HomeMy Public PortalAboutAudit Report - District- FY14
MIDPENINSULA REGIONAL
OPEN SPACE DISTRICT
ANNUAL FINANCIAL AUDIT REPORT
MARCH 31, 2014
CHAVAN & ASSOCIATES, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1475 SARATOGA AVE., SUITE 180
SAN JOSE, CA 95129
Midpeninsula Regional Open Space District
Santa Clara County
Table of Contents
TITLE PAGE
FINANCIAL SECTION:
Independent Auditor’s Report ..................................................................................................... 1 - 2
Management’s Discussion and Analysis ..................................................................................... 3 - 8
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position .............................................................................................. 9
Statement of Activities .................................................................................................. 10
Fund Financial Statements:
Balance Sheet – Governmental Funds ........................................................................... 11
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position ....................................................................................... 12
Statement of Revenues, Expenditures, and Changes
in Fund Balance – Governmental Funds ................................................................. 13
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balance to the Statement of Activities ................................. 14
Notes to the Basic Financial Statements ............................................................................... 15 - 36
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Revenue, Expenditures and Changes in Fund Balance –
Budget and Actual (GAAP) General Fund ........................................................................... 37
Schedule of Funding Progress – Other Postemployment Benefits .............................................. 38
SUPPLEMENTARY INFORMATION:
Schedule of Expenditures of Federal Awards ............................................................................. 39
Notes to Schedule of Expenditures of Federal Awards ............................................................... 40
OTHER INDEPENDENT AUDITOR’S REPORTS:
Independent Auditor’s 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 ......................................... 41 - 42
Independent Auditor’s Report on Compliance with Requirements that Could Have a
Direct and Material Effect on Each Major Program and on Internal Control over
Compliance in Accordance with OMB Circular A-133 ....................................................... 43 - 44
FINDINGS AND RECOMMENDATIONS:
Schedule of Findings and Questioned Costs ............................................................................... 45
Status of Prior Year’s Findings and Recommendations .............................................................. 46
FINANCIAL
SECTION
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INDEPENDENT AUDITOR’S REPORT
Board of Directors
Midpeninsula Regional Open Space District
Los Altos, California
Report on the Financial Statements
We have audited the accompanying financial statements of the Midpeninsula Regional Open Space
District (the District), as of and for the year ended March 31, 2014, and the related notes to the
financial statements, which collectively comprise the District’s basic financial statements as listed in
the table of contents.
Management’s Responsibility for the Financial Statements
The District’s 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 District’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 District’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.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the District, as of March 31, 2014, 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.
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Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis, budgetary comparison information and other postemployment
benefit information on pages 3 through 8, 37, and 38 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.
Other Information
As discussed in Note 1 to the financial statements, the District adopted the provisions of GASB
Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of
Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and
Liabilities, effective July 1, 2012.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated June 5,
2014 on our consideration of the District’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 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
internal control 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 District’s internal
control over financial reporting and compliance.
June 5, 2014
San Jose, California
Management’s Discussion and Analysis
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2014
INTRODUCTION
The Management’s Discussion and Analysis (MD&A) is a required section of the District’s annual financial
report, as shown in the overview below. The purpose of the MD&A is to present a discussion and analysis of
the District’s financial performance during the fiscal year that ended on March 31, 2014. This report will (1)
focus on significant financial issues, (2) provide an overview of the District’s financial activity, (3) identify
changes in the District’s financial position, (4) identify any individual fund issues or concerns, and (5) provide
descriptions of significant asset and debt activity.
This information, presented in conjunction with the annual Basic Financial Statements, is intended to provide a
comprehensive understanding of the District’s operations and financial standing.
Required Components of the Annual Financial Report
FINANCIAL HIGHLIGHTS
Driven by the strong economy in Silicon Valley, District property tax revenue increased above its long-term
trend line in fiscal 2014, growing by $2.2 million, or 7.1%. Tax revenue also exceeded budget by $0.7 million,
or 2.2%. The assessed valuation of secured and unsecured property within the District, as of July 1, 2013,
increased by 8.1%. District tax revenue growth never exactly matches the rate of increase in assessed
valuation because the District’s hybrid fiscal year spans two tax years and redevelopment-related taxes include
some one-time distributions. The District received 67% of its tax revenue from Santa Clara County and 33%
from San Mateo County.
The District purchased $3.6 million of land and associated structures in fiscal 2014, highlighted by a 148 acre
addition to the Monte Bello Open Space Preserve.
District expenditures were again within the annual budget. Excluding land acquisition transactions and debt
service, total District spending, $21.9 million, was $3.0 million, or 12.0%, below budget. As in most recent
years, a large majority of the budget variance was due to delays and deferrals of capital projects; the District
spent 95% of its budget for salaries and benefits, and 90% of the budget for services and supplies.
The District’s net position increased by $11.9 million, or 4.0%, in fiscal 2014, as revenues exceeded
expenditures. The assets of the District exceeded liabilities at the close of the 2014 fiscal year by $311.1
million. Of this total net asset amount, $268.9 million, or 86%, is invested in capital assets, net of related debt.
Management’s
Discussion & Analysis
Government-Wide
Financial Statements
Fund
Financial Statements
Notes to the
Financial Statements
Basic
Financial Statements
3
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2014
USING THE ANNUAL REPORT
This annual report consists of a series of basic financial statements and notes to those statements. These
statements are organized so the reader can understand the District as an entire operating entity. The statements
provide an increasingly detailed look at specific financial activities.
The Statement of Net Position and Statement of Activities comprise the government-wide financial statements
and provide information about the activities of the whole District, presenting both an aggregate view of the
District’s finances and a longer-term view of those finances. Fund financial statements provide the next level
of detail. For governmental funds, these statements tell how services were financed in the short-term as well as
what remains for future spending. The basic financial statements also include notes that explain some of the
information in the financial statements and provide more detailed data.
OVERVIEW OF THE FINANCIAL STATEMENTS
The full annual financial report is a product of three separate parts: the basic financial statements,
supplementary information, and this section, the Management’s Discussion and Analysis. The three sections
together provide a comprehensive financial overview of the District. The basic financials are comprised of two
kinds of statements that present financial information from different perspectives, government-wide and fund
statements.
Government-wide financial statements, which comprise the first two statements, provide both short-term
and long-term information about the District’s overall financial position.
Individual parts of the District, which are reported as fund financial statements, focus on reporting the
District’s operations in more detail. These fund financial statements comprise the remaining statements.
Notes to the financials, which are included in the financial statements, provide more detailed data and
explain some of the information in the statements. The required supplementary information section
provides further explanations and provides additional support for the financial statements.
GOVERNMENT-WIDE FINANCIAL STATEMENTS - STATEMENT OF NET POSITION AND THE STATEMENT OF
ACTIVITIES
The view of the District as a whole looks at all financial transactions and asks the question, “How did we do
financially during the fiscal year 2013 - 2014?” The Statement of Net Position and the Statement of Activities
answer this question. These statements include all assets and liabilities using the accrual basis of accounting
similar to the accounting practices used by most private-sector companies. This basis of accounting takes into
account all of the current year revenues and expenses regardless of when cash is received or paid.
These two statements report the District’s net position and changes in net position. This change in net position
is important because it tells the reader that, for the District as a whole, the financial position of the District has
improved or diminished. The causes of this change may be the result of many factors, some financial, and
some not. Non-financial factors include the District’s property tax base, current property tax laws in California
restricting revenue growth, facility conditions and other factors.
In the Statement of Net Position and the Statement of Activities, the District reports governmental activities.
Governmental activities are the activities where the District’s programs and services are reported. The District
does not have any business type activities.
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Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2014
REPORTING THE DISTRICT’S MOST SIGNIFICANT FUNDS
Fund Financial Statements
The analysis of the District’s fund financial statements begins on page 11. Fund financial reports provide
detailed information about the District’s major funds. The District uses one operating fund, the General Fund,
to account for a multitude of financial transactions.
Governmental Funds
The General Fund is a governmental fund type and is reported using an accounting method called modified
accrual accounting, which measures cash and all other financial assets that can readily be converted to cash.
The governmental fund statements provide a detailed short-term view of the District’s general government
operations and the basic services it provides. Governmental fund information helps determine whether there
are more or fewer financial resources that can be spent in the future to finance educational programs. The
relationship (or differences) between governmental activities (reported in the Statement of Net position and the
Statement of Activities) and governmental funds is reconciled in the financial statements.
THE DISTRICT AS A WHOLE
Recall that the Statement of Net Position provides the perspective of the District as a whole. Table 1 provides a
summary of the District’s net position as of March 31, 2014 as compared to March 31, 2013:
Percentage
2014 2013 Change Change
Assets
Current Assets 44,530,822$ 44,722,294$ (191,472)$ -0.43%
Noncurrent Assets 407,253,012 399,686,916 7,566,096 1.89%
Total Assets 451,783,834$ 444,409,210$ 7,374,624$ 1.66%
Deferred Outflows of Resources
Deferred loss on early retirement of long-term debt 2,962,414$ 3,301,608$ (339,194)$ 100.00%
Total Deferred Outflows of Resources 2,962,414$ 3,301,608$ (339,194)$ 100.00%
Liabilities
Current Liabilities 2,175,974$ 4,693,345$ (2,517,371)$ -53.64%
Noncurrent Liabilities 141,422,809 143,729,335 (2,306,526) -1.60%
Total Liabilities 143,598,783$ 148,422,680$ (4,823,897)$ -3.25%
Net Position
Net Investment in Capital Assets 268,869,441$ 259,637,822$ 9,231,619$ 3.56%
Restricted 4,326,997 2,730,928 1,596,069 58.44%
Unrestricted 37,951,027 36,919,388 1,031,639 2.79%
Total Net Position 311,147,465$ 299,288,138$ 11,859,327$ 3.96%
Table 1 - Summary of Statement of Net Position
Total net position increased by $11.9 million, as revenues exceeded expenditures. Noncurrent assets increased
due to $8.1 million of capital expenditures. Total liabilities decreased due to $3.0 million of principal
payments on outstanding debt and the reclassification of the $2.0 million Hawthorn endowment, received in
fiscal 2012, from deferred revenue to fund equity.
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Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2014
Table 2 shows the changes in net position for fiscal year 2014 as compared to 2013.
Percentage
2014 2013 Change Change
Revenues
Program revenues 3,322,797$ 6,184,430$ (2,861,633)$ -46.27%
General revenues:
Property taxes 32,433,076 30,269,803 2,163,273 7.15%
Investment earnings 137,619 287,642 (150,023) -52.16%
Miscellaneous 182,011 298,068 (116,057) -38.94%
Total Revenues 36,075,503 37,039,943 (964,440) -2.60%
Program Expenses
Land preservation 17,929,658 19,338,464 (1,408,806) -7.28%
Interest 7,162,596 7,272,915 (110,319) -1.52%
Depreciation 1,094,962 839,870 255,092 30.37%
Total Expenses 26,187,216 27,451,249 (1,264,033) -4.60%
Change in Net Position 9,888,287 9,588,694 299,593 3.12%
Adjustment to Beginning Net Position 1,971,040 - 1,971,040 100.00%
Begininng Net Position 299,288,138 289,699,444 9,588,694 3.31%
Ending Net Position 311,147,465$ 299,288,138$ 11,859,327$ 3.96%
Table 2 - Summary of Changes in Net Position
Program revenues decreased because the District received no material land donations in fiscal 2014. In fiscal
2013, the District received $3.9 million of land donations. Grant revenue totaled $1.9 million in fiscal 2014, a
$1.0 million increase over the prior year. Approximately 82% of this grant revenue was related to the
demolition of the old Air Force structures on the top of Mt. Umunhum. Property tax revenue increased by
7.1% due to growth in assessed valuation in both Santa Clara and San Mateo portions of the District.
Investment earnings declined due to the impact of lower interest rates.
THE DISTRICT’S FUND BALANCE
Table 3 provides an analysis of the District’s fund balances and the total change in fund balances from the
prior year.
Percentage
2014 2013 Change Change
Restricted for debt service 1,620,515$ 1,633,622$ (13,107)$ -1%
Restricted for Hawthorne maintenance 1,702,557 - 1,702,557 100%
Assigned for economic contingencies 5,000,000 - 5,000,000 100%
Unassigned 34,453,279 37,513,062 (3,059,783) -8%
Total Fund Balance 42,776,351$ 39,146,684$ 3,629,667$ 9%
Table 3 - Summary of Fund Balance
Following the completion of its new thirty year strategic plan, District management will develop
recommendations for the Board of Directors to commit or assign a majority of the unassigned fund balance
during fiscal 2015.
6
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2014
GENERAL FUND BUDGETING HIGHLIGHTS
The District’s budget is prepared according to California law and in the modified accrual basis of accounting.
During the course of the 2013-14 fiscal year, the District revised its General Fund budget which resulted in an
increase in budgeted expenditures of $41,000 from the original to final budget. The final budgeted revenue and
other financing sources estimate was $37,332,927. The original budgeted estimate was $36,046,000.
CAPITAL ASSETS
Table 4 shows March 31, 2014 capital asset balances as compared to March 31, 2013.
Percentage
2014 2013 Change Change
Land 383,509,165$ 379,410,829$ 4,098,336$ 1.08%
Work-in-Progress 4,709,807 4,396,366 313,441 7.13%
Structure and Improvements 7,201,862 7,397,095 (195,233) -2.64%
Infrastructure 7,011,681 5,146,364 1,865,317 36.25%
Equipment 884,424 775,677 108,747 14.02%
Vehicles 1,606,002 1,463,279 142,723 9.75%
Total Capital Assets - Net 404,922,941$ 398,589,610$ 6,333,331$ 1.59%
Table 4 - Summary of Capital Assets Net of Depreciation
LONG TERM LIABILITIES
Table 5 summarizes the percent changes in long-term liabilities over the past two years.
Percentage
2014 2013 Change Change
Promissory Notes 38,296,191$ 39,117,305$ (821,114)$ -2.10%
Revenue Bonds 101,862,705 103,136,897 (1,274,192) -1.24%
Compensated Absences 1,263,913 1,475,939 (212,026) -14.37%
Total Long-term Liabilities 141,422,809$ 143,730,141$ (2,307,332)$ -1.61%
Table 5 - Summary of Long-term Liabilities
BUDGETARY PERFORMANCE
The budgetary comparison schedule following Note 10 of the footnotes shows how the District financial
results of fiscal 2014, on a GAAP basis, compared to the original budget adopted in March 2013 and the final
budget adjusted in December 2013. Total revenue was $1.3 million, or 3.3%, under budget, entirely due to
delays in completing land transactions which included land donations. Total expenditures were $6.6 million,
or 20.4%, below budget, leaving an excess of revenue over expenditure of $10.5 million. Delays and deferrals
of capital outlays accounted for 78% of the total spending variance. Spending for salaries, benefits, services
and supplies was at 92.4% of budget, higher than most recent years.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
The Board of Directors adopted the District’s budget for fiscal year 2015 on March 26, 2014. This budget
assumes growth in regular property tax income of 6.6% and a decrease of 37% in redevelopment-related taxes,
for a net estimated tax revenue increase of 5.3%. The budget assumes the acquisition of $8.5 million of new
7
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2014
land and $6.0 million of other capital spending. Operating expenditures and debt service are budgeted at $19.1
million and $8.9 million, respectively. The budget also includes $0.8 million of election expenses and $0.6
million related to completion of the thirty year strategic plan and vision plan. If all revenues and expenditures
occur as budgeted, the District’s cash position would decrease by $5.7 million in fiscal 2015.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, parents, participants, investors and creditors
with a general overview of the District’s finances and to demonstrate the District’s accountability for the
money it receives. Questions concerning any of the information provided in this report or requests for
additional financial information should be addressed to the District Clerk, Midpeninsula Regional Open Space
District, 330 Distel Circle, Los Altos, California 94022.
8
Basic Financial Statements
Governmental
Activities
Assets
Current assets:
Cash and investments 34,330,982$
Accounts Receivable:
Deposits 694,849
Interest 32,773
Due from other governments:
Taxes receivable 8,599,282
Due from grantor government 365,987
Other current assets 506,949
Total current assets 44,530,822
Noncurrent assets:
Net OPEB asset 1,003,925
Notes receivable 183,164
Unamortized issuance costs 1,142,982
Non-depreciable capital assets 388,218,972
Capital assets, net of depreciation 16,703,969
Total noncurrent assets 407,253,012
Total Assets 451,783,834$
Deferred Outflows of Resources
Deferred loss on early retirement of long-term debt 2,962,414$
Liabilities
Current liabilities:
Accounts payable 744,178$
Deposits payable 128,441
Payroll and other liabilities 881,852
Accrued interest 421,503
Total current liabilities 2,175,974
Noncurrent liabilities:
Due within one year 3,498,284
Due after one year 137,924,525
Total noncurrent liabilities 141,422,809
Total Liabilities 143,598,783$
Net Position
Net Investment in Capital Assets 268,869,441$
Restricted for:
Debt service 1,620,515
Hawthorne maintenance 1,702,557
OPEB 1,003,925
Total restricted 4,326,997
Unrestricted 37,951,027
Total Net Position 311,147,465$
Midpeninsula Regional Open Space District
Statement of Net Position
March 31, 2014
The notes to the financial statements are an integral part of this statement.
9
Net (Expense)
Capital Revenue and
Charges for Grants and Changes in
Expenses Services Contributions Net Position
Governmental activities:
Land preservation 17,929,658$ 1,422,095$ 1,900,702$ (14,606,861)$
Interest 7,162,596 - - (7,162,596)
Depreciation 1,094,962 - - (1,094,962)
Total governmental activities 26,187,216$ 1,422,095$ 1,900,702$ (22,864,419)
General revenues:
Property taxes 32,433,076
Investment earnings 137,619
Other revenues 240,094
Special items - loss on disposal of capital assets (58,083)
Total general revenues and special items 32,752,706
Change in net position 9,888,287
Net position beginning 299,288,138
Prior period adjustment - Hawthorne contribution 1,971,040
Net position beginning as adjusted 301,259,178
Net position ending 311,147,465$
Midpeninsula Regional Open Space District
Statement of Activities
For the Fiscal Year Ended March 31, 2014
Program Revenues
The notes to the financial statements are an integral part of this statement.
10
Debt Total
General Service Governmental
Fund Fund Funds
ASSETS
Cash and investments 32,710,467$ 1,620,515$ 34,330,982$
Receivables:
Deposits 694,849 - 694,849
Interest 32,773 - 32,773
Due from other governments:
Taxes receivable 8,599,282 - 8,599,282
Due from grantor government 365,987 - 365,987
Other current assets 506,949 - 506,949
Notes receivable 183,164 - 183,164
Total Assets 43,093,471$ 1,620,515$ 44,713,986$
LIABILITIES
Liabilities:
Accounts payable 744,178$ -$ 744,178$
Deposits payable 128,441 - 128,441
Payroll and other liabilities 881,852 - 881,852
Total Liabilities 1,754,471 - 1,754,471
DEFERRED INFLOWS OF RESOURCES
Unearned revenue 183,164 - 183,164
FUND BALANCE
Restricted for:
Debt service - 1,620,515 1,620,515
Hawthorne maintenance 1,702,557 - 1,702,557
Assigned for:
Economic contingencies 5,000,000 - 5,000,000
Unassigned 34,453,279 - 34,453,279
Total Fund Balance 41,155,836 1,620,515 42,776,351
Total Liabilities and Fund Balance 43,093,471$ 1,620,515$ 44,713,986$
Balance Sheet
Midpeninsula Regional Open Space District
March 31, 2014
Governmental Funds
The notes to the financial statements are an integral part of this statement.
11
Total fund balance - governmental funds 42,776,351$
Amounts reported in the Statement of Net Position are different because:
Capital assets used in governmental activities are not financial resources and therefore are not
reported as assets in governmental funds.
Capital assets at cost 416,628,666$
Accumulated depreciation (11,705,725) 404,922,941
Principal on notes receivables are recorded as unearned revenue in the funds, which upon collection is a current
financial resource. In the government-wide financial statements, repayment of the principal amount
does not generate revenue in the statement of activities; therefore unearned revenue is not recorded. 183,164
Net OPEB assets are not available to pay for current period expenditures and, therefore, are not
recognized in the governmental funds statements. 1,003,925
Interest payable on long-term debt does not require the use of current financial resources and, therefore,
is not reported in the governmental funds.(421,503)
Issuance costs, discounts and premiums related to bond issues are recorded as other financing
sources and uses in the fund financial statements but are recorded as assets or liabilities
and amortized over the life of the bond in the statement of net position: (1,045,228)
Deferred loss on early retirement of long-term debt is recorded in the Statement of Net Position as a deferred outflow
of resources and amortized on a straight line basis over the original life of the defeased bond. 2,962,414
Long-term liabilities are not due and payable in the current period and therefore are not reported
as liabilities in the funds. Long-term liabilities at year-end consists of:
Revenue bonds 101,685,779$
Promissory notes 36,284,907
Compensated absences 1,263,913 (139,234,599)
Total net position - governmental activities 311,147,465$
Midpeninsula Regional Open Space District
Balance Sheet to the Statement of Net Position
March 31, 2014
Reconciliation of the Governmental Funds
The notes to the financial statements are an integral part of this statement.
12
Debt Total
General Service Governmental
Fund Fund Funds
Revenues:
Property taxes 32,433,076$ -$ 32,433,076$
Grant income 1,900,702 - 1,900,702
Property management 1,422,095 - 1,422,095
Investment earnings 163,215 (13,107) 150,108
Other revenues 144,762 - 144,762
Total revenues 36,063,850 (13,107) 36,050,743
Expenditures:
Current:
Salaries and employee benefits 13,078,635 - 13,078,635
Services and supplies 4,224,310 - 4,224,310
Capital outlay 8,230,927 - 8,230,927
Debt service:
Principal - 2,998,888 2,998,888
Interest - 5,859,356 5,859,356
Total expenditures 25,533,872 8,858,244 34,392,116
Excess (deficiency) of revenues
over (under) expenditures 10,529,978 (8,871,351) 1,658,627
Other financing sources (uses):
Transfers in - 8,858,244 8,858,244
Transfers out (8,858,244) - (8,858,244)
Total other financing sources (uses) (8,858,244) 8,858,244 -
Net changes in fund balance 1,671,734 (13,107) 1,658,627
Fund balance beginning 37,513,062 1,633,622 39,146,684
Prior period adjustment - Hawthorne contribution 1,971,040 - 1,971,040
Fund balance beginning - restated 39,484,102 1,633,622 41,117,724
Fund balance ending 41,155,836$ 1,620,515$ 42,776,351$
Midpeninsula Regional Open Space District
Statement of Revenues, Expenditures and Changes in Fund Balance
Governmental Funds
For the Fiscal Year Ended March 31, 2014
The notes to the financial statements are an integral part of this statement.
13
Total net change in fund balance - governmental funds 1,658,627$
Capital outlays are reported in governmental funds as expenditures. However, in the Statement
of Activities, the cost of those assets is allocated over their estimated useful lives as
depreciation expense.
Expenditures capitalized as capital assets 7,485,569$
Depreciation expense (1,094,962) 6,390,607
Governmental funds do not report loss on disposal of capital assets. However, in the government-wide
statement of activities and changes in net position, the cost to dispose of capital assets, net any
proceeds, is accounted for as a special item. (58,083)
Repayment of notes receivable is reported as revenue in the Governmental funds because financial resources
were received and available during the fiscal year. In the statement of net position, the payment reduces
the principal balance of notes receivable and does not generate revenue in the statement of activities. (12,489)
Accreted interest on capital appreciation bonds is not recorded in the governmental funds but is
required to be recorded under the accrual basis of accounting in the government wide financial
statements.(1,067,155)
The governmental funds report debt proceeds as an other financing source, while repayment of debt
principal is reported as an expenditure. Interest is recognized as an expenditure in the governmental
funds when it is due. The net effect of these differences in the treatment of long-term debt and
related items is as follows:
Repayment of bond principal 1,295,000$
Repayment of promissory notes princpal 1,703,888 2,998,888
Deferred loss on early retirement of long-term debt is amortized over the life of the debt in the statement of activities.
Amortization expense is not reported in the governmental funds.(339,194)
Issuance costs, discounts and premiums related to bond issues are recorded as other financing
sources and uses in the fund financial statements but are recorded as assets or liabilities
and amortized over the life of the bond in the statement of net position:
Amortization of issuance costs and premiums - net 95,332
In the Statement of Activities, compensated absences are measured by the amount earned during the
year. In governmental funds, however, expenditures for those items are measured by the amount
of financial resources used (essentially the amounts paid). This year, vacation used exceeded the
amounts earned.212,026
In the Statement of Activities, the net postemployment benefit asset is the amount by which the contributions
toward the OPEB plan were more than the annual required contribution as actuarially determined. The net
postemployment benefit is not recorded in the governmental fund statements. The change in the net
OPEB was recorded in the Statement of Activities in the amount of: (93,381)
Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds
because interest is recognized as an expenditure in the funds when it is due and thus requires the use of
current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest
accrues, regardless of when it is due.103,109
Change in net position of governmental activities 9,888,287$
Midpeninsula Regional Open Space District
Statement of Revenues, Expenditures and Changes in Fund Balance
For the Fiscal Year Ended March 31, 2014
Reconciliation of the Governmental Funds
to the Statement of Activities
The notes to the financial statements are an integral part of this statement.
14
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
15
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
A. General
The Midpeninsula Regional Open Space District (the District) was formed in 1972 to acquire and
preserve public open space land in northern and western portions of Santa Clara County. In June
1976, the southern and eastern portions of San Mateo County were annexed to the District. The
District annexed a small portion of the northern tip of Santa Cruz County in 1992. In September
2004, the District completed the Coastside Protection Program, which extended the District
boundaries to the Pacific Ocean in San Mateo County, from the southern borders of Pacifica to
the San Mateo/Santa Cruz County line.
B. Accounting Principles
The accounting policies of the District conform to generally accepted accounting principles as
prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute
of Certified Public Accountants (AICPA).
C. Reporting Entity
As required by generally accepted accounting principles, these basic financial statements present
the Midpeninsula Regional Open Space District and its component unit. The component unit
discussed in the following paragraph is included in the District's reporting entity because of the
significance of their operational or financial relationships with the District.
Blended Component Unit. The District and the County of Santa Clara entered into a joint
exercise of powers agreement dated May 1, 1996, creating the Midpeninsula Regional Open
Space District Financing Authority (the Authority), pursuant to the California Government Code.
The District is financially accountable for the Authority, as it appoints a voting majority of the
governing board; is able to impose its will in the Authority; and the Authority provides specific
financial benefits to, and imposes specific financial burdens on, the District. The Authority was
formed for the sole purpose of providing financing assistance to the District to fund the
acquisition of land to preserve and use as open space. As such, the Authority is an integral part of
the District, and accordingly, all of the Authority's activity is blended within the accompanying
debt service fund.
D. Basis of Presentation
Government-wide Financial Statements:
The government-wide financial statements (i.e., the Statement of Net Position and the Statement
of Activities) report information on all of the activities of the District. The Statement of Net
Position reports all assets, deferred outflows of resources, liabilities, deferred inflows of
resources, and net position.
The government-wide statements are prepared using the economic resources measurement focus.
This approach differs from the manner in which governmental fund financial statements are
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
16
prepared. Governmental fund financial statements, therefore, include the reconciliation with brief
explanations to better identify the relationship between the government wide statements and the
statements for the governmental funds.
The government-wide statement of activities presents a comparison between direct expenses and
program revenues for each function or program of the District’s governmental activities. Direct
expenses are those that are specifically associated with a service, program, or department and are
therefore clearly identifiable to a particular function. The District does not allocate indirect
expenses to functions in the statement of activities. Program revenues include charges paid by the
recipients of goods or services offered by a program, as well as grants and contributions that are
restricted to meeting the operational or capital requirements of a particular program. Revenues
that are not classified as program revenues are presented as general revenues of the District, with
certain exceptions. The comparison of direct expenses with program revenues identifies the
extent to which each governmental function is self-financing or draws from the general revenues
of the District.
Fund Financial Statements:
Fund financial statements report detailed information about the District. The accounting and
financial treatment applied to a fund is determined by its measurement focus. All governmental
funds are accounted for using a flow of current financial resources measurement focus. With this
measurement focus, only current assets, deferred outflows, current liabilities and deferred inflows
are generally included on the balance sheet. The Statement of Revenues, Expenditures, and
Changes in Fund Balance for these funds present increases (i.e., revenues and other financing
sources) and decreases (i.e., expenditures and other financing uses) in net current assets.
E. Basis of Accounting
Basis of accounting refers to when revenues and expenditures are recognized in the accounts and
reported in the financial statements. Government-wide financial statements are prepared using
the accrual basis of accounting. Governmental funds use the modified accrual basis of
accounting.
Revenues - Exchange and Non-exchange Transactions:
Revenue resulting from exchange transactions, in which each party gives and receives essentially
equal value, is recorded under the accrual basis when the exchange takes place. On a modified
accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and
become available. “Available” means the resources will be collected within the current fiscal
year or are expected to be collected soon enough thereafter to be used to pay liabilities of the
current fiscal year. For the District, “available” means collectible within the current period or
within 90 days after year-end.
Non-exchange transactions, in which the District receives value without directly giving equal
value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue
from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from
grants and entitlements is recognized in the fiscal year in which all eligibility requirements have
been satisfied. Eligibility requirements include timing requirements, which specify the year when
the resources are to be used or the fiscal year when use is first permitted; matching requirements,
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
17
in which the District must provide local resources to be used for a specific purpose; and
expenditure requirements, in which the resources are provided to the District on a reimbursement
basis. Under the modified accrual basis, revenue from non-exchange transactions must also be
available before it can be recognized.
Deferred Outflows/Deferred Inflows:
A deferred outflow of resources is a consumption of net assets by the government that is
applicable to a future reporting period. For example; prepaid items and deferred charges.
A deferred inflow of resources is an acquisition of net assets by the government that is applicable
to a future reporting period. For example; unearned revenue and advance collections.
Unearned Revenue:
Unearned revenue arises when assets are received before revenue recognition criteria have been
satisfied. Grants and entitlements received before eligibility requirements are met are recorded as
deferred inflows from unearned revenue. In the governmental fund financial statements,
receivables associated with non-exchange transactions that will not be collected within the
availability period have been recorded as deferred inflows from unearned revenue.
Expenses/Expenditures:
On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On
the modified accrual basis of accounting, expenditures are generally recognized in the accounting
period in which the related fund liability is incurred, as under the accrual basis of accounting.
However, under the modified accrual basis of accounting, debt service expenditures, as well as
expenditures related to compensated absences and claims and judgments, are recorded only when
payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in
the governmental funds. When both restricted and unrestricted resources are available for use, it
is the District’s policy to use restricted resources first, then unrestricted resources as they are
needed.
F. Fund Accounting
The accounts of the District are organized into two funds with a separate set of self-balancing
accounts that comprise of the District’s assets, deferred outflows, liabilities, deferred inflows,
fund balance, revenues, and expenditures.
Major funds are defined as funds that have either assets, liabilities, revenues or
expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand
total. The General Fund is always a major fund. The District may also select other funds it
believes should be presented as major funds.
The District reported all of its funds as major governmental funds in the accompanying financial
statements:
General Fund. The General Fund is the general operating fund of the District. It is used to
account for all financial resources. The major revenue sources for this fund are property taxes,
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
18
grant revenues and interest income. Expenditures are made for land preservation and other
operating expenditures.
Debt Service Fund. The Debt Service Fund is used to account for accumulation of resources for,
and the payment of long-term debt principal, interest and related costs. Resources are provided
by General Fund transfers and interest income on unspent funds.
G. Budgets and Budgetary Accounting
The District's Board of Directors adopts an annual operating budget for the District as a whole,
which includes both its General and Debt Service Funds on or before March 31, for the ensuing
fiscal year. The Board of Directors may amend the budget by resolution during the fiscal year.
The legal level of control, the level at which expenditures may not legally exceed the budget, is at
the category level.
H. Assets, Liabilities, and Equity
1. Cash and Cash Equivalents
Cash and cash equivalents include all cash and temporary investments with original
maturities of three months or less from the date of acquisition.
2. Prepaid Expenditures
The District has the option of reporting expenditures in governmental funds for prepaid items
either when purchased or during the benefiting period. The District has chosen to report the
expenditure during the benefiting period.
3. Capital Assets
Capital assets, which include land, buildings and improvements, furniture, equipment, and
construction in progress, are reported in the government-wide financial statements. Such
assets are valued at historical cost or estimated historical cost unless obtained by annexation or
donation, in which case they are recorded at estimated market value at the date of receipt. The
District utilizes a capitalization threshold of $10,000.
Projects under construction are recorded at cost as construction in progress and transferred to
the appropriate asset account when substantially complete. Costs of major improvements
and rehabilitation of buildings are capitalized. Repair and maintenance costs are charged to
expense when incurred. Equipment disposed of, or no longer required for its existing use, is
removed from the records at actual or estimated historical cost, net of accumulated
depreciation.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
19
All capital assets, except land and construction in progress, are depreciated using the straight-
line method over the following estimated useful lives:
Assets Years
Buildings and improvements 10 - 30
Infrastructure 30 - 40
Equipment 5 - 20
Vehicles 10 - 20
4. Compensated Absences
In accordance with the District's memorandum of understanding with various employee
groups, employees accrue fifteen days of vacation during the first nine years of service,
twenty days between service years 10 and fourteen, twenty-one days between service years
fifteen and nineteen, twenty-three days between service years twenty and twenty-four, and
twenty-five days after twenty-five years of service. An employee may accumulate vacation
time earned to a maximum of two times the amount of his/her annual vacation accrual.
Full-time employees accrue twelve days of sick leave: annually from the date of employment.
An employee may accumulate sick leave time earned on an unlimited basis. Upon
resignation, separation from service, or retirement from District employment, workers in
good standing with ten or more years of District employment shall receive a cash payment of
the equivalent cash value of accrued sick leave as follows:
Percentage of equivalent
cash value of accrued
Years of Employment sick leave
15-20 20%
16-20 25%
21 or more 30%
An employee hired before August 9, 2006, who retires from the District shall receive a cash
payment of the percentage of equivalent cash value or accrued sick leave based on years of
employment as described above, and apply the remainder of the equivalent cash value toward
his/her cost of retiree medical plan premiums and/or other qualified medical expenses. Upon
retirement, the amount qualified and designated for retiree medical costs shall be deposited in
the Retiree Health Savings (RH:S) plan, set up by the District. The cost for maintaining the
retiree's RHS account and the annual fee for the reimbursement process of qualified medical
expenses will be paid for by the retiree.
An employee hired on or after August 9, 2006, who retires from the District may elect to
receive only a cash payment of the percentage of equivalent cash value of accrued sick leave
based on years of employment as described above.
In all cases the equivalent cash value of accrued sick leave will be based on current rate of
pay as of the date of separation from District employment.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
20
The District accrues for all salary-related items in the government-wide statements for which
they are liable to make a payment directly and incrementally associated with payments made
for compensated absences on termination.
5. Long-Term/Noncurrent Obligations
In the government-wide financial statements, long-term debt and other long-term obligations
are reported as liabilities in the Statement of Net Position.
6. Debt Discount and Issuance Costs
Debt discounts, premiums, and issuance costs are capitalized as an offset to long-term debt
and amortized using the straight line method over the life of the related debt. Issuance costs
for the District's tax-exempt commercial paper short-term borrowings are expensed as
incurred.
7. Fund Balance Classifications
In accordance with Government Accounting Standards Board 54, Fund Balance Reporting
and Governmental Fund Type Definitions, the District classifies governmental fund balances
as follows:
Nonspendable fund balance includes amounts that cannot be spent either because it is not
in spendable form or because of legal or contractual constraints.
Restricted fund balance includes amounts that are constrained for specific purposes
which are externally imposed by providers, such as creditors or amounts constrained due
to constitutional provisions or enabling legislation.
Committed fund balances includes amounts that are constrained for specific purposes that
are internally imposed by the government through formal action of the highest level of
decision making authority and does not lapse at year-end. Committed fund balances are
imposed by the District’s board of directors.
Assigned fund balance includes amounts that are intended to be used for specific
purposes that are neither considered restricted or committed. Fund balance may be
assigned by the General Manager.
Unassigned fund balance includes positive amounts within the general fund which has
not been classified within the above mentioned categories and negative fund balances in
other governmental funds.
The District uses restricted/committed amounts to be spent first when both restricted and
unrestricted fund balance is available unless there are legal documents/contracts that prohibit
doing this, such as a grant agreement requiring dollar for dollar spending. Additionally, the
District would first use committed, then assigned, and lastly unassigned amounts of
unrestricted fund balance when expenditures are made.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
21
8. Net Position
Net position represents the difference between assets, deferred outflows of resources,
liabilities and deferred inflows of resources. Net investment in capital assets consists of
capital assets, net of accumulated depreciation, reduced by the outstanding balances of any
borrowings used for the acquisition, construction or improvement of those assets. In
addition, deferred outflows of resources and deferred inflows of resources that are
attributable to the acquisition, construction, or improvement of those assets or related debt
also are included in the net investment in capital assets component of net position. Net
position is reported as restricted when there are limitations imposed on its use either through
the enabling legislation adopted by the District or through external restrictions imposed by
creditors, grantors, laws or regulations of other governments. The District applies restricted
resources when an expense is incurred for purposes for which both restricted and unrestricted
net position is available.
Unrestricted net position reflect amounts that are not subject to any donor-imposed
restrictions. This class also includes restricted contributions whose donor-imposed
restrictions were met during the fiscal year. A deficit unrestricted net position may result
when significant cash balances restricted for capital projects exist. Once the projects are
completed, the restriction on these assets are released and converted to capital assets.
9. Property Taxes
The District receives property tax revenue from Santa Clara and San Mateo Counties (the
Counties). The Counties are responsible for assessing, collecting and distributing property
taxes in accordance with state law. Secured property taxes are recorded as revenue when
apportioned, in the fiscal year of the levy. The counties apportion secured property tax
revenue in accordance with the alternate method of distribution prescribed by Section 4705
of the California Revenue and Taxation Code. This alternate method provides for crediting
each applicable fund with its total secured taxes upon completion of the secured tax roll -
approximately October 1 of each year. Taxes are levied annually on July 1st, and one-half are
due by November 1st and one-half by February 1st. Taxes are delinquent after December
10th and April 10th, respectively. Supplemental property taxes are levied on a pro-rata basis
when changes in assessed valuation occur due to the completion of construction or sales
transactions. Liens on real property are established on January 15th for the ensuing fiscal
year.
On March 31, 1993, the Board of Supervisors adopted the "Teeter" method of property tax
allocation. This method allocates property taxes based on the total property tax billed. At
year-end, the County advances cash to each taxing jurisdiction equal to its current year
delinquent taxes. Once the delinquent taxes are collected, the revenue from penalties and
interest remains with the County and is used to pay the interest cost of borrowing the cash
used for the advances.
10. Accounting Estimates
The presentation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
22
assumptions that affect the reported amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
I. New Accounting Pronouncements
Summary of Statement No. 63, Financial Reporting of Deferred Outflows of Resources,
Deferred Inflows of Resources, and Net Position (Issued 06/11). This Statement provides
financial reporting guidance for deferred outflows of resources and deferred inflows of resources.
Concepts Statement No. 4, Elements of Financial Statements, introduced and defined those
elements as a consumption of Net Position by the government that is applicable to a future
reporting period, and an acquisition of Net Position by the government that is applicable to a
future reporting period, respectively. Previous financial reporting standards do not include
guidance for reporting those financial statement elements, which are distinct from assets and
liabilities. Concepts Statement 4 also identifies net position as the residual of all other elements
presented in a statement of financial position. This Statement amends the net asset reporting
requirements in Statement No. 34, Basic Financial Statements-and Management’s Discussion
and Analysis-for State and Local Governments, and other pronouncements by incorporating
deferred outflows of resources and deferred inflows of resources into the definitions of the
required components of the residual measure and by renaming that measure as net position, rather
than net assets. The provisions of this Statement were effective as of July 1, 2012.
Summary of Statement No. 65, Items Previously Reported as Assets and Liabilities (Issued
03/12). This Statement establishes accounting and financial reporting standards that reclassify, as
deferred outflows of resources or deferred inflows of resources, certain items that were
previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of
resources, certain items that were previously reported as assets and liabilities. This Statement
amends the financial statement element classification of certain items previously reported as
assets and liabilities to be consistent with the definitions in Concepts Statement 4. The provisions
of this Statement are effective for financial statements for periods beginning after December 15,
2012. However, the District has chosen to implement these reporting requirements as of July 1,
2012.
J. Upcoming Accounting and Reporting Changes
Summary of Statement No. 67 Financial Reporting for Pension Plans - an amendment of
GASB Statement No. 25 (Issued 06/12). This Statement replaces the requirements of
Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures
for Defined Contribution Plans, and No. 50, Pension Disclosures, as they relate to pension plans
that are administered through trusts or equivalent arrangements (hereafter jointly referred to as
trusts) that meet certain criteria. This Statement establishes a definition of a pension plan that
reflects the primary activities associated with the pension arrangement-determining pensions,
accumulating and managing assets dedicated for pensions, and paying benefits to plan members
as they come due. This Statement also details the note disclosure requirements for defined
contribution pension plans administered through trusts that meet the identified criteria. This
Statement is effective for financial statements for fiscal years beginning after June 15, 2013.
Earlier application is encouraged. The determination of the impact on the Entity’s financial
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
23
statements from the implementation of this standard is pending as of the issuance date of this
report.
Summary of Statement No. 68 Accounting and Financial Reporting for Pensions - an
amendment of GASB Statement No. 27 (Issued 06/12). The primary objective of this
Statement is to improve accounting and financial reporting by state and local governments for
pensions. It also improves information provided by state and local governmental employers about
financial support for pensions that is provided by other entities. This Statement replaces the
requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental
Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate
to pensions that are provided through pension plans administered as trusts or equivalent
arrangements (hereafter jointly referred to as trusts) that meet certain criteria. This Statement
establishes a definition of a pension plan that reflects the primary activities associated with the
pension arrangement-determining pensions, accumulating and managing assets dedicated for
pensions, and paying benefits to plan members as they come due. This Statement is effective for
fiscal years beginning after June 15, 2014. Earlier application is encouraged. The determination
of the impact on the Entity’s financial statements from the implementation of this standard is
pending as of the issuance date of this report.
NOTE 2 - CASH AND INVESTMENTS
Summary of Cash and Investments
The following summarizes deposits as of March 31, 2014:
Cash and
Cash Equivalents
Available Investment
Cash and Investments for Operations Restricted Total Rating Maturities
Cash Deposits:
Cash in Banks 131,683$ 1,709,132$ 1,840,815$ N/A N/A
Petty Cash 800 - 800 N/A N/A
Total Cash Deposits 132,483 1,709,132 1,841,615
Investments:
California Local Agency Investment Fund 7,825,290 - 7,825,290 Not Rated < 1yr
Santa Clara County Pool 23,043,562 - 23,043,562 Not Rated < 1yr
Cash with Fiscal Agent:
US Federal Agency Securities - 1,407,475 1,407,475 Aaa > 1yr
Money Market Mutual Funds - 213,040 213,040 Aaa > 1yr
Total Investments 30,868,852 1,620,515 32,489,367
Total Cash and Cash Equivalents 31,001,335$ 3,329,647$ 34,330,982$
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
24
Cash in Banks
Cash balances in banks are insured up to $250,000 per insured bank by the Federal Deposit Insurance
Corporation ("FDIC"). The District’s accounts are held with various banks. As of March 31, 2014, the
District’s bank balances exceeded FDIC coverage by $1,634,549.
Cash in Santa Clara County Treasury
Santa Clara County is a fiscal agent of the District. The fair value of the District's investment in the
county pool is reported at amounts based on the District's pro-rata share of the fair value provided by the
County Treasurer for the entire portfolio (in relation to the amortized cost of the portfolio). The balance
available for withdrawal is based on the accounting records maintained by the County Treasurer, which is
recorded on the amortized costs basis. Santa Clara County investment pool funds were available for
withdrawal on demand and had an average maturity date of less than one year.
All cash and investments are stated at fair value. Pooled investment earnings are allocated monthly based
on the average cash and investment balances of the various funds of the County.
California Local Agency Investment Fund
The District is a participant in the Local Agency investment Fund (LAIF) that is regulated by California
Government Code Section 16429 under the oversight of the Treasurer of the State of California. The
District reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as
the value of the pool share. The balance is available for withdrawal on demand, and is based on the
accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in
LAIF's investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other
asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies,
government-sponsored enterprises, United States Treasury Notes and Bills, and corporations. At March
31, 2014, these investments had an average maturity date of less than one year.
Investments Authorized by Debt Agreements
The District must maintain required amounts of cash and investments with trustees or fiscal agents under
the terms of certain debt issues. These funds are used if the District fails to meet its obligations under
these debt issues.
Restricted for Debt Service
The District has moneys held by Bank of New York as trustee, pledged to the payment or security of its
outstanding bond issues. All transactions associated with debt serve are administered by the Bank. The
cash and investment amounts were $1,620,515 as of March 31, 2014.
Cash Restricted for Hawthorne Property Maintenance
On November 10, 2011, the District received the gift of the 79 acre Hawthorne property, in Portola
Valley, California, and an endowment of $2,018,445 to manage the property in perpetuity. The cash
balance restricted for this purpose at March 31, 2014 was $1,709,132.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
25
Policies and Practices
The District's Investment Policy and the California Government Code allow the District to invest in the
following, provided the credit ratings of the issuers are acceptable to the District and approved
percentages and maturities are not exceeded. The table below also identifies certain provisions of the
California Government Code or the District's Investment Policy where it is more restrictive:
Authorized Investment Type
Maximum
Remaining
Maturity
Maximum
Percentage of
Portfolio
Maximum
Investment
In One Issuer
Medium Term Notes 5 years 30% No Limit
Money Market and Mutual Funds N/A 20% 10%
U.S. Treasury Obligations 5 years No Limit No Limit
Federal Agency Securities 5 years No Limit No Limit
Banker's Acceptance 180 days 40% 30%
Commercial Paper 270 days 25% 10%
Negotiable Certificates of Deposit 5 years 30% No Limit
Repurchase Agreements 1 year No Limit No Limit
Reverse Repurchase Agreements 92 days 20% No Limit
Local Agency Investment Fund (LAIF) N/A $40 million per
account
No Limit
a) Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of
an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its
fair value to the changes in market interest rates. The District manages its exposure to interest rate
risk by investing in the Santa Clara County investment pool and LAIF, which had fair values of
approximately $4.6 billion and $57.6 billion, respectively as of March 31, 2014.
b) Credit Risk
Credit risk is the risk of loss due to the failure of the security issuer. This is measured by the
assignment of a rating by a nationally recognized statistical rating organization. The investment with
the County’s investment pool is governed by the County’s general investment policy. The County’s
investments in 2013-14 included U.S. government securities or obligations explicitly guaranteed by
the U.S. government that are not considered to have credit risk exposure. The County’s two other
investment types, LAIF and money market mutual funds, are not rated.
c) Custodial Credit Risk – Deposits
Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be
returned to it. The District does not have a policy for custodial credit risk for deposits. However, the
California Government code requires that a financial institution secure deposits made by State or
local governmental units by pledging securities in an undivided collateral pool held by a depository
regulated under State law (unless so waived by the governmental unit). The market value of the
pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
26
by the public agencies. California law also allows financial institutions to secure public deposits by
pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits
and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105
percent of the secured deposits.
d) Concentration of Credit Risk
The District was not exposed to concentration of credit risk because it had no investments in any one
issuer that exceeded 5% of its total investment portfolio.
NOTE 3 – NOTES RECEIVABLE
On December 17, 1997, the District sold the title to and possession of a 50-year fee determinable estate
10-acre parcel near the Skyline Ridge Open Space Preserve. The District financed the purchase in the
amount of $288,800 over 25 years at a rate of 10% per annum. Monthly principal and interest payments
of $2,634 are due on the 1st of each month and late if not paid by the 10th, with the final payment
scheduled December 1, 2022. The outstanding balance at March 31, 2014 was $183,164.
NOTE 4 - CAPITAL ASSETS AND DEPRECIATION
Capital asset activity for the year ended March 31, 2014, is shown below:
Balance Transfers/ Balance
Description March 31, 2013 Additions Deletions Adjustments March 31, 2014
Non-depreciable Capital Assets:
Land and land improvements 379,410,829$ 3,906,775$ -$ 191,561$ 383,509,165$
Construction in progress 4,396,366 2,557,080 (57,276) (2,186,363) 4,709,807
Total non-depreciable capital assets 383,807,195 6,463,855 (57,276) (1,994,802) 388,218,972
Depreciable Capital Assets:
Structure and Improvements 14,675,675 224,210 - - 14,899,885
Infrastructure 6,414,048 231,287 - 1,994,802 8,640,137
Equipment 1,509,218 215,293 - - 1,724,511
Vehicles 2,794,237 350,924 - - 3,145,161
Total depreciable capital assets 25,393,178 1,021,714 - 1,994,802 28,409,694
Less accumulated depreciation for:
Structure and improvements 7,278,580 419,443 - - 7,698,023
Infrastructure 1,267,684 360,772 - - 1,628,456
Equipment 733,541 106,546 - - 840,087
Vehicles 1,330,958 208,201 - - 1,539,159
Total accumulated depreciation 10,610,763 1,094,962 - - 11,705,725
Total depreciable capital assets - net 14,782,415 (73,248) - 1,994,802 16,703,969
Total capital assets - net 398,589,610$ 6,390,607$ (57,276)$ -$ 404,922,941$
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
27
NOTE 5 – LONG-TERM DEBT
The following is a summary of the changes in long-term debt for the year ended March 31, 2014:
Balance Balance Due Within
Long-term Obligations April 01, 2013 Additions Deductions March 31, 2014 One Year
Promissory Notes:
Current Interest 20,595,092$ -$ 1,703,888$ 18,891,204$ 1,650,096$
Capital Appreciation 15,474,708 - - 15,474,708 -
Accreted interest 968,830 950,165 - 1,918,995 -
Unamortized Bond Premium 2,078,675 - 67,391 2,011,284 67,391
Subtotal Promissory Notes 39,117,305 950,165 1,771,279 38,296,191 1,717,487
Revenue Bonds:
Current Interest 100,690,000 - 1,295,000 99,395,000 1,495,000
Capital Appreciation 1,340,010 - - 1,340,010 -
Accreted interest 833,779 116,990 - 950,769 -
Unamortized Bond Premium 273,108 - 96,182 176,926 96,182
Subtotal Revenue Bonds 103,136,897 116,990 1,391,182 101,862,705 1,591,182
Compensated Absences 1,475,939 - 212,026 1,263,913 189,615
Total Long-term Obligations 143,730,141$ 1,067,155$ 3,374,487$ 141,422,809$ 3,498,284$
Promissory Notes
Daloia Land Purchase Contract Promissory Note
During the fiscal year ending 2003 the District entered into a land purchase contract promissory note
in the amount of $240,000. The promissory note bears interest at a fixed rate of 6.25% and matures
October 10, 2017. At March 31, 2014, the outstanding balance of the Daloia Land Contract note was
$81,205.
Hunt Living Trust Promissory Note
On April 1, 2003, the District entered into a $1,500,000 promissory note with the Hunt Living Trust
as part of a lease and management agreement. The note is due in full on April 1, 2023 and bears
interest at 5.5% semi-annually through April 1, 2013 and 5.0% per annum until the maturity, or prior
redemption, of the note. At March 31, 2014, the outstanding balance on the note was $1,500,000.
2005 Refunding Promissory Note
On June 30, 2005, the District issued $4,630,000 of 2005 Refunding Promissory Notes for the
purpose of refunding all of its outstanding 1995 Promissory Notes. The 2005 notes bear interest rates
from 3.25% to 5.00%. Principal and interest rates are due semi-annually on March 1 and September
1. At March 31, 2014, the outstanding balance was $1,210,000.
2010 Bergman Note
On Nov 30, 2010, the District issued a promissory note with Principal of $850,000 and interest of 4%
to finance the purchase of land. Interest is due on a quarterly basis beginning February 28, 2011 and
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
28
mature on November 30, 2015. The principal is due in full at maturity. At March 31, 2014, the
outstanding balance was $850,000.
2012 Refunding Promissory Notes
On January 19. 2012, the District advance refunded $34,652,643 in 1999 lease revenue bonds by
issuing $31,264,707 in promissory notes. The 2012 notes bear interest rates ranging from 2.00% to
6.04%. The notes are a blend of current interest and capital appreciation notes maturing through
2042. The net proceeds of $33,295,663 (after payment of $278,683 in underwriting fees, insurance,
and other issuance costs and a premium of $2,309,638) were used to purchase U.S government
securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for
all future debt service payments on the 1999 Series bonds. As a result, the 1999 Series bonds are
considered to be defeased and the liability for those bonds has been removed from the long-term debt
in the financial statements. At March 31, 2014, the outstanding balance of the notes, including
accreted interest of $1,918,995, was $32,643,702.
Revenue Bonds
2004 Revenue Bonds
On January 20, 2004, the Authority on behalf of the District, issued $31,900,010 of 2004 Revenue
Bonds for the purpose of acquiring land to preserve and use as open space, repay a portion of a 1995
Promissory Note, purchase a reserve fund surety policy, and pay bond issue costs. The bonds consist
of Current Interest and Capital Appreciation Bonds. The Current Interest Bonds bear interest at 2.0%
to 5.4% and are due semi-annually on March 1 and September 1. The Capital Appreciation Bonds
accrete interest at 5.2% to 5.53% and compound semi-annually on March 1 and September 1.
Principal payments on the Current Interest Bonds are due annually September 1. Principal payments
on the Capital Appreciation Bonds are payable at maturity beginning March, 2020. At March 31,
2014, the outstanding balance of these bonds was $29,615,010.
2007 Series A Revenue Refunding Bonds and Series B-T Taxable Revenue Refunding Bonds
On December 15, 2006 the District issued six series of promissory notes (2007 District Notes) for the
purpose of refunding its 1996 Project Lease, 1996 Promissory Notes, 1999 Project Lease, and 1999
Promissory Notes. On December 15, 2006 the Authority, on behalf of the District, issued
$52,415,000 of 2007 Series A Revenue Refunding Bonds and $6,785,000 of 2007 Series B-T
Taxable Revenue Refunding Bonds for the purpose of defeasing the aggregate purchase price of the
2007 District Notes. The Series A bonds bear interest from 4.0% to 5.0% and Series B-T bonds bear
interest at 5.15%. Interest for both series A and B-T are due semiannually on March 1 and September
1. Principal payments for the Series A bonds began September, 2012 and are due annually, thereafter.
Principal payments for the Series B-T bonds are due annually on September 1. At March 31, 2014
the outstanding balance of the 2007 Series A Bonds is $50,665,000. There is no remaining balance
on the 2007 Series B-T Bonds.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
29
2011 Revenue Bonds
On May 19, 2011, the Authority, on behalf of the District, issued $20,500,000 of 2011 Revenue
Bonds for the purpose of acquiring land to preserve and use as open space and pay bond issue and
related costs. The Bonds are not general obligations. Each year, the District will appropriate
revenues-mainly limited properly tax collections that Santa Clara County and San Mateo County
allocate to the District – to pay its obligations under a Lease Agreement for use and occupancy of
District land in addition to other District debt and lease obligations unrelated to this financing. The
Current Interest Bonds bear interest at 2.0% to 6.0% and are due semi-annually on March 1 and
September 1. Principal payments on the Current Interest Bonds are due annually September 1. At
March 31, 2014, the outstanding balance of these bonds was $20,455,000.
The following schedule summarizes the District’s outstanding Promissory Notes and Revenue Bonds
as of March 31, 2014:
Year of Interest Year of Original Outstanding Outstanding
Long Term Debt Type Issue Rate Maturity Issue April 01, 2013 Additions Retirements March 31, 2014
Promissory Notes:
Daloia Note Current Interest 2003 6.25% 2018 240,000$ 100,093$ -$ 18,888$ 81,205$
Hunt Note Current Interest 2004 5.00 - 5.50% 2024 1,500,000 1,500,000 - - 1,500,000
2005 Refunding Note Current Interest 2006 3.25 - 5.00% 2016 4,630,000 2,355,000 - 1,145,000 1,210,000
Bergman Note Current Interest 2011 4.00% 2016 850,000 850,000 - - 850,000
2012 Refunding Note Current Interest 2012 2.00 - 6.04% 2042 15,790,000 15,789,999 - 540,000 15,249,999
2012 Refunding Note CAB 2012 2.00 - 6.04% 2042 15,474,707 15,474,708 - - 15,474,708
Subtotal Promissory Notes 38,484,707 36,069,800 - 1,703,888 34,365,912
Revenue Bonds:
2004 Revenue Bonds Current Interest 2004 2.00 - 5.40% 2035 30,560,000 28,895,000 - 620,000 28,275,000
2004 Revenue Bonds CAB 2004 5.20 - 5.53% 2028 1,340,010 1,340,010 - - 1,340,010
2007 Series A Refunding Current Interest 2007 4.00 - 5.00% 2028 52,415,000 51,295,000 - 630,000 50,665,000
2011 Lease Revenue Current Interest 2012 2.00 - 6.00% 2042 20,500,000 20,500,000 - 45,000 20,455,000
Subtotal Revenue Bonds 104,815,010 102,030,010 - 1,295,000 100,735,010
Accreted Interest:
2012 Refunding Note 968,830 950,165 - 1,918,995
2004 Revenue Bonds 833,779 116,990 - 950,769
Subtotal Accreted Interest 1,802,609 1,067,155 - 2,869,764
Unamortized Bond Premium 2,351,783 - 163,573 2,188,210
Total Long Term Debt 143,299,717$ 142,254,202$ 1,067,155$ 3,162,461$ 140,158,896$
Promissory Notes future debt service requirements as of March 31, 2014 were as follows:
Year Ending March 31, Principal
Remaining
Accretion Interest Total
2015 1,650,096$ -$ 831,875$ 2,481,971$
2016 1,226,382 - 782,314 2,008,696
2017 387,750 - 744,646 1,132,396
2018 396,977 - 730,116 1,127,093
2019 395,000 - 714,050 1,109,050
2020-2024 3,700,000 - 3,257,225 6,957,225
2025-2029 7,540,000 - 2,200,275 9,740,275
2030-2034 10,175,601 11,202,899 89,875 21,468,375
2035-2039 6,041,487 17,004,488 - 23,045,975
2040-2042 2,852,619 18,268,911 - 21,121,530
Total Debt Service 34,365,912$ 46,476,298$ 9,350,376$ 90,192,586$
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
30
Revenue Bonds future debt service requirements as of March 31, 2014 were as follows:
Year Ending March 31, Principal
Remaining
Accretion Interest Total
2015 1,495,000$ -$ 4,916,630$ 6,411,630$
2016 3,260,000 - 4,810,530 8,070,530
2017 3,960,000 - 4,647,855 8,607,855
2018 4,245,000 - 4,456,905 8,701,905
2019 4,545,000 - 4,246,515 8,791,515
2020-2024 25,226,468 324,942 18,558,988 44,110,398
2025-2029 25,433,542 1,263,475 13,229,396 39,926,413
2030-2034 14,265,000 - 6,724,188 20,989,188
2035-2039 7,710,000 - 3,237,069 10,947,069
2040-2042 10,595,000 - 1,519,313 12,114,313
Total Debt Service 100,735,010$ 1,588,417$ 66,347,389$ 168,670,816$
Amortization of the deferred loss on early retirement of long-term debt for the fiscal year ended
March 31, 2014 was as follows:
Beginning Balance, at April 1, 2013 3,301,608$
Net Change (339,194)
Ending Balance, at March 31, 2014 2,962,414$
NOTE 6 – RENTAL INCOME
The District rents certain land and structures to other entities under operating leases with terms
generally on a month-to-month basis. Rental income of $1,115,570 was received during the year
ended March 31, 2014.
NOTE 7 - EMPLOYEE RETIREMENT SYSTEMS
Pension Plan
All permanent District employees are eligible to participate in the pension plan offered by California
Public Employees Retirement System (CALPERS) an agent multiple employer defined benefit
pension plan with acts as a common investment and administrative agent for its participating member
employers. CALPERS provides retirement and disability benefits, annual cost of living adjustments
and death benefits to plan members, who must be public employees and beneficiaries. The District's
employees participate in the Miscellaneous (non safety) Employee Plan. Benefit provisions under the
Plan are established by State statute and District resolution. Benefits are based on years of credited
service, equal to one year of full time employment. Funding contributions for the Plan are determined
annually on an actuarial basis as of June 30 by CALPERS; the District must contribute these
amounts.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
31
The pension plans' provisions and benefits in effect at March 31, 2014, are summarized as follows:
Benefit vesting schedule 5 years service
Benefit payments Monthly for life
Retirement age 55
Monthly benefits, as a % of annual salary 2.0-2.5%
Required employee contribution rates 7.89%
Required employer contribution rates 17.04%
CALPERS determines contribution requirements using a modification of the Entry Age Normal
Method. Under this method, the District's total normal benefit cost for each employee from date of
hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal
benefit cost under this method is the level amount the District must pay annually to fund an
employee's projected retirement benefit. This level percentage of payroll method is used to amortize
any unfunded actuarial liabilities. The actuarial assumptions used to compute contribution
requirements are also used to compute the actuarial accrued liability. The District does not have a net
pension obligation since it pays these actuarially required contributions bi-weekly.
CALPERS uses the market related value method of valuing the Plan's assets. An investment rate of
return of 7.50% is assumed, including inflation at 2.75%. Annual salary increases are assumed to
vary by duration of service. Changes in liability due to plan amendments, changes in actuarial
assumptions, or changes in actuarial methods are amortized as a level percentage of payroll on a
closed basis over twenty years. Investment gains and losses are accumulated as they are realized and
ten percent of the net balance is amortized annually.
As required by State law, effective July l, 2005, the District's Miscellaneous Plan was terminated,
and the employees in the plan were required by CALPERS to join new State-wide pools. One of the
conditions of entry to these pools was that the District true-up any unfunded liabilities in the former
Plans, either by paying cash or by increasing its future contribution rates through a Side Fund offered
by CALPERS. The District satisfied its Miscellaneous Plan's unfunded liability of $2,510,958 by
agreeing to contribute that amount to the Side Fund through an addition to its normal contribution
rates over the next 21 years. In 2013, the District made a one-time payment of $2,510,958 to
eliminate the liability. The required contributions representing annual pension cost, for the year
ended March 31 were as follows:
Fiscal Year
Ending
Annual
Pension Cost
(APC)
Percentage of
APC
Contributed
Net Pension
Obligation
3/31/2014 1,461,069$ 100% -$
3/31/2013 4,298,913 100% -
3/31/2012 1,572,759 100% -
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
32
The latest available actuarial values of the above State-wide pools (which differs from market value)
and funding progress were set forth as follows. The information presented below relates to the State-
wide pools as a whole, of which the District is one of the participating employers:
Valuation
Date
Accrued
Liability
Value of
Assets
Unfunded
(Overfunded)
Liability
Funded
Ratio
Annual
Covered
Payroll
Unfunded
(Overfunded)
Liability as %
of Payroll
6/30/2012 2,254,622,362 1,837,489,422 417,132,490 81.50% 339,228,272 122.97%
Audited annual financial statements are available from CALPERS at PO Box 942709, Sacramento,
CA 94229-2709.
Other Postemployment Benefits (OPEB)
Plan Description
The District joined the California Employers' Retiree Benefit Trust (CERBT), an agent multiple-
employer plan administered by CALPERS, consisting of an aggregation of single-employer plans.
The District Board authorized a deposit of $1,900,000 in CERBT on June 5, 2008, to begin funding
its OPEB liability.
By Board resolution and through agreements with its labor unit, the District provides certain health
care benefits for retired employees (spouse and dependents are not included) under third-party
insurance plans. A summary of eligibility and retiree contribution requirements are shown below:
Eligibility
Service or disability retirement from the District
Age 50 and 5 years of service
Continue participation in Public Employees
Medical and Hospital Care Act (PEMHCA)
Retiree Medical
Benefit
District pays retiree premiums up to:
$350 per month effective 1/1/2009
Must be at least equal to statutory PEMHCA minimum
($115 in 2013, $119 in 2014)
PEMHCA
Administrative Fee
District pays CalPERS administrative fees (0.33% of
premiums for 2013/14)
Surviving Spouse
Continuation
Retiree benefit continues to surviving spouse if
retiree elects survivor annuity under CalPERS
retirement plan
Other OPEB None
As of March 31, 2014, approximately 99 active employees and 21 retirees were eligible to receive
retirement health care benefits.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
33
Funding Policy
In accordance with the District's budget, the Annual Required Contribution (ARC) is to be funded
throughout the year as a percentage of payroll. Concurrent with implementing Statement No. 45, the
District’s Board of Directors passed a resolution to participate in CERBT, an irrevocable trust
established to fund OPEB. CERBT is managed by an appointed board not under the control of the
District. This Trust is not considered a component unit by the District and has been excluded from
these financial statements. Separately issued financial statements for CERBT may be obtained from
CALPERS at P.O. Box 942709, Sacramento, CA 94229-2709.
Annual OPEB Cost and Net OPEB Obligation
The District’s annual OPEB cost is calculated based on the ARC, an amount actuarially determined
in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding
that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any
unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The
following table shows the components of the District’s annual OPEB cost for the year, the amount
actually contributed to the plan, and changes in the District’s net OPEB obligation:
Annual required contribution $ 225,000
Interest on net OPEB asset
Adjustment to annual required contribution 120,000
Annual OPEB cost (expense) 265,000
Contributions made
Dncrease in net OPEB asset 93,381
Net OPEB obligation (asset) - beginnin g
Net OPEB obligation (asset) - ending
(80,000)
(171,619)
(1,097,306)
$ (1,003,925)
The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and
the net OPEB obligation for 2014 was as follows:
Fiscal Net OPEB
Year Annual Percentage of Annual Obligation/
Ended OPEB Cost Cost Contributed (Asset)
March 31, 2012 $ 179,255 0% (1,334,306)$
March 31, 2013 237,000 0% (1,097,306)
March 31, 2014 265,000 65% (1,003,925)
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
34
Funded Status and Funding Progress
The most recent actuarial valuation date was June 30, 2013. The following summarizes the funded
status of the plan as of March 31, 2014:
$ 2,786,000
2,339,701
$ 446,299
84%
$ 8,043,000
6%
Funded ratio (actuarial value of plan assets/AAL)
Projected covered payroll (active Plan members)
UAAL as a percentage of covered payroll
Actuarial accrued liability (AAL)
Value of plan assets
Unfunded actuarial accrued liability (UAAL)
Actuarial Methods and Assumptions
The ARC was determined as part of a June 30, 2013 actuarial valuation using the entry age normal
actuarial cost method. This is a projected benefit cost method, which takes into account those
benefits that are expected to be earned in the future as well as those already accrued. The actuarial
assumptions included (a) 6.25% to 7.25% investment rate of return, (b) 3.25% projected annual
salary increase, and (c) health inflation increases of 0% for 1 year, 1.5% for the next 5 years, and 3%
thereafter. The actuarial methods and assumptions used include techniques that smooth the effects of
short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Actuarial
calculations reflect a long-term perspective and actuarial valuations involve estimates of the value of
reported amounts and assumptions about the probability of events far into the future. Actuarially
determined amounts are subject to revision at least biannually as results are compared to past
expectations and new estimates are made about the future. The District's OPEB unfunded actuarial
accrued liability is being amortized as a level percentage of projected payroll using a 30 year open
amortization period.
NOTE 8 - JOINT VENTURES (JOINT POWERS AGREEMENTS)
The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; injuries to employees; and natural disasters. Prior to July 1, 2002, the District managed and
financed these risks by purchasing commercial insurance. On July 1, 2002, the District joined the
California Joint Powers Insurance Authority (CAL JPIA). CAL JPIA is composed of 119 California
public entities and is organized under a joint powers agreement pursuant to California Government
Code Section 6500 et seq. The purpose of CAL JPIA is to arrange and administer programs for the
pooling of self-insurance losses, to purchase excess insurance or reinsurance, and to arrange for
group-purchased insurance for property and other coverages. CAL JPIA's pool began covering claims
of its members in 1978. Each member government has an elected official as its representative on the
Board of Directors. The Board operates through a 9-member Executive Committee.
During the past three fiscal years, none of the programs of protection have had settlements or
judgments that exceeded pooled or insured coverage. There have been no significant reductions in
pooled or insured liability coverage from coverage in the prior year.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
35
Self-Insurance Programs of the CAL JPIA
General and Automobile Liability
Each government member pays a primary deposit to cover estimated losses for a fiscal year (claims year).
General liability (GL) coverage includes bodily injury, personal injury, or property damage to a third
party resulting from a member activity. The GL program also provides automobile liability coverage. Six
months after the close of a fiscal year, outstanding claims are valued. A retrospective deposit computation
is then made for each open claims year. Costs are spread to members as follows: the first $30,000 to
$750,000 are pooled based on member's share of costs under $30,000; costs in excess of $750,000 are
shared by the members based upon each individual member's payroll. Costs of covered claims above
$5,000,000 are currently paid by reinsurance. The protection for each member is $50,000,000 per
occurrence, up to $50,000,000.
Worker's Compensation
The District also participates in the Worker's Compensation program administered by CAL JPIA. Pool
deposits and retrospective adjustments are valued in a manner similar to the General Liability pool. The
District is charged for the first $50,000 of each claim. Costs from $50,000 to $100,000 per claim are
pooled based on the member's losses under its retention level. Costs between $100,000 and $2,000,000
per claim are pooled based on payroll. Costs from $2,000,000 to $5,000,000 are paid by excess insurance
purchased by CAL JPIA. The excess insurance provides coverage to statutory limits.
Purchased Insurance
Environmental Insurance
The District participates in the Pollution and Remediation Legal Liability Program, which is available
through CAL JPIA. The policy provides coverage for both first and third party damages, including sudden
and gradual pollution at or from property, streets, sanitary sewer trunk lines and storm drain outfalls
owned by the District. Coverage is on a claims-made basis. There is a $50,000 deductible. CAL JPIA has
a limit of $50,000,000 for the 3-year period from July 1, 2008 through July 1, 2011. Each member of
CAL JPIA has a $10,000,000 aggregate limit during the 3-year policy term.
Property Insurance
The District participates in the All-Risk property program of CAL JPIA which includes all-risk coverage
for real and personal property (such as buildings, office furniture, equipment, vehicles, etc). This
insurance is underwritten by several insurance companies. Property is currently insured according to a
schedule of covered property submitted by the District to CAL JPIA. The All-Risk deductible is $5,000
per occurrence; $1,000 for non-emergency vehicles. Premiums for the coverage are paid annually and are
not subject to retroactive adjustments.
Boiler & Machinery Insurance
The District participates in the optional coverage for boiler and machinery, which is purchased separately
under the property program. Coverage is for physical damage for sudden and accidental breakdown of
boilers and machinery, and electrical injury. There is a $5,000 per accident or occurrence deductible.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2014
36
Crime Insurance
The District participates in the crime program of CAL JPIA in the amount of $1,000,000 per claim, with a
$2,500 per occurrence deductible. Insurance provides coverage for employee dishonesty, failure to
faithfully perform duties, forgery, counterfeiting, theft, robbery, burglary, and computer fraud. Premiums
are paid annually and are not subject to retroactive adjustments.
Special Event Tenant User Liability Insurance
The District participates in the special events program of CAL JPIA which provides liability insurance
when District promises are used for special events. The insurance premium is paid by the tenant user to
the District according to a schedule. The District then pays the insurance arranged through CAL JPIA.
There is no deductible and the District is added as additional insured. Liability limits are purchased in $1
million per occurrence increments. Special Event Tenant User Liability Insurance. The District
participates in the special events program of CAL JPIA which provides liability insurance when District
promises are used for special events. The insurance premium is paid by the tenant user to the District
according to a schedule. The District then pays the insurance arranged through CAL JPIA. There is no
deductible and the District is added as additional insured. Liability limits are purchased in $1 million per
occurrence increments.
Vendors/Contractors Program
General liability coverage is provided to vendors/contractors who otherwise could not contract with the
District as they could not meet the minimum insurance requirement: $1 million per occurrence, $1 million
in aggregate.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Litigation
The District may be exposed to various claims and litigation during the normal course of business.
However, management believes there were no matters that would have a material adverse effect on the
District’s financial position or results of operations as of March 31, 2014.
NOTE 10 – SUBSEQUENT EVENTS
Management has reviewed subsequent events and transactions that occurred after the date of the financial
statements through the date the financial statements were issued. The financial statements include all
events or transactions, including estimates, required to be recognized in accordance with generally
accepted accounting principles.
On June 3, 2014, voters approved Measure AA, a general obligation bond measure authorizing the
District to issue up to $300 million in bonds, at a tax rate not to exceed $3.18 per $100,000 of assessed
value of property owned, and with expenditures verified by an independent citizen oversight committee.
The bond funds will be utilized to add trails and trail connections, open new preserves, protect redwood
forests, preserve farmland, restore wetlands and streams, provide habitat connectivity and reduce fire risk.
The funding for this bond measure will be used toward the 25 highest priority projects. As of June 5,
2014, the date of issuance of the financial statements, no Measure AA bonds were issued. Management
has concluded that no liability exists for the Measure AA bonds as of March 31, 2014.
REQUIRED
SUPPLEMENTARY
INFORMATION
Variance with
Final Budget
Actual Positive -
Original Final (GAAP Basis) (Negative)
Revenues:
Property taxes 30,285,000$ 31,723,000$ 32,433,076$ 710,076$
Grant income 2,386,000 2,234,927 1,900,702 (334,225)
Property management 1,390,000 1,390,000 1,422,095 32,095
Investment earnings 280,000 280,000 163,215 (116,785)
Land Donation 1,500,000 1,500,000 - (1,500,000)
Other revenues 205,000 205,000 144,762 (60,238)
Total revenues 36,046,000 37,332,927 36,063,850 (1,269,077)
Expenditures:
Current
Salaries and employee benefits 13,699,239 13,699,239 13,078,635 620,604
Services and supplies 4,920,501 5,032,001 4,224,310 807,691
Capital outlay 13,511,708 13,441,208 8,230,927 5,210,281
Total expenditures 32,131,448 32,172,448 25,533,872 6,638,576
Excess (deficiency) of revenues
over (under) expenditures 3,914,552 5,160,479 10,529,978 5,369,499
Other financing sources (uses):
Transfers in - - - -
Transfers out (8,874,965) (8,874,965) (8,858,244) 16,721
Total other financing sources (uses) (8,874,965) (8,874,965) (8,858,244) 16,721
Net change in fund balance (4,960,413) (3,714,486) 1,671,734 5,386,220
Fund balance beginning 37,513,062 37,513,062 37,513,062 -
Fund balance ending 34,523,689$ 35,769,616$ 41,155,836$ 5,386,220$
Budgeted Amounts
Midpeninsula Regional Open Space District
Budget to Actual (GAAP)
For the Fiscal Year Ended March 31, 2014
Schedule of Revenues, Expenditures and Changes in Fund Balance
General Fund
37
Midpeninsula Regional Open Space District
Schedule of Funding Progress – Other Postemployment Benefits
For the Fiscal Year Ended March 31, 2014
38
Actuarial
Accrued UAAL as
Actuarial Liability Unfunded a Percentage
Actuarial Value of (AAL) AAL Funded Covered of Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) ((b-a/c))
3/31/2010 1,894,000$ 1,500,000$ (394,000)$ 126.27% 5,772,000$ -6.83%
6/30/2011 2,058,000 1,844,000 (214,000) 111.61% 7,331,000 -2.92%
6/30/2013 2,035,000 2,555,000 520,000 79.65% 8,043,000 6.47%
SUPPLEMENTARY
INFORMATION
Midpeninsula Regional Open Space District
Schedule of Expenditures of Federal Awards
For the Fiscal Year Ended March 31, 2014
39
FEDERAL
CATALOG PROGRAM
PROGRAM NAME NUMBER EXPENDITURES
U.S Department of Defense
Community Economic Adjustment
Almaden AFS Midpeninsula (SP), SP1024-10-01 (1)12.600 1,241,196$
Total Expenditures of Federal Awards 1,241,196$
(1)Audited as major program
Midpeninsula Regional Open Space District
Notes to Schedule of Expenditures of Federal Awards
For the Fiscal Year Ended March 31, 2014
40
1. General
The accompanying Schedule of Expenditures of Federal Awards presents activity of the federal
financial assistance programs of the District All federal financial assistance received directly from
federal agencies, as well as federal financial assistance passed through other government agencies, is
included in this schedule.
2. Significant Accounting Policies
The accompanying Schedule of Expenditures of Federal Awards is presented using the modified
accrual basis of accounting, which is described in Note 1. Federal programs are labeled either as
Type A or Type B. Type A programs are defined as based on the following criteria:
Type A program means any
program with all federal
More than Equal to or less than expenditures that exceed:
$300,000 $10 million $300,000
$10 million $100 million 3% of federal awards
$100 million $1 billion $3 million
$1 billion $10 billion 0.3% of federal awards
$10 billion $20 billion $30 million
$20 billion 0.15% of federal awards
When total cash and noncash
expenditures of federal awards
for programs are:
Federal programs not labeled Type A as described above are labeled Type B programs.
3. Relationship to the Basic Financial Statements
The amounts reported in the accompanying Schedule of Expenditures of Federal awards agrees, in all
material respects, to amounts reported within the District’s financial statements. Federal award
revenues are reported principally in the District’s financial statements as grant income.
4. Relationship to Federal Financial Reports
Amounts reported in the accompanying Schedule of Expenditures of Federal Awards agree or can be
reconciled with the amounts reported or to be reported in the federal financial reports.
5. Pass-Through Entities' Identifying Number
When federal awards were received from a pass-through entity, the Schedule of Expenditures of
Federal Awards shows, if available, the identifying number assigned by the pass-through entity.
When no identifying number is shown, the District has determined that no identifying number is
assigned for the program or the District was unable to obtain an identifying number from the pass-
through entity.
OTHER INDEPENDENT
AUDITOR’S REPORTS
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INDEPENDENT AUDITOR’S 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
Board of Directors
Midpeninsula Regional Open Space District
Los Altos, California
We have audited, 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, the financial statements of the District as of
and for the year ended March 31, 2014, and the related notes to the financial statements, which
collectively comprise the District’s basic financial statements, and have issued our report thereon
dated June 5, 2014.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’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 District’s
internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 over financial reporting was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal control
over financial reporting that might be material weaknesses or significant deficiencies. Given these
limitations, during our audit we did not identify any deficiencies in internal control over financial
reporting 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 District’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
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info@cnallp.com • www.cnallp.com
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.
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
entity’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 entity’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
June 5, 2014
San Jose, California
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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN
ACCORDANCE WITH OMB CIRCULAR A-133
Board of Directors
Midpeninsula Regional Open Space District
Los Altos, California
Report on Compliance for Each Major Federal Program
We have audited the Midpeninsula Open Space District’s (the District) compliance with the types of
compliance requirements described in OMB Circular A-133 Compliance Supplement that could have
a direct and material effect on each of the District’s major federal programs for the year ended March
31, 2014. The District’s major federal programs are identified in the summary of auditor’s results
section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and
grants applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the District’s major federal
programs based on our audit of the types of compliance requirements referred to above. We
conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-
133, Audits of States, Local Governments, and Non‑Profit Organizations. Those standards and OMB
Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about
whether noncompliance with the types of compliance requirements referred to above that could have
a direct and material effect on a major federal program occurred. An audit includes examining, on a
test basis, evidence about the District’s compliance with those requirements and performing such
other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major
federal program. However, our audit does not provide a legal determination of the District’s
compliance.
Opinion on Each Major Federal Program
In our opinion, the District complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major federal
programs for the year ended.
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Report on Internal Control over Compliance
Management of the District is responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and
performing our audit of compliance, we considered the District’s internal control over compliance
with the types of requirements that could have a direct and material effect on each major federal
program to determine the auditing procedures that are appropriate in the circumstances for the
purpose of expressing an opinion on compliance for each major federal program and to test and report
on internal control over compliance in accordance with Circular A-133, but not for the purpose of
expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do
not express an opinion on the effectiveness of the District’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance
requirement of a federal program on a timely basis. A material weakness in internal control over
compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such
that there is a reasonable possibility that material noncompliance with a type of compliance
requirement of a federal program will not be prevented, or detected and corrected, on a timely basis.
A significant deficiency in internal control over compliance is a deficiency, or a combination of
deficiencies, in internal control over compliance with a type of compliance requirement of a federal
program that is less severe than a material weakness in internal control over compliance, yet
important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
Purpose of Report
The purpose of this report is solely to describe the scope of our testing of internal control over
financial reporting and compliance, and the result of that testing, and not to provide an opinion on the
effectiveness of the District’s internal control over financial reporting or on compliance. This report is
an integral part of an audit performed in accordance with Government Auditing Standards in
considering the District’s internal control over financial reporting and compliance. Accordingly, this
report is not suitable for any other purpose.
June 5, 2014
San Jose, California
Midpeninsula Regional Open Space District
Schedule of Findings and Questioned Costs
For the Fiscal Year Ended March 31, 2014
45
Section I - Summary of Auditor’s Results
Financial Statements:
Type of auditor's report issued
Internal control over financial reporting:
Material weaknesses? Yes X No
Significant deficiencies identified not
considered to be material weaknesses? Yes X No
Non-compliance material to financial statements noted? Yes X No
Federal Awards:
Internal control over major programs:
Material weaknesses? Yes X No
Significant deficiencies identified not
considered to be material weaknesses? Yes X No
Type of auditor's report issued on compliance over major progra ms
Any audit findings disclosed that are required to be reported in
accordance with Circular A-133 Section .510(a) Yes X No
Identification of Major Programs:
CFDA Numbers Name of Federal Program
Dollar threshold used to distinguish between
type A and type B programs:
Auditee qualified as low risk auditee? X Yes No
300,000$
Unmodified
Unmodified
12.600 Community Economic Adjustment
Section II - Financial Statement Findings
None
Section III - Federal Award Findings and Questioned Costs
None
Midpeninsula Regional Open Space District
Status of Prior Year’s Findings and Recommendations
For the Fiscal Year Ended March 31, 2014
46
Section II - Financial Statement Findings
None
Section III - Federal Award Findings and Questioned Costs
None