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HomeMy WebLinkAboutMINUTES - 12202005 - HA1 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Rudy Tamayo, Acting Executive Director DATE: December 20, 2005 SUBJECT: ACCEPTANCE OF AUDIT REPORT FOR FISCAL YEAR ENDED MARCH 31, 2005 SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: ACCEPT financial audit report for the period April 1, 2004 through March 31, 2005, performed by Harn & Dolan CPA's, Walnut Creek, California, as recommended by the Advisory Housing Commission. 11. FINANCIAL IMPACT: Funding has been provided for the audit contract in the Housing Authority's Fiscal Year 2005/2006 Consolidated Operating Budget. Ill. REASONS FOR RECOMMENDATION/BACKGROUND Harn & Dolan has completed their audit of the financial records of the Housing Authority of the County of Contra Costa and all financial records of the Housing Authority are in order. Although there were no material weaknesses identified, there was one non-financial reportable condition made. Furthermore, Harn & Dolan issued a Management Letter listing 6 areas that presented opportunities for strengthening internal controls and operating efficiencies. A copy of the Management Letter is attached for your review and a full copy of the Audit Report is on file with the Clerk of the Board. IV. CONSEQUENCES OF NEGATIVE ACTION: Should the Board of Commissioners elect not to accept the financial audit report as performed by the certified public accountancy firm of Harn & Dolan, it would become necessary to expend additional funds to either redo the financial audit report or contract with another certified public accountancy firm. CONTINUED ON ATTACHMENT: YES SIGNATU 'G� RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON APPROVED AS RECOMMENDED HER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A V UNANIMOUS (ABSENT TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF COMMISSIONERS ON THE DATE SHOWN. ATTESTED /t,)5 JC41N SWEETEN,CLERK OF THE BOARD OF COMMISSIONERS AND COUNTY ADMINISTRATOR BY k� -,DEPUTY H:\JudyHayes\MSOFFICE\WINWORD\BOARD\BO-AUDIT FYE 3-31-05.doc Harn & Dolan Certified Public Accountants 2423 Stirrup Court Walnut Creek, California 94596-6526 (925)280-1693 Fax(925) 938-4829 August 30, 2005 To the Board of Commissioners and Executive Director Housing Authority of the County of Contra Costa. Martinez, California In planning and performing our audit of the financial statements of the Housing Authority of the County of Contra Costa for the year ended March 31,2005,we considered the Authority's internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure. It's. However,, during our audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The items that accompany this letter summarize our comments and suggestions regarding those matters. We have issued a separate report on the Authority's*internal control structures which is included in our financial report dated August 30, 2005. This letter does not affect our report dated August 30,2005,on the financial statements of the Housing Authority of the County of Contra Costa. We Will discuss the status of these comments during our next engagement. We have already discussed many of these comments and suggestions with various Authority personnel,and we will be pleased to discuss them in further detail at your convenience,to perform any additional study of these matters, or to assist you in implementing recommendations. Sincerely Housing Authority of the County of Contra Costa August 30,2005 Page 2 I Subsequent to the preparation of the Financial Data Schedule,required by the U.S.Department of Housing and Urban Development,Real Estate Assessment Center(HUD,REAC),adjustments were made to the general ledger changing many of the balances. Upon further review, it was discovered that the software allows routine transactions to be posted to prior periods. Controls over the maintenance of the general ledger should be improved to insure that transactions are posted only to current accounting periods or to prior periods only when authorized by appropriate personnel. Authority's Response-A review is under way to address this issue of postings to prior periods. Restrictions will be placed in the software to prohibit postings out of period by staff. Further, we are researching system-generated entries to determine if out of period postings can be prohibited or, at a minimum,tracked. 2. Controls over the reconciliation procedures for the various Authority bank accounts could be improved. The bank reconciliation documentation is initialed by the preparer,but not initialed by a reviewer, if any. We noted several instances in which reconciling items should have required adjustment to the general ledger. In one case, $146,697 was shown as an outstanding credit to cash. This amount was transferred electronically to the vendor seven days after fiscal year end. This amount should have been shown as an accounts payable and not a reconciling item to cash. An audit adjusting entry was made for this amount. Controls over the accuracy of the general ledger would be improved if bank reconciliations were reviewed and that review documented. Controls would also be improved if, at year end, adjustments were made to the general ledger for reconciling items that do not actually effect cash as of the date of the reconciliation. Authority's Response-Bank reconciliations will be reviewed and signed off by the Accounting Supervisor not later than 45 days after the month has ended. During this time,the Accounting Supervisor will also insure that the required J ournal entries are completed and processed. 3. During our audit we noted several payments made after the fiscal year end which were for costs incurred during the fiscal year, These costs were not accrued to the correct fiscal year. The bulk of these costs had to do with contractor retention associated with projects funded by the Capital Fund Grants. In this case Net Assets was not effected. However, controls over financial reporting should be improved to insure that all costs are recorded in the fiscal year incurred. Authority's Response - We will develop a plan to review all payments made in the month following the fiscal year to determine the proper accrual procedures. 4. During our review of the grant reports for the Public Housing Capital Grant Fund,we noted that the general ledger accounts are too general to properly support the Annual 0t"StatementlPerformance and Evaluation Report. The generalledger accounts are not specific enough to track and report the cost categories required by HUD. The final result is that total costs reported to HUD via the Cost Certificate can not entirely be supported by the general ledger. Housing Authority of the County of Contra Costa August 30, 2005 Page 3 Currently hard costs are posted to Construction-in-Progress and soft costs are expensed. A spreadsheet is maintained to track cost detail based on an analysis of requisitions and invoices over the entire grant period. This spreadsheet does not support the Annual Statement/Performance and Evaluation Report. Controls over the financial reporting to HUD would be improved if the general ledger accounting system were expanded to include cost categories required to be reported upon in the Annual Statement/Performance and Evaluation Report. Costs could then be posted directly to the appropriate cost category as incurred. This step would not only improve the accuracy of the Annual Statement/Performance and Evaluation Report, but it would provide more verifiable support for the requisition of grant funds from HUD. Authority's Response - We will immediately expand the general ledger to include the detail required for the reporting to HUD. Invoices paid in the future will be posted to these new accounts. Further, we will. research costs *incurred previously and transfer them to the appropriate accounts. 5. During our review of the Public Housing tenant files,the Authority could not always document that unit inspection were performed in accordance with HUD regulations. HUD requires that dwelling units be inspected on an annual basis. We reviewed ten Public Housing tenant files and noted that, in six cases, unit inspections were not documented to have been performed on an annual basis. The duration between inspections ranged from fifteen to thirty-one months. Controls over the Authority's compliance with HUD regulations would be improved if the Authority established a system to insure that inspections are performed on an annual basis as required by HUD. Authority's Response-The Authority has engaged an outside firm to perform unit inspections. We expect inspections to be performed on an annual basis in a more consistent manner in the future. 6. During our review of seventeen Housing Choice Voucher tenant files,we noted the following: a) Recertifications of tenant income and family composition were not done on an annual basis in six cases. b) Housing assistance payments appeared to be incorrectly calculated in four cases. The errors appear to range from$3 to $43 per month. c) Unit inspections were not documented to have been performed on an annual basis in three cases. Controls over the administration of the Housing Choice Voucher program need to be strengthened to 'insure the Authority's compliance with HUD regulations. Authority's Response - The Authority has implemented a program compliance reporting system. We will continue to improve our quality assurance procedures in an effort to minimize and ultimately eliminate errors made, HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA BASIC FINANCIAL STATEMENTS YEAR ENDED MARCH 31,2005 (Including Auditors' Report Thereon) arn Dolan Certified Public Accountants 2423 Stirrup Court Walnut Creek, California 94596-6526 (925)280-1693 Fax(925)938-4829 August 30,2005 To the Board of Commissioners and Executive Director Housing Authority of the County of Contra Costa Martinez, California In planning and performing our audit of the financial statements of the Housing Authority of the County of Contra Costa.for the year ended March 31,2005,we considered the Authority's internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure. However, during our audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The items that accompany this letter summarize our comments and suggestions regarding those matters. We have issued a separate report on the Authority's internal control structures which is included in our financial report dated August 30,2005. This letter does not affect our report dated August 30,2005,on the financial statements of the Housing Authority of the County of Contra Costa. We will discuss the status of these comments during our next engagement. We have already discussed many of these comments and suggestions with various Authority personnel,and we will be pleased to discuss them in further detail at your convenience,to perform any additional study of these matters,or to assist you in implementing recommendations. Sincerely Housing Authority of the County of Contra.Costa August 30, 2005 Page 2 1. Subsequent to the preparation of the Financial Data Schedule,required by the U.S.Department offlousiffig and Urban Development,Real Estate Assessment Center(HUD,REAC),adjustments were made to the general ledger changing many of the balances. Upon further review, it was discovered that the software allows routine transactions to be posted to prior periods. Controls over the maintenance of the general ledger should be improved to insure that transactions are posted only to current accounting periods or to prior periods only when authorized by appropriate personnel. Authority's Response-A review is under way to address this issue of postings to prior periods. Restrictions will be placed in the software to prohibit postings out of period by staff. Further, we are researching system-generated entries to determine if out of period postings can. be Is *11 pronwited or, at a minimum,tracked. 2. Controls over the reconciliation procedures for the various Authority bank accounts could be improved. The bank reconciliation documentation is:initialed by the preparer,but not initialed by a reviewer, if any. We noted several instances in which reconciling items should have required adjustment to the general ledger. In one case, $146,697 was shown as an outstanding credit to cash. This amount was transferred electronically to the vendor seven days after fiscal year end. This amount should have been shown as an accounts payable and not a reconciling item to cash. An audit adjusting entry was made for this amount. Controls over the accuracy of the general ledger would be improved it bank reconciliations were reviewed and that review documented. Controls would also be improved if, at year end, adjustments were made to the general ledger for reconciling items that do not actually effect cash as of the date of the reconciliation. Authority's Response-Bank reconciliations will bereviewed and signed off by the Accounting Supervisor not later than 45 days after the month has ended. During this time,the Accounting Supervisor will also insure that the required journal entries are completed and processed. 3 During our audit we noted several payments made after the fiscal year end which were for costs incurred during the fiscal year. These costs were not accrued to the correct fiscal year. The bulk of these costs had to do with contractor retention associated with projects funded by the Capital Fund Grants. In this case Net Assets was not effected. However, controls over financial reporting should be improved to insure that all costs are recorded in the fiscal year incurred. Authority's Response 4M We will develop a plan to review all payments made in the month following the fiscal year to determine the proper accrual procedures. 4. During our review of the grant reports for the Public Housing Capital Grant Fund,we noted that -the general ledger accounts are too general to properly support the Annual Statement/Performance and Evaluation Report. The general ledger accounts are not specific enough to track and report the cost categories required by HUD. The final result is that total costs reported to HUD via the Cost Certificate can not entirely be supported by the general ledger. _01 Housing Authority of the County of Contra Costa August 30,2005 Page 3 Currently hard costs are posted to Construction-in-Progress and soft costs are expensed. A spreadsheet is maintained to track cost detail based on an analysis of requisitions and invoices over the entire grant period. This spreadsheet does not support the Annual Statement/Performance and Evaluation Report. Controls over the financial reporting to HUD would be improved ifthe general ledger accounting system were expanded to include cost categories required to be reported upon in the Annual Statement/Performance and Evaluation Report. Costs could then be posted directly to the appropriate cost category as incurred. This step would not only improve the accuracy of the Annual Statement/Performance and Evaluation Report, but it would provide more verifiable support for the requisition of grant funds from HUD. Authority's Response - We will immediately expand the general ledger to include the detail required for the reporting to HUD. Invoices paid in the future will be posted to these new accounts. Further, we will research costs incurred previously and transfer them to the appropriate accounts. 5. During our review of the Public Housing tenant files,the Authority could not always document that unit inspection were performed in accordance with HUD regulations. HUD requires that dwelling units be inspected on an annual basis. We reviewed ten Public Housing tenant files and noted that, in six cases, unit inspections were not documented to have been performed on an annual basis. The duration between inspections ranged from fifteen to thirty-one months. Controls over the Authority's compliance with HUD regulations would be improved if the Authority established a system to insure that inspections are performed on an annual basis as required by HUD. Authority's Response-The Authority has engaged an outside firm to perform unit inspections. We expect inspections to be performed on an annual basis in a more consistent manner in the future. 6. During our review of seventeen Housing Choice Voucher tenant files,we noted the following: a) Recertifications of tenant income and family composition were not done on an annual basis in six cases. b) Housing assistance payments appeared to be incorrectly calculated in four cases. The errors appear to range from$3 to $43 per month. c) Unit inspections were not documented to have been performed on an annual basis in three cases. Controls over the administration of the Housing Choice Voucher program need to be strengthened to insure the Authority's compliance with HUD regulations. Authority's Response - The Authority has implemented a program compliance reporting system. We will continue to improve our quality assurance procedures in an effort to minimize and ultimately eliminate errors made. HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA BASIC FINANCIAL STATEMENTS YEAR ENDED MARCH 31,2005 (]Including Auditors' Report Thereon) HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA BA5IC FINANCIAL STATEMENTS MARCH 31,2005 TABLE OF CONTENTS Page Management's Discussion and Analysis 1 Independent Auditors'Report 11 Financial Statements: Statement of Net Assets 13 Statement of Activities 15 Statement of Net Assets-Proprietary Funds 16 Statement of Revenues,Expenses, and Changes in Fund Net Assets-Proprietary Funds 17 Statement of Cash Flows-Proprietary Funds 18 Notes to the Basic Financial Statements 20 Supplemental Information: Schedule of Expenditures of Federal Awards 47 Notes to the Schedule of Expenditures of Federal Awards 48 Financial Data Schedule 49 Statement of Completed Capital Fund Program Project 54 Independent Auditors'Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 55 Independent Auditors'Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 57 Status of Prior Audit Findings 58 Schedule of Findings and Recommendations 59 HOUSING AUTHORITY OF'THHEE COUNTY OF CONTRA COSTA MANAGEMENT'S DISCUSSION ANDANALYSIS MARCH 31,2005 The Housing Authority ofthe County.ofContra Costa(the Authority)management discussion and analysis is designed to(a)assist the reader in focusing on significant financial issues,(b)provide an overview of the Authority's financial activity,(c)identify changes in the Authority's financial position(its ability to address the next and subsequent year challenges),and(d)identify individual fund issues or concerns. The Management Discussion and Analysis(MD&A)is designed to focus on the current year's activities,resulting changes and currently known facts. Please read MD&A in conjunction with the Authority's financial statements (beginning on page 13). FINANCIAL GHLIGHTS The Authority's net assets decreased by$1.43 million(or 6.46%)during 2005. The Authority engages only in business- .type activities,therefore the decrease is attributable to the Authority's business-type net assets. Net Assets were$22.11 million and$20.68 million for 2004 and 2005 respectively. The business-type activities revenue increased by$0.88 million(or 0.9 1%)during 2005. They were$96.45 million for 2004 and$97.33 million for 2005. The total expenses of all Authority programs increased by$1.25 million(or 1.25%)during 2005. Total expenses were $99.63 million and$100.89 million for 2004 and 2005 respectively. USING PHIS ANNUAL REPORT MD&A Management Discussion And Analysis Basic Financial Statements Authority-wide Financial Statements—pgs 13-15 Fund Financial Statement-pgs 16-19 Notes to Financial Statements(expanded/restructured)—pgs 20-45 1 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2005 (Continued) Authority-Wide Financial Statements The Authority-wide financial statements are designed to be corporate-like in that all business type activities are consolidated into columns that add to a total for the entire Authority. These Statements include a Statement ofNet Assets,which is similar to a Balance Sheet., The Statement ofNet Assets reports all financial and capital resources for the Authority. The statement is presented in the format where assets,minus liabilities,equal"Net Assets",formerly known as equity. Assets and liabilities are presented in order of liquidity, The focus ofthe Statement ofNet Assets(the"Unrestricted Net Assets")is designed to represent the net available liquid (non-capital)assets,net of liabilities,for the entire Authority.Net Assets(formerly equity)are reported in three broad categories: NetAssets,Invested in Capital Assets,Net ofRelated Debt: This component ofNet Assets consists ofall Capital Assets,reduced by the outstanding balances of any bonds,mortgages,-notes or other borrowings thdt are attributable to the acquisition,construction,or improvement of those assets, including accrued interest. Restricted Net Assets: This component ofNet Assets consists of restricted.assets,when constraints are placed on the asset by creditors(such as debt covenants) grantors,contributors,laws,regulations,etc. UnrestrictedNetAssets: Consists ofNet Assets that do not meet the definition oV`Net Assets Invested in Capital Assets,Net of Related Debt",or"Restricted Net Assets". The Authority-wide financial statements also include a Statement ofActivities(similarto an Income Statement). This Statement measures net revenue(expense)for each of the Authority's functions and reports revenue by program. General revenue is reported separately. The activities for the enterprise funds are presented by federal program administered by the Authority. The focus of the Statement of Activities is the"Change in Net Assets",which is similar to Net Income or Loss. Fund Financial Statements The Fund Financial Statements presentation is similar to the traditional government financial statements. The focus is now on Major Funds,rather than fund types. The Authority's funds consist exclusively of Enterprise Funds, Enterprise funds utilize the full accrual basis of accounting. The Enterprise method of accounting is similar to accounting utilized by the private sector accounting. Many of the funds administered by the Authority are provided by the Department of Housing and Urban* Development. Others are segregated to enhance accountability and control. GASB's 34 and 37 require individual enterprise funds to be reported as major funds if total assets,liabilities,revenue,or expenses of that individual fund exceed.10%or corresponding element total of the Authority as a whole. 2 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 319 2005 (Continued) The Authority's Funds: Major Funds Public Housing—Under the Public HousingProgram, (also titled as 'Low Rent-Aided Housing') the Authority rents units that it owns to very low&low-income households. The Public Housing Program is operated under an Annual Contributions Contract(ACC)with HUD. The ACC provides Operating Subsidy and Capital improvement Grant funding to enable the PHA to provide the housing at a rent that is*based upon 30%of household income or at a flat rate below market rate, Public Housing Capital Fund Grant-Through this program,HUD provides grants for the modernization of the Public Housing Program units. Themodernization is accounted for using this fund. Once the modernization is complete,the costs are transferred to the Public Housing Program. Housing Choice Voucher Propram—Under the Housing Choice Voucher Program, (hereunder titled as Woucher'Program)the Authority administers the program under an Annual Contributions Contract(ACC) with HUD.The ACC provides funding to the Authority to provide tenant based rental assistance to program participants. The rental assistance payment is structured so as the rental payment that the participant is obligated to-pay is 30%to 40%of household*income. Casa Del Rio, Associates - Casa Del Rio, Senior Housing Associates (CDR) was formed as a limited partnership on April 12,, 1994,for the purpose of developing,owning and operating an 82-unit affordable housing rental complex(the project)located in Antioch.-California,, The Project qualifies for low-income housing tax credits under Section 42 of the Internal Revenue Service.Code. Such projects are regulated under terms of a Regulatory Agreement,including rent charges,operating methods and other matters. This limited partnership is considered to be a blended component unit of the Authority. The general partner of the Partnership is HACCC Casa Del Rio, Inc., a California. public benefit corporation. The officer's and Board members of HACCC Casa Del Rio, Inc. are employees of the Authority,which was the developer of the Project,and is consider a blended component unit. Other Non-Maior,, Funds—In addition to the major funds above,the Authority also maintains the following non- major funds, Non-major funds are defined as funds that have assets,liabilities,revenues,or expenses of less than 10%of the Authority's total assets,liabilities,revenues or expenses: Shelter Plus Care Proeram--- —is designed to provide rental assistance and supportive services to homeless and disabled individuals and their families.It is cooperatively administered by the County Health Services Department and the Housing Authority of Contra Costa County,and has capacity to serve 200 households. Participants receive rental assistance through the Housing Choice Voucher Program funded by the U.S Department of Housing and Urban Development* Section 8 Rental Voucher—The Coggins Square family Apartments(150 Units)in the City of Pleasant Hill, CaliforniaCommunity Investtnent Demonstration(Pension Fund)Program was developed under Section 8 of the U.S. Department of Housing and Urban Development. HUD is responsible for the contract administration; however, HUD has contracted with the Housing Authority to carry.out the contract administrative functions for five of the units under this program. The administrative functions relate to the five project based Section 8 rental vouchers at Coggins Square. 3 HOUSING AUTHORITY OF THE COUN'T'Y OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2005 (Continued) Section 8 Moderate Rehabilitation—is a U.S. Department of Housing and Urban Development funded rehabilitation program that provides project based rental assistance based on the Housing Choice Voucher methodology in determining subsidized rent and program compliance, CDBG Rental Rehabilitation Progam -Under the RRP, the Authority executes annual funding contract with Contra Costa County to fund the operations of a* program that assists rental property owners with rehabilitation of housing units to help assure a supply of affordable rental apartments and homes for its Section 8/Voucher users and other low-income households. Technical assistance in determining repairs is provided by Authority staff and below-market-rate loans are made to cover part of rehabilitation costs. Program administrative costs are shared by the funding providers and the Authority. Management Fund & County Pro rg�s —represents non-HUD resources developed from a variety of activities, including County cost reimbursement projects. Discretely Presented Component Unit: DeAnza Gardens L.P.(DeAnza,�-DeAnza was fonied as a limited partnership on December 3,2001 for the purpose of acquisition,ownership,maintenance,and operation of-180 multi-family affordable rental housing complex located in Contra Costa.County. The project was built on land owned by and leased from the Housing Authority of the County of Contra Costa.(the Authority). Under the terms of the lease,title to the improvements reverts to the lessor at the- end of the 75-year lease.The Project qualifies for low-income housing tax credits under Section 42 of the Internal Revenue Service Code. Such projects are regulated under terms of a Regulatory Agreement, including rent charges,operating methods and other matters. The general partner of DeAnza. Gardens L.P. is DeAnza Corporation Inc., a California public benefit ' corporation. The officers and Board members of the corporation are separate and apart from the Housing Authority..The only Board member position in the corporation that represents the Housing Authority is the Executive Director, who serves as one of the five board positions of the corporation. The Housing Authority has been designated as the managing general partner. The fund financial statements consist of the following: The Statement ofNet Assets presents information on the Authority's assets and liabilities,with the difference between the two reported as net assets. Over time,increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. The StatementofRevenues.Expenses and Changes in FundNetAssets presents information showing how the Authority's net assets changed during the most recent fiscal year.All changes in net assets are reported as soon as the underlying event giving rise to the change occurs,regardless of the timing of related cash flows. Thus,revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, The Statement of Cash Flows presents the change in the Authority's cash and cash equivalents during the most recent fiscal year, 4 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2005 (Continued) Also included in the Basic Financial statements are: Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data.provided in the fund financial statements. Supplemental Information. Certain information is required to be included in this report by various federal agencies. This information is included after the notes to the financial statements under the title supplemental information. AUTHORITY-WIDE STATEMENT TABLE 1 STATEMENT OF NET ASSETS The following table reflects the condensed Statement of Net Assets,for the primary government,compared to prior year. The Authority is engaged only in Business-Type Activities. March 3 1,2005 March 31.2004 Current assets $ 691291,143 $ 89,333,9164 Restricted assets 151228,796 - Capital assets,net of depreciation 20,144,089 20.9011,557 .Other noncurrent assets 2,518.025 2.307,686 Total assets $ 30.182,053 $ 30,652,407 Current liabilities 1,974,844 23o676.1482 Payable from restricted assets 5143,903 - Long term liabilities 7,005.615 5.859,610 Total liabilities 9.495,362 8.536,092 Net assets: Invested in capital assets,net of debt 14,564,679 16,850,288 Restricted 5833,616 - Unrestricted - 5.538.39b 5.266.027 Total net assets 20q6_86.691 22.116.3 15 Total liabilities and net assets $ 3 0.182,05 3 $ 30.652,407 Major Factors Affecting the Statement of Net Assets The only major change that affected the Statement ofNet Assets was in Long-Term Liabilities. This increase*was due to a loan made for the energy conservation program to upgrade the Public Housing Program Units. The original loan balance was$1,570,465. Restricted assets and payable from restricted assets were not broken out Kiri the prioryear's financial statements. These did not increase significantly,but were instead shown as part of current assets and liabilities in the prior year. 5 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2005 (Continued) Table 2 below presents details on the change in Unrestricted Net Assets. in TABLE 2 CHANGE OF UNRESTRICTED NET ASSETS Unrestricted net assets April 1,2004 $ 59266,027 Adjustments to beginning balance: Casa Del Rio reserves transferred to restricted net assets (571,919) Interest on long-term debt transferred to investment in capital assets,net of debt 830,593 Prior period adjustment effecting depreciation and capital assets (21,000) Prior period adjustment due to HUD settlement statements . ---97,4504 Restated unrestricted net assets as of April 1,2004 516205205 Net loss before contributions (3,557,216) Adjusted for depreciation which does not effect unrestricted net assets 3,258,746 Adjusted for interest expensed, but not paid 78,799 Capital contributions 2,888,961 Capital additions C4.,24830151) Debt issued 1,570,465 Debt retired (61,716) Casa Del'Rio transfer to restricted reserves for current year (11,4697) Unrestricted net assets March 31,2005 $ 5,538,396 While the.result of operations is a significant measure of the Authority's activities,the analysis of the changes in unrestricted net assets provides a clearer change in financial well-being. 6 I HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2005 . (Continued) TABLE 3 STATEMENT OF REVENUES,EXPENSES AND CHANGES IN NET ASSETS The following schedule compares the revenues and expenses for the current and previous fiscal year. The Authority is engaged only in Business-Type Activities. . March 31.2005 March 31.2004 Operating revenue: Rental and other $ 3,961,771 $ 4,029,606 Non-operating revenue: Federal.grants and subsidies 935,1759864 92541051028 Capital contributions 2,888,961 - Ground lease with a related party 132,000 Restricted cash 4,838 10,698 Interest earned on notes receivable 56,911 - Total revenues 100.220.345 96.450.332 Operating expenses: Administration 891973,935 109,2169004 Tenant services 592,9838 480,924 Utilities 1,193,571 1,33591389 Maintenance 4,263,603 3,330,294 General 868,990 1,122,532 Housing assistance payments 82,199,343 80,060,481 Depreciation and amortization 3,258,746 - 3,014,261 Non-operating expenses: Debt-service interest 221,499 - Non-routine maintenance 86.1642 76,084 Loan amortization 5,433 - Loss on sale of equipment - (630) Total expenses 100.888.600 99s.635,4339 Net income(loss) (668.9255) (39,1859007) Prior period adjustment _ 761,369) - Changes in net assets $ 0.429,462.4) $ (11 85.007) Major Factors Affecting the Statement of Revenue.Expenses and Changes in Net Assets The major factor affecting change in revenue,as reflected in Table 3 above,is an increase to federal grants. This was mainly due to an increase of$2 million in Capital Fund Grant Program revenue from HUD and a$3 million increase in annual contributions earned in the Housing Choice Voucher Program. HUD allowed the Authority to utilize project reserves to off set the increase in the Housing Assistance Payments. 7 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2005 (Continued) Major changes in expenses were primary due to an increase in housing assistance payments of the Housing Choice Voucher Program. Housing assistance payments increased due to rising subsidies to families and higher rents. Savings were recognized in the Administrative area over the prior year because of$1,000,000 grant to DeAnza. Corporation was-a one time expense in the prior year and because no additional employee contribution to the retirement fund were required in the current fiscal year. ASSET FUND NEn"t ANALYSIS TABLE 4 FUND NET ASSETS The following table shows an analysis of balances and transactions for the individual funds making up the agency- wide financial statements that comply with Generally Accepted Accounting Principles(GAAP), Housing Casa Public Capital Fund Choice Del Nomrnaj or Housing Grants Vouchers Rio Funds Total Net assets,beginning of year $ 144491,,440 S 2q4784-901 1%819,a951 J-2229,417, 1,096%606 $ 22,116.315 Operating income(loss) (61319,809) (1$1159049) (863,064$143) (812609) (31,032,1645) (96,16139255) Non-operating revenue(expenses): - - %Wf Grants 3$7509821 190569870 859249,853 391189320 93,11759864 Ground lease to a related party 1321,000 M 132,000 Restricted interest 4,838 41,838 Interest earned on notes rec 29$918 263,993 56,911 Non-routine maintenance (809260) (19) (743) (5,620) (869642) Amortization-loan fees (51433) (59433) Debt-service interest (1014131) (228) —(1204132) (8) (221,1499) Net income(loss)before Contributions and transfers (29613$541) (589198) (7852343) (207,174) 107,040 (39,5573,216) Capital contributions 2$8889961 2,,t888,961 Operating transfers in go 12$457 12,457 Operating transfers out (12$457) M (12,457) Equity transfer 1,869.459 (1.869.459) Net income(loss) (756,1539) 961,304 (7859343) (207,174) 1199497 (6689255) Prior period adjustment (858e873) 98.271 (767) (761,36 ) Change in fund net assets -(1,615Al2) 961.304 (687,4072) (207 1184730A -0%429262a)j Net assets,end of year $12.4876e028 .3 440 $ La 132 m�7� 2 ===a021243 1_1215336 1 20,686,691 8 HOUSING AUTHORITY OF THE COUNTY OF CO NTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2005 (Continued) CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As ofyear-end,the Authority had$20.14 million invested in a variety of capital assets,which is virtually unchanged and is reflected in the following schedules. TABLE 5 CAPITAL ASSETS March 31 2005 March 31.2004 ChanRe Land $ 1,495,202 $ 1514959202 $ - Buildings 793,4689079 76,273,191 33,194,9888 Equipment 1,590,135 1.1594p537 (45,402) Accumulated depreciation (65,657,280) (61,6303,974) (4,026,306) Construction In Progress 3.247.953 2.279.601 968.352 Total 1 20.144.089 20.011.557 $ 132.532 The following reconciliation summarizes the change in Capital Assets. TABLE 6 CHANGE IN CAPITAL ASSETS Fixed assets-beginning of year $ 20,011,557 Additions: Energy lease 13,3523,468 Capital Fund Grant 2,888,961 Equipment 6,722 Depreciation (3,258,746) Prior period adjustment effecting depreciation (856.873) Fixed assets-end of year $ 20,144,089 Notes Payable Outstanding As of year-end,the Authority had$4,855.,018 of notes payable outstanding,see Note 7 to the financial statements. 9 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 319 2005 (Continued) ECONOMIC FACTORS Significant economic factors affecting the Authority are as follows: Federal-funding of the Department of Housing and Urban Development Local labor supply I and demand,which can affect salary and wage rates Local inflation,recession and employment trends,which can affect resident incomes and therefore the amount of rental income Local rental market & economy that has direct effect on the ability to find viable privately owned rental properties that are available to our Housing Choice Voucher participants, Inflationary pressure on utility rates, supplies and other costs FINANCIAL CONTACT The individual to be contacted regarding this report is John Hunter,Director of Finance of the Housing Authority of the County of Contra Costa,at(925)957.,8014. Specific requests may be submitted to John Hunter, Director of Finance,Housing Authority of the County of Contra Costa.,P.O.Box 2759,3133 Estudillo Street,Martinez,CA 94553* 10 Harn Dolan Certified Public Accountants - 2423 Stirrup Court Walnut Creek, California 94596-6526 (925)280-1693 Fax(925) 938-4829 INDEPENDENT AUDITORS' REPORT To the Board of Commissioners Housing Authority of the County of Contra Costa Martinez, California We have audited the accompanying financial statements of the business-type activities, the aggregate discretely presented component units,each major fund,and the aggregate remaining fund information of the Housing Authority of the County of Contra Costa, California, as of and for the year ended March 3 1, 2005, which collectively comprise the Authority's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Housing Authority of the County of Contra Costa, California's, management. Our responsibility is to express opinions on these financial- statements based on our audit. We did not audit the financial statements of HACCC Casa Del Rio,Inc,a California Nonprofit Public Benefit Corporation and CDR Senior Housing Associates,a California Limited Partnership,which are combined and reported as blended component units titled Casa Del Rio Hou-sing in the fund financial statements. We did not audit the financial statements of DeAnza Housing Corporation, a California Nonprofit Public Benefit Corporation and DeAnza, Gardens L.P. a California Limited Partnership,which are combined and reported as discretely presented component units titled Component Units in the Authority-wide financial statements. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for Component Units and Casa Del Rio Housing is based on the reports of the other auditors. 4 We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 and the reports of other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly,in all material respects,the respective financial position of the bus iness-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Housing Authority of the County of Contra Costa,California,as of March 3 1,2005,and 11 the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with GovernmentAuditing Standards,we have also issued a report dated August 30,200510 on our consideration of the Housing Authority of the County of Contra'Costa's internal control over financial reporting and on our tests of its compliance with certain provisions of laws,regulations,contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opon on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit. The management's discussion-and analysis on pages 1 through 10, is not a required part of the basic' financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We and the other auditors have applied certain limited procedures,which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However,'we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Housing Authority of the County of Contra Costa.,California,basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for the purpose of additional analysis as required by the U.S.Office of Management and Budget Circular A-13 3,Audits of States,Local Governments, and Non-Profit Organizations,and is not a required part of the basic financial statements. Also,the accompanying Financial Data Schedule, included on pages 49,,53 is presented for-purposes of additional analysis as required by U.S. Department of Housing and Urban Development, Real Estate Assessment Center and is not a required part of the basic financial statements. Also,the accompanying 40 Statement of Completed Capital Fund Program Project is presented for the purpose of additional analysis as required by the U.S. Department of Housing and Urban Development and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and,in our opinion,is fairly stated,in all material respects,in relation to the basic financial statements taken as a whole. leal ef ot 4100001 August 30, 2005 12 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATEMENT OF NET ASSETS MARCH 31,2005 Primary Component Government Units Business-type Activities ASSETS Current assets Cash and investments(Note 2) $ 5,304.9758 $ 82,667 Due from related parties(Note 15) - 2230902,457 Due from other agencies 308,660 Tenant accounts receivable 192.9510 21,442 Allowance for doubtful accounts (53.9000) - Other accounts receivable 21,211 4831441 Interest receivable 61,274 Notes receivable-short term(Note 5) 251,655 - Prepaid expenses 204.075 - Total current assets 6.29 1.1 43 23.055.007 Restricted assets: Restricted cash(Note 2 and 3) 1.228.796 42,236 Fixed assets(Note 6 and 15): Land 1,495,202 - Buildings 78,980,618 35,0141,962 Leasehold.improvements 487,461 - Furniture and equipment 13,5909,135 477,933 Construction in progress 33,2479953 - Accumulated depreciation (65.657.280) (76.814) OW Total fixed assets 20.144.089 35.416,081 Other noncurrent assets: Long-term notes receivable(Note 5) 2,065,231 - Interest receivable on long-term notes(Note 5) 2583,292 - Due from related parties(Note 15) 132,000 279 Loan costs(net of amortization of$86,806 and$1,329) 62,502 315,152 .6 Total other noncurrent assets 2.4518.025 315:1805 Total assets $ 30.182.053 $ 58.829,4129 13 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATEMENT OF NET ASSETS MARCH 31,2005 (Continued) Primary Component Government Units Business-type Activities LIABILITIES Current liabilities: Accounts payable $ 379,503 $ 31395,_867 Due to related parties(Note 15) am 19021,1495 Due to other agencies 419,642 Accrued salaries and related costs 152,1055 Tenant security deposits 2619604 Accrued-interest(Note 7) 16,1782 92,924 Unearned revenue(Note 9) 657,605 Current portion of compensated absences(Note 1.H.) 3149,035 Current portion of long-term debt(Note 7 and 15) 115.610 .244,096,4539 Total current liabilities 11974,844 283,606,825 Payable from restricted assets: Tenant security deposits 26,870 42,236 Family self sufficiency escrows 488,033 Other noncurrent liabilities, Long-tern portion of compensated absences(Note 1.H.) 713772 Long-,term debt(Note 7 and 15) 43,5549400 190003,000 Other noncurrent liabilities(Note 10) 253793443 Due to related parties(Note15) 234310- Total liabilities 9,449362 29.8833715 NET ASSETS(Note 11) Investment in capital assets,net of related debt 14,15649679 11,2269618 Restricted net assets 583,616 Unrestricted net assets 5.538j396 17.719.140 Total net assets 2046864691 28,4945,4758 Total liabilities and net assets $ 30,41822053 $ 58.829,129 The accompanying notes are an integral-part of this statement 14 ON 00 cn cn 00 ACT 00 Cf) CA C* C-4 oo r- `o N 00 00 C',00 c �yN C!Of 7-4 Q . - a 64c) � � d ` � o o°Oo 00 00 00 00 d� � .o oNo opo � `r"fid" N � � rr"' , r+ � Moo. M A cn cf4 4) te r, d' 2tn �cn 00 00 c OSAqllrr ta 00 CV) -t- 0 00 0- cn O cn �n ;4p), W � by N � � 4,4 r. N 00 d.00 oo cn t/1 H tet- � �p � p v`ni^ ..°�,, ° p" d � N '� !.1 v 'c � o +3 00 CC,� CC, N � `fir' N o c�•� � �j '�� N off, �v' r' ''` Co 'r' � H Q� �, C7 4r) 00 O 0 44- �011 co .0 rp 0 En tl 0 � 0 � � �'� ,te a V145w' '� V o �4- ami � w � °� •� +' x � •o � o � � oo W HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATEMENT OF NET.ASSETS-PROPRIETARY FUNDS MARCH 31,2005 Business-type Activities Public PH-Capital Hsg Choice Casa Del Nonmaj or Housing Fund Voucher Rio Housing Funds Totals ASSETS Current assets: Cash and investments(Note 2 $ 793,174 $ - $ 2,452,031 $ 176,153 1,883,400 $ 59304,758 Due from other fundsote 4 2,442,654 - - - 529498 214959152 (N ) agencies Due from other - 1959548 - - 1139112 3085660 Tenant accounts receivable 1879256 - - 59254 - 192,510 Allowance for doubtful accounts (53,000) - - - - (53,000) Other accounts receivable 2,990 32 39863 140 69081 139106 Interest receivable 29837 - 39854 - 54,583 619274 Short-term notes receivable(Note 5 251,655 2519655 Prepaid expenses 112.533 2.438 33.d50 55,128 ew� 326 204,075 p Total current assets 3,488.444 198.018 2.493,398 236,675 2361,655 8,778,190 Restricted assets: Restricted cash(Note 2 and 3) 15 6 465.155 612,515 1,228,796 Fixed assets(Note 6): _ Land 190269405 - - 4689797 - 194959202 Buildings 7226439759 - - 6,262,444 74,415 78,980,618 Leasehold improvements - - 4879461 - - 4879461 Furniture and equipment 5799447 290,987 3809,755 112,361 2269585 195909135 Construction in progress - 3,247,953 - 3,247,953 Accumulated depreciation (62.906.425) (98,735) (531,678) (10819,1442) , (301,00 (65,657,280 Total fixed assets 11.343.186 3.440.205 .33.6,538 5,024,160 - 20,144,089 Other noncurrent assets: Lon -term notes receivable(Note 5 - - 1,000,000 185,000 1,065,231 2,250,231 g ) Interest on (Note notes term-long 5) - - 120,000 - 138,292 258,292 Due from related (NoteS arties 1 132,000 - - - 132,000 p ) so Loan costs net of amortization of$86,806) - - - 62,502 - 62,502 Total assets 15 113,1756 3 638,223 $ 4,416,091 $ 6,120,852 $ 3,565,178 U.2 .j854,1100 LIABILITIES Current liabilities: Accounts a able $ 339507 $ 871 $ 5,114 $ 8,790 $ (10,779) $� 379503 pY Due to other funds(Note 4 - 154,882 2,304,650 - 27,515 2,487,047 Du ) Due to other agencies 719558 - 3169895 - 31,189 419,642 'es and related costs 147,456 897 - 3,502 - 200 1522055 Accrued salaries . Security deposits 261,604 - - - - 2619604 c ty p Accrued interest ote7 - - - 16,782 - 169782 Unearned revenue(Note 9 36,949 - 2,786 617,870 657,605 Un ) Currentortion of compensated absences 130,153 29,279 145,100 - 9,503 3149035 p mmmmm� - Current p g onion of lon -term debt ote 104.272 - - 11346 - 115.618 Total current liabilities 7853,499 185,929 297759261 399704 6759498 494613,891 Payable from restricted assets: security deposits - - - 26,870 - 262870 Tenant s ty p Family self sufficient escrows - - 4889033 - - 4889033 . y y Other noncurrent liabilities: - Long P compensated onion of com ensated absences 379254 129089 199918 - 2,511 719772 Long-term debt(Note 7) 194149975 3,1399425 185,000 497399400 Other noncurrent liabilities(Note 10) - - - 892.610 1,486.833 2,379.443 Total liabilities 2,237.728 198,018 3,2834212 43098,609 2.349,842 12,167,409 NET ASSETS(Note 11) Investment in ca ital assets net of debt 998239939 3,440,205 336,538 9639997 - 14,564,679 p � . Restricted net assets - - - 5839616 - 5839616 Unrestricted net assets 3.052.089 - ww� 796.341 47030 14215336 ._5,538,396 Total net assets _123876,028 3.440,205 12132,879 2,022,243 1,215,336 20_,686 691 Total liabilities and net assets 15.113356 336382 3 4.416.091 6 120.852 $ 3,565,178 $32,854,100 The accompanying notes are an integral part of this statement. 16 MOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATEMEENT OF REVENUES,EXPENSES,AND CHANGES IN FUND NET ASSETS . PROPRIETARY FUNDS FOR THE YEAR ENDED MARCH 319 Business-tune Activities Public PH-Capital Hsg Choice Casa Del Nonmaj or Housing Fund Voucher Rio Housing Funds Totals Operating revenue: Rents $ 393749576 $ - $ - $ 4059838 - $ 397809414 Interest-unrestricted 6,811 - 159627 99216 13,900• 17v754 Other 733483 - 237297.444 79,947 163 603 Total operating revenue 3,454,870 - 18. 356 422,498 66.047 3.961.771 Operating expenses: . Administration 196359814 5329482 5029480 128,537 218.9622 8 197 935 Tenant services 949194 1459,101 809,461 - 273,082 592,838 Utilities 19067,201 279235 379606 61,529 • 1,1939571 Maintenance 395989245 3479871 799908 10030452 - 13711127 49263,603 General 5129666 43,162 2953,073 453724 119,365 8681,990 Housing assistance payments - - 799740,847 - 2,4583,496 82,199,343 Depreciation(Note 6) 23866,559 58,198 166.124 167.865 - 3.258,746 Total operating expenses 9,774,679 14115,049 86,082,499 504,107 3,098,692 100575,026 Operating income(loss) (6,319,809) (1911530049) (86,10643,143) (81,609) (3,032,645) (96,61331255) Nonoperating revenue(expenses): Grants 39750,821 1,0569870 85,2499,853 - 391189320 9391752864 Ground lease to a related party(Note 15) 1329000 - - - - 132,000 Restricted interest 49838 - - - - 49838 Interest earned on notes receivable(Note 5) - - 299918 - 269993 569911 Non-routine maintenance (80,260) (19) (743) (5,620) (86,642) Amortization-loan fees - - - (5,433) - (59433) Debt service-interest(Note 7) (10133 1) - (228) (1203132) (8) X221,499) Net income(loss)before contributions and transfers (2,613,541) (58,198) (785,343) (207,174) 1079040 (39-5579216) Capital contributions in 29888,961 - - - 2,888,961 Transfers from other funds 198699459 - - - 129457 19881,916 Transfers to other funds (12,457) (1,869,459) - - - (1,881,916) Net income(loss) (756,539) 961,304 (785,343) (207,174) 119,497 (668,255) Net assets-beginning of year, as originally stated 14,4911,440 29,4789901 198199951 29229,417 1,0969606 223,1169315 Prior period adjustments(Note 12) (858.873) - 98,271 - (767) (761,369) Net assets-beginning of year,as restated _ 13,632,567 2,478,901 1,918,222 2,229,417 1,095.839 21,354,946 Net assets-end ofy ear $12,876,028 - , 3 440 205 $ 1,132,879 $ 2,022,243 $ 1,215,336 $20,686,691 The accompanying notes are an integral part of this statement. 17 HOUSING AUTHORITY CSF T]11E COUNTY OF CONTRA COSTA STATEMENT OF CASH FLOWS PR OPRIETARY FUNDS FOR T YEAR ENDED MARCH 31,2005 Business-ft: e Activities Public PH-Capital Hsg Choice Casa Del Nonmajor Housing Fund. Voucher Rio Housin Funds Totals Cash flows from operating activities: Rental receipts $ 3,170,320 $ $ $ 408,118 $ up $ 3,578,438 Interest receipts 13,121 11,773 91,216 (13,274) 20,836 Other receipts 70,644 (32) 30,680 52,382 3879040 540,714 Payroll and benefit expenditures (396119747) (4479611) (49817j063) (34,345) (432,751) (99343$517) Administration expenditures (380$920) (859230) (198169642) (94.0992) (6,955) (293849739) Tenant services expenditures (26t825) (1459101) (50) me (1622512) (3349488) Utilities expenditures (190679201) (279235) (379606) (612529) go (19193,571) Maintenance expenditures (192260896) (347,1012) (78,383) (1009354) (329405) (19785,050) General expenditures (265,9435) (31,038) (2629605) (92,711) (113,349) (63 5,13 8) Housing assistance payment expenditures (79.56142J2 (2,556,236) (82,119.658} Net cash provided(used)by operating activities (3.3245391 U.055259) (86.533.31 85385 J2.8283442) 1914656.173) Cash flow S from nondapital financing activities: Operating.grants received 3,750,821 943,918 88,3319218 39192,764 96,218,721 Interest on restricted cash 49838 W I= 4,838 Interfund borrowing (1889199) 111,358 290,305 (2219570) (81106) Operating transfer (129457) Im 12,457 - Borrowing with related parties 40 wo (159000) (15,000) Non-routine maintenance expenditures (829260) (17) (971) (52621) (883,869) Repayment of notes receivable 226,469 2261P469 Interest received on notes receivable 59,9646 591,646. Notes receivable issued - - - �_(104,765) (104s765) Net cash provided(used)by noncapital financing activities 3.472,743 1.055.259 88.620.552 _115 1159,380 96,292,1934 Cash flows from capital financing activities, Grants received to acquire capital assets 298883,961 2,888,961 Issuance of debt 13,570,465 1s570,465 Acquisition of capital assets (1,35'99190) (298889961) 40 (43,2489151) Principal paid on debt (519218) go (109498) (619716) Interest paid on debt (101.131) (413333) (142.v464) Net cash provided(used)by capital financing activities 58,926dw (51,831) 7,095 Net increase(decrease)to cash 2069730 290879234 18,954 3309938 21643,856 Cash at beginning of year 736,570 to 830,952769714. ..-1,552,462 3.889,698 Cash at end of year 943300 $ 2.9108�186 $ 78.8 .1668 1,883,400 1.6.,533,4534 Cash and investments $ 7939174 $ 294522031 $ 176,153 $ 13,8839400 $ 5,13049758 Restricted cash ew� 15 466.155 612s51. 1,1228396 Total cash at year end 943 300 2918,186 $ 78.8t668 1.1 _q881400 6,531554 18 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED MARCH 31,2005 (Continued) Business-tune Activities Public PH-Capital Hsg Choice Casa Del Nonmajor Housing Fund Voucher Rio Hou sin¢ Funds Totals Reconciliation of operating income(loss)to net cash provided(used)by operating activities: Operating income(loss) $(69319.1809) $(1,115,049) $(86,064,143) $ (81,609) $(3,032,645) $(96,613,255) Adjustments to reconcile operating income(loss)to net cash provided (used)by operating activities: Depreciation expense 21,866,559 589198 166,124 1679865 - 3,2589746 (Increase)Decrease in: Tenants accounts receivable 339525 - - (1,002) 2749171 3069694 Due from other agencies - - - - (971,740) (97,740) Other receivable (2,839) (32) 27,951 - 266,135 291,215 Interest receivable 69310 - (3,854) - 59161 79617 Prepaid expenses 99905 19124 329468 (3,453) 17 409061 Increase(Decrease)in: • Accounts payable (45,9072) 858 (816,649) (98) (129,290) (990,251) Due to other agencies 719558 - - - - 71,558 Tenant security deposits (31,719) - - 496 (.42) (31,265) Accrued salaries 122,336 (235) (6,376) 800 (1,587) 1145,938 Unearned revenues (40,295) - - 2,786 (123,308) (160,817) FSS escrows - - 177,425 - - 1779425 Compensated absences 4.602 (123) (46.264) 10.686 (314,499) Net cash provided(used) by operating activities $(3.324.939) (L0553252) 1(86.,53333-18) 85.785 $(2.828,442) 91,656.173) Noncash transactions: • To facilitate the close out of a Capital Fund Grant,fixed assets in the amount of$1,935,758 and accumulated depreciation of $66,300 were transferred from the Capital Fund Grant Enterprise Fund to the Public Housing Enterprise Fund. The accompanying notes are an integral part of this statement. 19 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 Note 1 - SUMMARY OF SIGNITICANT ACCOUNTING POLICIES The basic financial statements of The Housing Authority of the County of Contra Costa. (the Authority)have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental entities. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establiCalshing governmental accounting and financial reporting principles. A. Organization The Housing-Authority of the County of Contra Costa (the Authority) was established pursuant to the State Health and Safety Code in 1941. The Authority is a public entity organized under the laws of the State of California's Health and Safety Code to provide housing assistance to low and moderate income families at rents they can afford. Eligibility is determined by family composition and income in areas served by the Authority. To accomplish this purpose,the Authority has entered into Annual Contributions Contracts with the U.S.Department of Housing and Urban Development(HUD)to operate assisted housing programs. The governing board of the Authority is the County Board of Supervisors,which appoints a seven member advisory board. Although the Authority is a legally separate Agency, maintaining separate accounting records,staff,and administration facilities,the fact that the governing board is tile same as the County's defines the Authority as a blended component unit of the County of Contra Costa. The Authority's financial information-is therefore included as such in the Comprehensive Annual Financial Report of the County of Contra Costa. A copy of this report may be obtained by contacting the Office of the Auditor- Controller,625 Court Street,Martinez,California 94553. Be Financial Reporting Entitv The Authority's combined financial statements include the accounts of all the Authority's operations. The criteria for including organizations as component units within the Authority's reporting entity, as set forth in Section 2100 of GASB's Codification of Governmental Accounting and Financial Reporting Standards,include whether: * The organization is legally separate(can sue and be sued in their own name) * The Authority holds the corporate powers of the organization * The Authority appoints a voting majority of the organization's board * The Authority is able to impose its will on the organization * The organization has the potential to impose a financial benefit/burden on the Authority * There is financial dependency by the organization on the Authority 20 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH.31,2005 Note 1 (continued) (Continued) Based on the aforementioned criteria, the Authority has blended and discretely presented component units. The accompanying financial statements present the Authority and its component units,entities.for which the Authority is considered to be financially accountable. The blended component units,although legally separate entities,are,in substance,part of the authority's operations. Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the government. The component units are as follows: Blended Component Units. HACCC Casa Del Rio, Inc (A California Nonprofit Public Benefit Corporation) and CDR Senior Housing Associates (A California Limited Partnership) . HACCC Dasa Del Rio, Inc. is the general partner of CDR Senior Housing Associates. The officers and Board members of HACCC Casa Del Rio,Inc.are employees of the Authority. The partnership was formed i 1 1994 to develop and operate an 82-unit affordable housing rental complex located in Antioch,California,which is currently known as Casa Del Rio Senior Housing. Casa Del Rio Senior Housing was placed into service in 1995. Pursuant ,to the Indemnification Agreement dated July 1, 19941 by and among the Authority,HACCC Casa Del Rio, Inc., CDR Senior Housing Associates, and MHIFED I Limited Partnership, the Authority could possibly be liable for unpaid taxes, interest and penalties,, cost to contest, operating deficiency and expenses of enforcement as identified in the Agreement and for a sponsor's operating guaranty to provide sufficient staff or equipment to the general partner, as needed and remedies against sponsor for default under the Amended HCD Agreement. Casa Del Rio Senior Housing participates in the low-income housing tax credit program under Section 42 of the Internal Revenue Code. Various agreements dictate the maximum income levels of new tenants and also provide rent restrictions through 2054. Discretely Presented Component Units. DeAnza Housing Corporation (A California Nonprofit Public Benefit Corporation) and DeAnza Gardens, L.P. (A California Limited Partnership). The Authority is the General Partner and DeAnza Housing Corporation in the managing general partner of DeAnza Gardens, L.P. The partnership was formed for the purpose of acquisition, ownership, maintenance, and operation of 180 multi-family rental housing units and the provision oflow-income housing through the construction,renovation, rehabilitation,operation,and leasing of an affordable housing development located in Contra Costa.County,which is currently known as DeAnza Gardens. DeAnza-Gardens was placed into service during 2004. It was built on land owned by and leased from the Authority. Under the terms of the lease,title to the improvements revert to the Authority at the end of the 75-year lease. Financing for construction was obtained through notes from the Authority, Bank of America, and DeAnza Housing Corporation, 21 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note.1 (continued) DeAnza Gardens participates in the low-income housing tax credit-program under Section 42 of the Internal Revenue Code. Various agreements dictate the maximum income levels of new tenants and also provide rent restrictions through 2078, Complete audited financial statements are issued separately for each of the individual component units listed above and may be obtained from the Housing Authority of the County of Contra Costa, 3133 EMartinez, California 94553. C. Basis of Presentation* Government-Wide Financial Statements: The Statement of Net Assets and Statement of Activities display ino 'ation about the Authority as a whole. They *include all funds of the Authorityand a column for discretely presented component units. The Authority has no fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities ' financedgenerally are through taxes, *intergovernmental revenues and other non-exchange revenues. Business-type activities are financed in whole or in part by fees charged to f6w external parties for goods or services. The Authority's activities are strictly business-type, Fund Financial Statements: .Fund financial, statements of the Authority are organized into funds, each of which is .considered a separate 'accounting entity. The operations of each,fund are accounted for within a separate set of self balancing accounts that comprise its assets, liabilities, fund Is Is a equity, revenues, and expenses/expenditures-as appropriate. Government resources are allocated to,and accounted for, in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. A fund is considered major if it is the primary operating fund of the Authority or if total assets, liabilities,revenue, or expenses/expenditures of the individual fund are at least 10 percent of the Authority-wide total. The major enterprise funds,and a description of their purpose, for the fiscal year ended March 31,2005, are as follows: Public Housing Program Fund The Authority has contracted with HUD(Contract No. SF-477)to provide housing for low-income families pursuant to the United States Housing Act of 1937 and the Department of Housing and Urban Development Act., Under this program, the Authority has used loans and grants from HUD to develop and maintain housingwhich is rented to qualified low-income families. The notes an bonds used to develop the initial properties are guaranteed by HUD. HUD instructed all Authorities to remove this debt from their books of accounts. These HUD-guaranteed notes and bonds 22 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 1 (continued) have not been forgiven by HUD. The Public Housing Program's Annual Contributions 40 Contract (ACC) states that all debt services requirements related to these notes will be HUD's responsibility. It is therefore management's opinion,that the Authority is not liable for these notes and bonds unless the federal government fails to honor the ACC. Public Housing Capital Fund Program-This program,funded by HUD,provides funds for the modernization of Public Housing units. During modernization,costs are accounted for in this Enterprise fund. Uponcompletion of the modernization for each specific.grant, the capital assets are transferred to the Public Housing Program Enterprise Fund. Housing Choice Voucher Program Fund - The Authority has contracted with HUD (Contract No. SF-473) to provide rent subsidy payments to-low and moderate income families pursuant to the United States Housing Act of 193 7 and the Department Of Hous ing and Urban Development Act. Under this programHUD makes annual contribution payments to the Authority for housing assistance payments(HAP)made on behalf of the families and an administrative fee to cover.the Authority's costs of administering the program. Program participants lease directly with private owners after being certified, by Authority staff, as eligible under HUD regulations. Program participants make payments directly to owners for their portion of the rent,as calculated by Authority staff based on HUD regulations, while 40 the Authority pays the remaining portion of the rent to the owners. Casa Del Rio Housing-Seethe discussion on blended component units in Note I.B.above. Both of the blended component units are included in this column. Non Major Funds: 1. Shelter Plus Care 2. -Section 8 Moderate Rehabilitation 3. Section 8 Rental Voucher 4. CDBG Loan 5. Rental Rehabilitation Loan 6. Camp D.E.F.Y. 7. Management Fund 8. County Programs The various funds are grouped by-fund type in the combined financial statements as follows: 23 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL*STATEMENTS MARCH 31,2005 (Continued) Note 1 (continued) PROPRIETARY FUND TYPES Enterprise Funds Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises,where the intent is that costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Enterprise funds are also used when the governing body has decided that periodic determination of revenue eamed, expenses incurred, or net income is appropriate for capital maintenance, public -policy, management control, accountability or other purposes. At Accounting D. Measurement Focus and Basis 01 Measurement focus refers to what is being measured;basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made,regardless of the measurement focus applied, The Proprietary Fund Types are accounted for on an economic resources measurement focus using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recorded at the time liabilities are incurred. Under this basis of accounting and measurement focus, the Authority applies (a) all GASB pronouncements and (b) FASB Statements and Interpretations,APB opinions,and Accounting Research Bulletins issued on or before November 30, 1989, except those that conflict with a GASB pronouncement, Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses result from providing goods and services related to the 0 fund's ongoing operations. The principal operating revenue of the Authority's enterprise funds is dwelling rental income, Operating expenses are necessary costs that have been incurred in order to provide the good or service that is the. primary activity of the fund. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. E. Interfund Transactions Short-term amounts due between funds are classified as"Due from/to other funds". For the purpose of the Authority-Wide Statement of Net Assets,, due from/to other funds, totaling.$2,487,047,have been eliminated. See also Note 40 24 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 1 (continued) A long-term note due from the Management Enterprise Fund to the blended component unit,HACCC Casa Del Rio,Inc in the amount of$185,000 has been eliminated from the Authority-Wide Statement of Net Assets. See also note 5 and 7. Participants of the Housing Choice Voucher Program have decided to occupy units owned by the Authority's blended component unit. Housing assistance payments made by the Housing Choice Voucher Program to Casa Del Rio Senior Housing(CDR)totaled$16,586, for the fiscal year ended March 31, 2005. CDR has a fiscal year end of December 3 1, which differs from the fiscal year end of the primary government. HAP paid during CDR's fiscal year totaled$15,937. The difference is insignificant. CDR also pays the Authority $44,724 annually for management fees. Interfund revenue/expenses of$61,3 10 have been eliminated for the purpose of preparing the Authority-Wide Statement of Activities. Interfund transfers were made to close out programs and grants. Interfund transfers of $1,881,916 have been eliminated from the Authority-Wide Statement of Activities. F. Capital Assets Capital Assets, which include property, plant and equipment, acquired for Proprietary Funds are capitalized in the respective funds to which they apply. The Authority has an established capitalization policy,which requires all acquisitions of property and equipment in excess of $5,000 and all expenditures for .repairs, maintenance, renewals, and betterments that materially prolong the useful lives of assets to be capitalized. Property and equipment are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Interest expense incurred during the development period is capitalized. The costs or normalmaintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Depreciation of exhaustible fixed assets used by 'Proprietary Funds is charged as an expense against operations,and accumulated depreciation is reported on the Statement of Net Assets. Capital assets are being depreciated using the straight-line basis over the useful lives of the assets gepqLajl�as follows: Years- Computer Hardware and Software 3 Furniture and Equipment 5 Vehicles 5 Building Improvements 10 Buildings 27•5 25 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 1 (continued) G. Accounts Receivable Receivables are principally amounts due from HUD and tenants. Allowance for doubtful accounts has been provided based on the-likelihood of the recovery. H. Compensated Absences It is the Authority's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for unpaid accumulated sick leave since the government does not have a policy to pay any amounts when employees _. . separate from service with the Authority. All vacation pay is accrued when incurred and allocated to the appropriate-proprietary fund. Total liability for the Authority is $385,807 based on year-end hourly rates. Of this amount$314,,035 is considered by the Authority.to be a current liability. I. Net Assets Net assets represents the differences between assets and liabilities,, Net Assets consist of investment in capital assets,net of related debt;restricted net assets;*and unrestricted net assets. Net assets invested in capital assets,net of related debt,consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of borrowing used for acquisition, construction, or improvement- of those assets (excluding interfund borrowing and including accrued interest). Net assets are reported as restricted when there are limitations unposed on their use through constitutional provisions or enabling legislation or through external restrictions imposed by creditors, grantors,or laws or regulations of other governments. J. Cash and Investments Cash includes amounts in demand deposits and saving accounts. Investments are reported in the accompanying statement of net assets at fair value. . Changes in fair value that occur during a fiscal year are recognized as interest income reported for that fiscal year. Interest income includes interest earnings,changes in fair value, and any gains or losses realized upon the liquidation, maturity, or sale of investments. The Authority pools cash and investments of all funds. Each fund's share in this pool is displayed in the accompanying financial statements as cash and investments,, Interest income earned by the pooled investments is allocated to the various funds based on each fund's average cash and investment balance. . 26 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH31,2005 (Continued) Note 1 (continued) K. Tates The Authority is exempt from federal and state income taxes. The Authority is also exempt from property taxes but makes payments in lieu of taxes on owned housing. L. Budgets and Budgetary Accounting The Board of Commissioners adopts an operating budget no later than April 1. This budget is revised by the Board of Commissioners during the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption. M. Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities,and the reported revenues and expenses. Actual results could-differ from those estimates. N. Encumbrances Encumbrance accounting is not employed by the Authority. O. Grant Restrictions The Authority has received loans and grants from the U.S.Department of Housing and Urban Development. The grants require that only individual and families that meet various income,-age and employment standards be housed or aided. Note 2- CASH AND INVESTMENT Cash and investments as of March 31, 2005 are classified in-the accompanying financial statement as follows: Statement of net assets: Cash and investments $ 593043,758 Restricted cash 1,4228.796 Total Cash&Investments $ . 6,45334554 Demand deposits $ 2302029505 Investments 4,33 1,049 Total Cash&Investments 6,533,554 27 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 2 (continued) Investments authorized by the authority is empowered by the HUD Notice 99-48 and its own investment policy to invest HUD funds in the following: • United.States Treasury Bills,Notes and Bonds; • Obligations issued by Agencies or Instrumentalities of the U.S. Government; • State or Municipal Depository Funds,such as the Local Agency Investment Fund(LATE) or pooled cash investment funds managed by County treasurers; • Insured Demand and Savings Deposits,provided that deposits in excess of the insured amounts must be 100%collateralized by federal securities; • Insured Money Market Deposit Accounts; • Insured SUPER NOW accounts,provided that deposits in excess of the insured amount must be 100%collateralized by federal securities; • Negotiable Certificates of Deposit issued by federally or state chartered banks or associations,limited to no more than 30%of surplus funds; • Repurchase/Reverse Repurchase Agreements ofany securities authorized by this section; securities purchased under purchase agreements shall be no less than 1026/o of market value; • Sweep Accounts that are 100%collateralized by federal securities; • Shares of beneficial interest issued by diversified management companies investing in the securities and obligations authorized by this Section (Money Market Mutual Funds); Funds must carry the highest rating of at least two national rating agencies and are limited to not more than 20%of surplus funds; • Funds held under the terms of a Trust Indenture or other contract or agreement including the HUD/PHA Annual Contributions Contract, may be invested according to the provisions of those indentures or contracts;and Any other investment security authorized under the provisions of HUD Notice PIH 97-41. The Authority is empowered by the California Government Code(CGC) Sections 5922 and . 53601 et seq and its own investment policy to invest non-HUD funds in the following: • Bonds issued by the local entity with a maximum maturity of five years; • United States Treasury Bills,Notes and Bonds; • Registered state warrants or treasury notes or bonds issued by the State of California; • Bonds,notes,warrants or other evidence of debt issued by a local agency within the State of California,including pooled investment accounts sponsored by the State of California, County Treasurer,other local agencies or Joint Powers.Agencies; • Obligations issued.by Agencies or Instrumentalities of the U.S. Government; • Bankers Acceptances with a term not to exceed 270 days,limited to 40%of surplus funds; no more than 3 0%of surplus funds can be invested in Bankers Acceptances of any single commercial bank; . 28 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO TIRE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 2.(continued) • Prime Commercial Paper with a term not to exceed 180 days and the highest ranking issued by Moody's Investors Service or Standard & Poor's Corp., limited to 15% of surplus funds;provided that if the average total maturity of all commercial papers does not exceed 31 days up to 30%of surplus funds can be invested in commercial papers. • Negotiable Certificates of Deposit issued by federally or state chartered banks or associations,limited to not more than 30%of surplus funds; • Repurchase/Reverse Repurchase Agreements ofany securities authorized by this Section, securities purchased under these agreements shall be no less than 102%of market value. Securities purchased under reverse repurchase agreements shall be for temporary and unanticipated cash flow needs only. • Medium term notes(not to exceed two years)of U.S.corporations rated"AAA"or better by Moody"s or Standard&Poor's limited to not more than 30%of surplus funds; • Shares of beneficial interest issued by diversified management companies investing in the securities and obligations authorized by this Section (Money Market Mutual Funds), limited to not more than 15%of surplus funds; • Funds held under the terms of a Trust Indenture or other contract or agreement may be invested according to the provisions of those indentures or agreements; • Collateralized bank deposits with a perfected security interest in accordance with the Uniform Commercial Code(UCC)or applicable federal security regulations; • Any mortgage pass-through security, collateralized mortgage obligation, mortgaged backed or other pay-through bond, equipment least-backed certificate, consumer receivable pass-through certificate or consumer receivable backed bond of a maximum maturity of five years,securities in this category must be rated AA or better by a national rating service and are limited to not more than 30%of surplus funds; • Any other investment security authorized under the provisions of California Government Code Sections 5922 and 53601. Under the California Government Code,a financial institution is required to secure deposits 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 Authority deposits by pledging first trust deed mortgage notes having a value of 150%of the secured public deposits. 29 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 2 (continued) Investment Disclosure March 31,2005 Book Market Investment Twe Custodial Institution Value Value Matnrity Rate Money Market Cert. Alliance Inst.Res. $ 39 42 N/A Money Market Cert. APS Financial Corp. 43,903 4330904 N/A Money Market Cert. Alliance Bernstein - 13,390 N/A Government Security CBFA 192.9576 1923,576 N/A Government Security CHFA 74.9991 743,991 N/A Government Security C A 316.9049 316,049 N/A Government Security LAEF 19.1729130 19163.1530 N/A Certif. Of Deposit WestAmerica 1003,000 100,000 6/1/05 Certif..Of Deposit Key Bank USA,NA 99,000 993,000 09/14/06 214 Certif. Of Deposit United Kingfield Bank 100,000 98,595 12/29/06 259 Certif. Of Deposit Capital B&T Co. 99,000 98,483 12/30/07 223. Government Security Federal Home Loan Bank 235,000 227,069 3/28/08 AAA Government Security Federal Home Loan mgt 120,000 117,102 4/28/08 AAA Certif. Of Deposit Security ST Bank Wann 100,000 100,273 6/16/08 213 Government Security Federal Home Loan Bank 265,000 256.1554 6/19/08 AAA Government Security Federal Home Loan Bank 325,000 308,549 6/30/08 AAA Government Security Federal Home Loan Bank 355,000 340,356 7/02/08 AAA Government-Security Federal Home Loan Bank 3951,000 383,893 8/07/08 AAA Certif.Of Deposit Mutual Bank 99,000 98-9973 1/4/09 172 Government Security Federal Home Loan Bank 12050000 114,376 3/16/09 AAA . Government Security Federal Home Loan Bank 100.1000 96,875 9/14/09 AAA Government Security Federal Home Loan Bank 1 00.000 98,4469 12/30/09 AAA Total Investments 4.411.688 $ 4.3312049 Note 3- RESTRICTED CASH Restricted cash consists of funds that are held in escrow,capital lease funds that have not yet been spent on capital assets,replacement and operating reserves required by the lender,and funds being held by the Authority on behalf of its clients. The balances are as follows: Unspent capital lease funds (See also note 'n $ 150,126 Family Self Sufficiency Program participant's escrow funds 466,155 Blended component unit-Casa Del Rio: Replacement reserve 316,049 Operating reserve 267,567 Tenant security deposits 28.899 Total restricted cash $ 1,4228,4796 30 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 4- INTERFUND BALANCES The Authority utilizes a few cash accounts to make payments to vendors and for payroll. Costs are accrued to appropriate funds, which necessitates the use of interfand accounts. Costs are reimbursed on a periodic basis. The interfund accounts as of March 3 1,2005,are out of balance by$8,105. This is the amount due to the Authority by its component units. The component units have a fiscal year end that differs from the Authority's. Therefore,the interfund balances will not be in agreement. The interfimd payable balance of$2,487,047 was eliminated in the Authority-Wide Statement of Net Assets. The remaining 9 0 interFund receivable of $8,105 was reported as other accounts receivable. Note 5- NOTES RECEIVABLE A schedule of changes in notes receivable is as follows: Balance' Loans Loans Balance Short-Term 3/31/04 Issued Repaid 3/31/05 Portion CDBG Loan Program $ 863,919 $ 89,326 $ (783,811) $ 8749,434 $ 202,727 Rental Rehab.Program 544,781 223,800 (147,657) 419.9924 26,400 Employee computer loans - 51,1419 (2830891) 223,528 229,528 DeAnza Gardens LP 121.00onao-0 - - 1,4000,4000 - . 2,408,700 163,545 (255,359) 2.9316.1886 25 1,655 Interfund: CDR from mgmt fund 185,4000 - - 185,4000 - Totals 2.593300 163,4545 $(255.359) j__2s501,48861 $ 251,4655 The Authority has made deferred payment loans to individuals and organizations under the County Community- Development Block Grant Program (CDBG) and the County Rental Rehabilitation Program(RR).These loans are secured by deeds of trust in the name of the County of Contra Costa.These programs are revolving loan programs administered by the Authority.Any repayments of outstanding loans,or interest on the loans,must be used for new loans or program administration as authorized by the County. These loans typically earn 3%interest,per annum. Interest in the amount of$132,937 and 59,538 have accrued on the CDBG and Rental Rehab loans,respectively. The Authority considers$54,183 of this interest to be short-term. This short- term.portion has been reported as interest receivable in current assets. The remaining balance of $138,292 has been reported as interest receivable on long-term notes. These notes receivable, along with all of the accrued interest, is offset by an equal amount shown in-other noncurrent liabilities (See note 10). Interest revenue in the amount of$26,993 has been recognized. This interest represents the amount of revenue needed to be recorded to cover operating expenses. 31 . HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 5 (continued) Any amounts received in excess of the amount recognized is recorded as deferred revenue and held for future loan expenditures, The Authority administers an employee loan program whereby employees can borrow funds for the purpose of purchasing a computer to be used at home. These loans accrue no interest. Payments are made through the payroll system. Pursuant to a demand note dated June 30, 1994,the Authority may be liable to HACCC Casa Del Rio,Inc for$185,000. Although the note is due upon demand,the maturity date is December 31,, 2059. The note will be called prior to maturity only in the event that there are operating deficits and there is insufficient cash available to cover expenses. This interfund note has been eliminated in the Authority-Wide Statement of Net Assets* The Authorityhas also issued a note to the DeAnza Gardens,L.P.,which is a discretely presented component unit of the Authority(see Note 1.B.). The note bears simple interest at the rate 3% per annum, are due commencing on October 1,2005,but are payable only to the extent of the previous years'excess/distributable cash,and is due June 2043. Interest of$29,918,on this note was accrued during the current fiscal year and shown as nonoperating revenue. The total interest accrued on this note of$120,000, is reported as other noncurrent assets. In addition the DeAnza Housing Corporation issued a note in the amount of$1,000,000 bearing simple interest at 6.8%, to be paid in full June 2043. This second note is an intra-fund transaction. DeAnza Gardens L.P.owes the DeAnza.Housing Corporation. This loan has been eliminated from the discretely presented component unit column of the Authority-Wide Statement of Net Assets. Since this*loan does not effect the Authority, it is not shown in the table above, 32 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 6- CAPITAL ASSETS Capital asset activity for the year ending March 31,2U05. March 31, Prior Period March 31, 2004 Adiustment Additions Deletions Transfers 2005 Capital assets,not being depreciated: Land $ 19495,202 $ - $ - $ - $ - $ 194959,202 Construction In Progress 2.279.601 2,800.663 - (1,832.311) 3.247.953 Total 3.774,803 2.800.663 - _ 1,832,3111 4.743.155 Capital assets depreciated: Buildings and improvements 76,273,191 - 1,352,468 - 198429420 7994689079 Equipment 1,594.537 95.020 (89.313) (10.109) _ 1.590.135 Total capital assets being depreciated 77,867.728 - 1.447.488 (89.313) 1.832311 81.058.214 Accumulated depreciation: Buildings and improvements (60,456,646) (858,873) (2,996,808) 29000 (128,210) (64,438,537) Equipment !1,174.3281 (261.938) 89.313 128.210 (1.218.743) Total accumulated depreciation (61,630.974) (858.873) (3.258.746) 91.313 - __.(65.657.280) Total capital assets depreciated,net 16;236.754 (858.873) (1.811.258) 2.000 1.832.311 15.400.934 Total capital assets net $ 20,0113557 (858.,87a) $ 989.405 2,1000 $ $ 20.144,089 The changes by project are as follows: March 31, Prior Period March 31, 2004 Adiustment Additions Deletions Transfers 2005 TOTAL CAPITAL ASSETS: Public Housing $ 709954,663 $ - $ 19359,190 $ - $19935,9759 $ 7492499612 Capital Fund Grant 295859738 - 29888961 - (1,935,759) 3,538,940 Housing Choice Voucher 8889656 - - (20,441) - 868,215 Section 8 Moderate Rehab 2959458 - - (68,873) - 2269585 Management Fund 74,415 - - - - 749415 Blended Component Units: Casa Del Rio 6.8434,602 6.843.602 $ 81,642,532 $ - $ 4,248.151 89 314) $__ 85.801.369 DEPRECIATION: Public Housing $(599116,1694) $ (858,873) $(2.98669558) $ 29000 $ (66,300) $(62,906,425) Capital Fuad Grant (106,837) - (58,198) - 66,300 (98,735) Housing Choice Voucher (385,9994) - (166,125) 20,441 - (531,678) Section 8 Moderate Rehab (295,458) - 68,873 - (226,9585) Management Fund. (74,415) - - - - (74,415) Blended Component Units: Casa Del Rio (1.651.577) (167.865) - (1,819,442) $(61,630.9751 $ S(3.258.746) 91314 $ _ IL65.,6574280) During the prior fiscal year, the Authority recognized the demolition of one of its Public. Housing developments. The land was leased to DeAnza Gardens,L.P.for the purpose of building 180 multi-family rents.l housing units. Depreciation was removed from the books of accounts which equaled the historical cost of the property. This properly had not been fully depreciated. A prior period adjustment in the amount of$8 5 8,8 73 was poste*d during the current fiscal year to correct depreciation and to recognize the loss due to demolition of real property. 33 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 7- LONG TERM DEBT The following is a schedule of the changes in long-term debt for the current fiscal year: Balance Loans Balance Short-term 3/31/04 Issued Payments 3/31/05 Portion Public Housing Program: WestAmerica note $ - $ 1,570,465 $ (51,218) $ 1)51911247 1049,272 Blended component units: Casa Del Rio: CHFA 534,1651 - (10,498) 524,153 11,346 RHCP 2.626.618 - - 2.626.618 - 3,161,269 1,570,465 (61,716) 43,6709018 115,618 Interfund: Mgmt Fund to CDR 185.000 - - 185,000 . - Totals � 3.346,4269 1 570 465 (61.716) 4.855.018 115.6 1 8 On April 8. 2003, the Authority entered into an energy services agreement with EUA Citizens Conservation Services,Inc.(Citizens). Citizens prepared an energy audit which generated a report and plan of action. Citizens proposed installing certain energy saving equipment in the housing units of the Public Housing Program. The Authority agreed to pay for the purchase and installation of this equipment in an amount not to exceed$1,570,465. Citizens guarantees the Authority a specific level of cost savings due to the installation of the equipment for a period of twelve years. The costs savings is guaranteed by Citizens to exceed the Authority's debt service on the financing associated with the purchase and installation of this equipment. At the end of the twelve year period the title to the equipment will pass to the Authority. The$1,570,465 to fund this equipment lease and installation activity was borrowed from WestAmerica Bank. The loan is due in monthly installments of$14,003. The Authority began making these monthly payments during the fiscal year ended March 31,2005. The payments will continue through September 2016. Interest accrues on this loan at a rate of 4.3 3 0%per annum. Payments were made on this loan during the fiscal year ended March 31,2005,in the amount of$152,018. Interest in the amount of$101,131 was paid and expensed during the year. As of March 31, 2005, $150,126, of the original $1,570,465 loan, including interest revenue on the-account,remained unspent,held in an interest bearing checking account by WestAmerica Bank. The California Housing Finance Agency note,received through the State of California,is dated November 14, 1994. The original amount borrowed was $600,000. The loan carries a simple interest rate of 7.8%per annum. Principal and interest are payable in monthly installments of $4,319. The note is due in full December 2024.Interest in the amount of$41,333 was paid and expensed during the fiscal year ended December 31,2004. 34 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 7(continued) The Rental Housing Construction Program note,received through the State of California,is dated January 15, 1993. The original amount borrowed was$2,626,618. The loan accrues interest at a rate of 3%per annum. Payments are required on this loan only to the extent that the Casa Del Rio project has surplus cash. This note and interest on the note are due June 5, 2054. No payments were made on this loan during the fiscal year ended December 31,2004.. Interest was expensed in the amount of$78,799. The total amount of deferred interest accrued as payable is $9091,392* Of this amount $16,782 is considered to be short-term and is reported as interest payable in current liabilities. The remaining$892,6 10,considered to be long-term,is shown as other noncurrent liabilities. Pursuant to a demand note dated June 3 0, 1994,the Authority may be liable to HACCC Casa Del Rio,Inc for$185,000. Although the note is due upon demand,the maturity date is December 3 1, 2059. The note will be called prior to maturity only in the event that there are operating deficits and there is insufficient cash available to cover expenses. This interfund note has been eliminated in the Authority-Wide Statement of Net Assets. Following is a schedule of debt payment requirements to maturity for the two mortgages noted above that require payments: WestAmerica Note CHFA Year end'n¢ Principal Interest Principal Interest Total 2005 104,272 63,763 11,346 40,485 21-91,866 2006 1089,878 593,157 12,264 39,567 219,866 2007 113,687 54,348 13,256 38,575 219,866 2008 -118,708 49.9327 14,327 37,504 219,866 2009 12330952 44,0083 153,486 36,345 219,866 2010-201.4 706,134 1343,041 983,361 160,794 1.,0999330 2015-2019 243,616 8,432 145,093 114.1062 511,203 2020-2024 214,020 45.119 259,4139 1.519247 413.151 524.153 5 1 2 451 $ 2.9694,002 Note 8 - PAYMENT IN LIEU OF TAXES In connection with the Public Housing Program, the Authority is obligated to make annual payments in lieu of property taxes'based on the lesser of 25% of the assessable value of owned housing, times the current tax rate; or 10% of the dwelling rents, net of utilities expense. At March 3 1,2005, $71,5 5 8 was expensed fl,q2payment in lieu of takes. This amount is shown as Due to Other Agencies. 35 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31;2005 (Continued) Note9w UNEARNEDREVENUE Unearned revenue consists of: Prepaid rent- Public Housing $ 16,424 Casa Del Rio 2.786 Management Fund 1,541 Funds received in excess of program expenditures: Shelter Plus Care 30,131 CCC Homeless Shelter 7,663 Revolving loan funds held for future expenditures: CDBG 47,066 Rental Rehabilitation 513,995 Other: Public Housing 209,525 Management Fund 17,4474 657.605 Note 10- OTHER NONCURRENT LIABILITIES Other noncurrent liabilities consist of: Loan liability: CDBG: Notes receivable(See also Note 5) $ 874,434 Interest on notes receivable(See also Note 5) 132.937 $ 1,007,371 Rental Rehabilitation: Notes receivable(See also Note 5) 419,924 Interest on notes receivable(See also Note 5) 59.538 479,462 bong term portion of the interest payable on the RHCP loan-a liability of the blended component unit, Casa Del Rio (See also Note 7) 892.610 $ 237944 43 36 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA . NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 11 NET ASSETS A. Investment in Capital Assets.,Net of Related Debt Investment in capital assets,net of related debt consists of the following: Fixed assets,net of depreciation(see Note 6) $ 20,144,089 Long term debt(omitting inter:ftmd balances)(see Note 7) (4,670,018) Accrued interest on long term debt-short-term portion (16,782) Accrued interest on long term debt(see note 10) (892,4610) Investment in capital assets,net of related debt 14.564.679 B. Restricted Net Assets Net assets are reported as restricted when constraints placed on the net asset use are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments;or imposed by law through constitutional provisions or enabling legislation. The Authority has reported$583,616 as restricted net assets. These net assets are being held as replacement and operating reserves for Casa Del Rio Senior Housing,as required by the lender C. Deficit Net Assets As of March 3 1,2005,none of the Authority's Enterprise Funds carried a deficit unrestricted net assets balance. . Note 12-PRIOR PERIOD ADJUSTMENTS During the prior fiscal year,the Authority recognized the demolition of one of its Public Housing developments. The land was-leased to DeAnza Gardens, L.P. for the purpose of building 180 multi-family rental housing units. Depreciation was removed from the books of accounts which equaled the historical cost of the property. This properly had not been fully depreciated. A prior period adjustment in the amount of$858,873 was posted during the current fiscal year to correct depreciation and to recognize the loss due to demolition of real property. In November 2004,the Authority received the HUD approved settlement statement(form HUD- 5268 1)for the Housing Choice Voucher Program for the fiscal year ended March 31,2004. This settlement statement increased HUD annual contributions earned by$98,271. As a result,the Authority has reported a prior period adjustment for the increase of federal funds received from HUD for the fiscal year ended March 31,2004. 0 In February 2005,the Authority received the HUD approved.settlement statement(form HUD- 5268 1)for the Section 8 Moderate Rehabilitation Program for the fiscal year ended March 3 1,2004. This settlement statement decreased HUD annual contributions earned by$767. As a result,the 37 HOUSING AUTHORITY OF TIRE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 12 (continued) Authority has reported a prior period adjustment for the decrease of federal funds received from HUD for the fiscal year ended March 31,2004. The prior period adjustment of the discretely presented component units is an-adjustment for syndication costs segregated from capital assets as of January 1,2004. Note 13- RETIREMENT PLAN The Authority participates in acost-sharing multiple-employer defined.benefit retirement plan that is administered by the Contra Costa County Employees'Retirement Association. All full-time employees of the Authority participate in this plan. The plan provides death, disability.and service retirement benefits. Benefits are based on the employee's highest level of annual salary, years of service and age at the time of retirement. The Authority's retirement plan had 113 participants at March 31,2005. The Authority contributes 24.73%of eligible employees'annual compensation. In addition,the Authority also paid approximately 50%of the employees'basic annual contributions pursuant to agreements made during salary negotiations. Employer contributions are vested(1)ager 10 years of service and employee attain age 50 or(2)30 years of service regardless of age or(3)at mandatory age regardless.of the amount of service. Employees contribute to the retirement system through biweekly payroll deductions. The rate of contribution for employees is determined by age at the time of entrance into the system. Employee contributions and interest thereon may be withdrawn only at termination of employment or at retirement. To payroll subject to contributions was$5,354,116 for the year ended March 31, 2005. Employer contributions were $1,449,295 and employee contributions were$378,640,representing 27.07%and 7.08%of payroll subject to contribution,respectively, for.the fiscal year ended March 3 1,2005. The ten-year trend analysis and other disclosures required by accounting principles generally accepted in the United States of America are described in the financial statements of the Contra Costa.County Employees' Retirement Association(CCCERA). The CCCERA is a component unit of the County of Contra Costa and is reported as a pension trust.fand in their basic financial statements. Complete audited financial statements may be obtained from the administrative offices of CCCERA 1355 Willow Way, Suite 221, Concord, CA 94520. 38 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31t 2005 (Continued) Note 14- DERRED COMPENSATION PLAN The Authority offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan is administered by The Hartford Life Insurance Company. The plan,available to all regular 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 held in trust for the exclusive benefits of participants and their beneficiaries. A total of$2,090,671 is being held by The Hartford Life insurance Company on behalf of the Authority's employees. These funds are not recorded as assets of the Authority since they are held intrust for the exclusive benefit ofparticipants and their beneficiaries and are not subj ect to claims of the Authority's general creditors. -Note 15 CONTINGENT LIABILITIES AND RELATED PARTIES Casa Del Rio Housing-Blended Component Unit Casa Del Rio Housing is made up of HACCC Casa Del Rio,Inc(A California Nonprofit Public Benefit Corporation)and CDR Senior Housing Associates(A California Limited Partnership). HACCC Casa Del Rio, Inc. is the general partner of CDR Senior Housing Associates, The theofficers and Board members of HACCC Casa Del Rio,Inc.are employees of Authority, The partnership was formed in 1994 to develop and operate an 82-unit affordable housing rental complex located in Antioch, California, which is currently known as Casa Del Rio Senior Hous'"". Pursuant to the Indemnification Agreement dated July 1, 19949 by and among the Authority, HACCC Casa Del Rio,Inc.,CDR Senior Housing Associates,and MHIFED I Limited Partnership,, the Authority could possibly be liable for unpaid taxes, interest and penalties, cost to contest, operating deficiency and expenses of enforcement as identified in the Agreement. Pursuant to the Operating Deficit Guaranty-Agreement dated July 1, 1994,by the Authority to and for the benefit of MHIFED I Limited Partnership,the Authority can possibly be liable for operating deficit and expenses of enforcement as identified in the Agreement. Pursuant to the Indemnity Agreement,dated July 1 19943,by the Authority to and for the benefit of CDR Senior Housing Associates and MHIFED I Limited Partnership,the Authority can possibly be liable for any costs,expenses,and liabilities arising out of claims made by FPI(FPI Real Estate Group,FPI Mortgage Co. and FPI Management,Inc.)under the Development Agreement. 39 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 15 (continued) Pursuant to the Demand Note dated June 30, 1994,from the Authority to HACCC Casa Del Rio, Inc.,the Authority can possibly be liable to HACCC Casa Del Rio,Inc. for$185,000. Although the note is due upon demand the maturity date is.December 31,2059,the note will be called prior to maturity only in the event that there are operating deficits and there is not sufficient cash available to cover expenses. This note is recorded as both an interfund note receivable and note payable(see notes 5 and 7). These interfund notes have been eliminated from the Authority-Wide Statement of Net Assets. Pursuant to the Assignment and Assumption Agreement,the Authority can possibly be liable for any and all claims relating to the Assignment and Assumption Agreement arising prior to the date of the Assignment and Assumption Agreement. Pursuant to the Department of Housing and Community Development Rental Housing Construction Program First Amendment to the Regulatory Agreement (the "Amended HCD Agreement") dated November 14, 1-994, by and among the Department of Housing and Community Development,CDR Senior Housing Associates,and the Authority,the Authority can possible be liable for a sponsor's operating guaranty to provide sufficient staff or equipment to the general partner, as needed and remedies against sponsor for default under the Amended HCD Agreement. Since HACCC Casa Del Rio, Inc (CDR Inc) and CDR Senior Housing .Associates (CDR Associates)have the potential to impose a financial burden on the Authority,these entities have been included in the Authority's financial statements as a blended component unit. CDR Associates pays management fees to the Authority in the amount of$44,724 annually. These interfund revenue/expenses have bee.n eliminated from the Authority-Wide Statement of Activities. CDR Inc reports a receivable of$30,000 from CDR Associates. Also, CDR Inc reports an asset of$195,654 investment in CDR Associates partnership(asset),while CDR Associates showy the $195,654 as partner capital (net assets). Finally, CDR Inc. reports $15,000 management fee revenue earned from CDR Associates for the year. These intrafund amounts have been eliminated from the Casa Del Rio Blended Component Unit Enterpri se Fund for inclusion into the Authority- Wide and Fund Financial Statements. DeAnza-Discretely Presented Component Units The discretely presented component units are DeAnza Housing Corporation (A California Nonprofit Public Benefit Corporation) and DeAnza Gardens, L.P. (A California Limited Partnership). The Authority is the General Partner and DeAnza Housing Corporation is the managing general partner of DeAnza Gardens,L.P. The partnership was formed for the purpose of acquisition,ownership,maintenance,and operation of 180 multi-family rental housing units and 40 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 15 (continued) the provision of low-income housing through the construction, renovation, rehabilitation, operation, and leasing of an affordable housing development located in. Contra Costa County, which is currently known as DeAnza Gardens. DeAnzaHous'1119 Corporation(DeAnzaCozp)and DeAnza Gardens L.P.(DeAnza.L.P.)have been reported as discretely presented component units of the Authority. DeAnza Corp reports a receivable of$15,000 from DeAnza L.P.,while DeAnza L.P.reports a receivable of$8,932 from DeAnza Corp. DeAnza.Corp has loaned DeAnza L.P.$1,000,000,which has accrued interest in the amount of$102,000. These amounts are shown as long-term assets and long-term liabilities' in the respective entities financial statements. Also, DeAnza Corp reports anasset of $75 investment in DeAnza L.P. partnership,while DeAnza L.P.shows the$75 as partner capital(net assets). Finally,DeAnza Corp reports$15,000 management fee revenue earned from DeAnza L.P. .and $68,186 of interest revenue on the long-term note receivable from DeAnza L.P. These intraffind amounts have been eliminated when reporting these entities in the Authority-Wide Statement of Net.Assets and Statement of Activities. DeAnza Gardens was under construction as of December 31,2003. It was completed and placed into service during the fiscal year ended December 31,2004..DeAnza Gardens L.P.'s property and equipment are summarized as follows: 12/31/04 12/31/03 Construction in progress $ 29,643,572 $ 6.91589561 Land improvements 1,1509,712 964,9116 Off-site improvements 208,448 389179 On,-siteimprovements 4,012,230 547,012 Furniture and fixtures 477.93.3 - 35,492,895 7,707,9868 Less accumulated depreciation (76,4814) - 1�353416a081 7.707.868 41 HOUSING AUTHORITY OF THE_COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 15(continued) The amounts shown as due to related parties consist of the following: Short-term Long-term Note payable to the Authority $ l,000,000 Interest on the note to the Authority 1129710 Developers fee to the Authority 190219495 to the Authority —Land lease1145000 Amount due Boston Capital 73,500 Unknown 100 1.021.495 1 1,234,310 These amounts will not be in agreement with the amounts reported by the Authority since the entities have different fiscal year ends. The two DeAnza entities have fiscal year ends of December 31,while the Authority's fiscal year end is March 31. The Authority's Housing Choice Voucher Enterprise Fund loaned$1,000,000 to DeAnza Gardens L.P.. The note bears simple interest at the rate 3%per "1111, payments are due 0 encing on October 1,2005,but are payable only to the extent of the previous years'excess/distributable cash and is due June 2043. See also note 5. DeAnza Gardens was built on land owned by the Authority's Public Housing Program Enterprise' Fund. Based on an agreement between DeAnza Gardens L.P.and the Authority.,the land is leased for$72,000per year, from excess/distributable cash, 0 9 payableUnpaid lease amounts are carried forward without interest. The Authority's Public Housing Program Enterprise Fund reported $132,000 due from related party for this lease. This is the first year that this lease was recognized by the Authority. Therefore,the entire$132,000 is reported as nonoperating revenue of the Public Housing Program Enterprise Fund. DeAnza Gardens L.P. financial statements reported $1,021,495 of developer fees due to the Authority. The Authority has not-recorded any developer fees as of March 31, 2005. The Authority expects permanent financing to be in place prior to December 31, 2005. At that time many issues that are currently unknown will be settled. This will include whether or not DeAnza. Gardens L.P. will be able to pay the developer fee. The *11 record the fees earned at that time, Authority will The DeAnza Gardens' construction was financed with a loan from the Bank of America. This loan, totaling $24,096,539, was due June 30, 2005, extendable to the period of permanent financing, and accrues interest at LIBOR plus 2.25%per annum. This loan is reported as short- 42 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH.31,2005 •s (Continued) Note 15 (continued) term and is partially offset by$22,902,457 due from related party. The amount is expected to be received from the partnership's limited partner during the settlement of permanent financing. The component unit prior period adjustment consists of$139,861 of syndication costs capitalized in prior years. Note 16- RISK MANAGEMENT Workers Compensation Insurance: The Authority participates in a joint venture under a joint powers- agreement (JPA) with the California Housing Workers' Compensation Authority (LHWCA). LHWCA was formed to provide workers"compensation insurance coverage for member housing authorities. At December 31, 2004, there were thirty-one members. The relationship between the Authority and LHWCA is.such that LHWCA is not a component unit of the Authority for financial reporting purposes. Condensed LHWCA audited financial information for the year ended December 31, 2003 and 2004 are as follows: December 31.2004 December3l,2003 Total assets $ 1398699,674 $ 133,2563,694 Total liabilities _ 13.057.013) (11.880,4011) Retained earnings $ 812,661 $ 1,376,683 Total revenues $ 5,817,981 $ 7,65931435 Total expenses . X6.382.003) _(4,221,997) Net change in retained earnings $ (564.022) $ 3,437,438 LHWCA had oolong-term debt outstanding at December 31,2004. The Authority's share of year end assets, liabilities, or retained earnings has not been calculated. The Authority's annual premium is based on covered payroll. Premium paid for the calendar year ended December 3 1, 2004 was $287,169. Thisis a 22%increase over the prior year's premium. The premiums for 2005 have increased another 165%to$474,648.LHWCA issues separate comprehensive annual financial report.Copies of this report may.be obtained by contacting Bickmor'e Risk Services,6371 Auburn-Boulevard, Suite B, Citrus Heights, California, 95621. 43 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 16 (continued) Properly and Liability Insurance: The Authority participates in a joint venture under a Joint Powers Agreement (JPA) with the California Housing Authority Risk Management Agency (CHARMA). CHARMA was formed to provide property and liability coverage to its members. At May 31, 2004, there were six members other than the Authority. The Authority's property insurance deductible varies by location,however in no case is it more than$25,000 per occurrence. The Authority's liability insurance has a $50,000 deductible per occurrence. The Authority's automobile insurance has no deductible for.comprehensive damage and collision damage. The Authority paid premiums to CHARMA of approximately $449,124 during the fiscal year. The relationship between CHARMA is such that CHARMA is not a component unit of the Authority for financial reporting'purposes. CHARMA's governing board controls the operations of the JPA, including selection of management-and approval of operating budgets independent of any influence by member authorities beyond their representation on the board. Each member pays a premium commensurate with the level of coverage requested, and shares surpluses and deficits proportionately to its participation in CHARMA. Condensed CHARMA audited financial information for the year ended May 31,2004 and 2003, are as follows: May 31,2004 Mai 31,2003 Total assets $ 4,441,146 $ 41,210,013 Total liabilities (1,180.245) (144537.330) Retained earnings $ 33260,4901 $ 2,672,683 Total revenues $ 2,873,769 $ 2,58530915 Total expenses _ (2.285,55 1) L24298%694). Net increase in retained earnings $ 5 88,218 $ 287.221_ CHARMA has no long term debt outstanding at May 31,2004. The Authority's share of year-end assets,liabilities,or retained earnings has not been calculated. 44 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE BASIC FINANCIAL STATEMENTS MARCH 31,2005 (Continued) Note 17 - OPERATING LEASE The Authority leases an office building under an operating lease expiring on July 31, 2007,with an option to renew for additional five years. Minimum future rental ayments under this noncancelable operating lease are: Year ended March 3 1, Amount 2006 $ 186,580 2007 194,040 200865, nA5z.v Total minimum future rental payments $ 446.140 The rental expense for the current fiscal year under the operating lease amounted to $174,720. 45 SUPPLEMENT'INFOlMAFitON 46 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED MARCH 31,2005 Federal Grantor CFDA Number Expenditures Department of Housing and Urban Development mm): Direct Programs. Shelter Plus Care 14.238 2,671,780 Public and Indian Housing 14.850 39750,821 Section 8 Rental Voucher Program 14.855 349964 Lower Income Housing Assistance Program Section 8 Moderate Rehabilitation 14o856 139,593 Housing Choice Voucher Program 14.871 85,2493,853 • Public Housing 14.872 3,945,831Capital Fund Program Passed through the County of Contra Costa" Community Development Block Grant 14.218 57,957 Passed through the City of Antioch: Community Development Block Grant 14.218 25.000 Subtotal federal expenditures,Dept of-HUD 95,8753,799 Department of Justice. Passed through the State of California: Camp D.E.F.Y(Drug Education for Youth) 16.609 16.722 Award number US03010070 Total expenditures of federal awards $ 95.892,4521 major program. The accompanying Independent Auditors' Report and notes are an integral part of this statement. 47 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED MARCH 31,2005 Notes to the Schedule of Expenditures of Federal Awards: 1 The schedule of expenditures of federal awards includes the federal grant activity of the Housing Authority of the County of Contra Costa, California, and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133,Audits of States,Local Governments, and Non-Profit Organization. Therefore,some amounts presented in this schedule may differ from amounts presented in,or used in the preparation of,the basic financial statements, 2. Expenditures are calculated as follows: Shelter Plus Care Program-expenditures reported agree with the HUD grant earned for the year. This amount includes$126,245 of prior year expenditures for which revenue was not accrued. Public and Indian Housing Program - expenditures reported consist only of the operating subsidy amount received from HUD for the fiscal year ended March 31,2005. Housing Choice Voucher Program-expenditures reported agree With the HUD annual contributions earned from HUD. This amount is less than actual expenditures for the year. Operating reserves earned in prior years was used to cover the current year's loss. Section 8 Rental Voucher and Modena#e Rehabilitation Programs - expenditures reported agree with the HUD annual contributions earned.from HUD. -These amounts differ immaterially from the actual expenditures for the year, Public Housing Capital Fund Program - expenditures reported agree with the revenue and actual expenditures(expenses,plus capital expenditures,less depreciation expense)forthe current fiscal year, Camp D.E.F.Y.Program -expenditures agree with revenue and expenses for the current fiscal year. CDBG program - expenditures reported agree with actual amounts received from these granting sources. Actual expenditures were greater,with program income making up the shortfall. 48