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HomeMy Public PortalAboutAudit Report - District- FY95MIDPENINSULA REGIONAL OPEN SPACE DISTRICT AUDIT REPORT MARCH 31, 1995 Xy Vargas and Company certified public accountants C C' MIDPENINSULA REGIONAL OPEN SPACE DISTRICT TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT COMBINED BALANCE SHEET PAGE 1 2 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND 3 NOTES TO FINANCIAL STATEMENTS 4-10 Vargas and Company certified public accountants INDEPENDENT AUDITORS' REPORT To the Board of Directors of Midpeninsula Regional Open Space District We have audited the accompanying combined balance sheet of Midpeninsula Regional Open Space District as of March 31, 1995, and the related statement of revenues, expenditures and changes in fund balance - budget and actual - general fund for the year then ended. These financial statements are the responsibility of District management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Midpeninsula Regional Open Space District as of March 31, 1995, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. Yak?iv cud etmtbamy, Vargas and Company June 23, 1995 1 601 North First Street / San Jose, California 95112 / (408) 298-1700 / FAX (408) 293-9598 �l MIDPENINSUL A RE GIONAL OPEN SPACE DISTRICT COMBINED B ALANCE SHEET March 31.1995 Account Groups Ge neral General Total G en eral Age ncy Fixed L ong -Term (Memorandum ASSETS Fund Fund Ash Debt Onl y) Cash, including interest -beari ng deposits and c ash equivale nts $ 6,874,337 $ $ $ $ 6,874,337 Restricted cash and cash equivalents 4,886,199 4,886,199 Restricted investments 1,037,698 1,037,698 Property tax and other receiv ables 4,653,175 4,653,175 Prepaid expenses 17,577 17,577 Land 145,350,400 145,350,400 Structu res and impro vements 6,058,691 6,058,691 Equ ipmen t 1,312,573 1,312,573 A mount to be provided for retirement of general long-term debt 64.811 .766 64.811.766 TO TAL ASSETS $ 16.431.288 $ 1.037 .698 $ 152.721.664 $ 64 .811.766 $ 235.002 416 LIABILITIES AND FUND EQUITY LIABILI 1ES: Accoun ts payable $ 221,962 $ Accrued lia bilities 218,133 D eposits 25,490 Deferred reven ue 1,356,672 D eferred compen sation Long-term debt 1,037,698 $ $ 221,962* 218,133 25,490 1,356,672 1,037,698 64.811 .766 64.811 .766 Total liabilities 1. 822.257 1.037 .698 64.811 .766 67 671 .721 FUN D EQUITY: Inv estment in general fixed assets 152,721,664 152,721,664 Fund balan ce 14.609.031 14.609.031. Total fun d equity 14.609. 031 152.721 .664 167 .330.695 TOTAL LIA BILITIES AND FUND EQUITY $ 16.431.288 $ 1.037. 698 $ 152.721.664 $ 64.811.766 $ 235 .002.416 See n otes to fin ancial statemen ts. 2 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND FOR THE YEAR ENDED MARCH 31, 1995 REVENUES: General property tax State grants Aid from government agencies Interest Rental income and other Total EXPENDITURES: Salaries and benefits Professional services Vehicle expenses Rent Site supplies and services Utilities and communications Other Acquisitions: Land Structures and improvements Equipment Debt service: Principal retirement Interest Total EXCESS OF EXPENDITURES OVER REVENUES OTHER FINANCING SOURCES (USES): Proceeds from issuance of long-term debt, net Proceeds from sale of land Total other financing sources (uses) REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES FUND BALANCE, April 1, 1994 FUND BALANCE, March 31, 1995 Budget Actual $ 9,960,000 81,000 180,000 390,000 473,000 11,084,000 2,952,650 407,700 145,700 10,400 154,550 162,650 491,100 7,973,500 706,000 110,200 2,463,240 3,384,760 18,962,450 (7,878,450) 4,875,000 2 500,000 7,375,000 (503,450) 13,140,473 $12 637 023 See notes to financial statements. $10,198,973 1,351,520 249,574 618,438 651,490 13,069,995 2,868,447 310,985 141,352 11,559 135,009 158,882 432,896 8,453,728 129,244 116,433 873,573 3,195,553 16,827,661 (3,757,666) 5,216,224 10,000 5,226,224 1,468,558 13,140,473 $ 14 609 031 Variance Favorable (Unfavorable) $ 238,973 1,270,520 69,574 228,438 178,490 1,985,995 84,203 96,715 4,348 (1,159) 19,541 3,768 58,204 (480,228) 576,756 (6,233) 1,589,667 189,207 2,134,789 4,120,784 341,224 (2,490,000) (2,148,776) 1,972,008 $ 1.972.008 3 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 NOTE 1. ORGANIZATION AND 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. Basis of Accounting - The records of the District are maintained on the modified accrual basis of accounting. Under this method, revenues 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. Agency Fund - The Agency Fund accounts for the assets of the District's deferred compensation plan which are held by the District as an agent for its employees. 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. Long -Term Debt - The principal portion of long-term debt is recorded as a liability in the General Long -Term Debt Account Group. Property Tax Levy, Collection and Maximum Rates - The State of California (State) Constitution Article XIII A 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 XIII A 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 other districts. 4 V MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 The District receives property tax revenues from Santa Clara and San Mateo Counties. The Counties assess properties, bill for and collect 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 Property taxes are distributed to the District by the Counties following their collection. Unsecured taxes are levied on personal property other than real estate, land and buildings. These taxes are secured by liens on the property being taxed. Compensated Absences - Vacation pay is recorded as an expenditure in the year earned. Sick leave is recorded as an expenditure when paid. Any unused sick leave is forfeited by the employee upon termination of service, death or retirement. Total (Memorandum Only) - The column in the financial statements captioned "Total (Memorandum Only)" is presented for purposes of additional analysis and is not a required part of the basic financial statements. This information is not comparable to a consolidation and does not present financial position in conformity with generally accepted accounting principles. NOTE 2. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following at March 31, 1995: Deposits: Cash on hand and in banks $ 21,994 Short-term U.S. Government securities 4,886,199 Pooled Funds - Cash in Santa Clara County Treasury 6,851,543 Cash balances held in banks are insured up to $100,000 by the Federal Depository Insurance Corporation. All U.S. government securities are insured or collateralized with securities held by the District or its agent in the District's name. The type of investments made by the District are restricted by state law. The Santa Clara County investment pool is subject to legal restrictions, and additional restrictions prescribed by the County. 5 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 NOTE 3. DEFERRED COMPENSATION INVESTMENTS Investments of $1,037,698 with a fair market value of $1,037,698 at March 31, 1995, included in the Agency Fund, are restricted for the District's deferred compensation plan. The investments of the plan are held by the District's agent in the District's name. NOTE 4. FIXED ASSETS Changes in the General Fixed Assets Account Group for the year ended March 31, 1995 were as follows: Land Structures and improvements Equipment Balances April I, 1994 $136,896,672 5,929,447 1,200,019 Total $J44 026 138 Balances March 31, Additions Retirements 1995 $8,453,728 $ $145,350,400 129,244 6,058,691 116.434 3 880 1,312,573 $ 8 699 406 $ 3 880 $152 721 664 All fixed assets additions during fiscal 1995 were acquired through general fund expenditures. In conjunction with the purchase of a parcel of land during 1986, the District obtained an option exercisable through August 15, 1995 to acquire an additional 889 acres for $6.1 million plus $1,000 per day for each day after August 15, 1989. The purchase price as of March 31, 1995 was $8,154,000. As of March 31, ,1995, approximately $1,160,010 has been advanced to the noteholder on the property on behalf of its owner. Such amount is included in other receivables and deferred revenue in the accompanying combined balance sheet. NOTE 5. LONG-TERM DEBT Long-term debt issued to acquire land, structures and improvements, and equipment is recorded in the General Long -Term Debt Account Group. Changes in the account group for the year ended March 31, 1995 were as follows: Long-term debt, April 1, 1994 $ 60,086,533 Issuance of note payable (interest at 5.75-7%, due in 2014) 11,500,000 Principal reductions (873,574) Defeased notes (5,901,193) Long -teen debt, March 31, 1995 $ 64 811 766 6 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 Long-term debt of $53,011,766 bears interest at fixed rates from 5.0% to 7.0%, has a weighted average interest rate of 6.4% at March 31, 1995 and is partially collateralized by land with a cost of approximately $3,515,050. Long-term debt of $11,800,000, bears interest at a floating rate (4.25% at March 31, 1995) which is based upon prevailing market conditions and is redetermined every seven days. Long-term debt totaling $62,875,000 represents limited obligations payable from, but not collateralized by, property tax revenue of the District. Maturities of long-term debt are as follows: Principal Interest Total Year Ending March 31: 1996 $ 1,483,008 $ 3,976,771 $ 5,459,779 1997 2,434,962 3,756,261 6,191,223 1998 2,600,925 3,617,445 6,218,370 1999 2,266,951 3,475,525 5,742,476 Thereafter through 2021 56,025,920 34,162,887 90,188,807 Total $ 64 811 766 $ 48 988 889 $ 113 800 655 During fiscal 1995, the District issued $11,500,000 of promissory notes bearing interest rates from 5.75 to 7.0%. A portion of the net proceeds of the notes were used to advance refund $5,901,194 of outstanding notes. The advance refunding met the requirements of a legal debt defeasance. Including debt service on the $5.2 million net proceeds, the District reduced its aggregate debt service payments by approximately $4.7 million over the period from March 1995 through March 1997. The net result was a long-term economic loss (difference between the present values of the old and new debt service payments) of $320,500. At March 31, 1995, all of the 1987 notes are considered defeased. NOTE 6. EMPLOYEES' RETIREMENT PLAN All regular employees are eligible to participate in the Public Employees' Retirement Fund (the Fund) of the State of California's Public Employees Retirement System (PERS). The Fund, an agent multiple -employer defined benefit retirement plan that acts as a common investment and administrative agent for various local and state governmental agencies within California, is administered by a Board of Administration composed of individuals who are (1) elected by PERS members, (2) appointed by elected State of California officials, and (3) specific elected State of California officials. The Fund provides retirement, disability, and death benefits. Such benefits are based on each employee's years of service, age and final compensation. 7 ONAL 0 SPACE STRICT S \ Employees vest after five years of service and are eligible to receive retirement benefits at age 50. These benefits provisions and all other requirements are established by State statue and District resolution. For the year ended March 31, 1995, the District made contributions to the Fund of $266,321. The District's payroll for employees covered by the Fund for the year ended March 31, 1995 was $2,148,809 from a total payroll of $2,294,860. District participation in the Fund is comprised of 52 active employees of a total of 56 employees. The District's required employer contribution rate is 5.9%. The employees' required contribution rate is 7%, which is currently funded by the District. Funding Status and Progress - The "pension benefit obligation" is determined for each participating employer by the Fund's actuary and is a standardized disclosure measure that results from applying actuarial assumptions to estimate the present value of pension benefits, adjusted for the effects of projected salary increases and step rate benefits, to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the District's portion of the Fund to which contributions are made on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used. The pension benefit obligation was computed as part of an actuarial valuation performed as of June 30,1993. The significant actuarial assumptions used in the 1993 valuation to compute the pension benefit obligation were an assumed rate of return on investment assets of 8.75%, annual payroll increases of 4.5% attributable to inflation and 2.5% attributable to merit or seniority, and no post -retirement benefit increases. Information applicable to the District's employee group at June 30, 1993 (the latest date for which the information is available) follows: Net assets available for benefits, at cost (total market value, $3,409,729) $ 2,867,728 Pension Benefit Obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits 618,626 Current employees - Accumulated employee contributions and allocated investment earnings 1,016,919 Employer -financed, vested 648,347 Employer -financed, nonvested 61,012 Total pension benefit obligation 2,344,904 Unfunded pension benefit obligation 522_824 Changes in the Pension Benefit obligation from last year due to: Changes in Benefit Provisions -0- Changes in Actuarial Assumptions (40,376) 8 C. MIDP IN i A REGIO •O OPEN SP/AE DISTINCT NO ES O FINANC ST TEM) $ TS Actuarially Determined Contributions Required and Contributions Made - The funding policy of the Fund provides for actuarially determined periodic contributions by the District at rates such that sufficient assets will be available to pay Fund benefits when due. The District's contribution calculation for the year ended March 31, 1995 was made in accordance with the actuarially determined requirements computed as of June 30, 1993. If the District had not had a surplus in the PERS asset account or AB702 credits, the total pension funded contribution for fiscal 1995 would have consisted of $269,402 normal cost (12.54% of current covered payroll). The contribution rate for normal cost is determined using the credited projected benefits actuarial funding method. The Fund uses the level percentage of payroll method to amortize the liability over an eight -year period. Significant actuarial assumptions used in the 1993 valuation to compute the actuarially determined contribution requirements are the same as those used to compute the pension benefit obligation as described above, Historical Trend Information - Trend information gives an indication of the progress made in accumulating sufficient assets to pay for benefits when due. System wide ten- year trend information may be found in the California Public Employees' Retirement System annual reports. Trend information for the District for each of the five years in the period ended June 30, 1993 (the period for which information is available) is as follows (dollars in thousands): 1993 1992 1991 1990 1989 Net assets available for benefits $ 2,868 $2,459 $2,100 $1,771 $1,612 Pension benefit obligation 2345 2 124 l 831 1 571 1 325 Excess of net assets over the pension benefit obligation Percentage funded Annual covered payroll $ 523 $ 335 $ 269 $ 200 $ 287 122% 116% 115% 113% 122% $ 2,013 $1,876 $1,718 $1,444 $1,416 Excess of net assets over the pension obligation as a percentage of covered payroll 26% 17.9% 15.7% 13.9% 20.3% Employer contributions as a percentage of covered payroll 12.4% 10.2% 5.4% 11.9% 10.9% 9 C C MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 NOTE 7. DEFERRED COMPENSATION PLAN During 1988, the District established a deferred compensation plan for its employees in accordance with California Government Code Section 53212 and Internal Revenue Code Section 457. The plan, available to all District employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the District (without being restricted to the provisions of benefits under the Plan), subject only to the claims of the District's general creditors. Participants' rights under the plan are equal to those of general creditors of the District in an amount equal to the fair market value of the deferred account for each participant. Changes in the assets (restricted investments) of the deferred compensation plan for the year ended March 31, 1995 are as follows: Balance, April 1, 1994 $ 837,893 Additions 204,557 Payments (4,752) Balance, March 31, 1995 $ L037 698 NOTE 8. LEASE REVENUES The District leases certain land and structures to others under operating leases with terms generally on a month -to -month basis. I rase revenue received was approximately $445,743 during the year ended March 31, 1995. NOTE 9. LITIGATION 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. 10 C K. C: C: C C