Administrative Details Continuing Professional Education (CPE) regulations
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Download a copy of today’s slides or accompanying handout from the “Handouts” section in the top right corner of your screen.
Help Desk: 916-642-7012
Today’s Speaker: David Bullock, CPA
David is an Assurance and Government Advisory Services Partner in the San Francisco Bay Area office of MGO. He has 18 years of professional experience providing auditing, accounting and consulting services. During the past year, David has served as the engagement partner for diverse clients such as the Cities of Oakland, Palo Alto, and Pleasant Hill, County of Alameda, and the San Francisco Redevelopment Agency. In addition, David currently serves as the contracted controller for the Contra Costa County Redevelopment Agency.
www.mgocpa.com
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Polling Question #1
To what extent have you been following the drafts of the CCMA White Paper on Redevelopment Agencies … or have you had the opportunity to read the final copy?
a)Very closely
b)Somewhat closely
c)On a limited basis
d)Not at all
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Polling Question #2
What are your roles and responsibilities relating to the Accounting and Financial Reporting of Successor Agencies?
a)Accounting Department of a Successor Agency
b)Auditor-Controller’s Office of a California County
c)An Independent Auditor of a CPA Firm
d)Other
Today’s Agenda
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Structure and Presentation Accounting and Reporting Audit Requirements Q&A
Finding Levity Amidst the Challenges
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IN MEMORIAM ‐‐ OAKLAND REDEVELOPMENT AGENCY, 1956‐2012 OAKLAND, CA ‐‐ The Oakland Redevelopment Agency passed away peacefully at midnight on February 1 at age 55. Cause of death was listed as ABX 26 flu, complicated by acute EOPS poisoning. ORA, as she was affectionately known, was born on October 10, 1956. During ORA’s busy life, she was best known for transforming downtown Oakland... She was especially proud of the thousands of affordable housing units she helped produce for low income renters and homeowners. She even helped build the State of California’s downtown headquarters, but was later abandoned by an ungrateful State legislature and supreme court. She was estranged from her former CEO, Edmund G. Brown of San Francisco, Calif. They had a whirlwind romance in the early part of this century as ORA worked hard to make Mr. Brown’s 10K housing plan a reality; but he later left her for higher office and even tried to seize her life savings, which he claimed was his community property.
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Structure and Presentation
Successor Agency means “the county, city or city and county” that authorized the creation of each redevelopment agency or another entity, as provided by HSC.
Legal counsel for the SCO’s Office has made a determination that successor agencies are not separate legal entities!
Therefore, no longer a Component Unit
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Structure and Presentation
CCMA: Reporting Fund is to be a Private Purpose Trust Fund• What does that mean?
− Fiduciary Fund− Report assets held in a trustee or agency capacity for
others, therefore cannot be used to support the government's own programs
− Economic resources measurement focus and accrual basis of accounting
− Combine individual sub-funds into one reporting fund
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Structure and Presentation
No balances in Government-Wide financial statements at June 30, 2012!
Impact to Governmental Funds Major Fund Determination
• For 2012, could be a significant change in the calculation of major funds
− No ending assets or liabilities and only seven months of revenues and expenditures
• Suggestion: keep the treatment consistent with 2011, regardless of quantified results
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Structure and Presentation
Other Considerations• Transmittal letter (CAFR only)
• Management’s Discussion and Analysis
• Notes to the basic financial statements
• Combining statements and schedules
• Statistical section (CAFR only)
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Polling Question #3
Successor Agencies should be reported in the financial statements as:
a)Component unit
b)Governmental funds
c)Enterprise funds
d)Fiduciary funds
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Polling Question #3 Debrief
Successor Agencies should be reported in the financial statements as:
d) Fiduciary funds
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Polling Question #4
A private purpose trust fund is used to:
a)Account for tax-supported activities.
b)Report resources held by the reporting government in a purely custodial capacity.
c)Report all trust arrangements under which the principal and income benefit individuals, private organizations, or other governments.
d)Report an activity for which a fee is charged to external users for goods and services.
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Polling Question #4 Debrief
A private purpose trust fund is used to:
c) Report all trust arrangements under which the principal and income benefit individuals, private organizations, or other governments.
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Accounting and Reporting
AB X1 26 requires dissolution on 2/1/12• Final seven months will continue to be reported in the
governmental funds or as a discrete component unit
• After dissolution, activity of the successor agency will be reported in a fiduciary fund
For entities that followed the CRA guidance - Activity will have to be distinguished between the former Redevelopment Agency and the Successor Agency
New Fund Required: “Redevelopment Obligation Retirement Fund”
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Accounting and Reporting
Transfers of assets and liabilities of the former RDA to the successor agency• Reported as extraordinary gains/losses in
governmental funds and governmental activities− Since government-wide financial statements have
capital assets and long-term debt, among other differences, there will need to be a reconciliation of these differences when compared to governmental funds
• Reported as extraordinary gains/losses in the trust fund or as additions (“net assets received upon dissolution of redevelopment agency”)
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Accounting and Reporting
All transfers of assets and liabilities need to be at carrying value (e.g. net book value)
− Same methodology proposed in GASB Exposure Draft – Governmental Combinations and Disposals of Governmental Operations
− Extremely important to establish the carrying value at the transfer date (i.e., cut-off)
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Accounting and Reporting
Extraordinary Items may include• Unpaid advances from the City/County
• Transfers of properties held for resale and capital assets at carrying value
• Transfers of outstanding bonds at carrying value
• Transfers of all other assets and liabilities (including compensated absences, accrued employee benefits, etc. that go to the successor agency)
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Accounting and Reporting
Housing Funds• Unencumbered balances of Low and Moderate Income
Housing Fund goes to the successor agency− Pending legislation
• Assets transferred to the housing successor agency− If the City/County elected to be the housing
successor, then the transferred assets should be reported within its governmental funds … or possibly an enterprise fund in the case where a housing authority of the City/County elected to be the the housing successor
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Accounting and Reporting – February 1, 2012
Preliminary and Tentative - For Illustration Purposes Only Example of Select Governmental Funds Reported in the Primary Government (i.e., city-wide)
CITY OF EXAMPLEGovernmental Funds - SELECT FUNDS ONLY
Balance SheetFebruary 1, 2012
Low and Tax AllocationModerate Refunding New City
Project Area Income Bonds HousingOne Housing Debt Service Fund Total
Assets:Interest receivable -$ -$ -$ 10,000$ 10,000$ Notes and loans receivable - - - 1,058,000 1,058,000 Land held for redevelopment - - - 500,000 500,000
Total assets -$ -$ -$ 1,568,000$ 1,568,000$
Liabilities and Fund Balances:Liabilities:
Deferred revenue -$ -$ -$ 600,000$ 600,000$
Fund balances:Restricted for:
Low and moderate income housing - - - 968,000 968,000
Total liabilities and fund balances -$ -$ -$ 1,568,000$ 1,568,000$
Note: Normally, the reporting date would be 6-30-12, however, we are showing 2-1-12 for i l lustration of the impact of the dissolution (closing the former redevelopment funds).
Note: Housing Successor
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Accounting and Reporting – February 1, 2012Preliminary and Tentative - For Illustration Purposes Only Example of Select Governmental Funds Reported in the Primary Government (i.e., city-wide)
CITY OF EXAMPLEGovernmental Funds - SELECT FUNDS ONLY
Statement of Revenues, Expenditures and Changes in Fund BalancesFor the Year Ended June 30, 2012
Low and Tax AllocationModerate Refunding New City
Project Area Income Bonds HousingOne Housing Debt Service Fund Total
Revenues:Property taxes 712,000$ 928,000$ 3,000,000$ -$ 4,640,000$ Use of money and property 15,000 20,000 5,000 - 40,000 Other - 80,000 - - 80,000
Total revenues 727,000 1,028,000 3,005,000 - 4,760,000
Expenditures:Current:
Community development 1,849,000 900,000 130,000 - 2,879,000 Debt service:
Principal - - 570,000 - 570,000 Interest and fiscal charges - - 597,000 - 597,000
Total expenditures 1,849,000 900,000 1,297,000 - 4,046,000
Due within one year 700,000 Due in more than one year 5,000,000
Total liabilities 6,012,000
Net Assets:Held in trust for other purposes $ (2,018,000)
Note: Normally, the reporting date would be 6-30-12, however, we are showing 2-1-12 for illustration of initial balances transferred from the former redevelopment agency.
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Accounting and Reporting – February 1, 2012Preliminary and Tentative - For Illustration Purposes Only Example of a Private Purpose Trust Fund
CITY OF EXAMPLE
Statement of Changes in Fiduciary Net AssetsSuccessor Agency to the Example Redevelopment Agency Private Purpose Trust Fund
For the Period February 1, 2012 through June 30, 2012Establishing the "Extraordinary Loss" … at February 1, 2012
Additions:Property taxes -$ Investment earnings - Other -
Total additions -
Deductions:Program expenses of former redevelopment agency - Administrative expenses - Interest and fiscal ageny expenses of former redevelopment agency -
Total deductions -
Extraordinary loss (2,018,000)
Change in net assets (2,018,000) Net assets - beginning - Net assets - ending $ (2,018,000)
Note: Excludes new activity in the private purpose trust fund subsequent to 2/1/12, in order to isolate the initial transfer of assets and liabilities.
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Accounting and Reporting – January 31, 2012Preliminary and Tentative - For Illustration Purposes Only Example of a Stand Alone Audit of the Redevelopment Agency, before Dissolution
CITY OF EXAMPLE REDEVELOPMENT AGENCY
Statement of Net AssetsJanuary 31, 2012
GovernmentalActivities
Assets:Cash and investments:
Held in City Treasury 2,750,000$ Held with trustees 650,000
Interest receivable 18,000 Notes and loans receivable 1,058,000 Land held for redevelopment 586,000 Nondepreciable capital assets 500,000
Due within one year 700,000 Due in more than one year 5,000,000
Total liabilities 6,012,000
Net Assets:Invested in capital assets 500,000 Restricted for:
Low and moderate income housing 2,826,000 Debt service 1,742,000
Unrestricted (deficit) (5,518,000)
Total net deficit $ (450,000)
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Accounting and Reporting – January 31, 2012Preliminary and Tentative - For Illustration Purposes Only Example of a Stand Alone Audit of the Redevelopment Agency, before Dissolution
CITY OF EXAMPLE REDEVELOPMENT AGENCY
Statement of ActivitiesFor the Period July 1, 2011 through January 31, 2012
GovernmentalActivities
Program Expenses:Community development 2,319,000$ Pass-through agreements 150,000 Developer tax sharing reimbursements 410,000 Intergovernmental 1,800,000 Interest and fiscal charges 617,000
Total program expenses 5,296,000
General Revenues:Property taxes 4,640,000 Investment earnings 40,000 Other 130,000
Total general revenues 4,810,000
Change in net assets (486,000)
Net assets, beginning of year 36,000
Net deficit, end of year (450,000)$
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Accounting and Reporting – January 31, 2012Preliminary and Tentative - For Illustration Purposes Only Example of a Stand Alone Audit of the Redevelopment Agency, before Dissolution
CITY OF EXAMPLE REDEVELOPMENT AGENCYGovernmental Funds
Balance SheetJanuary 31, 2012
Low and Tax AllocationModerate Refunding
Project Area Income BondsOne Housing Debt Service Total
Assets:Cash and investments:
Held in City Treasury 650,000$ 1,200,000$ 900,000$ 2,750,000$ Held with trustees - - 650,000 650,000
Interest receivable 6,000 10,000 2,000 18,000 Advances to other funds - 60,000 - 60,000 Notes and loans receivable - 1,058,000 - 1,058,000 Land held for redevelopment 86,000 500,000 - 586,000
Total assets 742,000$ 2,828,000$ 1,552,000$ 5,122,000$
Liabilities and Fund Balances:Liabilities:
Accounts payable and accruals 120,000$ 2,000$ -$ 122,000$ Deferred revenue - 600,000 - 600,000 Advances from other funds 60,000 - - 60,000
Total liabilities 180,000 602,000 - 782,000
Fund balances:Restricted for:
Low and moderate income housing - 2,226,000 - 2,226,000 Debt service - - 1,552,000 1,552,000
Total fund balances 562,000 2,226,000 1,552,000 4,340,000
Total liabilities and fund balances 742,000$ 2,828,000$ 1,552,000$ 5,122,000$
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Accounting and Reporting – January 31, 2012Preliminary and Tentative - For Illustration Purposes Only Example of a Stand Alone Audit of the Redevelopment Agency, before Dissolution
CITY OF EXAMPLE REDEVELOPMENT AGENCY
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets - Governmental Activities
January 31, 2012
Total fund balances reported on the governmental funds balance sheet 4,340,000$
Amounts reported for governmental activities in the statement of net assetsare different from those reported in the governmental funds above because of the following:
Capital assets used in governmental activities are not financial resources and,therefore, are not reported in the funds 500,000
Receivables not available:Certain receivables are not available to pay for current period expenditures
and therefore are deferred in the governmental funds. 600,000
Long-term liabilities:The liabilities below are not due and payable in the current period and
therefore are not reported in the governmental funds:Long-term debt (5,700,000) Interest payable (190,000)
Net deficit of governmental activities (450,000)$
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Accounting and Reporting – January 31, 2012Preliminary and Tentative - For Illustration Purposes Only Example of a Stand Alone Audit of the Redevelopment Agency, before Dissolution
CITY OF EXAMPLE REDEVELOPMENT AGENCYGovernmental Funds
Statement of Revenues, Expenditures and Changes in Fund BalancesFor the Period July 1, 2011 through January 31, 2012
Low and Tax AllocationModerate Refunding
Project Area Income BondsOne Housing Debt Service Total
Revenues:Property taxes 712,000$ 928,000$ 3,000,000$ 4,640,000$ Use of money and property 15,000 20,000 5,000 40,000 Other - 80,000 - 80,000
Total revenues 727,000 1,028,000 3,005,000 4,760,000
Total expenditures 2,949,000 1,600,000 1,297,000 5,846,000
Excess (deficiency) of revenuesover (under) expenditures (2,222,000) (572,000) 1,708,000 (1,086,000)
Other financing sources (uses)Transfers in 200,000 - - 200,000 Transfers out - - (200,000) (200,000)
Total other financing sources (uses) 200,000 - (200,000) -
Change in fund balances (2,022,000) (572,000) 1,508,000 (1,086,000)
Fund balance, beginning of year 2,584,000 2,798,000 44,000 5,426,000
Fund balance, end of year 562,000$ 2,226,000$ 1,552,000$ 4,340,000$
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Accounting and Reporting – January 31, 2012
Preliminary and Tentative - For Illustration Purposes Only Example of a Stand Alone Audit of the Redevelopment Agency, before Dissolution
CITY OF EXAMPLE REDEVELOPMENT AGENCY
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities - Governmental Activities
For the Period July 1, 2011 through January 31, 2012
Net change in fund balances - total governmental funds (1,086,000)$
Amounts reported for governmental activities in the statement of activities are different because of the following:
Long term debt transactions: Repayment of bond principal is an expenditure in the governmental funds, but
in the statement of net assets the repayment reduces long-term liabilities. 570,000
Accrual of noncurrent items:The amounts below included in the statement of activities do not provide or
(require) the use of current financial resources and therefore are not reportedas revenues or expenditures in governmental funds:
Change in deferred revenue 50,000 Change in interest payable (20,000)
Change in net assets of governmental activities (486,000)$
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Accounting and Reporting
Disclosure of dissolution and transfer of assets and liabilities • A sample disclosure is included as part of the CCMA
White Paper
• Good starting point, but must be tailored to fit the events and circumstances unique to your organization
• Suggests to reconcile the difference between the extraordinary gain/loss reported in the governmental funds versus the fiduciary fund’s extraordinary gain/loss or additions
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Polling Question #5
Extraordinary items are:
a)Within the control of management that are either unusual in nature or infrequent in occurrence
b)Unusual in nature not in the control of management
c)Only infrequent in nature.
d)Both unusual in nature and infrequent in occurrence.
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Polling Question #5 Debrief
Extraordinary items are:
d) Both unusual in nature and infrequent in occurrence.
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Polling Question #6
The Low and Moderate Income Housing Fund (20% Fund) balances are to be disposed as follows:
a)Encumbered balances are transferred to the Successor Agency
b)Unencumbered balances are transferred to the Successor Agency
c)Total balances transferred to the Successor Agency
d)Transferred to the City’s General Fund
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Polling Question #6 Debrief
The Low and Moderate Income Housing Fund (20% Fund) balances are to be disposed as follows:
b) Unencumbered balances are transferred to the Successor Agency
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Audit Requirements
State and Local Audits/Oversight•Actions of the Oversight Board = DOF•Agreed-upon procedures engagements, directed by the County Auditor-Controllers
• Due by 7/1/12 and submitted to SCO by 7/15/12
• Purpose (1) establish assets/liabilities, (2) pass-through obligations, (3) determine the amount and terms of indebtedness, and (4) “Certify” the initial ROPS
•Actions of the County ACO = SCO•SCO also reviews redevelopment asset transfers made after 1/1/11 to determine if appropriate
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Audit Requirements
Transition Audits are highly recommended but not required by the SCO (no legislative basis – either for former RDA or SA)• No direct funding for audits under ABX1 26
• Bond covenants may require a separate audit
Two separate engagements are contemplated as two separate entities involved
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Audit Requirements
The RDA Audit Guide – Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies (August 2011) is no longer in effect (i.e., no compliance audit required)!!!
SCO states there is no legislative basis to require State Controller’s Reports or Statements of Indebtedness
Not yet known whether HCD reports will be required
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Polling Question #7
The State Department of Finance is responsible to:
a)Review the actions of the Oversight Board
b)Review the actions of the County Auditor-Controller’s Office
c)Certify the Recognized Obligation Payment Schedule
d)Review the redevelopment asset transfers made after 1/1/11
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Polling Question #7 Debrief
The State Department of Finance is responsible to:
a)Review the actions of the Oversight Board
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Polling Question #8
A “Stub” period audit of the former redevelopment agency is:
a)Required by the State Controller’s Office
b)Required by the State Department of Finance
c)Directly funded under ABX1 26
d)Not required, but recommended
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Polling Question #8 Debrief
A “Stub” period audit of the former redevelopment agency is:
d) Not required, but recommended
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What’s Next?
Pending legislation DOF has proposed trailer bill, with significant
changes to the existing laws and regulations in the Health and Safety Code
Administrative Costs will start to drop (5% to 3%, still subject to $250,000 … administrative budget to be approved by the Oversight Board)
Oversight Boards will consolidate on July 1, 2016
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References
CCMA White Paper (CalCPA members only) - http://www.calcpa.org/Content/24325.aspx
