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HomeMy Public PortalAboutAudit Report - District- FY02MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Independent Auditor's Reports and General -Purpose Financial Statements For the Year Ended March 31, 2002 L _ L MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FOR THE YEAR ENDED MARCH 31, 2002 Table of Contents . Page(s) Independent Auditor's Report 1 General -Purpose Financial Statements: Combined Balance Sheet 2 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund 3 Notes to General -Purpose Financial Statements 4 - 11 Other Report: Independent Auditor's Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of General -Purpose Financial Statements Performed in Accordance with Government Auditing Standards 12 Macias, Gini & Company fir Certified Public Accountants and Management Consultants Board of Directors Midpeninsula Regional Open Space District Partners Mt. Diablo Plaza Kenneth A. Macias, Managing Partner 2175 N. California Boulevard Ernest J. Gird Suite 620 Kevin J. O'Connell Walnut Creek, CA 94596-3565 Richard A. Green 925.274.0190 Jan A. Rosati 925.274.3819 FAX James V. Godsey www.maciasgini.com INDEPENDENT AUDITOR'S REPORT We have audited the accompanying combined balance sheet of Midpeninsula Regional Open Space District (the District), as of March 31, 2002, and the related statement of revenues, expenditures and changes in fund balance — budget and actual for the year then ended. These general-purpose financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and die 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 general-purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose fmancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of the District as of March 31, 2002, and the results of its operations for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated May 24, 2002 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 grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. MACIAS, GINI & COMPANY LLP L. L. Certified Public Accountants Walnut Creek, California May 24. 2002 Offices located throughout California 1 L. GENERAL-PURPOSE FINANCIAL STATEMENTS J MIDPENINSULA REGIONAL OPEN SPACE DISTRICT COMBINED BALANCE SHEET MARCH 31, 2002 Account Groups ASSETS Cash and investments Restricted cash and investments Receivables: Taxes Interest Other Notes receivable Prepaid items Land Structures and improvements Equipment Amount available in General Fund Amount to be provided for retirement of general long-term debt TOTAL ASSETS LIABILITIES AND FUND EQUITY Liabilities: Accounts payable Accrued liabilities Deposits Deferred revenue Promissory notes Certificates of participation Revenue bonds Total liabilities Fund Equity: Investment in general fixed assets Fund balance: Reserved for: Debt service Notes receivable Prepaid items Unreserved, designated for: Acquisition fund Future capital purchases Total fund equity TOTAL LIABILITIES AND FUND EQUITY General Fund $ 35,186,733 $ 3,951,688 4,432,405 287,787 2,826 275,255 14,161 General Fixed Assets 214,597,355 10,257,774 2,451,136 3,951,688 General Long -Term Debt Total (Memorandum Only) - $ 35,186,733 3,951,688 114,530,144 $ 44,150,855 $ 227,306,265 $ 118,481,832 $ 315,075 $ 328,171 34,377 735,802 12,336,318 15,165,000 90,980,514 4,432,405 287,787 2,826 275,255 14.161 214,597,355 10,257,774 2,451,136 3,951,688 114,530,144 $ 389,938,952 315,075 328,171 34,377 735,802 12,336,318 15,165,000 90,980,514 1,413,425 227,306,265 3,951,688 275,255 14,161 20,097,500 18,398,826 118,481,832 119,895,257 227,306,265 3,951,688 275,255 14,161 20,097,500 18,398,826 42,737,430 227,306,265 270,043,695 $ 44,150,855 $ 227,306,265 $ 118,481,832 $ 389,938,952 See accompanying notes to general-purpose financial statements. 2 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - GENERAL FUND YEAR ENDED MARCH 31, 2002 Revenue: General property tax Other property taxes Investment income Grants Donations Rental income and other Total revenue Expenditures: Salaries and benefits Professional services Vehicle expenditures Insurance Communications and publications Site supplies and services Utilities and communication Other Capital outlay: Land Structures and improvements Equipment Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources: Proceeds from promissory notes Excess (deficiency) of revenues and other financing sources over (under) expenditures Fund balance, beginning of year Fund balance, end of year Budget Actual $ 16,328,000 $ 198,000 1,427,700 3,943,000 803,300 22,700,000 5,200,550 763,600 196,900 267,100 159,000 288,110 176,210 438,475 20,097,500 1,255,800 356,250 1,801,790 4,354,400 17,367,281 204,320 1,692,197 2,399,000 3,000 1,027,212 22,693,010 5,021,464 521,512 189,620 256,049 157,917 295,040 171,040 398,362 3,675,746 753,817 361,862 1,801,790 4,354,383 Variance $ 1,039,281 6,320 264,497 (1,544,000) 3,000 223,912 (6,990) 179,086 242,088 7,280 11,051 1,083 (6,930) 5,170 40,113 16,421,754 501.983 (5,612) 17 35,355,685 17,958,602 (12,655,685) 4,734,408 590,000 17,397,083 17,390,093 590,000 $ (12,655,685) 5,324,408 37,413,022 $ 42,737,430 See accompanying notes to general-purpose financial statements. $ 17,980,093 3 r MIDPENINSULA REGIONAL OPEN SPACE DISTRICT ° NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2002 NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Midpeninsula Regional Open Space District (the District) was foamed in 1972 to acquire and preserve open space land in the 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. 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; is able to impose its will on 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 general-purpose financial statements. Fund Accounting The accounts of the District are organized on the basis of one fund and account groups, each of which is considered a separate accounting entity. All resources and operations of the District, including the Authority, are reported in the General Fund. The District reports its fixed assets in the General Fixed Assets Account Group and reports its long- term liabilities in the General Long -Term Debt Account Group. Basis of Accounting The records of the District are maintained on the modified accrual basis of accounting. Under this method, revenues, including property taxes, are generally recognized in the period they become measurable and available, and expenditures are generally recognized when the obligation is incurred, except for interest on long-term debt, which is recognized as an expenditure when due. Substantially all revenues are susceptible to accrual. Budgets and Budgetary Accounting The Board of Directors of the District adopts an annual operating budget on or before March 31 for the ensuing fiscal year, The Board of Directors may amend the budget by resolution during the fiscal year. All appropriations lapse at the end of the fiscal year. The budget is presented on a basis consistent with accounting principles generally accepted in the United States of America. Investments The District records investment transactions on the trade date. Investments are reported at fair value. Fair value is defined as the amount that the District could reasonably expect to receive for an investment in a current sale between a willing buyer and seller and is generally measured by quoted market prices. General Fixed Assets Land, structures, improvements and equipment purchased by the District are stated at cost in the General Fixed Assets Account Group (Account Group). Donations of capital assets are stated at their estimated fair market value as of the date received and are recorded as additions to the Account Group, however, are not recorded as revenue in the General Fund as these types of donations do not represent spendable financial resources. Depreciation is not recorded for capital assets. 4 F • MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2002 Property Tax Levy, Collection and Maximum Rates The State of California (State) Constitution Article XIIIA provides that the combined maximum property tax rate on any given property may not exceed one percent of its assessed value unless voters have approved an additional amount for general obligation debt. Assessed value is calculated at 100 percent of market value as defined by Article XIIIA and may be increased by no more than two percent per year unless the property is sold or transferred. The State Legislature has determined the method of distribution of receipts from the one percent tax levy among the counties, cities, school districts and special districts. The District receives property tax revenues from Santa Clara and San Mateo Counties. The Counties assess properties and bill for the collection of property taxes as follows: Secured Unsecured Valuation dates March 1 March 1 Lien/Levy dates July 1 March 1 Due dates 50% on November 1 July 1 50% on February 1 Delinquent as of December 10 (for November) August 31 April 10 (for February) Taxes are secured by liens on the property being taxed. The term "unsecured" refers to taxes on personal property and not land and buildings. Supplemental property taxes are levied based on changes in assessed values between the date of real property sales and new construction and the next normal assessment date. Property tax revenues are recognized when measurable and available to finance current operations. Available means collected within the current period or expected to be collected soon thereafter to be used to pay liabilities of the current period (not to exceed 60 days). Compensated Absences Vacation pay is accrued when earned and is included in the General Fund as accrued liabilities. Sick leave is recorded as an expenditure when paid. Use of Estimates The preparation of the general-purpose financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the general-purpose financial statements, as well as revenues and expenses during the reporting period. Actual results could differ from those estimates. Total (Memorandum Only) Column The total column in the combined balance sheet is captioned as "Total (Memorandum Only)" because it does not represent consolidated financial information and is presented only to facilitate financial analysis. The column does not represent information that reflects financial position or results of operations in accordance with accounting principles generally accepted in the United States of America. 5 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2002 NOTE B: CASH AND INVESTMENTS The District's cash and investments consist of the following at March 31 2002: Cash and investments Restricted cash and investments $ 35,186,733 3,951,688 Total cash and investments $ 39,138,421 Deposits At March 31, 2002, the carrying amount of the District's deposits was $4,214,593 and the bank balance was $4,522,714. The difference between the bank balance and the carrying amount represents outstanding checks and deposits in transit. Of the bank balance, $100,000 was covered by federal depository insurance and $4,422,714 was collateralized by the pledging financial institutions as required by Section 53652 of the California Government Code. Under the California Government Code, a financial institution is required to secure deposits in excess of those covered by federal depository insurance made by state or local governmental units by pledging securities held in the form of an undivided collateral pool. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited 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% of the secured public deposits. The collateral must be held at the pledging financial institution's trust department or other bank, acting as the pledging financial institution's agent, in the District's name. Investments Statutes authorize the District to invest in the County of Santa Clara Treasurer's investment pool, obligations of the U.S. Treasury or its agencies, certificates of deposit, bankers' acceptances, commercial paper and mutual funds invested in U.S. Government securities. The District did not enter into any reverse repurchase agreements during the year ended March 31, 2002. Information is not available on whether the various mutual funds and the County of Santa Clara Treasurer's investment pool in which the District has invested used, held or wrote derivative financial products during the year ended March 31, 2002. The County of Santa Clara Treasurer's investment pool is subject to regulatory oversight by the Treasury Oversight Committee, as required by California Government Code Section 27134. The fair value of the District's position in the pool is the same as the value of the pool shares, Provisions of the District's bond trust agreements require that certain restricted accounts be established. These accounts are held by trustees for the repayment of debt and as reserves. These funds have been invested only as permitted by specific state statutes and applicable resolutions or bond indentures. The cash equivalents and investments held by trustees have been classified as restricted on the balance sheet because their use is limited by bond covenants. 6 r MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR. ENDED MARCH 31, 2002 Custodial Credit Risk The District's investments are categorized below to give an indication of the level of custodial credit risk assumed by the District at March 31, 2002, Category 1 includes investments that are insured or registered, or securities held by the District or its agent in the District's name. Category 2 includes uninsured and unregistered investments, with the securities held by the Counterparty's trust department or agent in the District's name. Category 3 includes uninsured and unregistered investments, with securities held by the counterparty, or by its trust depat iment or agent, but not in the District's name. There were no Category I or 3 investments at March 31, 2002. The District's investments were classified as follows at March 31, 2002: Category 2 Investments: U.S. Government securities Investments not subject to categorization: County of Santa Clara Treasurer's investment pool Mutual funds Fair Value $ 3,391,022 31,425,725 107,081 Total $ 34,923,828 NOTE C: NOTE RECEIVABLE On December 17, 1997, the District sold 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 purchaser in the amount of $288,800 over 25 years at a rate of 10% per annum. Monthly principal and interest payments of $2,624 are due on the is` of each month and late if not paid by the 10th, with the final payment scheduled on December 1, 2022. The outstanding balance at March 31, 2002 is $275,255. NOTE D: FIXED ASSETS Changes in the General Fixed Assets Account Group for the year ended March 31, 2002, were as follows: Balances Balances April I, 2001 Additions Retirements March 31, 2002 Land $ 200,921,609 $ 13,675,746 $ $ 214,597,355 Structures & improvements 9,503,957 753,817 - 10,257,774 Equipment 2,147,939 361,862 58,665 2,451,136 $ 212,573,505 $ 14,791,425 $ 58,665 $ 227,306,265 The District received a land donation equal to an estimated fair market value of $10,000,000 during the fiscal year 2001/02. The donation came from the Peninsula Open Space Trust, the San Francisco Bay Area Program of the California Coastal Conservancy, and the Wildlife Conservation Board, in the amounts of $5 million, $3 million, and $2 million, respectively. The donation was recorded as an addition to the General Fixed Assets Account Group, but was not reported in the General Fund, as the District did not receive any spendable resources as a result of the donation. 7 r L_ ' L MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2002 NOTE E: LONG-TERM DEBT Changes in long-term debt for the year ended Match 31, 2002 is presented below. Promissory Notes: 1995 Hosking Property Aine Property Lazenby Property Corn Property McKannay-Seimers Property McKannay-Tate/A. Property 1993 Certificates of Participation Revenue Bonds: 1996 1999 1999, Second Issue Total Balance April 1, 2001 $ 11,200,000 500,000 108,197 54,141 770 11,863,108 15,645,000 29,938,005 30,949,288 29,195,932 90,083,225 $ 117,591,333 Additions and Accretion Retirements 250,000 340,000 590,000 515,173 830,957 756,159 2,102,289 $ 2,692,289 $ 100,000 10,550 5,470 770 116,790 480,000 765,000 440,000 1,205,000 $ 1,801,790 Balance March 31, 2002 $ 11,100,000 500,000 97,647 48,671 250,000 340,000 12,336,318 15,165,000 29,688,178 31,340,245 29,952,091 90,980,514 18,481,832 The following is a detail of the long-term debt of the District as of March 31, 2002: Promissory Notes ▪ 1995 Notes, principal balance of $11,100,000, comprised of $955,000 of Serial Notes, bearing interest at rates ranging from 6.15% to 7%, maturing annually from September 1, 2002 through September 1, 2009, and $10,145,000 of 7% term notes due on September 1, 2014. ▪ The five land contract promissory notes aggregate to a total debt of $1,236,318, bearing interest at fixed rates from 4.1% to 7%, and maturing at different intervals through January 10, 2012. The Hosking, Aine and Lazenby Properties are collateralized by land and the McKannay Properties are unsecured. 1993 Certificates of Participation ' 1993 Certificates of Participation, includes serial certificates with a principal balance of $4,910,000, bearing interest at rates ranging from 4.75% to 5.6%, maturing annually from September 1, 2002 through September 1, 2009. These certificates also include $4,345,000 of 5.70% tenn certificates due on September 1, 2014 and $5,910,000 of 5.75% term certificates due on September 1, 2002. 8 r MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2002 Revenue Bonds • On July 24, 1996, the Authority on behalf of the District issued the 1996 Revenue Bonds, which have a principal balance outstanding of $29,688,178. These bonds are comprised of $15,995,000 in current interest bonds, bearing interest at rates ranging from 4.6% to 5.75%, and maturing annually from September 1, 2002 through September 1, 2012. This issue also includes $4,900,000 of current interest term bonds, bearing interest at 5.9% due September 1, 2014 and $8,793,178 of capital appreciation bonds, bearing interest at rates ranging from 6.2% to 6.3%, maturing annually from September 1, 2015 through September 1, 2026. Accretion on the capital appreciation bonds for the year ended March 31, 2002 was $515,173. • On January 27, 1999, the Authority on behalf of the District issued the 1999 Revenue Bonds, first issue, which has a principal balance outstanding of $31,340,245. These bonds are comprised of $14,960,000 of current interest bonds, bearing interest at rates ranging from 3.75% to 4.625%, maturing annually from September 1, 2002 through September 1, 2014. This issue also includes $16,380,245 capital appreciation bonds, bearing interest at rates ranging from 5.2% to 5.4%, maturing annually from September 1, 2015 through September I, 2030. Accretion on the capital appreciation bonds for the year ended March 31, 2002 was $830,957. A portion of the proceeds was used to advance refund the 1992 Promissory Notes. On March 31, 2002, the 1992 Promissory Notes considered defeased have an outstanding balance of $6,230,000. On August 30, 1999, the Authority on behalf of the District issued the 1999 Revenue Bonds, second issue, which has a principal balance outstanding of $29,952,091. These bonds comprised of $10,935,000 current interest bonds, beginning interest at rates ranging from 4.25% to 5.2% maturing annually from August 1, 2002 through August 1, 2012. This issue also includes $6,185,000 of current interest term bonds, bearing interest at 5.25% due August 1, 2013 through August 1, 2017 and $12,832,091 capital appreciation bonds, bearing interest at rates ranging from 6.2% to 6.35%, maturing annually from August I, 2018 through August 1, 2031, Accretion on the capital appreciation bonds for the year ended March 31, 2002 was $756,159. A portion of the proceeds was used to repay the 1990 Promissory Notes. All debt is payable from limited ad valorem property taxes levied on all taxable property within the District. The District has not pledged its full faith and credit of taxing power for payment of the debt, nor is the debt collateralized by any District property, except for the Hosking, Aine and Lazenby Properties described above, Maturities of long-term debt are as follows: Year ending Total Debt March 31, Principal Interest Future Accretion Service 2003 $ 785,972 $ 4,277,083 $ 2,226,115 $ 7,289,170 2004 435,951 4,121,240 2,357,275 6,914,466 2005 608,235 3,982,399 2,496,207 7,086,841 2006 792,359 3,825,598 2,643,377 7,261,334 2007 1,002,854 3,649,642 2,799,264 7,451,760 2008-2012 10,970,390 14,735,359 16,678,316 42,384,065 2013-2017 22,482,560 5,335,692 21,407,440 49,225,692 2018-2022 24,361,712 615,926 19,568,288 44,545,926 2023-2027 25,495,094 14,024,906 39,520,000 2028-2032 31,546,705 - 5,648,295 37,195,000 $ 118,481,832 $ 40,542,939 $ 89,849,483 $ 248,874,254 9 L. MIDPENINSULA REGIONAL OPEN SPACE•DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2002 NOTE F: RENTAL INCOME The District leases (rents) certain land and structures to others under operating leases with terms generally on a month -to -month basis.. Rental income of $724,034 was received during the year ended March 31, 2002. NOTE G: EMPLOYEES' RETIREMENT PLAN Plan Description -- The District's defined benefits pension plan, Public Employee Retirement System (PERS) provides retirement and disability benefits, annual cost -of -living adjustments, and death benefits to plan members and beneficiaries. The PERS is part of the Miscellaneous portion of the California Public Employee Retirement System (CalPERS), an agent multiple employer plan administered by CaIPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements are established by State statutes within the Public Employees' Retirement Law. The District selects optional benefit provisions from the benefit menu by contracts with CaIPE'RS and adopts those benefits through District resolution. CalPERS issues a separate comprehensive annual financial report. Copies of the CalPERS' annual financial report may be obtained from the CalPERS Executive Office — 400 P Street — Sacramento, CA 95814. Funding Policy -- Active plan members in the PERS are required to contribute 7% of their annual covered salary, which is currently paid by the District on behalf of its employees. The District is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for the fiscal year ended March 31, 2002 was 0.0%. The contribution requirements of the plan are established by State statute and the employer contribution rate is established and may be amended by CalPERS. Annual Pension Cost — For fiscal year ended March 31, 2002, the District's annual pension cost was $269,187 and the District actually contributed $269,187. The required contribution for fiscal year ended March 31, 2002 was determined as part of the June 30, 2000 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 8.25% investment rate of return (net of administrative expenses); (b) projected -salary increases that vary by duration of service; and (c) 2% cost -of - living adjustment. Both (a) and (b) include an inflation component of 3.5%. The actuarial value of the District's assets was determined using a technique that smoothes the effect of short-term volatility in the market value of investments over a three-year period. The District's unfunded actuarial excess assets are being amortized as a level of percentage of projected payroll on a closed basis. The remaining amortization period at June 30, 2000 was 14 years. Three -Year Trend Information for the Fund Fiscal Year ending March 31, Annual Percentage Net Pension Of APC Pension Cost (APC) Contributed Obligation 2000 $ 335,404 100% 2001 261,223 100% 2002 269,187 100% 10 L. L MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2002 Regt (A) Entry Age (B) Actuarial Actuarial Actuarial Valuation Accrued Asset Date * Liability Value 6/30/98 6/30/99 6/30/00 ed Supplementary Information (C) $ 5,578,369 $ 7,009,702 6,356,332 8,269,579 7,422,454 9,493,705 Unfunded Actuarial Accrued Liability (Excess Assets) [(A) — (B)] $ - (1,431,333) (1,913,247) (2,071,251) (D) Funded (E) Ratio Covered [(B) / (A)] Payroll 125.7% $ 2,508,891 130.1% 2,986,627 127.9% 3,271,912 (F) Overfunded Actuarial Liability as a Percentage of Covered Payroll [(C) / (E)1 (57.050%) (64.060%) (63.304%) * There were no changes in actuarial assumptions since the prior year's actuarial valuation. NOTE II: EXPENDITURES IN EXCESS OF APPROPRIATIONS The site supplies and services expenditures exceeded the budget by $6,930 due to several unanticipated projects which include re -roofing the "Ranch House" employee residence at Skyline Ridge Open Space Preserve and re- roofing the Smith residence, which is tenant occupied. Capital outlay on equipment expenditures exceeded the budget by $5,612 due mostly to the purchase of a 42" HP Designer Jet printer in anticipation of saving printing costs in the long run. NOTE I: RESERVATIONS AND DESIGNATIONS OF FUND EQUITY Reserved fund balance represents that portion of fund balance, which is not available for appropriation for expenditure or is legally segregated for a specific future use. Portions of the unreserved fund balance have been designated for future acquisition of open space and for future capital purchases to be decided at a future date. Such plans or intentions are subject to change and may or may not result in expenditures. NOTE J: COMMITMENTS During May 2000, the District and the County of Santa Clara (the County) entered into an agreement whereby the District would operate and manage the Rancho San Antonio County Park (the Park). The park encompasses 165 - acres owned by the County and serves as a gateway facility to the District's Rancho San Antonio Open Space Preserve (the Preserve). The Preserve includes the Deer Hollow Farm, a homestead and educational center operated by the City of Mountain View. Under the agreement, the District agreed to manage the Park for a term of ten years and to ensure that Deer Hollow Farm receives funding for operations of no less than $50,000 per year. In return, the County contributed $1,500,000 to the District for the purpose of acquiring open space. NOTE K: RISK MANAGEMENT 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. The District manages and finances these risks by purchasing commercial insurance. There have been no significant reductions in insurance coverage from the previous year, nor have settled claims exceeded the District's commercial insurance coverage in any of the past three years. NOTE L: CONTINGENCIES The District has entered into numerous agreements, has properties that will require environmental remediation, and is named in certain claims and litigation. In the opinion of management, after consultation with counsel, the liability, if any, resulting therefrom will not have a material effect on the District's financial position. 11 L OTHER REPORT F ' ' Macias,Gini & Company MP Certified Public Accountants and Managem,eni Consultants Board of Directors Midpeninsula Regional Open Space District Partners Mt. Diablo Plaza' Kenneth A. Macias, Managing Partner 2175 N. California Boulevard Ernest J. Gird Suite 6210 Kevin J. O'Connell Walnut Creek, CA 94596-3565 Richard A. Green 925.274.0190 Jan A. Rosati 925.274.3819 FAX James V. Godsey www.macaasgini.com. INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF GENERAL-PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the general-purpose financial statements of Midpeninsuia Regional Open Space District (the District) as of and for the year ended March 31, 2002, and have issued our report thereon dated May 24, 2002. 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. Compliance As part of obtaining reasonable assurance about whether the District's general-purpose financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of general-purpose financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control over Financial Reporting In planning and performing our audit, we considered the District's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the general-purpose financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the general-purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of management and the District's Board of Directors and is not intended to be and should not be used by anyone other than these specified parties. MACIAS, GINI Sc COMPANY LLP Certified Public Accountants Walnut Creek, California May 24, 2002 Offices located throughout California 12 L: