HomeMy WebLinkAbout1G OCRCITY COUNCIL STAFF REPORT
DATE: March 11, 2021 CONSENT CALENDAR
SUBJECT: FISCAL YEAR 2019-20 FINANCIAL AUDIT REPORTS OF THE CITY OF
PALM SPRINGS
FROM: David H. Ready, City Manager
BY: Department of Finance and Treasury
SUMMARY
The certified public accounting firm of The Punn Group, LLC, completed the annual
financial reports of the City as of June 30, 2020.
RECOMMENDATION:
Receive and file the following Financial Audit Reports for fiscal year June 30, 2020:
• Comprehensive Annual Financial Report (CAFR)
• Audit Communication Letter to the City Council
• Internal Control and Compliance Letter to the City Council
• Passenger Facility Charge (PFC) Report
• Public Financing Authority Financial Statements.
• Measure J Fund Report Annual Financial Report
• Measure D Independent Accountant's Agreed Upon Procedures
• Measure A Independent Accountant's Agreed Upon Procedures (Conrad CPA
Firm)
STAFF ANALYSIS:
Based on the results of their audit, The Punn Group provided the City with an unqualified
opinion on the financial statements which means that the City's financial statements are
free of material misstatements and are in accordance with Generally Accepted
Accounting Principles (GMP).
The specific financial documents on which the auditor expresses an opinion are: 1) the
financial statements, and 2) notes to the basic financial statements which include required
supplementary information. These documents, along with the auditor's opinion, audit
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2City Council Staff Report March 11, 2021 --Page 2 FY 2019-20 Financial Audit Reports of the City of Palm Springs communication letter, and report on internal controls form the core of the Comprehensive Annual Financial Report (CAFR). Additional documents that make up the CAFR include: the letter of transmittal, management's discussion and analysis (MD&A), and a supplemental section which includes a statistical section presenting detailed information to assist the reader in assessing the economic condition of the City. The Punn Group provided the Internal Controls and Compliance Letter. The purpose of this report is to describe the scope of the auditor's testing of internal control over financial reporting and compliance, and the results of that testing. The auditors identified certain deficiencies in internal controls, specifically in the internal services funds in which there were overstated liabilities as follows: Airport Capital Assets During the prior fiscal year FY 18-19, several capital projects were being completed at the Airport. These projects included TSA renovations, Airfield design, and hold room chairs. These capital project costs were identified as an operational expense rather than a capital improvement to be considered as an asset. As a result of this finding, the total cost of these capital projects (recorded as an operational expense) in the amount of $647,433 have been identified as capital assets and have been correctly adjusted in the Airport Fund. This bookkeeping error results in a positive increase in the Airport Fund balance sheet by increasing the value of Airport assets by $647,433 as opposed to reflecting this as an operational expense. There is no change to the Airport fund cash balance as these capital projects were correctly accounted for and paid in accordance with the various Purchase Orders or contracts approved by the City Council or City Manager with funds budgeted and appropriated for that purpose. The correction is noted on the balance sheet where assets are recorded. Airport Fund Accounts Payable Accounting The Airport has various long-term agreements with the car rental agencies that require those vendors to pay a Minimum Annual Guarantee ("MAG") rental fee based on the prior year's car rental revenue. Annually, in July, an audit is performed by Airport staff to identify the actual car rental revenue in the prior fiscal year in comparison to the MAG payments previously paid, and an adjustment is identified for additional payment due to the City or a credit due back to the car rental agencies as an accounts payable liability. In FY 2016-17 the Airport staff audited the car rental agencies and determined that a total credit (overpayment) was due to these agencies in the amount of $1,026,075 and Finance staff correctly recorded this as an accounts payable liability in FY 2016-17. However, in FY 2017-18 with retirement of prior Finance staff, new staff overlooked the accounts payable liability posted in FY 2016-17 for the car rental credit and recorded it a second time in FY 2017-18. The recording of this accounts payable liability was reflected on the Airport Fund balance sheet, and in no way represented a double payment to the airport
3City Council Staff Report March 11, 2021 --Page 3 FY 2019-20 Financial Audit Reports of the City of Palm Springs car rental agencies. As a result, Staff has reversed the second posting of the accounts payable liability as the credit due to the airport car rental agencies in FY 2016-17 was correctly administered by the Airport staff in accordance with the car rental agency agreements. This correction results in a positive increase in the Airport Fund cash balance in the amount of $1,026,075. Loans Receivable The City's former Redevelopment Agency approved three different affordable housing projects (Sunset Hacienda, Vista Sunrise, and Desert Highland) and provided Housing Agency funding via long-term forgivable loans consistent with low-income rent-restricted affordable housing projects. The original loan agreements were recorded in 2004, 2005 and 2008, with the loan amounts for each of these affordable housing projects appropriately recorded in the Housing Agency's balance sheet. Subsequently, as these housing projects were constructed the developers requested and received City Council approval to increase the original loan amounts to account for unanticipated or increased costs. Each of these housing projects were approved with increased loan amounts in 2007 and 2009 in the total cumulative amount of $703,449; however, these additional loan amounts (although legally approved and paid) were not accounted for in the Housing Agency's balance sheet as Staff understood them to be a "forgivable loan." As a result of this bookkeeping error, the additional loan amounts have been adjusted in the Housing Successor Agency's balance sheet. Ultimately, there will be no change as these loan amounts are forgiven and no additional funds are otherwise due to the City. Internal Service Funds Cities use Internal Service Funds to budget costs for various internal expenditures common to different General Fund Departments or other Enterprise Funds (Airport, Wastewater, etc.) using revenue to cover costs charged respectively to the different General Fund Departments or other Enterprise Funds. Examples include Facilities Maintenance, Fleet Maintenance, and fringe benefit costs (Employee Benefits, Retiree Health Insurance, etc.). Generally speaking, Internal Service Funds should balance the expenditures of the costs funded with the revenues collected through charges for those costs to each respective General Fund Department or other Enterprise Fund. However, it is appropriate to carry a positive balance forward for anticipated costs in the following years. The identified negative balances in three Internal Service Funds are a result of bookkeeping errors where long-term debt or capital costs were incorrectly accounted as direct expenditures, resulting in the negative balances. These bookkeeping errors have been corrected resulting in positive fund balances in the three Internal Service Funds, as follows: 1) The Employee Benefits Fund is an Internal Service Fund established to account for costs and liabilities related to PERS. Costs are recovered through a monthly employee benefit charge based upon gross payroll and was reflecting a negative balance of ($15,611,732) at the end of FY 2018-19. This bookkeeping error was due to Finance Department staff at that time recording the City's total 2007 Pension
4City Council Staff Report March 11, 2021 -Page 4 FY 2019-20 Financial Audit Reports of the City of Palm Springs Obligation Bond balance ( considered a long-term debt) as a total debt liability in the Employee Benefits Fund as opposed to correctly recording only the annual debt payment to be charged and paid in that fiscal year. As a result, the total 2007 Pension Obligation Bond balance has been correctly accounted for in the General Government Long-Term Debt Fund and removed from the Employee Benefits Fund resulting in a correct accounting and positive balance of $5,669,184 at the end of FY 2019-20. 2) The Retiree Health Insurance Fund is an Internal Service Fund established to account for the costs of providing health insurance to qualifying retirees. The annual actuarial cost to the City for retiree health insurance is recorded and paid from this Internal Service Fund. This bookkeeping error was due to staff at that time recording the full unfunded liability for retiree health insurance into the Internal Service Fund resulting in a negative balance of ($149,264,756) at the end of FY 2018-19. As a result, the auditors reclassified the total unfunded liability balance for retiree health insurance of $155,831,492 and reclassified $10,626,310 in liabilities to the Airport Fund, $876,044 in liabilities to the Wastewater Fund and the balance to the liability to the General Government Long-Term Debt Fund resulting in a correct accounting and positive balance of $2,141,107 at the end of FY 2019-20. 3) The Cogeneration Plan Fund is an Internal Service Fund established to account for costs of the City's Municipal Cogeneration Plant at City Hall and the Sunrise Park electrical plant where the City produces its own electricity for consumption at various City facilities. Operational costs are recovered through charges to each General Fund Department and the Airport based upon their respective electrical consumption from those plants. In 2013, the City approved a Citywide Energy Management project that included $17 million in capital improvements to be completed at various City facilities including the Municipal Cogeneration Plant. At the time the Municipal Cogeneration Plant upgrades were completed in FY 2015-16, a capital project cost of $4,928,602 was accounted for as a direct operational expense rather than a capital investment to be considered as an asset. This change has been correctly adjusted in the Cogeneration Plant Fund. The bookkeeping error results in a positive current fund balance of $2,491,513 at the end of FY 2019-20. It is important to note that none of the findings identify misappropriation of funds, or failure to pay creditors, or to receive payment the City was otherwise due. These bookkeeping errors were incorrectly reflecting loan amounts or capital assets and affecting the fund balance of various funds as reported on the balance sheets, and have since been corrected as noted in this staff report. The FY 2019-20 audited financial reports are available on the City's webpage at the following link: https://www.palmspringsca.gov/government/departments/finance-treasury/comprehensive-annual-financial-report
5City Council Staff Report March 11, 2021 -Page 5 FY 2019-20 Financial Audit Reports of the City of Palm Springs Hard copies of the reports are available by request to the Department of Finance and Treasury. FISCAL IMPACT: None. Attachments: • Comprehensive Annual Financial Report (CAFR) • Audit Communication Letter to the City Council • Internal Control and Compliance Letter to the City Council • Passenger Facility Charge (PFC) Report • Public Financing Authority Financial Statements. • Measure J Fund Report Annual Financial Report • Measure D Independent Accountant's Agreed Upon Procedures • Measure A Independent Accountant's Agreed Upon Procedures (Conrad CPA firm)
6City of Palm Springs Palm Springs, California Communication of Internal Control Matters Identified in the Audit For the Year Ended June 30, 2020 THE II PUN GROUP ACCOU'ITANTS & ADVISOR~
7City of Palm Springs Communication of Internal Control Matters Identified in the Audit For the Year Ended June 30, 2020 Table of Contents Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ................................................................................................. 1 Material Weaknesses: Finding 2020-001 -Internal Control Over Financial Reporting ......................................................................... 3 Finding 2020-002 -Internal Service Funds ........................................................................................................ 5
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9INDEPENDENT AUDITOR'S 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 Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Palm Springs, California (the "City"), as of and for the year ended June 30, 2020, and the related notes to the basic financial statements, which collectively comprise City's basic financial statements and have issued our report thereon dated December 31, 2020. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material 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 and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings as items 2020-001 and 2020-002 that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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.
10Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California Page2 The City's Response to Findings The City's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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 entity'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. Santa Ana, California December 31, 2020 2
11City of Palm Springs Schedule of Findings For the Year Ended June 30, 2020 Finding 2020-001 Internal Control Over Financial Reporting Criteria: Management is responsible for designing, implementing, and maintaining appropriate internal control over financial reporting and compliance. Management is also responsible for the accuracy of the financial statements including disclosures. As part of satisfying that responsibility, staff must possess the skills, knowledge, and experience necessary to complete the year-end close and must diligently employ the skills, knowledge, and experience to produce reliable and accurate financial information. Effective internal control over financial reporting provides reasonable assurance for the completeness and accuracy of accounting records and proper year-end closing. Internal control is defined as a process implemented and monitored by the City Council, management, and other personnel that provides reasonable assurance that the objectives of the City will be achieved. Internal control is not one event, but a series of events that occur throughout an entity's operations. The City's internal control system should be designed to provide reasonable assurance regarding the achievement of objectives in the following categories: • Reliability of financial reporting for internal and external use; • Effectiveness and efficiency of operations; and • Compliance with applicable laws and regulations. The Internal Control Framework should include establishing or enhancing guidance in the following areas: • Control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure. • Risk assessment is the entity's identification and analysis of relevant risks to achievement of its objectives, forming a basis for developing appropriate risk responses. • Control activities are the actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system. • Information and communication systems support the identification, capture, and exchange of information in a form and time frame that enables people to carry out their responsibilities. • Monitoring consists of activities management establishes and operates to assess the quality of performance over time. Conditions: We noted the City recorded the following prior period adjustments to correct transactions that were incurred in the previous year(s): I. Reclassifying liabilities relating to Other Postemployment benefits a. Removed the liabilities from Internal Services Fund in the amount of $155,831,492 (CAFR, Note 18, page I 00). b. Reallocated liabilities from Governmental Activities to Airport Fund and Wastewater funds in the amount of$10,626,310 and $876,004, respectively. 2. Understatement of Capital Assets for the Airport fund in the amount of $647,433. 3. Understatement of Loans Receivable in the amount of $703,449. 4. Overstatement of Accounts Payable for the Airport fund in the amount of $1,026,075. 3
12Finding 2020-001 Cause: City of Palm Springs Schedule of Findings For the Year Ended June 30, 2020 Internal Control Over Financial Reporting (Continued) The City did not properly follow its policies and procedures for evaluating, reviewing, and properly recording financial transactions. Context and Effect: Restatements of beginning balance as of July I, 2019 for both Government-Wide Financial Statements and Certain Individual Fund Financial Statements. Recommendation: The City should enhance its review processes over transactions to ensure that they are thoroughly evaluated, reviewed and recorded in order to facilitate the accurate and complete year-end closing of the general ledger and the preparation of its basic financial statements. Views of Responsible Officials and Planned Corrective Actions: Airport Capital Assets During the prior fiscal year FY18-19, projects were being constructed at the Airport. These included TSA renovations, Airfield design, and hold room chairs. After Management reviewed the projects in total the amounts of $647,433 should have been included as capital assets in construction in progress and therefore since have been adjusted. Loans Receivable These are three (3) Housing Projects of the City which include Sunset Hacienda, Vista Sunrise, and Desert Highland with original agreements recorded in 2004, 2005 and 2008, which were revised in 2007 and 2009, to provide additional funding to cover the unanticipated costs per the developer requests. The loan receivable amounts were not adjusted in the ledger to reflect the increase of $703,449. Staff has recorded the correct balances. Accounts Payable During a changeover in staff in FY16-l 7, $1,026,075 was recorded in Accounts Payable and in FYI 7-18 the same amount was recorded in Contracts Payable resulting in a duplicate recording. This has been reversed out, resulting in an increase in fund balance by $1,026,075 in FY19-20. With new staff and Management in the Finance Department, we have set-up internal controls to review and have implemented new procedures. 4
13City of Palm Springs Schedule of Findings For the Year Ended June 30, 2020 Finding 2020-002 Internal Service Funds Criteria: Internal Service Funds are permitted to be used "to report any activities that provide goods or services to other funds, departments, or agencies of the primary government and its component units, or other governments, on a cost-reimbursement basis." Condition: On July 1, 2019, the City reported deficits in the following Internal Service Funds: Cause: Employee Benefits Retiree Health Insurance Cogeneration Plant $(15,611, 732) $(149,264,756) $(2,943,183) Improper use of Internal Service Fund to account for Other Postemployment Benefits and inconsistent with the accounting methodology used for Pensions. Context and Effect: By the City reporting these (deficits) in the Internal Service Funds, other funds and particularly the General Fund, which is typically the majority of the Internal Service Funds activity, have overstated the liabilities and Fund Balance (Deficit) by the amount of the current portion of the long-term liability. Recommendation: The City should quantify the impact of reporting the associated liabilities in the General and Other Funds and either: 1. Discontinue the use of Internal Service Funds and provide the accounting allocation of costs to other funds and the General Fund in order to manage these activities. 2. Continue the use of Internal Service Funds with the strong monitoring by the City management on a monthly basis to ensure that the Internal Service Funds are allocating costs to the appropriate funds. 3. Conduct an evaluation to determine if contribution rates on an annual basis sufficient to achieve a balanced fund balance with sufficient reserves sufficient to pay off liabilities as they come due over time. If a government does not intend to recover the full cost of providing goods or services, the use of an Internal Service Fund would not be appropriate. 5
14Finding 2020-002 City of Palm Springs Schedule of Findings For the Year Ended June 30, 2020 Internal Service Funds (Continued) Views of Responsible Officials and Planned Corrective Actions: Employee Benefits Fund: In FY2014-15 prior staffhad reclassified the 2007 Pension Obligation Bond balance of $19,420,216 liability from General Government to the Internal Service Fund resulting in a negative ($15,611,732) fund balance. The logic behind this was that departments were charged internally for the annual payment, transferred to the Employee Benefits Fund where the debt principal and interest were paid. Staff has moved the debt liability to a Long-Term Debt Fund in General Government, resulting in a positive $5,669,184 ending FY19-20 (1) fund balance in the Employee Benefits Fund. Retiree Health Insurance Fund: In FY2017-18, prior staff had recorded an entry received from the auditor in the amount of $155,831,492 for OPEB that was recorded in the incorrect fund resulting in a negative ($149,264,756) fund balance. Staff has moved the debt liability to a Long-Term Debt Fund in General Government, resulting in a positive $2,141,107 FY 19-20 ending fund balance in the Retiree Health Insurance Fund. Cogeneration Plant Fund: The capital project was started in FY13-14 and completed in FYlS-16. During that period of time $4,928,602 was expensed and not capitalized which resulted in a negative ($2,943,183) fund balance. Staff has capitalized the asset which resulted in a positive $2,491,513 ending FY 19-20 (1) fund balance in the Cogenerations Plant Fund. (1) Adjustments posted in FY20-21 6
15THE II PUNGROUP ACCOUNTANTS & ADVISORS December 31, 2020 To the Honorable Mayor and the Members of the City Council of the City of Palm Springs Palm Springs, California We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Palm Springs, California (the "City") for the year ended June 30, 2020. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated March 16, 2020. Professional standards also require that we communicate the following information related to our audit. Significant Audit Matters Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 2 to the basic financial statements. As described in Note 2 to the financial statements, the City implemented the following accounting standards: New Accounting Standards GASE Statement No. 95 -In May 2020, GASB issued Statement No. 95, Postponement of the Effective Dates ofCertainAuthoritative Guidance. The primary objective ofthis Statement is to provide temporary relief to governments and other stakeholders in light of the COVID-19 pandemic. That objective is accomplished by postponing the effective dates of certain provisions in Statements and Implementation Guides that first became effective or are scheduled to become effective for periods beginning after June 15, 2018, and later. Application of this statement is effective immediately and did not have a material effect on City's financial statements for the fiscal year ending June 30, 2020. No other new accounting policies were adopted and the application of existing policies was not changed during 2020. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
16To the Honorable Mayor and the Members of the City Council of the City of Palm Springs Palm Springs, California Page2 Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City's financial statements were: • Management's estimate of the investment fair market value is based on information provided by Cal Trust for the City's investment in Certificate of Deposit which are based on quoted price in the active markets for identical assets, and U.S. Treasury Securities, Federal Agency Securities, Corporate Bonds, and Money Market Mutual Funds which are based on market prices. We evaluated the key factors and assumptions used to develop the investment fair market value in determining that it is reasonable in relation to the financial statements taken as a whole. • Management's estimate of the depreciation on capital assets is based on the industry standard and past experience on actual useful life of the asset groups. We evaluated the key factors and assumptions used to develop the depreciation on capital assets in determining that it is reasonable in relation to the financial statements taken as a whole. • Management's estimate of the net pension liability is based on the actuarial valuation on total pension liability and based on financial statements on fiduciary net position for CalPERS plans. We evaluated the key factors and assumptions used to develop the net pension liability in determining that it is reasonable in relation to the financial statements taken as a whole. • Management's estimate of the net other postemployment benefits ("OPEB") liability is based on the actuarial valuation on total OPEB liability and financial statements on fiduciary net position. We evaluated the key factors and assumptions used to develop the OPEB liability in determining that it is reasonable in relation to the financial statements taken as a whole. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were: • Note 9-Defined Benefits Pension Plan (PERS) • Note IO-Other Postemployment Benefits (OPEB) • Note 12 -Leasehold Interest • Note 16 -Hotel Incentive Program Payment Obligations • Note 17 -Commitments and Contingencies • Note 18 -Restatements • Note 19 -Settlement • Note 20 -Subsequent Events The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit.
17To the Honorable Mayor and the Members of the City Council of the City of Palm Springs Palm Springs, California Page3 Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated December 31, 2020. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to the Management's Discussion and Analysis ('MD&A"), Budgetary Comparison Schedules, the Schedules of Changes of in Net Pension Liability and Related Ratios, the Schedules of Contributions-Pensions, the Schedule of Changes in Net Other Postemployment Benefits Liability and Related Ratios, and the Schedule of Contributions -Other Postemployment Benefits, which are Required Supplementary Information ("RSI") that supplement the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
18To the Honorable Mayor and the Members of the City Council of the City of Palm Springs Palm Springs, California Page4 We were engaged to report on the Combining and Individual Nonmajor Fund Financial Statements, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the Introductory and the Statistical Sections, which accompany the financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Restriction on Use This information is intended solely for the information and use of the City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, Santa Ana, California
19City of Palm Springs Palm Springs, California Communication of Internal Control Matters Identified in the Audit For the Year Ended June 30, 2020 THE• PUNGllOUP ACCOUNTANTS & ADVISORS
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21City of Palm Springs Communication of Internal Control Matters Identified in the Audit For the Year Ended June 30, 2020 Table of Contents Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ................................................................................................. I Material Weaknesses: Finding 2020-001 -Internal Control Over Financial Reporting ......................................................................... 3 Finding 2020-002 -Internal Service Funds ........................................................................................................ 5
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23THE II PUNGROUP ACCOUNTANTS & ADVISORS INDEPENDENT AUDITOR'S 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 Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Palm Springs, California (the "City"), as of and for the year ended June 30, 2020, and the related notes to the basic financial statements, which collectively comprise City's basic financial statements and have issued our report thereon dated December 31, 2020. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material 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 and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings as items 2020-001 and 2020-002 that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
24Honorable Mayor and Mem hers of the City Council of the City of Palm Springs Palm Springs, California Page 2 The City's Response to Findings The City's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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 entity'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. Santa Ana, California December 31, 2020 2
25City of Palm Springs Schedule of Findings For the Year Ended June 30, 2020 Finding 2020-001 Internal Control Over Financial Reporting Criteria: Management is responsible for designing, implementing, and maintaining appropriate internal control over financial reporting and compliance. Management is also responsible for the accuracy of the financial statements including disclosures. As part of satisfying that responsibility, staff must possess the skills, knowledge, and experience necessary to complete the year-end close and must diligently employ the skills, knowledge, and experience to produce reliable and accurate financial information. Effective internal control over financial reporting provides reasonable assurance for the completeness and accuracy of accounting records and proper year-end closing. Internal control is defined as a process implemented and monitored by the City Council, management, and other personnel that provides reasonable assurance that the objectives of the City will be achieved. Internal control is not one event, but a series of events that occur throughout an entity's operations. The City's internal control system should be designed to provide reasonable assurance regarding the achievement of objectives in the following categories: • Reliability of financial reporting for internal and external use; • Effectiveness and efficiency of operations; and • Compliance with applicable laws and regulations. The Internal Control Framework should include establishing or enhancing guidance in the following areas: • Control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure. • Risk assessment is the entity's identification and analysis of relevant risks to achievement of its objectives, forming a basis for developing appropriate risk responses. • Control activities are the actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system. • Information and communication systems support the identification, capture, and exchange of information in a form and time frame that enables people to carry out their responsibilities. • Monitoring consists of activities management establishes and operates to assess the quality of performance over time. Conditions: We noted the City recorded the following prior period adjustments to correct transactions that were incurred in the previous year(s): 1. Reclassifying liabilities relating to Other Postemployment benefits a. Removed the liabilities from Internal Services Fund in the amount of $155,831,492. (see Finding 2020-002) b. Reallocated liabilities from Governmental Activities to Airport Fund and Wastewater funds in the amount of $10,626,310 and $876,004, respectively. 2. Understatement of Capital Assets for the Airport fund in the amount of $647,433. 3. Understatement of Loans Receivable in the amount of $703,449. 4. Overstatement of Accounts Payable for the Airport fund in the amount of $1,026,075. 3
26Finding 2020-001 Cause: City of Palm Springs Schedule of Findings For the Year Ended June 30, 2020 Internal Control Over Financial Reporting (Continued) The City did not properly follow its policies and procedures for evaluating, reviewing, and properly recording financial transactions. Context and Effect: Restatements of beginning balance as of July 1, 2019 for both Government-Wide Financial Statements and Certain Individual Fund Financial Statements. Recommendation: The City should enhance its review processes over transactions to ensure that they are thoroughly evaluated, reviewed and recorded in order to facilitate the accurate and complete year-end closing of the general ledger and the preparation of its basic financial statements. Views of Responsible Officials and Planned Corrective Actions: Airport Capital Assets During the prior fiscal year FY18-19, projects were being constructed at the Airport. These included TSA renovations, Airfield design, and hold room chairs. After Management reviewed the projects in total the amounts of $647,433 should have been included as capital assets in construction in progress and therefore since have been adjusted. Loans Receivable These are three (3) Housing Projects of the City which include Sunset Hacienda, Vista Sunrise, and Desert Highland with original agreements recorded in 2004, 2005 and 2008, which were revised in 2007 and 2009, to provide additional funding to cover the unanticipated costs per the developer requests. The loan receivable amounts were not adjusted in the ledger to reflect the increase of $703,449. Staff has recorded the correct balances. Accounts Payable During a changeover in staff in FY16-17, $1,026,075 was recorded in Accounts Payable and in FY17-18 the same amount was recorded in Contracts Payable resulting in a duplicate recording. This has been reversed out, resulting in an increase in fund balance by $1,026,075 in FY19-20. With new staff and Management in the Finance Department, we have set-up internal controls to review and have implemented new procedures. 4
27Finding 2020-002 Criteria: City of Palm Springs Schedule of Findings (Continued) For the Year Ended June 30, 2020 Internal Service Funds Internal Service Funds are permitted to be used "to report any activities that provide goods or services to other funds, departments, or agencies of the primary government and its component units, or other governments, on a cost-reimbursement basis." Condition: On July 1, 2019, the City reported deficits in the following Internal Service Funds: Cause: Employee Benefits Retiree Health Insurance Cogeneration Plant $(15,611,732) $(149,264,756) $(2,943, 183) Improper use of Internal Service Fund to account for Other Postemployment Benefits and inconsistent with the accounting methodology used for Pensions. Context and Effect: By the City reporting these (deficits) in the Internal Service Funds, other funds and particularly the General Fund, which is typically the majority of the Internal Service Funds activity, have overstated the liabilities and Fund Balance (Deficit) by the amount of the current portion of the long-term liability. Recommendation: The City should quantify the impact of reporting the associated liabilities in the General and Other Funds and either: 1. Discontinue the use of Internal Service Funds and provide the accounting allocation of costs to other funds and the General Fund in order to manage these activities. 2. Continue the use of Internal Service Funds with the strong monitoring by the City management on a monthly basis to ensure that the Internal Service Funds are allocating costs to the appropriate funds. 3. Conduct an evaluation to determine if contribution rates on an annual basis sufficient to achieve a balanced fund balance with sufficient reserves sufficient to pay off liabilities as they come due over time. If a government does not intend to recover the full cost of providing goods or services, the use of an Internal Service Fund would not be appropriate. 5
28Finding 2020-002 City of Palm Springs Schedule of Findings (Continued) For the Year Ended June 30, 2020 Internal Service Funds (Continued) Views of Responsible Officials and Planned Corrective Actions: Employee Benefits Fund: In FY2014-15 prior staff had reclassified the 2007 Pension Obligation Bond balance of $21,696,212 liability from General Government to the Internal Service Fund. The logic behind this was that departments were charged internally for the annual payment, transferred to the Employee Benefits Fund where the debt principal and interest were paid. Staff has moved the debt liability to a Long-Term Debt Fund in General Government, resulting in a $5,161,244 ending fund balance in the Employee Benefits Fund. Retiree Health Insurance Fund: In FY2017-18, prior staff had recorded an entry received from the auditor in the amount of $145,410,862 for OPEB that was recorded in the incorrect fund resulting in a negative fund balance. Staff has moved the debt liability to a Long-Term Debt Fund in General Government, resulting in a $2,141,107 ending fund balance in the Retiree Health Insurance Fund. Cogeneration Plant Fund: The capital project was started in FY13-14 and completed in FY15-16. During that period of time $4,928,602 was expensed and not capitalized which resulted in a negative $2,437,088 fund balance. Staff has capitalized the asset which resulted in a $2,491,513 positive fund balance. 6
29City of Palm Springs Palm Springs, California Independent Auditors' Report on Compliance with Requirements Applicable to the Passenger Facility Charge Program For the Year Ended June 30, 2020 THE• PUN GROUP ACCOUNTANTS & v\DVIS0RS
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31Independent Auditors' Reports: City of Palm Springs Passenger Facility Charge Program For the Year Ended June 30, 2020 Table of Contents Report on Compliance with Requirements Applicable to the Passenger Facility Charge Program: Report on Internal Control Over Compliance, and Report on Schedule of Passenger Facility Charges Collection and Expenditures .......................... -............................... 1 Schedule of Collections and Expenditures -Cash Basis ........................................................................................... 3 Notes to Schedule of Passenger Facility Charge (PFC) Collection and Expenditures ............................................... 5 Schedule of Findings and Questioned Costs .............................................................................................................. 6
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33lHE II PUNGROUP ACCOUNTANTS & ADVISORS INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE PASSENGER FACILITY CHARGE PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON SCHEDULE OF PASSENGER FACILITY CHARGES COLLECTION AND EXPENDITURES To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California Report on Compliance for Passenger Facility Charge Program We have audited the compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration, for the City of Palm Springs, California (the "City") passenger facility charge program for the year ended June 30, 2020. Management's Responsibility Management is responsible for the compliance with the Passenger Facility Charge Audit Guide for Public Agencies applicable to its passenger facility charge program. Auditors' Responsibility Our responsibility is to express an opinion on compliance with the requirements as described in the Passenger Facility Charge Audit Guide for Public Agencies. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration. Those standards and the Audit Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a material effect on the City's passenger facility charge program. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the City's passenger facility charge program. However, our audit does not provide a legal determination of City's compliance with those requirements. Opinion In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that are applicable to the City's passenger facility charge program for the year ended June 30, 2020. Report on Internal Control Over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types ofrequirements that could have a material effect on the City's passenger facility charge program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the City's passenger facility charge program and to test and report on internal control over compliance in accordance with the Passenger Facility Charge Audit Guide for Public Agencies, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City's internal control over compliance. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
34To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California Page 2 A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with the compliance requirement of the passenger facility charge program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with the compliance requirement of the passenger facility charge program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with the compliance requirement of the passenger facility charge program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Passenger Facility Charge Audit Guide for Public Agencies. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Passenger Facility Charges Collection and Expenditures We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2020, and have issued our report thereon dated December 31, 2020 which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming our opinions on the City's financial statements. The accompanying Schedule of Passenger Facility Charges Collections and Expenditures, as required by the Audit Guide, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain other procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Passenger Facility Charges Collections and Expenditures is fairly stated in all material respects in relation to the basic financial statements as a whole. Santa Ana, California December 31, 2020 2
35City of Palm Springs Passenger Facility Charge Program Schedule of Collections and Expenditures -Cash Basis For the Year Ended June 30, 2020 Adjusted Beginning Balance PFC Bond DescriEtion Unli9uidated PFC Revenues I Proceeds Cash receipts and disbursement month ended July 31, 2019 $ 8,848,952 Cash receipts and disbursement month ended August 31, 2019 26,888,174 Cash receipts and disbursement month ended September 30, 2019 27,147,068 Cash receipts and disbursement month ended October 31, 2019 27,467,561 Cash receipts and disbursement month ended November 30, 2019 27,886,078 Cash receipts and disbursement month ended December 31, 2019 28,370,889 Cash receipts and disbursement month ended January 31, 2020 28,509,146 Cash receipts and disbursement month ended February 28, 2020 29,038,288 Cash receipts and disbursement month ended March 31, 2020 29,605,880 Cash receipts and disbursement month ended April 30, 2020 30,398,624 Cash receipts and disbursement month ended May 31, 2020 30,939,759 Cash receipts and disbursement month ended June 30, 2020 31,069,361 $ 326,169,780 1 PFC revenues are reported when the cash is received. 2 Unliquidated PFC are collections that have not bee! applied to approved PFC projects. See Notes to Schedule of Passenger Facility Charge Collections and Expenditures. 3 $ 253,152 $ 25,600,563 241,303 274,322 370,964 446,507 506,750 503,937 534,423 752,319 520,930 123,844 1,673 $ 4,530,124 $ 25,600,563 Interest Earned $ 15,213 19,763 52,691 41,033 38,304 42,883 33,205 33,169 40,425 20,205 5,758 2,195 $ 344,844
36City of Palm Springs Passenger Facility Charge Program Schedule of Collections and Expenditures -Cash Basis (Continued) For the Year Ended June 30, 2020 Bond Description Payment Cash receipts and disbursement month ended July 31, 2019 $ (7,353,549) Cash receipts and disbursement month ended August 31, 2019 Cash receipts and disbursement month ended September 30, 2019 Cash receipts and disbursement month ended October 31, 2019 Cash receipts and disbursement month ended November 30, 2019 Cash receipts and disbursement month ended December 31, 2019 Cash receipts and disbursement month ended January 31, 2020 Cash receipts and disbursement month ended February 28, 2020 Cash receipts and disbursement month ended March 31, 2020 Cash receipts and disbursement month ended April 30, 2020 Cash receipts and disbursement month ended May 31, 2020 Cash receipts and disbursement month ended June 30, 2020 (1,530,000) $ (8,883,549) See Notes to Schedule of Passenger Facility Charge Collections and Expenditures. 4 Expenditures Transfers Total Total $ (476,157) $ (2,172) (6,520) 6,520 (411,376) (8,000) (556,750) (5,217,932) $ (1,454,455) $ (5,217,932) Ending Balance Unliquidated PFC2 $ 26,888,174 27,147,068 27,467,561 27,886,078 28,370,889 28,509,146 29,038,288 29,605,880 30,398,624 30,939,759 31,069,361 23,768,547
37City of Palm Springs Passenger Facility Charge Program Notes to Schedule of Passenger Facility Charge Collections and Expenditures For the Year Ended June 30, 2020 Note 1-Basis of Presentation The accompanying Schedule of Passenger Facility Charge Collections and Expenditures (Schedule) includes all the Passenger Facility Charges ("PFC") and the interest earnings thereon collected by the City of Palm Springs from July 1, 2019 through June 30, 2020. This schedule is presented on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The information in this Schedule is presented for purposes of additional analysis as specified in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration. Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements of the City. PFC expenditures may consist of approved capital projects costs, administrative costs and bond financing costs, if requested in application. Eligible expenditures not requested or approved in the application are not applied against PFC collection. The accompanying Schedule includes the eligible expenditures that have been applied against PFC collection as of June 30, 2020. 5
38City of Palm Springs Passenger Facility Charge Program Schedule of Findings and Questioned Costs For the Year Ended June 30, 2020 Section I -Summary of Auditors' Results A. Current Year Findings and Questioned Costs -Passenger Facility Charge Program No findings or questioned costs were noted on the City's compliance with requirements of the passenger facility charge program for the year ended June 30, 2020. B. Prior Year Findings and Questioned Costs -Passenger Facility Charge Program No findings or questioned costs were noted on the City's compliance with requirements of the passenger facility charge program for the year ended June 30, 2019. 6
39City of Palm Springs Public Financing Authority (A Component Unit of the City of Palm Springs, California) Palm Springs, California Independent Auditors' Report and Basic Financial Statements For the Year Ended June 30, 2020 THE·• PUN GROUP ACCOUNTANTS & ADVISORS
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41City of Palm Springs Public Financing Authority Basic Financial Statements For the Year Ended June 30, 2020 Table of Contents Independent Auditors' Reports: Report on the Financial Statements ................................................................................................................. 1 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 ............................................................................... 3 Basic Financial Statements: Statement of Net Position .................................................................................................................................... 7 Statement of Revenues, Expenses, and Changes in Net Position ........................................................................ 8 Statement of Cash Flows ..................................................................................................................................... 9 Notes to the Basic Financial Statements ........................................................................................................... 15 Supplementary Information: Combining Statement of Net Position by Bond Program ................................................................................. 29 Combining Statement of Revenues, Expenses, and Changes in Net Position by Bond Program ................................................................................................................... 30 Combining Statement of Cash Flows by Bond Program .................................................................................. 31
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43THE II PUNGROUP ACCOUNTANTS & ADVISORS INDEPENDENT AUDITORS' REPORT To the Board of Directors of the City of Palm Springs Public Financing Authority Palm Springs, California Report on the Financial Statements We have audited the accompanying financial statements of the City of Palm Springs Public Financing Authority (the "Authority"), a component unit of the City of Palm Springs, California (the "City"), as of and for the year ended June 30, 2020, and the related notes to the basic financial statements, which collectively comprise the Authority's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Authority's preparation and fair presentation of the financial statements 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, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority as of June 30, 2020, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
44To the Board of Directors of the City of Palm Springs Public Financing Authority Palm Springs, California Page 2 Emphasis of Matter As described in Note 1 to the basic financial statements, these financial statements present only the Palm Springs Public Financing Authority and do not purport to and do not present fairly the financial position of the City as of June 30, 2020, the changes in its financial position, or where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is no modified with respect to this matter. Other Matters Required Supplementary Information Management has omitted the 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 on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority's basic financial statements. The Combining and Individual Fund Financial Statements, the Schedules of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual and the Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining Financial Statements by Bond Program are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining Financial Statements by Bond Program are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 31, 2020 on our consideration of the Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Authority's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority's internal control over financial reporting and compliance. Santa Ana, California December 31, 2020 2
45THE II PUNGROUP ACCOUNTANTS & ADYISOR.S 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 Independent Auditors' Report To the Board of Directors of the City of Palm Springs Public Financing Authority Palm Springs, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the City of Palm Springs Public Financing Authority (the "Authority"), a component unit of the City of Palm Springs, California (the "City"), as of and for the year ended June 30, 2020, and the related notes to the basic financial statements, which collectively comprise the Authority's basic financial statements, and have issued our report thereon dated December 31, 2020. 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") to determine 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 may exist that have not been identified. 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 determination of financial statement amounts. 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. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
46To the Board of Directors of the City of Palm Springs Public Financing Authority Palm Springs, California Page 2 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 Authority's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Santa Ana, California December 31, 2020 4
47BASIC FINANCIAL STATEMENTS s
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49City of Palm Springs Public Financing Authority Statement of Net Position June 30, 2020 ASSETS Current Assets: Lease receivable -current portion (Note 3) Restricted cash and investments with fiscal agent Total current assets Noncurrent Assets: Lease receivable -noncurrent portion (Note 3) Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred charges from debt refunding Total deferred outflows of resources LIABILITIES Current Liabilities: Interest payable Bonds payable, due within one year (Note 4) Total current liabilities Noncurrent Liabilities: Bonds payable, due in more than one year (Note 4) Total noncurrent liabilities Total liabilities NET POSITION Restricted for debt services Unrestricted ( deficit) Total Net Position (Deficit) See accompanying Notes to the Basic Financial Statements. 7 $ 5,275,000 3,247,381 8,522,381 95,185,000 95,185,000 103,707,381 2,227,387 2,227,387 595,796 5,275,000 5,870,796 101,312,208 101,312,208 107,183,004 2,171,069 (3,419,305) $ (1,248,236)
50City of Palm Springs Public Financing Authority Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2020 OPERATING REVENUES: Lease revenues Total operating revenue Operating income NONOPERA TING REVENUES (EXPENSES): Interest revenue Interest expense and fiscal charges Total nonoperating revenues (expenses) Change in net position NET POSITION (DEFICIT): Beginning of year End of year See accompanying Notes to the Basic Financial Statements. 8 $ 4,633,085 4,633,085 4,633,085 50,881 (4,314,939) {4,264,058) 369,027 (1,617,263) $ (1,248,236)
51City of Palm Springs Public Financing Authority Statement of Cash Flows For the Year Ended June 30, 2020 Cash Flows from Operating Activities: Cash received from lessee Net cash provided by operating activities Cash Flows From Capital and Related Financing Activities: Principal paid on long-term debt Interest paid on long-term debt Net cash used in capital and related financing activities Cash Flows from Investing Activities Interest received Net cash provided by investing activities Net change in cash and cash equivalents Cash and Cash Equivalents: Beginning of year End of year Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Changes in assets and liabilities: Decrease (increase) in lease receivable Total adjustments Net cash provided by operating activities See accompanying Notes to the Basic Financial Statements. 9 $ 9,663,085 9,663,085 (5,030,000) (4,643,107) (9,673,107) 50,881 50,881 40,859 3,206,522 $ 312471381 $ 4,633,085 5,030,000 5,030,000 $ 9,663,085
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53NOTES TO THE BASIC FINANCIAL STATEMENTS 11
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55City of Palm Springs Public Financing Authority Index to the Notes to the Basic Financial Statements For the Year Ended June 30, 2020 Note 1-Summary of Significant Accounting Policies ........................................................................................ 15 A Financial Reporting Entity .......................................................................................................................... 15 B. Basis of Accounting and Measurement Focus ............................................................................................ 15 C. Cash and Investments .................................................................................................................................. 15 D. Investments Valuation and Fair Value Measurement ................................................................................. 16 E. Long-term Debt ........................................................................................................................................... 16 F. Net Position ................................................................................................................................................. 16 G. Use of Estimates .......................................................................................................................................... 16 H. Implementation of New GASB Pronouncements ....................................................................................... 16 Note 2 -Cash and Investments ............................................................................................................................. 17 A Investments Authorized by Debt Agreement. ............................................................................................. 17 B. Risk Disclosures .......................................................................................................................................... 17 Note 3 -Lease Receiva hie ...................................................................................................................................... 19 A 2012 Series B Lease Revenue Bonds .......................................................................................................... 19 B. Convention Center ...................................................................................................................................... 19 C. 2015 Lease Revenue Refunding Bonds ...................................................................................................... 19 D. 2017 Lease Revenue Refunding Bonds ...................................................................................................... 19 Note 4-Long-term Liabilities .............................................................................................................................. 20 A 2012A Lease Revenue Bonds (Convention Center) ................................................................................... 21 B. 2014A Lease Revenue Bonds (Convention Center) ................................................................................... 21 C. 2012 Series B Lease Revenue Bonds (Measure 1) ...................................................................................... 22 D. 2015 Lease Revenue Refunding Bonds ...................................................................................................... 23 E. 2017 Lease Revenue Refunding Bonds ...................................................................................................... 24 Note 5 -Contingencies ........................................................................................................................................... 24 Note 6 -Net Position Deficit .................................................................................................................................. 25 13
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57City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements For the Year Ended June 30, 2020 Note 1 -Summary of Significant Accounting Policies The basic financial statements of the City of Palm Springs Public Financing Authority (the "Authority") have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") as applied to governmental agencies. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the Authority's significant policies: A. Financial Reporting Entity The Authority was created by a joint exercise of powers agreement between the City of Palm Springs (the "City") and the former Redevelopment Agency of the City on February 1, 1991. The purpose of the Authority is to provide, through the issuance of debt, financing necessary for various capital improvements. The Authority is a component unit and an integral part of the reporting entity of the City. Administrative and related normal business expenses incurred in the day-to-day operations of the Authority are provided by the City and are not included in the accompanying basic financial statements. Such expenses are insignificant to the Authority's operations. The funds of the Authority have been included within the scope of the financial statements of the City because the City Council of the City is the governing board and has financial accountability over the operations of the Authority. Only the financial activity of the Authority is included herein and these financial statements, therefore, do not purport to represent the financial position or results of operations of the City. B. Basis of Accounting and Measurement Focus The Authority's basic financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows for each major Proprietary Fund. The basic financial statements are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets, deferred outflows of resources, liabilities (whether current or noncurrent), and deferred inflows of resources are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Fund Net Position presents increases (revenues) and decreases (expenses) in total 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. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts. Operating revenues are those revenues that are generated from the primary operations which is the lease payments received from the City. Operating expenses are those expenses that are essential to the primary operations which are the cost of administrating the services. All other revenues and expenses are reported as non-operating revenues or expenses. C. Cash and Investments The Authority's cash and investments are held by a fiscal agent. Investments have been made only as permitted by specific State Statutes governing their investments or applicable Authority resolution or bond indenture. 15
58City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 1 -Summary of Significant Accounting Policies (Continued) D. Investment Valuation and Fair Value Measurement Investments in nonparticipating interest earning contracts (including investment agreements) are reported at cost, and all other investments at fair value. U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosures about fair value measurement. Investments, unless otherwise specified, recorded at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The three levels of the fair value measurement hierarchy are described below: Level 1 -Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. Level 2 -Inputs, other than quoted prices included in Level 1, that are observable for the assets or liabilities through corroboration with market data at the measurement date. Level 3 -Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the assets or liabilities at the measurement date. E. Long-Term Debt Bond premium and discounts are deferred and amortized over the life of the bonds. Bonds payable are reported net of applicable bond premium or discount. Gains or losses from refunding are deferred and amortize over the shorter of the life of the refunded debt or the life of the refunding debt and are reported in deferred inflows or deferred outflows of resources. F. Net Position Net position is classified as restricted for debt service. This consists of funds held by trustee for the repayment of debt principal or interest or as reserve. G. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. H. Implementation of New GASB Pronouncements GASB Statement No. 95 -In May 2020, GASB issued Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance. The primary objective of this Statement is to provide temporary relief to governments and other stakeholders in light of the COVID-19 pandemic. That objective is accomplished by postponing the effective dates of certain provisions in Statements and Implementation Guides that first became effective or are scheduled to become effective for periods beginning after June 15, 2018, and later. Application of this statement is effective immediately and did not have a material effect on Authority's basic financial statements for the year ended June 30, 2020. 16
59City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 2-Cash and Investments At June 30, 2020, the Authority's cash and investments are held by fiscal agents totaling $3,247,381. Fiscal agents are mandated by bond indentures as to the types of investments in which debt proceeds can be invested. A. Investments Authorized by Debt Agreements Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the investment policy of the City of Palm Springs. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk. B. Risk Disclosures Interest Rate Risk Authorized Investment Type U.S. Treasury Obligations Local Agency Bonds Federal Agencies Bankers' Acceptances Commercial Paper Medium-term Corporate Notes Money Market Mutual Funds Mutual Funds, investing in eligible securities Local Agency Investment Fund (LAIF) Collateralized Certificate of Deposit Maximum Maturity 5 years 5 years 5 years 180 days 270 days 5 years 90 days n/a n/a 1 year Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Authority manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the Authority's investments held by bond trustee to market interest rate fluctuations is provided by the following table that shows the distribution of these investments by maturity: Maturit~ Fair Value 6 Months Measurement Authorized Investment T~Ee Total or Less Ineut Money Market Mutual Fund $ 3,247,381 $ 3,247,381 Level2 17
60City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 2 -Cash and Investments (Continued) B. Risk Disclosures (Continued) Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City of Palm Springs, or debt agreements, and the actual rating as of year-end for each investment type. The U.S. treasury securities are not analyzed since they are not deemed to have credit risk. Authorized Investment TYJ)e Total Rating Money Market Mutual Fund $ 3,247,381 AAA Concentration of Credit Risk The investment policy of the City contains no limitation on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. There were no investments in any one issuer that represent 5% or more of the total Authority investment. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposit or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposit or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. For investments identified herein as held by bond trustee. the bond trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investments on behalf of the reporting government. 18
61City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 3 -Lease Receivable A. 2012 Series B Lease Revenue Bonds On June 6, 2012, the Authority issued $44,965,000 Lease Revenue Bonds, Series B to provide funds for the financing and acquisition and construction of public improvements. The bonds are payable from the revenues pledged under the Indenture of Trust, consisting primarily of lease payments to be made by the City of Palm Springs to the Authority as rental for certain City owned property and from certain funds held under the Indenture of Trust and insurance or condemnation awards. The lease receivable at June 30, 2020, is $34,070,000. B. Convention Center On April 1, 1991, the Authority issued $50,668,512 of Lease Revenue Bonds, 1991 Series A, to provide funds for the advance refunding of certain outstanding certificates of participation previously sold to refinance the convention center facilities in the City of Palm Springs, and to finance the construction and acquisition of certain additional improvements and land relating to the convention center facilities. On October 1, 1997, the Authority issued $12,300,000 of Lease Revenue Bonds, 1997 Series A Bonds. On September 30, 2001, the Authority issued $28,540,000 of Lease Revenue Refunding Bonds, 2001 Series A to provide funds for the advance refunding of certain 1991 Series A bonds. In May 2004, the Authority issued $62,395,000 of Lease Revenue Bonds to provide funds for the advance refunding of the 1997 Revenue Bonds and to finance certain improvements to the Convention Center. In February 2012, the Authority issued $23,980,000 Lease Revenue Bonds to provide funds for the refunding of the 2001 Lease Revenue Bonds. In July 2014, the Authority issued 45,550,000 of lease revenue bonds, Series A to provide for the current refunding of the Lease revenue bonds, 2004. For the use and possession of the convention center facilities, the City entered into a lease agreement with the Authority on April 1, 1991, and amended the lease on October 1, 1997, September 30, 2001, and on May 13, 2004. The amended lease agreements terminate on the dates on which the bonds are paid or deemed to have been paid in full. The City agrees to pay semiannual lease payments as rent for the use and occupancy of the convention center facilities. Lease payments which commenced on October 15, 1991, are payable each April 15 and October 15, in amounts sufficient to pay the principal and interest coming due on the bonds. The lease receivable for all debt issues at June 30, 2020, is $54,535,000. C. 2015 Lease Revenue Refunding Bonds On December 1, 2015, the City of Palm Springs Public Financing Authority issued $5,680,000 Lease Revenue Refunding Bonds. The proceeds from the issuance were used to refund the 2002A Certificates of Participation, which were used to fund capital projects related to the downtown parking structure. The City agrees to pay semiannual lease payments as rent for the use of the downtown parking projects site. On or before each lease payment date, the City is obligated to deposit with the trustee the full amount of the lease payment coming due and payable on the next interest payment date. The lease receivable at June 30, 2020, is $4,555,000. D. 2017 Lease Revenue Refunding Bonds On June 13, 2017, the City of Palm Springs Financing Authority issued $9,970,000 Lease Revenue Refunding Bonds, Series 2017 to defease the outstanding balance of the Refunding Lease Revenue Bonds, Series 2007. The Bonds are payable from Lease payments to be made by the City of Palm Springs to the Authority as rental for certain real property and the improvements consisting of the City's police department headquarters and a municipally owned golf course. The lease receivable at June 30, 2020, is $7,300,000. 19
62City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 3 -Lease Receivable (Continued) D. 2017 Lease Revenue Refunding Bonds (Continued) Future estimated minimum lease payments to be received are as follows: 2012 Series B 2015 Refunding Lease Revenue Convention Lease Revenue 2017 Lease Year Ending June 30, Bonds Center Bonds Refunding Bonds 2021 $ 3,186,363 $ 4,688,219 $ 642,125 $ 1,201,550 2022 3,186,363 4,686,368 650,125 1,203,950 2023 3,183,763 4,763,231 656,625 1,199,750 2024 3,186,013 4,766,437 715,250 1,199,450 2025 3,183,763 4,772,219 706,250 1,198,750 2026-2030 15,934,838 24,321,031 2,186,250 2,412,400 2031-2035 15,933,738 24,430,684 2036 4,885,312 Total $ 9,718,257 9,726,806 9,803,369 9,867,150 9,860,982 44,854,519 40,364,422 4,885,312 Total 47,794,841 77,313,501 5,556,625 8,415,850 139,080,817 Less: Amount representing interest (13,724,841) (22,778,501) (1,001,625) (1,115,850) (38,620,817) Total principal outstanding $ 34,070,000 $ 54,535,000 $ 4,555,000 $ 7,300,000 $ 100,460,000 Current $ 5,275,000 Noncurrent $ 95,185,000 Note 4-Long-Term Debt The following is summary of changes in long-term liabilities for the year ended June 30, 2020: Balance Balance Due within Due in More Jul~ I, 2019 Additions Deletions June 30, 2020 One Year Than One Year Public Borrowings: 2012A Lease Revenue Bonds $ 15,185,000 $ -$ (1,420,000) $ 13,765,000 $ 1,460,000 $ 12,305,000 Unamortized premium 146,974 (60,820) 86,154 86,154 2014 Lease Revenue Bonds 41,550,000 (780,000) 40,770,000 825,000 39,945,000 Unamortized premium 3,940,917 (225,196) 3,715,721 3,715,721 2012 Series B Lease Revenue Bond 35,630,000 (1,560,000) 34,070,000 1,625,000 32,445,000 Unamortized premium 1,018,440 (72,248) 946,192 946,192 2015 Lease Revenue Refunding Bonds 4,920,000 (365,000) 4,555,000 425,000 4,130,000 Unamortized premium 685,753 (87,301) 598,452 598,452 2017 Lease Revenue Refunding Bonds 8,205,000 (905,000) 7,300,000 940,000 6,360,000 Unamortized premium 749,694 160,339 029,344l 780,689 780,689 Total long-term debt $ 112,031,778 $ 160,339 $ (5,604,909~ $ 106,587,208 $ 5,275,000 $ 101,312,208 20
63City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 4-Long-Term Debt (Continued) A. 2012A Lease Revenue Bonds (Convention Center) B. On February 1, 2012, the Authority issued $23,980,000 Lease Revenue Bonds, Series A to provide funds for the current refunding of the Lease Revenue Bonds, 2001 Series A. The bonds are payable from the revenues pledged under the Indenture of Trust, consisting primarily of lease payments by the City of Palm Springs to the Authority as rental for the City Convention Center and from certain funds held under the Indenture of Trust and insurance or condemnation awards. The bonds accrue interest at rates between 2.00% and 5.00%. The principal amounts mature between November 1, 2012 and November 1, 2025, ranging from $1, 180,000 to $2,865,000. The required reserve for the 2012A and 2014A Convention Center Lease Revenue Bond is $5,005,928 and is satisfied with a Municipal Bond Debt Service Reserve Insurance Policy deposited in the reserve fund, and fully funded at June 30, 2020. The amount of bonds outstanding at June 30, 2020, is $13,765,000 with unamortized premium of$86,154. The outstanding bonds contain a provision that if any event of default should occur, the Trustee, as assignee to the Authority, may elect not to terminate the lease agreement and may re-enter and re-let the facilities and may enforce the lease agreement and hold the City liable for all lease payments on an annual basis while re-entering and re-letting the facilities. Alternatively, the Trustee may elect to terminate the lease agreement and may re-enter and re-let the facilities and seek to recover all costs, losses or damages caused by the City's default. Future debt service requirements are as follows: Year Ending June 30, Princieal Interest Total 2021 $ 1,460,000 $ 496,363 $ 1,956,363 2022 1,505,000 446,887 1,951,887 2023 2,550,000 370,500 2,920,500 2024 2,645,000 278,706 2,923,706 2025 2,740,000 189,488 2,929,488 2026-2030 2,865,000 71,625 2,936,625 Total $ 13,765,000 $ 1,853,569 $ 15,618,569 2014A Lease Revenue Refunding Bonds (Convention Center) On July 24, 2014, the Authority issued $45,550,000 Lease Revenue Bonds, Series A to provide funds for the current refunding of the Lease Revenue Bonds, 2004. The bonds are payable from the revenues pledged under the Indenture of Trust, consisting primarily of lease payments by the City of Palm Springs to the Authority as rental for the City Convention Center and from certain funds held under the Indenture of Trust and insurance or condemnation awards. The bonds accrue interest at rates between 3.50% and 5.00%. The principal amounts mature between November 1, 2014 and August 1, 2035, ranging from $650,000 to $4,825,000. The required reserve for the 2012A and 2014A Convention Center Lease Revenue Bond is $5,005,928 and is satisfied with a Municipal Bond Debt Service Reserve Insurance Policy deposited in the reserve fund, and fully funded at June 30, 2020. The amount of bonds outstanding at June 30, 2020, is $40,770,000 with unamortized premium of $3,715,721. 21
64City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 4 -Long-Term Debt (Continued) B. 2014A Lease Revenue Refunding Bonds (Convention Center) (Continued) C. The Authority reduced the aggregate debt service payments by $22,528,329 over the remaining maturity period of the 2014 A Convention Center Lease Revenue Bonds to obtain an economic gain of $17,974,052 ( difference between the present values of the debt service payments on the old and new debt). The bond refunding has deferred refunding charges of $2,127,885. The outstanding bonds contain a provision that if any event of default should occur, the Trustee, as assignee of the Authority, may elect not to terminate the lease agreement and may re-enter and re-let the leased property and may enforce the lease agreement and hold the City liable for all lease payments on an annual basis while re-entering and reletting the leased property. Such re-entry and reletting shall not affect a surrender of the lease agreement. Alternatively, the Trustee may elect to terminate the lease agreement and may re-enter and re-let the leased property and seek to recover all costs, losses or damages caused by the City's default. Future debt service requirements are as follows: Year Ending June 30, Princieal Interest Total 2021 $ 825,000 $ 1,906,856 $ 2,731,856 2022 870,000 1,864,481 2,734,481 2023 1,842,731 1,842,731 2024 1,842,731 1,842,731 2025 1,842,731 1,842,731 2026-2030 13,390,000 7,994,406 21,384,406 2031-2035 20,860,000 3,570,684 24,430,684 2036 4,825,000 60,312 4,885,312 Total $ 40,770,000 $ 20,924,932 $ 61,694,932 2012 Series B Lease Revenue Bonds (Measure J) On June 6, 2012, the Authority issued $44,965,000 Lease Revenue Bonds, Series B to provide funds for the financing and acquisition and construction of public improvements. The bonds are payable from the revenues pledged under the Indenture of Trust, consisting primarily of lease payments to be paid by the City of Palm Springs to the Authority as rental for certain City owned property and from certain funds held under the Indenture of Trust and insurance or condemnation awards. The bonds accrue interest at rates between 2.00% and 5.25%. The principal amounts mature between June 1, 2013 and June 1, 2035, ranging from $1,135,000 to $3,050,000. The total outstanding at June 30, 2020, is $34,070,000 including $946,192 of unamortized premium. The outstanding bonds contain a provision that if any event of default should occur, the Trustee, as assignee of the Authority, may elect not to terminate the lease agreement and may re-enter and re-let the leased property and may enforce the lease agreement and hold the city liable for all lease payments on an annual basis while re-entering and reletting the leased property. Alternatively, the Trustee may elect to terminate the lease agreement and may re-enter and re-let the leased property and seek to recover all costs, losses or damages caused by the City's default. 22
65City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 4 -Long-Term Debt (Continued) C. D. 2012 Series B Lease Revenue Bonds (Measure J) (Continued) Future debt service payments are as follows: Year Ending June 30, Princieat Interest Total 2021 $ 1,625,000 $ 1,561,363 $ 3,186,363 2022 1,690,000 1,496,363 3,186,363 2023 1,755,000 1,428,763 3,183,763 2024 1,845,000 1,341,013 3,186,013 2025 1,935,000 1,248,763 3,183,763 2026-2030 11,240,000 4,694,838 15,934,838 2031-2035 13,980,000 1,953,738 15,933,738 Total $ 34,070,000 $ 13,724,841 $ 47,794,841 2015 Lease Revenue Refunding Bonds On December I, 2015, the Authority issued $5,680,000 Lease Revenue Refunding Bonds. The proceeds from the issuance were used to refund the 2002A Certificates of Participation, which were used to fund capital projects related to the downtown parking structure. Interest on the bonds range between 2.0% to 5.0% and the final maturity date is November I, 2027. The total bonds outstanding at June 30, 2020, is $4,555,000 including $598,452 ofunamortized premium. The outstanding bonds contain a provision that if any event of default should occur, the Trustee, as assignee of the Authority, may elect to terminate the lease agreement and may re-enter and re-let the leased property and may enforce the lease agreement and hold the City liable for all Lease Payments on an annual basis while re-entering and reletting the leased property. Alternatively, the Trustee may elect to terminate the lease agreement and may re-enter and re-let the leased property and seek to recover all costs, losses or damages caused by the City's default. Future debt service payments are as follows: Year Ending June 30, Princieat Interest Total 2021 $ 425,000 $ 217,125 $ 642,125 2022 455,000 195,125 650,125 2023 485,000 171,625 656,625 2024 570,000 145,250 715,250 2025 590,000 116,250 706,250 2026-2028 2,030,000 156,250 2,186,250 Total $ 4,555,000 $ 1,001,625 $ 5,556,625 23
66City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 4-Long-Term Debt (Continued) E. 2017 Lease Revenue Refunding Bonds On June 13, 2018, the City of Palm Springs Financing Authority issued $9,970,000 Lease Revenue Refunding Bonds, Series 2017 to defease the outstanding balance of the Refunding Lease Revenue Bonds, Series 2007. The Lease Revenue Refunding Bonds, Series 2017 accrues interest payable semiannually on November 1 and May 1 of each year at rates between 2.00% and 4.00%. Principal is due annually on May 1 of each year ranging from $870,000 to $1,160,000 and the final maturity date is May 1, 2027. The City reduced the aggregate debt service payments by $1,436,326 over the remaining maturity period of the 2017 Lease Revenue Refunding Bonds to obtain an economic gain of $1,324,695 ( difference between the present values of the debt service payments on the old and new debt). The bond refunding has deferred refunding charges of$99,502. The outstanding bonds contain a provision that if any event of default should occur, the Trustee, as assignee of the Authority, may elect not to terminate the lease agreement and may re-enter and re-let the leased property and may enforce the lease agreement and hold the City liable for all lease payments on an annual basis while re-entering and reletting the leased property. Alternatively, the Trustee may elect to terminate the lease agreement and may re-enter and re-let the leased property and seek to recover all costs, losses or damages caused by the City's default. The total bonds outstanding at June 30, 2020, is $7,300,000 including $780,689 ofunamortized premium. Future debt service payments are as follows: Year Ending June 30, Princi~al Interest Total 2021 $ 940,000 $ 261,550 $ 1,201,550 2022 980,000 223,950 1,203,950 2023 1,015,000 184,750 1,199,750 2024 1,035,000 164,450 1,199,450 2025 1,055,000 143,750 1,198,750 2026-2030 2,275,000 137,400 2,412,400 Total $ 7,300,000 $ 1,115,850 $ 8,415,850 Note 5 -Contingencies In December 2019, a novel strain of coronavirus has spread around the world resulting in business and social disruption. The coronavirus was declared a Public Health Emergency of International Concern by the World Health Organization on January 30, 2020. The operations and business results of the Authority could potentially be adversely affected by this global pandemic. The extent to which the coronavirus may impact business activity or investment results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain the coronavirus. While the disruption is currently expected to be temporary, there is considerable uncertainty around the duration of the closings. However, the related financial impact on the Authority and the duration cannot be estimated at this time. 24
67City of Palm Springs Public Financing Authority Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2020 Note 6-Net Position Deficit At June 30, 2020, the Authority had an unrestricted net position deficit in the amount of $1,248,236. This deficit will be recovered from future lease revenues from the Convention Center, 2015 Refunding Lease Revenue Bonds, and 2017 Lease Revenue Bonds. 25
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69SUPPLEMENTARY INFORMATION 27
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71City of Palm Springs Public Financing Authority Combining Statement of Net Position by Bond Program June 30, 2020 2012 Series B 2015 Lease Lease Convention Revenue 2017 Lease Revenue Revenue Bonds Center Refunding Bonds Refunding Bonds ASSETS Current Assets: Lease receivable -current portion $ 1,625,000 $ 2,285,000 $ 425,000 $ 940,000 Restricted cash and investments with fiscal agent 3,247,375 5 1 Total current assets 4,872,375 2,285,005 425,000 940,001 Noncurrent Assets: Lease receivable -noncurrent portion 32,445,000 52,250,000 4,130,000 6,360,000 Total noncurrent assets 32,445,000 52,250,000 4,130,000 6,360,000 Total assets 37,317,375 54,535,005 4,555,000 7,300,001 DEFERRED OUTFLOWS OF RESOURCES Deferred charges from debt refunding 2,127,885 99,502 Total deferred outflows of resources 2,127,885 99,502 LIABILITIES Current Liabilities: Interest payable 130,114 407,624 37,958 20,100 Bonds payable, due within one year 1,625,000 2,285,000 425,000 940,000 Total current liabilities 1,755,114 2,692,624 462,958 960,IO0 Noncurrent Liabilities: Bonds payable, due in more than one year 33,391,192 56,051,875 4,728,452 7,140,689 Total noncurrent liabilities 33,391,192 56,051,875 4,728,452 7,140,689 Total liabilities 35,146,306 58,744,499 5,191,410 8,100,789 NET POSITION Restricted for debt services 2,171,069 Unrestricted (deficit) (2,081,609) (636,410) (701,286) Total Net Position $ 2,171,069 $ (2,081,609) $ (636,410) $ (701,286) 29 Total $ 5,275,000 3,247,381 8,522,381 95,185,000 95,185,000 I03,707,381 2,227,387 2,227,387 595,796 5,275,000 5,870,796 IO 1,312,208 IO 1,312,208 107,183,004 2,171,069 (3,419,305) $ (1,248,236)
72City of Palm Springs Public Financing Authority Combining Statement of Revenues, Expenses, and Changes in Net Position by Bond Program For the Year Ended June 30, 2020 2012 Series B 2015 Lease 2017 Lease Lease Convention Revenue Revenue Revenue Bonds Center Refunding Bonds Refunding Bonds OPERA TING REVENUES: Lease revenues $ 1,619,424 $ 2,482,666 $ 234,573 $ 296,422 Total operating revenue 1,619,424 2,482,666 234,573 296,422 Operating income 1,619,424 2,482,666 234,573 296,422 NON OPERA TING REVENUES (EXPENSES): Interest revenue 48,042 2,392 335 112 Interest expense and fiscal charges (1,546,314) (2,294,345) (145,316) (328,964) Total nonoperating revenues (expenses) (1,498,272) (2,291,953) (144,981) (328,852) Change in net position 121,152 190,713 89,592 (32,430) NET POSITION (DEFICIT): Beginning of year 2,049,917 (2,272,322) (726,002) (668,856) End of year $ 2,171,069 $ (2,081,609) $ (636,410) $ (701,286) 30 Total $ 4,633,085 4,633,085 4,633,085 50,881 (4,314,939) (4,264,058) 369,027 (1,617,263) $ (1,248,236)
73City of Palm Springs Public Financing Authority Combining Statement of Cash Flows by Bond Program For the Year Ended June 30, 2020 2012 Series B 2015 Lease Lease Convention Revenue 2017 Lease Revenue Revenue Bonds Center Refunding Bonds Refunding Bonds Cash Flows from Operating Activities: Cash received from lessee $ 3,179,424 $ 4,682,666 $ 599,573 $ 1,201,422 Net cash provided by operating activities 3,179,424 4,682,666 599,573 1,201,422 Cash Flows From Capital and Related Financing Activities: Principal paid on long-term debt (1,560,000) (2,200,000) (365,000) (905,000) Interest paid on long-term debt (1,623,762) (2,486,544) (235,051) (297,750) Net cash used in capital and related financing activities {3,183,762) (4,686,544) (600,051) (1,202,750) Cash Flows from Investing Activities Interest received 48,042 2,392 335 112 Net cash provided by investing activities 48,042 2,392 335 112 Net change in cash and cash equivalents 43,704 {1,486) (143) (1,216) Cash and Cash Equivalents: Beginning of year 3,203,671 1,491 143 1,217 End of year $ 3,247,375 $ 5 $ $ 1 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating income $ 1,619,424 $ 2,482,666 $ 234,573 $ 296,422 Adjustments to reconcile operating income to net cash provided by operating activities: Changes in assets and liabilities: Decrease (increase) in lease receivable 1,560,000 2,200,000 365,000 905,000 Total adjustments 1,560,000 2,200,000 365,000 905,000 Net cash provided by operating activities $ 3,179,424 $ 4,682,666 $ 599,573 $ 1,201,422 31 Total $ 9,663,085 9,663,085 (5,030,000) (4,643,107) (9,673,107) 50,881 50,881 40,859 3,206,522 $ 3,247,381 $ 4,633,085 5,030,000 5,030,000 $ 9,663,085
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75Measure J Fund of the City of Palm Springs Palm Springs, California Fund Financial Statements and Independent Auditors' Reports For the Year Ended June 30, 2020 THE II PUN GROUP ACCOU~TANTS & ADVISORS
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77FINANCIAL SECTION City of Palm Springs Measure J Fund For the Year Ended June 30, 2020 Table of Contents Independent Auditors' Report on the Fund Financial Statements ............................................................................ 1 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 ................................................................................................. 3 Fund Financial Statements: Balance Sheet ...................................................................................................................................................... 7 Statement of Revenues, Expenditures, and Changes in Fund Balance ................................................................ 8 Notes to the Basic Financial Statements ............................................................................................................ 11 Supplementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual... ......................... 17
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79THE II PUNGROUP ACCOUNTANTS & ADVISORS INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California Report on Financial Statements We have audited the accompanying financial statements of the Measure J Fund (the "Fund") of the City of Palm Springs (the "City"), which comprise the balance sheet as of June 30, 2020, and the related statement of revenues, expenditures, and changes in fund balance for the year then ended, and the related notes to the fund financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position as of June 30, 2020 of the fund, and the changes in financial position for the year then ended, in accordance with accounting principles generally accepted in the United States of America. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
80To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California Page 2 Emphasis of Matter As discussed in Note 1, the financial statements present only the balance sheet and the statement of revenues, expenditures and changes in fund balance of the Fund and do not purport to, and do not present fairly the financial position of the City as of June 30, 2020, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Management has omitted Management's Discussion and Analysis ("MD&A") 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 ("GASB"), 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 on the basic financial statements is not affected by this missing information. Accounting principles generally accepted in the United States of America require that the Budgetary Comparison Schedules -Measure J Fund, be presented to supplement the basic financial statements. Such 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 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 31, 2020, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Santa Ana, California December 31, 2020 2
81THE II PUNGROUP ACCOUNTANTS & ADVISORS 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 Independent Auditors' Report To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Measure J Fund (the "Fund") of the City of Palm Springs (the "City"), which comprise the balance sheet as of June 30, 2020 and the related statement of revenues, expenditures, and changes in fund balance for the year then ended, and the related notes to the fund financial statements and have issued our report thereon dated December 31, 2020. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting ("internal control") to determine 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 City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material 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 and therefore, material weaknesses or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the financial statements of the Measure J Fund of the City 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 determination of financial statement amounts. 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. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
82To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California Page 2 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 entity'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. Santa Ana, California December 31, 2020 4
83FUND FINANCIAL STATEMENTS 5
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85Assets Cash and investments City of Palm Springs Measure J Fund Balance Sheet June 30, 2020 Due from State of California Department of Tax and Fee Administration Interest receivable Total assets Liabilities and Fund Balances Liabilities: Accounts payable Accrued payroll Total liabilities Fund Balance: Assigned Total fund balance Total liabilities and fund balance See accompanying Notes to Fund Financial Statements. 7 $ $ $ $ 20,539,800 2,394,605 35,998 22,970,403 978,063 2,068 980,131 21,990,272 21,990,272 22,970,403
86City of Palm Springs Measure J Fund Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2020 Revenues: Taxes Use of money and property Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures EXCESS OF REVENUES OVER (UNDER) EXPENDITURES Other financing sources (uses): Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCE Fund Balance: Beginning of year End of year See accompanying Notes to Fund Financial Statements. 8 $ $ 14,829,517 428,552 1,665 15,259,734 7,439,741 7,439,741 7,819,993 (8,343,940) (8,343,940) (523,947) 22,514,219 21,990,272
87NOTES TO THE FUND FINANCIAL STATEMENTS 9
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89City of Palm Springs Measure J Fund Notes to the Fund Financial Statements For the Fiscal Year Ended June 30, 2020 Note 1 -Summary of Significant Accounting Policies Reporting Entity The City of Palm Springs, California Measure J Fund (the "Fund") is used to account for Measure J's activities. Measure J is a local revenue measure passed on November 8, 2011, to maintain local community services and economically revitalize the downtown area. These funds are general purpose revenues that have no restrictions placed upon them. A majority of voters must approve the decision to impose, increase or extend a general tax. Measure J includes a "sunset provision", causing the tax to expire at the end of its specified term. The Fund is a governmental fund of the City of Palm Springs, California, and the accompanying financial statements are included in the City of Palm Springs, California's basic financial statements. The accompanying financial statements are for the Measure J Fund only and are not intended to fairly present the financial position of the City of Palm Springs, California or the results of its operations. Basis of Presentation The accompanying financial statements present only information pertain to the Fund and are not intended to present the financial position, changes in financial position, or cash flows of the City in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The financial statement presentation follows the recommendations promulgated by the Governmental Accounting Standards Board ("GASB") commonly referred to as U.S. GAAP. GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting standards. Measurement Focus and Basis of Accounting In the accompanying financial statements, the Fund is presented using the "current financial resources" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balance present increases (revenues) and decrease (expenditures) in net current assets. The activities of the Fund are recorded in a special revenue fund and accounted for using the modified accrual basis of accounting. Special revenue funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Under the modified accrual basis of accounting, revenues are recognized when they become susceptible to accrual (i.e. both measurable and available). Measurable means that the amount of the transaction can be estimated, or otherwise determined. Available means the funds are collectible within 90 days after year-end. Expenditures are generally recognized when the related liability is incurred. Cash and Investments The Fund's cash and cash investments are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Investments for the Fund are reported at fair value. The State Treasurer's Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. The Fund pools its cash and investments with the City of Palm Springs. 11
90City of Palm Springs Measure J Fund Notes to the Fund Financial Statements (Continued) For the Fiscal Year Ended June 30, 2020 Note 1 -Summary of Significant Accounting Policies (Continued) Receivables and Payables All receivables are shown net of an allowance for uncollectible. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Classification of Fund Balance All fund balance in the Fund is assigned. Assigned -amounts that are constrained by the City's intent to be used for specific purposes, but are neither restricted nor committed. The governing council has authorized the City Manager to assign fund balance. The City Council may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year's appropriated budget. Unlike commitments, assignments generally do not exist temporarily. In other words, an additional action does not normally have to be taken for the removal of the assignment. The authority for assigning fund balance is expressed by the City Manager or the appointed designee based on the City's approved policies. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflow of resources, liabilities, deferred inflow of resources, revenues and expenditures. Actual results could differ from those estimates. Note 2 -Cash and Investments Cash and investments as of June 30, 2020 consist of the following: Description June 30, 2020 Demand Deposits $ 20,539,800 Total cash and investments $ 20,539,800 The Fund's cash and investments are pooled with the City of Palm Springs cash and investment in order to generate optimum interest income. Each fund's share of the pooled cash account is separately accounted for, and investment income is allocated to all participating funds based on the relationship of their month-end cash balances to the total of the pooled cash and investments. Information regarding the authorized types of deposits and investments, the type of risks (i.e. credit, interest rate, custodial, etc.) and other disclosures associated with the Fund's pooled cash and investments is included in the City of Palm Springs' basic financial statements, which are available at 3200 East Tahquitz Canyon Way, Palm Springs, California 92262 or on the City's website. 12
91City of Palm Springs Measure J Fund Notes to the Fund Financial Statements (Continued) For the Fiscal Year Ended June 30, 2020 Note 3-Commitments and Contingencies The Fund is subject to litigation arising in the normal course of business. In the opinion of legal counsel there is no pending litigation, which is likely to have a material adverse effect on the financial position of the Fund. In December 2019, a novel strain of coronavirus has spread around the world resulting in business and social disruption. The coronavirus was declared a Public Health Emergency of International Concern by the World Health Organization on January 30, 2020. The operations and business results of the Fund could potentially be adversely affected by this global pandemic. The extent to which the coronavirus may impact business activity or investment results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain the coronavirus. The ultimate financial impact and duration cannot be estimated at this time. Note 4-Risk Management The Fund is covered under the City of Palm Springs' insurance policies. Therefore, the limitations and self-insured retentions applicable to the City also apply to the Fund. Additional information on coverage and self-insured retentions can be obtained by contacting the City of Palm Springs. Note 5 -Transfers The City transferred $5,143,940 to offset costs associated with COVID-19 and $3,200,000 to fund debt service for Measure J bond debt. 13
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93SUPPLEMENTARY INFORMATION 15
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95City of Palm Springs Measure J Fund Statement of Revenues, Expenditures, and Change in Fund Balances -Budget and Actual For the Year Ended June 30, 2020 Variance with Final Budget BudSieted Amounts Positive OriSiinal Final Actual (Negative) Revenues: Taxes $ 15,506,400 $ 10,899,435 $ 14,829,517 $ 3,930,082 Use of money and property 428,552 428,552 Miscellaneous 1,665 1,665 Total revenues 15,506,400 10,901,100 15,259,734 4,358,634 Expenditures: Current: Public works 12,306,400 43,013,137 7,439,741 35,573,396 Total expenditures 12,306,400 43,013,137 7,439,741 35,573,396 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 3,200,000 p2,l 12,037) 7,819,993 39,932,030 Other Financing Sources (Uses): Transfers out {8,343,940} {8,343,940) Total Other Financing Sources (Uses) {8,343,940} {8,343,940} NET CHANGE IN FUND BALANCE $ 3,200,000 $ {40,455,977} (523,947) $ 39,932,030 Fund Balance: Beginning of year 22,514,219 End of year $ 21,990,272 See accompanying Notes to the Financial Statements 17
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97City of Palm Springs Measure D Sales Tax Fund Palm Springs, California Independent Accountants' Report on Agreed-Upon Procedures for Compliance with Ordinance No. 1945 Imposing a Transaction and Use Tax to be Administered by the State Board of Equalization For the Year Ended June 30, 2020 THE. PUN GROUP ACCOUNTANTS & ADVISORS
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99lHE II PUNGROUP ACCOUNTANTS & ADVISORS INDEPENDENT ACCOUNTANTS' REPORT ON APPL YING AGREED-UPON PROCEDURES To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California We have performed the procedures enumerated below which were agreed to by the management of the City of Palm Springs, California (the City), solely to assist the City in evaluating compliance with Ordinance No. 1945, Imposing a Transaction and Use Tax to be Administered by the California Department of Tax and Fee Administration (the CDTF A) for the fiscal year ended June 30, 2020. This engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below, either for the purpose for which this report has been requested, or for any other purpose. The procedures and associated findings are as follows: I. Procedure Performed: We obtained a copy and read the City's Ordinance related to the 0.5% local tax measure "D" in order to gain an understanding of certain requirements. Results: We noted that the City Council placed before the voters of the City a transaction and use tax measure providing for a half-cent increase in sales tax to increase the level of services the City is able to provide to the community and help pay for various public facilities that are needed in the community. The election was held on November 7, 2017, at which time, the voters passed the measure, identified as Measure D on the ballot. 2. Procedure Performed: We reviewed the internal controls over collection, management and use of the Measure "D" tax revenues. Results: Revenues from Measure D are collected by the CDTF A and remitted to the City on a monthly basis. Cash receipts from Measure D are recorded in a separate general ledger account in the City's General Fund when received. A review of internal controls over cash receipts was performed as part of the City's financial audit and no deficiencies or material weaknesses was identified. The use of Measure D revenues is comingled with the general fund expenditures. 3. Procedure Performed: We traced 100% of the sales tax remittance advices from the CDTF A to the general ledger to ensure the collection and recording of Measure "D" revenues is accurate. Results: No exception noted based on test work performed. 200 E. Sandpointe Ave., Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 www.pungroup.com
100To the Honorable Mayor and Members of the City Council of the City of Palm Springs Palm Springs, California Page 2 4. Procedure Performed: The Ordinance indicates that money from the tax would go to the City's General Fund and could be used for general governmental purposes such as fire and police protection, paramedic service, community programs (such as addressing homelessness, and providing senior and youth services), street, park and public facility cleaning, repair and maintenance, police and fire equipment, and other unfunded public needs. We verified that the City complied with this section of the ordinance and will include a table of cumulative revenues and expenditures of the measure "D". Results: Revenues from Measure Dare accounted for in a separate general ledger account in the General Fund and used for general governmental purposes. 5. Procedure Performed: In accordance with Section 14 and Section 15 of the ordinance, verify the City has completed its annual audit of the City of Palm Springs performed by an independent certified public accounting firm and includes revenues and expenditures related to measure "D" in the fiscal year. Conclusion Results: The City's financial audit for fiscal year 2019-20 was performed by The Pun Group, LLP, an independent certified public accounting firm. The audit included all City's revenues and expenditures including Measure D revenue. We were not engaged to, and did not conduct an audit, the objective of which would be the expression of an opinion on the specified elements, accounts or items. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to the City. This report is intended solely for the use of the City and is not intended to be, and should not be, used by anyone other than this specified party. Santa Ana, California December 3 1, 2020
101CITY OF PALM SPRINGS, CALIFORNIA Report on Agreed-Upon Procedures Applied to Measure A -Local Streets and Roads Fiscal Year Ended June 30, 2020
102Conrad CERTIFIED PUBLIC ACCOUNTANTS Independent Accountant's Report On Applying Agreed-Upon Procedures The Board of Commissioners Riverside County Transportation Commission Riverside, California We have performed the procedures enumerated below, which were agreed to by the Riverside County Transportation Commission ("RCTC"), solely to assist RCTC in determining whether the City of Palm Springs, California ("City") was in compliance with the Measure A -Local Streets and Roads Program grant terms and conditions for the year ended June 30, 2020. The City's management is responsible for the accounting records. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described below, either for the purpose for which this report has been requested, or for any other purpose. Our procedures and related findings are as follows: 1. Obtain the 2009 Measure A (Ordinance 02-001) compliance requirements. Western County jurisdictions are required to participate in the Transportation Uniform Mitigation Fee ("TUMF") program and in the Multi-Species Habitat Conservation Plan ("MSHCP") which are administered by the Western Riverside Council of Governments ("WRCOG") and the Western Riverside County Regional Conservation Authority ("RCA"), respectively. Coachella Valley jurisdictions are required to participate in the TUMF program administered by the Coachella Valley Association of Governments ("CVAG"). Indicate participation in TUMF and/or MSHCP programs. Finding: No exceptions were noted as a result of applying this procedure. The City participates in the TUMF program administered by CVAG. 2. Obtain the City's approved 5-Year Capital Improvement Plan ("CIP") from RCTC for the fiscal year ended June 30, 2020. Finding: No exceptions were noted as a result of applying this procedure. 3. Obtain a detailed general ledger and balance sheet from the City for the fiscal year ended June 30, 2020. a. Identify the amount of Measure A cash and investments recorded at June 30, 2020. Compare amount to Measure A fund balance and provide an explanation for any difference greater than 25% fund balance. 23161 Lake Center Drive, Suite 200, Lake Forest, CA 92630 • T: (949) 552-7700 • www.conradllp.com 1
103Board of Commissioners Riverside County Transportation Commission Riverside, California Finding: Measure A cash and investments were $1,398,977 at June 30, 2020. The difference between Measure A cash and investments of $1,398,977 and fund balance of $1,862,536 is $463,559 or 25% of the fund balance. b. Identify amounts due from other funds. Finding: There were no amounts due from other funds at June 30, 2020. c. Identify the components of ending fund balance for Measure A activity. Finding: Ending fund balance for Measure A activity was restricted in the amount of $1,862,536 at June 30, 2020. i. Identify the existence of any restatement of Measure A fund balance and inquire of management as to the reason for any restatement. Finding: We noted no restatement of Measure A fund balance at June 30, 2019. ii. Compare ending fund balance to total revenues for the current year and prior two years. If ending fund balance is greater than sum of total revenues for the three-year period, inquire of management as to the reason(s) for the accumulation of fund balance. Finding: No exceptions were noted as a result of applying this procedure. The City's ending fund balance did not exceed the cumulative total revenues for the 3-year period as illustrated below. Revenue for year ended June 30, 2020 Revenue for year ended June 30, 2019 Revenue for year ended June 30, 2018 Total Revenue for the 3-year period Fund balance for year ended June 30, 2020 $ 4,167,671 4,839,066 2,310,068 $ 11 316 805 $ 1862536 4. Obtain an operating statement for Measure A activity for the fiscal year ended June 30, 2020 (see Exhibit A), including budget amounts. a. Review the revenues in the operating statement. i. Inquire of management as to what fund was used to record Measure A revenues received from RCTC and document total revenues for the fiscal year ended June 30, 2020. Finding: The City accounts for Measure A revenue in its Measure A Improvements Fund (Fund #134). The City recorded total revenues in the amount of $4,167,671 for the fiscal year ended June 30, 2020. 2
104Board of Commissioners Riverside County Transportation Commission Riverside, California ii. Obtain a listing of Measure A payments made from RCTC to the City. Compare the Measure A revenues recorded by the City to the listing of payments made by RCTC. Finding: We identified no variances between the Measure A revenues recorded by the City and the RCTC Measure A payment schedule, which totaled $2,301,944. iii. Determine the amount of interest allocated to Measure A activity for the fiscal year ended June 30, 2020. Finding: The City allocated interest in the amount of $57,902 to the Measure A activity for the fiscal year ended June 30, 2020. b. Review the expenditures in the operating statement. i. Inquire of management as to what fund is used to record Measure A expenditures and document total expenditures for the fiscal year ended June 30, 2020. Finding: The City accounts for Measure A expenditures in its Measure A Improvements Fund (Fund #134). The City recorded total expenditures in the amount of $7,932,229 for the fiscal year ended June 30, 2020. ii. Select expenditures for testing that comprise at least 20% of total Measure A expenditures. Finding: The City recorded Measure A expenditures in the amount of $7,932,229. We selected $1,950,072 or 25% for testing. 1. For the expenditures selected for testing, compare the dollar amount recorded in the general ledger to the supporting documentation. Finding: No exceptions were noted as a result of applying this procedure. 2. For the expenditures selected for testing, review the 5-Year CIP and note whether the projects claimed were included in the 5-YearCIP and whether they constitute allowable costs. Finding: Expenditures selected for testing were included in the 5-Year CIP and were allowable costs. No exceptions were noted as a result of applying this procedure. iii. Inquire of management as to the nature of any transfers (in and out) recorded in the Measure A Fund. For any transfers out, determine if nature of transfer out was included in the 5-Year CIP. Finding: We noted transfers in from the Debt Service Fund in the amount of $1,039,158 and transfers out to the Debt Service Fund in the amount of $2,772,220 for debt service. The $2,772,220 in transfer out included $1,099,900 in debt service 3
105Board of Commissioners Riverside County Transportation Commission Riverside, California expenditures and $1,672,320 for debt service reserve maintained with the fiscal agent. During the year, the City erroneously transferred out $1,672,320 to the Debt Service Fund into the reserve maintained for debt service fund. The City transferred in the excess amount of $1,039,158 back to the Measure A fund to reflect the correct reserve in the amount of $633, 162. The transfers out to the Debt Service Fund for the Local Measure A bond payment was included in the 5-Year CIP. iv. Inquire of management as to the amount of general or non-project-related costs, if any, included in expenditures. If indirect costs exceed 8% of Measure A revenue, inquire of management as to the basis for indirect costs charged to Measure A. If indirect costs are identified, determine if such costs are included in the 5-Year CIP. Finding: Per discussion with management, there were no indirect costs recorded for the fiscal year ended June 30, 2020. v. Inquire of management as to the amount of debt service expenditures recorded in the Measure A fund. 1. For cities with advance funding agreements with RCTC, compare debt service expenditures to Measure A payments withheld by RCTC. Finding: There was no advance funding agreement with RCTC noted. 2. For cities with other indebtedness, determine if such costs are included in the 5-Year CIP. Finding: The City recorded Measure A debt service expenditures in the amount of $1,099,900. We noted that the debt service expenditures were included in the 5-year CIP. 3. Compare the debt service expenditures to prior year amount. If debt service expenditures have increased or decreased at least 25%, inquire of management as to the reason for the change in debt service expenditures. Finding: No exceptions were noted as a result of applying this procedure. 5. Obtain from RCTC a listing of jurisdictions that participate in the Western County or Coachella Valley TUMF programs. a. If the jurisdiction is a participant in the TUMF program, select at least one disbursement for validation as to the amount remitted to WRCOG or CVAG, as applicable. Finding: We selected one disbursement of $85,160 for validation. The payment selected for testing indicated that the TUMF is collected and remitted to CVAG as required. 4
106Board of Commissioners Riverside County Transportation Commission Riverside, California b. Indicate the total amount of TUMF fees collected and remitted during the fiscal year ended June 30, 2020. Finding: The total amount of TUMF collected was $367,287 and the amount remitted during the fiscal year ended June 30, 2020 was $389,433. The difference was due to a TUMF collection of $22,146 in June 2019 remitted in the current fiscal year. 6. Obtain from RCTC a listing of jurisdictions that participate in the Western County MSHCP program. a. If the jurisdiction is a participant in the Western County MSHCP program, select at least one disbursement for validation as to the amount remitted to RCA. Finding: The City is not a participant in the Western County MSHCP program. b. Inquire of management as to the existence of any fees collected in prior years that were not remitted to RCA by the end of this fiscal year. Finding: The City is not a participant in the Western County MSHCP program. c. Indicate the total amount of Western County MSHCP fees collected and remitted during the fiscal year. Finding: The City is not a participant in the Western County MSHCP program. 7. Obtain from RCTC the Maintenance of Effort ("MOE") base year requirement, including its supporting detail calculations for the City, and the carryover amount allowed as of the beginning of the fiscal year. a. Obtain from the City a calculation of its current year MOE amount in a format similar to its base year calculation. See Exhibit 8. Finding: No exceptions were noted as a result of applying this procedure. b. Compare the current year MOE amounts from the General Fund to the general ledger. Finding: No exceptions were noted as a result of applying this procedure. c. Scan the General Fund general ledger to determine if there were any transfers in to fund any MOE amounts. Finding: No transfers in were noted as a result of applying this procedure. d. Compare the amount of current year MOE expenditures to the MOE base requirement and add any excess to, or subtract any deficiency from, the carryover amount. 5
107Board of Commissioners Riverside County Transportation Commission Riverside, California Finding: We noted that current year MOE expenditures of $9,306,858 were greater than the MOE base requirement of $1,498,732 resulting in an excess of $7,808,126 for fiscal year ended June 30, 2020. e. If the amount of discretionary funds spent is less than the MOE base requirement ("MOE deficiency") determine the amount of any prior year MOE carryover using the information obtained from RCTC and reduce the MOE deficiency by any available MOE carryover to determine an adjusted current year expenditure amount. Finding: No exceptions were noted as a result of applying this procedure. The City's discretionary funds spent in the fiscal year ended June 30, 2020, exceeded the MOE base year requirement. The City's MOE carryover at June 30, 2020 is calculated as follows: MOE excess at July 1, 2019 Current year MOE expenditures Less: MOE base requirement Excess MOE for fiscal year ended June 30, 2020 MOE excess at June 30, 2020 $ 28,887,938 9,306,858 (1,498,732) 7,808,126 $ 36 696 064 We were not engaged to, and did not, conduct an examination, the objective of which would be the expression of an opinion on the accounting records. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Board of Commissioners and management of RCTC and the City Council and management of the City of Palm Springs and is not intended to be, and should not be, used by anyone other than these specified parties. Lake Forest, California November 18, 2020 6
108Revenues: Measure A CITY OF PALM SPRINGS, CALIFORNIA Measure A Operating Statement For the Fiscal Year Ended June 30, 2020 (Unaudited) Budget $ 2,430,900 Coachella Valley Association of Governments 15,512,465 Investment income Transportation Uniform Mitigation Fee Transfer in Total revenues 17,943,365 Expenditures: Bond construction 10,049 Construction and maintenance 15,678,700 Transfers out 1,099,900 Total expenditures 16,788,649 Excess (deficiency) of revenues over (under) expenditures $ 1,154,716 7 EXHIBIT A Variance From Final Budget Favorable Actual (Unfavorable) $ 2,301,944 $ (128,956) 790,813 (14,721,652) 57,902 57,902 (22,146) (22,146) 1,039,158 1,039,158 4,167,671 (13,775,694) 6,420 3,629 5,153,589 10,525,111 2,772,220 (1,672,320) 7,932,229 8,856,420 $ !3,764,558) $ !4,919,274)
109FY 2019/20 Construction and Maintenance Expenditures
(Rounded to nearest dollar)
CITY OF PALM SPRINGS, CALIFORNIA
Measure A MOE Calculation
For the Fiscal Year Ended June 30, 2020
(Unaudited)
Project Expenditures Included in General Ledger Total Cost General Fund Measure A
Construction:
NMTP biking issues (260-4500-59445) $ -$ -$
CMAQ/CVAG bike lanes (260-4500-59469) --
Street reconstruction (260-4493-5XXXX) 1,937,755 1,937,755
Community sidewalks (260-4494-5XXXX) 1,341,899 1,341,899
Maintenance:
Street maintenance (001-4201-4XXXX) 1,691,775 1,691,775
Signal maintenance & repair (001-4171-43200 (St Francis)) 404,661 404,661
Sidewalk cleaning/downtown (001-4210-4XXXX) 1,444,728 1,444,728
Street light operation and overhead (001-4301-4XXXX) 888,813 888,813
Streets 19 -Recon O Seal (261-4490-50812) 3,041,955 3,041,955
Engineering/Administrative Overhead Not Allocated to
Saecific Proiects (4171J: 2,491,524 2,491,524
Expenditure Totals $ 13,243,110 $ 13,243,110 $
Deductions for Special Consideration (Deductions Must
EXHIBITB
Funding Breakdown
Federal State City Funds Other
-$ -$ -$ -$ -
-$ -$ -$ -$ -
Also Be Included in Project Expenditures Above): Total Project Cost General Fund State Reason Why Project Expenditure Should Be Deducted from MOE
Construction:
Maintenance:
Sidewalk cleaning/downtown
Engineering/Administrative Overhead Not Allocated to
Saecific Proiects:
Deduct Totals
$ 1,444,728
2,491,524
$ 3,936,252
Total GF Expenditures
Less: Deductions
MOE Current Year
$
$
$
1,444,728
2,491,524
3,936,252
13,243,110
(3,936,252)
9,306,858
MOE base year requirement 1,498,732
MOE excess for fiscal year ended June 30, 2020 $ 7,808, 126
8
Costs included in Department 421 O are not related to maintenance of street lighting.