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HomeMy Public PortalAboutAudit Report - District- FY98MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Financial Statements and Report of Independent Certified Public Accountants March 31, 1998 150 Almaden Boulevard P.O. Box 6779 San Jose, CA 95150-6779 408 275-9000 FAX 408 275-0582 Report of Independent Certified Public Accountants Grant Thornton 1011 . GRAN -MORN -MN LLP Accountants and Management Consultants The U.S. Member Firm of Grant Thornton International The Board of Directors Midpeninsula Regional Open Space District We have audited the accompanying combined balance sheet of the Midpeninsula Regional Open Space District (the "District") as of March 31, 1998, and the related statement of revenues, expenditures and changes in fund balance, budget and actual, of the General Fund for the year then ended. These financial statements are the responsibility of the District's 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 the District at March 31, 1998, and the results of operations and changes in fund balance of the General Fund for the year then ended in conformity with generally accepted accounting principles. 4474V\ DID San Jose, California May 22, 1998 Midpeninsula Regional Open Space District COMBINED BALANCE SHEET March 31, 1998 Account Groups ASSETS General General Total General Agency Fixed Long -Term (Memorandum Fund Fund Assets Debt Only) Cash, Including interest -bearing deposits and cash equivalents $ 13,122,725 $ $ $ $ 13,122,725 Restricted cash and cash equivalents 1,788,190 - - - 1,788,190 Unrestricted investments 443,109 - - 443,109 Restricted investments 3,586,156 2,367,236 - - 5,953,392 Property tax and other receivables 3,404,647 - 3,404,647 Prepaid expenses 23,321 - 23,321 Land - 162,417,029 162,417,029 Structures and improvements 8,104,227 - 8,104,227 Equipment - 1,682,504 1,682,504 Amount available in General Fund - 5,817,455 5,817,455 Amount to be provided for retirement of general long-term debt - - - 73,940,571 73,940,571 TOTAL ASSETS $ 22,368,148 $ 2,367,236 $ 172,203,760 $ 79,758,026 $ 276,697,170 LIABILITIES AND FUND EQUITY Liabilities Accounts payable $ 141,210 $ - $ - $ - $ 141,210 Accrued liabilities 183,319 - 183,319 Deposits 29,903 - - 29,903 Deferred revenue 289,192 - 289,192 Deferred compensation 2,367,236 2,367,236 Long-term debt - - 79,758,026 79,758,026 Total liabilities 643,624 2,367,236 79,758,026 82,768,886 Fund equity Investment in general fixed assets Fund balance 21,724,524 172,203,760 172,203,760 21,724,524 Total fund equity 21,724,524 - 172,203,760 193,928,284 TOTAL LIABILITIES AND FUND EQUITY $ 22,368,148 $ 2,367,236 $ 172,203,760 $ 79,758,026 $ 276,697,170 The accompanying notes are an integral part of this statement. 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, 1998 REVENUES General property tax State grants Other property taxes 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 REVENUES OVER (UNDER) EXPENDITURES Fund balance, April 1, 1997 Fund balance, March 31, 1998 Budget $ 10,980,000 886,000 180,000 845,000 643,000 13,534,000 3,390,650 254,850 155,000 10,000 214,800 167,400 550,225 13,154, 000 994,800 143,500 1,445, 950 4,533,650 25,014,825 Actual $ 11,313,406 585,422 224,259 1,353,222 982,469 14,458,778 3,133,448 244,828 136,417 8,962 197,111 171,911 498,047 1,987,950 897,098 151,380 1,445, 974 4,533,576 13,406,702 (11,480,825) 1,052,076 20,672,448 20,672,448 Variance Favorable (Unfavorable) $ 333,406 (300,578) 44,259 508,222 339,469 924,778 257,202 10,022 18,583 1,038 17,689 (4,511) 52,178 11,166,050 97,702 (7,880) (24) 74 11,608,123 12,532,901 $ 9,191,623 $21,724,524 $ 12,532,901 The accompanying notes are an integral part of this statement, Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS March 31, 1998 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 1. 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. 2. Reporting Entity The District and the Midpeninsula Regional Open Space District Financing Authority (the "Authority") have a financial and operational relationship which meets the reporting entity definition criteria of GASB Statement No. 14, The Financial Reporting Entity, for inclusion of the Authority as a component unit of the District. Accordingly, the financial activities of the Authority have been included in the financial statements of the District. The following are those aspects of the relationship between the District and the Authority which satisfy GASB No. 14 criteria. Accountability 1. The Authority's Board of Directors was appointed by the Districts Board of Directors, except for the member appointed by the Board of Supervisors of Santa Clara County. 2. The District is able to impose its will upon the Authority, based on the following: • All major financing arrangements, contracts, and other transactions of the Authority must have the consent of the District. • The District exercised significant influence over operations of the Authority. The District is the sole obligator for any obligations issued by the Authority. 3. The Authority provides specific financial benefits or imposes specific financial burdens on the District based upon the following: • Any deficits incurred by the Authority will be reflected in the payments of the District. • Any surpluses of the Authority revert to the District. Scope of Public Service The Authority is organized as a joint powers authority pursuant to the California Government Code, 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, The District intends to manage and occupy all properties financed by the Authority. �. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Presentation For financial presentation purposes, the Authority's financial activity has been blended, or combined, with the financial data of the District. The financial statements present the Authority's financial activity within the General Fund and the Account Groups. The 1996 Revenue Bonds issued by the Authority are included in the General Long -Term Debt Account Group. 3. 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. 4. 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. 5. 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. 6. 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. 7. Long-term Debt The principal portion of long-term debt is recorded as a liability in the General Long -Term Debt Account Group. C Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) 8, 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. 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. 9. Compensated Absences Vacation pay is recorded as an expenditure in the year earned. Sick leave is recorded as an expenditure when paid. 10. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reporting period. Actual results could differ from those estimates. C C Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) 11. 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 B - CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following at March 31, 1998: Deposits Cash on hand and bank overdraft - unrestricted $ (97,668) Cash in banks - restricted 1,779,628 Pooled Funds Cash in Santa Clara County Treasury - unrestricted 13,220,393 Cash in Santa Clara County Treasury - restricted 8,562 Cash balances held in banks are insured up to $100,000 by the Federal Depository Insurance Corporation. The Santa Clara County investment pool is subject to legal restrictions, and additional restrictions prescribed by the County. NOTE C - DEFERRED COMPENSATION INVESTMENTS Investments with a fair market value of $2,367,236 at March 31, 1998, 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 D - INVESTMENTS The District maintains certain restricted investments for purposes of satisfying the future requirements of its long-term debt. The District also maintains certain unrestricted investments that are held by Santa Clara County. All investments held are U.S. Government securities with a maturity date of August 31, 1999. 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 Investments are recorded at cost which approximates fair market value as of March 31, 1998. C C Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE E - FIXED ASSETS Changes in the General Fixed Assets Account Group for the year ended March 31, 1998 were as follows: Balances Balances April 1, March 31, 1997 Additions Retirements 1998 Land $ 160,429,360 $ 1,987,669 $ - $ 162,417,029 Structures and improvements 7,206,848 897,379 8,104,227 Equipment 1,543,066 151,380 11,942 1,682,504 $ 169,179,274 $ 3,036,428 $ 11,942 $ 172,203,760 All fixed assets additions during fiscal 1997 were acquired through general fund expenditures. NOTE F - 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, 1998 were as follows: Long-term debt, April 1, 1997 Principal repayments Long-term debt, March 31, 1998 $81,204,000 1,445,974 $79,758,026 The following is a detail of the long-term debt of the District as of March 31, 1998: • Long-term debt $717,825 bears interest at fixed rates from 6% to 7% at March 31, 1998 and is collateralized by land. • 1990 Notes, principal balance of $13,270,000, bearing interest at rates ranging from 6.50% to 7,50%, maturing annually from September 1, 1995 through September 1, 2010. • 1992 Notes, principal balance of $7,680,000, bearing Interest at rates ranging from 5% to 6.35% maturing annually from July 1, 1997 through July 1, 2012. • 1993 Certificates of Participation including Serial Certificates with a principal balance of $6,570,000, bearing interest at rates ranging from 2.90% to 5.6% maturing annually from September 1, 1994 through September 1, 2009. This issue also includes $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, 2020. c r C Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE F - LONG-TERM DEBT (continued) • 1995 Notes, principal balance of $11,500,000, comprised of $1,355,000 of Serial Notes, bearing interest at rates ranging from 5.75% to 7%, maturing annually from September 1, 1998 through September 1, 2009, and $10,145,000 of 7% term notes due on September 1, 2014, • 1996 Notes, principal balance of $29,765,201, including $18,630,000 of Current Interest Bonds, bearing interest at rates ranging from 3.9% to 5.75% maturing annually from September 1, 1997 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 $6,235,201 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. All notes are 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 or taxing power for payment of the notes nor are the notes collateralized by any District property. Maturities of long-term debt are as follows: Year ending March 31, 1999 2000 2001 2002 2003 Thereafter through 2027 NOTE G - EMPLOYEES' RETIREMENT PLAN Principal Interest Total $ 2,001,951 2,203,031 2,364,170 2,552,405 3,247,088 67, 386, 381 $ 79,758,026 $ 4,440,435 4,326,246 4,199, 061 4,057,826 3,903,046 47,333,932 $ 68,260,546 $ 6,442,386 6,529,277 6,563,231 6,610,231 7,150,134 114, 723, 313 $ 148,018,572 All regular employees are eligible to participate in the Public Employees' Retirement Fund (the "Fund") of the State of Califomia'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. 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 statute and District resolution. C: Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE G - EMPLOYEES' RETIREMENT PLAN (continued) For the year ended March 31, 1998, the District made contributions to the Fund of $201,520. The District's payroll for employees covered by the Fund for the year ended March 31, 1998 was $2,512,880 from a total payroll of $2,600,128. District participation in the Fund is comprised of 58 active employees of a total of 69 employees. The District's required employer contribution rate is 3.29%. 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 "excess of net assets available for benefits over the pension benefit obligation" was computed as part of an actuarial valuation performed as of June 30, 1996 (most recent valuation). Significant actuarial assumptions used in the valuation include (a) rate of return on the investment of present and future assets of 8.50% per year compounded annually; (b) projected salary increases of 4.5% per year attributable to inflation; (c) across the board real salary increases of 0.0%; and (d) additional projected salary increases, that vary by length of service, each year and are attributable to merit/longevity. Information applicable to the District's employee group at June 30, 1996 (the latest date for which the information is available) follows: Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits $ 920,393 Current employees - Accumulated employee contributions and allocated investment earnings 1,560,152 Employer -financed, vested 784,079 Employer -financed, nonvested 95,696 Total pension benefit obligation 3,360,320 Net assets available for benefits, at cost (total market value, $5,133,828) 4,780,546 Unfunded pension benefit obligation (surplus) $(1,420,227) Changes in the pension benefit obligation from last year due to: Changes in benefit provisions $ Changes in actuarial assumptions C; C' Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE G - EMPLOYEES' RETIREMENT PLAN (continued) 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 Districts contribution calculation for the year ended March 31, 1998 was made in accordance with the actuarially determined requirements computed as of June 30, 1996. 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 1996 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 Systems' annual report. Trend information for the District for each of the five years in the period ended June 30, 1996 (the period for which information is available) is as follows (dollars in thousands): 1996 1995 1994 1993 1992 Net assets available for benefits $ 4,781 $ 4,206 $ 3,631 $ 2,868 $ 2,459 Pension benefit obligation 3.360 3.150 2,619 2,345 2.124 Excess of net assets over the pension benefit obligation Percentage funded Annual covered payroll Excess of net assets over the pension obligation as a percentage of covered payroll Employer contributions as a percentage of covered payroll $ 1,421 $ 1,056 $ 1,012 $ 523 $ 335 142% 133% 139% 122% 116% $ 2,736 $ 2,585 $ 2,293 $ 2,013 $ 1,876 52% 41% 44% 26% 17.9% 7.4% 7.7% 6.1% 12.4% 10.2% Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1998 NOTE H - 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 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, 1998 are as follows: Balance, April 1, 1997 $ 1,645,870 Additions 754,969 Payments 33,603 Balance, March 31, 1998 $ 2,367,236 NOTE I - LEASE REVENUES The District leases certain land and structures to others under operating leases with terms generally on a month -to -month basis. Lease revenue received was approximately $590,584 during the year ended March 31, 1998. NOTE J - 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. G C C