a fund is determined by its
measurement focus and basis of accounting. Financial statements for the special revenue fund
type of governmental funds are presented using the current financial resources measurement focus
and the modified accrual basis of accounting.
Basis of accounting refers to when revenues and the related assets and liabilities are recognized in
the accounts and reported in the Transportation Fund financial statements. Specifically, it relates to
the timing of measurements made, regardless of the nature of the measurement. Revenues are
recognized in the accounting period in which they become measurable and available.
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City of Palm Desert Transportation Fund
Notes to Financial Statements, Continued
For the years ended June 30, 2004 and 2003
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Expenditures are recognized in the accounting period in which the fund liability is incurred, if
measurable, except for unmatured interest on general long term liabilities, which is recognized
when due. Additionally, consistent with the flow of current financial resources measurement focus
required for governmental fund financial statements, unmatured long-term indebtedness is
reported as a long-term liability of the City, not as a liability of the fund.
Under the modified accrual basis of accounting, revenues are recorded when susceptible to
accrual, that is, when they become both measurable and available to finance expenditures in the
fiscal period. "Available" means collectible within the current period or soon enough thereafter to
be used to pay liabilities of the current period. For the City, revenues and other governmental fund
financial resources are recognized if measurable and collectible generally within 90 days following
the end of the fiscal year. Revenues considered susceptible to accrual primarily include Measure A
and interest.
Revenue Recognition
Recognition of revenues arising from nonexchange transactions, which include revenues from
taxes, certain grants, and contributions, is based on the primary characteristic from which the
revenues are received .by the City. Measure A funds originate from "derived tax revenues", of
which the primary characteristic is that the assessing government imposes the provision of the
resources on the provider (the entity that acquires the income) and the government's assessment is
on an exchange transaction.
For the City, funds received for street and road improvement purposes under Measure A retain
the primary characteristic from which derived. Revenues received under the Measure A street and
road improvements program are recognized in the period when the underlying exchange has
occurred and resources are available.
Budgetary Control and Encumbrances
The City adopts an annual budget on a basis consistent with generally accepted accounting
principles in the United States and utilizes an encumbrance system as a management control
technique to assist in controlling expenditures and enforcing revenue provisions. Under this
system, the current year expenditures are charged against the budgeted appropriation.
Encumbrances outstanding at year-end are reported as reservations of fund balances for
subsequent year expenditures as they do not constitute expenditures or liabilities.
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.
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City of Palm Desert Transportation Fund
Notes to Financial Statements, Continued
For the years ended June 30, 2004 and 2003
2. CASH AND INVESTMENTS
The City has pooled its cash in order to achieve a higher return on investments while facilitating
management of cash. The balance in the pool is available to meet current operating requirements.
Cash in excess of current requirements is invested in various interest -bearing accounts and other
investments for varying terms. Transportation Fund cash is deposited in the City's internal
investment pool, which is reported at fair value. Interest income is allocated on the basis of
average cash balances. Investment policies and associated risk factors applicable to the
Transportation Funds are those of the City and are included in the City's basic financial
statements.
The investments made by the City are limited to those allowable under State Statutes and include
the following types of investments:
Certificates of Deposit
Bankers Acceptances
Medium Term Notes
Repurchase Agreements
Government Agency Securities
Treasury Bill and Notes
Passbook Savings Accounts
State of California Local Agency Investment Fund (LAIF)
The City's investments with LAIF at June 30, 2004, included a small portion of the pooled funds
invested in derivatives and similar transactions. These investments may include the following:
Structured Notes - Debt securities (other than Asset -Backed Securities) whose cash -flow
characteristics (coupon rate, redemption amount, or stated maturity) depend on one or more
indices and/ or that have imbedded forwards or options.
Asset -Backed Securities - Generally mortgage -backed securities which entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments
from a pool of mortgages (for example, Collateralized Mortgage Obligations) or credit card
receivables.
As of June 30, 2004, the City had pooled cash and investments in LAIF, which had invested 1.603%
of the pooled investment funds in derivatives and similar investments.
See the City's basic financial statements for disclosures related to cash and investments and the
related custodial risk categorization.
3. COMPLIANCE REQUIREMENTS
Funds received pursuant to the provisions of Measure A (Ordinance No. 88-1 of the County of
Riverside) may only be used for local streets and roads.
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City of Palm Desert Transportation Fund
Notes to Financial Statements, Continued
For the years ended June 30, 2004 and 2003
4. TRANSPORTATION UNIFORM MITIGATION FEE PROGRAM
To be eligible for Measure A monies, cities in the Coachella Valley must participate in the
Transportation Uniform Mitigation Fee (TUMF) program necessary for implementation of the
planned Regional Arterial System. Accordingly, the City collected TUMF fees totaling
approximately S576,277 and $551,801 in 2004 and 2003, respectively, which were remitted to the
Coachella Valley Association of Governments.
5. MAINTENANCE OF EFFORT
In accordance with the requirements of Measure A, the City must maintain its continuous
commitment of local discretionary expenditures for streets and roads. The base year calculation of
local discretionary expenditures (Base Year) represents the three-year average of discretionary
streets and roads expenditures incurred by the City for 1986 through 1988. During 2004 and 2003,
the City's local discretionary expenditures for streets and roads, as calculated below, indicates the
City is in compliance with this requirement. The City has a total cumulative excess of local
expenditures of $53,228,056 at June 30, 2004.
2004 2003
Current year local discretionary expenditures $ 8,415,865 $ 8,912,733
Less: Base Year
Excess (deficiency) of current year expenditures
over (under) Base Year
Excess (deficiency) of local expenditures at beginning of year
Excess (deficiency) of local expenditures at end of year
(904,798) (904,798)
7,511,067 8,007,935
45,716,989 37,709,054
$ 53,228,056 $ 45,716,989
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C&L
Caporicci & Larson
Certified Public Accountants
INDEPENDENT AUDITOR' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER
FINANCIAL REPORTING OF THE MEASURE A TRANSPORTATION FUND BASED ON AN AUDIT
OF THE MEASURE A TRANSPORTATION FUND'S FINANCIAL STATEMENTS IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council
of the City of Palm Desert
Palm Desert, California
We have audited the financial statements of the Measure A Transportation Fund (Transportation $und) of the
City of Palm Desert, California (City), as of and for the year ended June 30, 2004, and have issued our report
thereon dated October 15, 2004. We conducted our audit in accordance with generally accepted auditing
standards in the United States and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether the Transportation Fund's financial statements are
free of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts and grants, including Measure A (Ordinance No. 88-1 of the County of Riverside),
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 of the Transportation Fund and, accordingly, we do not express such an opinion. The results of our
tests disclosed no instances of noncompliance that are required to be reported under Government Auditing.
Standards.
Internal Control Over Financial Reporting
In planning and performing our audit of the Transportation Fund, we considered the City's internal control
over financial reporting in order to determine our auditing procedures for the purpose of expressing our
opinion on the Transportation Fund's financial statements and not to provide assurance on the internal
control over financial reporting. Our consideration of the internal control over financial reporting would not
necessarily disclose all matters in the internal control over financial reporting that might be material
weaknesses. A material weakness is a condition in which the design or operation of one or more of the
internal control components does not reduce to a relatively low level the risk that misstatements in amounts
that would be material in relation to the Transportation Fund's financial statements being audited may occur
and not be detected within a timely period by employees in the normal course of performing their assigned
functions. We noted no matters involving the internal control over financial reporting and its operation that
we consider to be material weaknesses.
This report is intended solely for the information and use of management, the City Council, the Riverside
County Transportation Commission and the California State Controller's Office and is not intended to be and
should not be used by anyone other than these specified parties.
eirral4f ee-e zoi,Afvt--
Costa Mesa, California
October 15, 2004
Toll Free Ph: (877) 862-2200 Toll Free Fax: (866) 436-0927
Oakland Orange County Sacramento San Diego
180 Grand Ave., Suite 1365 3184-DAirway Avenue 777 Campus Commons Rd., Suite 200 Goo 'B"Street, Suite 1900
Oakland, California 94612 Costa Mesa, California 92626 Sacramento, California 95825 San Diego, California 92101