HESPERIA HOUSING AUTHORITY
COMPONENT UNIT
FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2023
Attachment 1
HESPERIA HOUSING AUTHORITY
TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2023
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
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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, 20 23, 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 abo ve present f airly, in all material respects, the financial position of the Authority, as of June 30, 2023, 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 applica ble to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are fur ther described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We a re 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 pre paration 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 mainte nance 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 aggregat e, 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.
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 t hat 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 resulti ng from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional om issions, misrepresentations, or the override of internal con trol.
Misstatements are considered material if there is a substantial likelihood t hat, ind ividually or in the aggregate, they would influence the judgment made by a reasonable user based on the fi nancial 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 th e risks of material misstatement of the financial statements, whether due to fraud or error, and d esign and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures 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 control. 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 a s 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 concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, sig nificant audit findings, and certain internal c ontrol 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 schedule s, be presented to supplement the basic financial statements. Such information 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 GAA S, 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 date d December 7, 2023 on our consideration of th e Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regula tions, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our tes ting of int ernal control over fina ncial 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 pa rt of an a udit performed in accor dance with Government Auditing Standards in considering the Authority’s internal control over f inancial reporting and compliance.
CliftonLarsonAllen LLP
Irvine, California
December 7, 2023
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, 2023. Please read it in conjunction with the accompanying basic financial statements.
FINANCIAL HIGHLIGHTS
During FY 2022-23, t he Auth ority’s net position increased by 4% or approximately $0.5 million from June 30, 2022. This is primarily due to an increase of $0.5 million in interest revenues received during the fiscal year ending June 20, 2023 , of which $0.4 million is related to interest income on notes receivable from loans made for low and moderate housing projects.
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 providi ng 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 statement s. 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 fi nances is, “Is the Authority as a whole better off or worse off as a result of this y ear’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 s howing 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). 5 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 activities or objectives. The Authority, like other state and local governments, uses fund accounting to ensure and demonstrate complia nce with finance-related legal requirements. The Authori ty 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 st atements, 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 t he information presented for governmental funds with similar information presented fo r 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 pr ovide additional informa tion 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 Pos ition (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.
2022 2023 Amount Percentage
Current and other assets 11,974,046 $ 12,467,590 $ 493,544 $ 4% Total assets 11,974,046 12,467,590 493,544 4% Total deferred outflow of resources - - - 0%
Current liabilities 107 5 (102) -95%
Total liabilities 107 5 (102) -95%
Total deferred inflow of resources - - - 0%
Net Position:
Restricted 11,973,939 12,467,585 493,646 4% Total Net Position 11,973,939 $ 12,467,585 $ 493,646 $ 4% Table 1
Condensed Statement of Net Position
Changes from 2022 to 2023
6 The following is a brief explanation for the changes in Table 1 above for the fiscal year ending June 30, 2023:
• Current and other assets in the amount of $12.5 million increased by $0.5 million from the year ending June 30, 2022. This is a result of a $0.5 million increase in interest income, of which $0.4 million is attributable to interest on notes receivable from loans made for low and moderate income housing projects.
• Current liabilities totaled $5 on June 30, 2023, which is a decrease of $ 102 and is primarily attributed to the timing of the payment of invoices.
• Total Net Position increase d by $0.5 million as a result of the changes to assets and liabilities discussed above.
AUTHORITY ACTIVITIES
As shown in Table 2, the Authority’s June 30, 2023, net position increased by approximately $0. 5 million. Total June 30, 2023 revenue of $ 0.6 million exceeds the Authority’s current year expenditures by $0.5 million, and is higher than June 30, 2022 revenue by $0.5 million. The year-over-year increase in revenue is a result of increased interest income, of which $0.4 million is related to interest on notes receivable from loans made for low and moderate income housing projects. Fiscal Year 2022 -23 expenditures of $ 153,628 are $ 225,199 less than the prior year ’s expenditures of $ 378,827. The decrease in expenditures is primarily related to a one-time $315,000 transfer out during FY 2021-22 to reimburse the Neighborhood Stabilization Grant fund for low moderate income housing expenses in excess of the grant allowance; this was offset by a FY 2022-23 market value loss of $90,000 in land held for resale.
2022 2023 Amount Percentage
Revenues
General revenues:
Income from money and property (28,612)$ 486,379 $ 514,991 $ 1800% Other 178,628 160,895 (17,733) -10%
Total revenues 150,016 647,274 497,258 331% Expenses
Development Services 378,827 153,628 (225,199) -59% Total expenses 378,827 153,628 (225,199) -59% Change in net position (228,811) 493,646 722,457 316% Net position at July 1 12,202,750 11,973,939 (228,811) -2% Net position at June 30 11,973,939 $ 12,467,585 $ 493,646 $ 4% Changes from 2022 to 2023
Table 2
Changes in Net Position
7 FINANCIAL ANALYSIS OF THE AUTHORITY’S FUNDS
At year-end, the Authority’s governmental funds reported combined fund balances of $12.5 million. • The fund balance of the Hesperia Housing Authority Fund is $10.6 million, which is restricted for low and moderate income housing functions. The Fund balance has increased by $ 0.4 million from June 30, 20 22, a result of increased interest revenue, of which $0.4 million is related to interest income on notes receivable from loans made for low and moderate income housing projects. • The Victor Valley Economic Development Agency (VVEDA) Housing Authority Fund balance is $1.9 million, which is relatively unchanged from June 30, 2022, having received $36,667 in interest earnings on cash balances . It should be noted that VVEDA funds m ust be utilized for low and moderate income housing functions in the VVEDA target area.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
In Fiscal Year 2023-24, the Authority’s budget anticipates revenues of $0.2 million, which will be offset by expenditures of approximately $0.1 million to maintain current operations.
CONTACTING THE AUTHORITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, t axpayers, customers, and creditors with a general overview of the Authority’s finances and to show the Authority’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Authority’s Finance Department, at the City of Hesp eria, 9700 Seventh Avenue, Hesperia, California 92345.
8 FINANCIAL STATEMENTS
HESPERIA HOUSING AUTHORITY
STATEMENT OF NET POSITION
JUNE 30, 2023
See accompanying Notes to Financial Statements.
9 ASSETS
Current Assets:
Cash and Cash Equivalents 5,644,521$
Receivables:
Accrued Interest 43,007
Due from City of Hesperia 115
Land Held for Resale 6,779,947
Total Current Assets 12,467,590
Noncurrent Assets:
Notes Receivable 22,703,860
Allowance for Notes Receivable (22,703,860)
Total Noncurrent Assets -
Total Assets 12,467,590
LIABILITIES
Current Liabilities:
Accounts Payable and Other Current Liabilities 5
Total Current Liabilities 5
NET POSITION
Restricted for Low Income Housing 12,467,585
Total Net Position 12,467,585$
Governmental
Activities
HESPERIA HOUSING AUTHORITY
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2023
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 153,628$ -$ -$ $
- $
(153,628)
Total Governmental Activities 153,628$ -$ -$ $ - (153,628)
GENERAL REVENUES
Income from Money and Property 486,379
Other 160,895
Total General Revenues 647,274
CHANGE IN NET POSITION 493,646
Net Position - Beginning of Year 11,973,939
NET POSITION - END OF YEAR 12,467,585$
Program Revenues
- $
HESPERIA HOUSING AUTHORITY
BALANCE SHEET
GOVERNMENTAL FUNDS
JUNE 30, 2023
See accompanying Notes to Financial Statements.
11 Hesperia VVEDA Total Housing
Housing Housing Authority
Authority Authority Funds
ASSETS
Cash and Cash Equivalents 3,818,160$ 1,826,361$ 5,644,521$ Due from City of Hesperia 115 - 115
Accrued Interest 29,075 13,932 43,007
Notes Receivable 22,703,860
Allowance for Notes Receivable (22,703,860)
Land Held for Resale 6,779,947
22,703,860
(22,703,860)
6,779,947
Total Assets 10,627,297$ 1,840,293$ 12,467,590$
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable and Other Current Liabilities 5$ -$ 5$ Total Liabilities 5
-
5 FUND BALANCES
Restricted:
Low Income Housing 10,627,292 1,840,293 12,467,585 Total Liabilities and Fund Balances 10,627,297$ 1,840,293$ 12,467,590$ -
-
-
HESPERIA HOUSING AUTHORITY
RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION
GOVERNMENTAL FUNDS
JUNE 30, 2023
See accompanying Notes to Financial Statements.
12 Total Fund Balances - Governmental Funds 12,467,585$ There are no reconciling items.
Total Net Position 12,467,585$
HESPERIA HOUSING AUTHORITY
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30, 2023
See accompanying Notes to Financial Statements.
13 Hesperia VVEDA Total Housing
Housing Housing Authority
Authority Authority Funds
REVENUES
Use of Money and Property 449,712$ 36,667$ 486,379$ Other Revenues 160,895 - 160,895
Total Revenues 610,607 36,667 647,274
EXPENDITURES
Current:
Development Services 150,514 - 150,514
Total Expenditures 150,514 - 150,514
DEFICIENCY OF REVENUES
UNDER EXPENDITURES 460,093 36,667 496,760
Fund Balances - Beginning of Year 10,167,199 1,803,626 11,970,825 FUND BALANCES - END OF YEAR 10,627,292$ 1,840,293$ 12,467,585$
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, 2023
See accompanying Notes to Financial Statements.
14 Net Change in Fund Balances - Total Governmental Funds 496,760$ 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. (3,114) Change in Net Position of Governmental Activities 493,646$
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
15 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity
The Hesperia Housing Authority (Authority), which is a subsidiary component un it 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 the dissolution of the former Hesperia Community Redevelopment Agency occurred on February 1, 2012.
The Authority develops, manages, and prom otes programs an d projects that preserve and improve the supply of affordable housing in the City for low and moderate income persons.
B. Basis of Presentation
The acco unting polic ies of the Authority con form to accounting principles generally accepted in the United Stat es of America as they are applicable to governmental units.
The Govern mental Accounting Standards Bo ard (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles.
The more signi ficant accountin g po licies refle cted in the financial statements are summarized as follows:
Government-Wide Financial Statements
The government -wide fi nancial statement s (i.e., the statement of net positi on and the statement of activities) report information on all of th e 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 suppo rted by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent o n fees and cha rges for support. The Authority has no business-type activities.
The statement of activities demonstrate s the degree to which the direct expenses of a given function are o ffset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers who pur chase, use, or directly benefit from goods, services, or privileges provided by a given fun ction and 2) gra nts and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not prop erly included among prog ram revenues are reported instead as general revenues.
Governmental Fund Financial Statements
The accounting s ystem 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 o f self-balancing accounts that constitute its assets, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures.
Governmental resources are a llocated to and accounted for in indiv idual funds based upon the purposes 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, 2023
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 informat ion 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, ex ternal resource p roviders, or through enabling legislation.
In the governmental fund statements, when e xpenditures 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 A uthority Fund is used to account for Low and Moderate H ousing activity. The fund balance is set aside to provide for future low and mode rate income housing.
Victor Valley Economic Development Authority (VVEDA) Housing Authority Fund is used to account for Low and Moderate Housing activity within the VVEDA pro ject 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 governm ent-wide statement of net position and the statement of activities, activities are presented using the economic resour ces measurement f ocus. Under the economic resources m easurement focus, all (both current and lo ng-term) economic resources and obligations of the government are reported.
In the fund financial statements, all governmental funds are accounted for on a spending or “financial flow” measurement focus. This means that o nly current assets and current liabilities are generally in cluded on their balance sheets. Their reported fund balances (net curr ent assets) are considered a mea sure of “available spendable resou rces”.
Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a su mmary of sources and uses of available spendable resources during a period.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
17 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus (Continued)
Because of their s pending meas urement focus, expenditure recognition for governmental fund types ex cludes amounts re presented by noncurrent liabilities. Since they do not affect n et current assets, such long-term amount s are not recognized as governmental fund type expenditures or fund liabilities.
Amounts expended to acquire capital assets are recorde d as expenditures in the year that resources were exp ended, rather than as a fun d asset. The proceeds of long -term debt are recorded as other financing sources rather than as a fund liabi lity. 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 amount consists of capita l assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction or improv ement of the assets. The Authority has no capital assets.
• Restricted net position – This amount is restr icted by external creditors, gran tors, contributors, or laws or regulations of other governments. • Unrestricted net p osition – This amount is the net position that do es not meet the definition of “invest ment in capita l assets, net of related debt” or “restr icted net position”.
When both r estricted and unrestricted resources are combined in a fund, expenses are considered to be paid first f rom restricted resources, and then from unrestricted resources.
D. Basis of Accounting
Basis of accou nting refers to “w hen” transactions are recorded re gardless of the measurement focus applied.
In the governm ent-wide statement of net position and statement of activities, the governmental activities are pr esented using the accrual basis of ac counting. Under the accrual basis of accounting, revenues are r ecognized when earned and expenses are recorded when the liability is incurred or e conomic 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, 2023
18 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Basis of Accounting (Continued)
In the fund financial statements, go vernmental funds are presented using the modified-accrual basis of accounting. Their revenues are recognized when they become measurable and avail able as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available m eans 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 a vailability criteria for the governmental fun ds 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 revenu es are recog nized as revenues in the period i n which the underlying exchange transaction upon which they are based takes place. Imposed nonexchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is n ot 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 applicabl e eligibility requirements have been met.
E. Cash and Investments
Investments ar e stated at fair value (quote d 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, 2023, 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 t hat 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 no tes 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, 2023
19 NOTE 1 REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. Capital Assets
Capital a ssets, which include equipment, are depreciated and are rep orted in the government-wide financial state ments. Authority policy has set the capit alization threshold for reporting capital assets at $5,000.
Capital as sets hav e an estimated useful life greate r than one year and are valued at historical cost or estima ted cost if actual histo rical cost is not available. Donated capital assets are recor ded 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 ch arged to operations using the straight -line method based on the estimated useful life of an asset ranging from 5 to 30 years. The Authority has no capital assets.
I. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will some times repor t a separate section for deferred outflows of re sources. This separate financial statemen t element, deferred outflows of resources, represents a consumption of net position t hat applies to a future period(s) and so will not be recogn ized as an o utflow of r esources (expense/expenditure) until then. The Authority does not have any type of these items at June 30, 2023.
In addition to liabi lities, the statement of net position will someti mes report a separate section for deferred inflows of resources. This separate fi nancial statement element, deferred inflows of resources, represents an acquisition of net po sition that applies to a future period(s) and so will not be recognized as an inflow of reso urces (revenue) until that time. The Authority does not have any type of these items at June 30, 2023.
J. Receivables
All acco unts, t axes, and service receivab les 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 liabilitie s and disclo sure of contingent assets and li abilities at the date of th e financial statements and the reported amounts of revenues and expen ses d uring the reporting period. Actual results could differ from those estimates.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
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 investments are maintained in an investment pool managed by the City. The Authority is a voluntary pa rticipant in that pool. This pool is gove rned 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 financial statements at amounts based upon the Authority’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 ac counting records maintained b y 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 below iden tifies the investment types that are authorized for the Authority by the Californi a Government Code (or the Authority’s investment p olicy, where more restrictive). The tab le also identifies certain provisions of the Cali fornia Government Code (or the Authority’s investment policy, where more restrictiv e) that address interest 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 Unlimited None
U.S. State or Local Agency Securities 5 Years Unlimited 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 Unlimited 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 equiv alents are pooled with t he City of Hesperia’s cash and investments. Additional disclosures regard ing the pool ed invest ments related to interest rate risk, c redit risk, custodial credit risk and fai r value measurements are available in the City of Hesperia’s Annual Comprehensive Financial Report.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
21 NOTE 3 NOTES RECEIVABLE
Notes receivable, totaling $22.7 million at June 30, 2023 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 rec eipts; therefore, the Authority has recorded an allowance for uncollectible for the outstanding balance of $22.7 million.
Notes receivable at June 30, 2023 include the following:
Outstanding Outstanding
June 30, 2022 Additions Deductions June 30, 2023
A. KDF VAH I, L.P. 3,227,098$ 29,000$ -$ 3,256,098$ B. KDF Hesperia, L.P. 1,937,663 24,458 - 1,962,121
C. KDF Hesperia II, L.P. 2,626,903 28,102 - 2,655,005
D. PDDC San Remo Hesperia, L.P. 4,435,634 39,557 (28,904) 4,446,287 E. PDDC San Remo Hesperia II, L.P. 6,062,884 55,757 (108,722) 6,009,919 F. Eagle Hesperia 55, L.P. 4,290,531 76,639 (334,345) 4,032,825 G. Homebuyer Assistance Program 341,605 - - 341,605
Totals 22,922,318$ 253,513$ $ (471,971) 22,703,860$ 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, constr uction and operation of a 68 -unit apartment complex of which certain units shall be available to very low income tenants, low income tenants, and moderate income tenants. Under the t erms of the OPA, the HCRA loaned $2,900,000 of its low and moderate income housing funds toward the actual cost for the development, construction, and opera tion 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 tru st on the property. Due to the dis solution of redevelopm ent agencies by AB 26x1, the Authority assum ed responsibility of the HCRA notes receivable. Accrued interest on the note throu gh June 30, 2023 is $ 356,098. The balance of the loan outstanding at June 30, 2023 was $3,256,098. Payments on the loan are based on a percentage of the Par tnership’s positive cash flow. Any unpaid balance is due and payable at the maturity date.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
22 NOTE 3 NOTES RECEIVABLE (CONTINUED)
B. KDF Hesperia, L.P.
In December 2005, the former HCRA entered into an OPA with KDF Hesperia, L.P. (a California limi ted partnership) for the development , construction and operation of a 110-unit apartment complex of which certai n units shall be available to very low inco me tenants, low income tenants, and moderate income te nants. Under the t erms of the OPA, the HCRA loaned $1,250,000 of its low and modera te income housing funds toward the actual cost for the development, construc tion, and operation of the project.
The loan is for a term of not more tha n 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, 2023 is $313,532. The bal ance of the loan o utstanding at June 30, 2023 was $1,962,121.
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 i nto an OPA with KDF Hespe ria II, L.P. (a California limited partnership) for the development, constr uction an d operation of a 72-unit apartment complex of which certain unit s shall be available to very low income tenants, low income tenants, and moderate i ncome 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 pro ject.
The loan is for a term of not more than 55 years and shall bear intere st at a rate of 1%.
The agreement is secured by a deed of tru st 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 Authority issued a loan of $270,07 0, with an interest rate of 3%, to assist with converting the construction loan to a permanent loan.
Accrued in terest on the combined n otes through June 30, 2023 is $384,935. The balance of the loan outstanding at June 30, 2023 was $2,655,005. 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, 2023
23 NOTE 3 NOTES RECEIVABLE (CONTINUED)
D. PDDC San Remo Hesperia, L.P.
On No vember 20 07, 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, construct ion, and operation of a 65 -unit apartment complex of which certain units sh all be av ailable to very low -income tenants and low -income tenants.
Under the terms of the OPA, t he HCRA loan ed $3,955,711 of its low and mo derate income ho using 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 secu red 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, 2023 is $490,576. The balance of the loan outstanding at June 30, 2023 was $4,446,287. 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 Rem o Hesperia II, L.P. (Palm Desert Development Company, a California limited partnership) for the d evelopment, construction, and operat ion of a 58-unit apartm ent co mplex of which cert ain 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 fun ds towa rd the actual cost for t he devel opment, construction, and operation of t he project. The loan is for a term of not more than 55 years and sh all 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 re ceivable. Accrued interest on the note through June 30, 2023 is $483,592 and principal and interest payments received are $1,377,143. The balance of the loan outstanding at June 30, 2023 was $6,009,919.
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 availabl e to low income senior citizens. Under the terms of the OPA, the Authority loaned $3,831,975 of its low and m oderate income housing funds tow ard 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, 2023 is $ 200,852. The balance of the l oan outstandi ng at June 30, 2023 was $4,032,825. Any unpaid balance is due and payable at the maturity date.
HESPERIA HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
24 NOTE 3 NOTES RECEIVABLE (CONTINUED)
G. Homebuyer Assistance Program
On July 17, 2012 the City Counci l and Housing A uthority adopted Joint Resolution No. 2012-061 and HHA 2012 -010 approving implementation of the S eller Mortgage Carryback Program (SMCP) that carried back a portion of the sale price of properties as a second m ortgage loan and; the SMCP wil l enable the City and HHA to fund the amount ne eded to make the purchase pri ce of single family residential properties affordable to households whose income is 50% AMI or below, in the form of a 30-year deferred, zero interest bearing loan for an original amount of $428,554. The SMCP loan is secure d by a second deed of trust on th e property. Principal payments received to date are $86,949. At June 30, 2023, four of the five loans are outstanding with t otal balance of $341,605.
NOTE 4 RISK MANAGEMENT
The Authority, through the City o f Hesperia, is a member of the P ublic Entity Risk Management Authority (PERMA), a joint powers auth ority for the purpose of achieving savings on insurance premiums. Disclosures regarding these po licies are available in the City of Hesperia’s Annual Comprehensive Financial Report. 25 REQUIRED SUPPLEMENTARY INFORMATION
HESPERIA HOUSING AUTHORITY
BUDGETARY COMPARISON SCHEDULE
HESPERIA HOUSING AUTHORITY SPECIAL REVENUE FUND
YEAR ENDED JUNE 30, 2023
See accompanying Note to Required Supplementary Information. 26 Variance with
Original Final Actual Final Budget
FUND BALANCE - BEGINNING OF YEAR 10,167,199$ 10,167,199$ 10,167,199$ -$
RESOURCES (INFLOWS)
Use of Money and Property 23,832 23,832 449,712 425,880 Other Revenues 94,084 94,084 160,895 66,811
Amount Available for
Appropriations 117,916 117,916 610,607 492,691
CHARGES TO APPROPRIATIONS
(OUTFLOWS)
Current:
Development Services 72,586 150,514 150,514 -
Total Charges to Appropriations 72,586 150,514 150,514 -
EXCESS OF RESOURCES
OVER CHARGES TO
APPROPRIATIONS 45,330 (32,598) 460,093 492,691
FUND BALANCE - END OF YEAR 10,212,529$ 10,134,601$ 10,627,292$ 492,691$ Budgeted Amounts
HESPERIA HOUSING AUTHORITY
BUDGETARY COMPARISON SCHEDULE
VVEDA HOUSING AUTHORITY SPECIAL REVENUE FUND –
YEAR ENDED JUNE 30, 2023
See accompanying Note to Required Supplementary Information. 27 Variance with
Original Final Actual Final Budget
FUND BALANCE - BEGINNING OF YEAR 1,803,626$ 1,803,626$ 1,803,626$ -$
RESOURCES (INFLOWS)
Use of Money and Property 3,500 3,500 36,667 33,167
FUND BALANCE - END OF YEAR 1,807,126$ 1,807,126$ 1,840,293$ 33,167$ Budgeted Amounts
HESPERIA HOUSING AUTHORITY
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2023
28 NOTE 1 BUDGETARY DATA
In conjunction with the City of Hesperia’s budgeting process, the Authorit y adopts annual operating budgets for t he governmental funds e ach year. The Authority’s Board approves each year's budge t submitted by th e City Manag er prior to the beginning of the new fiscal year. The Board conducts public hearings prior to its adoption. Supplemental appropriations, when requ ired during the period, are also approved by the Board. Increases in a nnual expenditures require a pproval by t he Board. I nterdepartmental budget changes are approved by the City Manager. In most cases, expenditures ma y 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.