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HomeMy WebLinkAbout2017/04/18 - Agenda Packet - Planned Communities Citizens' Oversight CommitteePLANNED COMMUNITIES CITIZENS' OVERSIGHT COMMITTEE AGENDA RANCHO CUCAMONGA CITY YARD 8794 LION STREET RANCHO CUCAMONGA, CA 91730 A. 8:00 P.M. -CALL TO ORDER Al. Pledge of Allegiance A2. Roll Call: Jaime Garcia Christina Macias Ruth McMillan Demeke Muarega Pete Peterson A3. Approval of Minutes: March 8, 2016 B. PUBLIC COMMUNICATIONS This is the time and place for the general public to address the Planned Communities Citizens' Oversight Committee on any item listed or not listed on the agenda. State law prohibits the Committee from addressing any issue not previously included on the Agenda. The Committee may receive testimony and set the matter for a subsequent meeting. Comments are to be limited to five minutes per individual. C. ITEM 3 FOR DISCUSSION Cl. Review and Discussion of Annual Independent Report. C2. Review and Approval of Annual Written Report to the City Council. C3. Planned Communities District Updates. D. ADJOURNMENT I, Lori Sassoon, Deputy City Manager of the City of Rancho Cucamonga, or my designee, hereby certifies that a true, accurate copy of the foregoing agenda was posted on April 13, 2017 at 5:30pm per Government Code Section 64954.2 at 10500 Civic Center Drive and 8794 Lion Street, Rancho Cucamonga, CA 91730. Lori Sassoon Deputy City Manager/Administrative Services CITY OF RANCHO CUCAMONGA PLANNED COMMUNITIES CITIZENS' OVERSIGHT COMMITTEE ANNUAL MEETING MINUTES A. CALL TO ORDER -RAINS ROOM The City of Rancho Cucamonga Planned Communities Citizens' Oversight Committee held their Annual Meeting on Tuesday, March 8, 2016 in the Rains Room at the Civic Center, 10500 Civic Center Drive, Rancho Cucamonga, California. Deputy City Manager/Administrative Services called the meeting to order at 3:00 p.m. Al. Pledge of Allegiance: Led by Chair Garcia A2. Roll Call: Present were Committee Members: Jaime Garcia, Priscilla Kania, Christina Macias, Ruth McMillan, Demeke Muarega and Pete Peterson. Also present were: Lori Sassoon, Deputy City Manager/Administrative Services; Tamara Layne, Finance Director; Bill Wittkopf, Public Works Director; Ingrid Bruce, GIS/Special Districts Manager; Noah Daniels, Finance Manager; Chris Bopko, Management Analyst III and Melinda Garcia, Administrative Secretary. A3. Tour of City LMD's. Staff and the Committee toured sites in LMD's 2, 4, and 6. Items observed during the tour were the Base Line median projects in LMD 6, Vintage Park, and Victoria Arbors Park. The Committee had many questions about maintenance practices, contracts, who is responsible for which aspects of maintenance (contractors vs city staff), the drought, future planned improvements, etc. 1= B. PUBLIC COMMUNICATIONS No public communications were made. 1= C. ITEMS OF DISCUSSION Cl. Approval of Minutes: Committee Member Kania motioned to approve the minutes from the meeting of January 22, 2015. The motion was seconded by Committee Member Macias. C2. Review and discussion of Annual Independent Audit Report for LMD's 2, 4R, 6R and 7. The City Auditor, Rich Kikuchi, provided detailed information about the role of the auditor, procedures, the various letters that they issue, and results. A discussion ensued regarding rates, fund balances, uses of funds, administrative costs, and reserves. In addition to the annual newsletters, the Committee would like to see more communication from the City to educate residents about LMD's. The Committee also suggested informing the public about the City's new drought -tolerant landscaping standards, and what they can do to save water. C3. Review and approval of annual written report to the City Council. Following the discussion, Committee Member Peterson motioned to approve the annual report to the City Council. The motion was seconded by Committed Member Kania. The Committee selected April 20, 2016 as the date for the report to be presented to the City Council. C4. Election of Committee Chair and Vice -Chair. Committee Member Muarega motioned for Jaime Garcia to continue as the Chair and Ruth McMillan to continue as the Vice -Chair. The motion was seconded by Committee Member Peterson and unanimously approved by the Committee. D. ADJOURNMENT Committee Member Garcia motioned to adjourn the meeting. The motion was seconded by Committee Member Peterson. The meeting adjourned at 7:00 p.m. Respectfully submitted, Jaime Garcia, Chair Date: LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #411 TERRA VISTA, #6R CARYN COMMUNITY, AND #7 NORTH ETIWANDA CITY OF RANCHO CUCAMONGA, CALIFORNIA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2016 LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #4R TERRA VISTA, #6R CARYN COMMUNITY, AND #7 NORTH ETIWANDA CITY OF RANCHO CUCAMONGA, CALIFORNIA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2016 LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #4R TERRA VISTA, #6R CARYN COMMUNITY, AND #7 NORTH ETIWANDA YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS Page Number INDEPENDENT AUDITORS' REPORT............................................................................................... 1 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES INFUND BALANCES.................................................................................................................... 3 NOTES TO STATEMENT OF REVENUES, EXPENDITURES AND CHANGES INFUND BALANCES.................................................................................................................... 4 INDEPENDENT AUDITORS' REPORT To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California Report on the Statement of Revenues, Expenditures and Changes in Fund Balances We have audited the accompanying statement of revenues, expenditures and changes in fund balances of Landscape Maintenance Districts #2 Victoria, #4R Terra Vista, #6 Caryn Community and #7 North Etiwanda of the City of Rancho Cucamonga (collectively, the Districts), for the year ended June 30, 2016, and the related notes to statement of revenues, expenditures and changes in fund balances as listed in the table of contents. Management's Responsibility for the Statement of Revenues, Expenditures and Changes in Fund Balances Management is responsible for the preparation and fair presentation of the statement of revenues, expenditures and changes in fund balances 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 statement of revenues, expenditures and changes in fund balances that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on the statement of revenues, expenditures and changes in fund balances based on our audit. We conducted our audit 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 State Controller's Minimum Audit Requirements for California Special District. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues, expenditures and changes in fund balances are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues, expenditures and changes in fund balances. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the statement of revenues, expenditures and changes in fund balances, 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 statement of revenues, expenditures and changes in fund balances 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 statement of revenues, expenditures and changes in fund balances. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. PrimeGlobal A,-1—Mn of Jnd,Me de A—Vu g N— °:: LSLD* To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California Opinions In our opinion, the statement of revenues, expenditures and changes in fund balances referred to above present fairly, in all material respects, the respective financial position of the revenues, expenditures and changes in fund balances of Landscape Maintenance Districts #2 Victoria, #4R Terra Vista, #6 Caryn Community and #7 North Etiwanda of the City of Rancho Cucamonga for the year ended June 30, 2016, in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 29, 2016, on our consideration of the Districts' 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 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 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 Districts' internal control over financial reporting and compliance. O� goy Brea, California November 29, 2016 2 LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #411 TERRA VISTA, #6R CARYN COMMUNITY, AND #7 NORTH ETIWANDA CITY OF RANCHO CUCAMONGA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2016 Revenues: Taxes Intergovernmental Charges for services Use of money and property Contributions from City Total Revenues Expenditures: Current: Community development: Personnel services Operating costs: Operations and maintenance Contract services Tree maintenance Utilities Assessment administration General overhead allocation Interfund allocation Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Net Change in Fund Balances Fund Balance, Beginning of Year Fund Balance, End of Year Landscape Maintenance District #2 Victoria $ 3,214,343 122,924 3,531 47,265 328,570 3,716,633 803,689 Landscape Maintenance District #411 Terra Vista $ 2,840,277 3,142 60,005 2,903,424 854,624 Landscape Maintenance District #611 Caryn Community $ 471,484 4,014 475,498 16,786 Landscape Maintenance District #7 North Etiwanda $ 915,528 602 40,729 50,000 1,006,859 179,834 62,769 113,936 8,208 26,447 1,169,293 560,747 197,136 293,343 130,560 70,583 35,650 6,950 721,133 290,370 98,370 272,462 34,870 22,990 7,020 15,430 223,250 179,300 23,840 72,200 75,020 - - - 3,220,584 2,092,550 387,010 866,666 496,049 810,874 88,488 140,193 496,049 810,874 88,488 140,193 2,808,796 3,616,478 228,557 824,775 $ 3,304,845 $ 4,427,352 $ 317,045 $ 964,968 See Notes to Financial Statements 3 LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #411 TERRA VISTA, #611 CARYN COMMUNITY, AND #7 NORTH ETIWANDA CITY OF RANCHO CUCAMONGA, CALIFORNIA NOTES TO STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES JUNE 30, 2016 Note 1: Description of the Reporting Entity The City of Rancho Cucamonga was incorporated on November 30, 1977, under the laws of the State of California and enjoys all the rights and privileges applicable to a General Law City. It is governed by an elected five -member board. The City of Rancho Cucamonga, California, has formed certain maintenance districts and authorized the levy of assessments pursuant to the terms and provisions of the "Landscaping and Lighting Act of 1972," being Division 15, Part 2 of the Streets and Highways Code of the State of California (commencing with Section 22500). The City levies annual assessments to finance the costs and expenses necessary for maintenance and improvements in each assessment district. The City cannot levy and collect annual assessments within an assessment district without complying with the procedures specified in the Landscaping and Lighting Act of 1972. On an annual basis, an Engineer's Report must be prepared for each assessment district which contains a full and detailed description of the improvements and the proposed assessments upon assessable lots and parcels of land within the district. The City Council must also adopt a resolution of intention which: • Declares the intention of the City Council to levy and collect assessments within the assessment district for the fiscal year stated therein. • Generally describes the existing and proposed improvements and any substantial changes proposed to be made in existing improvements. • Refers to the assessment district by its distinctive designation and indicates the general location of the district. • Refers to the Engineer's Report for a full and detailed description of the improvements, the boundaries of the assessment district and any zones therein, and the proposed assessments upon assessable lots and parcels of land within the district. • Gives notice of the time and place for public hearing by the City Council on the levy of the proposed assessment. • States whether the assessment is proposed to increase from the previous year. The improvements for the maintenance districts include, but are not limited to turf, ground cover, planter beds, shrubs, plants and trees, landscape lighting, irrigation systems, electrical energy for irrigation controllers, hardscapes, entry signs, sound walls, and all associated appurtenant facilities. A description of the specific improvements to be maintained and serviced within each assessment district is set forth in the Annual Engineer's Report. Maintenance may include the furnishing of services and materials for the ordinary and usual maintenance, operation, and servicing of any improvement, including repair, removal, or replacement of all or any part of any improvement; providing for the life, growth, health, and beauty of landscaping, including cultivation, irrigation, trimming, spraying, fertilizing, or treating for disease or injury; the removal of trimmings, rubbish, debris, and other solid waste; the cleaning, sandblasting, and painting of walls and other improvements to remove or cover graffiti. Service may include the furnishing of electric current or energy, gas, or other illuminating agent for the lighting or operation of any improvements; and water for the irrigation of any landscaping, the operation of any fountains, or the maintenance of any other improvements. 4 LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #411 TERRA VISTA, #611 CARYN COMMUNITY, AND #7 NORTH ETIWANDA CITY OF RANCHO CUCAMONGA, CALIFORNIA NOTES TO STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (CONTINUED) JUNE 30, 2016 Note 1: Description of the Reporting Entity (Continued) The accompanying statement of revenues, expenditures and changes in fund balances contains information relative only to the Landscape Maintenance Districts #2 Victoria, #4R Terra Vista, #6R Caryn Community, and #7 North Etiwanda of the City of Rancho Cucamonga, which are an integral part of the City of Rancho Cucamonga. Victoria Neighborhood Parks and Landscape Maintenance District (LMD 2) was formed in 1982 and consists of 5,859 single family homes, 559 condominiums, 589 multi -family units, 42.33 acres of commercial/industrial, 70.27 acres of public service parcels, and 48.01 acres of vacant land, six parks, and trails. On June 5, 2013, a Proposition 218 ballot proceeding was held and residents approved a rate increase. The assessment rates are as follows: Fiscal year Fiscal year Percentage 2015-16 2016-17 Change Single family home $ 464.97 $ 476.19 2.41% Condominium unit 342.18 350.65 2.48% Multi -family unit 325.47 333.33 2.41% Commercial/industrial parcel per acre 2,198.04 2,251.08 2.41% Public service parcel per acre 126.81 129.87 2.41% Undeveloped parcel per acre 92.99 95.24 2.42% Landscape Maintenance District No. 4R (LMD 4R) was formed in 1984 and consists of 2,652 single family homes, 1,395 condominiums, 3,641 multi -family, 35.41 acres of schools, 176.28 acres of commercial/industrial, and 77.96 acres of vacant land. On December 2, 2009, a Proposition 218 ballot proceeding was held and residents approved a rate increase. The assessment rates are as follows: Fiscal year Fiscal year Percentage 2015-16 2016-17 Change Single family home $ 408.21 $ 418.05 2.41% Condominium unit 326.57 334.44 2.41% Multi -family unit 285.75 292.64 2.41% Commercial/industrial parcel per acre 1,326.68 1,358.66 2.41% Undeveloped parcel per acre 102.05 104.51 2.41% School parcel per acre 102.05 104.51 2.41% Landscape Maintenance District No. 6R (LMD 6R) was formed in 1986 and consists of 963 single family homes in Zone 1, 310 single family homes in Zone 2, 5.35 acres of schools, and 0.54 acres of vacant land. On September 1, 2010, a Proposition 218 ballot proceeding was held and residents approved a rate increase. The assessment rates are as follows: Fiscal year Fiscal year Percentage 2015-16 2016-17 Change Single family home - Zone 1 $ 393.17 $ 402.65 2.41% Single family home - Zone 2 294.88 301.99 2.41% School parcel per acre 98.29 100.66 2.41% Undeveloped parcel per acre 98.29 100.66 2.41% LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #411 TERRA VISTA, #6R CARYN COMMUNITY, AND #7 NORTH ETIWANDA CITY OF RANCHO CUCAMONGA, CALIFORNIA NOTES TO STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (CONTINUED) JUNE 30, 2016 Note 1: Description of the Reporting Entity (Continued) Landscape Maintenance District No. 7 (LMD 7) was formed in 1989 and currently consists of 2,969 single family homes. The assessment rates are as follows: Fiscal year Fiscal year Percentage 2015-16 2016-17 Change Single family home $ 307.05 $ 307.05 0.00% Note 2: Measurement Focus, Basis of Accounting and Financial Statement Presentation The statement of revenues, expenditures and fund balances is reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Assessment Revenue Assessment revenue is recognized on the modified accrual basis, that is, in the fiscal year for which the assessments have been levied providing they become available. Available means then due, or past due and receivable within the current period and collected within the current period or expected to be collected soon enough thereafter to be used to pay liabilities of the current period. The County of San Bernardino collects the assessments for the Landscape Maintenance Districts. Assessment liens attach annually as of 12:01 A.M. on the first day in January proceeding the fiscal year for which the assessments are levied. Assessments are levied on real property as it exists on that date. The assessment levy covers the fiscal period July 1 to June 30. One-half of the assessment is due November 1; the second half of the assessment is due February 1. All assessments are delinquent if unpaid on December 10 and April 10, respectively. Fund Type All of the funds included in this report are accounted for in the City's financial records as special revenue funds. Special revenue funds account for and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes. Special revenue funds are designed to help determine and demonstrate resources that must be used for a specified purpose are, in fact, used for that purpose. 9 LS[2*�:: 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 To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, 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 statement of revenues, expenditures and changes in fund balances of Landscape Maintenance Districts #2 Victoria, #4R Terra Vista, #6R Caryn Community, and #7 North Etiwanda of the City of Rancho Cucamonga, California, (collectively, the Districts) as of and for the year ended June 30, 2016, and the related notes to statement of revenues, expenditures and changes in fund balances, and have issued our report thereon dated November 29, 2016. Internal Control over Financial Reporting In planning and performing our audit of the statement of revenues, expenditures and changes in fund balances, we considered the Districts' 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 statement of revenues, expenditures and changes in fund balances, but not for the purpose of expressing an opinion on the effectiveness of the Districts' internal control. Accordingly, we do not express an opinion on the effectiveness of the Districts' 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 Districts' statement of revenues, expenditures and changes in fund balances 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 Districts' statement of revenues, expenditures and changes in fund balances 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. PrimeGlobal LS[2*':: Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California 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 Districts' internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Districts' internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 04, *� Q,-Vo4 Brea, California November 29, 2016 LS121a�:: CPAs AND ADVISORS November 29, 2016 To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California We have audited the statement of revenues, expenditures and changes in fund balances of the Landscape Maintenance Districts #2 Victoria, #4R Terra Vista, #6R Caryn Community, and #7 North Etiwanda (collectively, the Districts) of the City of Rancho Cucamonga for the year ended June 30, 2016. 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 the City Council of Rancho Cucamonga dated May 11, 2016. Professional standards also require that we communicate the following information related to our audit. Sianificant Audit Findinas Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Districts are described in the notes to the financial statements. No new accounting policies were adopted that impacted the statement of revenues, expenditures and changes in fund balances of the Districts, and the application of existing policies was not changed during fiscal year 2015/16. We noted no transactions entered into by the Districts 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. 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. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. No misstatements were found. PrimeGlobal ••• L L,**••• 00 To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California 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 November 29, 2016. 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 Districts' statement of revenues, expenditures and changes in fund balance 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. To our knowledge, there were no such consultations with other accountants. 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 Districts' 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 audit procedures related to the audit. These procedures include, but are not limited to, the following: Proposed Segmentation of the Engagement We utilize a governmental audit program which we will tailor to the Districts' operations. The tailoring is necessary to accommodate specific client circumstances and to recognize differences in organizational structure. Our audit programs are organized by financial statement category. This approach takes full advantage of our accumulated experience. The primary benefit is that the risk of omitting important procedures is substantially reduced. We believe that this approach tends to be the most effective and efficient for an entity such as the Districts. The audit procedures are listed in the most logical sequence which improves efficiency. The savings in effort and time gained by using our audit program can free an auditor's attention for unusual or difficult situations that may arise. The audit programs are designed to increase audit efficiency by linking financial statement assertions, audit objectives, and procedures that are basic to most governmental audit engagements. LSL•��� To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California Sample Size and Extent of Statistical Sampling Our approach may be to utilize statistical sampling in the areas of receipts, disbursements, utility billing and payroll. Here we develop a statistical conclusion based upon an initial computer selected random sample which is based on the population and other risk factors identified. If errors are noted in the sample, the sample size will be expanded. We believe that a random selection can be efficient, while providing each item in the population an equal chance of being selected. Additionally, we may select a stratified sample of all transactions over a specified dollar limit for review. This allows us to cover all high dollar value transactions not otherwise selected in the random sample. Our samples are selected randomly utilizing IDEA data analysis software. Extent of EDP Software Our traditional approach is to "audit around" the computer, which means that we verify output by agreeing it, through our audit tests, with corresponding source input transactions. We do not choose to use audit software that runs through the Districts' computer system, such as a test deck. Like other aspects of the internal control structure, computer controls are documented in our memoranda and questionnaires. We will consider whether specialized skills are needed to consider the effect of computer processing on the audit, to understand the internal control structure policies and procedures or to design and perform audit procedures. The decision to use a computer specialist in audit planning is a matter of our professional judgment. We will consider the complexity of the computer system and assess whether we can identify the types of misstatements that might occur. LSL's IT Specialist will be involved in the planning and performance of the audit and also in assessing the IT controls of the District. Analytical Procedures We use analytical procedures as an overall review of the financial information in the preliminary and final stages of the audit. These procedures are designed to assist us in planning our audit and in assessing the propriety of the conclusions reached and in the evaluation of the overall financial statement presentation. The procedures to be utilized consist of determining expectations for percentage increases and decreases between significant revenue, expenditure and balance sheet accounts, reading the financial statements and related notes, and we focus on overall relationships within the financial statements. Once determined, these are reviewed to determine if the changes appear reasonable or require further analysis. For all significant differences, explanations are obtained as to why the situation occurred and additional substantive procedures may be applied and related evidence gathered to resolve concerns and questions. Approach to Understanding District's Internal Control Structure To gain an understanding of the Districts' internal control structure, we will perform procedures as required by the new Auditing Standards, primarily SAS 104-111. This will include documenting the major transaction classes, purpose of funds, the structure of the District and to quantify materiality. We will review and make recommendations on the internal control structure, which consists of Control Environment, Accounting System and Control Procedures. We will review internal controls in the area of cash; investments; revenues and receivables; expenditures and accounts payable; payroll; inventories; property and equipment, debt and debt service; insurance and claims. Based on the result of our review, we will issue a formal internal control report (SAS 115 Letter) that will identify any significant deficiencies and or material weaknesses which we identify. This report is required by the Government Auditing Standards issued by the Comptroller General of the United States. In addition, we will also issue a separate communication letter directly to the governing board. LSL•':' 0 To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California This letter would communicate any significant deficiencies or material weaknesses we identify in the internal control system and other matters that we feel should be communicated to the governing board. All internal control issues will initially also be discussed with management of the District. Approach to Determining Laws and Regulations Subject to Audit The Laws and Regulations that will be subject to audit test work are determined from the applicable laws, regulations, contracts, and grant agreements which we identify through the understanding we obtain of the Districts and our extensive experience with governmental entities. Approach to be Taken in Drawing Audit Samples For the purpose of tests of controls and tests of compliances with laws and regulations, we use audit sampling. Tests of controls are procedures directed towards determining the effectiveness of the design or operation of an internal structure policy or procedures. Normally, audit sampling is used for tests of controls that involve inspection of documents and reports indicating performance of the policy or procedures and, in many cases, re -performance of the application of the policy or procedures. These sampling procedures test the operating effectiveness of an internal control structure policy or procedures by determining how the policy or procedure was applied, the consistency with which it was applied during the audit period, and by whom it was applied. To achieve this goal, we draw samples in the area of disbursements, receipts, utility billing and payroll. Each document selected will be tested for various attributes that are designed to verify compliance with different aspects of internal controls. Additionally, each sample item will be tested for coding to the proper accounts and posting to the general ledger. The following new Governmental Accounting Standards Board (GASB) pronouncements were effective for the fiscal year 2015/16 audit: GASB Statement No. 72, Fair Value Measurement and Application. GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. GASB Statement No. 79, Certain External Investment Pools and Pool Participants. The following GASB pronouncements are effective in the following fiscal year audit and should be reviewed for proper implementation by management: Fiscal year 2016/17: GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statement Nos. 67 and 68. GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. GASB Statement No. 77, Tax Abatement Disclosures. GASB Statement No. 78, Pensions Provided through Certain Multiple -Employer Defined Benefit Pension Plans. LSL:o':: To the Landscape Maintenance Districts Citizens' Oversight Committee City of Rancho Cucamonga, California GASB Statement No. 80, Blending Requirements for Certain Component Units -an amendment of GASB Statement No. 14. GASB Statement No. 82, Pension Issues — an amendment of GASB Statement Nos. 67, No. 68, and No. 73. Fiscal year 2017/18: GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. GASB Statement No. 81, Irrevocable Split Interest Agreements. Restriction on Use This information is intended solely for the use of the Landscape Maintenance Districts Citizens' Oversight Committee and management of the Districts and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, .4�*,-44Pow Brea, California STAFF REPORT DATE: , 2017 TO: Mayor and Members of the City Council FROM: John R. Gillison, City Manager INITIATED BY: Planned Communities Citizens' Oversight Committee Lori Sassoon, Deputy City Manager/Administrative Services Tamara L. Layne, Finance Director Noah M. Daniels, Finance Manager SUBJECT: SUMMARY OF REVIEW OF RESULTS OF ANNUAL INDEPENDENT AUDIT OF LANDSCAPE MAINTENANCE DISTRICTS #2 VICTORIA, #411 TERRA VISTA, #611 CARYN COMMUNITY, AND #7 NORTH ETIWANDA FOR FISCAL YEAR 2015/16 RECOMMENDATION: Staff recommends that the City Council receive and file the results of the Committee's review of the annual independent audit of Landscape Maintenance Districts #2 Victoria, #4R Terra Vista, #6R Caryn Community, and e#7Noh Etiwanda (collectively "the Districts") for Fiscal Year lwqW 2015/16. BACKGROUND: Established by Resolution 13-079, the Planned Communities Citizens' Oversight Committee is made up of five members of the public that reside, and own property, within the Districts, and do not serve on any other standing City Commission or Committee. A primary purpose of the Committee is to review the annual audit after it is prepared and report the results of its review to the City Council and the community on an annual basis. The Committee has neither budgetary or operational decision -making authority, nor the authority to allocate financial resources or direct staff. ANALYSIS: At its meeting of April 18, 2017, Tamara Layne, Finance Director, and Frank North, Senior Audit Manager, from the accounting firm of Lance, Soll & Lunghard LLP, provided the results of the annual audit of the Districts. The reports generated from the audit include: • Statement of Revenues, Expenditures and Changes in Fund Balances for the Districts for the year ended June 30, 2016 • Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters • Audit Communication Letter Page 1 of 2 The auditor provided an overview for how they consider internal controls when determining the appropriate audit procedures to express an opinion about whether the Districts' financial report is free from material misstatement. As these processes were reviewed, the Committee discussed the audit process, and how the City ensures that funds collected for the Districts are spent for the operations. The staff from the City's Finance Department and the auditor confirmed that the revenues received were accurately recorded and were expended for the maintenance and operations of the Districts. The Committee noted that, in accordance with the law, the City accounts for each individual district's revenue and expenditures in separate funds. The auditor also communicated information about their professional responsibilities, which includes communication about significant aspects of the audit and other matters. Staff is pleased to inform the Council that there were no audit findings, misstatements identified during the audit, or other difficulties in performing the audit. FISCAL IMPACT: There is no fiscal impact. COUNCIL GOAL ADDRESSED: MID AND LONG RANGE PLANNING Develop a fiscal sustainability plan for the City's special districts — This continues the Committee's responsibility for providing additional financial oversight of the Districts. ATTACHMENTS: Attachment 1 — Statement of Revenues, Expenditures and Changes in Fund Balances for the Districts for the year ended June 30, 201 6- - Attachment 2 — Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Attachment 3 — Audit Communication Letter Page 2 of 2