May 21, 2024, Item #7
DATE:
TO:
FROM:
CONTACT:
SUBJECT:
Summary:
AGENDA RE PO RT City of Poway
May 21, 2024
Honorable Chairman and Members of the Housing Authority Robert Manis, Director of Development Services lv'f
Marie Sanders, Senior Management Analyst A C..
(858) 668-4637 or [email protected] 1\/::5
CITY COUNCIL
Poway Housing Successor Annual Report For Fiscal Year 2022-23 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 2022-23 (Attachment A), and the Poway Housing Authority Basic Financial Statements and Independent Auditors Report for the year ending June 30, 2023 (Attachment B), are included with this agenda report for review by 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 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 2022-23 indicates a balance in the LMIHAF of $4,599,600. A notable expenditure this fiscal year was the final payment of $470,000 for a developer loan for the Apollo Apartments affordable housing project at Poway Commons. LMIHAF monies may be utilized to acquire, rehabilitate, ensure 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 1 of 34
May 21, 2024, Item #7
previous balance of Redevelopment financing, program income from operations, repayments of loans, and land sales.
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 2022-23 B. Poway Housing Authority Basic Financial Statements and Independent Auditors Report for the year ended June 30, 2023
Reviewed/Approved By:
Assistant City Manager
2 of34
Reviewed By:
Alan Fenstermacher
City Attorney
Approved By:
gJ;;,
City Manager
May 21, 2024, Item #7
POWAY HOUSING SUCCESSOR ANNUAL REPORT
REGARDING THE LOW-AND MODERATE-INCOME HOUSING ASSET FUND FOR FISCAL YEAR 2022-2023
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 May 21, 2024. 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 2022-23 (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 2022-23 as prepared by Davis Farr, LLP, which the 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.
POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2022 -2023 3 of34
ATTACHMENT A
May 21, 2024, Item #7
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
sect
ion
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:
Th
is
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
jur
isdiction
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, 2013
to
December
31 ,
2023
.
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
mon
ies
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 of34
PO
WA
Y
HOU
SING
SU
CCE
SS
OR
ANNU
AL REP
OR
T
FISCA
L YEAR
20 22
-2023
May 21, 2024, Item #7
I. AMOUNT DEPOSITED INTO LMIHAF
A total of $41,300 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 $4,599,600 none of which is being held for items listed on the ROPS. This includes $5,111,224 in cash and investments, and $362,965 in housing loans receivable, less $44,783 in liabilities. The $362,965 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 2022-23
Monitoring & Administration Expenditures
'
$18,875
Homeless Prevention & Rapid Rehousing Expenditures $0
Housing Development Expenditures ' ,.
$563,995 -
Total LMIHAF Expenditures in Fiscal Year $582,870
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:
1 Fiscal Year 2022-23
Cash and Cash Equivalents '
Accounts Receivable $12,390
Statutory Value of Real Property Owned by Housing Authority . $13,917,824 Value of Loans and Grants Receivable $362,965
Total Value of. Housing Successor Assets $19,404,423
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 34 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2022 -2023 May 21, 2024, Item #7
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 Date of Size Status Purchase
27546061 12674 Monte Vista Rd 02/22/2000 2.06 Acres The Housing Authority has successfully negotiated an
I• affordable housing agreement
[i
and ground lease with a
1, Ii developer to build a 60-unit
affordable rental community.
Consideration of approval by the
Housing Authority Board/City is
scheduled for 6/4/2024.
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 continue to be
evaluated.
31710151 Floodway adjacent to 08/27/2004 2.15 Acres Vacant land. Property located in & 52 the Solara Affordable floodway, cannot be developed.
Housina Develooment
6 of34 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2022 -2023 May 21, 2024, Item #7
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
& 36 Pomerado Road
01/9/2018 1.07 Acres Future affordable housing site.
Funds for demolition of the site
are budgeted, awaiting
Housing Authority Board
approval.
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)(8), 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)(8) 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 LM I HAF 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 34 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2022 -2023 May 21, 2024, Item #7
agency and/or the City within the previous 1 O 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, 2023:
Housing Test 2013-2023
# of Assisted Senior Rental Units 43
# of Total Assisted Rental Units 246
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 $4,599,600 on deposit in the LMIHAF does not exceed the sum of the annual deposits made in the preceding four fiscal years of $5,136,075.
The following provides the Excess Surplus test for the preceding four Fiscal Years:
FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23 Total FY19-22 Beginning Balance $1,586,131 $4,438,922 $3,434,907 $5,192,659 Add: Deposits $2,884,440 $368,684 $1,841,652 $41,300 $5,136,075 (Less) Expenditures $(31,649) $(1,372,699) $(83,900) $(582,870) Ending Balance $4,438,922 $3,343,907 $5,192,659 $4,651,088 (Less) Commitments $(81,783) $(37,598) $(39,850) $ (51,488) Uncommitted Balance $4,357,139 $3,397,309 $5,152,809 $4,599,600 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 12/31/2023
8 of34 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2022 -2023 May 21, 2024, Item #7
Add: Restricted Homeowner Units Added by Housing Successor (January 0 1, 2023 through December 31, 2023) (Less): Restricted Homeowner Units Lost to Portfolio (January 1, 2023 0 through December 31, 2023) Additionally, no inventory was lost in 2023. 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 34 POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2022 -2023 May 21, 2024, Item #7
10 of
34 POWAY
HOUSING
AUTHORITY
(A
Component
Unit
of
the
City
of
Poway)
Financial
Statements
YearEndedJune30,2023
ATTACHMENT
B
May 21, 2024, Item #7
POWAY HOUSING AUTHORITY
Table of Contents
Year Ended June 30, 2023
Independent Auditor's Report ......................................................................................................... 1 Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Position ....................................................................................................... 6 Statement of Activities ............................................................................................................ 7 Fund Financial Statements
Balance Sheet .......................................................................................................................... 8 Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position ............................................................................................ 9 Statement of Revenues, Expenditures and Changes in Fund Balance .................................... 10 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities ................ 11 Notes to the Basic Financial Statements ......................................................................................... 12 Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule ............................................................................................ 20 Note to Required Supplementary Information ....................................................................... 21 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 ................................................................ 22 11 of 34
May 21, 2024, Item #7
Davis Farr
CERTIFIED PUBLIC ACCOUNTANTS
Davis Farr LLP
18201 Von Karman 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 ended June 30, 2023, 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, 2023, 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.
12 of 34 1
May 21, 2024, Item #7
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.
13 of 34 2
May 21, 2024, Item #7
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 December 27, 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. 'Dau l.S~i:U'"r Llt°
Irvine, California
December 27, 2023
14 of 34 3
May 21, 2024, Item #7
This
page
intentionally
left
blank
15 of
34 4
May 21, 2024, Item #7
BASIC FINANCIAL STATEMENTS
16 of 34 5
May 21, 2024, Item #7
17 of 34
ASSETS
Poway Housing Authority
Statement of Net Position
June 30, 2023
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 5,111,224
12,390
362,965
13,917,824
19,404,403
30,047
14,736
44,783
13,917,824
5,441,796
19,359,620
May 21, 2024, Item #7
Functions/Programs
Governmental activities:
General government
Development services
Total governmental activities
Poway Housing Authority
Statement of Activities
Year Ended June 30, 2023
Program Revenues
Expenses
$ 18,875
563,995
$ 582,870
Operating
Charges Contributions
for and
Services Grants
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 34 7
Net (Expense)
Revenue
and
Changes in
Net Position
(18,875)
(563,995)
(582,870)
64,818
339,446
404,264
(178,606)
$ 19,538,226
$ 19,359,620
May 21, 2024, Item #7
19 of 34
ASSETS
Cash and investments
Accounts receivable
Poway Housing Authority
Balance Sheet
Governmental Fund
June 30, 2023
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 5,111,224
12,390
362,965
5,486,579
30,047
14,736
44,783
5,441,796
5,441,796
5,486,579
May 21, 2024, Item #7
Poway Housing Authority
Reconciliation of the Balance Sheet of the
Governmental Fund to the Statement of Net Position
June 30, 2023
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. $ 5,441,796
13,917,824
Net position of governmental activities $ 19,359,620
=======
See accompanying notes to the basic financial statements 20 of 34 9
May 21, 2024, Item #7
21 of 34
Poway Housing Authority
Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Fund
Year Ended June 30, 2023
REVENUES
Lease revenue $
Investment income
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 64,818
339,446
404,264
18,875
563,995
582,870
(178,606)
5,620,402
5,441,796
May 21, 2024, Item #7
Poway Housing Authority
Reconciliation of the Statement of Revenues,
Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities
Vear Ended June 30, 2023
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 34 11
$ (178,606)
$ (178,606}
May 21, 2024, Item #7
POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2023
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.
B. Basis of Accounting/Measurement Focus
The accounts of the Authority are organized on the basis offunds, 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 of34 12
May 21, 2024, Item #7
POWAY
HOUSING
AUTHORITY
Notes
to
the
Basic
Financial
Statements
Year
Ended
June
30,
2023
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
fo
r
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
Financ
ial
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
account
ing,
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
34 13
May 21, 2024, Item #7
POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2023
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 34 14
May 21, 2024, Item #7
POWAY
HOUSING
AUTHORITY
Notes
to
the
Basic
Financial
Statements
Year
Ended
June
30,
2023
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
and
equipment
Infrastructure
10-50
years
10-100
years
5-20
years
20-50
years
E.
Deferred
Outflows/Inflows
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
futu
re
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
34 15
May 21, 2024, Item #7
POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2023
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.
27 of 34 16
May 21, 2024, Item #7
POWAY HOUSING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2023
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, 2023, the Authority had a cash balance of $5,111,224.
Note 3 -Capital Assets
The summary of changes in capital assets for the year ended June 30, 2023 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, 2022
$ 13,917,824
13,917,824
$ 13,917,824
Additions Deletions
Balance
June 30, 2023
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, 2023 is $7,870.
28 of 34 17
May 21, 2024, Item #7
POWAY
HOUSING
AUTHORITY
Notes
to
the
Basic
Financial
Statements
Year
Ended
June
30,
2023
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
interest
between
2 percent
and
3 percent
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
atJune
30,
2023
is
$2,072,774.
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,
2023
is
$41,119,809.
29 of
34 18
May 21, 2024, Item #7
REQUIRED SUPPLEMENTARY INFORMATION
30 of 34 19
May 21, 2024, Item #7
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
31 of 34
$
$
POWAY HOUSING AUTHORITY
Budgetary Comparison Schedule
Year Ended June 30, 2023
Budget Amounts
Original Final
18,389 18,389
69,227 69,227
40,000 40,000
127,616 127,616
106,100 116,110
55,300 663,953
161,400 780,063
(33,784) {652,447)
(33,784) (652,447)
See note to required supplementary information
20 Actual Variance with
Amounts Final Budget
(18,389)
64,818 (4,409)
339,446 299,446
404,264 276,648
18,875 97,235
563,995 99,958
582,870 197,193
(178,606) 473,841
(178,606) 473,841
5,620,402
$ 5,441,796
May 21, 2024, Item #7
POWAY HOUSING AUTHORITY
Note to Required Supplementary Information
Year Ended June 30, 2023
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.
32 of 34 21
May 21, 2024, Item #7
Davis
Farr
LLP
18201
Von
Karmcm
Avenue
I Suite
1100
I Irv
ine,
CA
92612
Main
: 949
.474
.2020
I Fa
x: 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,
2023,
and
the
related
notes
to
the
financial
statements,
which
collectively
comprise
the
Authority's
basic
financial
statements,
and
have
issued
our
report
thereon
dated
December
27,
2023.
Report
on
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
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
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
or
significant
deficiencies
may
exist
that
have
not
been
identified.
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May 21, 2024, Item #7
Report on 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
December 27, 2023
34 of 34 23