Item 1.14 - Poway Housing Successor Annual Report FY 2015-16G1t OF POIY�1
TSF Cary /Na THEgOGoJ��¢�
City of Poway
COUNCIL AGENDA REPORT
APPROVED
0
APPROVED AS AMENDED
❑
(SEE MINUTES)
DENIED
❑
REMOVED
❑
CONTINUED
RESOLUTION NO.
DATE: May 16, 2017
TO: Honorable Chair and Members of the Housing Authority
FROM: Robert Manis, Director of Development Services
CONTACT: Nicole Murphy, Senior Management Analys
(858) 668-4554 or nmurphy(a poway.org
SUBJECT: Poway Housing Successor Annual Report FY 2015-16
Summary:
Pursuant to California Health and Safety Code Sections 34176 and 34176.1(0
(Dissolution Law), the Poway Housing Authority, in its capacity as Housing Successor to
the dissolved Poway Redevelopment Agency, must prepare an annual report detailing its
activities during each fiscal year. The Poway Housing SuccessorAnnual Report for Fiscal
Year 2015-16 (Attachment A), and the Poway Housing Authority Basic Financial
Statements and Independent Auditors Report for the year ended June 30, 2016
(Attachment B), are included with this agenda report for review by the Poway Housing
Authority.
Recommended Action:
It is recommended that the Poway Housing Authority Board receive and file this report.
Discussion:
Part 1.85, Division 24 of the California Health and Safety Code, particularly Sections
34176 and 34176.1 (f), require that the Housing Successor provide an annual report of
the Successor's activities during the prior fiscal year. The purpose of the report is to
provide the governing body of the Housing Successor with an annual report on the
housing assets and activities of the Housing Successor. The report is to be provided to
the Poway Housing Authority Board, along with an independent financial audit of the Low
and Moderate Income Housing Asset Fund within six months after the end of each fiscal
year. Due to Poway's annual timing for completion of the Housing Authority audit, it is
not possible for this report to be completed within the six-month period. However, there
is no penalty for delayed submission of the report.
Environmental Review:
This item is not subject to California Environmental Quality Act (CEQA) review.
Fiscal Impact:
There is no fiscal impact associated with this action.
1 of 42 May 16, 2017, Item #1.14
Poway Housing Successor Annual Report FY 2015-16
May 17, 2017
Page 2
Public Notification:
None.
Attachments:
A. Poway Housing Successor Annual Report for Fiscal Year 2015-16
B. Poway Housing Authority Basic Financial Statements and Independent Auditor's
Report for Fiscal Year 2015-16
Reviewed/Approved By: Reviewed By: Ap ved By: �,//' — J
Wendy Kaserman Morgan Foley Tina M. White (//Alm`
Assistant City Manager City Attorney City Manager
2 of 42 May 16, 2017, Item #1.14
POWAY HOUSING SUCCESSOR ANNUAL
REPORT REGARDING THE
LOW AND MODERATE INCOME HOUSING ASSET FUND
FOR FISCAL YEAR 2015-2016 PURSUANT TO
CALIFORNIA HEALTH AND SAFETY CODE SECTION 34176.1(f)
FOR THE
POWAY HOUSING AUTHORITY
This Housing Successor Annual Report (Report) regarding the Low and Moderate Income
Housing Asset Fund (LMIHAF) has been prepared pursuant to California Health and Safety
Code Section 34176.1(0 and is dated as of December 28, 2016. This Report sets forth certain
details of the Poway Housing Authority, in its capacity as Housing Successor to the dissolved
Poway Redevelopment Agency, activities during Fiscal Year 2015-16 (Fiscal Year). The purpose
of this Report is to provide the governing body of the Housing Successor an annual report on the
housing assets and activities of the Housing Successor under Part 1.85, Division 24 of the
California Health and Safety Code, in particular sections 34176 and 34176.1 (Dissolution Law).
The following Report is based upon information prepared by Housing Successor staff and
information contained within the Poway Housing Authority Basic Financial Statements and
Independent Auditor's Report for Fiscal Year 2015-16 as prepared by Rogers, Anderson,
Malody & Scott, LLP (Audit), which Audit is separate from this annual summary Report; further,
this Report conforms with and is organized into sections I. through XI., inclusive, pursuant to the
Dissolution Law:
1. Amount Deposited into LMIHAF: This section provides the total amount of funds
deposited into the LMIHAF during the Fiscal Year. Any amounts deposited for items
listed on the Recognized Obligation Payment Schedule (ROPS) must be distinguished
from the other amounts deposited.
II. Ending Balance of LMIHAF: This section provides a statement of the balance in the
LMIHAF as of the close of the Fiscal Year. Any amounts deposited for items listed on the
ROPS must be distinguished from the other amounts deposited.
III. Description of Expenditures from LMIHAF: This section provides a categorized
description of the expenditures made from the LMIHAF during the Fiscal Year.
IV. Statutory Value of Assets Owned by Housing Successor: This section provides the
statutory value of real property owned by the Housing Successor, the value of loans and
grants receivables, and the sum of these two amounts.
3 of 42 ATTACHMENT A May 16, 2017, Item #1.14
V. Description of Transfers: This section describes transfers pursuant to Health and
Safety Code Section 34176. 1 (c)(2), if any, to another housing successor agency made
in previous Fiscal Year(s), including whether the funds are unencumbered and the
status of projects, if any, for which the transferred LMIHAF will be used. The sole
purpose of the transfers must be for the development of transit priority projects,
permanent supportive housing, housing for agricultural employees or special needs
housing.
VI. Project Descriptions: This section describes any project for which the Housing
Successor receives or holds property tax revenue pursuant to the ROPS and the status
of that project.
VII. Status of Compliance with Section 33334.16: This section provides a status update
on compliance with Section 33334.16 for interests in real property acquired by the
former redevelopment agency prior to February 1, 2012. For interests in real property
acquired on or after February 1, 2012, the Housing Successor must provide a status
update on the project. The Poway Housing Successor has not acquired any property
on or after February 1, 2012.
VIII. Description of Outstanding Obligations under Section 33413: This section
describes the outstanding inclusionary and replacement housing obligations, if any,
under Section 33413 that remained outstanding prior to dissolution of the former
redevelopment agency as of February 1, 2012, along with the Housing Successor's
progress in meeting those prior obligations, if any, of the former redevelopment agency
and how the Housing Successor's plans to meet unmet obligations, if any.
IX. Income Test: This section provides the information required by Section
34176.1(a)(3)(B), or a description of expenditures by income restriction for five-year
period, with the time period beginning January 1, 2014, and whether the statutory
thresholds have been met. However, reporting of the Income Test is not required until
2019.
X. Senior Housing Test: This section provides the percentage of units of deed -restricted
rental housing restricted to seniors and assisted individually or jointly by the Housing
Successor, its former redevelopment Agency, and its host jurisdiction within the previous
10 years in relation to the aggregate number of units of deed -restricted rental housing
assisted individually or jointly by the Housing Successor, its former Redevelopment
Agency and its host jurisdiction within the same time period. For this Report the ten-year
period reviewed is January 1, 2006 to January 1, 2016.
XI. Excess Surplus Test: This section provides the amount of excess surplus in the LMIHAF,
if any, and the length of time that the Housing Successor has had excess surplus, and the
Housing Successor's plan for eliminating the excess surplus.
4 of 42 May 16, 2017, Item #1.14
This Report is to be provided to the Housing Successor's governing body along with an
independent financial audit of the LMIHAF within six months after the end of each fiscal year.
In addition, the Report and the former redevelopment agency's pre -dissolution Implementation
Plans are available to the public on the City's website hftp://poway.org/207/Affordable-Housing.
AMOUNT DEPOSITED INTO LMIHAF
A total of $181,952 was deposited into the LMIHAF during the Fiscal Year, as detailed on page 8
of the Audit.
It. ENDING BALANCE OF LMIHAF
At the close of the Fiscal Year, the ending balance in the LMIHAF was $2,421,060, none of
which is being held for items listed on the ROPS, as detailed on page 6 of the Audit. This
includes $1,710,688 in cash and investments, and $728,097 in housing loans receivable, less
$17,725 in liabilities.
The $728,097 is due from the Successor Agency, and represents the Housing Authority's 20%
of the former Redevelopment Agency's loan balance, and repayment is subject to approval by
the California Department of Finance.
III. DESCRIPTION OF EXPENDITURES FROM LMIHAF
The following is a description of expenditures from the LMIHAF by category:
IV. STATUTORY VALUE OF ASSETS OWNED BY HOUSING SUCCESSOR
Under the Dissolution Law and for purposes of this Report, the "statutory value of real
property" means the value of properties formerly held by the former redevelopment agency as
listed on the housing asset transfer schedule approved by the Department of Finance as listed
in such schedule under Section 34176(a)(2), the value of the properties transferred to the
Housing Successor pursuant to Section 34181(f), and the purchase price of properties
purchased by the Housing Successor. Further, the value of loans and grants receivable are
included in these reported assets held in the LMIHAF.
5 of 42 May 16, 2017, Item #1.14
Monitoring & Administration Expenditures
$113,299
Homeless Prevention & Rapid Rehousing Expenditures
$0
Housing Development Expenditures
$0
Total LMIHAF Expenditures in Fiscal Year 2015-2016
$113,299
IV. STATUTORY VALUE OF ASSETS OWNED BY HOUSING SUCCESSOR
Under the Dissolution Law and for purposes of this Report, the "statutory value of real
property" means the value of properties formerly held by the former redevelopment agency as
listed on the housing asset transfer schedule approved by the Department of Finance as listed
in such schedule under Section 34176(a)(2), the value of the properties transferred to the
Housing Successor pursuant to Section 34181(f), and the purchase price of properties
purchased by the Housing Successor. Further, the value of loans and grants receivable are
included in these reported assets held in the LMIHAF.
5 of 42 May 16, 2017, Item #1.14
The following provides the statutory value of assets owned by the Housing Successor:
Cash and Cash Equivalents $1,710,688
Statutory VWw of Rral Property Owned by Housing Au#mmAy $77,762,674
Value of Loans and Grants Receivable $787,097
Taal Value of Hm"Q Successor Assets SM183,734
V. DESCRIPTION OF TRANSFERS
The Housing Successor did not make any LMIHAF transfers to other Housing Successor(s)
under Section 34176.1(c)(2) during the Fiscal Year.
VI. PROJECT DESCRIPTIONS
The Housing Successor did not receive and did not hold property tax revenue pursuant to the
ROPS.
VII. STATUS OF COMPLIANCE WITH SECTION 33334.16
Section 34176.1 provides that Section 33334.16 does not apply to interests in real property
acquired by the Housing Successor on or after February 1, 2012.
With respect to interests in real property acquired by the former redevelopment agency prior to
February 1, 2012, and transferred to the Successor Agency pursuant to Health and Safety
Code Section 34176, the time periods described in Section 33334 16 shall be deemed to have
commenced on the date that the Department of Finance approved the property as a housing
asset on the Housing Asset Transfer Form; thus, as to real property acquired by the former
redevelopment agency now held by the Housing Successor, the Housing Successor must
initiate activities consistent with the development of the real property for the purpose for which
it was acquired within five years of the date the DOF approved such property as a housing
asset. Poway's Housing Assets Transfer Form was approved by the DOF on August 31,
2012.
The following provides a status update on the real property housing assets that were acquired
by the former redevelopment agency prior to February 1, 2012, and transferred to the Housing
Successor on February 1, 2012. and compliance with the five-year period to commence
development activities. No property has been acquired by the Housing Successor using the
LMIHAF on or after February 1, 2012.
6 of 42 May 16, 2017, Item #1.14
HOUSING AUTHORITY PROPERTIES ACQUIRED PRIOR TO FEBRUARY 1, 2012
APN
Street Address
Description
Date of
Size
Status
Purchase
27546061
12674 Monte Vista Rd
Future
2/22/2000
2.06 Acres
Vacant land.
Affordable
Housing
31747201
13021-13023 Poway
Future
03/26/2002
2.6 Acres
Vacant land.
Road
Affordable
Development
Housing
opportunity
feasibility study
underway.
31747206
13031 Poway Rd
Future
3/30/2010
.24 Acres
Vacant building.
Affordable
Development
Housing
opportunity
feasibility study
underway.
32119028
Twin Peaks Rd
Future
11/03/2004
2.15 Acres
Vacant. Exclusive
Affordable
Negotiating Rights
Housing
Agreement
extended in May
2016.
31715214
12341 Oak Knoll Road
Future
3/23/2011
3.18 Acres
Leased. Exclusive
Affordable
Negotiating Rights
Housing
Agreement
extended in June
2016.
31423026
13424 Scots Way
Vacant lot
08/27/2002
0.70 Acres
Vacant land. Due
to significant
access issues,
Housing Authority
will explore options
to sell property to
adjoining neighbor.
31421418
14048 Sycamore
Future
06/30/2005
0.32 Acres
Vacant land.
Avenue
Affordable
Housing
31710151
Wanesta - Floodway
Remnant
8/27/2004
2.15 Acres
Vacant land.
& 52
behind Solara
Soodway
Floodway
parcels
properties behind
Solara Affordable
Hsg. Cannot be
developed.
VIII. DESCRIPTION OF OUTSTANDING OBLIGATIONS PURSUANT TO SECTION
33413
Replacement Housing: According to the 2010-2014 Implementation Plan for the former
redevelopment agency, no Section 33413(a) replacement housing obligations were
transferred to the Housing Successor. Furthermore, the Housing Successor has not caused
the demolition of any units and no new replacement housing obligations have been created.
7 of 42 May 16, 2017, Item #1.14
Inclusionary/Production Housing. According to the 2010-2014 Implementation Plan for
the former redevelopment agency, no Section 33413(b) inclusionary/production housing
obligations were transferred to the Housing Successor.
The former redevelopment agency's Implementation Plans are posted on the City's website
at http //poway.org/207/Affordable-Housing.
IX. EXTREMELY -LOW INCOME TEST
Section 34176.1(a)(3)(B) requires that the Housing Successor must require at least 30% of
the funds deposited into the LMIHAF to be expended for development of rental housing
affordable to and occupied by households earning 30% or less of the AMI over a five year
period. If the Housing Successor fails to comply with the Extremely -Low Income requirement
in any five-year report, then the Housing Successor must ensure that at least 50% of the
funds remaining in the LMIHAF be expended in each fiscal year following the latest fiscal
year following the report on households earning 30% or less of the AMI until the Housing
Successor demonstrates compliance with the Extremely -Low Income requirement. This
information is not required to be reported until 2019 for the 2014 — 2019 period.
X. SENIOR HOUSING TEST
The Housing Successor is required to calculate the percentage of units of deed -restricted
rental housing restricted to seniors and assisted by the Housing Successor, the former
redevelopment agency and/or the City within the previous 10 years in relation to the
aggregate number of units of deed -restricted rental housing assisted by the Housing
Successor, the former redevelopment agency, and/or City within the same time period. If
this percentage exceeds 50%, then the Housing Successor cannot expend future funds in
the LMIHAF to assist additional senior housing units until the Housing Successor or City
assists and construction has commenced on a number of restricted rental units that is equal
to 50% of the total amount of deed -restricted rental units.
The following provides the Housing Successor's Senior Housing Test for the 10 -year period
of January 1, 2005 through January 1, 2015:
8 of 42 May 16, 2017, Item #1.14
XI. EXCESS SURPLUS TEST
Excess Surplus is defined in Section 34176.1(d) as an unencumbered amount in the LMIHAF
account that exceeds the greater of one million dollars ($1,000,000) or the aggregate amount
deposited into the LMIHAF account during the Housing Successor's preceding four Fiscal
Years, whichever is greater.
The LMIHAF was not created until February 1, 2012. The current balance of $1,692,964 on
deposit in the LMIHAF does not exceed the sum of the annual deposits made in the preceding
four fiscal years ($1,742,561) and as a result, the LMIHAF does not have an Excess Surplus.
The following provides the Excess Surplus test for the preceding four Fiscal Years:
Balance
(Lass) Expenditures
Ending Balance
$126,468
$1,118,939
.,
$1.237,666
1 $212,256
$227,944
$(38,825)
$(113298)
86 $1,578,318
$1,692,964
9 of 42 May 16, 2017, Item #1.14
Poway Housing Authority
Poway, California
Basic Financial Statements
and Independent Auditor's Report
For the year ended June 30, 2016
10 of 42 ATTACHMENT B May 16, 2017, Item #1.14
Poway Housing Authority
Basic Financial Statements
For the Year Ended June 30, 2016
TABLE OF CONTENTS
Page
Independent Auditor's Report ........................................................................ 1
Basic Financial Statements
Government -Wide Financial Statements
Statement of Net Position......................................................................... 4
Statement of Activities.............................................................................. 5
Fund Financial Statements
BalanceSheet....................................................................................... 6
Reconciliation of the Balance Sheet to the Statement of Net Position .................. 7
Statement of Revenues, Expenditures and Changes in Fund Balance ................. 8
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balance to the Statement of Activities ............................................. 9
Notes to the Basic Financial Statements...................................................... 10
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule................................................................... 23
Note to Budgetary Comparison Schedule......................................................... 24
Independent Auditor's Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters Based on an Audit
of Financial Statements Performed in Accordance with Government Auditing
Standards.............................................................................................. 25
11 of 42 May 16, 2017, Item #1.14
ROGERS. ANDERSON, MALODY & SCOTT. LLP
CERTIFIED PUBLIC ACCOUNTANTS. SINCE 1948
Independent Auditor's Report
735 E. Carnegie Or. Suite 100
San Bernardino. CA 92408
909 889 0871 T
909 889 5361 F To the Chairman and Commissioners
ramsepa.net of the Poway Housing Authority
Poway, Califomia
PARTNERS
Brenda L. Odle. CPA. MST
Terry P. Shea. CPA Report on the Financial Statements
Kirk A. Franks. CPA
Scott W. Manno, CPA. CDMA We have audited the accompanying financial statements of the
Leena ag. CPA. PA MBA, CDMA CDMA
Bradford
governmental activities and the major fund of the Poway Housing Authority
rO A. 4, WelCbu'. CPA.
Jay H. Zeicher. CPA (Partner Emeritm) (Authority), a component unit of the City of Poway (City), as of and for the
Phillip H. Waller. CPA iPartner Ementnq year ended June 30, 2016, and the related notes to the financial statements,
which collectively comprise the Authority's basic financial statements as
MANAGERS, STAFF
jenny Lm. CPA. MST listed in the table of contents.
Seddg Hyea Lee. CPA MRA
Charles De Slnmm. CPA Management's Responsibility for the Financial Statements
Nathan Statham. CPA. MPA
den
Garnr.1 S:hultz. CPA Duran. CPA
Bnanna $ Management is responsible for the preparation and fair presentation of these
Daniel Hernandez. CPA. MBA financial statements in accordance with accounting principles generally
Lisa Dong.ue Guo. CPA. MSA accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based
on our audit. We conducted our audit in accordance with auditing standards
generally accepted in the United States of America and the standards
applicable to financial audits contained in Govemment Auditing Standards,
issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
MEMBERS amounts and disclosures in the financial statements. The procedures
Amrriran Insmute of selected depend on the auditor's judgment, including the assessment of the
Certified Public Accounianls risks of material misstatement of the financial statements, whether due to
PCP$ The AICPA Allnnice fraud or error. In making those risk assessments, the auditor considers
(,•" CPA F."ms internal control relevant to the entity's preparation and fair presentation of
cn'r,•"nln,nraf Audn the financial statements in order to design audit procedures that are
°""I't" Cr appropriate in the circumstances, but not for the purpose of expressing an
California Society of opinion on the effectiveness of the entity's internal control. Accordingly, we
Cnruhi,d Public Accountants
express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
12 of 42 1 May 16, 2017, Item #1.14
STABILITY. ACCURACY. TRUST.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities and the major fund of the Authority as of
June 30, 2016, and the respective changes in financial position for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
Emphasis of a Matter
Specific Authority Presentation
As discussed in Note 1, the basic financial statements present only the Authority and do not
purport to, and do not present fairly, the financial position of the City of Poway, California, as of
June 30, 2016, and the changes in its financial position, or where applicable, its cash flows for the
year then ended in accordance with accounting principles generally accepted in the United States
of America. Our opinions are not modified with respect to this matter.
Other Matters
Required Supplementary Information
Management has omitted the Management's Discussion and Analysis that accounting principles
generally accepted in the United States of America required to be presented to supplement the
basic financial statements. Such missing information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be
an essential part of financial reporting for placing the financial statements in an appropriate
operational, economic, or historical context. Our opinions on the basic financial statements are not
affected by this missing information.
Accounting principles generally accepted in the United States of America require that the
Budgetary Comparison Schedule be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board, who considers it to be an essential part of financial reporting for
placing the basic financial statements in an appropriate operational, economic, or historical
context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information because
the limited procedures do not provide us with sufficient evidence to express an opinion or provide
any assurance.
13 of 42 2 May 16, 2017, Item #1.14
Other Reporting Required by Govemment Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
December 28, 2016, on our consideration of the Authority's internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on the internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Governmental Auditing Standards in
considering the Authority's internal control over financial reporting and compliance.
&3ers,19ndersorl,M&Iod 9Scott, LLP
San Bernardino, California
December 28, 2016
14 of 42 3 May 16, 2017, Item #1.14
This page intentionally left blank.
15 of 42 May 16, 2017, Item #1.14
Basic Financial Statements
16 of 42 May 16, 2017, Item #1.14
Poway Housing Authority
Statement of Net Position
June 30, 2016
ASSETS
Cash and investments $ 1,710,688
Due from other governments 728,097
Capital assets 17,762,674
Total assets 20,201,459
LIABILITIES
Accounts payable 13,425
Deposits 4,300
Total liabilities 17,725
NET POSITION
Net investment in capital assets 17,762,674
Restricted for:
Housing 2,421,060
Total net position $ 20,183,734
17 of 42 See accompanying notes too basic financial *,torr ts1017, Item #1.14
Poway Housing Authority
Statement of Activities
For the Year Ended June 30, 2016
Governmental
Activities
Program Grants and Net (Expenses)
Revenues Contributions Revenues and
Charges Operating Grants Capital Grants Changes in
Functions/Programs: Expenses for Services & Contributions & Contributions Net Position
Governmental activities:
General government $ 106,534 $ 56,403 $ - $ - $ (50,131)
Development services 6,765 - (6,765)
Total govemmental activities $ 113,299 $ 56,403 $ - $ - (56,896)
General revenues
Investment income 21,102
Other 104,447
Total general revenues 125,549
Extraordinary items (2,153,521)
Change in net position (2,084,868)
Net position, beginning 22,268,602
Net position, ending $ 20,183,734
18 of 42 See accompanying notes is basic financialfay't�017, Item #1.14
Poway Housing Authority
Balance Sheet
Governmental Fund
June 30, 2016
ASSETS
Cash and investments $ 1,710,688
Due from other governments 728,097
Total assets $ 2,438,785
LIABILITIES AND FUND BALANCE
Liabilities:
Accounts payable $ 13,425
Deposits 4,300
Total liabilities 17,725
Fund balance:
Restricted 2,421,060
Total fund balance 2,421,060
Total liabilities and fund balance $ 2,438,785
19 of 42 See accompanying notes to6basic financial Va'yf"W,ts 017, Item #1.14
Poway Housing Authority
Reconciliation of the Balance Sheet to the Statement of Net Position
Governmental Fund
June 30, 2016
Total Governmental Fund Balance $ 2,421,060
Amounts reported in governmental activities in the statement of net
position are different because:
Capital assets used in the governmental activities are not current
financial resources and, therefore, are not reported in the fund. 17,762,674
Net Position of Governmental Activities $ 20,183,734
20 of 42 See accompanying notes t basic financialay'',ts1017, Item #1.14
Poway Housing Authority
Statement of Revenues, Expenditures and Changes in Fund Balance
Governmental Fund
For the Year Ended June 30, 2016
REVENUES
Charges for services $ 56,403
Use of money and property 21,102
Other revenues 104,447
Total revenues 181,952
EXPENDITURES
Current:
General government 4,700
Development services 6,765
Capital outlay 101,834
Total expenditures 113,299
EXTRAORDINARY ITEMS (2,153,521)
Net change in fund balance (2,084,868)
Fund balance, beginning 4,505,928
Fund balance, ending $ 2,421,060
21 of 42 See accompanying notes to basic financial sway ?9,t 017, Item #1.14
Poway Housing Authority
Reconciliation of the Statement of Revenues, Expenditures
and Changes in Fund Balance to the Statement of Activities
Governmental Fund
For the Year Ended June 30, 2016
Net change in fund balance - total governmental fund
Change in net position of governmental activities
$ (2,084,868)
22 of 42 See accompanying notes to basic financial V y�,th17, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30. 2016
Note 1 — Summary of Significant Accounting Policies
The basic financial statements of the Poway Housing Authority (Authority), a component unit of
the City of Poway, California (City), have been prepared in conformity with accounting principles
generally accepted in the United States of America (U.S. GAAP) as applied to governmental
agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard
setting body for establishing governmental accounting and financial reporting principles. The
more significant of the Authority's accounting policies are described below.
A. Description of Reporting Entity
On March 1, 2011, the City Council of the City of Poway declared a need for a housing authority
in the City of Poway and adopted a resolution forming the Poway Housing Authority. The
creation of the Housing Authority provides the City legal authority to continue monitoring
ongoing rent and income compliance at affordable housing developments.
The former Poway Redevelopment Agency (Agency) and the Authority prepared a Cooperation
Agreement to provide for implementation of certain low and moderate income housing projects
and to make payments by the Agency to the Authority for the costs to the Authority for
performing its obligations. The Agency was dissolved due to the passage of Assembly Bill X1 26
which became effective on October 1, 2011. In accordance with Health and Safety code
34175(b), on February 1, 2012, all housing assets, liabilities and fund balance of the Agency
were transferred to the Authority as the Successor Agency to the Poway Redevelopment
Agency.
The Authority meets the criteria set forth in U.S. GAAP for inclusion as a blended component
unit within the City reporting entity based on the City's oversight responsibility in selection of the
governing board. In addition, all of the Authority's activities are conducted within the geographic
boundaries of the City. Blended component units, although legally separate entities, are, in
substance, part of the City's operations; therefore, data from these units are combined with data
of the primary government in the financial statement presentation of the City. Only the funds 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.
B. Basis of Accounting/Measurement Focus
The accounts of the Authority are organized on the basis of funds, each of which is considered
a separate accounting entity. The operations of each fund are accounted for with a separate set
of self -balancing accounts that comprise its assets, deferred outflows of resources, liabilities,
deferred inflows of resources, fund equity, revenues, and expenditures or expenses, as
appropriate. Governmental resources are allocated to and accounted for in individual funds
based upon the purposes for which they are to be spent and the means by which spending
activities are controlled.
23 of 42 10 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 1 — Summary of Significant Accounting Policies (Continued)
B. Basis of Accounting/Measurement Focus (Continued)
Government -Wide Financial Statements
The Authority's Government -Wide Financial Statements include a Statement of Net Position and
a Statement of Activities. These statements present summaries of governmental activities for
the Authority.
These basic financial statements are presented on an "economic resources" measurement
focus and the accrual basis of accounting. Accordingly, all of the Authority's assets and
liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are
included in the accompanying Statement of Net Position. The Statement of Activities presents
changes in net position. Under the accrual basis of accounting, revenues are recognized in the
period in which they are earned while expenses are recognized in the period in which the
liability is incurred.
Certain types of transactions are reported as program revenues for the Authority in three
categories:
Charges for services
Operating grants and contributions
Capital grants and contributions
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for the governmental fund. An accompanying
schedule is presented to reconcile and explain the differences in fund balance as presented in
these statements to the net position presented in the Government -Wide Financial Statements.
All governmental funds are accounted for on a spending or "current financial resources"
measurement focus and the modified accrual basis of accounting. Accordingly, only current
assets and current liabilities are included on the Balance Sheet. The Statement of Revenues,
Expenditures and Changes in Fund Balance presents increases (revenues and other financing
sources) and decreases (expenditures and other financing uses) in net current assets. Under
modified accrual basis of accounting, revenues are recognized in the accounting period in which
they become both measurable and available to finance expenditures of the current period.
Revenues are recorded when received in cash, except that revenues subject to accrual
(generally 60 days after year-end) are recognized when due. The primary revenue sources,
which have been treated as susceptible to accrual by the Authority, are property tax, and
intergovernmental revenues. Expenditures are recorded in the accounting period in which the
related fund liability is incurred.
24 of 42 11 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30. 2016
Note 1 — Summary of Significant Accounting Policies (Continued)
B. Basis of Accounting/Measurement Focus (Continued)
Unearned revenues arise when the government receives resources before it has a legal claim to
them, as when grant monies are received prior to incurring qualifying expenditures. In
subsequent periods when both revenue recognition criteria are met or when the government
has a legal claim to the resources, the unearned revenue is removed from the balance sheet
and revenue is recognized.
The Reconciliation of the Fund Financial Statements to the Government -Wide Financial
Statements is provided to explain the differences created by the integrated approach of GASB
Statement No. 34.
Fund Accounting
The Authority uses funds to maintain its financial records during the year. A fund is defined as a
fiscal and accounting entity with a self -balancing set of accounts. The Authority only has one
governmental fund.
Governmental Fund
Housing Authority Fund - The Housing Authority Fund is the Authority's operating fund.
accounts for all financial resources of the general government.
C. Cash and Investments
The Authority's cash and investment balances are included in the City's investment pool. The
City pools cash resources from all City funds in order to facilitate the management of cash and
achieve the goal of obtaining the highest yield with the greatest safety and least risk. The
balance in the pooled cash account is available to meet current operating requirements. Cash in
excess of current requirements is invested in various interest-bearing accounts and other
investments for varying terms. Investments are stated at fair value. Market value is used as fair
value for those securities for which market quotations are readily available.
25 of 42 12 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 1 — Summary of Significant Accounting Policies (Continued)
C. Cash and Investments (Continued)
The City participates in an investment pool managed by the State of California titled Local
Agency Investment Fund ("LAIF") which has invested a portion of the pool funds in structured
notes and asset-backed securities. LAIF determines fair value on its investment portfolio based
on market quotations for those securities where market quotations are readily available and
based on amortized cost or best estimate for those securities where market value is not readily
available. LAIF's investments are subject to credit risk with the full faith and credit of the State of
California collateralizing these investments. In addition, these investments are subject to market
risk and changes in interest rates.
Cash equivalents are considered amounts in demand deposits and short-term investments with
a maturity date within three months of the date acquired by the Authority and are presented as
"Cash and investments" in the accompanying basic financial statements.
D. Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads,
streets, sidewalks, medians and storm drains) are reported in the Government -Wide Financial
Statements. Authority policy has set the capitalization threshold for reporting capital assets at
$5,000. Capital assets are valued at historical cost or estimated historical cost if actual historical
cost was not available. Donated assets are valued at their estimated fair market value on the
date donated.
Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as
follows:
Buildings 10-50 years
Building improvements 10-100 years
Furniture and equipment 5-20 years
Infrastructure 20-50 years
26 of 42 13 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 1 — Summary of Significant Accounting Policies (Continued)
E. Deferred Outtlows/tnflows of Resources
In addition to assets, the balance sheet will sometimes report a separate section for deferred
outflows of resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of fund balance that applies to future periods and so will
not be recognized as an outflow of resources (expenditure) until then. The Authority currently
has no items that qualify for reporting in this category.
In addition to liabilities, the balance sheet will sometimes report a separate section for deferred
inflows of resources. This separate financial element, deferred inflows of resources, represents
an acquisition of fund balance that applies to future periods and so will not be recognized as an
inflow of resources (revenue) until that time. The Authority currently has no items that qualify for
reporting in this category.
F. Net Position
Net position is comprised of the various net earnings from operating income, non-operating
revenues and expenses. Net position is classified in the following categories:
Net Investment in Capital Assets — This component of net position consists of capital
assets, net of accumulated depreciation, reduced by the outstanding balances of debt
that are attributable to the acquisition, construction, or improvement of those assets.
Restricted — This component of net position consists of restricted assets and deferred
outflows of resources reduced by liabilities and deferred inflows of resources related to
those assets.
Unrestricted — This component of net position is the amount of the assets, deferred
outflows of resources, liabilities, and deferred inflows of resources that are not included
in the determination of net investment in capital assets or the restricted component of
net position.
When an expense is incurred for purposes for which both restricted and unrestricted net position
are available, the Authority's policy is to apply restricted net position first.
27 of 42 14 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 1 — Summary of Significant Accounting Policies (Continued)
G. Fund Balances
In the governmental fund financial statements, fund balances are classified in the following
categories:
Nonspendable — Items that cannot be spent because they are not in spendable form, such as
prepaid items and inventories, items that are legally or contractually required to be maintained
intact, such as principal of an endowment or revolving loan funds.
Restricted — Restricted fund balances encompass the portion of net fund resources subject to
externally enforceable legal restrictions. This includes externally imposed restrictions by
creditors, such as through debt covenants, grantors, contributions, laws or regulations of other
governments, as well as restrictions imposed by law through constitutional provisions or
enabling legislation.
Committed — Committed fund balances encompass the portion of net fund resources, the use of
which is constrained by limitations that the government imposes upon itself at its highest level of
decision making, normally the governing body through council resolutions, etc., and that remain
binding unless removed in the same manner. The Board of Directors is considered the highest
authority for the Authority,
Assigned — Assigned fund balances encompass the portion of net fund resources reflecting the
government's intended use of resources. Assignment of resources can be done by the highest
level of decision making or by a committee or official designated for that purpose. The Board of
Directors has authorized the Executive Director for that purpose.
Unassigned — This category is for any remaining balances that are not classified as
nonspendable, restricted, committed or assigned.
When expenditures are incurred for purposes for which both restricted and unrestricted fund
balances are available, the Authority's policy is to apply restricted fund balances first, then
unrestricted fund balances as they are needed.
When expenditures are incurred for purposes where only unrestricted fund balances are
available, the Authority uses the unrestricted resources in the following order: committed,
assigned, and unassigned.
H. Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
28 of 42 15 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 2 — Cash and Investments
The Authority's cash and investment balances are maintained as part of the City investment
pool, which includes cash balances and authorized investments of all City funds. This pooled
cash is invested by the City Treasurer to enhance earnings. The pooled interest earned is
allocated to the funds based on average month-end cash balances of the various funds.
Cash and investments consisted of the following at June 30, 2016:
Demand deposits $ 10,264
Investments 1,700,424
Total cash and investments $ 1,710,688
A. Cash Deposits
The carrying amounts of the Authority's demand deposits were $10,264 at June 30, 2016- Bank
balances at June 30, 2016, were $22,687 which were fully insured or collateralized with
securities held by the pledging financial institutions in the City's name as discussed below.
The California Government Code requires California banks and savings and loan associations
to secure the Authority's cash deposits by pledging securities as collateral. This Code states
that collateral pledged in this manner shall have the effect of perfecting a security interest in
such collateral superior to those of a general creditor. Thus, collateral for cash deposits is
considered to be held in the Authority's name.
The market value of pledged securities must equal at least 110% of the Authority's cash
deposits. California law also allows institutions to secure Authority deposits by pledging first
trust deed mortgage notes having a value of 150% of the Authority's total cash deposits. The
Authority may waive collateral requirements for cash deposits, which are fully insured by the
Federal Deposit Insurance Corporation. The Authority, however, has not waived the
collateralization requirements.
The City follows the practice of pooling cash and investments of all funds, except for funds
required to be held by fiscal agents under the provisions of bond indentures. Interest income
earned on pooled cash and investments is allocated on an accounting period basis to the
various funds based on the period -end cash and investment balances. Interest income from
cash and investments with fiscal agents is credited directly to the related fund.
29 of 42 16 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30. 2016
Note 2 — Cash and Investments (Continued)
B. Investments
The table below identifies the investment types that are authorized for the Authority by the
California Government Code (or the City's investment policy, where more restrictive). The table
also identifies certain provisions of the California Government Code (or the City's investment
policy, where more restrictive) that address interest rate risk, credit risk, and concentration of
credit risk. This table does not address investments of debt proceeds held by bond trustee that
are governed by the provisions of debt agreements of the Authority, rather than the general
provisions of the California Government Code or the City's investment policy.
Investment Type
U.S. Treasury Obligations
U.S. Agency Securities
Bankers' Acceptances
Medium -Term and Corporate Notes
Money Market Mutual Funds
Mortgage Backed Securities
Asset Backed Securities
Commercial Paper
Municipal Bonds
Negotiable Certificates of Deposit
Local Agency Investment Fund (LAIF)
County of San Diego Investment Pool
CalTrust Joint Powers Authority
Obligation of any state
C. Risk Disclosures
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair
value of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to changes in the market interest rates. One of the ways that the
Authority manages its exposure to interest rate risk is by purchasing a combination of shorter
term and longer term investments and by timing cash flows from maturities so that a portion of
the portfolio is maturing or coming close to maturity evenly over time as necessary to provide
the cash flow and liquidity needed for operations.
30 of 42 17 May 16, 2017, Item #1.14
Maximum
Maximum
Maximum
Percentage of
Investment in
Maturity
Portfolio
One Issuer
5years
None
None
5 years
75%
25%
180 days
40%
5%
5 years
30%
5%
N/A
20%
10%
5 years
20%
5%
5 years
20%
5%
270 days
25%
5%
5 years
30%
5%
5 years
30%
5%
N/A
None
$65,000,000
N/A
None
None
N/A
None
None
5 years
None
None
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair
value of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to changes in the market interest rates. One of the ways that the
Authority manages its exposure to interest rate risk is by purchasing a combination of shorter
term and longer term investments and by timing cash flows from maturities so that a portion of
the portfolio is maturing or coming close to maturity evenly over time as necessary to provide
the cash flow and liquidity needed for operations.
30 of 42 17 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30. 2016
Note 2 — Cash and Investments (Continued)
C. Risk Disclosures (Continued)
Interest Rate Risk (Continued)
Information about the sensitivity of the fair values of the Authority's investments (including
investments held by bond trustee) to market interest rate fluctuations is provided by the
following table that shows the distribution of the Authority's investments by maturity:
Investment Type
U.S. Treasury Bills
U.S. Agencies
Municipalities
CalTrust Investment Pool - Short term
CalTrust Investment Pool - Medium term
Medium -Term and Corporate Notes
Local Agency Investment Fund (LAIF)
Total
None of the Authority's investments are highly sensitive to interest rate fluctuations.
Concentration of Credit Risk
The Authority's Policy states that not more than 25% of the portfolio shall be invested in any one
entity or any one instrument to protect the Authority from concentration of credit risk, with the
following exceptions: U.S. Treasury Obligations and investments pools (State of California —
Local Agency Investment Fund). In addition, purchases of commercial paper must not exceed
25% of the value of the portfolio at any time and single issuer holdings must not exceed 5% per
issuer. The Authority is in compliance with these provisions of the Policy.
The following is a chart of the Authority's investment portfolio:
Trustee/Custodian Investment Type Amount
Union Bank U.S. Treasuries $ 136,476
Union Bank
Union Bank
Union Bank
Wells Fargo
State Treasurer Office
31 of 42
U.S. Agencies 420,285
Municipalities 30,447
Medium -Term and Corporate Notes 376,371
CalTrust Investment Pool 319,854
Local Agency Investment Fund (LAIF) 416,991
$ 1,700,424
18 May 16, 2017, Item #1.14
Remaining Maturities
12 Months
13 to 24
25 to 60
Amounts
or Less
Months
Months
$ 136,476
$ -
$ 60,489 $
75,987
420,285
60,370
165,248
194,667
30,447
-
11,619
18,828
158,504
158,504
-
-
161,350
161,350
376,371
218,062
127,762
30,547
416,991
416,991
-
$ 1,700,424
$ 1,015,277
$ 365,118 $
320,029
None of the Authority's investments are highly sensitive to interest rate fluctuations.
Concentration of Credit Risk
The Authority's Policy states that not more than 25% of the portfolio shall be invested in any one
entity or any one instrument to protect the Authority from concentration of credit risk, with the
following exceptions: U.S. Treasury Obligations and investments pools (State of California —
Local Agency Investment Fund). In addition, purchases of commercial paper must not exceed
25% of the value of the portfolio at any time and single issuer holdings must not exceed 5% per
issuer. The Authority is in compliance with these provisions of the Policy.
The following is a chart of the Authority's investment portfolio:
Trustee/Custodian Investment Type Amount
Union Bank U.S. Treasuries $ 136,476
Union Bank
Union Bank
Union Bank
Wells Fargo
State Treasurer Office
31 of 42
U.S. Agencies 420,285
Municipalities 30,447
Medium -Term and Corporate Notes 376,371
CalTrust Investment Pool 319,854
Local Agency Investment Fund (LAIF) 416,991
$ 1,700,424
18 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 2 — Cash and Investments (Continued)
C. Risk Disclosures (Continued)
Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. The following presentation is the minimum rating
required by (where applicable) the California Government Code, the Authority's investment
policy, or debt agreements, and the actual rating as of year-end for each investment type:
Imestmem Type
Amounts
Rating
Not Rated
AA•
AA
AA-
A- A A -
U.S. Treasury Bias
S 138.476
AU
S -
$ 136,476
$
$ -
S - 5 - $ -
U.S. Agencies
420,285
Aaa
-
420,285
-
-
- -
Municipalities
30,447
Aaa
-
-
-
30,447
- -
CalTrust Investment
Pool - Shat term
158,504
Aar
-
-
158,504
-
- - -
CalTnnt Imestment
Pad- Medium term
161,350
NIA
161,350
-
-
- -
Madium-Term and
Corporate Notes
376,371
At
-
37,316
45,250
75.112
75,748 112,958 29,987
Local Agency
Investment Fund
(LAW)
416,991
NIA
416,991
-
Total
$1,700,424
$ 578,341
$ 594,077
5 203,754
$ 105,559
$ 75,748 S 112,958 S 29,987
D. Investment in Local Agency Investment Funds
The Authority's investments with Local Agency Investment Funds (LAIF) at June 30, 2016,
included a portion of the pooled funds invested in Medium -Term and Short -Term Structured
Notes and Asset -Backed Securities. These investments included the following:
Structured Notes are debt securities (other than asset-backed securities) whose cash
flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon
one or more indices and/or that have embedded forwards or options.
Asset -Backed Securities the bulk of which are mortgage-backed securities, entitle their
purchasers to receive a share of the cash flows from a pool of assets such as principal
and interest repayments from a pool of mortgages (such as Collateralized Mortgage
Obligations) or credit card receivables.
As of June 30, 2016, the Authority had $416,991 invested in LAIF, which had invested 2.08% of
the pooled investment funds in short-term and medium-term Structured Notes and Asset -
Backed Securities.
32 of 42 19 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 2 — Cash and Investments (Continued)
E. Investment in CaITRUST
The Authority is a voluntary participant in the Investment Trust of California (CaITRUST) a Joint
Powers Authority. CaITRUST is a program established by public agencies in California for the
purpose of pooling and investing local agency funds. CaITRUST invests in fixed income
securities eligible for investment pursuant to California Government Code Sections 53601, et.
seq. and 53635, et. seq. Investments in CaITRUST are highly liquid, as deposits can be
converted to cash within 24 hours without loss of interest. The balance available for withdrawal
is based on the accounting records maintained by CaITRUST, which are recorded on a fair
market value basis. Separate CaITRUST financial statements are available from CalTRUST'S
offices at 400 Capital Mall, Suite 702, Sacramento, CA 95814.
As of June 30, 2016, the Authority had $319,854 invested in CaITRUST.
The Authority's investment in this pool is reported in the accompanying financial statements at
fair market value.
F. Fair Value Measurements
GASB Statement No. 72, Fair Value Measurements and Application, establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This
hierarchy consists of three broad levels: Level 1 inputs consist of quoted prices (unadjusted) for
identical assets and liabilities in active markets that a government can access at the
measurement date, Level 2 inputs consist of inputs that are observable for an asset or liability,
either directly or indirectly, and Level 3 inputs have the lowest priority and consist of
unobservable inputs for an asset or liability.
The following table presents the balances of the assets measured at fair value on a recurring
basis as of June 30, 2016.
Fair Value Measurement Using
Investments by Not Subject
Fair Value Level Level 1 Level 2 Level 3 to GASB 72 Total
June 30, 2016
Assets
U.S. Treasury Bills
U.S. Agencies
Municipalities
CatTrust Investment Pool - Short term
CaFrrust Investment Pool - Medium term
Medium -Term and Corporate Notes
Local Agency Investment Fund (LAIF)
$ 136,476 $
420,285
30,447
376,371
158,504
161,350
416,991
$ 136,476
420,285
30,447
158,504
161,350
376,371
416,991
S 963,579 $ $ $ 736,845 $1,700.424
33 of 42 20 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 3 — Capital Assets
The summary of changes in capital assets for the year ended June 30, 2016 is as follows:
Capital assets, not being
depreciated:
Land
Total capital assets, not being
depreciated
Governmental activities - capital
assets
Balance Balance
July 1, 2015 Additions Deletions June 30, 2016
$17,762,674 $ $ $ 17,762,674
17,762,674
17,762,674
$17,762,674 $ $ $ 17,762,674
Note 4 — Related Party Transactions
In an effort to ensure that the objectives of Poway's Redevelopment Plan and the Poway
Redevelopment Agency's (Agency) 5 -Year Implementation Plan are fulfilled, on March 11,
2011, the Agency transferred all housing related assets to the Authority through a Cooperation
Agreement between the Agency and the Authority. Under the terms of this agreement, the
Authority agreed to respectively carry out the projects and activities of the Agency in
accordance with the objectives and purposes included in the Redevelopment and
Implementation Plans. Projects included in the Cooperation Agreement between the Agency
and the Authority further the goals of the Redevelopment Plan. It was initially anticipated that
these projects would be funded based on available tax increment to be received through 2037,
but because of the dissolution of the Agency under AB X1 26 tax increment revenue has been
eliminated, and therefore, no funding for these projects from that source is available. Future
project funding will come from the management of the Authority's assets and may include
interest revenue, lease revenue, residual receipt revenue and the sale of assets.
Note 5 — Rehabilitation Loan Program
Housing Rehabilitation Loan Program
Non -forgivable loans are due upon the sale, transfer or foreclosure of the property. Due to the
contingent repayment schedule of these loans, an expenditure is recorded when the loan is
made and no receivable is included in the accompanying basic financial statements. The
balance of the non -forgivable rehabilitation loans at June 30, 2016 is $7,870.
34 of 42 21 May 16, 2017, Item #1.14
Poway Housing Authority
Notes to the Basic Financial Statements
June 30, 2016
Note 5 — Rehabilitation Loan Program (Continued)
Affordable Housing Loans
These loans are made to aid in the purchase of affordable housing in the City of Poway. They
are for a 45 year term with no interest and if there is a sale, transfer or foreclosure before the
end of the term the loan must be assumed by an income qualified buyer and the 45 year term
starts over. Due to the contingent nature of the repayment schedule of these loans, an
expenditure is recorded when the loan is made and no receivable is included in the
accompanying basic financial statements. The balance of these Affordable Housing loans at
June 30, 2016 is $2,690,132.
Development Loans
The City, through the Housing Authority, has development loans primarily for affordable rental
housing projects and for one group home for the developmentally disabled. The affordable
rental housing loans have 55 year terms with three percent simple interest. Loan payments are
made from residual receipts and generally do not cover the annual accrued interest. Therefore,
due to the contingent nature of the repayment schedule of these loans, an expenditure is
recorded when the loan is made and no receivable is included in the accompanying basic
financial statements. The balance of the development loans, including accrued interest, at June
30, 2016 is $33,665,790.
Note 6 — Extraordinary Items
Loans to the Successor Agency to the Former Poway Redevelopment Agency
Upon dissolution of the former Poway Redevelopment Agency, advances made from the
Authority to the former Poway Redevelopment Agency required approval by certain regulatory
oversight agencies to be considered enforceable obligations of the Successor Agency. Certain
advances were approved as enforceable obligations by the respective regulatory oversight
agencies while other advances were disapproved. The Authority's position is that all of the
advances to the former Poway Redevelopment Agency, which now reside in the Successor
Agency, were for legitimate redevelopment purposes, and therefore, should be included in
future Recognized Obligation Repayment Schedules (ROPS), and paid from Poway's
Redevelopment Property Tax Trust Fund. The Department of Finance (DOF) position on the
advances it did not approve is that sufficient loan documentation was not provided. The City
provided council actions and budgetary documents in support of each of the advances, and
believes this documentation does support the repayment of the advances. The recognition of
the advances was denied on appeal by the City. As a result of the appeal decision, the
unapproved advances were written off by the Authority. The amount written of was $2,153,521.
35 of 42 22 May 16, 2017, Item #1.14
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36 of 42 May 16, 2017, Item #1.14
Required Supplementary Information
(Unaudited)
37'of 42 May 16, 2017, Item #1.14
Poway Housing Authority
Budgetary Comparison Schedule
For the Year Ended June 30, 2016
EXPENDITURES
Current:
General government
Development services
Capital outlay
Total expenditures
EXTRAORDINARY ITEMS
Net change in fund balance
Fund balance, beginning
Fund balance, ending
- 4,700 4,700 -
719 18,719 6,765 11,954
35,036 145,966 101,834 44,132
35,755 169,385 113,299 56,086
(2,153,521) 2,153,521
$ 74,695 $ (2,084,868) $ 2,025,933
4,505,928
$ 2,421,060
38 of 42 See accompanying note to budgetary compari nn scned��1
23 7, Item #1.14
Original
Variance with
Budget
Final Budget
Actual
Final Budget
REVENUES
Charges for services
$ 57,150
$ 57,150
$ 56,403
$ (747)
Use of money and property
13,300
13,300
21,102
7,802
Other revenues
40,000
40,000
104,447
64,447
Total revenues
110,450
110,450
181,952
71,502
EXPENDITURES
Current:
General government
Development services
Capital outlay
Total expenditures
EXTRAORDINARY ITEMS
Net change in fund balance
Fund balance, beginning
Fund balance, ending
- 4,700 4,700 -
719 18,719 6,765 11,954
35,036 145,966 101,834 44,132
35,755 169,385 113,299 56,086
(2,153,521) 2,153,521
$ 74,695 $ (2,084,868) $ 2,025,933
4,505,928
$ 2,421,060
38 of 42 See accompanying note to budgetary compari nn scned��1
23 7, Item #1.14
Poway Housing Authority
Note to Budgetary Comparison Schedule
For the Year Ended June 30, 2016
Note 1 — Budgetary Information
The Authority adopts an annual budget prepared on the modified accrual basis for its major
fund. The Executive Director is required to prepare and submit to the Authority's Board of
Directors the annual budget of the Authority and administer it after adoption. Any revisions that
alter the total appropriations of any fund must be approved by the Board of Directors.
Prior year appropriations lapse unless they are encumbered at year end or re -appropriated
through the formal budget process. For the major fund, total expenditures may not legally
exceed total appropriations.
Budget information is presented for the major fund on a basis consistent with generally
accepted accounting principles. Budgeted revenue and expenditure amounts represent the
original budget modified for adjustments during the year.
39 of 42 24 May 16, 2017, Item #1.14
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40 of 42 May 16, 2017, Item #1.14
ROGERS. ANDERSON, MALODY & SCOTT. LLP
CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948
735 E. Carnegie Dr. Suite 100
San Bernardino. CA 92408
909 889 0871 T
909 889 5361 F
ramscpa.net
Independent Auditor's Report on Internal Control Over Financial
PARTNERS Reporting and on Compliance and Other Matters Based on an Audit
B, enda L Odle. CPA. MS r of Financial Statements Performed in Accordance With Government
Terry P Shea. CPA Auditing Standards
Kirk A Franks. CPA
SCOtt W. Manno. CPA. CDMA
Leena Shanbhag, CPA. MST, CDMA
Bradrerd A Welrbu. CPA. MBA. CGMA To the Chairman and Commissioners
Jay H Zcrchnr, CPA IParrnerEmcrnml of the Poway Housing Authority
Phillip H Waller, CPA IPartni,r Ernenmsl
Poway, California
MANAGERS ,STAFF
Jenny Liu. CPA. MST We have audited, in accordance with the auditing standards generally
5e.,,Jos o L,on,.0CPA. A accepted in the United States of America and the standards applicable to
Ch.,, Jos Dc Smom, CPA
Nathan Statham. CPA. MRA financial audits contained in Government Auditing Standards issued by
Gardenya Duran. CPA the Comptroller General of the United States, the financial statements of
Bnanna Schultz. CPA the govemmental activities and the major fund of the Housing Authority of
Damcl Hernandez. CPA, MBA
Lisa Dongaam Guo. CPA. MSA the City of Poway (Authority), a component unit of the City of Poway
(City), as of and for the year ended June 30, 2016, and the related notes
to the financial statements, which collectively comprise the Authority's
basic financial statements and have issued our report thereon dated
December 28, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we
considered the Authority's internal control over financial reporting (internal
control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the
effectiveness of the Authority's internal control. Accordingly, we do not
express an opinion on the effectiveness of the Authority's internal control.
A deficiency in internal control exists when the design or operation of a
MEMBERS control does not allow management or employees; in the normal course
An+ancan Instam'. of
Ceinhed Pub., Accounlan:s of performing their assigned functions, to prevent, or detect and correct,
PCPS r:.. AICPA A+Lnnc. misstatements on a timely basis. A material weakness is a deficiency, or
;n, CPA Furr.. a combination of deficiencies, in internal control, such that there is a
G-iv.:runent„I Ai„ht reasonable possibility that a material misstatement of the entity's financial
o,nl,lyCente, statements will not be prevented, or detected and corrected on a timely
Soc,efy of basis. A significant deficiency is a deficiency, or a combination of
Ceruhed Puohc ACCn„ntAn:s deficiencies, in internal control that is less severe than a material
weakness, yet important enough to merit attention by those charged with
governance.
41 of 42 25 May 16, 2017, Item #1.14
STABILITY. ACCURACY. TRUST.
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies. Given these limitations, during our audit we did
not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority's financial statements
are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which
could have a direct and material effect on the determination of financial statement amounts.
However, providing an opinion on compliance with those provisions was not an objective of our
audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of
the entity's internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the Authority's
internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
R05ers,Rndersor1,MoLJod8& Scott)LLP
San Bernardino, California
December 28, 2016
42 of 42 26 May 16, 2017, Item #1.14