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HomeMy Public PortalAboutAudit Report - District- FY00MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Independent Auditor's Reports and General -Purpose Financial Statements For the Year Ended March 31, 2000 MIOPENINSULA REGIONAL OPEN SPACE DISTRICT FOR PHL YEAR ENDED MARCH 31, 2000 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 up _erturdaa mucn•_ ?._counron*: Board of Directors Midpeninsula Regional Open Space District Partners Kenneth A. Macias Ernest j. Gini Kevin J. O'Connell INDEPENDENT AUDITOR'S REPORT Mt. Diablo Plaza 2175 N. California Boulevard Suite 620 Walnut Creek, CA 94596-3565 925.274.0190 925.274.3819 LAX W,vww. maciasgini.com We have audited the accompanying combined balance sheet of Midpeninsula Regional Open Space District (the District), as of March 31, 2000, 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 generally accepted auditing standards 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 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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, 2000, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated June 1, 2000 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 Certified Public Accountants Walnut Creek, California June 1, 2000 OFFIC LOCATIONS Sacramento • Los Angeles • San Francisco Bay Area 1 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT COMBINED BALANCE SHEET March 31, 2000 Account Groups General General Total General Fixed Long -Term (Memorandum Fund Assets Debt Only) ASSETS Cash and investments $ 35,187,581 $ $ $ 35,187,581 Restricted cash and investments 4,060,425 4,060,425 Receivables: Taxes 3,433,788 3,433,788 Interest 306,891 306,891 Notes 282,513 282,513 Prepaid items 22,865 - 22,865 Land 187,239,981 187,239,981 Structures and improvements 9,291,105 9,291,105 Equipment 1,937,135 1,937,135 Amount available in General Fund 4,060,425 4,060,425 Amount to be provided for retirement of general long-term debt 113,164,972 113,164,972 TOTAL ASSETS $ 43,294,063 $ 198,468,221 $ 117,225,397 $ 358,987,681 LIABILITIES AND FUND EQUITY Liabilities: Accounts payable $ 263,873 $ $ - $ 263,873 Accrued liabilities 231,255 231,255 Deposits 30,500 30,500 Deferred revenue 650,305 650,305 Promissory notes 11,982,558 11,982,558 Certificates of participation 16,105,000 16,105,000 Revenue bonds - 89,137,839 89,137,839 Total liabilities 1,175,933 117,225,397 118,401,330 Fund Equity: Investment in general fixed assets - 198,468,221 198,468,221 Fund balances: Reserved for debt service 4,060,425 4,060,425 Reserved for prepaid items 22,865 22,865 Unreserved, undesignated 38,034,840 38,034,840 Total find equity 42,118,130 198,468,221 240,586,351 TOTAL LIABILITIES AND FUND EQUITY $ 43,294,063 $ 198,468,221 $ 117,225,397 $ 358,987,681 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, 2000 Revenue: General property tax Other property taxes Investment income Grants and donations Rental income and other Total revenue Expenditures: Salaries and benefits Professional services Vehicle expenditures Rent 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 Reserve fund used toward refunding Total expenditures EXCESS OF REVENUE UNDER EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds from refunding bonds Payment to refunded bond escrow agent Total other financing sources (uses) EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR Budget Actual Variance $ 13,183,000 302,000 1,257,000 1,358,000 614,000 $ 13,751,246 428,698 1,870,889 1,612,731 844,436 $ 568,246 126,698 613,889 254,731 230,436 16,714,000 18,508,000 1,794,000 4,082,275 3,952,585 129,690 817,300 489,624 327,676 158,600 184,391 (25,791) 165,150 160,981 4,169 129,425 126,174 3,251 256,350 247,363 8,987 142,900 129,499 13,401 253,225 260,393 (7,168) 20,175,500 20,584,997 (409,497) 811,450 565,010 246,440 218,050 217,448 602 1,873,214 1,148,214 725,000 3,673,786 5,353,153 (1,679,367) 1,234,684 (1,234,684) 32,757,225 34,654,516 (1,897,291) (16,043,225) (16,146,516) (103,291) 28,366,961 28,366,961 (12,083,145) (12,083,145) 16,283,816 16,283,816 $ (16,043,225) 137,300 $ 16,180,525 41,980,830 $ 42,118,130 See accompanying notes to general-purpose financial statements. 3 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2000 NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Midpeninsula Regional Open Space District (the District) was formed 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 portion of San Mateo County was 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 reportsits 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 generally accepted accounting principles. 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 Authority 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. Assets donated to the District are stated at their estimated fair market value as of the date received. Depreciation is not recorded for fixed assets. 4 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2000 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 an additional amount for general obligation debt has been approved by voters. 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 Lien/Levy dates Due dates Delinquent as of March 1 July 1 50% on November 1 50% on February 1 December 10 (for November) April 10 (for February) March 1 March 1 July 1 August 31 Taxes are secured by liens on the property being taxed. The term "unsecured" refers to taxes on personal property other than land and buildings. Supplemental property taxes are levied based on changes in assessed values between the date of real property sales and construction and the next normal assessment date. Property tax revenue is recognized in accordance with GASB Interpretation 5, Property Tax Revenue Recognition in Governmental Funds, which states that such revenue be recorded when it becomes measurable and available. 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 generally accepted accounting principles. 5 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2000 NOTE B: CASH AND INVESTMENTS The District's cash and investments consist of the following at March 31 2000: Unrestricted $ 35,187,581 Restricted 4,060,425 Total cash and investments $ 39,248,006 Deposits At March 31, 2000, the carrying amount of the District's deposits was $5,262,916 and the bank balance was $5,298,629. The difference between the bank balance and the carrying amount represents outstanding checks and deposits in transit. Of the bank balance, $200,000 was covered by federal depository insurance and $5,098,629 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, 2000. 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, 2000. 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 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2000 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, 2000. Category 1 includes investments that are insured or registered, or with securities held by the District or its agent in the District's name. Category 2 includes uninsured and unregistered investments, with 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 department or agent, but not in the District's name. There were no Category 3 investments at March 31, 2000. The District's investments were classified as follows at March 31, 2000: Fair Value Category 1 Investments: Commercial paper Category 2 Investments: U.S. Government securities Investments not subject to categorization: County of Santa Clara Treasurer's investment pool Mutual funds $ 9,854,125 3,416,083 20,526,626 188,256 Total $ 33,985,090 NOTE C: NOTES 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 1" 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, 2000 is $282,513. NOTED: FIXED ASSETS Changes in the General Fixed Assets Account Group for the year ended March 31, 2000, were as follows: Balances Balances April 1, 1999 Additions Retirements March 31, 2000 Land $ 166,654,984 $ 20,584,997 $ - $ 187,239,981 Structures & improvements 8,726,095 565,010 - 9,291,105 Equipment 1,763,180 217.448 (43,493) 1,937,135 $ 177,144,259 $ 21,367,455 $ (43,493) $ 198,468,221 Included in the land additions for the year ended March 31, 2000 is the purchase of the "lower" portion of the Bear Creek Redwood Open Space Preserve. On March 10, 1999, the District entered into an Agreement for Option and Purchase of Real Property and advanced $10,500,000 to the seller in connection with that agreement. On July 15, 1999, the District exercised its option to purchase the "lower" property and provided the remaining $4,500,000 necessary to purchase the property. 7 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2000 NOTE E: LONG-TERM DEBT Changes in long-term debt for the year ended March 31, 2000 is presented below. Balance Additions Balance April 1, 1999 and Accretion Retirements March 31, 2000 Promissory Notes: 1990 $ 12,615,000 $ - $ 12,615,000 $ 1995 11,400,000 100,000 11,300,000 Hosking Property 500,000 - 500,000 Aine Property 127,274 - 9,216 118,058 Lazenby Property 64,169 - 4,868 59,301 Com Property 9,327 4,128 5,199 24,715,770 12,733,212 11,982,558 1993 Certificates of Participation 16,465,000 360,000 16,105,000 Revenue Bonds: 1996 29,230,201 1,557,813 670,000 30,118,014 1999 29,663,017 872,473 30,535,490 1999, Second Issue 28,484,335 28,484,335 58,893,218 30,914,621 670,000 89,137,839 Total $ 100,073,988 $ 30,914,621 $13,763,212 $ 117,225,397 The following is a detail of the long-term debt of the District as of March 31, 2000: Promissory Notes • 1995 Notes, principal balance of $11,300,000, comprised of $1,155,000 of Serial Notes, bearing interest at rates ranging from 6.15% to 7%, maturing annually from September 1, 2000 through September 1, 2009, and $10,145,000 of 7% term notes due on September 1, 2014. • Four land contract promissory notes, aggregating debt of $682,558 bearing interest at fixed rates from 6% to 7%, maturing at different intervals through August 31, 2008, and are collateralized by land. 1993 Certificates of Participation • 1993 Certificates of Participation, includes serial certificates with a principal balance of $5,850,000, bearing interest at rates ranging from 4.75% to 5.6%, maturing annually from September 1, 2000 through September 1, 2009. These certificates also include $4,345,000 of 5.70% term certificates due on September 1, 2014 and $5,910,000 of 5.75% term certificates due on September 1, 2000. Revenue Bonds • 1996 Bonds, principal balance of $30,118,014, comprised of $17,425,000 in current interest bonds, bearing interest at rates ranging from 4.6% to 5.75% maturing annually from September 1, 2000 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 $7,793,014 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. Aggregated accretion on the capital appreciation bonds as of March 31, 2000 is $1,557,813, 8 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2000 • 1999 Bonds of $30,535,490, comprised of $15,775,000 of current interest bonds, bearing interest at rates ranging from 3.75 to 4.625%, maturing annually from September 1, 2000 through September 1, 2014. This issue also includes $14,760,490 capital appreciation bonds, bearing interest at rates ranging from 5.2% to 5.4%, maturing annually from September 1, 2015 through September 1, 2030. A portion of the proceeds were used to advance refund the 1992 Promissory Notes. On March 31, 2000, the 1992 Promissory Notes considered defeased have an outstanding balance of $6,990,000. Aggregated accretion on the capital appreciation bonds as of March 31, 2000 is $872,473. • On August 30, 1999, the Authority on behalf of the District issued $28,366,961 of 1999 Revenue Bonds, second issue. Of these proceeds, $12,083,145 was used to repay the 1990 Promissory Notes. 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 $11,364,335 capital appreciation bonds, bearing interest at rates ranging from 6.2% to 6.35%, maturing annually from August 1, 2018 through August 1, 2031. Accretion on the capital appreciation bonds for the year ended March 31, 2000 was $117,374. 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 four notes totaling $682,558 described above. Maturities of long-term debt are as follows: Year ending March 31, Principal Interest Total 2001 $ 1,619,450 $ 4,434,017 $ 6,053,467 2002 1,801,789 4,354,013 6,155,802 2003 3,012,088 4,252,893 7,264,981 2004 2,793,226 4,097,050 6,890,276 2005 3,104,441 3,958,209 7,062,650 Thereafter through 2030 104,894,403 124,507,707 229,402,110 $ 117,225,397 $ 145,603,889 $ 262,829,286 NOTE F: RENTAL INCOME The District leases certain land and structures to others under operating leases with terms generally on a month -to - month basis. Rental income of $661,610 was received during the year ended March 31, 2000. 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 CalPERS, 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 CalPERS 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. 9 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2000 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 CaIPERS Board of Administration. The required employer contribution rate for fiscal year ended March 31, 2000 was 3.1%. The contribution requirements of the plan are established by State statute and the employer contribution rate is established and may be amended by CaIPERS. Annual Pension Cost - For fiscal year ended March 31, 2000, the District's annual pension cost was $335,404 and the District actually contributed $335,404. The required contribution for fiscal year ended March 31, 2000 was determined as part of the June 30, 1998 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, 1998 was 16 years. Three -Year Trend Information for the Fund Fiscal Year ending March 31, 1998 1999 2000 Actuarial Valuation Date * 6/30/96 6/30/97 6/30/98 Annual Pension Cost (APC) $ 201,520 338,599 335,404 Percentage Of APC Contributed Required Supplementary Information (A) Entry Age (B) Actuarial Actuarial Accrued Asset Liability Value $ 4,715,902 $ 4,705,140 5,078,750 5,676,800 5,578,369 7,009,702 (C) Unfunded Actuarial Accrued Liability (Excess Assets) [(A) — B)] $ 10,762 (598,050) (1,431,333) (D) Funded Ratio [(B) / (A)] 99.8% 111.8% 125.7% 100% 100% 100% (E) Covered Payroll $ 2,361,398 2,413,032 2,508,891 * There were no changes in actuarial assumptions since the prior year's actuarial valuation. NOTE H: EXPENDITURES IN EXCESS OF APPROPRIATIONS Net Pension Obligation (F) Unfunded Actuarial Liability as a Percentage of Covered Payroll [(C) I (E)] 0.456% (24.784%) (57.050%) Total expenditures exceeded appropriations by $1,897,291 for the year ended March 31, 2000. The vehicle expenditures exceeded the budget by $25,791 due to higher than expected fuel costs; other expenditures exceeded the budget by $7,168 due mostly to rental payments exceeding projections; land acquisitions exceeded the budget by $409,497 due to land donations that were not budgeted; and debt service exceeded the budget by a net $2,189,051 due to the costs of refunding the 1990 Promissory Notes and costs of issuance related to the 1999 Revenue Bonds, Second Issue. 10 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 2000 NOTE I: 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 J: CONTINGENCIES The District 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. II OTHER REPORT Macias,Gini& Company ,-..lulled PUbdIC Board of Directors Midpeninsula Regional Open Space District Partners Kenneth A. Macias Ernest J. Gini Kevin J. O'Connell Mt. Diablo Plaza 2175 N. California Boulevard Suite 620 Walnut Creek, CA 94596-3565 92_5.274.0190 925.274.3819 FAX www.maciasguv.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 W1111. GOVERNMENT AUDITING STANDARDS We have audited the general-purpose financial statements of Midpeninsula Regional Open Space District (the District) as of and for the year ended March 31, 2000, and have issued our report thereon dated June 1, 2000. We conducted our audit in accordance with generally accepted auditing standards 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. IVIAClAS, GINI & COMPANY LLP +J l _-4 CrTavt_ Certified Public Accountants Walnut Creek, California June 1, 2000 OFFICE LOCATIONS Sacramento • Los Angeles • San Francisco Bay Area 12