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INDEPENDE
NT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council
City of Orange, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Housing Successor special revenue fund of the City of Orange, California (the “City”), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Fund’s basic financial statements, and have issued our report thereon dated March 3,2025.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over the Fund’s financial reporting (internal control) as a basis fo r designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatem ent of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal co ntrol that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Fund’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, including the requirements of California Heal th and Safety Code Applicable to California Housing Successor Agencies, noncompliance with which could have a direct and material effect on the financial statements.
However, providing an opinion on compliance with thos e provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
To the Honorable Mayor and Members of the City Council
City of Orange, California
Purpose of This Report
The purpose of this report is solely to describe the sc ope of our testing of internal control and compliance and the results of that testing, and not to pr ovide an opinion on the effectiveness of t he Successor’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Successor’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
March 3, 2025
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CITY OF ORANGE HOUSING SUCCESSOR
ORANGE, CALIFORNIA
Financial Statements
For the Year Ended June 30, 2024
PREPARED BY: FINANCE DEPARTMENT
CITY OF ORANGE HOUSING SUCCESSOR
ORANGE, CALIFORNIA
Financial Statements
For the Year Ended June 30, 2024
Table of Contents
Page
Number
INDEPENDE
NT AUDITORS’ REPORT
Financial Audit ..................................................................................................................................................... 1 Compliance Audit ................................................................................................................................................ 4
BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements:
Statement of Net Position .................................................................................................................................. 6 Statement of Activities ......................................................................................................................................... 7 Fund Financial Statements:
Balance Sheet – Governmental Funds ............................................................................................................. 8 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position........................................................................................................................ 9 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Fund ......................................................................................................................... 10 Reconciliation of the Statement of Revenues, Expenses and Changes in Fund Balances of Governmental Funds to the Statement of Activities .......................................................... 11 Notes to the Financial Statements .................................................................................................................... 12
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget to Actual .............................................................................................................................................. 17 Notes to the Required Supplementary Information ........................................................................................... 18
OTHER SUPPLEMENTARY INFORMATION
Computation of Low and Moderate Income Housing Funds Excess/Surplus ................................................... 19
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INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
City of Orange, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, and the major fund of the Housing Successor special revenue fund (the “Fund”) of the City of Orange, California (the “City”), as of and for the year ended June 30, 2024, and the related notes to the 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 Fund of the City, as of June 30, 2024, and the changes in its financ ial position 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 and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Our responsibilitie s under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical respon sibilities, 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.
Emphasis of Matter
As discussed in Note 1, the financial statements present on ly the Fund and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2024, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance wit h accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
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.
Auditor’s 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 auditor’s 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 generally accepted au diting standards 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.
1 To the Honorable Mayor and Members of the City Council City of Orange, California
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
x Exercise professional judgment and maintain pr ofessional skepticism throughout the audit. x Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures respon sive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. x 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 City’s internal control. Accordingly, no such opinion is expressed. x Evaluate the appropriateness of accounting policies us ed and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
We are required to communicate with those charged 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 princ
iples generally accepted in the United States of America requ ire that the budgetary comparison information, as listed on the table of contents, 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 his torical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the informat ion 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.
Management has omitted management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial st atements, is required by t he 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. Our opinion on the basic financial statements is not affected by this missing information.
Supplementary Information
Our audit was conducted for the purpose
of forming opinions on the financial statements that collectively comprise the Fund’s basic financial statements. The accompanying Computation of Excess/Surplus is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and r elates directly to the underlying accounting and other records used to prepare the basic financial statemen ts. The information has been subjected to the auditing procedures applied in the audit of the basic financial st atements and certain additio nal procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards g enerally accepted in the United States of America. In our opinion, the Computation of Excess/Surplus is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
2 To the Honorable Mayor and Members of the City Council City of Orange, California
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 3,2025, on our consideration of the City’s internal control over the Fund’s financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and gr ant 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 pr ovide an opinion on the effectiveness of the City ’s internal control over the Fund’s financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City ’s internal control over the Fund’s financial reporting and compliance.
Irvine, California
March 3, 2025
3 INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE
AND ON INTERNAL CONTROL OVER COMPLIANCE
To the Honorable Mayor and Members of the City Council
City of Orange, California
Report on Compliance
Opinion
We have audited the City of Orange, California (the “City”)’s compliance with the types of compliance requirements identified as subject to audit in the California Health and Safety Code sections applicable to the California Housing Successor Agencies (the “HSC”) that could have a direct and material effect on the City’s Low-Moderate Income Housing Program (the “Program”) for the year ended June 30, 2024.
In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the Program for the year ended June 30, 2024.
Basis for Opinion
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of the HSC. Our responsibilities under those standards and the HSC are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with 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 opinion on compliance for the Program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Program.
Auditor’s Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. 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 generally accepted auditing standards, Government Auditing Standards, and the HSC will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of the Program as a whole.
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4 To the Honorable Mayor and Members of the City Council City of Orange, California
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the HSC, we:
x Exercise professional judgment and maintain professional skepticism throughout the audit. x Identify and assess the risks of material noncompliance, 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 City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. x Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and repo rt on internal control over compliance in accordance with the HSC, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Report on Internal Control over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of the Program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of the Program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of the Program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the HSC. Accordingly, this report is not suitable for any other purpose.
Irvine, California
March 3, 2025
5 CITY OF ORANGE, CALIFORNIA
Housing Successor
Statement of Net Position
Governmental
Activities
ASSETS
Cash and investments 946,831$
Receivables (net of uncollectibles):
Accounts 2,501
Accrued i
nterest 7,269
N
otes and loans 28,921,145
Total assets 29,877,746
DEFERRED OUTFLOWS OF RESOURCES
Pension-related 113,891
OPEB-related 26,122
Total deferred outflows of resources 140,013
LIABILITIES
Accounts payable 11,906
Noncurrent liabilities:
Due in more than one year:
Net pension liability 89,913
Net OPEB liability 117,182
Total liabilities 219,001
DEFERRED INFLOWS OF RESOURCES
Pension-related 3,642
OPEB-related 53,885
Total deferred inflows of resources 57,527
NET POSITION
Restricted for housing 29,741,231
Total net position 29,741,231$
June 30, 2024
See accompanying notes to the financial statements.
6 CITY OF ORANGE, CALIFORNIA
HOUSING SUCCESSOR
Statement of Activities
For the Year Ended June 30, 2024
Operating Capital
Charges for Contributions Contributions Governmental
Expenses Services and Grants and Grants Activities
Functions/Programs:
Primary government:
Governmental activities:
General government 56,553$ -$ -$ -$ (56,553)$ Community development 228,286 - - - (228,286) Economic development 37,884 - - - (37,884) Total governmental activities 322,723$ -$ -$ -$ (322,723)$ General revenues:
General revenues:
Use of money and property 242,751
Other 12,531,973
Total general revenues 12,774,724
Change in net position 12,452,001
Net position-beginning 17,289,230
Net position-ending 29,741,231$
Program Revenues
Net (Expenses)
Revenues and
Changes in Net
Position
See accompanying notes to the financial statements.
7 CITY OF ORANGE, CALIFORNIA
HOUSING SUCCESSOR
Balance Sheet
Governmental Fund
June 30, 2024
ASSETS
Cash and investments 946,831$
Receivables (net of allowance for uncollectible):
Accounts 2,501
Accrued interest 7,269
Notes and loans 28,921,145
Total assets 29,877,746$
LIABILITIES
Accounts payable 11,906$
Total liabilities 11,906
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues 1,250,000
Total deferred inflows of resources 1,250,000
FUND BALANCE
Restricted for housing 28,615,840
Total fund balance 28,615,840
Total liabilities, deferred inflows of resources,
and fund balance 29,877,746$
See accompanying notes to financial statements.
8 HOUSING SUCCESSOR
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
June 30, 2024
Amounts reported for governmental activities in the Statement of Net Position are different because:
Total fund balances - governmental funds 28,615,840$
Deferred outflows-pension related 113,891
Deferred outflows-OPEB related 26,122
Deferred inflows-pension related (3,642)
Deferred inflows-OPEB related (53,885)
Total deferred outflows and inflows related to postretirement benefits 82,486 Long-term receivables 1,250,000
Total other long-term assets 1,250,000
Net pension liability (89,913)
Net OPEB liability (117,182)
Total long-term liabilities (207,095)
Net position of governmental activities 29,741,231$
Long-term liabilities that are not due and payable in the current period, and therefore, are not reported in the funds.
CITY OF ORANGE, CALIFORNIA
Differences between expected and actual experiences, assumption changes and net differences between projected and actual earnings, and contributions subsequent to the measurement date for the postretirement ben efits (pension and OPEB) are recognized as deferred outflows of resources and deferred inflows of resources on the Statement of Net Position.
Other long-term assets that are not available to pay for current period expenditures and, therefore, are either labeled unavailable or not reported in the funds.
See accompanying notes to the financial statements.
9 CITY OF ORANGE, CALIFORNIA
HOUSING SUCCESSOR
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Fund
For the Year Ended June 30, 2024
REVENUES
Use of money and property 242,751$
Miscellaneous 12,531,973
Total revenues 12,774,724
EXPENDITURES
Current:
General government 27,178
Community development 151,415
Economic development 30,051
Total expenditures 208,644
Net change in fund balances 12,566,080
Fund balance-beginning 16,049,760
Fund balance-ending 28,615,840$
See accompanying notes to financial statements.
10 HOUSING SUCCESSOR
Reconciliation of the Statement of Revenues, Expenses and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2024
Amounts reported for governmental activities in the Statement of Activities are different because:
Net change in fund balances - total governmental funds: 12,566,080$ Changes in pension liabilities and related deferred outflows and inflows of resources 18,938 Changes in OPEB liabilities and related deferred outflows and inflows of resources (133,017) Total adjustment (114,079)
Change in net position of governmental activities 12,452,001$ Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds.
CITY OF ORANGE, CALIFORNIA
See accompanying notes to the financial statements.
11 CITY OF ORANGE HOUSING SUCCESSOR
Notes to Financial Statements
For the Year Ended June 30, 2024
NO
TE 1: SIGNIFICANT ACCOUNTING POLICIES
A.
Financial Reporting Entity
The Orang
e Successor Housing Agency (Housing Successor) was established on February 1, 2012, pursuant to the dissolution of the former Redevelopment Agency. Prior to that, the activities were accounted for in the Redevelopment Agency Housing Fund. The City Council became the governing board of the Housing Successor.
The Housing Successor was formed for purposes of construction and management of quality affordable housing within the City.
The Housing Successor is controlled by the City of Orange (City) and, accordingly, the accompanying fund financial statements are included as a special revenue fund of the basic financial statements prepared by the City.
The accompanying financial statements are intended to reflect the financial position of operations for the Housing Successor Fund only and do not purport to, and do not, present the financial position of the City of Orange, California. Separate financial statements are prepared for the City of Orange, and may be obtained from the City.
B.
Basis of Presentation
The
Housing Successor’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America.
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the fund. The Housing Successor has no fiduciary activities.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direc t expenses are those that are clearl y identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
While separate government-wide and fund financial statements are presented, they are interrelated.
C.
Measurement Focus, Basis of Accounting and Financial Statement Presentation The g
overnment-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long term) economic resources and obligations are included in the accompanying Statement of Net Position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the current financial resources measurement focus, only current assets and liabilities are generally included on the balance sheet. Under the modified accrual basis of accounting, revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Housing Successor considers revenues relating to grants to be available if they are collected within 120 days of the end of the current fiscal period, and within 60 days for all other revenues.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting.
Use of money and property is considered to be measurable and available only when cash is received by the government.
12 CITY OF ORANGE HOUSING SUCCESSOR
Notes to Financial Statements
For the Year Ended June 30, 2024
NO
TE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D.
Assets, Liabilities and Net Position or Equity
Ca
sh and Investments
Investments are reported in the accompanying financial statements at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Changes in fair value that occur during a fiscal year are recognized as use of money and property for that fiscal year. Use of money and property includes interest earnings, changes in fair value (realized/unrealized), gains or losses realized upon the liquidation, maturity, or sale of investments, and rental income.
Cash and investments are pooled with other City of Orange funds for investment purposes, with interest being allocated monthly to various funds based on each fund’s prior month-end cash and investment balance. Interest income for cash and investments excluded from pooled cash is credited directly to the related funds. Investment policies applicable to all the Housing Successor’s funds are those of the City of Orange and are included in the notes to the City’s basic financial statements.
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 and will not be recognized as an outflow of resources (expense/expenditure) until that time. The Housing Successor has items related to the pension and OPEB plans that qualify for reporting in this category.
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 of inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The Housing Successor has items related to the pension and OPEB plans that qualify for reporting in this category.
Net Position Flow Assumption
Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Housing Successor’s policy to consider restricted net position to have been depleted before unrestricted net position is applied.
Fund Balance Flow Assumptions
Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the Housing Successor’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.
13 CITY OF ORANGE HOUSING SUCCESSOR
Notes to Financial Statements
For the Year Ended June 30, 2024
NO
TE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fund Equity
In the fund financial statements, government funds report the following fund balance classification:
Non-spendable include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.
Restricted include amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors, or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation.
Committed include amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority, the City Council. The formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution. The Housing Successor did not have any committed fund balance as of June 30, 2024.
Assigned include amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed. The Housing Successor did not have any assigned fund balance as of June 30, 2024.
Unassigned include the residual amounts that have not been restricted, committed, or assigned to specific purposes.
Use of Estimates
The preparation of basic financial statements in conformity with accounting principles generally accepted in the United State
s of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and deferred inflow/outflows of resources at the reporting date and revenue and expenses during the reporting period. Actual results could differ from those estimates.
Loans Receivable
Non
-current portions of long-term receivables due are reported on the Governmental and Government-wide financial statements. For loans that have a forgiveness component and/or repayment term greater than that of conventional loans, an allowance is recorded to more accurately present the net present value of these receivables.
NOTE 2: CASH AND INVESTMENTS
As of Jun
e 30, 2024, cash and investments were reported in the accompanying financial statements as follows:
Equity in City Investment pool $ 946,831
Total cash and investments $ 946,831
A.
Equity in the Cash and Investment Pool of the City of Orange The
Housing Successor has no separate bank accounts or investments other than its equity in the cash and investment pool managed by the City of Orange. The Housing Successor 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 of Orange. The Housing Successor has not adopted an investment policy separate from that of the City of Orange. The fair value of the Housing Successor’s investment in the pool is reported in the accompanying financial statements at amounts based upon the Housing Successor’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 at the estimated fair value. 14 CITY OF ORANGE HOUSING SUCCESSOR
Notes to Financial Statements
For the Year Ended June 30, 2024
NOT
E 2: CASH AND INVESTMENTS (CONTINUED)
B.
Disclosures Relating to the Investment Policy, Interest Rate Risk and Custodial Credit Risk Additional di
sclosures related to the investment policy, interest rate risk, credit risk and custodial credit risk are available in the City of Orange’s Annual Comprehensive Financial Report.
C.
Fair Value Measurements
The Ho
using Successor categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the relative inputs used to measure the fair value of the investments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The Housing Successor’s investment in the City investment pool is not subject to the fair value hierarchy.
NOTE 3: NOTES AND LOANS RECEIVABLE
With the dissolution of the Redevelopment Agency effective February 1, 2012, the City Council adopted a resolution authorizing the City of Orange to become the Housing Successor and enabling the City to retain housing assets and functions of the Redevelopment Agency. The Housing Successor provides housing loans for the rehabilitation and expansion of housing for low and moderate-income families in the City. Housing rehabilitation loans are for the purpose of rehabilitation and upgrading existing housing due to structural deficiencies. Housing loans also assist in the construction of new multi-family housing projects or rehabilitation of existing multi-family units. The balance of the loan at June 30, 2024, net of allowance for loan forgiveness, is $28,921,145.
Additionally, the former Redevelopment Agency issued several promissory notes, pursuant to and in implementation of the “Affordable Housing Resale Restrictions Option to Designate Eligible Purchaser with Alternative Option to Purchase and Option to Purchase upon Default.” These notes do not actually represent cash paid to the borrowers, but represent the subsidy constructively received by the borrower as a result of borrowers’ purchase of the property at a price below its fair market value. No repayment of these notes is due by the borrower until the Affordable Term of the loan date (45 years commencing from the loan date), or upon default, as described in the note. As of June 30, 2024, the outstanding amount for these loans was $378,668. Due to the length of the deferral and the uncertainty of prepayment on these loans, an allowance has been recorded for the full amount of the loan receivable.
On December 21, 2022, the City entered into Financing Agreements that provided the Developer of the Villa St. Joseph Affordable Housing Project for the acquisition and development of forty-nine (49) affordable rental housing units for Extremely Low Income, Very Low Income, Low Income Senior Citizen Households, and one (1) manager’s unit located at 480 South Batavia Street in the City of Orange, while maintaining compliance with the affordable housing requirements. The Financing Agreements provided for City Loans from various funds, which included $576,000 from the Housing Successor Fund. The loan balance is $458,696 at June 30, 2024. Due to the length of the deferral and the uncertainty of prepayment on these loans, an allowance has been recorded for the full amount of the loan receivable.
On January 23, 2024, the City entered into a Financing Agreement that provided the Developer of 1800 E. La Veta Avenue in the City of Orange for the development and operation of one hundred sixty-four (164) affordable rental housing units for Extremely Low Income and Lower Income Senior Citizen Households, and two (2) ma
nager’s units. The Financing Agreement provided for a City loan from the Housing Successor Fun d in the amount of $2,200,00
0. The loan balance is $1,980,000 at June 30, 2024. Due to the length of the deferral and the uncertaint
y of prepayment on these loans, an allowance has been recorded for the full amount of the loan receivable.
15 CITY OF ORANGE HOUSING SUCCESSOR
Notes to Financial Statements
For the Year Ended June 30, 2024
NO
TE 4: RETIREMENT PLAN
A.
Plan Description, Benefits Provided and Employees Covered The City contributes to the California Pu
blic Employees' Retirement System (CalPERS), an agent multiple-employer public employee defined benefit pension plan (the Plan). CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and their beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and memoranda of understanding with employee bargaining units. A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the CalPERS June 30, 2016 Annual Actuarial Valuation Report. Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website under Employers. Additional information can be found in the City’s Comprehensive Annual Financial Report for the Year Ended June 30, 2024.
The Plan provides benefits for two membership classifications, Miscellaneous and Safety, and those benefits are tiered based upon date of CalPERS membership. Safety membership is extended to those in active law enforcement and fire suppression, while all others are classified as Miscellaneous members. Assembly Bill (AB) 340, also known as the Public Employees’ Pension Reform Act (PEPRA), created new benefit formulas and a final compensation period as well as new contribution requirements for new employees. For the purpose of PEPRA, “new employees” are those hired on or after January 1, 2013 and had never been a member of CalPERS previously.
CalPERS refers to members prior to January 1, 2013, as Classic members.
Employees of the City of Orange Housing Successor are covered under the Miscellaneous Plan. Further details of the City of Orange Retirement Plans can be found in the City’s Annual Comprehensive Financial Report for the Year Ended June 30, 2024.
The City allocates a percentage of the GASB 68 net pension liability, deferred outflows, deferred inflows, and required supplementary information to the Housing Successor based on its pro rata share of the actual employer pension cost to the City.
NOTE 5: OTHER POST EMPLOYMENT BENEFITS (OPEB)
The City administers an Agent Multiple-Employer defined benefit post-employment healthcare plan for eligible City retirees and their dependents through the California Public Employees' Retirement System (CalPERS). Retirees from the City enrolled in the Public Employees Medical and Hospital Insurance Program (PEMHCA), a single-employer postemployment benefits plan through CalPERS, are eligible for these benefits. These health insurance benefits are authorized through City Resolutions/Memorandas of Understanding defining health care benefits and contribution levels and through the contractual agreement between the City and CalPERS. The City currently contributes $149 per month for each retiree and the retiree is responsible for the balance of the premium amount.
The City allocates a percentage of the GASB 75 OPEB total liability, deferred outflows and inflows, and required supplementary information to the Housing Successor based on its pro rata share determined by an actuarial valuation annually.
NOTE 6: SUBSEQUENT EVENT
In preparing these financial statements, the Housing Successor has evaluated events and transactions for potential recognition or disclosure through March 3, 2025, the date the financial statements were available to be issued. No events or transactions were identified that required recognition or disclosure. 16 Variance with
Final Budget
Budget Amounts Actual Positive
Original Final Amounts (Negative)
REVENUES
Use of money and property 85,341$ 85,341 $ 242,751 $ 157,410$ Miscellaneous - - 12,531,973 12,531,973
Total revenues 85,341 85,341 12,774,724 12,689,383
EXPENDITURES
Current:
General government 27,458 27,458 27,178 280 Community development 52,955 181,660 151,415 30,245 Economic development 32,242 2,808,242 30,051 2,778,191 Total expenditures 112,655 3,017,360 208,644 2,808,716 Net change in fund balance (27,314)$ (2,932,019)$ 12,566,080 15,498,099$ Fund balance-beginning 16,049,760
Fund balance-ending 28,615,840$
CITY OF ORANGE, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget to Actual For the Year Ended June 30, 2024
17 CITY OF ORANGE HOUSING SUCCESSOR
Notes to Required Supplementary Information
For the Year Ended June 30, 2024
Budg
etary Accounting
Annual budgets are adopted by July 1 of each year on a basis consistent with generally accepted accounting principles for all governmental funds. The budget is monitored to ensure compliance with legal provisions embodied in the appropriated budget as approved or amended by the City Council throughout the year. Department heads are responsible for monitoring their department’s appropriated budget.
Legal level of Control – The legal level of budgetary control is at the department level within each fund. Transfers of appropriations between funds, between departments within a fund, and between capital outlay or debt service and another object group classification within a department, require City Council approval. All other transfers of appropriations can be made with City management approval. 18 CITY OF ORANGE HOUSING SUCCESSOR
Computation of Low and Moderate Income Housing Funds
Excess/Surplus
Opening Fund Balance 28,615,840$
Less Unavailable Amounts:
Loans receivable (28,921,145)
(28,921,145)
Available Housing Successor Funds (305,305)
Limitation (greater of $1,000,000 or four years deposits) Aggregate amount deposited for last four years:
2023-2024 12,774,724$
2022-2023 650,408
2021-2022 81,742
2020-2021 1,030,623
Total 14,537,497$
Base Limitation 1,000,000$
Greater amount 14,537,497
Computed Excess/Surplus None A
A. No Excess Surplus was developed for fiscal year ended June 30, 2024. According to HSC 34176.1(d) if a housing successor has an excess surplus, the housing successor sha ll encumber the excess surplus for the purposes as described in 34176.1 paragraph (3) of subdivision (a), or transfer these funds pursuant to 3417 6.1 paragraph (2), within three fiscal years, currently by June 30, 2026. If the housing successor fails to comply within this subdivision, the housing successor, within 90 days of the end of the third fiscal year, shall transfer any excess surplus to the Department of Housing and Community Development for expenditure pursuant to the Mu ltifamily Housing Program or the Joe Serna Jr. Farmworker Housing Grant Program.
Low and Moderate
All Project Area
July 1, 2024
Housing Funds
19