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HomeMy WebLinkAboutItem 5: Resolution on Receipt of FY12 URA Financial ReportEURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY Action: Adoption of Resolution 1066 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, 2012 Meeting Date: January 14, 2013 Agenda Item Number: 5 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, 2012. 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, 2012, and issued an unqualified opinion on the basic financial statements. The key pages of the Report, which the council may wish to review, are pages 3 - 4 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 statement, 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 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 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 S:\CMO\2013 Council Agendas\M130114\S1301145.doc 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. 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 work papers, 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. 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, 2012, and demonstrates the Agency’s compliance with the Policy. AGENCY OPTIONS None. AGENCY DIRECTOR’S RECOMMENDATION The Agency Director recommends adoption of the Resolution. SUGGESTED MOTION Move to adopt a resolution acknowledging receipt of the Annual Financial Report for the Urban Renewal Agency of the City of Eugene for the fiscal year ended June 30, 2012. ATTACHMENTS A.Resolution B.Copy of the 2012 Report FOR MORE INFORMATION Staff Contact: Fionan Cronin Telephone: 541-682-5394 Staff E-Mail: finn.j.cronin@ci.eugene.or.us S:\CMO\2013 Council Agendas\M130114\S1301145.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, 2012 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, 2012, 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, 2012." The foregoing resolution adopted the 14th day of January, 2013. Director URBAN RENEWAL AGENCY A Component Unit of the City of Eugene, Oregon Annual Financial Report Fiscal Year Ended June 30, 2012 URBAN RENEWAL AGENCY A Component Unit of the City of Eugene, Oregon Annual Financial Report Fiscal Year Ended June 30, 2012 (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, 2012 Table of Contents Exhibit/ Schedule Page(s) Principal Officials 1 Independent Auditors’ Report 3 - 4 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 - 28 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/ Page(s) Schedule 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 Principal officials as of June 30, 2012 Name Term Expires Mayor: Kitty Piercy January 2013 Board Members:George Brown January 2013 Betty Taylor January 2013 Alan Zelenka January 2015 George Poling January 2015 Mike Clark January 2015 Pat Farr January 2015 Andrea Ortiz January 2013 Chris Pryor January 2013 Administrator:Jon R. 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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, 2012 were $10,531,617. Of this amount, $6,337,101 was unrestricted. At June 30, 2012, the Agency’s governmental funds reported combined ending fund balances of $9,900,965. Of that amount, $7,173,573 is available for spending at the Agency’s discretion. The General Fund’s spendable fund balance was $281,736 at the end of FY12. General Fund expenditures for FY12 were $3,146,535. 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. Notes to the basic financial statements. The notes provide additional information that is essential to a full 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 $10,531,617 at the close of the most recent fiscal year. This compares to net assets of $8,083,396 in the previous year. A portion of the Agency’s net assets (39.8%) 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 ($6,337,101) may be used to meet the government’s ongoing obligations within the urban renewal boundary. Urban Renewal Agency's Net Assets 20122011 Current and other assets$13,558,49011,289,222 Capital assets4,194,5164,736,470 Total assets17,753,00616,025,692 Noncurrent liabilites6,429,0007,183,000 Other liabilities792,389759,296 Total liabilities7,221,3897,942,296 Net assets: Invested in capital assets4,194,5164,736,470 Unrestricted6,337,1013,346,926 Total net assets$10,531,6178,083,396 Urban Renewal Agency's Change in Net Assets 20122011 Revenues: Program revenues: Fines, fees, and charges for services$628,5231,352,817 Capital grants and contributions2,907,0454,149,682 General revenues: Taxes2,813,6822,657,872 Investment earnings102,051149,078 Total revenues6,451,3018,309,449 Expenses: Urban renewal redevelopment4,003,08020,016,791 Total expenses4,003,08020,016,791 Increase (decrease) in net assets 2,448,221(11,707,342) Net assets, July 18,083,39619,790,738 Net assets, June 30$10,531,6178,083,396 Urban Renewal Agency Revenues by Source Taxes - 43.6% Fines, fees, and charges for services - 9.7% Investment earnings - 1.6% Capital grants and contributions - 45.1% 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 $9,900,965. Approximately 72% of this total amount ($7,173,573) is available for spending at the Agency’s discretion. The remainder of fund balance ($2,727,392) 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 $281,736, all of which was available to spend. General Fund Budgetary Highlights The difference between the original budget and the final amended budget was an increase of $880,784. This increase was funded by unspent resources from the prior year and current year resources. Capital Assets and Debt Administration Capital assets. The Agency’s investment in capital assets for its governmental activities as of June 30, 2012 amounted to $4,194,516 (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 20122011 Construction in Progress$24,6400 Land1,908,0262,215,459 Improvements1,187,2711,350,587 Infrastructure1,074,5791,170,424 Total capital assets$ 4,194,5164,736,470 Additional information on the Agency’s capital assets can be found in note (4)(C) of this report. Noncurrent liabilities. On May 25, 2011, the Agency issued $7,900,000 of Downtown Urban Renewal District Tax Increment Bonds, Series 2011 A, bearing a fixed interest rate of 5.20% and maturing on June 1, 2020. The proceeds of the bonds were used to refund $4.4 million in debt service associated with the City’s Broadway Garages limited tax bonds and provide $3.5 million in financial assistance to Lane Community College for construction of their new Downtown campus. Next Year’s Budgets and Rates For FY13, the following factors were taken into account when developing the urban renewal budgets: Property taxes in both districts are predicted to increase due to a projected increase in the assessed value in the districts. The property tax collection rate for both districts is estimated to be 94% in FY13. The FY12 actual was approximately 97% for both current and delinquent taxes. The Downtown District will continue to implement redevelopment of properties in FY13. The budget includes Farmers’ Market and downtown lighting improvements. There are no new projects planned in the Riverfront District for FY13, 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 100 West 10 Avenue, Suite 400 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, 2012 (amounts in dollars) Assets Equity in pooled cash and investments7,120,491 Receivables (net of allowance)3,695,418 Due from other governments15,189 Assets held for resale2,727,392 Capital assets: Land and construction in progress1,932,666 Other capital assets (net of accumulated depreciation)2,261,850 Total assets17,753,006 Liabilities Accounts payable and other liabilities38,389 Bonds payable754,000 Total current liabilities792,389 Noncurrent liabilities Bonds payable 6,429,000 Total noncurrent liabilities6,429,000 Total liabilities7,221,389 Net assets Invested in capital assets4,194,516 Unrestricted6,337,101 Total net assets10,531,617 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, 2012 (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 redevelopment4,003,080628,52302,907,045(467,512) Total governmental activities4,003,080628,52302,907,045(467,512) General revenues: Property taxes2,813,682 Unrestricted investment earnings102,051 Total general revenues2,915,733 Change in net assets2,448,221 Net assets, July 1, 20118,083,396 Net assets, July 1, 201210,531,617 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, 2012 (amounts in dollars) RiverfrontRiverfrontTotal DebtCapitalSpecialCapitalGovernmental General ServiceProjectsRevenueProjectsFunds Assets Equity in pooled cash and investments243,843912,834721,2855,078,112164,4177,120,491 Receivables: Interest10,54838,859010,854060,261 Taxes0155,908061,4190217,327 Accounts88,740000088,740 Loans and notes3,556,56000003,556,560 Allowance for uncollectibles(70,992)0000(70,992) Due from other governments010,63604,553015,189 Assets held for resale00860,16001,867,2322,727,392 Total assets3,828,6991,118,2371,581,4455,154,9382,031,64913,714,968 Liabilities and Fund Balances Liabilities Deferred revenue3,546,963194,767072,27303,814,003 Total liabilities3,546,963194,767072,27303,814,003 Fund balances Nonspendable00860,16001,867,2322,727,392 Restricted281,736923,470721,2855,082,665164,4177,173,573 Total fund balances281,736923,4701,581,4455,082,6652,031,6499,900,965 Total liabilities and fund balances3,828,6991,118,2371,581,4455,154,9382,031,649 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.3,657,525 Capital assets are not financial resources in governmental funds, but are reported in the Statement of Net Assets at their net depreciable value. 4,194,516 All liabilities are reported in the Statement of Net Assets. However, if they are not due and payable in the current period, they are not recorded in governmental funds.(7,221,389) Total net assets10,531,617 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, 2012 (amounts in dollars) RiverfrontRiverfrontTotal DebtCapitalSpecialCapitalGovernmental GeneralServiceProjectsRevenueProjectsFunds Revenues Taxes01,900,6960872,91202,773,608 Intergovernmental2,354,3180552,727002,907,045 Rental income29,7000063,000092,700 Charges for services5,73000005,730 Repayment of revolving loans82,972000082,972 Miscellaneous, primarily interest45,8662,2135,39431,51567485,662 Total revenues2,518,5861,902,909558,121967,4276745,947,717 Expenditures Current - departmental: Urban renewal redevelopment3,146,53500183,43403,329,969 Debt service: Principal0717,000000717,000 Interest0417,647000417,647 Issuance costs0135000135 Capital outlay0024,6400024,640 Total expenditures3,146,5351,134,78224,640183,43404,489,391 Excess (deficiency) of revenues over expenditures(627,949)768,127533,481783,9936741,458,326 Other financing sources (uses) Transfers in230,9090000230,909 Transfers out0(230,909)000(230,909) Total other financing sources (uses)230,909(230,909)0000 Net change in fund balances(397,040)537,218533,481783,9936741,458,326 Fund balances, July 1, 2011678,776386,252740,5314,298,6722,030,9758,135,206 Prior period adjustment (Note 5C)00307,43300307,433 Fund balances, July 1, 2011, as restated678,776386,2521,047,9644,298,6722,030,9758,442,639 Fund balances, June 30, 2012281,736923,4701,581,4455,082,6652,031,6499,900,965 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, 2012 (amounts in dollars) Net change in fund balances - total governmental funds1,458,326 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds do not report expenditures for unpaid compensated absences, interest expense, or arbitrage since they do not require the use of current financial resources. However, the Statement of Activities reports such expenses when incurred, regardless of when settlement ultimately occurs. 3,832 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.(234,521) 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.503,584 Proceeds from the issuance of long-term debt provide current financial resources to governmental funds and are reported as revenues. In the same way, repayments of long-term debt use current financial resources and are reported as expenditures in governmental funds. However, neither the receipt of debt proceeds nor the payment of debt principal affect the Statement of Activities, but are reported as increases and decreases in noncurrent liabilities in the Statement of Net Assets. 717,000 Change in net assets of governmental activities.2,448,221 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, 2012 (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 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 GAAP 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 (now known as the Downtown District) 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. On September 11, 1985 the Eugene City Council adopted the Riverfront Research Park Urban Renewal Plan. 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 loans and grants as well as pay 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 debt service on tax increment bonds 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. 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, rights-of-way (included with land), improvements, and infrastructure. 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 or have an indefinite useful life (e.g., land and rights-of way). Depreciation is an accounting process which allocates the cost of capital assets, in a rational manner, to those periods expected to benefit from the use of the capital assets. Depreciation is notintended to represent an estimate in the decline of fair market value, nor is 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 Category useful life 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. 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. 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 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. 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 cost plan. The overhead 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: 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 $3,657,525 difference are as follows: Receivables: Interest$49,713 Taxes217,327 Loans and notes3,546,962 Subtotal3,814,002 Allowance for uncollectibles(156,477) Net adjustment$3,657,525 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 (A) Explanation of Certain Differences Between the Government-wide Statement of Net Assets and the Governmental Fund Balance Sheet, continued 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 $4,194,516 difference are as follows: Capital assets (net of accumulated depreciation) reported in the Statement of Net Assets: Land and construction in progress$1,932,666 Other capital assets (net of accumulated depreciation)2,261,850 Net adjustment$4,194,516 All liabilities are reported in the Statement of Net Assets. However, if they are not due and payable in the current period, they are not recorded in governmental funds. The details of this $7,221,389 difference are as follows: Bonds payable$(7,183,000) Accrued interest payable(38,389) Net adjustment$(7,221,389) (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: Governmental funds do not report expenditures for unpaid compensated absences, interest expense, or arbitrage since they do not require the use of current financial resources. However, the Statement of Activities reports such expenses when incurred, regardless of when settlement ultimately occurs. The details of this $3,832 difference are as follows: Accrued interest3,832 $ 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 $234,521 difference are as follows: Capital outlay$24,640 Depreciation expense(259,161) Net adjustment $(234,521) 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, continued 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 $503,584 difference are as follows: Change in deferred revenue from the following sources: Property taxes receivable$41,211 Notes receivable475,397 Subtotal516,608 Change in the allowance for doubtful receivables(13,024) Net adjustment$503,584 Proceeds from the issuance of long-term debt provide current financial resources to governmental funds and are reported as revenues. In the same way, repayments of long-term debt use current financial resources and are reported as expenditures in governmental funds. However, neither the receipt of debt proceeds nor the payment of debt principal affect the Statement of Activities, but are reported as increases and decreases in noncurrent liabilities in the Statement of Net Assets. The details of this $717,000 difference are as follows: Principal payments: Tax increment bonds$717,000 (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 $880,784. 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, 2012: Deposits with banks$666,630 Investments6,453,861 $7,120,491 Detailed information for the Agency’s pooled cash and investments can be found in the City of Eugene’s FY12 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, 2012, the deferred revenue reported in the Balance Sheet for governmental funds consist of the following: Total Property taxes receivable: Debt Service$155,908 Riverfront Special Revenue61,419 Notes receivable: General3,546,963 Other: Debt Service38,859 Riverfront Special Revenue10,854 Total deferred revenue$3,814,003 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 BeginningEnding balanceIncreasesDecreasesbalance Governmental activities: Capital assets, not being depreciated Construction in Progress$024,640024,640 Land2,215,4590(307,433)1,908,026 Total capital assets, not being depreciated2,215,45924,640(307,433)1,932,666 Capital assets, being depreciated Improvements 3,747,984003,747,984 Infrastructure2,645,718002,645,718 Total capital assets being depreciated6,393,702006,393,702 Less accumulated depreciation for: Improvements (2,397,397)(163,316)0(2,560,713) Infrastructure(1,475,294)(95,845)0(1,571,139) Total accumulated depreciation(3,872,691)(259,161)0(4,131,852) Total capital assets, being depreciated, net2,521,011(259,161)02,261,850 Governmental activities capital assets, net$4,736,470(234,521)(307,433)4,194,516 (D) Noncurrent Liabilities The Urban Renewal Agency issues tax increment bonds to finance major construction projects within its districts. These bonds are serviced by property tax increment revenues. When an urban renewal district is first created, the assessed property value within the district boundaries is established as a “frozen base”. The Urban Renewal Agency receives property taxes related to the incremental increase in the property value that is in excess of the “frozen base”. Annual debt service requirements to maturity for the tax increment bonds are as follows: Fiscal year ending June 30PrincipalInterest 2013$754,000373,516 2014794,000334,308 2015835,000293,020 2016878,000249,600 2017924,000203,944 2018-20202,998,000313,404 $7,183,0001,767,792 URBAN RENEWAL AGENCY OF THE CITY OF EUGENE, OREGON Notes to Basic Financial Statements (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 $2,000,000 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 $1,000,000 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, with earthquake and flood insurance coverage subject to the following deductibles: flood - $250,000 deductible per occurrence; earthquake – 2% of the combined value of the property at the location, subject to a minimum deductible of $100,000 per location and the deductible applies separately to each location. (B) Outstanding Encumbrances At June 30, 2012, the Agency intends to honor $56 in outstanding encumbrances in the Riverfront Capital Projects Fund. (C) Prior Period Adjustment In FY09, the City contributed a vacant lot and the Urban Renewal Agency contributed $307,433 in cash to acquire three tax lots (a building and two parking lots) adjacent to the old Sears building site. In FY11, the Agency donated the parking lots and the former Sears site to Lane Community College for construction of their new downtown facility. In FY12, the remaining tax lot (the building at 942 Olive St.) was reclassed to assets held for resale ($860,160) within the Urban Renewal Agency, resulting in a $307,433 fund balance restatement and $552,727 in intergovernmental revenues from the City. 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, 2012 (amounts in dollars) Budget Actual BudgetGAAP FinalbasisAdjustmentbasis Original Revenues Intergovernmental1,626,0002,366,0002,354,31802,354,318 Rental income0029,700029,700 Charges for services005,73005,730 Repayment of revolving loans00082,97282,972 Miscellaneous56,00056,00047,391(1,525)45,866 Total revenues1,682,0002,422,0002,437,13981,4472,518,586 Expenditures Urban renewal redevelopment355,000355,000230,9342,915,6013,146,535 Loans granted1,740,0003,119,1732,915,601(2,915,601)0 Total expenditures2,095,0003,474,1733,146,53503,146,535 Excess (deficiency) of revenues over expenditures(413,000)(1,052,173)(709,396)81,447(627,949) Other financing sources (uses) Principal payments received80,00080,00082,972(82,972)0 Transfers in355,000355,000230,9090230,909 Total other financing sources (uses)435,000435,000313,881(82,972)230,909 Net change in fund balance22,000(617,173)(395,515)(1,525)(397,040) Fund balance, July 1, 201138,000677,173677,1731,603678,776 Fund balance, June 30, 201260,00060,000281,65878281,736 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, 2012 (amounts in dollars) BudgetActual BudgetGAAP OriginalFinalbasisAdjustmentbasis Revenues Taxes825,000825,000872,9120872,912 Rental income63,00063,00063,000063,000 Miscellaneous26,00026,00035,706(4,191)31,515 Total revenues914,000914,000971,618(4,191)967,427 Expenditures Urban renewal redevelopment249,144249,144183,4340183,434 Total expenditures249,144249,144183,4340183,434 Excess (deficiency) of revenues over expenditures664,856664,856788,184(4,191)783,993 Total other financing sources (uses)00000 Net change in fund balance664,856664,856788,184(4,191)783,993 Fund balance, July 1, 20114,150,9864,292,5064,292,5066,1664,298,672 Fund balance, June 30, 20124,815,8424,957,3625,080,6901,9755,082,665 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, 2012 (amounts in dollars) Actual BudgetGAAP basisAdjustmentbasis Budget Revenues Taxes1,785,0001,900,69601,900,696 Miscellaneous31,0009,100(6,887)2,213 Total revenues1,816,0001,909,796(6,887)1,902,909 Expenditures Debt service1,135,0001,134,78201,134,782 Total expenditures1,135,0001,134,78201,134,782 Excess (deficiency) of revenues over expenditures681,000775,014(6,887)768,127 Other financing sources (uses) Transfers out(355,000)(230,909)0(230,909) Total other financing sources (uses)(355,000)(230,909)0(230,909) Net change in fund balance326,000544,105(6,887)537,218 Fund balance, July 1, 2011378,716378,7167,536386,252 Fund balance, June 30, 2012704,716922,821649923,470 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, 2012 (amounts in dollars) Actual BudgetGAAP basisAdjustmentbasis Budget Revenues Intergovernmental00552,727552,727 Miscellaneous2,0005,484(90)5,394 Total revenues2,0005,484552,637558,121 Expenditures Capital outlay734,59324,640024,640 Total expenditures734,59324,640024,640 Excess (deficiency) of revenues over expenditures(732,593)(19,156)552,637533,481 Total other financing sources (uses)0000 Net change in fund balance(732,593)(19,156)552,637533,481 Fund balance, July 1, 2011740,167740,167364740,531 Prior period adjustment (Note 5C)00307,433307,433 Fund balance, July 1, 2011, as restated740,167740,167307,7971,047,964 Fund balance, June 30, 20127,574721,011860,4341,581,445 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, 2012 (amounts in dollars) Actual BudgetGAAP basisAdjustmentbasis Budget Revenues Miscellaneous1,000860(186)674 Total revenues1,000860(186)674 Expenditures Capital outlay141,500000 Total expenditures141,500000 Excess (deficiency) of revenues over expenditures(140,500)860(186)674 Total other financing sources (uses)0000 Net change in fund balance(140,500)860(186)674 Fund balance, July 1, 2011163,495163,4951,867,4802,030,975 Fund balance, June 30, 201222,995164,3551,867,2942,031,649 B-4 Urban Renewal Agency of the City of Eugene, Oregon Schedule of Property Tax Transactions For the fiscal year ended June 30, 2012 (amounts in dollars) Uncollected Adjustments, Uncollected balancesCurrentinterest, and balances Fiscal yearJuly 1, 2011year's levydiscountsCollectionsJune 30, 2012 1965-0528,6490(1,292)(1,092)26,265 20063,2880(450)632,901 20074,5540(264)(1,028)3,262 200811,789066(6,530)5,325 200920,24802,108(15,453)6,903 201038,56101,190(6,778)32,973 201173,1420(1,213)(21,111)50,818 201202,878,102(68,502)(2,720,720)88,880 Totals180,2312,878,102(68,357)(2,772,649)217,327 Summary by fund type Special Revenue Fund(872,564)61,419 Debt Service Fund(1,900,085)155,908 Totals(2,772,649)217,327 AUDIT COMMENTS (this page intentionally left blank) AUDIT COMMENTS (Comments and Disclosures Required by State Regulators) _________ Oregon Administrative Rules 162-10-000 through 162-10-320, 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 REQUIRED BY OREGON STATE REGULATIONS 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, 2012, and have issued our report thereon dated December 7, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards. Compliance As part of obtaining reasonable assurance about whether the Agency’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants including provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules 162-10-000 to 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations, noncompliance with which could have a direct and material effect on determination of financial statements 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. We performed procedures to the extent we considered necessary to address the required comments and disclosures which included, but were not limited to the following: Deposit of public funds with financial institutions (ORS Chapter 295). Indebtedness limitations, restrictions and repayment. Budgets legally required (ORS Chapter 294). Insurance and fidelity bonds in force or required by law. Programs funded from outside sources. Highway revenues used for public highways, roads, and streets. Authorized investment of surplus funds (ORS Chapter 294). Public contracts and purchasing (ORS Chapters 279A, 279B, 279C). In connection with our testing nothing came to our attention that caused us to believe City of Eugene was not in substantial compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules 162-10-000 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations. 43 OAR 162-10-0230 Internal Control In planning and performing our audit, we considered City of Eugene’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of Eugene’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City 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 a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. 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. This report is intended solely for the information and use 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 those specified parties. ISLER CPA By: Gary Iskra, CPA, a member of the firm Eugene, Oregon December 7, 2012 44