HomeMy WebLinkAboutAPFA 2019
Azusa Public
Financing
Authority
Azusa, California
Basic Financial Statements
and Independent Auditors’ Reports
For the year ended June 30, 2019
Azusa Public Financing Authority
Table of Contents
i
Page
Independent Auditors’ Report .............................................................................................................................. 1
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position ........................................................................................................................... 6
Statement of Activities ................................................................................................................................ 7
Fund Financial Statements:
Balance Sheet ................................................................................................................................................ 10
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position........................................................................ 11
Statement of Revenues, Expenditures and Changes in Fund Balances ............................................... 12
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures
and Changes in Fund Balances to the Government-Wide
Statement of Activities .......................................................................................................................... 13
Notes to Basic Financial Statements ................................................................................................................ 16
Independent Auditors’ Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards ................................................................................ 23
ii
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INDEPENDENT AUDITORS’ REPORT
To the Board of Directors
of the City of Azusa Public Financing Authority
Azusa, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major
fund, and the aggregate remaining fund information of the Azusa Public Financing Authority, (the
Authority) as of and for the year ended June 30, 2019, and the related notes to the financial statements,
which collectively comprise the District’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
Our responsibility is to express 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 and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of
the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
2
To the Board of Directors
of the City of Azusa Public Financing Authority
Azusa, California
Page 2
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, each major fund, and the aggregated
remaining fund information of the Authority, as of June 30, 2019, and the respective changes in
financial position for the year then ended in accordance with accounting principles generally accepted
in the United States of America.
Other Matters
Required Supplementary Information
Management has omitted the management’s discussion and analysis that accounting principles
generally accepted in the United States of America require to be presented to supplement the basic
financial statements. Such missing information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board, who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. Our opinion on the basic financial statements is not affected by this missing
information.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated February 19,
2020, on our consideration of the Authority’s internal control over financial reporting and on our tests
of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and
other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the Authority’s internal
control over financial reporting and compliance.
Badawi & Associates
Certified Public Accountants
Berkeley, California
February 19, 2020
BASIC FINANCIAL STATEMENTS
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4
GOVERNMENT-WIDE FINANCIAL STATEMENTS
5
Azusa Public Financing Authority
Statement of Net Position
June 30, 2019
ASSETS
Current assets:
Cash and investments 12,517$
Total current assets 12,517
Noncurrent assets:
Restricted cash and investments 2,738,549
Contracts and notes receivable 45,320,000
Total noncurrent assets 48,058,549
Total assets 48,071,066
DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on refunding 521,188
Total deferred outflows of resources 521,188
LIABILITIES
Current liabilities:
Interest payable 927,160
Long-term debt - due in one year 1,625,000
Total current liabilities .2,554,010
Noncurrent liabilities:
Long-term debt - due in more than one year 46,313,281
Total noncurrent liabilities 46,313,281
Total liabilities 48,867,291
NET POSITION
Restricted for debt service 2,749,216
Unrestricted (3,024,253)
Net position (275,037)$
See accompanying Notes to Basic Financial Statements.
6
Azusa Public Financing Authority
Statement of Activities
For the year ended June 30, 2018
Net
(Expense) Revenue
and Changes
in Net Position
Expenses
Charges for
Services
Operating
Grants and
Contributions Total
Governmental
Activities
Governmental activities
General government 2,751$ -$ -$ -$ (2,751)$
Interest on long-term debt 1,751,392 - - - (1,751,392)
Total governmental activities 1,754,143$ -$ -$ -$ (1,754,143)
General Revenues:
Unrestricted investment earnings 1,959,542
Total general revenues 1,959,542
Change in net position 205,399
Net position - beginning of year (480,436)
Net position - end of year (275,037)$
See accompanying Notes to Basic Financial Statements.
Program Revenues
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FUND FINANCIAL STATEMENTS
9
Azusa Public Financing Authority
Balance Sheet - Governmental Funds
June 30, 2019
COP - 2003 Lease 2015 Water Total
Revenue Refunding Refunding Bonds Governmental Funds
ASSETS
Cash and investments 12,517$ -$ 12,517$
Receivables:
Contracts and notes 1,160,000 44,160,000 45,320,000
Restricted assets:
Cash and investments with fiscal agent 517,330 2,221,219 2,738,549
Total assets 1,689,847$ 46,381,219$ 48,071,066$
DEFERRED INFLOWS OF
RESOURCES, AND FUND BALANCES
Deferred inflows of resources:
Unavailable revenues 1,160,000$ 44,160,000$ 45,320,000$
Total deferred inflows of resources 1,160,000 44,160,000 45,320,000
Fund Balances:
Restricted for debt service 527,997 2,221,219 2,749,216
Total fund balances 527,997 2,221,219 2,749,216
Total deferred inflows of
resources, and fund balances 1,689,847$ 46,381,219$ 48,071,066$
See accompanying Notes to Basic Financial Statements.
10
Azusa Public Financing Authority
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
Fund Balances of Governmental Funds 2,749,216$
Long-term receivables are not available for current period expenditures and, therefore are deferred
on the modified accrual basis in governmental funds.45,320,000
Deferred amounts related to the refunding of long-term debt were not current financial
resources. Therefore, they were not reported in the Governmental Funds Balance Sheet.
This amount is to be amortized over the life of the long-term debt.521,188
Interest payable on long-term debt did not require current financial resources. Therefore, interest
payable was not reported as a liability in Governmental Funds Balance Sheet.(927,160)
Long-term liabilities are not due and payable in the current period and therefore they are not
reported in the funds.
Long term debt due within one year (1,625,000)
Long term debt due in more than one year (46,313,281)
Net Position of Governmental Activities (275,037)$
See accompanying Notes to Basic Financial Statements.
Amounts reported for governmental activities in the Statement of Net Position are different because:
For the year ended June 30, 2019
11
Azusa Public Financing Authority
Statement of Revenues, Expenditures and Changes in Fund Balances
For the year ended June 30, 2019
COP - 2003 Lease 2015 Water Total
Revenue Refunding Refunding Bonds Governmental Funds
REVENUES:
Use of money and property 372,104$ 3,132,438$ 3,504,542$
Total revenues 372,104 3,132,438 3,504,542
EXPENDITURES:
Current:
General government 2,751 - 2,751
Debt service:
Principal 300,000 1,245,000 1,545,000
Interest and fiscal charges 33,704 1,853,563 1,887,267
Total expenditures 336,455 3,098,563 3,435,018
Net change in fund balances 35,649 33,875 69,524
FUND BALANCES:
Beginning of year 492,348 2,187,344 2,679,692
End of year 527,997$ 2,221,219$ 2,749,216$
See accompanying Notes to Basic Financial Statements.
12
Azusa Public Financing Authority
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities
Net Change in Fund Balances - Total Governmental Funds
69,524
Repayment of bond principal is an expenditure in the governmental funds, but the
reapyment reduces long-term liabilities in the statement of net position.1,545,000
Unamortized premium or discount on bonds issued are other financing sources or uses in
governmental funds, but these are spread to future periods over the life of the bonds on the
statement of net position.
- This amount is the current year amortization expense 125,734
- This amount is the current year amortization expense (26,060)
Interest expense on long-term debt is reported on the accrual basis on the Government-Wide
Statements, but expenditures on long-term debt in the governmental funds statements are
recorded when paid. The following amount represents the change in accrued interest from
the prior year.36,201
Some revenues reported in the statement of activities do not represent current financial
resources and therefore are not reported as revenue in the governmental funds. This amount
represents the change in deferred inflows.(1,545,000)
Change in Net Position of Governmental Activities 205,399$
See accompanying Notes to Basic Financial Statements.
Amounts reported for governmental activities in the Statement of Activities are different
because:
For the year ended June 30, 2019
Deferred amounts related to the refunding of long-term debt were not current financial
resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. This
amount is to be amortized over the life of the long-term debt.
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14
15
NOTES TO BASIC FINANCIAL STATEMENTS
City of Azusa Public Financing Authority
Notes to Basic Financial Statements
For the year ended June 30, 2019
16
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the Azusa Public Financing Authority (Authority) have been prepared in
conformity with generally accepted accounting principles (GAAP) in the United States as applied to
governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-
setting body for establishing governmental accounting and financial reporting principles. The more
significant of the Authority’s accounting policies are described below:
A. Description of Reporting Entity
Azusa Public Financing Authority (the Authority) is a joint powers agency created by a joint powers
agreement between the City of Azusa Redevelopment Agency, dated January 2, 1990. It was created
pursuant to Articles 1 through 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of
California in accordance with the provisions of the Marks-Roos Local Bond Pooling Act of 1985. The
purpose of the Authority is to provide loans to refinance certain debt previously issued by the City of
Azusa and to finance certain capital improvement projects for the benefit of the City and the Agency.
The redevelopment Agency was dissolved as of January 31, 2012, through the Supreme Court decision
on Assembly Bill 1X 26.
The Authority is an integral part of the reporting entity of the City of Azusa. The funds of the Authority
have been included within the scope of the financial statements of the City because of the City Council
of the City of Azusa is the governing board and has responsibility over the operation of the Authority.
Only the funds of the Authority are included herein; therefore, these financial statements do not purport
to represent the financial position of results of operation of the City of Azusa, California.
B. Basis of Accounting and Measurement Focus
The accounts of the Authority are organized on the basis of funds, each of which is considered a
separate accounting entity. The operations of each fund are accounted for with a separate set of self-
balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or
expenses, as appropriate. Governmental resources are allocated to and accounted for in individual
funds based upon the purposes for which they are to be spent and the means by which spending
activities are controlled.
Government-Wide Financial Statements
The Authority’s government-wide financial statements include a Statement of Net Position, a Statement of
Activities and Changes in Net Position. These statements present summaries of governmental activities for
the Authority.
These statements are presented on an “economic resources” measurement focus and the accrual basis of
accounting. The Statement of Activities and Changes in Net Position presents changes in Net Position.
Under the accrual basis of accounting, revenues are recognized in the period in which they are earned
while expenses are recognized in the period in which the liability is incurred. The type of transactions
reported as program revenues for the Authority are reported in charges for services.
City of Azusa Public Financing Authority
Notes to Basic Financial Statements
For the year ended June 30, 2019
17
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
C. Cash and Cash Equivalent
The Authority pools its cash and investments with the City’s cash & investments. The balance in the
pooled cash account is available to meet current operating requirements. Cash in excess of current
requirements is invested in various interest-bearing accounts and other investments for varying terms.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures (Amendment of GASB
No. 3), certain disclosure requirements for Deposits and Investment Risks were made in the following
areas:
Interest Rate Risk
Credit Risk
Overall
Custodial Credit Risk
Concentrations of Credit Risk
In addition, other disclosures are specified including use of certain methods to present deposits and
investments, highly sensitive investments, credit quality at year-end, and other disclosures.
Highly liquid market investments with maturities of one year or less at time of purchase are stated at
amortized cost. All other investments are stated at fair value. Market value is used as fair value for those
securities for which market quotations are readily available.
The City participates in an investment pool managed by the State of California titled Local Agency
Investment Fund (LAIF) which has invested a portion of the pooled funds in Structured Notes and Asset-
Backed Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of
California collateralizing these investments. In addition, these Structured Notes and Asset-Backed
Securities are subject to market risk as to the change in interest rates.
Cash equivalents are considered amounts in demand deposits and short-term investments with a maturity
date within three months of the date acquired by the City and are presented as “Cash and Investments” in
the accompanying Basic Financial Statements.
D. Long-Term Obligations
In the basic financial statements, long-term debt and other long-term obligations are reported as
liabilities in the governmental activities. Bond premiums and discounts, if material, are deferred and
amortized over the life of the bonds using the effective interest method. Bonds payable are reported net
of the applicable bond premium or discount. Bond issuance costs are expensed as incurred.
City of Azusa Public Financing Authority
Notes to Basic Financial Statements
For the year ended June 30, 2019
18
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
E. Deferred Outflows of Resources
In addition to assets, the statement of financial position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of net position that applies to a future period(s) and so will not be
recognized as an outflow of resources (expense/ expenditure) until then.
F. Net Position
In the basic financial statements, Net Position is classified in the following category:
Restricted Net Position – This amount is restricted by external creditors, grantors, contributors, or laws or
regulations of other governments.
G. Use of Restricted / Unrestricted Net Position
When an expense is incurred for purposes for which both restricted and unrestricted Net Position is
available, the Authority’s policy is to apply restricted Net Position first.
H. Fund Balances
Fund balances are classified as follows:
Nonspendable Fund Balances
These include amounts that cannot be spent because they are either (a) not in spendable form or (b)
legally or contractually required to be maintained intact, e.g., the principal of an endowment fund.
Examples of “not in spendable form” include inventory, prepaid amounts, long-term notes and loans,
property held for resale and other items not expected to be converted to cash. However, if the proceeds
from the eventual sale or liquidation of the items would be considered restricted, committed or assigned
(as defined further on) then these amounts would be included in the restricted, committed or assigned
instead of the nonspendable classification. A debt service reserve fund held by a trustee is an example
of fund balance in nonspendable form that is classified as restricted instead of nonspendable since the
reserve is eventually liquidated to make the final debt service principal payment.
Restricted Fund Balances
Restricted fund balances have externally enforceable limitations on use. The limitations on use can be
imposed by creditors, grantors, or contributors as well as by constitutional provisions, enabling
legislation, laws and government regulations.
Committed Fund Balances
Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action
(Resolution) of the Board are classified as committed fund balances.
City of Azusa Public Financing Authority
Notes to Basic Financial Statements
For the year ended June 30, 2019
19
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
H. Fund Balances, Continued
Assigned Fund Balances
Fund balance amounts for which the Board has expressed intent for use but not taken formal action to
commit are reported as assigned under GASB 54.
Unassigned Fund Balance
These are either residual positive net resources of the General Fund in excess of what can properly be
classified in one of the other four categories, or negative balances.
Hierarchy of Expenditures to Classify Fund Balance Amounts
To determine the composition of ending fund balances, the Board established the order in which
restricted and unrestricted (committed, assigned and unassigned) funds are to be expended. To this
purpose, for expenditures made in any governmental fund, the restricted amounts will be reduced first,
followed by committed amounts, assigned amounts, and then unassigned amounts.
I. Use of Estimates
The preparation of basic financial statements in conformity with generally accepted accounting
principles requires Authority management to make estimates and assumptions that affect certain
amounts and disclosures. Accordingly, actual results could differ from those estimates.
J. New Pronouncements
In fiscal year 2019, the Authority adopted the following Governmental Accounting Standards Board
Statements:
GASB Statement No. 83, Certain Asset Retirement Obligations – The objective of this statement
is to provide financial statement users with information about asset retirement obligations
(AROs) that were not addressed in GASB standards by establishing uniform accounting and
financial reporting requirements for these obligations. The requirements of this statement
did not apply to the Authority for the current fiscal year.
GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and
Direct Placements – The objective of this statement is to improve consistency in the
information that is disclosed in notes to government financial statements related to debt,
including direct borrowings and direct placements, and to provide financial statement users
with additional essential information about debt. The requirements of this statement did not
apply to the Authority for the current fiscal year.
City of Azusa Public Financing Authority
Notes to Basic Financial Statements
For the year ended June 30, 2019
20
2. CASH AND INVESTMENTS
The Authority’s cash and investments consist of cash and investments held by fiscal agents and cash and
investments pooled with the City’s cash and investments. At June 30, 2019, the Authority had the
following cash and investment balances:
Governmental
Activities Total
Cash and investment pooled with the City of Azusa 12,517$ 12,517$
Restricted cash and investments 2,738,549 2,738,549
Total cash and investments 2,751,066$ 2,751,066$
3. CONTRACTS AND NOTES RECEIVABLE
Lease Agreement
The Authority entered into a lease agreement with the City of Azusa to lease certain facilities of the City.
Title to these facilities will remain at all times with the City of Azusa. The Authority has used the
leasehold rights that it acquired as lessee to lease the facilities back to the City. Amounts paid by the
City to the Authority in return for the City's right to use and operate the property are equal in amount
to the debt service requirements of the Authority for the $4,825,000 2003 Lease Revenue Refunding
Certificates of Participation. As of June 30, 2019, the outstanding lease receivable balance was $1,160,000.
Installment Sale Agreement
Pursuant to an installment agreement dated July 23, 2015, the Authority agrees to provide for the
refinance the 2006 water revenue bonds for the water system capital improvements program. Under the
terms of this agreement, the City is obligated to pay the purchase price from net revenue derived from
the operation of the Water System in amounts equal to the Authority's annual debt service obligations
on its $47,740,000 2015 Water System Refunding Revenue Bonds. As of June 30, 2019, the outstanding
installment receivable from the City was $44,160,000.
City of Azusa Public Financing Authority
Notes to Basic Financial Statements
For the year ended June 30, 2019
21
4. LONG-TERM LIABILITIES
Long-term liabilities consisted of the following:
Due in
Balance Balance Due Within More Than
July 1, 2018 Additions Deletions
June 30, 2019 One Year One Year
2003 Lease Revenue
Refunding Bonds 1,460,000$ -$ (300,000)$ 1,160,000$ 315,000$ 845,000$
2015 Water Revenue
Bonds 45,405,000 - (1,245,000) 44,160,000 1,310,000 42,850,000
46,865,000$ -$ (1,545,000)$ 45,320,000 1,625,000$ 43,695,000$
Unamortized bond premium 2,621,218 - 2,621,218
Unamortized bond discount (2,937) - (2,937)
47,938,281$ 1,625,000$ 46,313,281$
A. Certificates of Participation – 2003 Lease Revenue Refunding
In August 2003, the City of Azusa issued $4,825,000 of 2003 Lease Revenue Refunding Certificates of
Participation to currently refund $4,565,000 of outstanding 1994 Certificates of Participation, to provide
for a reserve fund, and to pay for the costs of issuance of the Certificates.
The Certificates represent the interest in the lease payments to be made by the City to the Authority for
the use and occupancy of the real property and improvement of the Azusa City Hall and construction of
the Azusa Senior Center. The Certificates maturing from 2004 to 2020 are serial certificates payable in
annual installments ranging from $265,000 to $845,000. Interest is payable semi-annually on each
August 1 and February 1, commencing August 1, 2004, at rates ranging from 2.0% to 4.56% per annum.
The outstanding principal balance as of June 30, 2019, was $1,160,000. The annual requirements to
amortize the outstanding Certificates of Participation as of June 30, 2019 are as follows:
Principal Interest Total
2020 315,000$ 44,071$ 359,071$
2021 845,000 18,590 863,590
Total 1,160,000$ 62,661$ 1,222,661$
2003 Certificates of Participation
City of Azusa Public Financing Authority
Notes to Basic Financial Statements
For the year ended June 30, 2019
22
4. LONG-TERM LIABILITIES, Continued
B. 2015 Water System Refunding Revenue Bonds
On July 23, 2015, the City issued $47,740,000 of 2015 Water System Refunding Revenue Bonds. The
proceeds were used to refinance all of the City’s obligations in connection with the Azusa Public
Financing Authority Parity Revenue Bonds (Water System Capital Improvements Program) Series 2006,
and pay costs of issuance incurred in connection with the issuance of the 2015 Bonds. The bonds are
payable solely from the Water net revenues, and the City is not obligated to pay them except from the
applicable Water net revenues. The refunding resulted in a difference between there acquisition price
and the net carrying amount of the old debt of $625,426, which is reported as a deferred outflow of
resources in the accompanying financial statements and amortized over the remaining life of the
refunded debt. The City completed the refunding to reduce its total debt service payments by $3,440,000
and to obtain an economic gain (difference between the present values of the old and new debt service
payments) of $14,486,840. Serial bonds mature in annual installments beginning on July 1, 2017 through
July 1, 2039, in amounts ranging from $1,150,000 to $3,035,000. Interest ranges from 3.000% to 5.000%
and is payable semi-annually on July 1 and January 1.
The annual requirements to amortize the outstanding bonds as of June 30, 2019, including interest are as
follows:
Principal Interest Total
2020 $1,310,000 $1,789,688 3,099,688$
2021 1,375,000 1,722,563 3,097,563
2022 1,445,000 1,652,063 3,097,063
2023 1,520,000 1,577,938 3,097,938
2024 1,600,000 1,499,938 3,099,938
2025-2029 9,220,000 6,264,238 15,484,238
2030-2034 11,140,000 4,339,644 15,479,644
2035-2039 13,515,000 1,973,975 15,488,975
2040 3,035,000 60,700 3,095,700
Totals 44,160,000$ 20,880,747$ 65,040,747$
2015 Water System Refunding Revenue Bonds
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Board of Directors
of the City of Azusa Public Financing Authority
Azusa, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards issued
by the Comptroller General of the United States, the financial statements of the City of Azusa Public
Financing Authority (Authority), a component unit of the City of Azusa, as of and for the year ended June
30, 2019, and the related notes to the financial statements, which collectively comprise the Authority’s basic
financial statements, and have issued our report thereon dated February 19, 2020.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in
the circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we
do not express an opinion on the effectiveness of the Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity’s
financial statements will not be prevented, or detected and corrected on a timely basis. A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
24
To the Board of Directors
of the City of Azusa Public Financing Authority
Azusa, California
Page 2
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
Badawi & Associates
Certified Public Accountants
Berkeley, California
February 19, 2020