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Home My WebLink AboutMeasure "A" Ended 06/30/06Approved. Carlos L. Ortega;,City Manager CITY OF PALM DESERT FINANCE DEPARTMENT Staff Report REQUEST: RECEIVE AND FILE THE AUDITED FINANCIAL REPORTS FOR THE MEASURE A FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2006 DATE: FEBRUARY 8, 2007 CONTENTS: AUDITED FINANCIAL REPORT FOR MEASURE A FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Recommendation: By Minute Motion, that the City Council receive and file the audited financial statements for Measure A Fund for fiscal year ending June 30, 2006. 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. Caporicci & Larson, CPA, performed and completed the annual independent audit for the fiscal year ended June 30, 2006, for the Measure A Fund in September 2006, in accordance with generally accepted auditing standards. In the auditor's opinion, the basic financial statements present fairly, in all material respects, the financial position of the Measure A Fund as of June 30, 2006, and the results of its operations of the year then ended are in conformity with accounting principles generally accepted in the United States of America. In conducting the audit, the auditors are also required to test internal controls. For the year ended June 30, 2006, the auditors did not issue a management letter, indicating that the current internal controls are adequate. The Audit, Investment and Finance Committee received the audited financial statements for the Measure A Fund at their January 23, 2007 meeting, and it was recommended that the statements for the fiscal year ended June 30, 2006 be received and filed by the City Council. CITY COUNCIL ACTION: APPROVED , DENIED RECEIVED E Ft /e. OTHER Paul S. Gibson, Director of Finance/City Treasurer STING DATE c9 - 8 - 0 ri AYES: ,hx'f15nht F r�Uson, rer �v, `fi'�eaei -Kei�W NOES: None, ABSENT: 0p ABSTAIN: klor e VERIFIED BY: iqr C?-'iginal on File withjCity Clerk's Office \\WIN2K\groups\Finance\Niamh Ortega\Wpdocs\PGibson\Staff Reports\Audit staff reports 2006\audit 2006 Measure i � ' � I • � 1 o a m esert �l � Measure A Trans ortation Fund p � . . Palm Desert, Calif ornia 1 1 -1 � � Financial Statements and Independent Auditors' Reports _� For the years ended June 30, 2006 and 2005 � _� J C�L ICaporlcci&Iarson J Ceritf�ed Public Accountants I i f City of Palm Desert iMeasure A Transportation Fund Table of Contents I Pa�e J IndependentAuditors' Report....................................................................................................................1 , iFinancial Statements: � Comparative Balance Sheets...................................................................................................................3 �1 Comparative Statements of Revenues, Expenditures and Changes in Fund Balance....................4 � Notes to the Financial Statements ..........................................................................................................5 � Reyuired Supplementary Information: � Statements of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual -For the year ended June 30, 2006...............................................................11 "'� Statements of Revenues, Expenditures and Changes in Fund Balance- __ Budget and Actual -For the year ended June 30, 2005 ...............................................................12 _� Schedule of Discretionary Expenditures for Street and Road Improvements Compared to Maintenance of Effort Base.....................................................................................13 � Transportation Uniform Mitigation Fee Program.............................................................................14 � Report on Compliance and on Internal Control Over Financial Reporting....................................16 =1 i _ � ► � 1 _� I I ► C�L � I capoc;cc;&t.arson i Certifted Publtc Accountants I j INDEPENDENT AUDTTORS'REFORT f � To the Honorable Mayor and Members of the City Council ! of the City of Palm Desert Palm Desert,California � We have audibed the accompanying financial st�atements of the Measure A Fund(Transportation Fund)of the City of Palm Desert, California (City), as of and for the years ended June 30, 2006 and 2005, as lisbed in the table of conbents.These fu�ar►cial stabements are the responsibility of tfie Cit�s management Our responsibility is t�o express I an opinion on these financial statements based on our audits. �.l � We rnnducbed our audits in accordance with generally accepbed auditing standards in the Uni�d States and �e standards applicable to fntiaru�ial audits contained in GoUernment Auditing Standards, issued by the Comptroller General of the Unibed States. Those standards require �at we plan and perform the audits to obtain reasonable assurance about whether the financial stafiements are free of material misstatement An audit uuludes examuung, � on a best basis,evidence supporting t�e 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 fu�artcial stafiement presentation We believe tr�at our audits provide a reasonable basis for our opinion. � As described in Note 1,the financial stabements present only the Transportadon Fund and are not inbended to,and do not,present fairly the financial position of the City as of June 30,2006 and 2005,and the changes in fund balance I thereof for the years then ended in conformity with generally accepbed accounting principles in the United States. � In our opinion, the financial stabements referred t�o above present fairly, in all mafierial respects, the financial � position of the Transportation Fund of ifie City, as of June 30,2006 and 2005, and the respective changes in fund . balance for the years then ended in conformity with generally accepted accounting principles in the United Stabes. � In accordance with Gavernment Audifing Standards,we have aLso issued our report as of and for ti�e year ended June 30, 2006,dated October 11, 2006,on our consideration of the City's internal control over financial reporting of the Transportation Fund and our bests of its compliance wi� certain provisions of laws, regulations, contracts and � grants.The purpose of t�at report is b�describe the scope of our testing on internal control over financial reporting and compliance and the results of�at besting,and not to provide an opinion on the inbemal control over financial reporting or on compliance. That report is an inbegral part of an audit performed in accordance with Gvr�ernment � Auditing Standards and should be read in conjunctian wit�this report in considering�e results of our audits. The accompanying Required Supplement�y Information,as Iisted in tfie table of content�,is not a required part of I �e financsal stabements but is supplementary information required by the Governmental Accounting Standards Board or the Riverside County Transpor�tion Commission. We have applied certain limited procedures, which mnsisbed priixipally of inquiries of management regazding the methods of ineasurement and presentation of the � Required Supplementary Information However,we did not audit the infom�ation and express no opinion on it , �� . � Irvine,California Orbober 11,2006 � Toll Free Ph:(87�862-22(� Toll Free Fax:(866)43(r-0927 oaklaad Orsa�e Couety 8acrameato Baa Dle�o I 1ld0 Gt�nd Ave.,Suite 1365 9 Co�ontc Ptrk,Suitc 100 777 Campus Commons Rd.,Suite 2W 4858 Mcrcury,Sultr 106 Oakland,('alifomla 99612 Irvine,Callfomia 9260G Sacrunento,Callfomia 95825 San Dlcgo,CaLfomi�92111 f � . I I � � I i � �� I 1 FINANCIAL STATEMENTS � � � � � i .i � , _I 2 � !� City of Palm Desert Measure A Transportation Fund � Comparative Balance Sheets 1 June 30, 2006 and 2005 � { Measure A � 2006 2005 ASSETS i � Cash and investments $ 7,036,783 $ 4,442,951 ' Due from City of Palm Desert _ 15p,364 Due from other govemmental agencies 1,127,746 796,737 �1 Total assets $ 8,164,529 $ 5,890,052 � LIABILITIES AND FUND BALANCE Liabilities: � Accounts payable $ 55,920 $ 49,609 Deferred revenue 281,957 - � Totalliabilities 337,877 49,609 Fund Balance: Reserved for continuing appropriations 5,992,012 2,541,335 ) Reserved for encumbrances 1,407,784 412,774 ,l Designated for future projects 426,856 2,886,334 Total fund balance 7,826,652 5,840,443 JTotal liabilities and fund balance $ 8,164,529 $ 5,890,052 � � �1 I f � � I , 1 See accompanying Notes to the Financial Statements. I 3 � 1 �� City of Palm Desert Measure A Transportation Fund ` Compazative Statements of Revenues, Expenditures and Changes in Fund Balance For the years ended June 30,2006 and 2Q05 i i Measure A � 2006 2005 REVENUES: I Measure A $ 2,825,202 $ 2,385,026 � Reimbursements from other agencies 223,335 554,830 lnterestincome 189,356 76,519 , � Other revenue - 7,295 u`J Tota]revenues 3,237,893 3,023,670 � EXPENDITURES: Construction and maintenance 1,251,684 1,110,423 � Total expenditures 1,251,684 1,110,423 � REVENUES OVER(UNDER)E?�ENDITURES 1,986,209 1,913,247 FUND BALANCE: ; 1 Beginning of year 5,840,443 3,927,196 1 End of year $ 7,826,652 $ 5,840,443 i . � � _1 I � � i _� � , � See accompanying Notes to the Financial Statements. l 4 1 City of Palm Desert � Measure A Transportation Fund ; Notes to the Financial Statements For the years ended June 30,2006 and 2005 j I 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES � � The Reporting Entity , � 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 Coun Trans ortation Commission RCTC allocated Measure A funds to the Ci tY P ( ) ty 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 Accountin� � I The accounts of the City are organized on the basis of funds which are considered to be se arate P 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 l/z% l sales tax allocations. This fund is legally restricted for specific purposes and is included in the basic J financial statements of the City. 1 Basis of Accountin� , The accounting and financial reporting treatment applied to a fund is determined by its I 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. f 1 Basis of accounting refers to when revenues and the related assets and liabilities are recognized in i the accounts and reported in the Transportation Fund financial statements. Specifically,it relates to �� the timing of ineasurements made, regardless of the nature of the measurement. � � 5 i City of Palm Desert ; Measure A Transportation Fund ` Notes to the Financial Statements, Continued For the years ended June 30,2006 and 2005 I , 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued I ' Basis of Accountin,g, Continued i � Revenues are recognized in the accounting period in which they become measurable and available. � 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 goverrunental 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 ineasurable and collectible generally within 60 days following :� the end of the fiscal year. Revenues considered susceptible to accrual primarily include Measure A and interest. � Revenue Reco ition 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. � For the City, funds received for street and road improvement purposes under Measure A originate from derived tax revenues. Revenues received under the Measure A street and road improvements iprogram are recognized in the period when the underlying exchange has occurred and resources _. are available. iDeferred revenues arise when potential revenues do not meet both the measurable and available ' criteria for recognition in the current period. Deferred revenues also arise when the City receives resources before it has a legal claim to them, as when grant monies are received prior to the � incurrence of qualified expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for deferred � revenue is removed from the balance sheet and revenue is recognized. , � � 6 ! � City of Palm Desert iMeasure A Transportation Fund , Notes to the Financial Statements, Continued For the years ended June 30,2006 and 2Q05 I , 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,Continued i � 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 encurnbrance system as a management control ; technique to assist in controlling expenditures and enforcing revenue provisions. Under this .__1 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 re aration of financial statements in conformi with enerall acce ted accountin P P tY g Y P g � principles requires management to rnake 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 5 management of cash. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms. The Transportation Fund's cash, as of June 30, � 2006 and 2005, respectively,was as follows: � 2006 2005 Measure A $ 7,036,783 $ 4,942,951 I The Transportation Fund's cash is deposited in the City's internal investment pool, which is �" reported at fair value. 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 Govemment Agency Securities ` Bankers Acceptances Treasury Bili and Notes -' Medium Term Notes Passbook Savings Accounts I Repurchase Agreements State of California Local Agency Investrnent Fund (LAIF) i 7 I I City of Palm Desert Measure A Transportation Fund I Notes to the Financial Statements, Continued For the yeazs ended June 30,2006 and 2005 � 2. CASH AND INVESTMENTS,Continued I � The City's investments with LAIF at June 30, 2006, included a small portion of the pooled funds invested in derivatives and similar transactions. These investments 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, 2006, the City had pooled cash and investments in LAIF, which had invested 2.567% ,, 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. .l 3. DUE FROM CITY OF PALM DESERT � Due from City of Palm Desert consisted of the following: � 2006 2005 Palm Desert Redevelopment Agency $ - $ 150,364 I ., 1 4. DUE FROM OTHER GOVERNMENTAL AGENCIES I , Due from other governmental agencies consisted of the following: I 2006 2005 Riverside County Transportation Commi�cion $ 743,342 $ 642,271 ' Coachella Valley Association of Governments 377,801 151,092 � City of Rancho M'uage 6,603 3,374 i $ 1,127,746 $ 7%,737 J 1 8 City of Palm Desert Measure A Transportation Fund , Notes to the Financial Statements, Continued For the years ended June 30,2006 and 2005 i i 5. DEFERRED REVENUE 1 In the Measure A Fund, deferred revenue consisted of the following: , 2006 2005 City of Rancho Mirage $ 6,603 $ - I Developer contributions 275,354 - '�r � Total $ 281,957 $ ' - �� The City of Palm Desert and the City of Rancho Mirage jointly funded part of the Measure A related projects. As of June 30, 2006, the City had incurred expenses that had not been billed to the � City of Rancho Mirage in the amount of $6,603. In addition, the City had received funding from developers towards construction work on Dinah Shore Drive and Monterey Avenue. This money will be deferred until expended upon the agreed projects. � 6. RESTRICTIONS 1 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. � � _� � � l � � � � l 9 .I � i I � ; � � � _� REQUIRED SUPPLEMENTARY INFORMATION I � � � � � , f � i � 10 � �� 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, 2006 i I � Variance from ' Final Budget Budget Favorable j Original Final Actual (Unfavorable) REVENUES: " ' Measure A $ 2,343,250 $ 2,343,250 $ 2,825,202 $ 481,952 �I Reimbursements from other agencies 500,000 500,000 223,335 (276,665) Interest income 48,600 48,600 189,356 140,756 � Total revenues 2,891,850 2,891,850 3,237,893 346,043 EXPENDITURES: � Construction and maintenance 5,769,000 8,721,907 1,251,684 7,470,223 I Total expenditures 5,769,000 8,721,907 1,251,684 7,470,223 � REVENUES OVER(UNDER)IXPENDTTURES $ (2,877,150) $ (5,830,05� 1,986,209 $ 7,816,266 � FUND BALANCE: Beginning of year 5,840,443 I End of year $ 7,826,652 I � � �l 1 .l _7 1 � � 1� 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 Variance from � Final Budget Budget Favorable ` Original Final Actual (Unfavorable) I ' REVENUES: ; Measure A $ 2,275,000 $ 2,275,000 $ 2,385,026 $ 110,026 �; Reimbursements from other agencies - - 554,830 554,830 Interest income 70,000 70,000 76,519 6,519 � Other revenue - - 7,295 7,295 Total revenues 2,345,000 2,345,000 3,023,670 678,670 EXPENDIT'URES: � , Construction and maintenance 1,560,000 5,724,912 1,110,423 4,614,489 � Total expenditures 1,560,000 5,724,912 1,110,423 4,614,489 REVENUES OVER(UNDER)EXPENDTTURES $ 785,000 $ (3,379,912) 1,913,247 $ 5,293,159 . � � FUND BALANCE: Beginning of year 3,927,196 � End of year $ 5,840,443 i � � ., ; , I _; � � 1 ( 12 .; ' City of Palm Desert . Measure A Transportation Fund Schedule of Discretionary Expenditures for Street and Road Improvements Compared to the Maintenance of Effort Base � For the years ended June 30,2006 and 2005 i 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 2006 and 2005, � 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$73,272,364 and $61,899,569 at June 30, 2006 and 2005, respectively. 2006 2005 � 3..� Current year local discretionary expenditures $ 12,277,593 $ 9,576,311 Less:Base Year (904,798) (904,798) � Excess(deficiency)of current year expenditures over(under)Base Year 11,372,795 8,671,513 � Excess(deficiency)of local expenditures at beginning of year 61,899,569 53,228,056 Excess(deficiency)of local expenditures at end of year $ 73,272,364 $ 61,899,569 i 1 O � � 1 _� I r � , � _1 , l I 13 � City of Palm Desert ; Measure A Transportation Fund Transportation Uniform Mitigation Fee Program For the years ended June 30,2006 and 2005 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 $1,297,268 and $1,457,996 in fiscal years 2006 and 2005, respectively, which were remitted to the Coachella : Valley Association of Governments. :�, :.., � � � ?►� � , ' � � � . � i � _� i � 1 i � 1 I 14 � � �i "�i � � � � REPORT ON COMPLIANCE AND ON INTERNAL ; � CONTROL OVER FINANCIAL REPORTING � l � � I ..1 I J J I l 15 C&L Caporicci&larson , Certtfied Publtc Accountants INDEPENDENT AUDITORS'REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING OF THE MEASURE A TRANSPORTATION FUND BASED ON AN AUDTT OF THE MEASURE A TRANSPORTATION FUND'S FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AiIDTITNG 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 City of Palm Desert, California (City), as of and for the year ended June 30,2006, and have issued our _ j report thereon dated October 11, 2006. We conducted our audit in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in �I Governrnent Auditing Standards,issued by the Comptroller General of the United States. . 1 �"f Compliance � As part of obtaining reasonable assurance about whether the Transportation Fund's financial statements are free of material misstatement, we performed tests of their compliance with certain provisions of laws, regulations,contracts and grants,including the requirements governing the 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 Ireported under Government Auditing Standnrds. Internal Control Over Financial Reporting I In planning and performing our audits of the Transportation Fund,we considered the City's internal control � over financial reporting of the Transportation Fund 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 1 course of performing their assigned functions. We noted no matters involving the internal control over Ifinancial reporting and its operation that we consider to be material weaknesses. I This report is intended solely for the information and use of management, the City Council, and the Riverside County Transportation Commission and is not intended to be and should not be used by anyone other than these specified parties. I 'u; � �,�-- �y� I Irvine,California October 11,2006 , Toll Frec Ph:(877)�2-2200 Toll Frer Fax:(H66)4iCr-0927 O�lclaad Oranse County Sacrameneo 8aa Dleso 4 1 AO Grand Avr,Suite 1 i65 9 Corpontr Park,SWte!00 777 Campus Commons Rd.,Suitc 2W 4858 Mereury,Sultc 106 Oakland,Caliturnia y4612 [rvinc,California y261X Sacnmrnto,('allfomla 95A25 San I�cgo,California 92111