DATE:
TO:
FROM:
CONTACT:
SUBJECT:
Summary:
AGENDA REPORT CityofPoway
June 6, 2023
Honorable Chairman and Members of the Housing Authority Robert Manis, Director of Development Services~
Marie Sanders, Senior Management Analyst J fJJ
(858) 668-4637 or [email protected] '1(t'
Poway Housing Successor Annual Report Fiscal Year 2021-22
CITY COUNCIL
Pursuant to California Health and Safety Code Sections 34176 and 34176.1 (f) (Dissolution Law), the Poway Housing Authority, in its capacity as Housing Successor to the dissolved Poway Redevelopment Agency, must prepare an annual report detailing its activities during each fiscal year. The Poway Housing Successor Annual Report for Fiscal Year 2021-22 (Attachment A), and the Poway Housing Authority Basic Financial Statements and Independent Auditors Report for the year ending June 30, 2022 (Attachment B), are included with this agenda report for review by the Poway Housing Authority Board. The Poway City Council also sits as the Poway Housing Authority Board.
Recommended Action:
It is recommended the Poway Housing Authority Board receive and file this report.
Discussion:
Part 1.85, Division 24 of the California Health and Safety Code, particularly Sections 34176 and 34176.1 (f), require that the Housing Successor provide an annual report of the Successor's activities during the prior fiscal year. The purpose of the report is to provide the governing body of the Housing Successor with an annual report on the housing assets and activities of the Housing Successor. The report is to be provided to the Poway Housing Authority Board, along with an independent financial audit of the Low- and Moderate-Income Housing Asset Fund (LMIHAF) within six months after the end of each fiscal year. Due to Poway's annual timing for completion of the Housing Authority audit, it is not possible for this report to be completed within the six-month period. However, there is no penalty for delayed submission of the report.
The Poway Housing Successor Annual Report for Fiscal Year 2021-22 indicates a balance in the LMIHAF of $5,152,809. LMIHAF monies can be spent to acquire, rehabilitate, acquire long term affordability covenants for, or preserve lower income housing (affordable to households earning 80 percent of median income or less). Additionally, funds may be used for program administration and monitoring as well as for homelessness prevention and rapid rehousing services. The source of funding for the LMIHAF is derived from the previous balance of Redevelopment financing, program income from operations, repayments of loans, and land sales.
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June 6, 2023, Item #11
Environmental Review:
This item is not subject to California Environmental Quality Act (CEQA) review.
Fiscal Impact:
There is no fiscal impact associated with this item.
Public Notification:
None.
Attachments:
A. Poway Housing Successor Annual Report for Fiscal Year 2021-22 B. Poway Housing Authority Basic Financial Statements and Independent Auditors Report for the year ended June 30, 2022
Reviewed/ Approved By:
Assistant City Manager
2 of 36
Reviewed By:
Alan Fenstermacher
City Attorney
Approved By:
ChtM#.
City Manager
June 6, 2023, Item #11
POWAY HOUSING SUCCESSOR ANNUAL REPORT
REGARDING THE LOW- AND MODERATE-INCOME HOUSING ASSET FUND FOR FISCAL YEAR 2021-2022
PURSUANT TO CALIFORNIA HEALTH AND SAFETY CODE SECTION 34176.1(f)
FOR THE POWAY HOUSING AUTHORITY
This Housing Successor Annual Report (Report) regarding the Low- and Moderate-Income Housing Asset Fund (LMIHAF) has been prepared pursuant to California Health and Safety Code Section 34176.1 (f) and is dated as of June 6, 2023. This Report sets forth certain details of the Poway Housing Authority, in its capacity as Housing Successor to the dissolved Poway Redevelopment Agency, activities during Fiscal Year 2021-22 (Fiscal Year) . The purpose of this Report is to provide the governing body of the Housing Successor an annual report on the housing assets and activities of the Housing Successor under Part 1.85, Division 24 of the California Health and Safety Code, in particular sections 34176 and 34176.1 (Dissolution Law).
The following Report is based upon information prepared by Housing Successor staff and information contained within the Poway Housing Authority Basic Financial Statements and Independent Auditor's Report for Fiscal Year 2021-22 as prepared by Davis Farr, LLP, which Audit is separate from this annual summary report ; further , this report conforms with and is organized into sections I. through XII., inclusive, pursuant to the Dissolution Law:
I. Amount Deposited into LMIHAF: This section provides the total amount of funds deposited into the LMIHAF during the Fiscal Year. Any amounts deposited for items listed on the Recognized Obligation Payment Schedule (ROPS) must be distinguished from the other amounts deposited.
II. Ending Balance of LMIHAF: This section provides a statement of the balance in the LMIHAF as of the close of the Fiscal Year. Any amounts deposited for items listed on the ROPS must be distinguished from the other amounts deposited.
Ill. Description of Expenditures from LMIHAF: This section provides a categorized description of the expenditures made from the LMIHAF during the Fiscal Year.
IV. Statutory Value of Assets Owned by Housing Successor: This section provides the statutory value of real property owned by the Housing Successor, the value of loans and grants receivables, and the sum of these two amounts.
V. Description of Transfers: This section describes transfers pursuant to Health and Safety Code Section 34176.1 (c)(2), if any, to another housing successor agency made in previous Fiscal Year(s), including whether the funds are unencumbered and the status of projects, if any, for which the transferred LMIHAF will be used. The sole purpose of the transfers must be for the development of transit priority projects, permanent supportive housing, housing for agricultural employees or special needs housing .
3 of 36 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2021 - 2022
ATTACHMENT A
June 6, 2023, Item #11
VI. Project Descriptions: This section describes any project for which the Housing Successor receives or holds property tax revenue pursuant to the ROPS and the status of that project.
VII. Status of Compliance with Section 33334.16: This section provides a status update on compliance with Section 33334.16 for interests in real property acquired by the former redevelopment agency prior to February 1, 2012. For interests in real property acquired on or after February 1, 2012, the Housing Successor must provide a status update on the project. The Poway Housing Successor has acquired two properties since February 1, 2012.
VIII. Description of Outstanding Obligations under Section 33413: This section describes the outstanding inclusionary and replacement housing obligations, if any, under Section 33413 that remained outstanding prior to dissolution of the former redevelopment agency as of February 1, 2012, along with the Housing Successor's progress in meeting those prior obligations, if any, of the former redevelopment agency and how the Housing Successor's plans to meet unmet obligations, if any.
IX. Income Test: This section provides the information required by Section 34176.1 (a)(3)(B), or a description of expenditures by income restriction for five-year period, with the time period beginning January 1, 2014, and whether the statutory thresholds have been met.
X. Senior Housing Test: This section provides the percentage of units of deed-restricted rental housing restricted to seniors and assisted individually or jointly by the Housing Successor, its former redevelopment Agency, and its host jurisdiction within the previous 10 years in relation to the aggregate number of units of deed-restricted rental housing assisted individually or jointly by the Housing Successor, its former Redevelopment Agency and its host jurisdiction within the same time period. For this Report, the ten-year period reviewed is January 1, 2012 to December 31, 2022.
XI. Excess Surplus Test: This section provides the amount of excess surplus in the LMIHAF, if any, and the length of time that the Housing Successor has had excess surplus, and the Housing Successor's plan for eliminating the excess surplus.
XII. Inventory of Homeownership Units: This section provides a summary of covenanted homeownership units assisted by the former redevelopment agency or the housing successor that are subject to covenants or restrictions or to an adopted program that protects the former redevelopment agency's investment of monies from the Low- and Moderate-Income Housing Fund pursuant to subdivision (f) of Section 33334.3. Inventory shall include the following: a) the number of those units; b) in the first report pursuant to this subdivision, the number of units lost to the portfolio after February 1, 2012, and the reason or reasons for those losses. For all subsequent reports, the number of the units lost to the portfolio in the last fiscal year and the reason for those losses; c) any funds returned to the housing successor as part of an adopted program that protects the former redevelopment agency's investment of moneys from the Low- and Moderate-Income Housing Fund; and d) whether the housing successor has contracted with any outside entity for the management of the units and, if so, the identity of the entity. 4 of36 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2021- 2022 June 6, 2023, Item #11
I. AMOUNT DEPOSITED INTO LMIHAF
A total of $1,841,652 was deposited into the LMIHAF during the Fiscal Year.
II. ENDING BALANCE OF LMIHAF
At the close of the Fiscal Year, the ending balance in the LMIHAF was $5,152,809 none of which is being held for items listed on the ROPS. This includes $5,201, 162 in cash and investments, and $427,743 in housing loans receivable, less $18,793 in liabilities. The $427,743 is due from the Successor Agency and represents the Housing Authority's 20% of the former Redevelopment Agency's loan balance, and repayment is subject to approval by the California Department of Finance.
Ill. DESCRIPTION OF EXPENDITURES FROM LMIHAF
The following is a description of expenditures from the LMIHAF by category:
Fiscal Year 2021-22
Monitoring & Administration Expenditures $9,925
Homeless Prevention & Rapid Rehousing Expenditures $0
Housing Development Expenditures $73,974
Total LMIHAF Expenditures in Fiscal Year $83,899
IV. STATUTORY VALUE OF ASSETS OWNED BY HOUSING SUCCESSOR Under the Dissolution Law and for purposes of this Report, the "statutory value of real property" means the value of properties formerly held by the former redevelopment agency as listed on the housing asset transfer schedule approved by the Department of Finance as listed in such schedule under Section 34176(a)(2), the value of the properties transferred to the Housing Successor pursuant to Section 34181 (f), and the purchase price of properties purchased by the Housing Successor. Further, the value of loans and grants receivable are included in these reported assets held in the LMIHAF. The following provides the statutory value of assets owned by the Housing Successor:
Fiscal Year 2021-22
Cash and Cash Equivalents $5,201,162
Accounts Receivable $10,290
Statutory Value of Real Property Owned by Housing A1:.1thority . $13,917,824 Value of Loans and Grants Receivable $427,743
Total Value of Housing Successor Assets $19,557,019
V. DESCRIPTION OF TRANSFERS
The Housing Successor did not make any LMIHAF transfers to other Housing Successor(s) under Section 34176.1 ( c)(2) during the Fiscal Year.
5 of 36 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2021- 2022 June 6, 2023, Item #11
VI. PROJECT DESCRIPTIONS
The Housing Successor did not receive and did not hold property tax revenue pursuant to the ROPS.
VII. STATUS OF COMPLIANCE WITH SECTION 33334.16
Section 34176.1 provides that Section 33334.16 does not apply to interests in real property acquired by the Housing Successor on or after February 1, 2012.
With respect to interests in real property acquired by the former redevelopment agency prior to February 1, 2012, and transferred to the Successor Agency pursuant to Health and Safety Code Section 34176, the time periods described in Section 33334.16 shall be deemed to have commenced on the date that the Department of Finance (DOF) approved the property as a housing asset on the Housing Asset Transfer Form; thus, as to real property acquired by the former redevelopment agency now held by the Housing Successor, the Housing Successor must initiate activities consistent with the development of the real property for the purpose for which it was acquired within five years of the date the DOF approved such property as a housing asset.
Poway 's Housing Assets Transfer Form was approved by the DOF on August 31 , 2012.
The following provides a status update on the real property housing assets that were ·acquired by the former redevelopment agency prior to February 1, 2012, and transferred to the Housing Successor on February 1, 2012, and compliance with the five-year period to commence development activities .
APN Street Address p~:~~:!e Size Status
27546061 1267 4 Monte Vista Rd 02/22/2000 2.06 Acres Housing Authority is currently negotiating an affordable
housing agreement and ground
lease with a developer to build
an affordable community for
developm~ntally disabled
adults and veterans.
32119028 Twin Peaks Rd 11/03/2004 2.15 Acres Vacant land. 31423026 13424 Scots Way 08/27/2002 0.70 Acres Vacant land. Due to access issues, development options
are still actively being
evaluated.
31421418 14048 Sycamore Ave 06/30/2005 0.32 Acres Vacant land. Development options are still being
evaluated.
31710151 Floodway adjacent to 08/27/2004 2.15 Acres Vacant land (remnant parcel & 52 the Solara Affordable from development of adjacent Housing Development Solara affordable housing
development). Property is in
the floodway and cannot be
develo ed.
6 of 36 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2021 - 2022 June 6, 2023, Item #11
The following provides a status update on real property housing assets that were acquired by the Housing Successor after February 1, 2012.
APN Street Address p~:!~:!e Size Status
31723222 12207 & 12237 Old 01/9/2018 1.07 Acres Future affordable housing site. & 36 Pomerado Road Funds for demolition of the site
are budgeted, awaiting
Housing Authority Board
a roval.
VIII. DESCRIPTION OF OUTSTANDING OBLIGATIONS PURSUANT TO SECTION 33413 Replacement Housing: According to the 2010-2014 Implementation Plan for the former redevelopment agency, no Section 33413(a) replacement housing obligations were transferred to the Housing Successor. Furthermore, the Housing Successor has not caused the demolition of any units and no new replacement housing obligations have been created. lnclusionary/Production Housing. According to the 2010-2014 Implementation Plan for the former redevelopment agency, no Section 33413(b) inclusionary/production housing obligations were transferred to the Housing Successor.
The former redevelopment agency's Implementation Plans are posted on the City's website at http://poway.org/207 /Affordable-Housing.
IX. EXTREMELY LOW-INCOME TEST
This section provides the information required by Section 34176.1 (a)(3)(B), or a description of expenditures by income restriction for five-year period, with the time period beginning January 1, 2014 and whether the statutory thresholds have been met.
Section 34176.1 (a)(3)(B) requires that the Housing Successor must require at least 30% of the LMIHAF, after expenditures allowed pursuant to Code section 34176.1 (a)(1) and (2,) to be expended for development of housing affordable to, and occupied by, households earning 30% or less of the AMI. If the Housing Successor fails to comply with the extremely low income requirement in any five year report beginning with the five year report to be issued in 2019, then the Housing Successor shall ensure that at least 50% of these remaining LMIHAF funds expended in each fiscal year following the latest fiscal year following the five year report are expended for the development of rental housing affordable to, and occupied by, households earning 30% or less of the area AMI until the housing successor demonstrates compliance with the extremely low-income requirement in an annual report. This information is not required to be reported until 2024, for the 2020 - 2024 reporting period.
X. SENIOR HOUSING TEST
The Housing Successor is required to calculate the percentage of units of deed-restricted rental housing restricted to seniors and assisted by the Housing Successor, the former redevelopment 7 of 36 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2021- 2022 June 6, 2023, Item #11
agency and/or the City within the previous 10 years in relation to the aggregate number of units of deed-restricted rental housing· assisted by the Housing Successor, the former redevelopment agency, and/or City within the same time period. If this percentage exceeds 50%, then the Housing Successor cannot expend future funds in the LMIHAF to assist additional senior housing units until the Housing Successor or City assists and construction has commenced on a number of restricted rental units that is equal to 50% of the total amount of deed-restricted rental units. The following provides the Housing Successor's Senior Housing Test for the 10-year period of January 1, 2012 through December 31, 2022:
Housing Test 2012-2022
# of Assisted Senior Rental Units 43
# of Total Assisted Rental Units 246
'C ... ,,, ..
Senior Housing Percentage ~> 17% ...
XI. EXCESS SURPLUS TEST
Excess Surplus is defined in Section 34176.1 (d) as an unencumbered amount in the LMIHAF account that exceeds the greater of one million dollars ($1,000,000) or the aggregate amount deposited into the LMIHAF account during the Housing Successor's preceding four Fiscal Years, whichever is greater.
The LMIHAF was created on February 1, 2012. The current uncommitted balance of $5,152,809 on deposit in the LMIHAF does not exceed the sum of the annual deposits made in the preceding four fiscal years of $5,335,680.
The following provides the Excess Surplus test for the preceding four Fiscal Years:
FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 Total FY18-21 Beginning Balance $2,117,450 $1,586,131 $4,438,922 $3,434,907 Add: Deposits $240,904 $2,884,440 $368,684 $1,841,652 $5,335,680 (Less) Expenditures $(772,223) $(31,649) $(1,372,699) $(83,900) k . · ,,. " , .
Ending Balance $1,586,131 $4,438,922 $3,343,907 $5,192,659 (Less) Commitments $(77,366) $(81,783) $(29,263) $(39,850) - ,,, ... ~
Uncommitted Balance $1,508,765 $4,357,139 $3,405,644 $5,152,809 XII. HOMEOWNERSHIP UNITS
The Housing Successor is to provide an inventory of homeownership units assisted by the former redevelopment agency or the Housing Successor that are subject to covenants or restrictions or to an adopted program that protects the former redevelopment agency's investment of monies from the LMIHAF pursuant to Section 33334.3(f). The inventory for the Housing Successor is as follows:
Restricted Homeownership Units as of 12/31/2022
8 of 36 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2021 - 2022 June 6, 2023, Item #11
Add: Restricted Homeowner Units Added by Housing Successor (January 0 1, 2022 through December 31, 2022) -(Less): Restricted Homeowner Units Lost to Portfolio (January 1, 2022 0 through December 31, 2022) - Additionally, no inventory was lost in 2022. A total of $0 was returned to the Housing Successor as a result of the restrictions adopted to protect the former redevelopment agency's investment in LMIHAF monies and the Housing Successor did not contract with an outside entity for the management of the ownership portfolio.
9 of 36 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2021- 2022 June 6, 2023, Item #11
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POWAY HOUSING AUTHORITY
{A Component Unit of the
City of Poway)
Financial Statements
YearEndedJune30,2022
ATTACHMENT B
June 6, 2023, Item #11
POWAY HOUSING AUTHORITY
Table of Contents
Year Ended June 30, 2022
Independent Auditor's Report .... . . ...... .... ....... ........ ... ................... ........... ........ ... . . . ... . .. ............ ...... ... 1 Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Position ..................................... .................................................................. 4 Statement of Activities ............................................................................................................ 5 Fund Financial Statements
Balance Sheet ..................................................... ........................................ ............................. 6 Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position ............................................................................................ 7 Statement of Revenues, Expenditures and Changes in Fund Balance .................................... 8 Reconciliation ofthe Statement of Revenues, Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities ................ 9 Notes to the Basic Financial Statements............ ..................................... ............................ ............ 10 Required Supplementary Information {Unaudited)
Budgetary Comparison Schedule .................... .................................................................... .... 18 Note to Required Supplementary Information ................................................... .................... 19 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 ......................................... ....................... 21 11 of 36
June 6, 2023, Item #11
Davis Farr LLP
18201 Von Karrncm Avenue I Suite 1100 I Irvine, CA 92612 Main : 949.474.2020 I Fax: 949.263.5520
INDEPENDENT AUDITOR'S REPORT
Poway Housing Authority
City of Poway
Poway, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the governmental activities and the major fund of the Poway Housing Authority (the Authority), a component unit of the City of Poway, California, as of and for the year June 30, 2022, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities and the major fund of the Authority as of June 30, 2022, and the respective changes in financial position the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Authority and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of a Matter
As described more fully in Note 1, the basic financial statements present only the Authority and are not intended to present fairly the financial position and results of operations of the City of Poway, California in conformity with 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 The Authority's management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority's ability to continue as a going concern for one year after the date that the financial statements are issued.
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June 6, 2023, Item #11
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 opinion. 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 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 om1ss1ons, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and 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 as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority's ability to continue as a going 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, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Budgetary Comparison Schedule 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 auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
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June 6, 2023, Item #11
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 statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. Our opinion the basic financial statements is not affected by this missing information.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 17, 2023 on our consideration of the Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority's internal control over financial reporting and compliance.
Irvine, California
January 17, 2023
14 of 36 3
June 6, 2023, Item #11
This page intentionally left blank
15 of 36 4
June 6, 2023, Item #11
BASIC FINANCIAL STATEMENTS
16 of 36 5
June 6, 2023, Item #11
17 of 36
ASSETS
Poway Housing Authority
Statement of Net Position
June 30, 2022
Cash and investments (Note 2)
Accounts receivable
Due from other governments
Capital assets, nondepreciable (Note 3)
Total assets
LIABILITIES
Accounts payable
Unearned revenue
Total liabilities
NET POSITION
Investment in capital assets
Restricted for:
Housing
Total net position
$
$
See accompanying notes to the basic financial statements 6 5,201,162
10,290
427,743
13,917,824
19,557,019
4,057
14,736
18,793
13,917,824
5,620,402
19,538,226
June 6, 2023, Item #11
Functions/Programs
Governmental activities:
General government $
Development services
Community services
Total governmental activities $
Poway Housing Authority
Statement of Activities
Year Ended June 30, 2022
Program Revenues
Expenses
9,925
73,974
83,899
Operating
Charges Contributions
for and
Services Grants
19,969
1,634,152
19,969 1,634,152
General Revenues
Investment income
Other
Capital
Contributions
and
Grants
Total general revenues and transfers
Change in net position
Net position, beginning
Net position, ending
See accompanying notes to the basic financial statements 18 of 36 7
Net (Expense)
Revenue
and
Changes in
Net Position
10,044
(73,974)
1,634,152
1,570,222
35,380
53,338
88,718
1,658,940
17,879,286
$ 19,538 ,226
June 6, 2023, Item #11
19 of 36
ASSETS
Cash and investments
Accounts receivable
Poway Housing Authority
Balance Sheet
Governmental Fund
June 30, 2022
Due from other governments
Total assets
LIABILITIES AND FUND BALANCE
Liabilities:
Accounts payable
Unearned revenue
Total liabilities
FUND BALANCE
Restricted
Total fund balances
Total liabilities and fund balance
$
$
$
$
See accompanying notes to the basic financial statements 8 5,201,162
10,290
427,743
5,639,195
4,057
14,736
18,793
5,620,402
5,620,402
5,639,195
June 6, 2023, Item #11
Poway Housing Authority
Reconciliation of the Balance Sheet of the
Governmental Fund to the Statement of Net Position
June 30, 2022
Total Governmental Fund Balance
Amounts reported for governmental activities in the Statement of Net Position were different because:
Capital assets used in governmental activities were not current financial resources and, therefore, were not reported in the funds.
Net position of governmental activities
See accompanying notes to the basic financial statements 20 of 36 9
$ 5,620,402
13,917,824
$ 19,538,226
June 6, 2023, Item #11
21 of 36
Poway Housing Authority
Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Fund
Vear Ended June 30, 2022
REVENUES
Lease revenue $
Investment income
Loan repayment
Reimbursement agreement fees
Total revenues
EXPENDITURES
Current:
General government
Development services
Total expenditures
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year $
See accompanying notes to the basic financial statements 10 19,969
35,380
1,634,152
53,338
1,742,839
9,925
73,974
83,899
1,658,940
3,961,462
5,620,402
June 6, 2023, Item #11
Poway Housing Authority
Reconciliation of the Statement of Revenues,
Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities
Year Ended June 30, 2022
Net change in fund balance - total governmental fund
Change in net position of governmental activities
See accompanying notes to the basic financial statements 22 of 36 11
$ 1,658,940
$ 1,658,940
June 6, 2023, Item #11
POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2022
Note 1- Reporting Entity and Summary of Significant Accounting Policies The accounting policies of the Poway Housing Authority (Authority) conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the Authority's significant accounting policies:
A. Description of Reporting Entity
On March 1, 2011, the City Council of the City of Poway declared a need for a housing authority in the City of Poway and adopted a resolution forming the Poway Housing Authority. The creation of the Housing Authority provides the City legal authority to continue monitoring ongoing rent and income compliance at affordable housing developments.
The former Poway Redevelopment Agency (Agency) and the Authority prepared a Cooperation Agreement to provide for implementation of certain low and moderate income housing projects and to make payments by the Agency to the Authority for the costs to the Authority for performing its obligations. The Agency was dissolved due to the passage of Assembly Bill Xl 26 which became effective on October 1, 2011. In accordance with Health and Safety code 34175(b), on February 1, 2012, all housing assets, liabilities and fund balance of the Agency were transferred to the Authority as the Successor Agency to the Poway Redevelopment Agency.
The Authority meets the criteria set forth in U.S. GAAP for inclusion as a blended component unit within the City reporting entity based on the City's oversight responsibility in selection of the governing board.
In addition, all of the Authority's activities are conducted within the geographic boundaries of the City.
Blended component units, although legally separate entities, are, in substance, part of the City's operations; therefore, data from these units are combined with data of the primary government in the financial statement presentation of the City. Only the funds of the Authority are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City.
8. Basis of Accounting/Measurement Focus
The accounts ofthe Authority are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled . 23 of 36 12
June 6, 2023, Item #11
POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2022
Note 1- Reporting Entity and Summary of Significant Accounting Policies (Continued) Government-Wide Financial Statements
The Authority's Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of governmental activities for the Authority.
These basic financial statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the Authority's assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.
Certain types of transactions are reported as program revenues for the Authority in three categories:
• Charges for services
• Operating grants and contributions
• Capital grants and contributions
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for the governmental fund. An accompanying schedule is presented to reconcile and explain the differences in fund balance as presented in these statements to the net position presented in the Government-Wide Financial Statements.
All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balance presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. ·
Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the Authority, are property tax, and intergovernmental revenues. Expenditures are recorded in the accounting period in which the related fund liability is incurred. 24 of 36 13
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POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2022
Note 1- Reporting Entity and Summary of Significant Accounting Policies (Continued) Unearned revenues arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures . In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the unearned revenue is removed from the balance sheet and revenue is recognized.
The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of generally accepted accounting principles.
Fund Accounting
The Authority uses funds to maintain its financial records during the year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. The Authority only has one governmental fund.
Governmental Fund
Housing Authority Fund .- The Housing Authority Fund is the Authority's operating fund. It accounts for all financial resources of the Authority.
C. Cash and Investments
The Authority's cash and investment balances are included in the City's investment pool. The City pools cash resources from all City funds in order to facilitate the management of cash and achieve the goal of obtaining the highest yield with the greatest safety and least risk. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms. Investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available.
The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund ("LAIF") which has invested a portion of the pool funds in structured notes and asset backed securities. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. LAIF investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments . In addition, these investments are subject to market risk and changes in interest rates.
Cash equivalents are considered amounts in demand deposits and short-term investments with a maturity date within three months of the date acquired by the Authority and are presented as "Cash and investments" in the accompanying basic financial statements. 25 of 36 14
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POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2022
Note 1- Reporting Entity and Summary of Significant Accounting Policies (Continued) D. Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, streets, sidewalks, medians and storm drains) are reported in the Government-Wide Financial Statements.
Authority policy has set the capitalization threshold for reporting capital assets at $5,000. Capital assets · are valued at historical cost or estimated historical cost if actual historical cost was not available. Donated assets are valued at their estimated acquisition value on the date donated .
Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows:
Buildings
Building improvements
Furniture 9nd equipment
Infrastructure
10-50 years
10-100 years
5-20 years
20-50 years
E. Deferred Outflows/In/lows of Resources
In addition to assets, the balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expenditure) until then . The Authority currently has no items that qualify for reporting in this category.
In addition to liabilities, the balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial element, deferred inflows of resources, represents an acquisition of net assets that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time . The Authority currently has no items that qualify for reporting in this category .
F. Net Position
Net position is comprised of the various net earnings from operating income, non-operating revenues and expenses. Net position is classified in the following categories:
Net Investment in Capital Assets - This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets.
Restricted - This component of net position consists of restricted assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets.
Unrestricted - This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position .
When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the Authority's policy is to apply restricted net position first . 26 of 36 15
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POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June_30, 2022
Note 1- Reporting Entity and Summary of Significant Accounting Policies (Continued) G. Fund Balances
In the governmental fund financial statements, fund balances are classified in the following categories:
Nonspendable - Nonspendable fund balances are items that cannot be spent because they are not in spendable form, such as prepaid items and inventories, items that are legally or contractually required to be maintained intact, such as principal of an endowment or revolving loan funds.
Restricted - Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt ,covenants, grantors, contributions, laws or regulations of other governments, as well as restrictions imposed by law through constitutional provisions or enabling legislation.
Committed - Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making, normally the governing body through council resolutions, etc., and that remain binding unless removed in the same manner. The Board of Commissioners is considered the highest authority for the Authority.
Assigned - Assigned fund balances encompass the portion of net fund resources reflecting the government's intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for that purpose. The Board of Commissioners has authorized the Executive Director for that purpose.
Unassigned - This category is for any remaining balances that are not classified as nonspendable, restricted, committed or assigned.
When expenditures are incurred for purposes for which both restricted and unrestricted fund balances are available, the Authority's policy is to apply restricted fund balances first, then unrestricted fund balances as they are needed.
When expenditures are incurred for purposes where only unrestricted fund balances are available, the Authority uses the unrestricted resources in the following order: committed, assigned, and unassigned.
H. Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Note 2 - Cash and Investments
Equity in Cash and Investment Pool of the City of Poway 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 participant in that pool. This pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Authority has not adopted an investment policy separate from that of the City.
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POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2022°
Note 2 - Cash and Investments (Continued)
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 accounting records maintained by the City, which are recorded on an original cost basis. At June 30, 2022, the Authority had a cash balance of $5,201,162.
Note 3 - Capital Assets
The summary of changes in capital assets for the year ended June 30, 2022 is as follows:
Capital assets, not being
depreciated:
Land
Total capital assets, not being
depreciated
Governmental activities - capital
assets
Note 4 - Related Party Transactions
Balance
June 30, 2021
$ 13,917,824
13,917,824
$ 13,917,824
Additions Deletions
Balance
June 30, 2022
13,917,824
13,917,824
13,917,824
In an effort to ensure that the objectives of Poway's Redevelopment Plan and the Poway Redevelopment Agency's (Agency) 5-Year Implementation Plan are fulfilled, on March 11, 2011, the Agency transferred all housing-related assets to the Authority through a Cooperation Agreement between the Agency and the Authority. Under the terms of this agreement, the Authority agreed to respectively carry out the projects and activities of the Agency in accordance with the objectives and purposes included in the Redevelopment and Implementation Plans. Projects included in the Cooperation Agreement between the Agency and the Authority further the goals of the Redevelopment Plan. It was initially anticipated that these projects would be funded based on available tax increment to be received through 2037, but because of the dissolution of the Agency under AB Xl 26, tax increment revenue has been eliminated, and therefore, no funding for these projects from that source is available.
Future project funding will come from the management of the Authority's assets and may include interest revenue, lease revenue, residual receipt revenue and the sale of assets.
Note 5 - Rehabilitation Loan Program
Housing Rehabilitation Loan Program
There are two types of housing rehabilitation loan. Forgivable rehabilitation loans are forgiven at a rate of 10% per year given all loan covenants are met. Non-forgivable loans are due upon the sale, transfer or foreclosure of the property. Due to the contingent nature of the repayment schedule of these loans, there is an allowance recorded at 100% of the outstanding balance. The balance of the non-forgivable rehabilitation loans at June 30, 2022 is $7,870.
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POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
YearEndedJune3~2022
Note 5 - Rehabilitation Loan Program (Continued)
Affordable Housing Loans
These loans are made to aid in the purchase of affordable housing in the City of Poway. They are for a 45-year term with no interest and if there is a sale, transfer or foreclosure before the end of the term the loan must be assumed by an income qualified buyer and the 45-year term starts over. Due to the contingent nature of the repayment schedule of these loans, there is an allowance recorded at 100% of the outstanding balance. The balance of these Affordable Housing loans at June 30, 2022 is $2,690,132.
Development Loans
The City, through the Housing Authority, has development loans primarily for affordable rental housing projects and for one group home for the developmentally disabled. The affordable rental housing loans have 55-year to 57-year terms with three percent simple interest. Loan payments are made from residual receipts and generally do not cover the annual accrued interest. Therefore, due to the contingent nature of the repayment schedule of these loans, there is an allowance recorded at 100% of the outstanding balance. The balance of the development loans, including accrued interest, at June 30, 2022 is $40,710,578.
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REQUIRED SUPPLEMENTARY INFORMATION
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REVENUES
Lease revenue
Investment income
Loan repayment
Reimbursement agreement fees
Total revenues
EXPENDITURES
Current:
General government
Development services
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
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$
$
POWAY HOUSING AUTHORITY
Budgetary Comparison Schedule
Year Ended June 30, 2022
Budget Amounts
Original Final
32,002 32,002
68,486 68,486
40,000 40,000
140,488 140,488
99,900 108,235
49,300 591,944
149,200 700,179
(8,712) (559,691)
(8,712) (559,691)
See note to required supplementary information
21 Actual Variance with
Amounts Final Budget
19,969 (12,033)
35,380 (33,106)
1,634,152 1,634,152
53,338 13,338
1,742,839 1,602,351
9,925 98,310
73,974 517,970
83,899 616,280
1,658,940 2,218,631
1,658,940 2,218,631
3,961,462
$ 5,620,402
June 6, 2023, Item #11
POWAY HOUSING AUTHORITY
Note to Required Supplementary Information
Year Ended June 30, 2022
Note 1 - Budgetary Information
The Authority adopts an annual budget prepared on the modified accrual basis for its major fund. The Executive Director is required to prepare and submit to the Authority's Board of Commissioners the annual budget of the Authority and administer it after adoption. Any revisions that alter the total appropriations of any fund must be approved by the Board of Commissioners.
Prior year appropriations lapse unless they are encumbered at year-end or re-appropriated through the formal budget process. For the major fund, total expenditures may not legally exceed total appropriations .
Budget information is presented for the major fund on a basis consistent with generally accepted accounting principles. Budgeted revenue and expenditure amounts represent the original budget modified for adjustments during the year.
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Davis Farr LLP
18201 Von l<arman Avenue I Su ite 1100 I Irvine, CA 92612 Moin : 949.474.2020 I Fax: 949.263.5520
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
Poway Housing Authority
City of Poway
Poway, California
INDEPENDENT AUDITOR'S REPORT
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 governmental activities, and the major fund of the Housing Authority of the City of Poway (Authority), a component unit of the City of Poway (City), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements, and have issued our report thereon dated January 17, 2023.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority's internal control over financial reporting (internal control) as a basis for designing the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority's internal control.
A deficiency in internal control exists when the design or operat ion 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 misstatement 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 control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
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Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Authority'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
January 17, 2023
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