HESPERIA HOUSIN
G AUTHORITY
COMPONENT UNIT
FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2022
Attachment 1
HESPERIA HOUSING AUTHORITY
TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2022
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENT
’S DISCUSSION AND ANALYSIS 4
FINANCIAL STATEMENTS
STATEMENT OF NET POSITION 9
STATEMENT OF ACTIVITIES 10
BALANCE SHEET 11
RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION – GOVERNMENTAL FUNDS 12
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS 13
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES TO THE STATEMENT OF
ACTIVITIES – GOVERNMENTAL FUNDS 14
NOTES TO FINANCIAL STATEMENTS 15
REQUIRED SUPPLEMENTARY INFORMATION
BUDGETARY COMPARISON SCHEDULE – HESPERIA HOUSING
AUTHORITY SPECIAL REVENUE FUND 26
BUDGETARY COMPARISON SCHEDULE – VVEDA HOUSING AUTHORITY SPECIAL REVENUE FUND 27
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION 28
1 INDEPENDENT AUDITORS’ REPORT
Board of Directors
Hesperia Housing Authority
Hesperia, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the Hesperia Housing Authority (the Authority) (a component unit of the City of Hesperia), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority, as of June 30, 2022, and the changes in financial position, and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Authority and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer.
CliftonLarsonAllen LLP
CLAconnect.com
Board of Directors
Hesperia Housing Authority
2 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial stat ements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosure s in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal cont rol. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going co ncern for a reasonable period of time.
We are required to communicate with those cha rged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison schedules, be presented to supplement the basic financial statements. Such in formation is the responsibility of management and, 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 GAAS, 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.
Board of Directors
Hesperia Housing Authority
3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 8, 2022 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, and grant agreements and other matters. The purpose of that report is solely 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 effectiveness of the Authority’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance.
CliftonLarsonAllen LLP
Irvine, California
December 8, 2022
4 MANAGEMENT’S DISCUSSION AND ANALYSIS
Our discussion and analysis of the Hesperia Housing Authority’s (Authority) financial performance provides an overview of the Authority’s financial activities for the fiscal year (FY) ending June 30, 2022. Please read it in conjunction with the accompanying basic financial statements.
FINANCIAL HIGHLIGHTS
During FY 2021-22, the Authority net position decreased by $0.2 million. While discussed in greater detail later, this is primarily related to reimbursing the City of Hesperia’s Neighborhood Stabilization Program (NSP) expenditures pertaining to low and moderate income housing functions.
USING THIS ANNUAL REPORT
This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Activities provide information about the activities of the Authority as a whole and present a longer-term view of the Authority’s finances. Fund financial statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Authority’s operations in more detail than the government-wide statements by providing information about the Authority’s most significant funds.
REPORTING THE AUTHORITY AS A WHOLE
The discussion and analysis provided here are intended to serve as an introduction to the Authority’s basic financial statements. The basic financial statements consist of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) the notes to financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves.
Government-Wide Financial Statements
One of the most important questions asked about the Authority’s finances is, “Is the Authority as a whole better off or worse off as a result of this year’s activities?” The Government-Wide Statements – The Statement of Net Position and the Statement of Activities – report information about the Authority as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting method, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid.
The statement of net position presents financial information on all of the Authority’s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating.
The statement of activities presents information showing how the Authority’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows . Thus, revenues and expenses are reported for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
REPORTING THE AUTHORITY’S MOST SIGNIFICANT FUNDS
Fund Financial Statements – A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific acti vities or objectives. The Authority, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with 5 finance-related legal requirements. The Authority uses a governmental fund to account for its operations.
Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources , as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in assessing a government’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
Notes to the Financial Statements – The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements.
THE HESPERIA HOUSING AUTHORITY AS A WHOLE
Our analysis focuses on the Condensed Statement of Net Position (Table 1) and Changes in Net Position (Table 2) of the Authority. As noted earlier, net position over time, may serve as a useful indicator of a government’s financial position.
2021 2022 Amount Percentage
Current and other assets 12,632,458 $ 11,974,046 $ (658,412)$ -5% Total assets 12,632,458 11,974,046 (658,412) -5% Total deferred outflow of resources - - - 0%
Current liabilities 429,708 107 (429,601) -100%
Total liabilities 429,708 107 (429,601) -100% Total deferred inflow of resources - - - 0%
Net Position:
Restricted 12,202,750 11,973,939 (228,811) -2% Total Net Position 12,202,750 $ 11,973,939 $ (228,811)$ -2% Table 1
Condensed Statement of Net Position
Changes from 2021 to 2022
The following is a brief explanation for the changes in Table 1 abov e for the fiscal year ending June 30,
2022:
Current and other assets in the amount of $12.0 million decreased by $0.7 million from the year ending June 30, 2021. This is primarily the result of reimbursing the City of Hesperia’s Neighborhood Stabilization Program (NSP) approximately $0.7 million, which consists of $0.4 million for homebuyer assistance loans authorized by the Authority and $0.3 million for the reimbursement expenditures pertaining to low and moderate income housing functions. 6 Current liabilities totaled $107 at June 30, 2022, which is a decrease of $429,601. This decrease is attributed to the payment of the $0.4 million reimbursement to the City of Hesperia’s NSP during fiscal year ending June 30, 2022.
As discussed, the impact of the changes to current assets and current liabilities is the cause for the $228,811 decrease to Total Net Position.
AUTHORITY ACTIVITIES
As shown in Table 2, the Authority’s June 30, 2022 net position decreased by approximately $0.2 million. While the June 30, 2022 total revenue of $150,016 is $11,240 more than June, 30 2021, it is less than the current year expenses for the Authority. The year-over-year increase to revenue is primarily due to a repayment of a homebuyer a ssistance program loan. The June 30, 2022 expenses are $1.5 million less than that of fiscal year ending June 30, 2021; the prior year included $1.4 million adjustment to the value of land held for resale and $0.4 million recognition of homebuyer assistance program loan. The June 30, 2022 expenses are primarily related to the reimbursement of approximately $0.3 million to the City of Hesperia’s Neighborhood Stabilization Program (NSP) for low and moderate income housing functions.
2021 2022 Amount Percentage
Revenues
General revenues:
Income from money and property 46,568 (28,612) (75,180) Other 92,208 178,628 86,420
-161%
94%
Total revenues 138,776 150,016 11,240 8% Expenses
Development Services 1,907,414 378,827 (1,528,587) -80% Total expenses 1,907,414 378,827 (1,528,587) -80% Change in net position (1,768,638) (228,811) 1,539,827 -87% Net position at July 1 13,971,388 12,202,750 (1,768,638) -13% Net position at June 30 12,202,750 $ 11,973,939 $ (228,811)$ -2% Changes from 2021 to 2022
Table 2
Changes in Net Position
FINANCIAL ANALY
SIS OF THE AUTHORITY’S FUNDS
At year-end, the Authority’s governmental funds reported combined fund balances of $12.0 million. The fund balance of the Hesperia Housing Authority Fund is $10.2 million, which is restricted for low and moderate income housing functions. The Fund balance has decreased by $0.2 million from June 30, 2021, which is due to the reimbursement to the City of Hesperia’s Neighborhood Stabilization Program (NSP).
The Victor Valley Economic Development Agency (VVEDA) Housing Authority Fund balance is $1.8 million, which is relatively unchanged from June 30, 2021. It should be noted that VVEDA funds must be utilized for low and moderate income housing functions in the VVEDA target area. 7 ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
In Fiscal Year 2022-23, the Authority’s budget anticipates revenues of $0.1 million, which will be offset by expenditures of approximately $72,586 to maintain current operations.
CONTACTING THE AUTHORITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the Authority’s finances and to show the Authority’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Authority’s Finance Department, at the City of Hesperia, 9700 Seventh Avenue, Hesperia, California 92345.
8 FINANCIAL STATEMENTS
HESPERIA HOUSING AUTHORITY
STATEMENT OF NET POSITION
JUNE 30, 2022
See accompanying Notes to Financial Statements.
9 ASSETS
Current Assets:
Cash and Cash Equivalents 5,091,568$
Receivables:
Accrued Interest 9,258
Due from City of Hesperia 106
Land Held for Resale 6,870,000
Total Current Assets 11,970,932
Noncurrent Assets:
Deposits 3,114
Notes Receivable 22,922,318
Allowance for Notes Receivable (22,922,318)
Total Noncurrent Assets 3,114
Total Assets 11,974,046
LIABILITIES
Current Liabilities:
Accounts Payable and Other Current Liabilities 107
Total Current Liabilities 107
NET POSITION
Restricted for Low Income Housing 11,973,939
Total Net Position 11,973,939$
Governmental
Activities
HESPERIA HOUSING AUTHORITY
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
10 Net (Expense)
Revenue and
Changes in
Net Position
Operating Capital
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities Primary Government:
Governmental Activities:
Development Services 378,827$ -$ -$ $ - $ (378,827) Total Governmental Activities 378,827$ -$ -$ $ - (378,827)
GENERAL REVENUES
Income from Money and Property (28,612)
Other 178,628
Total General Revenues 150,016
CHANGE IN NET POSITION (228,811)
Net Position - Beginning of Year 12,202,750
NET POSITION - END OF YEAR 11,973,939$
Program Revenues
HESPERIA HOUSING AUTHORITY
BALANCE SHEET
GOVERNMENTAL FUNDS
JUNE 30, 2022
See accompanying Notes to Financial Statements.
11 Hesperia VVEDA Total Housing
Housing Housing Authority
Authority Authority Funds
ASSETS
Cash and Cash Equivalents 3,291,156$ 5,091,568$
Due from City of Hesperia 106
Accrued Interest 6,044
$ 1,800,412
Notes Receivable 22,922,318
Allowance for Notes Receivable (22,922,318)
Land Held for Resale 6,870,000
106
9,258
22,922,318
(22,922,318)
6,870,000
Total Assets 10,167,306$ 1,803,626$ $ 11,970,932
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable and Other Current Liabilities 107$ -$ 107$ Total Liabilities 107 - 107
FUND BALANCES
Restricted:
Low Income Housing 10,167,199 1,803,626 11,970,825
Total Liabilities and Fund Balances 10,167,306$ 1,803,626$ 11,970,932$ -
3,214
-
-
-
HESPERIA HOUSING AUTHORITY
RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION
GOVERNMENTAL FUNDS
JUNE 30, 2022
See accompanying Notes to Financial Statements.
12 Total Fund Balances - Governmental Funds 11,970,825$ Amounts reported for governmental activities in the Statement of Net Position are different because:
Deposits with insurance providers to pay for long-term liabilities are not current financial resources to the governmental funds. 3,114 Total Net Position 11,973,939$
HESPERIA HOUSING AUTHORITY
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
13 Hesperia VVEDA Total Housing
Housing Housing Authority
Authority Authority Funds
REVENUES
Use of Money and Property $ (12,101) $ (16,511) $ (28,612) Other Revenues 178,628 - 178,628
Total Revenues 166,527 (16,511) 150,016
EXPENDITURES
Current:
Development Services 372,133 - 372,133
Total Expenditures 372,133 - 372,133
DEFICIENCY OF REVENUES
UNDER EXPENDITURES (205,606) (16,511) (222,117) Fund Balances - Beginning of Year 10,372,805 1,820,137 12,192,942 FUND BALANCES - END OF YEAR 10,167,199$ 1,803,626$ 11,970,825$
HESPERIA HOUSING AUTHORITY
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
14 Net Change in Fund Balances - Total Governmental Funds $ (222,117) Amounts reported for governmental activities in the Statement of Activities are different because:
Recording of long-term deposits are included in governmental activities in the government-wide Statement of Activities. (6,694)
Change in Net Position of Governmental Activities $ (228,811)
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
15 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity
The Hesperia Housing Authority (Aut hority), which is a subsidiary component unit of the City of Hesperia (City), was established on April 5, 2011 by Resolution No. 2011-022 of the City Council. The Hesperia Housing Authority was activated when t he dissolution of the former Hesperia Community Redevelopment Agency o ccurred on February 1, 2012.
The Authority develops, manages, and promotes programs and projects that pres erve and improve the supply of affordable housing in the City for low and moderate income persons.
B. Basis of Presentation
The accoun ting policies of the Authority conform to accounting principles generally accepted in the United States of America as they are applicable to governmental units.
The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial repo rting principles.
The more significant accounting policies reflected in the financial statements are summarized as follows:
Government-Wide Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the activities of the Hesperia Housing Authority. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Authority has no business-type activities.
The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not pr operly included among program revenues are reported instead as gene ral revenues.
Governmental Fund Financial Statements
The accounting system of the Authority is organized and operated on the basis of two funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitu te its assets, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures.
Governmental resources are allocated to and accounted for in individual funds ba sed upon the pu rposes for which they are to be spent and the means by which spending activities are controlled.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
16 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Basis of Presentation (Continued)
Governmental Fund Financial Statements (Continued)
Fund financial statements for the Authority’s governmental funds are presented after the government-wide financial statements. These statements display information about major funds individually.
The Authority’s Governmental Fund Balances are comprised of the following component:
The restricted fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation.
In the governmental fund statements, when expenditures are incurred, the Authority uses the most restrictive funds first. The Authority would use the appropriate funds in the following order: committed, assigned, and lastly unassigned amounts.
The Authority has two major funds described below:
Hesperia Housing Authority Fund is used to account for Low and Moderate Housing activity. The fund balance is set aside to provide for future low and moderate income housing.
Victor Valley Economic Development Authority (VVEDA) Housing Authority Fund is used to account for Low and Moderate Housing activi ty within the VVEDA project area that is located within the boundaries of the City.
C. Measurement Focus
Measurement focus is a term used to describe “which” transactions are recorded within the various financial statements.
In the government-wid e statement of net position and the statement of activiti es, activities are presented using the economic resources measurement focus. Unde r the economic resources measurement focus, all (both current and long-term) econ omic resources and obligations of the government are reported.
In the fund financial statements, all governmental funds are accounted for on a spe nding or “financial flow” measurement focus. This means that only current assets and cu rrent liabilities ar e generally included on their balance sheets. Their reported fund ba lances (net current assets) are considered a measure of “available spendable resources”.
Governmental fund operating statements present increases (revenues and ot her financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and us es of available spendable resources during a period.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
17 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus (Continued)
Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities.
Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as a fund asset. The proceeds of long-term debt are recorded as other financing sources rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures.
In the statement of net position, the net position is classified in the following categories:
Investment in capital assets – This am ount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction or improvement of the assets. The Authority has no capital assets.
Restricted net position – This amount is re stricted by external creditors, grantors, contributors, or laws or regulations of other governments. Unrestricted net position – This amount is the net position that does not meet the definition of “investment in capital assets, net of related debt” or “restricted net position”.
When both restricted and unrestricted resources are combined in a fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources.
D. Basis of Accounting
Basis of accounting refers to “when” transactions are recorded regardless of the measurement focus applied.
In the government-wide statement of net position and statement of activities, the governmental activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used, regardless of the timing of related cash flows. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
18 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Basis of Accounting (Continued)
In the fund financial statements, governmental funds are presented using the modified-accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The Authority considers revenues to be available if they are collected within 60 days of the end of the current fiscal period.
Revenue recognition is subject to the measurable and availability criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed nonexchange trans actions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government-mandated and voluntary nonexchange transactions are recognized as revenues when all applicable eligibility requirements have been met.
E. Cash and Investments
Investments are stated at fair value (quoted market price or best available estimate thereof, see Note 2).
F. Claims and Judgments
When it is probable that a claim liability has been incurred at year-end, and the amount of the loss can be reasonably estimated, the Authority records the estimated loss, net of any insurance coverage under its self-insurance program. At June 30, 2022, in the opinion of the Authority's Attorney, the Authority had no material unrecorded claims that would require loss provision in the financial statements, including losses for claims that are Incurred But Not Reported (IBNR). Small dollar claims and judgments are recorded as expenditures when paid.
The Authority participates in the insurance program of the City of Hesperia. Information relating to the insurance program can be found in the notes to the basic financial statements of the City of Hesperia.
G. Land Held for Resale
Land held for resale is carried at the lower of cost or estimated realizable value.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
19 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. Capital Assets
Capital assets, which include equipment, are depreciated and are reported in the government-wide financial statements. Authority policy has set the capitalization threshold for reporting capital assets at $5,000.
Capital assets have an estimated useful life greater than one year and are valued at historical cost or estimated cost if actual historical cost is not available. Donated capital assets are recorded at acquisition value at the date of acquisition. The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized.
Depreciation is charged to operations using the straight-line method based on the estimated useful life of an asset ranging from 5 to 30 years.
I. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Authority does not have any type of these items at June 30, 2022.
In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources . This separate financial statement element, deferred inflows of resources , represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Authority does not have any type of these items at June 30, 2022.
J. Receivables
All accounts, taxes, and service receivables are shown net of an allowance for uncollectibles.
K. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
20 NOTE 2 CASH AND INVESTMENTS
A. Equity in Cash and Investment Pool of the City of Hesperia The Authority does not have a separate bank account; however, the Authority’s cash and inve stments are maintained in an investment pool managed by the City. The Authority is a voluntary participant in that pool. This pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Authority has not adopted an investment policy separate from that of the City. The fair value of the Authority’s investment in this pool is reported in the accompanying fina ncial statements at amounts based upon the Auth ority’s pro-rata share of the fair value calculated by the City for the entire City portfolio. The balance available for withdrawal is based on the accounting records maintained by the City, which are recorded on an original cost basis.
B. Investments Authorized by the California Government Code and the Authority’s Investment Policy
The table b elow identifies the investment types that are authorized for the Authorit y by the Californ ia Government Code (or the Authority’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the Authority’s investment policy, where more restrictive) that address intere st rate risk, and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio in One Issuer U.S. Treasury Obligations 5 Years 100% None
U.S. and State or Local Agency Securities 5 Years 100% None Banker's Acceptances 180 Days 25% 5%
Commercial Paper 270 Days 15% 10%
Negotiable Certificates of Deposit 5 Years 25% None
Repurchase Agreements 1 Year 20% None
Local Agency Investment Fund (LAIF) N/A 100% None
Medium-Term Notes 5 Years 30% None
Mutual and Money Market Funds N/A 20% 10%
Collateralized Bank Deposits 5 Years 10% None
Investment Pools N/A 30% None
Municipal Bonds 5 Years 10% None
Supranational Obligations 5 Years 30% None
Public Bank Obligations 5 Years 100% None
C. Disclosures Related to Interest Rate Risk, Credit Risk and Custodial Credit Risk, and Fair Value Measurements
The Authority’s cash and cash equivalents are pooled with the City of Hesperia’s cash
and investments. Additional disclosures regarding the pooled investments related to interest rate risk, credit risk, custodial credit risk and fair value meas urements are available in the City of Hesperia’s Annual Comprehensive Financial Report.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
21 NOTE 3 CHANGES IN CAPITAL ASSETS
A summary of changes in capital assets at June 30, 2022 is as follows:
Balance at Balance
June 30, 2021 Increases Decreases June 30, 2022
Capital Assets Being Depreciated:
Equipment and Vehicles 6,596$ $ - $ (6,596) -$ Less Accumulated Depreciation for:
Machinery and Equipment (6,596) - 6,596 -
Total Capital Assets Being
Depreciated, Net
Net Capital Assets -$ -$ -$ -$
NOTE 4 NOTES RECEIVABLE
Notes receivable, totaling $22.9 million at June 30, 2022 consists of loans provided for low and moderate income housing, with interest between 1% and 3% and maturity of 55 years.
Payments on these notes are based on a percentage of the residual receipts. The Authority does not know the timing of the repayment of the notes, as there is not enough information on the receipt of residual receipts; therefore, the Authority has recorded an allowance for uncollectible for the outstanding balance of $22.9 million.
Notes receivable at June 30, 2022 include the following:
Outstanding Outstanding
June 30, 2021 Additions Deductions June 30, 2022
A. KDF VAH I, L.P. 3,198,098$ 29,000$ -$ 3,227,098$ B. KDF Hesperia, L.P. 1,913,205 24,458 - 1,937,663 C. KDF Hesperia II, L.P. 2,598,801 28,102 - 2,626,903 D. PDDC San Remo Hesperia, L.P. 4,396,077 39,557 - 4,435,634 E. PDDC San Remo Hesperia II, L.P. 6,114,945 56,661 (108,722) 6,062,884 F. Eagle Hesperia 55, L.P. 4,213,892 76,639 - 4,290,531 G. Homebuyer Assistance Program 428,554 - (86,949) 341,605 Totals 22,863,572$ 254,417$ (195,671)$ 22,922,318$ A. KDF VAH I, L.P.
In July 2006, the former Hesperia Community Redevelopment Agency ( HCRA) entered into an Owner Participation Agreement (OPA) with KDF VAH I, L.P. (a California limited partnership) for the development, construction and operation of a 68-unit apartment complex of which certain units shall be available to very lo w income tenants, low income tenants, and moderate income tenants. Under the terms of the OPA, the HCRA loaned $2,900,000 of its low and moderate income housing funds toward the actual cost fo r the development, construction, and operation of the project. The loan is for a term of not more than 55 years and shall bear interest at a rate of 1%. The agreement is secured by a deed of trust on the property. Due to the dissolution of redevelopment agencies by AB 26x1, the Authority assumed responsibility of the HCRA notes receivable.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
22 NOTE 4 NOTES RECEIVABLE (CONTINUED)
A. KDF VAH I, L.P. (Continued)
Accrued interest on the note through June 30, 2022 is $327,098. The balance of the loan outstanding at June 30, 2022 was $3,227,098. Payments on the loan are based on a percentage of the Partnership’s positive cash flow. Any unpaid balance is due and payable at the maturity date.
B. KDF Hesperia, L.P.
In December 2005, the former HCRA entered into an OPA with KDF Hesperia, L.P. (a California limited partnership) for the development, construction and operation of a 110-unit apartment complex of which certain units shall be available to very low income tenants, low income tenants, and moderate income tenants. Under the terms of the OPA, the HCRA loaned $1,250,000 of its low and moderate income housing funds toward the actual cost for the development, construction, and operation of the project.
The loan is for a term of not more than 55 years and shall bear simple interest at a rate of 1%. The agreement is secured by a deed of trust on the property. Due to the dissolution of redevelopment agencies by AB 26x1, the Authority assumed responsibility of the HCRA notes receivable. On February 1, 2012, the Housing Authority issued a loan of $398,589, with an interest rate of 3%, to assist with converting the construction loan to a permanent loan. Accrued interest on the combined notes through June 30, 2022 is $289,074. The balance of the loan outstanding at June 30, 2022 was $1,937,663.
Payments on the loan are based on a percentage of the Partnership’s positive cash flow.
Any unpaid balance is due and payable at the maturity date.
C. KDF Hesperia II, L.P.
In March 2006, the former HCRA entered into an OPA with KDF Hesperia II, L.P. (a California limited partnership) for the development, construction and operation of a 72-unit apartment complex of which certain units shall be available to very low income tenants, low income tenants, and moderate income tenants. Under the terms of the OPA, the HCRA loaned $2,000,000 of its low and moderate income housing funds toward the actual cost for the development, construction, and operation of the project.
The loan is for a term of not more than 55 years and shall bear interest at a rate of 1%.
The agreement is secured by a deed of trust on the property. Due to the dissolution of redevelopment agencies by AB 26x1, the Author ity assumed responsibility of the HCRA notes receivable. On February 1, 2012, the Authority issued a loan of $270,070, with an interest rate of 3%, to assist with converting the construction loan to a permanent loan.
Accrued interest on the combined notes through June 30, 2022 is $356,833. The balance of the loan outstanding at June 30, 2022 was $2,626,903. Payments on the loan are based on a percentage of the Partnership’s positive cash flow. Any unpaid balance is due and payable at the maturity date.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
23 NOTE 4 NOTES RECEIVABLE (CONTINUED)
D. PDDC San Remo Hesperia, L.P.
On November 2007, the former HCRA entered into an OPA with PDDC San Remo Hesperia, L.P. (Palm Desert Development Company, a California limited partnership) for the development, construction, and operation of a 65-unit apartment complex of which certain units shall be available to very low-income tenants and low-income tenants.
Under the terms of the OPA, the HCRA loaned $3,955,711 of its low and moderate income housing funds toward the actual cost for the development, construction, and operation of the project. The loan is for a term of not more than 55 years and shall bear interest at a rate of 1%. The agreement is secured by a deed of trust on the property.
Due to the dissolution of redevelopment agencies by AB 26x1, the Authority assumed responsibility of the HCRA notes receivabl e. Accrued interest on the note through June 30, 2022 is $479,923. The balance of the loan outstanding at June 30, 2022 was $4,435,634. Payments on the loan are based on a percentage of the Partnership’s positive cash flow. Any unpaid balance is due and payable at the maturity date.
E. PDDC San Remo Hesperia II, L.P.
On October 5, 2010, the former HCRA entered into an OPA with PDDC San Remo Hesperia II, L.P. (Palm Desert Development Company, a California limited partnership) for the development, construction, and operation of a 58-unit apartment complex of which certain units shall be available to very low-income tenants and low-income tenants. Under the terms of the OPA, the HCRA loaned $6,613,620 of its low and moderate income housing funds toward the actual cost for the development, construction, and operation of the project. The loan is for a term of not more than 55 years and shall bear interest at a rate of 1%. The agreement is secured by a deed of trust on the property. Due to the dissolution of redevelopment agencies by AB 26x1, the Authority assumed responsibility of the HCRA notes receivable. Accrued interest on the note through June 30, 2022 is $445,625 and principal and interest payments received are $1,268,421. The balance of the loan outstanding at June 30, 2022 was $6,062,884.
F. Eagle Hesperia 55, L.P.
On February 16, 2016, the former HCRA entered into an OPA with Eagle Hesperia 55 L.P. (a California limited partnership) for the development, construction, and operation of a 96-unit apartment complex of which certain units shall be available to low income senior citizens. Under the terms of the OPA, the Authority loaned $3,831,975 of its low and moderate income housing funds toward the actual cost for the development, construction, and operation of the project. The loan is for a term of 55 years, with the option of extending the term up to 25 years; the option must be exercised between the 53rd year and 54th year. The loan shall bear interest at a rate of two percent (2%). The agreement is secured by a deed of trust on the property. Accrued interest on the note through June 30, 2022 is $458,556. The balance of the loan outstanding at June 30, 2022 was $4,290,531. Any unpaid balance is due and payable at the maturity date.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
24 NOTE 4 NOTES RECEIVABLE (CONTINUED)
G. Homebuyer Assistance Program
On July 17, 2012 the City Council and Housing Authority adopted Joint Resolution No. 2012-061 and HHA 2012-010 approving implementation of the Seller Mortgage Carryback Program (SMCP) that carried back a portion of the sale price of properties as a second mortgage loan and; the SMCP will enable the City and HHA to fund the amount needed to make the pu rchase price of single family residential prop erties affordable to households whose income is 50% AMI or below, in the form of a 30 -year deferred, zero interest b earing loan for an original amount of $428,554. The SMCP loan is secured by a second deed of trust on the property. Principal payments received are $86,949. At June 30, 2022, four of the five loans are outst anding with total balance of $341,605.
NOTE 5 RISK MANAGEMENT
The Authority, through the City of Hesperia, is a member of the Public Entity Risk Management Authority (PERMA), a joint powers authority for the purpose of achieving savings on insurance premiums. Disclosures regarding these policies are available in the City of Hesperia’s Annual Comprehensive Financial Report. 25 REQUIRED SUPPLEMENTARY INFORMATION
HESPERIA HOUSING AUTHORITY
BUDGETARY COMPARISON SCHEDULE
HESPERIA HOUSING AUTHORITY SPECIAL REVENUE FUND
YEAR ENDED JUNE 30, 2022
See accompanying Note to Required Supplementary Information. 26 Variance with
Original Final Actual Final Budget
FUND BALANCE - BEGINNING OF YEAR 10,372,805$ 10,372,805$ 10,372,805$ -$
RESOURCES (INFLOWS)
Use of Money and Property 49,120 49,120 (12,101) (61,221) Other Revenues 93,178 381,178 178,628 (202,550) Amount Available for
Appropriations 142,298 430,298 166,527 (263,771)
CHARGES TO APPROPRIATIONS
(OUTFLOWS)
Current:
Development Services 66,650 372,238 372,133 105 Total Charges to Appropriations 66,650 372,238 372,133 105
EXCESS OF RESOURCES
OVER/(UNDER) CHARGES TO
APPROPRIATIONS 75,648 58,060 (205,606) (263,666) FUND BALANCE - END OF YEAR 10,448,453$ 10,430,865$ 10,167,199$ $ (263,666) Budgeted Amounts
HESPERIA HOUSING AUTHORITY
BUDGETARY COMPARISON SCHEDULE
VVEDA HOUSING AUTHORITY SPECIAL REVENUE FUND –
YEAR ENDED JUNE 30, 2022
See accompanying Note to Required Supplementary Information. 27 Variance with
Original Final Actual Final Budget
FUND BALANCE - BEGINNING OF YEAR 1,820,137$ 1,820,137$ 1,820,137$ -$
RESOURCES (INFLOWS)
Use of Money and Property 10,000 10,000 (16,511) (26,511) FUND BALANCE - END OF YEAR 1,830,137$ 1,830,137$ 1,803,626$ $ (26,511) Budgeted Amounts
HESPERIA HOUSING AUTHORITY
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2022
28 NOTE 1 BUDGETARY DATA
In conjunction with the City of Hesperia’s budgeting process, the Authority adopts annual operating budgets for the governmental funds each year. The Authority’s Board approves each year's budget submitted by the City Manager prior to the beginning of the new fiscal year. The Board conducts public hearings prior to its adoption. Supplemental appropriations, when required during the period, are also approved by the Board. Increases in annual expenditures require approval by the Board. Interdepartmental budget changes are approved by the City Manager. In most cases, expenditures may not exceed appropriations at the fund level for each fund. At fiscal year-end, all operating budget appropriations lapse.
However, encumbrances at year-end are reported as reservations of fund balance. Budgets for the governmental funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America.