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HomeMy WebLinkAboutItem 4: Adoption of Resolution Acknowledging Receipt of the FY10 URA Annual Financial Report 1 EURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY Action: Adoption of Resolution 1058 Acknowledging Receipt of the Annual Financial Report of the Urban Renewal Agency of the City of Eugene, Oregon, for the Fiscal Year Ended June 30, 2010 Meeting Date: January 11, 2011 Agenda Item Number: 4 Department: Central Services Staff Contact: Fionan Cronin www.eugene-or.gov Contact Telephone Number: 541-682-5394 ISSUE STATEMENT This is a resolution acknowledging receipt of the Annual Financial Report (Report) of the Urban Renewal Agency (Agency) of the City of Eugene for the fiscal year ended June 30, 2010. This resolution demonstrates compliance with ORS 297.465(2), which requires that a copy of the Agency’s financial report, containing a signed expression of opinion, be furnished to each member of the governing body. BACKGROUND Under Oregon Municipal Audit Law, the Agency is required each fiscal year to contract with an authorized accounting firm for the audit of its accounts and fiscal affairs (ORS 297.425). The regional firm of Isler CPA (auditors) has completed the audit of the Agency’s annual financial report for the fiscal year ended June 30, 2010, and issued an unqualified opinion on the basic financial statements. The auditors conduct the audit of the Agency’s basic financial statements in accordance with generally accepted auditing standards and the Minimum Standards for Audits of Oregon Municipal Corporations. Management is responsible for the information contained in, and the preparation of, the Agency’s financial statements. To effectively fulfill this responsibility and to contain the cost of auditor services, staff devotes significant effort to the closing of accounting records, the preparation of schedules and audit workpapers, and the production of the Annual Financial Report. This also results in staff expertise being developed on specific financial and service issues that can then be used to assist departments and other pertinent parties. The key pages of the report, which the council may wish to review, are page 3 and pages 43-44, where the two auditors' reports are found. In the first report, the auditors have issued a "clean opinion" on the Agency’s basic financial statements, indicating that the Agency has prepared these statements in conformity with generally accepted accounting principles (GAAP). GAAP for state and local governments is promulgated by the Governmental Accounting Standards Board (GASB) to ensure consistency in accounting and comparability in financial reporting among state and local governments. A clean opinion is a fundamental financial goal for every \\Cesrv500\cc support\CMO\2011 Council Agendas\M110111\S1101114.doc 2 government, as it represents the highest level of opinion a government can receive from its independent auditors. A clean opinion is an important indicator of sound financial management and creditworthiness to the citizens, other governmental jurisdictions (state and federal), credit rating agencies, investment bankers, bond holders, and other private sector entities. In the second report, the auditors address the Agency’s compliance with applicable provisions of Oregon Revised Statutes including, requirements related to debt, deposit of public funds, preparation and adoption of the budget, accounting records and related internal control structure, etc. The auditors noted that nothing came to their attention that caused them to believe that the Agency was not in compliance with state regulations. RELATED POLICY ISSUES Policy B.1 of the City’s Financial Management Goals and Policies states that “The City will maintain an accounting and financial reporting system that allows reporting in conformance with Generally Accepted Accounting Principles and Oregon Local Budget Law and will issue a Comprehensive Annual Financial Report each fiscal year.” This action signifies formal completion of this process for the fiscal year ended June 30, 2010, and demonstrates the Agency’s compliance with the policy. AGENCY OPTIONS None. AGENCY DIRECTOR’S RECOMMENDATION The Agency Director recommends adoption of the proposed resolution. SUGGESTED MOTION Move to adopt Resolution 1058 acknowledging receipt of the Annual Financial Report for the Urban Renewal Agency of the City of Eugene for the fiscal year ended June 30, 2010. ATTACHMENTS A.Resolution B.2010 Report FOR MORE INFORMATION Staff Contact: Fionan Cronin Telephone: 541-682-5394 Staff E-Mail: finn.j.cronin@ci.eugene.or.us \\Cesrv500\cc support\CMO\2011 Council Agendas\M110111\S1101114.doc ATTACHMENT A RESOLUTION NO. A RESOLUTION ACKNOWLEDGING THE RECEIPT OF THE ANNUAL FINANCIAL REPORT OF THE URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, FOR THE FISCAL YEAR ENDED JUNE 30, 2010 The Urban Renewal Agency of the City of Eugene finds that: The firm of Isler CPA has completed the audit of the financial statements of the Urban Renewal Agency of the City of Eugene for the fiscal year ended June 30, 2010, as required by ORS 297.425 and, pursuant to ORS 297.465, reported to the Board on its findings. NOW, THEREFORE, BE IT RESOLVED by the Urban Renewal Agency of the City of Eugene, as follows: Section 1. That the Board hereby acknowledges that it has received the "Annual Financial Report of the Urban Renewal Agency, a Component Unit of the City of Eugene, for the fiscal year ended June 30, 2010." The foregoing resolution adopted the 11th day of January, 2011. ___________________________________ Director URBAN RENEWAL AGENCY A Component Unit of the City of Eugene, Oregon Annual Financial Report Fiscal Year Ended June 30, 2010 URBAN RENEWAL AGENCY A Component Unit of the City of Eugene, Oregon Annual Financial Report Fiscal Year Ended June 30, 2010 (With Independent Auditors’ Report Thereon) Report Prepared by the City of Eugene Finance Division URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Annual Financial Report Year Ended June 30, 2010 Table of Contents Exhibit/ Page(s) Schedule Principal Officials 1 Independent Auditors’ Report 3 Management’s Discussion and Analysis 5 - 9 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 1 13 Statement of Activities 2 14 Fund Financial Statements: Balance Sheet - Governmental Funds 3 15 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 4 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 5 17 19 - 27 Notes to Basic Financial Statements Required Supplementary Information: Schedules of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: General Fund A – 1 31 Riverfront Special Revenue Fund A – 2 32 Other Supplementary Information: Schedules of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Debt Service Fund B – 1 35 Capital Projects Fund B – 2 36 Riverfront Capital Projects Fund B – 3 37 Schedule of Property Tax Transactions B – 4 38 i URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Annual Financial Report Table of Contents, continued Exhibit/ Schedule Page(s) Audit Comments and Disclosures: Independent Auditors’ Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Oregon Minimum Standards for Audits of Oregon Municipal Corporations 43 - 44 ii URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Eugene City Hall 777 Pearl Street Eugene, Oregon 97401 Principal officials as of June 30, 2010 Name Term Expires Mayor: Kitty Piercy January 2013 Board Members: George Brown January 2013 Betty Taylor January 2013 Alan Zelenka January 2011 George Poling January 2011 Mike Clark January 2011 Jennifer Solomon January 2011 Andrea Ortiz January 2013 Chris Pryor January 2013 Administrator: Jon R. Ruiz (this page intentionally left blank) INDEPENDENT AUDITORS’ REPORT To the Honorable Mayor, Members of the Urban Renewal Agency Board and Administrator of the Urban Renewal Agency of the City of Eugene, Oregon We have audited the accompanying financial statements of the governmental activities and each major fund of the Urban Renewal Agency of the City of Eugene, Oregon (“Urban Renewal Agency”) (a component unit of the City of Eugene, Oregon) as of and for the year ended June 30, 2010, which collectively comprise the Urban Renewal Agency’s basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the Urban Renewal Agency’s management. Our responsibility is to express opinions 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. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Urban Renewal Agency as of June 30, 2010, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis (page 5 through 9) and budgetary comparison information (page 31 through 32) are not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures to management’s discussion and analysis, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. The budgetary comparison information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in relation to the basic financial statements taken as a whole. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Urban Renewal Agency’s basic financial statements. The other supplementary information (page 35 through 38) is presented for purposes of additional analysis and is not a required part of the basic financial statements. That information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. ISLER CPA By: Gary Iskra, CPA, a member of the firm Eugene, Oregon December 3, 2010 (this page intentionally left blank) Management’s Discussion and Analysis The management of the Urban Renewal Agency (Agency), a component unit of the City of Eugene, Oregon presents this narrative overview and analysis to facilitate both a short and a long-term analysis of the financial activities of the Agency for the fiscal year ended June 30, 2010. This Management’s Discussion and Analysis (MD&A) is based on currently known facts, decisions, and conditions that existed as of the date of the independent auditors’ report. Financial Highlights The net assets of the Agency (assets less liabilities) at June 30, 2010 were $19,790,738. Of this amount, $14,789,792 is unrestricted. At June 30, 2010, the Agency’s governmental funds reported combined ending fund balances of $12,656,028. Of that amount, $10,249,868 is available for spending at the Agency’s discretion. The General Fund’s spendable fund balance is $1,705,029 at the end of the current fiscal year. General Fund expenditures for the current fiscal year were $1,074,793. Overview of the Financial Statements The following discussion and analysis is intended to serve as an introduction to the Agency’s basic financial statements. The Agency’s basic financial statements are comprised of three components: 1. Government-wide financial statements 2. Fund financial statements 3. Notes to the basic financial statements . Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the Agency’s finances, in a manner similar to a private-sector business. The Statement of Net Assets presents information on all of the Agency’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Agency is improving or deteriorating. The Statement of Activities presents information showing how the Agency’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Examples of such items include earned, but uncollected, property taxes. The Agency focuses on planning and development activities within the boundaries of the two urban renewal districts in the City of Eugene. Both government-wide financial statements provide information on these activities, which is supported mainly by property taxes. The government-wide financial statements can be found on Exhibits 1 and 2 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Agency uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Agency are governmental funds. Governmental funds. Governmental funds are used to account for activities where emphasis is placed on available financial resources, rather than upon net income determination. Therefore, unlike the government-wide financial statements, governmental fund financial statements focus on the acquisition and use of current spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financial decisions. Both the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. These reconciliations can be found on Exhibits 3 and 5 of this report. The Agency maintains two taxing districts within the urban renewal boundary: the Downtown District and the Riverfront District. The Agency maintains five individual governmental funds to account for these two districts: a general fund, a debt service fund, and a capital projects fund for the Downtown District; and a special revenue fund and a capital projects fund for the Riverfront District. Information for each fund is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. The basic governmental fund financial statements can be found on Exhibits 3 and 4 of this report. . The notes provide additional information that is essential to a full Notes to the basic financial statements understanding of the data provided in the government-wide and fund financial statements. They are an integral part of the financial statements and should be read in conjunction with them. Required supplementary information. The Agency adopts an annual appropriated budget for all its funds. To demonstrate compliance with the budget, budgetary comparison statements have been provided for the General Fund and the Riverfront Special Revenue Fund as required supplementary information. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the Agency, assets exceeded liabilities by $19,790,738 at the close of the most recent fiscal year. A portion of the Agency’s net assets (25.3%) reflects its investment in capital assets (land, construction in progress, improvements, and infrastructure). The Agency uses these capital assets to plan and develop designated properties within the urban renewal boundary. Consequently, these assets are not available for future spending. The remaining balance of net assets ($14,789,792) may be used to meet the government’s ongoing obligations within the urban renewal boundary. Urban Renewal Agency's Net Assets 20102009 Current and other assets$14,796,51515,221,986 Capital assets5,000,9465,258,104 Total assets19,797,46120,480,090 Other liabilities6,7234,995 Total liabilities6,7234,995 Net assets: Invested in capital assets5,000,9465,258,104 Unrestricted14,789,79215,216,991 Total net assets19,790,73820,475,095 $ Urban Renewal Agency's Change in Net Assets 20102009 Revenues: Proram revenues: g Fines, fees, and chares for services$598,638768,807 g Capital rants and contributions0428,190 g General revenues: Taxes2,518,7072,517,489 Investment earnins201,448397,213 g Total revenues3,318,7934,111,699 Expenses: Urban renewal redevelopment4,003,1504,014,550 Transfers out0440,000 Total expenses4,003,1504,454,550 Increase decrease in net assets 684,357342,851 ()()() Net assets, Jul 120,475,09520,817,946 y Net assets, June 30$19,790,73820,475,095 The Agency’s net assets decreased by $0.7 million compared to a $0.3 million decrease in the prior year. Urban Renewal Agency Revenues by Source Taxes - 75.9% Fines, fees, and charges for services - 18.0% Investment earnings - 6.1% Fund-based Financial Analysis As previously discussed, the Agency uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. The focus of the Agency’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Agency’s financing requirements. In particular, spendable fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Agency reported combined ending fund balances of $12,656,028. Approximately 81% of this total amount ($10,249,868) is available for spending at the Agency’s discretion. The remainder of fund balance ($2,406,160) is not available for new spending because it includes nonspendable assets held for resale. The General Fund is the chief operating fund of the Agency. At the end of the current fiscal year, the total fund balance was $2,243,957, of which $1,705,029 is available to spend. As a measure of the General Fund’s liquidity, it may be useful to compare total fund balance to total fund expenditures. Spendable fund balance is 1.6 times larger than total expenditures. General Fund Budgetary Highlights The difference between the original budget and the final amended budget was an increase of $107,811. This increase was funded by unspent resources from the prior year and current year resources. Capital Assets . The Agency’s investment in capital assets for its governmental activities as of June 30, 2010 Capital assets amounted to $5,000,946 (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, improvements, and infrastructure. Urban Renewal Agency's Capital Assets, Net of Accumulated Depreciation 20102009 Land$2,215,4592,215,459 Construction in roress053,189 pg Imrovements other than buildins1,513,9031,612,044 pg Infrastructure1,271,5841,377,412 Total capital assets $5,000,9465,258,104 Additional information on the Agency’s capital assets can be found in note (4)(C) of this report. Next Year’s Budgets and Rates For FY11, the following factors were taken into account when developing the urban renewal budgets: Property taxes are predicted to increase in the downtown district in FY11 due to a small increase in incremental value and expiration of the Multi-Unit Property Tax Exemption for the Broadway Place apartments. Property taxes in the Riverfront District are budgeted to increase slightly due to a higher tax rate applied for the division of tax calculation. The property tax collection rate for both districts is estimated to be 94% in FY11. The FY10 actual was approximately 97% for both current and delinquent taxes. The Downtown District will continue to implement redevelopment of two properties in FY11. The budget includes a construction loan to Beam Development for renovating the Centre Court building, as well as a contribution to th the Lane Community College Downtown Campus at the 10 & Charnelton site. The budget also includes two other projects from the 2010 plan amendment – Farmers’ Market improvements and Broadway Place garages and public safety improvements. There are no new projects planned in the Riverfront District for FY11, although planning continues for the EWEB property. Requests for Information This financial report is designed to provide a general overview of the Agency’s finances for all those with an interest in the Agency. Questions concerning any of the information provided in this report, or requests for additional financial information, should be addressed to: Fionan Cronin, CPA Assistant Finance Director City of Eugene th Avenue, Suite 400 100 West 10 Eugene, Oregon 97401 (this page intentionally left blank) BASIC FINANCIAL STATEMENTS (this page intentionally left blank) Exhibit 1 Urban Renewal Agency of the City of Eugene, Oregon Statement of Net Assets June 30, 2010 (amounts in dollars) Assets Equity in pooled cash and investments9,676,714 Cash with fiscal agent500,000 Receivables (net of allowance)2,196,814 Due from other governments16,827 Assets held for resale2,406,160 Capital assets: Land and construction in progress2,215,459 Other capital assets (net of accumulated depreciation)2,785,487 Total assets19,797,461 Liabilities Accounts payable and other liabilities6,438 Due to other governments285 Total liabilities6,723 Net assets Invested in capital assets5,000,946 Unrestricted14,789,792 Total net assets19,790,738 The accompanying notes are an integral part of the financial statements. Exhibit 2 Urban Renewal Agency of the City of Eugene, Oregon Statement of Activities For the fiscal year ended June 30, 2010 (amounts in dollars) Net Expense and Changes Program Revenuesin Net Assets Fees, Fines, andOperatingCapital Charges forGrants andGrants and ExpensesServicesContributionsContributionsTotal Functions/Programs Governmental activities: Urban renewal redevelopment4,003,150598,63800(3,404,512) Total governmental activities4,003,150598,63800(3,404,512) General revenues: Property taxes2,518,707 Unrestricted investment earnings201,448 Total general revenues2,720,155 Change in net assets(684,357) Net assets, July 1, 200920,475,095 Net assets, July 1, 201019,790,738 The accompanying notes are an integral part of the financial statements. Exhibit 3 Urban Renewal Agency of the City of Eugene, Oregon Balance Sheet Governmental Funds June 30, 2010 (amounts in dollars) RiverfrontRiverfrontTotal DebtCapitalSpecialCapitalGovernmental General ServiceProjectsRevenueProjectsFunds Assets Equity in pooled cash and investments1,148,4494,598,650238,2653,528,997162,3539,676,714 Cash with fiscal agent500,0000000500,000 Receivables: Interest9,62636,87908,019054,524 Taxes0148,321045,8610194,182 Accounts54,514000054,514 Loans and notes1,984,50200001,984,502 Allowance for uncollectibles(1,090)0000(1,090) Due from other governments013,04003,787016,827 Assets held for resale538,9280001,867,2322,406,160 Total assets4,234,9294,796,890238,2653,586,6642,029,58514,886,333 Liabilities and Fund Balances Liabilities Accounts payable6,43800006,438 Due to other governments32002530285 Deferred revenue1,984,502185,200053,88002,223,582 Total liabilities1,990,972185,200054,13302,230,305 Fundbalances Fundbalances Nonspendable538,9280001,867,2322,406,160 Restricted1,705,0294,611,690238,2653,532,531162,35310,249,868 Total fund balances2,243,9574,611,690238,2653,532,5312,029,58512,656,028 Total liabilities and fund balances4,234,9294,796,890238,2653,586,6642,029,585 Reconciliation to the Statement of Net Assets: The Statement of Net Assets reports receivables at their net realizable value. However, receivables not available to pay for current-period expenditures are deferred in governmental funds.2,133,764 Capital assets are not financial resources in governmental funds, but are reported in the Statement of Net Assets at their net depreciable value.5,000,946 Total net assets19,790,738 The accompanying notes are an integral part of the financial statements. Exhibit 4 Urban Renewal Agency of the City of Eugene, Oregon Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the fiscal year ended June 30, 2010 (amounts in dollars) RiverfrontRiverfrontTotal DebtCapitalSpecialCapitalGovernmental GeneralServiceProjectsRevenueProjectsFunds Revenues Taxes01,795,3950757,47802,552,873 Rental income57,923000057,923 Charges for services6170000617 Repayment of revolving loans58,510000058,510 Miscellaneous, primarily interest75,16772,0803,29249,6072,302202,448 Total revenues192,2171,867,4753,292807,0852,3022,872,371 Expenditures Current - departmental: Administration1,074,79300186,21801,261,011 Capital outlay000011,23211,232 Intergovernmental02,473,7490002,473,749 Total expenditures1,074,7932,473,7490186,21811,2323,745,992 Excess (deficiency) of revenues over expenditures(882,576)(606,274)3,292620,867(8,930)(873,621) Other financing sources (uses) Transfersinransersn472044,0100000,00572044, Tfi472044010000000572044 Transfers out0(572,044)000(572,044) Total other financing sources (uses)472,044(572,044)100,000000 Net change in fund balances(410,532)(1,178,318)103,292620,867(8,930)(873,621) Fund balances, July 1, 20092,654,4895,790,008134,9732,911,6642,038,51513,529,649 Fund balances, June 30, 20102,243,9574,611,690238,2653,532,5312,029,58512,656,028 The accompanying notes are an integral part of the financial statements. Exhibit 5 Urban Renewal Agency of the City of Eugene, Oregon Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the fiscal year ended June 30, 2010 (amounts in dollars) Net change in fund balances - total governmental funds(873,621) Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are reported as expenditures in governmental funds. However, the Statement of Activities allocates the cost of capital outlays over their estimated useful lives as depreciation expense.(257,158) Governmental funds defer revenues that do not provide current financial resources. However, the Statement of Activities recognizes such revenues at their net realizable value when earned, regardless of when received.446,422 Change in net assets of governmental activities.(684,357) The accompanying notes are an integral part of the financial statements. (this page intentionally left blank) URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements June 30, 2010 (1) Summary of Significant Accounting Policies The financial statements of the Urban Renewal Agency (Agency) of the City of Eugene, Oregon (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard- setting body for establishing governmental accounting and financial reporting standards. The Agency has early implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions.There was no change in fund classifications. The more significant of the Agency's accounting policies are described below. (A) The Financial Reporting Entity The Agency's governing body is identical to the Eugene City Council, and because the services of the Agency are exclusively for the benefit of the City, the Agency has been determined under standards established by Governmental Accounting Standards Board Statement No. 14 to be a component unit of the City. As a result, the funds of the Agency are blended with those of the City by including them in the appropriate statements and schedules of the City's Comprehensive Annual Financial Report, copies of which can be obtained from the Finance Division of the City. (B) Organization and Operation The Urban Renewal Agency of the City of Eugene was established on July 10, 1967 as a separate political body charged with the responsibility to implement the Central Eugene Project and Urban Renewal Plan. On May 24, 1982, the powers granted to the Agency under Oregon Revised Statutes Chapter 457 were transferred to the City Council of Eugene. The accounts of the Agency are organized on the basis of funds. Fund accounting is designed to demonstrate legal compliance and aid financial management by segregating government functions and activities. The operations of each fund are accounted for by providing a separate set of self-balancing accounts, which comprise its assets, liabilities, fund balances, revenues, and expenditures. (C) Government-wide and Fund Financial Statements The government-wide financial statements (Exhibits 1 and 2) report information on all activities of the Agency. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. The Statement of Activities (Exhibit 2) demonstrates the degree to which the expenses of a given function are offset by program revenues. Program revenues include 1) fines, fees, and charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or program and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or program. Grants and contributions not restricted are reported as general revenues rather than program revenues. Taxes and other items not properly included among program revenues are also reported as general revenues. Fund financial statements (Exhibits 3 and 4) are provided for all governmental funds. continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (1) Summary of Significant Accounting Policies, continued (D) Measurement Focus, Basis of Accounting, and Financial Statement Presentation Measurement focus refers to what is measured by a fund. Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. The government-wide financial statements are accounted for using an economic resources measurement focus, whereby all assets and liabilities are reported in the Statement of Net Assets. The increases and decreases in those net assets are reported in the Statement of Activities. The accrual basis of accounting is used whereby revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The governmental fund financial statements are accounted for using a current financial resources measurement focus. The Balance Sheet generally reports only current assets and current liabilities; and the Statement of Revenues, Expenditures, and Changes in Fund Balances presents increases and decreases in those net current assets. These funds use the modified accrual basis of accounting whereby revenues are recorded when susceptible to accrual (both measurable and available). "Measurable" means that the amount of the transaction can be determined. "Available" is defined as being collectible within the current period or soon enough thereafter (60 days) to be used to liquidate liabilities of the current period.Expenditures, other than interest on long-term obligations, are recorded when the fund liability is incurred. Real and personal property taxes were levied as of July 1 for the fiscal year on values assessed as of January 1. Property taxes are an enforceable lien on both real and personal property as of July 1 and are due and payable in three installments on November 15, February 15, and May 15. All property taxes are billed and collected by Lane County and remitted to the Agency. In the governmental fund financial statements, property taxes are reflected as revenues in the fiscal period for which they were levied, provided they are 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 (60 days). Otherwise, they are reported as deferred revenues. In the government-wide financial statements, property tax revenues are fully recognized at the time of levy. Property taxes which are held at year-end by the collecting agency, Lane County, and are remitted to the City within the 60-day period are reported as "Due from other governments." Repayment of revolving loans and miscellaneous revenues (except investment earnings) are recorded as revenues when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned since they are measurable and available. Rental income is typically received in advance and is deferred when appropriate. Governmental Funds Governmental funds finance all of the functions of the Agency. The measurement focus is upon determination of changes in current financial resources, rather than upon net income determination. The following are the Agency's Downtown District governmental funds: General Fund The General Fund is the general operating fund of the Agency. It is used to account for all financial resources except those required to be accounted for in another fund. Principal sources of revenue are rental income, interest on investments, principal and interest payments on outstanding loans, and transfers from the Debt Service Fund. Primary expenditures of the General Fund are made for downtown development and administration costs. continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (1) Summary of Significant Accounting Policies, continued (D) Measurement Focus, Basis of Accounting, and Financial Statement Presentation, continued Governmental Funds, continued Debt Service Fund The Debt Service Fund is used to account for the accumulation of tax increment resources and the payment of intergovernmental expenditures to the City, including principal and interest on the Library Certificates of Participation, and other expenditures within the district. Capital Projects Fund The Capital Projects Fund is used to account for the financial resources to be used for the acquisition or construction of major capital facilities within the Downtown District. The following are the Agency's Riverfront District governmental funds: Riverfront Special Revenue Fund The Riverfront Special Revenue Fund is used to account for the proceeds of specific revenue sources that are externally restricted to expenditures for the Riverfront District. Riverfront Capital Projects Fund The Riverfront Capital Projects Fund is used to account for the financial resources that are restricted to expending for acquisition or construction of major capital facilities within the Riverfront District. (E) Equity in Pooled Cash and Investments The Agency invests cash through the City into various investment programs. Policies adopted by the Investment Advisory Board and the Eugene City Council authorize the City to invest in obligations of the U.S. Treasury and its agencies, time certificates of deposit, bankers’ acceptances, municipal bonds, corporate bonds, commercial paper, repurchase agreements, reverse repurchase agreements, and the Oregon Local Government Investment Pool (LGIP). It is the City’s policy to report at amortized cost all short-term, highly-liquid money market investments (including corporate bonds, commercial paper, bankers’ acceptances, municipal bonds, and U.S. Treasury and agency obligations) and participating interest-earning investment contracts with a remaining maturity at time of purchase of one year or less. Such investments are stated at cost, increased by accretion of discounts and reduced by amortization of premiums, both computed by the straight-line method. Callable investments purchased at a discount are amortized to the maturity date, and callable investments purchased at a premium are amortized to the first call date. Investments with a remaining maturity at time of purchase of more than one year are valued at fair value. The City maintains a common cash and investments pool for all City funds, including funds of the Agency. Interest earned on the pooled cash and investments is allocated quarterly based on each fund’s average cash and investments balance as a proportion of the City’s total pooled cash and investments. The City considers “cash” to include the pooled cash and investments, since the pool has the general characteristics of a demand deposit account, in that any participating fund may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty. continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (1) Summary of Significant Accounting Policies, continued (F) Receivables All receivables are shown net of an allowance for uncollectibles in the Statement of Net Assets and the Governmental Funds Balance Sheet. (G) Capital Assets Capital assets are defined as tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period. The capitalization threshold for capital assets is $5,000. Tangible assets include land, right-of-way (included with land), improvements, and infrastructure. Intangible assets include copyrights, trademarks, and computer software. Except for infrastructure placed in service prior to July 1, 1980, all capital assets have been capitalized in the government-wide financial statements. In accordance with the current financial resources measurement focus, capital assets are not capitalized in the governmental fund financial statements. All purchased capital assets are valued at historical cost. Historical cost is measured by the cash or cash equivalent price of obtaining an asset, including ancillary charges necessary to place the asset into its intended location and condition for use. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Amounts expended for maintenance and repairs are charged to expenditures in the appropriate funds as incurred and are not capitalized. Capital assets are depreciated unless they are inexhaustible in nature (e.g., land). Depreciation is an accounting process used to allocate the cost of capital assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the capital asset. Depreciation is not intended to represent an estimate in the decline of fair market value, nor are capital assets net of accumulated depreciation intended to represent an estimate of the current condition of the assets, or the maintenance requirements needed to maintain the assets at their current level of condition. Depreciation is computed over the estimated useful lives of the capital assets. All estimates of useful lives are based on actual experience by City departments with identical or similar capital assets. Infrastructure assets are depreciated using a composite depreciation method. All other categories of assets are depreciated on the straight-line basis of accounting. The estimated useful lives of the various categories of assets are as follows: Estimated useful life Category Improvements 20 years Infrastructure 25 years Upon disposal of capital assets, cost and accumulated depreciation are removed from the accounts and, if appropriate, a gain or loss on the disposal is recognized. In accordance with the composite depreciation method, no gain or loss is recorded upon disposal, but rather, cost is removed from the capital asset account and charged to the accumulated depreciation account. Capital assets are reported net of accumulated depreciation in the Statement of Net Assets, and depreciation expense is reported in the Statement of Activities in the urban renewal redevelopment function. (H) Fund Balances In the fund financial statements, the fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (1) Summary of Significant Accounting Policies, continued (H) Fund Balances, continued Fund balance is reported as nonspendable when the resources cannot be spent because they are either in a nonspendable form or legally or contractually required to be maintained intact. Resources in nonspendable form include inventories, prepaids and deposits, and assets held for resale. Fund balance is reported as restricted when the constraints placed on the use of resources are either: (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. (I) Indirect Expenses The Agency’s Statement of Revenues, Expenditures, and Changes in Fund Balances include reimbursement to the City’s Central Services department for general services provided to the Agency by the City’s General Fund. The charge for general service costs is based on an approved overhead rate applied to direct costs. The indirect cost reimbursement has been included in program expenses in the Statement of Activities. (2) Reconciliation of Government-wide and Fund Financial Statements (A) Explanation of Certain Differences Between the Government-wide Statement of Net Assets and the Governmental Fund Balance Sheet The Balance Sheet for governmental funds (Exhibit 3) includes a reconciliation between total fund balances and total net assets in the Statement of Net Assets (Exhibit 1). The following are selected elements of that reconciliation: Capital assets are not financial resources in governmental funds, but are reported in the Statement of Net Assets at their net depreciable value. The details of this $5,000,946 difference are as follows: Capital assets (net of accumulated depreciation) reported in the Statement of Net Assets: Land and construction in progress$2,215,459 Other capital assets (net of accumulated depreciation)2,785,487 Net adjustment$5,000,946 The Statement of Net Assets reports receivables at their net realizable value. However, receivables not available to pay for current-period expenditures are deferred in governmental funds. The details of this $2,133,764 difference are as follows: Receivables: Interest$44,898 Taxes194,182 Loans and notes1,984,502 Subtotal2,223,582 Allowance for uncollectibles(89,818) Net adjustment$2,133,764 continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (2) Reconciliation of Government-wide and Fund Financial Statements, continued (B) Explanation of Certain Differences Between the Government-wide Statement of Activities and the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances The Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities is provided at Exhibit 5. The following are selected elements of that reconciliation: Capital outlays are reported as expenditures in governmental funds. However, the Statement of Activities allocates the cost of capital outlays over their estimated useful lives as depreciation expense. The details of this $257,158 difference are as follows: Capital outlay$11,232 Depreciation expense(268,390) Net adjustment $(257,158) Governmental funds defer revenues that do not provide current financial resources. However, the Statement of Activities recognizes such revenue at their net realizable value when earned, regardless of when collected. The details of this $446,422 difference are as follows: Change in deferred revenue from the following sources: Property taxes receivable$(33,180) Notes receivable543,332 Subtotal510,152 Change in the allowance for doubtful receivables(63,730) Net adjustment$446,422 (3) Stewardship, Compliance, and Accountability (A) Budgetary Information The City of Eugene submits to the City Council of Eugene (acting as the Urban Renewal Agency Board under provisions of Oregon Revised Statute 457.460) a proposed operating and capital budget a sufficient length of time in advance to allow adoption of the budget prior to July 1. Prior to July 1, the Agency legally adopts its annual budget for all funds through passage of a resolution. The resolution authorizes fund appropriations as current annual departmental requirements, debt service, capital outlay, interfund transfers, interfund loans, intergovernmental, and miscellaneous fiscal transactions. Expenditures cannot legally exceed appropriations at these control levels. Appropriations which have not been spent at year-end lapse, although an amending resolution passed in the subsequent year specifically provides for the reappropriation of prior-year lapsed encumbrances. Unexpected additional resources, or appropriations may be added to the budget through the use of a supplemental budget. A supplemental budget requires hearings before the public, publications in newspapers, and approval by the Agency. Original and supplemental budgets may be modified by the use of appropriation transfers between the levels of control. Such transfers require approval by passing an Agency resolution authorizing the transfer. All budget amendments are subject to the limitations put forth in the Oregon Revised Statutes Chapters 294.305 through 294.565 (Oregon Budget Law). The net effect of amending resolutions passed during the fiscal year was an appropriation increase of $437,314. continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (4) Detailed Notes on All Funds (A)Equity in Pooled Cash and Investments The City maintains a common cash and investments pool that is available for use by all funds, including the Agency. The Agency’s portion of this pool is displayed in the Statement of Net Assets and the Balance Sheet as "Equity in pooled cash and investments.” Cash and investments are comprised of the following at June 30, 2010: Deposits with banks241,295 Cash with fiscal agent500,000 Investments9,435,419 10,176,714 Detailed information for the Agency’s pooled cash and investments can be found in the City of Eugene’s FY10 Comprehensive Annual Financial Report (Notes to Basic Financial Statements). (B) Deferred Revenue Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period, and for resources that have been received but not yet earned. At June 30, 2010, the deferred revenue reported in the Balance Sheet for governmental funds consist of the following: Total Property taxes receivable: Debt Service $148,321 Riverfront Special Revenue 45,861 Notes receivable: General 1,984,502 Other: Debt Service 36,879 Riverfront Special Revenue 8,019 Total deferred revenue $ 2,223,582 continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (4) Detailed Notes on All Funds, continued (C) Capital Assets (5) Other Information (A) Risk Management The Agency is a participant in the City’s Risk and Benefits Internal Service Fund which accounts for and finances its risks of loss. The Risk and Benefits Fund has a self-insured liability program which covers personal injury, public official errors and omissions, automobile, and employer’s liability, with a maximum self-insured retention of $500,000 per occurrence. In addition, the Risk and Benefits Fund has a self- insured workers’ compensation program which covers employees’ work related illnesses and injuries, including employer’s liability, with a maximum self-insured retention of $500,000 per occurrence. The Agency, as a participant in the Risk and Benefits Fund, retains a portion of the risk of loss for general liability. Coverage for workers’ compensation, general liability, and employees’ medical claims in excess of the self-insurance retention limit is purchased from commercial insurers. The Risk and Benefits Fund also purchases all risk property insurance coverage from a commercial insurer. The property insurance policy has a basic $25,000 deductible, however, earthquake and flood insurance coverage were subject to $250,000 deductible per occurrence. During the previous three fiscal years, there were no general liability claims that exceeded the insurance coverage levels. continued URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (5) Other Information, continued (B) Commitments Pursuant to an intergovernmental agreement between the City and the Agency, a portion of the Agency’s tax increment revenues were to be used to provide funding resources to the City to cover debt service associated with the certificates of participation (COP’s) issued by the City to finance the construction of a library. During the fiscal year, $2,408,749 in payments were made to the City to pay off the COP’s debt. The payments are included with intergovernmental expenditures in the Agency’s Debt Service Fund. In September 2010, the City and the Agency entered into an intergovernmental agreement whereby a portion of the Agency’s tax increment revenues are to be used to provide resources to cover debt service associated with the limited tax bonds issued by the City to finance construction of the Broadway Garages. Payments are due in August and February each year, and are reported as intergovernmental expenditures in the Agency’s Debt Service Fund. Annual debt service requirements to maturity for the City’s Broadway Garages Limited Tax bonds are as follows: PrincipalInterestTotal Year ending June 30 2011 $420,000320,506740,506 2012 470,000289,913759,913 2013 515,000256,053771,053 2014 565,000218,575783,575 2015 620,000177,100797,100 2016 675,000131,775806,775 2017 735,00082,425817,425 2018 810,00028,350838,350 $ 4,810,0001,504,6976,314,697 (C) Outstanding Encumbrances Encumbrances outstanding at June 30, 2010 which the Agency intends to honor are $70,000 and $56 in the General Fund and Riverfront Capital Projects Fund, respectively. (this page intentionally left blank) REQUIRED SUPPLEMENTARY INFORMATION (this page intentionally left blank) A-1 Urban Renewal Agency of the City of Eugene, Oregon General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the fiscal year ended June 30, 2010 (amounts in dollars) BudgetActual BudgetGAAP OriginalFinalbasisAdjustmentbasis Revenues Intergovernmental6,700,0006,700,000000 Rental income0057,923057,923 Charges for services2,0002,0006170617 Repayment of revolving loans00058,51058,510 Miscellaneous549,000549,00080,290(5,123)75,167 Total revenues7,251,0007,251,000138,83053,387192,217 Expenditures Administration972,000972,000478,750596,0431,074,793 Loans granted9,049,1569,156,967596,043(596,043)0 Total expenditures10,021,15610,128,9671,074,79301,074,793 Excess (deficiency) of revenues over expenditures(2,770,156)(2,877,967)(935,963)53,387(882,576) Other financing sources (uses) Principal payments received50,00050,00058,510(58,510)0 Transfers in772,000772,000472,0440472,044 Total other financing sources (uses)822,000822,000530,554(58,510)472,044 Net change in fund balance(1,948,156)(2,055,967)(405,409)(5,123)(410,532) Fund balance, July 1, 20091,998,1562,105,9672,105,967548,5222,654,489 Fund balance, June 30, 201050,00050,0001,700,558543,3992,243,957 A-2 Urban Renewal Agency of the City of Eugene, Oregon Riverfront Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the fiscal year ended June 30, 2010 (amounts in dollars) BudgetActual BudgetGAAP OriginalFinalbasisAdjustmentbasis Revenues Taxes685,000685,000757,4780757,478 Rental income25,00025,000000 Miscellaneous26,00026,00053,976(4,369)49,607 Total revenues736,000736,000811,454(4,369)807,085 Expenditures Administration288,000288,000186,2180186,218 Total expenditures288,000288,000186,2180186,218 Excess (deficiency) of revenues over expenditures448,000448,000625,236(4,369)620,867 Total other financing sources (uses)00000 Net change in fund balance448,000448,000625,236(4,369)620,867 Fund balance, July 1, 20092,631,4872,899,2502,899,25012,4142,911,664 Fund balance, June 30, 20103,079,4873,347,2503,524,4868,0453,532,531 OTHER SUPPLEMENTARY INFORMATION (this page intentionally left blank) B-1 Urban Renewal Agency of the City of Eugene, Oregon Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the fiscal year ended June 30, 2010 (amounts in dollars) Actual BudgetGAAP BudgetbasisAdjustmentbasis Revenues Taxes1,730,0001,795,39501,795,395 Miscellaneous19,00087,667(15,587)72,080 Total revenues1,749,0001,883,062(15,587)1,867,475 Expenditures Intergovernmental2,473,7502,473,74902,473,749 Total expenditures2,473,7502,473,74902,473,749 Excess (deficiency) of revenues over expenditures(724,750)(590,687)(15,587)(606,274) Other financing sources (uses) Transfers out(872,000)(572,044)0(572,044) Total other financing sources (uses)(872,000)(572,044)0(572,044) Net change in fund balance(1,596,750)(1,162,731)(15,587)(1,178,318) Fund balance, July 1, 20095,761,7915,761,79128,2175,790,008 Fund balance, June 30, 20104,165,0414,599,06012,6304,611,690 B-2 Urban Renewal Agency of the City of Eugene, Oregon Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the fiscal year ended June 30, 2010 (amounts in dollars) Actual BudgetGAAP BudgetbasisAdjustmentbasis Revenues Intergovernmental0000 Miscellaneous03,325(33)3,292 Total revenues03,325(33)3,292 Expenditures Capital outlay234,593000 Total expenditures234,593000 Excess (deficiency) of revenues over expenditures(234,593)3,325(33)3,292 Other financing sources (uses) Transfers in100,000100,0000100,000 Total other financing sources (uses)100,000100,0000100,000 Net change in fund balance(134,593)103,325(33)103,292 Fund balance, July 1, 2009134,593134,593380134,973 Fund balance, June 30, 20100237,918347238,265 B-3 Urban Renewal Agency of the City of Eugene, Oregon Riverfront Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the fiscal year ended June 30, 2010 (amounts in dollars) Actual BudgetGAAP BudgetbasisAdjustmentbasis Revenues Miscellaneous2,0002,650(348)2,302 Total revenues2,0002,650(348)2,302 Expenditures Capital outlay157,72911,232011,232 Total expenditures157,72911,232011,232 Excess (deficiency) of revenues over expenditures(155,729)(8,582)(348)(8,930) Total other financing sources (uses)0000 Net change in fund balance(155,729)(8,582)(348)(8,930) Fund balance, July 1, 2009170,547170,5471,867,9682,038,515 Fund balance, June 30, 201014,818161,9651,867,6202,029,585 B-4 Urban Renewal Agency of the City of Eugene, Oregon Schedule of Property Tax Transactions For the fiscal year ended June 30, 2010 (amounts in dollars) Uncollected Adjustments, Uncollected balancesCurrentinterest, and balances Fiscal yearJuly 1, 2009year's levydiscountsCollectionsJune 30, 2010 1965-0339,9360(16,262)(972)22,702 20043,6000(366)(116)3,118 20055,0070(404)(655)3,948 20068,3330(641)(3,753)3,939 200724,05602,749(18,146)8,659 200857,63701,258(27,184)31,711 200975,9560(630)(37,494)37,832 201002,624,265(78,332)(2,463,660)82,273 Totals214,5252,624,265(92,628)(2,551,980)194,182 Summary by fund type Special Revenue Fund(757,213)45,861 Debt Service Fund(1,794,767)148,321 Totals(2,551,980)194,182 AUDIT COMMENTS (this page intentionally left blank) AUDIT COMMENTS (Comments and Disclosures Required by State Regulators) _________ Oregon Administrative Rules 162-010-0000 through 162-010-0330, of the Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State in cooperation with the Oregon State Board of Accountancy, enumerate the financial statements, schedules, comments, and disclosures required in audit reports. The required financial statements and schedules are set forth in preceding sections of this report. Required comments and disclosures related to the audit of such statements and schedules are set forth following. (this page intentionally left blank) INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH OREGON MINIMUM STANDARDS FOR AUDITS OF OREGON MUNICIPAL CORPORATIONS To the Honorable Mayor, Members of the Urban Renewal Agency Board and the Administrator City of Eugene, Oregon We have audited the basic financial statements of the Urban Renewal Agency (Agency) of the City of Eugene, Oregon as of and for the year ended June 30, 2010 and have issued our report thereon dated December 3, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Agency’s internal control over financial reporting as a basis for designing our auditing procedures 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 Agency’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Agency’s internal control over financial reporting. Adeficiency 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 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. Our consideration of internal control over financial reporting 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 financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance As part of obtaining reasonable assurance about whether the Agency’s financial statements are free of material misstatement, we performed tests of the Agency’s compliance with certain provisions of laws, regulations, contracts, grants, including provisions of Oregon Revised Statutes as specified in Oregon administrative Rules OAR 162-10-0000 to 162-10-0330, as set forth below, noncompliance with which could have a direct and material effect on the determination of financial statement amounts: Accounting records and related internal control structure. The use of various depositories to secure the deposit of public funds. The requirements relating to debt. The requirements relating to the preparation, adoption and execution of the annual budgets for fiscal years 2010 and 2011. The requirements relating to insurance and fidelity bond coverage. The appropriate laws, rules and regulations pertaining to programs funded wholly or partially by other governmental agencies. The requirements pertaining to the use of revenue from taxes on motor vehicle use fuel funds. The statutory requirements pertaining to the investment of public funds. The requirements pertaining to the awarding of public contracts and the construction of public improvements. 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 that are required to be reported under Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State. This report is intended solely for the information of the Honorable Mayor, members of the Urban Renewal Agency Board, the Administrator and management of the Urban Renewal Agency of the City of Eugene, Oregon and the Secretary of State, Audits Division, of the State of Oregon and is not intended to be and should not be used by anyone other than these specified parties. ISLER CPA By: Gary Iskra, CPA, a member of the firm Eugene, Oregon December 3, 2010