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HomeMy WebLinkAbout; ; 1989 Carlsbad Redevelopment Agency audit report; 1993-06-30CARLSBAD REDEVELOPMENT AGENCY Component Unit Financial Statements Year Ended June 30, 1993 (With Independent Auditors' Report) CARLSBAD REDEVELOPMENT AGENCY Component Unit Financial Statements Year Ended June 30, 1993 TABLE OF CONTENTS Financial Section: Page Independent Auditors' Report 1 Component Unit Financial Statements: Combined Balance Sheet - All Governmental Fund Types and Account Groups 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types 3 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Special Revenue and Debt Service Funds 4 Notes to Component Unit Financial Statements 5 Auditors' Opinion on Compliance with Audit Guidelines for California Redevelopment Agencies 14 CONRAD CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714)474-2020 The Board of Commissioners Carlsbad Redevelopment Agency Carlsbad, California INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the Carlsbad Redevelopment Agency, a component unit of the City of Carlsbad, as of and for the year ended June 30, 1993, as listed in the table of contents. These component unit financial statements are the responsibility of the management of the Carlsbad Redevelopment Agency. Our responsibility is to express an opinion on these component unit financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the component unit financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the component unit financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall component unit financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of the Carlsbad Redevelopment Agency at June 30, 1993, and the results of operations for the year then ended, in conformity with generally accepted accounting principles. October 8, 1993 -1- MEMBERS CF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CARLSBAD REDEVELOPMENT AGENCY Combined Balance Sheet All Governmental Fund Types and Account Groups June 30, 1993 Governmental Fund Types Account Group Totals Assets and Other Debits Cash and investments (note 3) Loan receivable Taxes receivable Interest receivable Amount available in debt service fund Amount to be provided for retirement of advances Amount to be provided for retirement of bonds Total assets and other debits Special Revenue $2,301,076 102,387 10,229 35,517 - Debt Service 1,739,951 - 40,916 6,905 - Capital Projects 2,836,635 - - 5,615 - Long-term Debt - - - 1,787,772 (Memorandum 1993 6,877,662 7 102,387 51,145 48,037 1,787,772 1 Onlv) 1992 ,244,993 127,375 - 53,798 ,757,057 S2.449.209 1.787.772 7,924,846 7,924,846 7,460,785 9.397.228 9.397.228 9.717.943 2.842.250 19.109.846 26.189.077 26.361.951 Liabilities and Fund Balances Liabilities: Accounts payable Accrued expenses Advances from the City of Carlsbad (note 5) Bonds payable (note 5) Total liabilities $127 8,026 - 8.153 35,222 13,547 - 48.769 - 7,924,846 11.185.000 19.109.846 35,349 21,573 7,924,846 11.185.000 19.166.768 8,990 11,271 7,460,785 11.475.000 18.956.046 Fund balances: Reserved for loan receivable (note 7) Reserved for debt service (note 7) Reserved for low and moderate income housing (note 7) Reserved for encumbrances (note 7) Unreserved: Designated for approved capital projects (note 7) Undesignated (note 7) Total fund balances Total liabilities and fund balances 102,387 2,319,379 19,290 1,787,772 192,242 2,459,371 141.868 2.441.056 1.787.772 2.793.481 102,387 127,375 1,787,772 1,757,057 2,319,379 1,891,697 211,532 290,969 2,459,371 2,582,808 141.868 755.999 7.022.309 7.405.905 S2.449.209 1.787.772 2.842.250 19.109.846 26.189.077 26.361.951 See accompanying notes to component unit financial statements. -2- CARLSBAD REDEVELOFMEffT AGENCY Coabined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types Year Ended June 30, 1993 Totals Revenues: Tax increment Intergovernmental Charges for services Interest Miscellaneous Total revenues Expenditures: General government Capital outlay Debt service: Principal Interest and fiscal charges State mandated payment (note 9) Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Proceeds from advances from the City of Carlsbad (note 5) Administrative fee received from bond refunding Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Special Revenue $ 330,515 125,715 4.379 460.609 81,437 - Debt Service 1,322,061 121,515 1.443.576 - 290,000 1,329,644 257.278 Capital Projects 29,800 750 109,520 14.795 154.865 753,104 231,860 - (Memorandum 1993 1,652,576 29.800 750 356,750 19.174 2.059.050 834,541 231,860 290,000 1,329,644 257.278 Onlv) 1992 1,588,363 450,408 2.038.771 752,601 589,494 299,800 1,364,057 81.437 379.172 36.616 36.616 415,788 Fund balances at beginning of year 2.025.268 Fund balances at end of year S2.441.QS6 1.876.922 984.964 2.943.323 3.005.952 (433.346) (830.0991 (884.273) (967.181) 464,061 464,061 1,125,238 (464,061) (464,061) 464,061 464,061 36.616 (1,125,238 500,731 _ 464.061 500.677 500.731 30,715 (830,099) (383,596) (466,450) 1.757.057 3.623.580 7.405.905 7.872.355 1.787.772 2.793.481 7.022.309 7.405.905 See accompanying notes to component unit financial statements. -3- CARLSBAD REDEVELOPMENT AGENCY Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Special Revenue and Debt Service Funds Year Ended June 30, 1993 Special Revenue Debt Service Revenues: Tax increment Interest Miscellaneous Total revenues Expenditures: General government Debt service: Principal Interest and fiscal charges State mandated payment (note 9) Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Administrative fee received from bond refunding Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year Fund balances at end of year Budget $ 400.000 100,000 500.000 126,925 126.925 373.075 373,075 2.025.268 Actual on Budgetary Variance- Basis Favorable (Note 2) (Unfavorable) 330.515 (69.485) 125.715 25,715 4.379 4.379 460.609 100,727 100.727 359.882 36.616 36.616 (39.3911 26,198 26.198 (13.1931 36.616 36.616 396,498 23,423 2.025.268 Actual on Budgetary Variance- Basis Favorable Budget (Note 2) (Unfavorable) 1,600,000 1,322,061 (277,939) 60,000 121,515 61,515 290,000 290,000 847,939 865,583 257.278 257.278 1.395.217 1.412.861 264.783 1.660.000 1.443.576 (216.4241 (17,644) 464,061 464,061 464.061 464.061 $2.398.343 2.421.766 23.423 264,783 494,776 229,993 1.757.057 1.757.057 - 2.021.840 2.251.833 229.993 See accompanying notes to component unit financial statements. -4- CARLSBAD REDEVELOPMENT AGEfNCY Notes to Component Unit Financial Statements Year Ended June 30, 1993 (1) Organization and Summary of Significant Accounting Policies The Carlsbad Redevelopment Agency (the Agency) was established in July 1976 with the adoption of Ordinance No. 1191 by the Carlsbad City Council pursuant to the California Community Redevelopment Law, now codified as Part 1, Division 24, of the State of California Health and Safety Code. The Agency has the broad authority to acquire, rehabilitate, develop, administer and sell or lease property. The Agency is not subject to federal or state income taxes. The principal objectives of the Agency are to eliminate blighted influences within the "Village Area" of the City of Carlsbad, stimulate and attract private investment, generate added employment through increased specialty goods and services and expand the City's sales tax revenue. The Agency is an integral part of the reporting entity of the City of Carlsbad (the City). The funds and account group of the Agency have been included within the scope of the general purpose financial statements of the City because the City Council exercises oversight responsibility over the operations of the Agency. Only the funds and account group of the Agency are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad, California. The accounting policies of the Agency conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant policies: (a) Basis of Presentation The accounts of the Agency are organized on the basis of funds and an account group, each of which is considered to be a separate accounting entity. The operations of each fund and account group are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures. The various funds and account group are summarized by type in the financial statements. The fund types and account group used by the Agency are as follows: GOVERNMENTAL FUND TYPES Governmental funds are used to account for the Agency's expendable financial resources and related liabilities. The measurement focus is upon determination of changes in financial position. The following are the Agency's governmental fund types: -5- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies„ (Continued) (a) Basis of Presentation. (Continued) Special Revenue Funds Special revenue funds are used to account for revenues derived from specific sources (other than major capital projects) that are restricted by law or administrative regulation to expenditures for specified purposes. Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and payment of general long-term debt principal, interest and related costs. Capital Projects Funds Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. GENERAL LONG-TERM DEBT ACCOUNT GROUP This account group is used to establish accounting control and accountability for the Agency's general long-term debt. This account group is used to account for all long-term obligations of the Agency. (b) Measurement Focus and Basis for Accounting Governmental fund types are accounted for on a "spending" measurement focus. Accordingly, only current assets and current liabilities are included on their balance sheets, and the reported fund balance provides an indication of available, spendable resources. Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in available spendable resources. The modified accrual basis of accounting is utilized by the governmental fund types. Revenues are recognized when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenues that are accrued include the tax increment on real property taxes and interest income. -6- CARLSBAD REDEVELOPMENT AGEi^Y Notes to Component Unit Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (b) Measurement Focus and Basis for Accounting. (Continued) Real property taxes are levied on October 15 against owners of record at March 1. The taxes are due in two installments, on November 1 and February 1, and become delinquent after December 10 and April 10, respectively. Tax liens attach annually as of 12:01 a.m. on the first day of March in the fiscal years for which the taxes are levied. Under the provisions of NCGA Interpretation 3, property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided it is collected within 60 days of the end of the fiscal year. Governmental fund expenditures are recognized when the liability is incurred, except for principal and interest on long-term debt which is recognized when due. (c) Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary control in the governmental funds. Encumbrances outstanding at year-end do not constitute expenditures or liabilities, but are reported as reservations of fund balance for subsequent-year expenditures. (d) Cash and Investments The Agency participates in the pooled cash and investment fund of the City of Carlsbad. Pooled investments are stated at cost or amortized cost. The Agency's equity in the pooled cash is included in the financial statements as cash and investments. Interest earned as a result of the pooling is allocated to the Agency based on its average monthly balances. (e) Compensated Absences Vacation pay is payable to employees at the time used or upon termination of employment. The cost of accumulated vacation expected to be paid in the next 12 months is recorded as a fund liability; currently no amounts are expected to be paid after 12 months. -7- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (f) Total Columns Total columns on the accompanying combined financial statements are captioned "Totals (Memorandum Only)" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in fund balance in conformity with generally accepted accounting principles. Such data is not comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. (2) Budgetary Data The budget for the Agency is established by the City of Carlsbad. The City Manager is authorized to make transfers of appropriated amounts within a fund for up to $25,000. Revisions that alter the total appropriations of any fund must be approved by the City Council. A mid-year budget review is conducted each year. Any major changes to the adopted budget are approved by the City Council at that time. Budgets are adopted on the modified accrual basis, except that encumbrances are treated as budgeted expenditures in the year purchases are committed. Expenditures may not exceed budgeted appropriations at the departmental level. Unencumbered appropriations lapse at year-end. Annual budgets are adopted for the special revenue and debt service funds. The following schedule is a reconciliation of the budgetary and GAAP fund balances: Special Revenue Debt Service Fund balance - budgetary basis $2,421,766 2,251,833 Encumbrances outstanding at year-end 19,290 Debt service on advances from City of Carlsbad - not budgeted - (464.061) Fund balance - GAAP basis $2.441.056 1.787.772 -8- CARLSBAD REDEVELOPMENT AGEi,^Y Notes to Component Unit Financial Statements (Continued) (3) Cash and Investments The Agency participates in the pooled cash fund of the City. Authority for Deposits and Investments The Agency's investment policy and state statutes authorize the Agency to invest in demand and time deposits, obligations of the U.S. Treasury, its agencies and instrumentalities, commercial paper rated A-l by Standard and Poor's Corporation or P-l by Moody's Commercial Paper record, banker's acceptances with a maximum maturity of 270 days, repurchase and reverse repurchase agreements, certificates of deposit with national and state licensed or chartered banks or federal or state savings and loan associations, money market and mutual funds whose portfolios consist of one or more of the foregoing investments, and the State Treasurer's investment pool. State statutes require that all deposits be insured or collateralized. Depositories holding public funds on deposit are required to maintain collateral in the form of a pool of securities with the agent of the depository having a market value of at least 10 to 50 percent in excess of the total amount of all public funds on deposit. Classification of Investments bv Credit Risk: As defined in Governmental Accounting Standards Board Statement No. 3, the Agency's investments in securities are categorized in the following manner: Category 1 - Investments that are insured or registered, which are held by the Agency or its agent in the Agency's name. Category 2 - Uninsured and unregistered investments, for which the securities are held by the counterparty's trust department or agent in the Agency's name. Category 3 - Uninsured and unregistered investments, for which the securities are held by the counterparty or by its trust department or agent, but not in the Agency's name. At June 30, 1993, the Agency had the following investments which are not categorizable by credit risk: Carrying Investment Amount Investment in mutual funds $3,994,188 Investment in City's pooled cash fund 2.883.474 $6.877.662 The carrying amount equals the market value. -9- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (4) Pension Plan The Agency's employees are included in the City's pension plan which is administered by the California Public Employees Retirement System (PERS). PERS is an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State of California. All full-time employees are eligible to participate as members of the PERS. Benefits vest after an employee has been a member of the plan for five years. Employees are eligible to retire after age 50 with 5 years of credited service. Annual retirement benefits are determined based on age at retirement, the length of membership service and the amount of earnings based on the highest twelve consecutive months average. The PERS also provides death and disability benefits. These benefit provisions and all other requirements are established by state statute. Employees are required to make contributions equaling 7% of gross pay. This is paid by the City for the benefit of the employees in lieu of salary. The City is also required to contribute the remaining amounts necessary to fund the benefits for its members, using the actuarial basis recommended by the PERS actuaries and actuarial consultants and adopted by the PERS Board of Administration. Additional disclosures required by Governmental Accounting Standards Board Statement No. 5 are not available for the Agency as a separate entity. This information for the City's reporting entity is presented in the Comprehensive Annual Financial Report of the City of Carlsbad. (5) Long-term Debt The following is a summary of changes in long-term debt for the year ended June 30, 1993: Principal Principal Balance at Additional Principal Balance at July 1. 1992 Obligations Retirements June 30. 1993 Advances from the City of Carlsbad $ 7,460,785 464,061 - 7,924,846 Bonds payable 11.475.000 - 290.000 11.185.000 $18.935.785 464.061 290.000 19.109.846 Since activation of the Redevelopment Agency in July 1976, the City has advanced the Agency monies for approved expenditures. Advances from the City bear interest equal to the City's interest rate received on pooled investments. There is no stated maturity date. -10- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (5) Long-term Debt. (Continued) Bonds payable consist of $11,185,000 in 1988 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds. Principal is due in amounts ranging from $305,000 to $595,000 on April 1 of each year through 2003, a principal payment of $2,890,000 on April 1, 2007, and a principal payment of $3,950,000 on April 1, 2011. The principal payments of $2,890,000 and $3,950,000 are subject to mandatory sinking fund redemption which amounts are reflected in the debt service requirements below. Interest is payable each year on October 1 and April 1 at rates varying from 5.9% to 7.8% per annum. Debt service requirements to maturity for the bonds, including sinking fund payments, are as follows: 1994 $ 1,135,828 1995 1,142,222 1996 1,146,598 1997 1,148,522 1998 1,148,062 1999-2003 5,806,054 2004-2008 5,876,260 2009-2011 3.567.180 20,970,726 Less amounts representing interest (9.785.726) Bonds payable $11.185.000 At June 30, 1993, the Agency was in compliance with all significant debt covenants. (6) Obligations Under Operating Leases In June 1988, the Agency entered into an agreement to lease a parking lot from a private party. The lease requires monthly rental payments for twenty years. Total annual rent payments are $44,091 for fiscal year ending June 30, 1994 with annual cost of living adjustments required and market value adjustments required every 5 years after fiscal year ending June 30, 1988. The future minimum rental payments have been calculated with a 6% annual cost of living adjustment. In May 1990, the Agency entered into an agreement to lease a parking lot on Carlsbad Village Drive from a private party. The lease requires monthly rental payments of $4,350 commencing July 1, 1991 for five years. Total annual rent expense is $52,200 for fiscal year ending June 30, 1994 and $43,500 for fiscal year ending June 30, 1995. The following is a schedule by year of future minimum rental payments required under operating leases at June 30, 1993: -11- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (6) Obligations Under Operating Leases. (Continued) Year Ending June 30. Annual Rental Payments 1994 $ 96,291 1995 90,236 1996 49,541 1997 52,513 1998 55,664 Thereafter 777.717 Total minimum lease payments $1.121.962 (7) Fund Balances Reserves for the loan receivable and low and moderate income housing are established to show that certain assets are already committed for other purposes and are not available for discretionary expenditures. Reserve for debt service represents resources legally restricted to the payment of general long-term debt principal and interest maturing in future years. Reserve for encumbrances represents commitments related to unperformed contracts for services and undelivered goods. Unreserved-designated for approval capital projects represents the fund balance expected to be used for the acquisition or construction of major capital facilities. Unreserved-undesignated balances represent the fund balance remaining after reduction for reserved and designated fund balances. (8) Other Required Individual Fund Disclosures Expenditures exceeded appropriations in the following fund: Expenditure Appropriation Debt service fund $865,583 847,939 The excess of expenditures over appropriations in the debt service fund relates to fiscal charges. -12- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (9) State Mandated Payment The Agency was required by the State Department of Finance, pursuant to a letter dated October 1, 1992, to shift a portion of tax increment money to the Educational Revenue Augmentation Fund. The Agency funded its $257,278 payment from Agency tax increment funds. (10) Subsequent Events On September 1, 1993, the Agency issued $15,495,000 in tax allocation bonds. The bonds were issued to defease the outstanding 1988 tax allocation bonds, and to provide money to finance redevelopment activities within the project area. The interest rate is 5.25%, payable semi-annually. -13- CERTIFIED PUBLIC ACCOUNTANTS A WRTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 (714)474-2020 The Board of Commissioners Carlsbad Redevelopment Agency Carlsbad, California Auditors' Opinion On Compliance With Audit Guidelines for California Redevelopment Agencies We have audited the combined financial statements of the Carlsbad Redevelopment Agency (a component unit of the City of Carlsbad, California) as of and for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Compliance with laws and regulations applicable to the Carlsbad Redevelopment Agency is the responsibility of the Carlsbad Redevelopment Agency's management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the Carlsbad Redevelopment Agency's compliance with provisions of laws and regulations contained in the Guidelines For Compliance Audits of California Redevelopment Agencies issued by the State Controller's Office, Division of Local Government Fiscal Affairs. The results of our tests indicated that, with respect to the items tested, the Carlsbad Redevelopment Agency complied, in all material respects, with the provisions referred on the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the Carlsbad Redevelopment Agency had not complied, in all material respects, with those provisions. This report is intended for the information of the Carlsbad Redevelopment Agency, and the State Controller's Office. However, this report is a matter of public record and its distribution is not limited. October 8, 1993 -14- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY OF CARLSBAD Carlsbad, California Single Audit Report on Federal Assistance Programs For the fiscal year ended June 30, 1993 CITY OF CARLSBAD Single Audit Report on Federal Assistance Programs For the fiscal year ended June 30, 1993 TABLE OF CONTENTS Page Independent Auditors' Report on Schedule of Federal Financial Assistance 1 Schedule of Federal Financial Assistance 2 Independent Auditors' Report on Internal Control Structure Based on an Audit of General Purpose or Basic Financial Statements Performed in Accordance with Government Auditing Standards 3 Independent Auditors' Report on Internal Control Structure Used in Administering Federal Financial Assistance Programs 5 Independent Auditors' Report on Compliance Based on an Audit of General Purpose or Basic Financial Statements Performed in Accordance with Government Auditing Standards 8 Independent Auditors' Report on Compliance with Specific Requirements Applicable to Major Federal Financial Assistance Programs 9 Independent Auditors' Report on Compliance with General Requirements Applicable to Federal Financial Assistance Programs 11 Independent Auditors' Report on Compliance with Specific Requirements Applicable to Nonmajor Federal Financial Assistance Program Transactions 12 Findings and Recommendations 13 Status of Prior Audit Findings 15 CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE We have audited the general purpose financial statements of the City of Carlsbad, California, as of and for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. These general purpose financial statements are the responsibility of the management of the City of Carlsbad, California. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements of the City of Carlsbad, California, taken as a whole. The accompanying schedule of federal financial assistance is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in that schedule has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. October 8, 1993 -1- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER Of AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY OF CARLSBAD Schedule of Federal Financial Assistance For the fiscal year ended June 30, 1993 U.S. Department of Housing and Urban Development Direct Assistance: Lower Income Housing Assistance Program Section 8 Housing Voucher Program Community Development Block Grant Subtotal Federal Domestic Program Federal Federal Assistance Identification Assistance Assistance Number Number Received (1) Expenditures 14.156 14.177 14.218 CA16E077012 and CA16E077003/013 $2,064,231 CA16V077002/005 B-92-MC-06-0563 339,141 409.767 2,097,629* 353,629* 266.250 2.813.139 2.717.508 U.S. Department of Health and Human ServicesPass-through from the County of San Diego: Senior Nutrition Program U.S. Department of Agriculture Pass-through from the County of San Diego:Senior Nutrition Program U.S. Department of the Interior Pass-through from the California Department of Parks and Recreation:National Park Service 13.635 30718E 10.558 30718E 15.904 06-91-60002 65.308 76.695 29.176 29.176 778 778 U.S. Department of Education Pass-through from the California State Library: Library Services U.S. Federal Emergency Management Agency (FEMA) Pass-through from the California Office of Emergency Services: FEMA Assistance Total federal financial assistance 40-2251 40—2422 84.034 40-2576 53.238 78.588 83.516 979-073-11194 47.511 127.935 S3.009.ISO 3.030.680 * Tested as a major program. (1) Based on actual cash receipts from July 1, 1992 through June 30, 1993. See accompanying independent auditors' report. -2- CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE BASED ON AN AUDIT OF GENERAL PURPOSE OR BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the general purpose financial statements of the City of Carlsbad, California, as of and for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. We have conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and performing our audit of the general purpose financial statements of the City of Carlsbad, California, for the year ended June 30, 1993, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. The management of the City of Carlsbad, California, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions, or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purposes of this report, we have classified the significant internal control structure policies and procedures in the following categories: revenues/receipts, purchases/disbursements and payroll/personnel. -3- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION The Honorable Members of City Council City of Carlsbad, California Page Two For all of the control categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. However, we noted certain matters involving the internal control structure and its operation that we have reported to the management of the City of Carlsbad, California, in a separate letter dated October 8, 1993. This report is intended for the information of City management and the agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1993 -4- V_>OIN fyvL)CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS HOOMAIN STREET. SUITE c IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE USED IN ADMINISTERING FEDERAL FINANCIAL ASSISTANCE PROGRAMS We have audited the general purpose financial statements of the City of Carlsbad, California, for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. We have also audited the City's compliance with requirements applicable to major federal financial assistance programs and have issued our report thereon dated October 8, 1993. We conducted our audits in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and Office of Management and Budget (OMB) Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and about whether the City of Carlsbad, California, complied with laws and regulations, noncompliance with which would be material to a major federal financial assistance program. In planning and performing our audits for the year ended June 30, 1993, we considered the internal control structure of the City of Carlsbad, California, in order to determine our auditing procedures for the purpose of expressing our opinions on the general purpose financial statements of the City of Carlsbad, California, and on the compliance of the City of Carlsbad, California with requirements applicable to major programs and to report on the internal control structure in accordance with OMB Circular A-128. This report addresses our consideration of internal control structure policies and procedures relevant to compliance with requirements applicable to federal financial assistance programs. We have addressed internal control structure policies and procedures relevant to our audit of the general purpose financial statements in a separate report dated October 8, 1993. The management of the City of Carlsbad, California, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles, and that federal financial assistance programs are managed in compliance with applicable laws and regulations. Because of inherent limitations -5- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION The Honorable Members of City Council City of Carlsbad, California Page Two in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures used in administering federal financial assistance programs in the following categories. Accounting Controls • Purchases/Disbursements • Payroll/Personnel • Revenues/Receipts Administrative Controls General Requirements: Political Activity Davis-Bacon Act Civil Rights Cash Management Relocation Assistance and Real Property Management Federal Financial Reports Allowable Costs/Cost Principles Drug-Free Workplace Act Administration Requirements Specific Requirements: Types of Services Eligibility Matching, Level of Effort, or Earmarking Reporting Release of Funds Environmental Review Program Income Monitoring Subrecipients Claims for Reimbursements Specific Requirements For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. -6- The Honorable Members of City Council City of Carlsbad, California Page Three During the year ended June 30, 1993, the City of Carlsbad, California, expended 81 percent of its total federal financial assistance under major federal financial assistance programs. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the City of Carlsbad, California's ability to administer federal financial assistance programs in accordance with applicable laws and regulations. These reportable conditions are found in the Findings and Recommendations section, Findings 1, 2 and 3. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that noncompliance with laws and regulations that would be material to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control structure policies and procedures used in administering federal financial assistance would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, we believe none of the reportable conditions described above is a material weakness. We also noted other matters involving the internal control structure and its operation that we have reported to the management of the City of Carlsbad, California, in a separate letter dated October 8, 1993. This report is intended for the information of the City management, and the agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1993 -7- CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE. CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE BASED ON AN AUDIT OF GENERAL PURPOSE OR BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the general purpose financial statements of the City of Carlsbad, California, as of and for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to the City of Carlsbad, California, is the responsibility of the management of the City of Carlsbad, California. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests indicate that for the items tested, the City of Carlsbad, California, complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those provisions. The results of our audit procedures disclosed no immaterial instances of noncompliance with the requirements referred to above. This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1993 -8- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS We have audited the general purpose financial statements of City of Carlsbad, California, as of and for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. We have also audited compliance by the City of Carlsbad, California, with the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; release of funds; environmental review; program income; monitoring subrecipients; and claims for reimbursements that are applicable to each of its major federal financial assistance programs, which are identified in the accompanying schedule of federal financial assistance, for the year ended June 30, 1993. The management of the City of Carlsbad, California, is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit of compliance with those requirements in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures did not disclose any immaterial instances of noncompliance with the requirements referred to above. In our opinion, the City of Carlsbad, California, complied, in all material respects, with the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; release of funds; environmental review; program income; monitoring subrecipients; and claims for reimbursements that are applicable to each of its major federal financial assistance programs for the year ended June 30, 1993. -9- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION The Honorable Members of City Council City of Carlsbad, California Page Two This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1993 -10- CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714)474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS We have audited the general purpose financial statements of City of Carlsbad, California, as of and for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. We have applied procedures to test whether the City of Carlsbad, California, has complied with the following requirements applicable to its federal financial assistance programs, the major programs of which are identified in the schedule of federal financial assistance, for the year ended June 30, 1993: political activity, Davis-Bacon Act, civil rights, cash management, relocation assistance and real property management, federal financial reports, allowable costs/cost principles, Drug-Free Workplace Act and administrative requirements. Our procedures were limited to the applicable procedures described in the Office of Management and Budget's "Compliance Supplement for Single Audits of State and Local Governments". Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the second paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Carlsbad, California, had not complied, in all material respects, with those requirements. Also, the results of our procedures did not disclose any immaterial instances of noncompliance with those requirements. This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. C0+IAA October 8, 1993 -11- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOCIATES < PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS We have audited the general purpose financial statements of City of Carlsbad, California, as of and for the year ended June 30, 1993, and have issued our report thereon dated October 8, 1993. In connection with our audit of the 1993 general purpose financial statements of the City of Carlsbad, California, and with our consideration of the City's internal control structure used to administer federal financial assistance programs, as required by Office of Management and Budget Circular A-128, "Audits of State and Local Governments", we selected transactions applicable to certain nonmajor federal financial assistance programs for the year ended June 30, 1993. As required by OMB Circular A-128, we have performed auditing procedures to test compliance with the requirements governing types of services allowed or unallowed, eligibility, and special requirements that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with these requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Carlsbad, California, had not complied, in all material respects, with those requirements. Also, the results of our procedures did not disclose any immaterial instances of noncompliance with those requirements. This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. October 8, 1993 -12- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY OF CARLSBAD Findings and Recommendations For the fiscal year ended June 30, 1993 (1) Separate Allowances Should be Used for HUD Section 8 Utility Allowances During our single audit testwork over the Section 8 Housing Assistance Payments Program, we noted four instances where the utility allowances were incorrectly calculated based upon the approved utility allowance schedule. The utility allowance schedule identifies a fixed amount for water/trash. If the tenant is paying only for water, the caseworkers would assign a partial amount from the water/trash allowance. The method used to determine the partial amount is not documented or supported. Recommendation We recommend that the Authority develop and implement a utility allowance schedule that identifies separate allowances for water and trash. City Response Regarding Corrective Actions Planned The Housing Authority has developed and implemented a utility allowance schedule which identifies separate allowances for water and trash. (2) Reconciliation of HUD Section 8 Payments During our single audit testwork, we found that the "HUD payment register", which identifies Section 8 housing assistance payments, was not reconciled to the general ledger. The HUD payment register details the amount of payment the City housing department requested on behalf of each recipient and the general ledger details actual payments made to landlords on behalf of recipients. Recommendation For proper accounting control, the HUD payment register and the general ledger should be reconciled monthly. Any differences between the two documents should be investigated and resolved. Citv Response Regarding Corrective Actions Planned A first quarter reconciliation has been completed; a reconciliation for the second quarter will be done by the end of January 1994. Monthly reconciliations will be done starting with the month of January 1994. (3) Monitoring Subrecipients in the Community Development Block Grant (CDBG) Program During our single audit review of controls over the CDBG program, we noted that the City did not perform any on-site visits for those subrecipients receiving over $25,000 during the fiscal year. -13- CITY OF CARLSBAD Findings and Recommendations (Continued) (3) Monitoring Subrecipients in the Community Development Block Grant (CDBG) Program. (Continued) Recommendation We recommend that the City implement its on-site monitoring system for those subrecipients receiving over $25,000. City Response Regarding Corrective Actions Planned The City will implement an on-site monitoring process for all CDBG subrecipients regardless of funding amount. The City intends to conduct formal onsite visits at least one time per program year. Informal visits will be made periodically throughout the year to monitor subrecipients who require additional/special assistance from City staff. -14- CITY OF CARLSBAD Status of Prior Audit Findings The prior year single audit findings have been adequately resolved. -15- PARKING AUTHORITY OF THE CITY OF CARLSBAD Combined Financial Statements Year Ended June 30, 1993 (With Independent Auditor's Report Thereon) AUTHORITY OF THE CITY OF CA. .BAD Combined Financial Statements Year Ended June 30, 1993 TABLE OF CONTENTS Page Independent Auditors' Report 1 Combined Balance Sheet - All Governmental Fund Types and Account Group 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types 3 Notes to Combined Financial Statements 4 Supplementary Statements and Schedule: Combining Balance Sheet - Debt Service Funds 10 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds 11 Schedule of Insurance Coverage 12 CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Board of Directors Parking Authority of the City of Carlsbad Carlsbad, California Independent Auditors' Report We have audited the accompanying component unit financial statements of the Parking Authority of the City of Carlsbad (the Authority), as of and for the year ended June 30, 1993, as listed in the accompanying table of contents. These component unit financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these component unit financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of the Parking Authority of the City of Carlsbad as of June 30, 1993, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion of the component unit financial statements taken as a whole. The combining financial statements and schedule listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the component unit financial statements of the Parking Authority of the City of Carlsbad. Such information has been subjected to the auditing procedures applied in the audit of the component unit financial statements and, in our opinion, is fairly stated in all material respects in relation to the component unit financial statements taken as a whole. September 3, 1993 -1- MEMBERS Of AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION PAu -NG AUTHORITY OF THE CITY OF CA. jBAD Combined Balance Sheet All Governmental Fund Types and Account Group June 30, 1993 Governmental Fund Types Assets and Other Debits Cash and investments (note 2) Net investment in direct financing leases (note 3) Accrued interest receivable Due from other funds (note 5) Amount available in debt service funds Amount to be provided for retirement of general long-term debt General $2,084 916 Debt Service 586,854 611,147 11,315 14,558 Account Group General Long-term Debt 597,253 677.747 Totals (Memorandum Only) 588,938 677,747 11,315 15,474 597,253 677.747 Total assets and other debits $3.000 1.290.474 1.275.000 2.568.474 Liabilities and Fund Balances Liabilities: Due to other funds (note 5) Deferred revenue Revenue bonds payable (note 4) Total liabilities Fund balances: Reserved for debt service Unreserved - undesignated Total fund balances Total liabilities and fund balances $-15,474 677,747 597.253 1.275.000 693.221 1.275.000 597,253 $3.000 1.290.474 1.275.000 15,474 677,747 1.275.000 1.968.221 597,253 3.000 600.253 2.568.474 See accompanying notes to combined financial statements. -2- PA. iNG AUTHORITY OF THE CITY OF CA JBAD Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types Year Ended June 30, 1993 Revenues: Lease payments Interest income Total revenues General Debt Service 130,500 41.793 172.293 Totals (Memorandum Only) 130,500 41.793 172.293 Expenditures: Principal retirement Interest Administrative Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year Fund balances at end of year 2.799 2.799 2.799 175,000 105,600 280.600 (2.799) 175,000 105,600 2.799 283.399 (2.799) 2,799 (108.307) 18,074 (20.873) (111.106) 20,873 (20.873) 3.000 $3.000 (111,106) 708.359 597.253 (111,106) 711.359 600.253 See accompanying notes to combined financial statements, -3- PARK J AUTHORITY OF THE CITY OF C .LSBAD Notes to Combined Financial Statements Year Ended June 30, 1993 (1) Organization and Summary of Significant Accounting Policies The Parking Authority of the City of Carlsbad (the Authority) was created pursuant to the Parking Law of 1949 and was authorized by the City Council on April 19, 1966 for the purpose of providing and expanding public parking facilities for the City of Carlsbad (the City). A five-member commission appointed by the City Council governs the Authority. The Authority is not subject to federal or state income taxes. The Authority is an integral part of the reporting entity of the City. The accounts of the Authority have been included within the scope of the general purpose financial statements of the City because the City Council exercises oversight responsibility over the operations of the Authority. Only the accounts of the Authority are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad. The accounting policies of the Authority conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant policies: (a) Basis of Presentation The accounts of the Authority are organized on the basis of funds and an account group, each of which is considered to be a separate accounting entity. The operations of each fund and account group are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures. The various funds and the account group are summarized by type in the financial statements. Fund types and the account group used by the Authority are as follows: GOVERNMENTAL FUND TYPES Governmental funds are used to account for the Authority's expendable financial resources and related liabilities. The measurement focus is upon determination of changes in financial position. The following are the Authority's governmental fund types: General Fund The general fund is the general operating fund of the Authority. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and payment of, general long-term debt principal, interest and related costs. -4- PARK .G AUTHORITY OF THE CITY OF v *LSBAD Notes to Combined Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (a) Basis of Presentation. (Continued) GENERAL LONG-TERM DEBT ACCOUNT GROUP This account group is used to establish accounting control and accountability for the Authority's general long-term debt. It is used to account for all long-term obligations of the Authority. (b) Measurement Focus and Basis for Accounting Governmental fund types are accounted for on a "spending" measurement focus. Accordingly, only current assets and current liabilities generally are included on their balance sheets, and the reported fund balance provides an indication of available, spendable resources. Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in available spendable resources. Governmental fund types use the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual (i.e., both measurable and available). Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenues that are accrued include interest income. Governmental fund expenditures are recognized when the liability is incurred, except for principal and interest on long-term debt, which is recognized when due. (c) Budgets The Authority does not adopt an annual budget; thus, no budgetary comparisons are presented. (d) Investments Investments are stated at cost or amortized cost which approximates market value. (e) Total Columns Total columns on the combined statements are captioned "Totals (Memorandum Only)" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in fund balance in conformity with generally accepted accounting principles. Such data is not comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. -5- PARK G AUTHORITY OF THE CITY OF ^ .*LSBAD Notes to Combined Financial Statements (Continued) (2) Cash and Investments Cash and investments held by the Authority at June 30, 1993 consisted of the following: Deposits $ 2,084 Investments 586.854 $588.938 The Authority's investment policy and state statutes authorize the Authority to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, commercial paper rated A-l by Standard and Poor's Corporation or P-l by Moody's Commercial Paper, banker's acceptances with a maximum maturity of 270 days, repurchase and reverse repurchase agreements, certificates of deposit with national and state licensed or chartered banks or federal or state savings and loan associations, money market and mutual funds whose portfolios consist of one or more of the foregoing investments, San Diego County investment pool and the State Treasurer's investment pool. 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. As of June 30, 1993, all of the Authority's deposits were classified as category 1. The bank balance equals the carrying amount. Classification of Investment by Credit Risk As defined in Governmental Accounting Standards Board Statement No. 3, investments in securities are categorized in the following manner: Category 1 - Investments that are insured or registered, which are held by the Authority or its agent in the Authority's name. Category 2 - Uninsured and unregistered investments, for which the securities are held by the counterparty's trust department or agent in the Authority's name. Category 3 - Uninsured and unregistered investments, for which the securities are held by the counterparty or by its trust department or agent, but not in the Authority's name. -6- PARK G AUTHORITY OF THE CITY OF I 1LSBAD Notes to Combined Financial Statements (Continued) (2) Cash and Investments. (Continued) Category Carrying Market Type of Investment 1 2 3 Amount Value U.S. Treasury notes and bills $ - 309,346 - 309,346 313,000 Government agency obligations - 151.406 _= 151.406 150.000 $ - 460.752 - 460,752 463,000 Investment in mutual funds - Pacific Horizons 126.102 126.102 Total investments $586.854 (3) Lease Agreements Leases have been executed between the Authority and the City under which the City agreed to make annual payments of $138,000 and $174,000 for the lease of a parking facility and its subsequent expansion, respectively. The leases have been recorded by the Authority as direct financing leases. Lease payments are due quarterly and terminate on the date of retirement of the related revenue bonds. Under the terms of the lease agreements and the bond resolutions, Debt Service Funds in excess of the next interest and principal payments may be used as follows: First, to maintain a reserve of $68,000 and $156,000, respectively, for the 1969 and the 1981 Bonds. Next, to pay the General Fund for any expenses of the Authority and to maintain the fund balance at $3,000, and then as credits to the City for rentals due under the leases. Due to the excess monies in the 1969 Bond Service Fund during the fiscal year ending June 30, 1993, no lease payments were required from the City under the parking facility lease. A lease payment of $130,500 was required during the fiscal year ending June 30, 1993 from the City under the expansion lease to cover debt service payments during the year for the 1981 bond issue. (4) Revenue Bonds Payable The following is a summary of changes in revenue bonds payable for the year ended June 30, 1993: -7- PARKi.. J AUTHORITY OF THE CITY OF C .LSBAD Notes to Combined Financial Statements (Continued) (4) Revenue Bonds Payable. (Continued) Series 1969 Series 1981 Totals Revenue bonds payable June 30, 1992 $450,000 1,000,000 1,450,000 Bonds retired 100.000 75.000 175.000 Revenue bonds payable, June 30, 1993 $350.000 925.000 1.275.OOP Revenue bonds payable at June 30, 1993 were comprised of the following individual issues: 1969 Parking Revenue Bonds: 1969 Carlsbad Parking Authority Revenue Bonds, remaining principal due in amounts ranging from $100,000 to $125,000 on October 1 of each year through 1995, interest payable on October 1 and April 1 at 6.4% per annum. The bonds are subject to call in whole or in part at the option of the Authority at prices ranging from 100.5% to 105% of the principal amount of the bonds. 1981 Parking Revenue Bonds: 1981 Carlsbad Parking Authority Revenue Bonds, remaining principal due in amounts ranging from $75,000 to $150,000 on February 1 of each year through 2001, interest payable on August 1 and February 1 at 8.0% per annum. Bonds maturing on or after February 1, 1991 are subject to call in whole or in part at the option of the Authority at prices ranging from 100.25% to 102% of the principal amount of the bonds. Debt service requirements to maturity for the revenue bonds payable are as follows: Year Ending June 30. Series 1969 Series 1981 Total Less amounts interest 1994 1995 1996 1997 1988 Thereafter representing $119,200 137,000 129,000 - -_ 385,200 35.200 174,000 166,000 158,000 150,000 167,000 466.000 1,281,000 356.000 293,200 303,000 287,000 150,000 167,000 466.000 1,666,200 391.200 Total revenue bonds payable $350.000 925.OOP 1.275.0PP -8- PARKi. J AUTHORITY OF THE CITY OF C .LSBAD Notes to Combined Financial Statements (Continued) (4) Revenue Bonds Payable. (Continued) At June 30, 1993, the Authority was in compliance with all significant debt covenants. (5) Due To and From Other Funds The following table shows amounts due from funds within the Authority to other funds within the Authority at June 30, 1993: Due To: General Fund Bond Service Funds Series 1969 Series 1981 Due from: Bond Service Funds: Series 1969 $ 24 Series 1981 892 Reserve Funds: Series 1969 - 2,060 Series 1981 _= - 12.498 Total $916 2.060 12.498 -9- SUPPLEMENTARY STATEMENTS AND SCHEDULE .iRKING AUTHORITY OF THE CITY OF CARLSB, Combining Balance Sheet Debt Service Funds June 30, 1993 Assets Investments Net investment in direct financing lease Accrued interest receivable Due from other funds Total assets Bond Service Funds Reserve Funds Series 1969 Series 1981 Series 1969 Series 1981 Totals 68,009$246,344 29,372 4,247 2.060 108,752 648,375 268 12.498 $282.023 769.893 163,749 586,854 677,747 2,051 4,749 11,315 - - 14.558 70.060 168.498 1.290.474 Liabilities and Fund Balances Liabilities: Due to other funds Deferred revenue Total liabilities Fund balances - reserved for debt service 252.627 Total liabilities and fund balances $282.023 $ 24 29.372 29.396 892 648.375 649.267 120.626 769.893 2,060 2.060 68.000 70.060 12,498 15,474 - 677.747 12.498 693.221 156.000 597.253 168.498 1.290.474 -10- JIKING AUTHORITY OF THE CITY OF CARLSBA Combining Statement of Revenue, Expenditures and Changes in Fund Balance Debt Service Funds Year Ended June 30, 1993 Revenues: Lease payments Interest income Total revenues Bond Service Funds Reserve Funds Series 1969 Series 1981 Series 1969 Series 1981 Totals 20.195 20.195 130,500 5.628 12.446 41.793 5.628 12.446 172.293 Expenditures: Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year Fund balances at end of year 100,000 25.600 5,628 (8101 4.818 75,000 80.000 125.600 155.000 12,446 (1.9891 (100,587) (10,519) 353.214 131.145 S2S2.627 120.626 175,000 105.600 280.600 (5.6281 (5.628) 68.000 12.446 (108.307) 18,074 (12.4461 (20.8731 (2.799) (111,106) 156.000 708.359 156.000 597.253 -11- PAR; G AUTHORITY OF THE CITY OF RLSBAD Schedule of Insurance Coverage Year Ended June 30, 1993 Insurance coverage maintained by the City of Carlsbad with the Authority listed as additional insured at June 30, 1993 includes: Type of Coverage Amount of Coverage Term All risk including valuable papers and rental income $37,973,804 10/01/92 to 10/01/93 Equipment floater 517,410 10/01/92 to 10/01/93 Honesty Blanket Bond 1,500,000 04/16/93 to 04/16/94 Effective January 1, 1986, the Authority has not been covered under a liability insurance policy but has been included under the City of Carlsbad's self-insurance program. -12- CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION Combined Financial Statements Year Ended June 30, 1993 (With Independent Auditors' Report Thereon) CITY CARLSBAD PUBLIC IMPROVEMENT CC JRATION Combined Financial Statements Year Ended June 30, 1993 TABLE OF CONTENTS Page Independent Auditors' Report 1 Combined Balance Sheet - Governmental Fund Type and Account Group 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds 3 Notes to Combined Financial Statements 4 Supplementary Statements: Combining Balance Sheet - Debt Service Funds 8 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds 9 CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714)474-2020 The Board of Directors City of Carlsbad Public Improvement Corporation Carlsbad, California Independent Auditors' Report We have audited the accompanying component unit financial statements of the City of Carlsbad Improvement Corporation (the Corporation) as of and for the year ended June 30, 1993, as listed in the accompanying table of contents. These component unit financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these component unit financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of the City of Carlsbad Public Improvement Corporation as of June 30, 1993, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the component unit financial statements taken as a whole. The combining financial statements listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the component unit financial statements of the City of Carlsbad Public Improvement Corporation. Such information has been subjected to the auditing procedures applied in the audit of the component unit financial statements and, in our opinion, is fairly stated in all material respects in relation to the component unit financial statements taken as a whole. September 8, 1993 -1- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY t :ARLSBAD PUBLIC IMPROVEMENT COL .NATION Combined Balance Sheet Governmental Fund Type and Account Group June 30, 1993 Governmental Fund Tvoe Debt Service Assets Cash and investments held by trustee (note 2) $ 876,096 Net investment in direct financing lease (note 3) 6,926,549 Interest receivable 29,980 Amount available in debt service funds Amount to be provided for retirement of certificates of participation - Total assets $7.832.625 Account Group General Totals Long-term (Memorandum Debt Only) 876,096 6,926,549 29,980 903,451903,451 6.926.549 7.830.OOP 6.926.549 15.662.625 Liabilities and Fund Balance Liabilities: Deferred revenue $6,926,549 Certificates of participation payable (note 4) - Total liabilities 6.926.549 7.830.000 7.830.000 6,926,549 7.830.000 14.756.549 Fund balances: Reserved for arbitrage (note 5) Reserved for debt service (note 5) Total fund balances Total liabilities and fund balances 2,625 903.451 906.076 2,625 903.451 906.076 $7.832.625 7.830.000 15.662.625 See accompanying notes to combined financial statements, -2- CITY CARLSBAD PUBLIC IMPROVEMENT Cl. ORATION Combined Statement of Revenues, Expenditures and Changes in Fund Balance - Debt Service Funds Year Ended June 30, 1993 Revenues: Lease payments Interest on investments Total revenues $735,051 74.977 810.028 Expenditures: Principal Interest Arbitrage rebate Administrative Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Transfers to the City of Carlsbad Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year Fund balances at end of year 260,000 606,448 23,200 7.600 897.248 (87.220) 68,896 (68,896) Q6) (76) (87,296) 993.372 $906.076 See accompanying notes to combined financial statements, -3- CITY OF *, ^LSBAD PUBLIC IMPROVEMENT ^ . RPORATION Notes to Combined Financial Statements Year Ended June 30, 1993 (1) Organization and Summary of Significant Accounting Policies The City of Carlsbad Public Improvement Corporation (the Corporation) was organized on June 1, 1988 under the Nonprofit Public Benefit Corporation law for the purpose of financing and constructing certain improvements on the parcel of property known as Hosp Grove. The Corporation is not subject to federal or state income taxes. The Corporation is an integral part of the reporting entity of the City of Carlsbad, California (the City). The accounts of the Corporation have been included within the scope of the general purpose financial statements of the City because the City Council exercises oversight responsibility over the operations of the Corporation. Only the accounts of the Corporation are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad. The accounting policies of the Corporation conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant policies: (a) Basis of Presentation The accounts of the Corporation are organized on the basis of funds and an account group, each of which is considered to be a separate accounting entity. The operations of each fund and account group are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures. The various funds and the account group are summarized by type in the financial statements. The fund types and the account group used by the Corporation are as follows: GOVERNMENTAL FUND TYPE Governmental funds are used to account for the Corporation's expendable financial resources and related liabilities. The measurement focus is upon determination of changes in financial position. The following is the Corporation's governmental fund type: Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and payment of, general long-term debt principal, interest and related costs. GENERAL LONG-TERM DEBT ACCOUNT GROUP This account group is used to establish accounting control and accountability for the Corporation's general long-term debt. It is used to account for all long-term obligations of the Corporation. CITY OF C vLSBAD PUBLIC IMPROVEMENT <_ .tPORATION Notes to Combined Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (b) Measurement Focus and Basis for Accounting Governmental fund types are accounted for on a "spending" measurement focus. Accordingly, only current assets and current liabilities are generally included on their balance sheets, and the reported fund balance provides an indication of available, spendable resources. Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in available, spendable resources. Governmental fund types use the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual (i.e., both measurable and available). Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenues that are accrued include interest income. Governmental fund expenditures are recognized when the liability is incurred, except for principal and interest on long-term debt, which is recognized when due. (c) Budgets The Corporation does not adopt an annual budget, therefore, no budgetary comparisons are presented. (d) Investments Investments are stated at cost or amortized cost which approximates market value. (e) Total Columns Total columns on the combined statements are captioned "Totals (Memorandum Only)" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in fund balances in conformity with generally accepted accounting principles. Such data is not comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. -5- CITY OF I .iLSBAD PUBLIC IMPROVEMENT c ^PORATION Notes to Combined Financial Statements (Continued) (2) Cash and Investments Authority for Investments The Trust Agreement by and among the Bank of America, as successor trustee, the Corporation and the City of Carlsbad, dated June 1, 1988, authorizes the trustee to invest in Federal Treasury Securities, Federal Agency Securities, interest-bearing demand or time deposits, obligations of U.S. corporations having assets in excess of $500,000,000 and carrying one of the three highest ratings by Moody's and Standard and Poor's Corporation, repurchase agreements, money market funds, commercial paper rated A-l by Standard and Poor's Corporation and P-l by Moody's Commercial Paper with original maturities of not more than 180 days, bankers acceptances with maturities of not more than 270 days, and tax-exempt obligations rate in one of the three highest ratings by Moody's and Standard and Poor's Corporation. Classification of Investment by Credit Risk As defined in Governmental Accounting Standards Board Statement No. 3, investments in securities are categorized in the following manner: Category 1 - Investments that are insured or registered, which are held by the Corporation or its agent in the Corporation's name. Category 2 - Uninsured and unregistered investments, for which the securities are held by the counterparty's trust department or agent in the Corporation's name. Category 3 - Uninsured and unregistered investments, for which the securities are held by the counterparty or by its trust department or agent, but not in the Corporation's name. As of June 30, 1993, the Corporation had $7,096 invested in mutual funds and $869,000 invested in a guaranteed investment contract which are not categorizable by credit risk. (3) Lease Agreements Under the terms of a lease agreement dated June 1, 1988, the City has leased property known as Hosp Grove to the Corporation and the Corporation has leased back to the City the same property and all improvements constructed thereon. The Agreement requires the City to pay seminannual lease payments to the Corporation equal to the debt service requirements of the Certificates of Participation issued by the Corporation on June 1, 1988 (the Certificates). The lease payments are due on each January 15 and July 15 until the Certificates have been paid in full. In addition, the City must pay all taxes, assessments, insurance, maintenance and utilities on the property and its improvements. The lease expires on August 1, 2008 or upon the date of retirement of the Certificates. The lease has been accounted for as a direct financing lease. -6- CITY OF C .<LSBAD PUBLIC IMPROVEMENT L ^PORATION Notes to Combined Financial Statements (Continued) (4) Certificates of Participation The Corporation issued the Certificates on June 1, 1988 in the amount of $8,690,000 pursuant to a Trust Agreement by and among the Corporation, the City and the Trustee. The Certificates represent an undivided interest in the lease payments made by the City of Carlsbad to the Corporation. Interest is payable at rates ranging from 5.75% to 7.6% per annum. The Certificates mature on August 1 of each year through 2008. Certificates maturing on August 1, 2008 are subject to mandatory redemption on August 1 in each year on or after August 1, 2001, in amounts reflected in the debt service requirements below. Certificates maturing on or after August 1, 1999 are subject to call in whole or in part at the option of the Corporation at prices ranging from 100% to 102% of the principal amount of the Certificates. The Corporation is required to maintain a debt service reserve of $869,000. As of June 30, 1993, the balance is $903,451. Debt service requirements to maturity for the Certificates are as follows: Year ending June 30. 1994 $ 865,054 1995 866,873 1996 866,733 1997 859,795 1998 860,985 1999-2003 4,284,040 2004-2008 4,256,800 2009 851.600 13,711,880 Less amounts representing interest (5.881.880) $ 7.830.OOP Changes in general long-term debt from the previous year result from payments of principal and interest on the Certificates. At June 30, 1993, the Corporation was in compliance with all significant debt covenants. (5) Fund Balances The reserve for arbitrage represents amounts which may be owed to the federal government under the Tax Reform Act of 1986. The reserve for debt service represents resources legally restricted to the payment of general long-term debt principal and interest maturing in future years. -7- SUPPLEMENTARY STATEMENTS CITY C JARLSBAD PUBLIC IMPROVEMENT COk .{ATION Combining Balance Sheet - Debt Service Funds June 30, 1993 Assets Cash and investments held by trustee Net investment in direct financing lease Interest receivable Total assets Lease Payment Reserve 873,151$ 2,945 6,926,549 6.929.494 29.980 903.131 Total 876,096 6,926,549 29.980 7.832.625 Liabilities and Fund Balances Liabilities: Deferred revenue Total liabilities $6.926.549 6.926.549 6.926.549 6.926.549 Fund balances: Reserves for arbitrage Reserves for debt service Total fund balances 2,625 320 2.945 903.131 903.131 2,625 903.451 906.076 Total liabilities and fund balances $6.929.494 7.832.625 -8- CITY CARLSBAD PUBLIC IMPROVEMENT CC ;RATION Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds Year ended June 30, 1993 Revenues: Lease payments Interest on investments Total revenues Lease Payment Reserve Total $ 735,051 2.113 737.164 72.864 72.864 735,051 74.977 810.028 Expenditures: Principal Interest Arbitrage rebate Administrative Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financial sources (uses): Operating transfers in Operating transfers out Transfer to the City of Carlsbad Total other financing sources (uses) 260,000 606,448 23,200 7.600 897.248 260,000 606,448 23,200 7.600 897.248 (160.084) 68,896 (76) 68.820 Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses (91,264) Fund balances at beginning of year Fund balances at end of year 94.210 $ 2.946 72.864 (87.220) 68,896 (68,896) (68,896) - (76) (68.896)(76) 3,968 (87,296) 899.162 993.372 903.130 906.076 -9-