HomeMy WebLinkAboutAudited Financial Reports - Measure A - FY Ending 06/30/05City of Palm Desert
STAFF REPORT
Council Meeting of January 26, 2006
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: PAUL S. GIBSON, DIRECTOR OF FINANCE/CITY TREASURER
SUBJECT: Citv of Palm Desert Audited Financial Reports for the Measure A
Fund for the Fiscal Year Endin_q June 30, 2005
DATE: January 26, 2006
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, 2005.
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.
The audited financial statements will be submitted for review to the Investment Committee
at their meeting in January 2006.
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, 2005.
Respectf I sub fitted,
ti ""t
PAUL IGIRSON,
DIR TOR OF FINANCE/TREASURER
H N cctgO5V udit05lstatlreportmeasurea2OO5audit wpd
Reviewed and concur,
CA LOS RTEGA,
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, 2005 and 2004
C&L
Caporicci & [arson
Certified Public Accountants
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City of Palm Desert
Measure A Transportation Fund
Table of Contents
Pa&e
IndependentAuditors' Report ....................................................................................................................1
Financial Statements:
ComparativeBalance Sheets................................................................................................................... 3
Comparative Statements of Revenues, Expenditures and Changes in Fund Balance....................4
Statements of Revenues, Expenditures and Changes in Fund Balance -
Budget and Actual - For the year ended June 30, 2005.................................................................5
Statements of Revenue Expenditures and Changes in Fund Balance -
S s p g
Budget and Actual - For the year ended June 30, 2004.................................................................6
Notes to the Financial Statements.......................................................................................................... 7
Report on Compliance and on Internal Control Over Financial Reporting:
1 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
Performed in Accordance with Government Auditing Standards......................................................13
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�C&L
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), a special revenue fund, of the City of Palm Desert, California (City), as of and for the
years ended June 30, 2005 and 2004, 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, 2005 and 2004, and the revenues,
expenditures, and changes in fund balances 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, 2005 and 2004, and the revenues,
expenditures, and changes in fund balances for the years then ended in conformity with generally accepted
accounting principles in the United States.
As described in Note 1 to the financial statements, the Transportation Fund adopted Statement No. 40 of the
Governmental Accounting Standards Board, Deposit and Investment Risk Disclosures.
In accordance with Government Auditing Standards, we have also issued our report as of and for the year
ended June 30, 2005, dated October 13, 2005, 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 13, 2005
Toll Free Ph: (877) 862-2200
Oakland Orange Conary
180 Grand Ave., Suite 1365 31 ADD Airway Avenue
0.61 1 C.hf—i. Od61 7 Crxtn Mesa. C21ifornia 92626
Toll Free Fax: (866) 436-0927
Sacraments San Diego
77 Campus Commons Rd., Suite 200 1858 Mercury Suite 105
Sacramento, California 95825 San Diego, California 92111
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FINANCIAL STATEMENTS
City of Palm Desert
Measure A Transportation Fund
Comparative Balance Sheets
June 30, 2005 and 2004
Measure A
2005
2004
ASSETS
Cash and investments
$
4,942,951
$
4,063,811
Due from other funds
150,364
-
Due from other governmental agencies
796,737
587,788
Total assets
$
5,890,052
$
4,651,599
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable
$
49,609
$
261,912
Retentions payable
-
462,491
Total liabilities
49,609
724,403
Fund Balances:
Reserved for continuing appropriations
2,541,335
2,802,428
Reserved for encumbrances
412,774
860,125
Designated for future projects
2,886,334
264,643
Total fund balances
5,840,443
3,927,196
Total liabilities and fund balances
$
5,890,052
$
4,651,599
See accompanying Notes to the Financial Statements.
City of Palm Desert
Measure A Transportation Fund
Comparative Statements of Revenues, Expenditures and Changes in Fund Balance
For the years ended June 30, 2005 and 2004
REVENUES:
Measure A
Reimbursements from other agencies
Interest income
Other revenue
Total revenues
EXPENDITURES:
Construction and maintenance
Total expenditures
REVENUES OVER (UNDER) EXPENDITURES
FUND BALANCE:
Beginning of year
End of year
See accompanying Notes to the Financial Statements.
Measure A
2005 2004
$ 2,385,026
554,830
76,519
7,295
3,023,670
1,110,423
1,110,423
1,913,247
3,927,196
$ 5,840,443
$ 2,260,912
1,091,870
60,651
300
3,413,733
6,668,206
6,668,206
(3,254,473)
7,181,669
$ 3,927,196
11
City of Palm Desert
Measure A Transportation Fund
Statements of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the year ended June 30, 2005
REVENUES:
Measure A
Reimbursements from other agencies
Interest income
Other revenue
Total revenues
EXPENDITURES:
Construction and maintenance
Total expenditures
REVENUES OVER (UNDER) EXPENDITURES
FUND BALANCE:
Beginning of year
End of year
Measure A
Variance
Budget
Favorable
Original
Final
Actual
(Unfavorable)
$ 2,275,000 $
2,275,000
$ 2,385,026
$ 110,026
-
-
554,830
554,830
70,000
70,000
76,519
6,519
-
-
7,295
7,295
2,345,000
2,345,000
3,023,670
678,670
1,560,000
5,724,912
1,110,423
4,614,489
1,560,000
5,724,912
1,110,423
4,614,489
$ 785,000 $
(3,379,912)
1,913,247
$ 5,293,159
3,927,196
$ 5,840,443
See accompanying Notes to the Financial Statements.
City of Palm Desert
Measure A Transportation Fund
Statements of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the year ended June 30, 2004
REVENUES:
Measure A
Reimbursements from other agencies
Interest income
Other revenue
Total revenues
Measure A
Variance
Budget Favorable
Original Final Actual (Unfavorable)
$ 2,100,000 $ 2,100,000 $ 2,260,912 $ 160,912
1,954,000 1,954,000 1,091,870
(862,130)
44,678 44,678 60,651
15,973
- - 300
300
4,098,678 4,098,678 3,413,733
(684,945)
EXPENDITURES:
Construction and maintenance 1,746,029 10,921,186 6,668,206 4,252,980
Total expenditures 1,746,029 10,921,186 6,668,206 4,252,980
REVENUES OVER (UNDER) EXPENDITURES $ 2,352,649 $ (6,822,508) (3,254,473) $ 3,568,035
FUND BALANCE:
Beginning of year
End of year
7,181,669
$ 3,927,196
See accompanying Notes to the Financial Statements.
City of Palm Desert
Measure A Transportation
Notes to Financial Statements
For the years ended June 30, 2005 and 2004
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Revortin¢ Entitv
The financial statements of the Measure A Transportation Fund (Transportation Fund) 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 disbursed 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.
City of Palm Desert
Measure A Transportation Fund
_ Notes to Financial Statements, Continued
For the years ended June 30, 2005 and 2004
r
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
Ereported 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 60 days following
the end of the fiscal year. Revenues considered susceptible to accrual primarily include Measure A
r, and interest.
Revenue Recognition
t 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.
City of Palm Desert
! '"-ar;ure A Transportation Fund
Notes to Financial Statements, Continued
For the years ended June 30, 2005 and 2004
f�
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Implementation of New GASB Pronouncement
The Transportation Fund adopted a new accounting standard in order to conform to the following
Governmental Accounting Standards Board Statement:
Statement No. 40, Deposit and Investment Risk Disclosures
GASB Statement No. 40 addresses selected issues and amends GASB Statements No. 3, Deposits
with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase
Agreements. The statement focuses on common deposit and investment risks related to credit risk,
concentration of credit risk, interest rate risk, and foreign currency risk. The statement requires
certain disclosures of investments that have fair values that are highly sensitive to changes in
r interest rates.
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.
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 amounting to $4,942,951 and $4,063,811
as of June 30, 2005 and 2004, respectively 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 Fund 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 may
include the following types of investments:
Certificates of Deposit Government Agency Securities
Bankers Acceptances Treasury Bill and Notes
Medium Term Notes Passbook Savings Accounts
Repurchase Agreements State of California Local Agency Investment Fund (LAIF)
City of Palm Desert
Measure A Transportation Fund
1 . Notes to Financial Statements, Continued
For the years ended June 30, 2005 and 2004
2. CASH AND INVESTMENTS, Continued
The City's investments with LAIF at June 30, 2005, included a small portion of the pooled funds
r invested in derivatives and similar transactions. These investments include the following:
t
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, 2005, the City had pooled cash and investments in LAIF, which had invested 2.406%
l of the pooled investment funds in derivatives and similar investments.
See the City's basic financial statements for disclosures related to cash and investments including
those disclosures relating to interest rate risk, credit rate risk, custodial credit risk, and
concentration risk.
3. DUE FROM OTHER FUNDS
Due from other funds consisted of the following:
2005 2004
Redevelopment agency $ 150,364 $ -
$ 150,364 $ -
4. DUE FROM OTHER GOVERNMENTAL AGENCIES
Due from other governmental agencies consisted of the following:
2005 2004
Riverside County Transportation Commission $ 642,271 $ 461,131
Coachella Valley Association of Governments 151,092 126,657
City of Rancho Mirage 3,374 -
$ 7%,737 $ 587,788
I City of Palm Desert
r Measure A Transportation Fund
l . Notes to Financial Statements, Continued
r For the years ended June 30, 2005 and 2004
f.
5. 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.
(' 6. 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 $1,457,996 and $576,277 in fiscal years 2005 and 2004, respectively, which were
remitted to the Coachella Valley Association of Governments.
7. 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
1 streets and roads expenditures incurred by the City for 1986 through 1988. During 2005 and 2004,
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 $61,899,569 and $53,228,056 at June 30, 2005 and 2004, respectively.
Current year local discretionary expenditures
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
2005
$ 9576,311
(904,798)
8,671,513
53,228,056
2004
$ 8,415,865
(904,798)
7,511,067
45,716,989
$ 61,899,569 $ 53,228,056
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REPORT ON COMPLIANCE AND ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
C&L
j Caporicci & Larson
I Certified Public Accountants
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 PERFORMED 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 Fund) of the
1 City of Palm Desert, California (City), as of and for the year ended June 30, 2005, and have issued our report
l thereon dated October 13, 2005. 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.
Comvliance
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
f - 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
l Government Auditing Standards.
Internal Control Over Financial Revorting
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.
Costa Mesa, California
October 13, 2005
Toll Free Ph: (871) 862-2200
Oakland oraase C-Ulh'
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Oakland. California 94612 Costa Netia, Califomia 92626
Toll Free Fax: (866) 436-4I927
Sacramento San Dleso
. 77 Campus Commons Rd., Suite 200 1858 Metrury, Suite 105
Sacramento, Califomia 95825 San Diego, Califomia 92111