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HomeMy Public PortalAboutAudit Report - District- FY96MIDPENINSULA REGIONAL OPEN SPACE DISTRICT (M.R.O.S.D.) Financial Statements and Report of Independent Certified Public Accountants March 31, 1996 Suite 600 150 Almaden Blvd, San Jose, CA 95113 408 275-9000 FAX 408 275-0582 Report of Inde •endent Certified Public Accountants Grant Thornton The Board of Directors Midpeninsula Regional Open Space District GRANT THORNTON LLP Accountants and Management Consultants The U.S. Member Firm of Grant Thornton International We have audited the accompanying combined balance sheet of the Midpeninsula Regional Open Space District (the "District") as of March 31, 1996, and the related statement of revenue, expenditures and changes in fund balance, budget and actual, of the District General Fund. 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, 1.996, 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. San Jose, California June 14, 1996 Midpeninsula Regional Open Space District COMBINED BALANCE SHEET March 31, 1996 ASSETS Account Groups General General Total General Agency Fixed Long -Term (Memorandum Fund Fund Assets Debt Only) Cash, Including interest -bearing deposits and cash equivalents $ 2,168,491 $ Restricted cash and cash equivalents 353,043 Restricted investments 4,535,435 Property tax and other receivables 3,399,161 Prepaid expenses 5,762 Land Structures and improvements Equipment Amount available in General Fund Amount to be provided for retirement of general long-term debt 1,388,925 $ $ 2,168,491 353,043 5,924,360 3,399,161 5,762 159, 759, 076 159, 759, 076 6,359,406 - 6,359,406 1,466,485 - 1,466,485 - 4,886,478 4,888,478 65,698,796 65,698,796 TOTAL ASSETS $ 10,461,892 $ 1,388,925 $ 167,584,967 $ 70,587,274 $ 250,023,058 LIABILITIES AND FUND EQUITY Liabilities Accounts payable $ 148,527 $ $ - $ - $ 148,527 Accrued liabilities 246,728 246,728 Deposits 25,415 - - 25,415 Deferred revenue 223,117 - - 223,117 Deferred compensation 1,388,925 1,388,925 Long-term debt - _ 70,587,274 70,587,274 Total liabilities 643,787 1,388,925 - 70,587,274 72,619,986 Fund equity Investment in general fixed assets - 167,584,967 167,584,967 Fund balance 9,818,105 - 9,818,105 Total fund equity 9,818,105 167,584,967 177,403,072 TOTAL LIABILITIES AND FUND EQUITY $ 10,461,892 $ 1,388,925 $ 167,584,967 $ 70,587,274 $ 250,023,058 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, 1996 REVENUES General property tax State grants Other property taxes Interest Gifts 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 Proceeds from issuance of long-term debt, net REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES Fund balance, April 1, 1995 Fund balance, March 31, 1996 Budget $ 9,927,000 486,000 180,000 575,000 659,000 11,827,000 3,162, 300 325,900 149,700 8,900 193,250 130,050 353,800 14,339,500 910,750 184,600 1,483, 000 3,971,000 25,212,750 (13,385,750) 7,260,000 Actual $ 10,173,272 332,268 118,564 693,687 300,000 761,783 12, 379, 574 2,922,558 333,864 138,206 10,145 191,781 115,306 393,020 14,408,676 300,715 180,605 1,483,007 3,951,132 24,429,015 (12, 049,441) 7,258,515 Variance Favorable (Unfavorable) $ 246,272 (153,732) (61,436) 118,687 300,000 102,783 552,574 239,742 (7,964) 11,494 (1,245) 1,469 14,744 (39,220) (69,176) 610,035 3,995 (7) 19,868 783,735 1,336,309 (1,485) (6,125,750) (4,790,926) 1,334,824 14,609,031 14,609,031 $ 8,483,281 $ 9,818,105 g, 1,334,824 The accompanying notes are an integral part of this statement. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS March 31, 1996 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. 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. 3. 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. 4. 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. 5. 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. 6. Long -Term Debt The principal portion of long-term debt is recorded as a liability in the General Long -Term Debt Account Group. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) 7. 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 March 1 July 1 March 1 50% on November 1 July 1 50% on February 1 December 10 (for November) August 31 April 10 (for February) 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. 8. 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. 9. 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. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 NOTE B - CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following at March 31, 1996: Deposits Cash on hand and in banks - unrestricted $ (5,980) Cash in banks - restricted 338,924 Pooled Funds Cash in Santa Clara County Treasury - unrestricted Cash in Santa Clara County Treasury - restricted 2,174,471 14,119 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. NOTE C - DEFERRED COMPENSATION INVESTMENTS Investments of $1,388,925 with a fair market value of $1,388,925 at March 31, 1996, 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 - RESTRICTED INVESTMENTS The District maintains certain restricted investments for purposes of satisfying the future requirements of its long-term debt. These investments are in U.S. Government securities with maturity dates ranging from March 31, 1997 to August 31, 1999. The investments are recorded at cost which approximates fair market value as of March 31, 1996. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 NOTE E - FIXED ASSETS Changes in the General Fixed Assets Account Group for the year ended March 31, 1996 were as follows: Balances Balances April 1, March 31, ' 1995 Additions Retirements 1996 Land $ 145,350,400 $14,408,676 $ - $ 159,759,076 Structures and improvements 6,058,691 300,715 - 6,359,406 Equipment 1,312.573 180.605 26.693 1.466.485 $ 152.721.664 $14,889.996 $ 26,693 $ 167.584,967 All fixed assets additions during fiscal 1995 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, 1996 were as follows: Long-term debt, April 1, 1995 Issuance of notes payable (interest at 8.0%, due in 2010) Issuances of note payable (interest at 6%, due in 1996) Principal reductions $64,811,766 6,258,515 1,000,000 (1.483,007) Long-term debt, March 31, 1996 $70.587.274 Long-term debt of $9,002,274 bears interest at fixed rates from 5% to 8% at March 31, 1996 (weighted average interest rate is 7.47%) and is collateralized by land with an original cost basis of approximately $17,000,000. The following is a detail of the remaining long-term of the District as of March 31, 1996: • 1988 Notes, principal balance outstanding of $10,400,000, bearing interest at a variable floating rate (4.1% as of March 31, 1996), due February 1, 2008. • 1990 Notes, principal balance of $14,460,000, bearing interest at rates ranging from 6.50% to 7.50%, with a weighted average interest rate of 7.25%, maturing annually from September 1, 1995 through September 1, 2010. • 1992 Notes, principal balance of $8,000,000, bearing interest at rates ranging from 5% to 6.35%, with a weighted average interest rate of 6.00%, maturing annually from July 1, 1997 through July 1, 2012. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 NOTE F - LONG-TERM DEBT (continued) • 1993 Certificates of Participation including Serial Certificates with a principal balance of $6,970,000, bearing interest at rates ranging from 2.90% to 5.6%, with a weighted average interest rate of 5.16%, 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. • 1995 Notes, principal balance of $11,500,000, including $1,355,000 of Serial Notes, bearing interest at rates ranging from 5.75% to 7%, with a weighted average interest rate of 6.56%, maturing annually from September 1, 1998 through September 1, 2009. This issue also includes $10,145,000 of 7% term notes due on September 1, 2014. 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 Principal 1997 1998 1999 2000 2001 Thereafter through 2021 NOTE G - EMPLOYEES' RETIREMENT PLAN $ 3,664,395 2,850,084 2,536,043 2,638,650 2,831,894 56.066.208 Interest $ 4,348,314 4,099,772 3,937,919 3,797,670 3,648,015 29.984.194 $ 70.587.274 $ 49.815.884 Total $ 8,012,709 6,949,856 6,473,962 6,436,320 6,479,909 86.050.402 $ 120.403.158 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. 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. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 NOTE G - EMPLOYEES' RETIREMENT PLAN (continued) For the year ended March 31, 1996, the District made contributions to the Fund of $140,691. The District's payroll for employees covered by the Fund for the year ended March 31, 1996 was $2,249,510 from a total payroll of $2,922,558. District participation in the Fund is comprised of 52 active employees of a total of 55 employees. The District's required employer contribution rate is 5.3%. 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, 1994 (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, 1994 (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 Current employees - Accumulated employee contributions and allocated investment earnings Employer -financed, vested Employer -financed, nonvested Total pension benefit obligation Net assets available for benefits, at cost (total market value, $3,620,354) Unfunded pension benefit obligation (surplus) $ 737,742 1,201, 369 622,094 58.376 2,619,581 3.631.247 $(1.011.666) Changes in the pension benefit obligation from last year due to; Changes in benefit provisions $ Changes in actuarial assumptions (225,249) Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 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 District's contribution calculation for the year ended March 31, 1996 was made in accordance with the actuarially determined requirements computed as of June 30, 1994. 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 1994 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, 1994 (the period for which information is available) is as follows (dollars in thousands): 1994 1993 1992 1991 1990 Net assets available for benefits $ 3,631 $ 2,868 $ 2,459 $ 2,100 $ 1,771 Pension benefit obligation 2.619 2.345 2.124 1.831 1.571 Excess of net assets over the pension benefit obligation $ 1.012 $ 523 $ 335 $ 269 $ 200 Percentage funded 139% 122% 116% 115% 113% Annual covered payroll $ 2,293 $ 2,013 $ 1,876 $ 1,718 $ 1,444 Excess of net assets over the pension obligation as a percentage of covered payroll Employer contributions as a percentage of covered payroll 44% 26% 17.9% 15.7% 13.9% 6.1% 12.4% 10.2% 5.4% 11.9% Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 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, 1996 are as follows: Balance, April 1, 1995 $ 1,037,698 Additions 362,449 Payments (11,222) Balance, March 31, 1996 $ 1.388.925 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 $684,392 during the year ended March 31, 1996. 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 Districts financial position. Midpeninsula Regional Open Space District NOTES TO FINANCIAL STATEMENTS (continued) March 31, 1996 NOTE K - SUBSEQUENT EVENT The District issued $29,910,201 of Revenue bonds dated July 1, 1996. The bonds mature in September 2026 with yield rates ranging from 3.9% to 6.3%. The District will be required to make principal and interest payments on this obligation beginning September 1, 1997, out of an established reserve. The proceeds from the bonds were used to defease the 1988 Notes and to retire a $1,000,000 note payable. The remainder of the proceeds are being held in the General Fund to be used to retire certain outstanding long-term obligations and, possibly, for future land acquisitions.