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HomeMy WebLinkAboutItem No. 03 Western RCA Indep Accts ReportText File City of Lake Elsinore 130 South Main Street Lake Elsinore, CA 92530 www.lake-elsinore.org File Number: ID# 16-346 Agenda Date: 8/23/2016 Status: Consent AgendaVersion: 1 File Type: ReportIn Control: City Council Agenda Number: 3) Page 1 City of Lake Elsinore Printed on 8/18/2016 REPORT TO CITY COUNCIL TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: GRANT M. YATES, CITY MANAGER PREPARED BY: NANCY L. LASSEY, MSA, FINANCE ADMINISTRATOR DATE: AUGUST 23 , 2016 SUBJECT: WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY INDEPENDENT ACCOUNTANT’S REPORT FOR FISCAL YEAR 2012-2013 AND 2013-2014 Recommendation Receive and file the Western Riverside County Regional Conservation Authority Independent Accountant’s Report for the Fiscal Year 2012-2013 and 2013-2014. Background On an annual basis the Western Riverside County Regional Conservation Authority (RCA) enlists an independent auditing firm to visit City Hall and perform agreed-upon procedures to determine if the City is in compliance with the collection and remittance of fees collected for the Multiple Species Habitat Conservation Plan (MSHCP). The auditing firm typically reviews the City’s documents and reports related to the receipt of MSHCP fees and remittance of fees to RCA for the Fiscal Year. Discussion The Independent Accountant’s Report for the Fiscal Year 2012-2013 and 2013-2014 provided to the City from the auditing firm, Vavrinek, Trine, Day & Co., LLP, presents the purpose, procedures followed, and findings of their audit and delivers favorable results. Exhibits RCA Independent Accountant’s Report for FY 2012-2013 RCA Independent Accountant’s Report for FY 2013-2014 Western Riverside County Regional Conservation Authority Independent Accountants' Report on Applying Agreed-Upon Procedures For the City of Lake Elsinore For the Year Ended June 30, 2013 1     INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Board of Directors Western Riverside County Regional Conservation Authority We have performed the procedures enumerated in Attachment A, which were agreed to by the Western Riverside County Regional Conservation Authority (RCA) solely to assist you in determining that Multiple Species Habitat Conservation Plan (MSHCP) fees were collected and remitted by the City of Lake Elsinore (City) in accordance with the MSHCP Implementing Agreement and the Joint Exercise of Powers Agreement (JPA creating the RCA dated January 27, 2004) for the fiscal year ending June 30, 2013. The City is responsible for the collection and remittance of MSHCP fees. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the management of the RCA. Consequently, we make no representations regarding the sufficiency of the procedures described in Attachment A, either for the purpose for which this report has been requested or for any other purpose. Our procedures and findings are listed in Attachment A. We were not engaged to and did not conduct an audit, the objective of which would be the expression of an opinion, on the collection and remittance of MSHCP fees. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the management of Western Riverside County Regional Conservation Authority and is not intended to be, and should not be, used by anyone other than those specified parties. Riverside, California, June 17, 2016 WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2013 ATTACHMENT A     2 Our procedures and findings and procedures are as follows: 1. Obtain each Member Agency ordinance for collection of the MSHCP fees. Findings – We obtained Ordinance No. 1124 which established the development mitigation fee for funding the preservation of ecosystems in accordance with the MSHCP, creating city code Chapter 16.85. 2. Upon obtaining the ordinance, determine if it is in accordance with the MSHCP Implementing Agreement and Joint Powers Agreement. Findings – The RCA prepared a model ordinance for the member agencies to be in accordance with the MSHCP Implementing Agreement and JPA. The City ordinance was in agreement with the model ordinance except for the following:  Section 1.I of the City ordinance was not included in the model ordinance. This paragraph states, “The fee set forth herein does not reflect the entire cost of the lands which need to be acquired in order to implement the MSHCP and mitigate the impact caused by new development. Additional revenues will be required from other sources. The City Council finds that the benefit to each development project is greater than the amount of the fee to be paid by the project.”  Section 1.J of the model ordinance was not included in the City ordinance.  Section 11 of the model ordinance requires prior approval by the RCA before granting local development fee credits or waivers, while Section 11 of the City ordinance gives the RCA a cooperative role and audit power in granting the fee credits or waivers. 3. Determine if fees on the building permits are collected in accordance with the Member Agency ordinance. Findings – The City ordinance states that the MSHCP fee must be collected prior to the issuance of the permit. We tested 198 building permits as described in procedure 5. No exceptions were noted. 4. Obtain the schedule of fees collected on the building permits for the year ended June 30, 2013. Findings – We obtained the schedule from the City noting the total amounts collected for building permits for the year ended June 30, 2013 was $46,512. These amounts were remitted to the RCA between September 13, 2012 and June 13, 2013. 5. Select for testing 10% of the building permits from the total building permits issued, selecting no less than 25 permits or 100% of permits if total permits issued is less than 25. Findings – We obtained the population of 1,976 issued permits for the period from July 1, 2012 through June 30, 2013. We selected a sample of 198 (10%) permits. Our sample consisted of the following:  Four building permits were subject to the MSHCP fee. WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2013 ATTACHMENT A     3  One building permit was exempt under Section 10.A of the City ordinance as reconstruction or improvements that are damaged or destroyed by fire or other natural causes.  104 building permits were exempt under Section 10.B of the City ordinance as rehabilitation, remodeling, or minor additions to an existing Development Project.  22 building permits were exempt under Section 10.D of the City ordinance as existing improvements that are converted from an existing permitted use to a different permitted use, provided that no additional area of the property is disturbed as a result of such conversion.  One building permit was exempt under Section 10.E of the City ordinance as an existing improvement with no additional property disturbed.  66 building permits were related to permits issued for projects within the boundaries of various development agreements as noted: o The City asserted five permits were exempt under the K. Hovnanian at La Laguna LLC settlement and implementation agreement (settlement agreement) dated March 13, 2012. The settlement agreement references the original development agreement and subsequent amendments between the City and La Laguna Estates dated July 18, 1990. The amended development agreement expired in July 2010. The settlement agreement found that the project was exempt from the MSHCP fee because the amended development agreement was executed prior to the adopting of the MSHCP ordinance in July 2014. This matter is currently under review with the RCA, City and legal counsels. o The City asserted 42 permits were exempt under the Cottonwood Canyon development agreement dated July 1990 (development agreement), the amended developer agreement dated January 2010, and Planning Commission Resolution (resolution) 2009-11 dated February 2009. The original development agreement expired July 9, 2010 and was amended in January 2010 to extend through July 1, 2030. The resolution found that the subdivision was exempt from the MSHCP fee. This matter is currently under review with the RCA, City and legal counsels. o The City asserted four permits were exempt under a Settlement Agreement and Memorandum of Understanding dated February 2004 between the County of Riverside, Pacific Clay Products, Inc., Castle & Cooke Lake Elsinore Outlet Centers, Inc., Castle & Cooke Corona, Inc., Gateway Business Park, LLC, and Murdock Alberhill Ranch Limited Partnership. o The City asserted 11 permits were exempt under the Laing-CP Lake Elsinore LLC development agreement dated December 2002 (development agreement) and the amended and restated developer agreement dated August 2004. The amendment prohibits the imposition of any assessment or fee applicable to the development, except as provided in Section 13.1 of the agreement. The City asserted the MSHCP fee does not meet the requirements of Section 13.1. This matter is currently under review with the RCA, City and legal counsels. WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2013 ATTACHMENT A     4 o The City asserted four permits were exempt under the Rialto Development Corporation development agreement dated June 1990 (development agreement) and the First and Second Memorandum of Understanding (MOU) with White Rock Acquisition Company, LP dated November 2003 and April 2006 (in relation to Rialto development agreement). The Second MOU stipulates that the MSHCP fees for the Development Area have been satisfied. As such, the City asserted the MSHCP fee is not applicable. This matter is currently under review with the RCA, City and legal counsels. We made inquiries of City personnel, inspected building permits, development agreements, and other documentation to support granting of the exemptions under the City ordinance. 6. Recalculate the fees collected by the Member Agency on building permits to determine if they are correct and if the correct amounts have been remitted to the RCA. If fees are incorrect, determine the fees that should have been collected and remitted. Findings – For the sample selected in procedure 5 above, the four building permit fees were recalculated and agreed to the amount collected and remitted without exception. For the items under review by the RCA, fees were not calculated and collected as the City asserted the projects were exempt from the MSHCP fees. 7. Determine if fees collected on building permits were remitted on a timely basis to the RCA. Findings – Per the JPA dated January 27, 2004, all development mitigation fees must be remitted to the RCA within 90 days of the earlier of the date they were collected or should have been collected. No exceptions were noted. 8. Determine additional amounts, if any, which should be returned to the Member Agency for building permits. Findings – None noted. 9. If amounts are due to the RCA on building permits, calculate interest owed, based on the RCA’s Resolution No. 07-04 adopted on September 10, 2007, using the interest rate paid by Riverside County Treasury on amounts held by the County. Findings – Not applicable. 10. Obtain a list of all construction contracts awarded by the member Agency during the fiscal year. Findings – We obtained the listing of 29 construction contracts awarded by the City during the year ended June 30, 2013. WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2013 ATTACHMENT A     5 11. Select a sample of 10% of the contracts for testing, selecting no less than three contracts, or 100% of contracts if the total number of contracts is less than three. Findings – We haphazardly selected four construction contracts from the list provided. As noted under procedure 12, one contract for Pardee Homes was for construction of single family residences under the Cottonwood Canyon development agreement. As this was not a City construction project, we selected an additional contract from the list provided. 12. Compute the amounts of MSHCP contributions on the construction contracts that should have been remitted. Findings – The City asserted that each of the four contracts selected were exempt. We inspected the contracts, project descriptions, and other supporting documentation summarized as follows:  Pardee Homes – Track 36447 - The City asserted this project was exempt under the Cottonwood Canyon development agreement dated July 1990 (development agreement), the amended developer agreement dated January 2010, and Planning Commission Resolution (resolution) 2009-11 dated February 2009. The original development agreement expired July 9, 2010 and was amended in January 2010 to extend through July 1, 2030. The resolution found that the subdivision was exempt from the MSHCP fee. This matter is currently under review with the RCA, the City and legal counsels. Also see procedure 5 for permits related to this project. Through inspection of supporting documents, we noted the project was for the construction of single family residences within the City. As this was not a City construction project, we tested an additional contract noted below (Diamond Circle Rehabilitation).  Rosetta Canyon Fire Station and Park Equipment Room Cabinet Project - The City asserted this project was exempt as development within a project area that has been previously improved. Through inspection of supporting documentation, we noted the project was for the construction of cabinets in the Rosetta Canyon Fire Station and park equipment room. No exceptions were noted.  Pavement Overlay on Hunco Way – The City asserted the project was exempt under MSHCP through Section 1.A.2 of the RCA’s fee collection and remittance policy as a maintenance and safety project, defined in Section 7 of the MSHCP. Through inspection of supporting documentation, we noted that this project was for the overlay of the final asphalt cap on the existing pavement on Hunco Way. No exceptions were noted.  Diamond Circle Rehabilitation – The City asserted the project was exempt under MSHCP through Section 1.A.2 of the RCA’s fee collection and remittance policy as a maintenance and safety project, defined in Section 7 of the MSHCP. Through inspection of supporting documentation, we noted that this project was for street improvements which included new curb and gutter, cross gutters, concrete sidewalks, and ADA improvements and asphalt concrete paving. No exceptions were noted. 13. Determine if the MSHCP contributions on the construction contracts were remitted to the RCA within 90 days of contract award. Findings – Not applicable. WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2013 ATTACHMENT A     6 14. Determine additional amounts on construction contracts, if any, which should be remitted to the RCA or returned to the Member Agency. Findings – Not applicable. 15. If additional amounts are due to the RCA on construction contracts, calculate interest owed, using the interest rate paid by Riverside County Treasury on amounts held by the County. Findings – Not applicable. Western Riverside County Regional Conservation Authority Independent Accountants' Report on Applying Agreed-Upon Procedures for the City of Lake Elsinore For the Year Ended June 30, 2014 1     INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Board of Directors Western Riverside County Regional Conservation Authority We have performed the procedures enumerated in Attachment A, which were agreed to by the Western Riverside County Regional Conservation Authority (RCA) solely to assist you in determining that Multiple Species Habitat Conservation Plan (MSHCP) fees were collected and remitted by the City of Lake Elsinore (City) in accordance with the MSHCP Implementing Agreement and the Joint Exercise of Powers Agreement (JPA creating the RCA dated January 27, 2004) for the fiscal year ending June 30, 2014. The City is responsible for the collection and remittance of MSHCP fees. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the management of the RCA. Consequently, we make no representations regarding the sufficiency of the procedures described in Attachment A, either for the purpose for which this report has been requested or for any other purpose. Our procedures and findings are listed in Attachment A. We were not engaged to and did not conduct an audit, the objective of which would be the expression of an opinion on the collection and remittance of MSHCP fees. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the management of Western Riverside County Regional Conservation Authority and is not intended to be, and should not be, used by anyone other than those specified parties. Riverside, California, February 10, 2016 WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2014 ATTACHMENT A     2 Our procedures and findings and procedures are as follows: 1. Obtain each Member Agency ordinance for collection of the MSHCP fees. Findings – We obtained Ordinance No. 1124 which established the development mitigation fee for funding the preservation of ecosystems in accordance with the MSHCP. 2. Upon obtaining the ordinance, determine if it is in accordance with the MSHCP Implementing Agreement and Joint Powers Agreement. Findings – The RCA prepared a model ordinance for the member agencies to be in accordance with the MSHCP Implementing Agreement and JPA. The City ordinance was in agreement with the model ordinance except for the following:  Section 1.I of the City ordinance was not included in the model ordinance which states, “The fee set forth herein does not reflect the entire cost of the lands which need to be acquired in order to implement the MSHCP and mitigate the impact caused by new development. Additional revenues will be required from other sources. The City Council finds that the benefit to each development project is greater than the amount of the fee to be paid by the project.”  Section 1.J of the model ordinance was not included in the City ordinance.  Section 11 of the model ordinance requires prior approval by the RCA before granting local development fee credits or waivers, whereas Section 11 of the City ordinance gives the RCA a cooperative role and audit power in granting the fee credits or waivers. 3. Determine if fees on the building permits are collected in accordance with the Member Agency ordinance. Findings – The City ordinance stated that the MSHCP fee must be collected prior to the issuance of the permit. We tested 242 building permits as described in procedure 5. No exceptions were noted. 4. Obtain the schedule of fees collected on the building permits for the year ended June 30, 2014. Findings – We obtained the schedule noting the total amounts collected by the City on building permits for the year ended June 30, 2014 was $48,982. These amounts were remitted to the RCA between August 5, 2013 and September 12, 2013. 5. Select for testing 10% of the building permits from the total building permits issued, selecting no less than 25 permits or 100% of permits if total permits issued is less than 25. Findings – We obtained the population of 2,411 issued permits for the period from July 1, 2013 through June 30, 2014. We haphazardly selected 242 (10%) permits. Our sample consisted of the following: • Three building permits were subject to the MSHCP fee. WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2014 ATTACHMENT A     3 • 112 building permits were exempt under Section 10.B of the City ordinance as rehabilitation, remodeling, or minor additions to an existing Development Project. • Three building permits were exempt under Section 10.D of the City ordinance as existing improvements that were converted from an existing permitted use to a different permitted use, provided that no additional area of the property is disturbed as a result of such conversions. • 61 building permits were not subject to the MSHCP. The building permits were issued by the City to perform an inspection of an existing development project. The activity on the building permit does not meet the definition of a development project, which is defined in Section 3 of the City ordinance as a project undertaken for the purpose of development. • 63 building permits were exempt under Section 4.C of the City’s Resolution No. 2004-11 under various development agreements executed and effective prior to the City's adoption of the MSHCP fee ordinance in July 2004, as noted:  The City asserted five permits were exempt under the K. Hovnanian at La Laguna LLC settlement and implementation agreement (settlement agreement) dated March 13, 2012. The settlement agreement references the original development agreement and subsequent amendments between the City and La Laguna Estates dated July 18, 1990. The amended development agreed expired in July 2010. The settlement agreement found that the project was exempt from the MSHCP fee because the amended development agreement was executed prior to the adopting of the MSHCP ordinance in July 2014. This matter is currently under review with the RCA, City and legal counsels.  The City asserted 25 permits were exempt under the Cottonwood Canyon development agreement dated July 1990 (development agreement), the amended developer agreement dated January 2010, and Planning Commission Resolution (resolution) 2009-11 dated February 2009. The original development agreement expired July 9, 2010 and was amended in January 2010 to extend through July 1, 2030. The resolution found that the subdivision was exempt from the MSHCP fee. This matter is currently under review with the RCA, City and legal counsels.  The City asserted six permits were exempt under a Settlement Agreement and Memorandum of Understanding dated February 2004 between the County of Riverside, Pacific Clay Products, Inc., Castle & Cooke Lake Elsinore Outlet Centers, Inc., Castle & Cooke Corona, Inc., Gateway Business Park, LLC, and Murdock Alberhill Ranch Limited Partnership.  The City asserted 22 permits were exempt under the Laing-CP Lake Elsinore LLC development agreement dated December 2002 (development agreement) and the amended and restated developer agreement dated August 2004. The amendment prohibits the imposition of any assessment or fee applicable to the development, except as provided in Section 13.1 of the agreement. The City asserted the MSHCP fee does not meet the requirements of Section 13.1. This matter is currently under review with the RCA, City and legal counsels. WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2014 ATTACHMENT A     4  The City asserted five permits were exempt under the Rialto Development Corporation development agreement dated June 1990 (development agreement) and the First and Second Memorandum of Understanding (MOU) with White Rock Acquisition Company, LP dated November 2003 and April 2006 (in relation to Rialto development agreement). The Second MOU stipulates that the MSHCP fees for the Development Area have been satisfied. As such, the City asserted the MSHCP fee is not applicable. This matter is currently under review with the RCA, City and legal counsels. We made inquiries of City personnel, inspected building permits and other documentation to support the granting of the exemptions under the City ordinance. No exceptions were noted, except for the matters under review by the RCA, City and legal counsels. 6. Recalculate the fees collected by the Member Agency on building permits to determine if they are correct and if the correct amounts have been remitted to the RCA. If fees are incorrect, determine the fees that should have been collected and remitted. Findings – For the sample selected in procedure 5 above, the building permit fees were recalculated and agreed to the amount collected and remitted without exception, except for the matters under review by the RCA, City and legal counsels. 7. Determine if fees collected on building permits were remitted on a timely basis to the RCA. Findings – Per the JPA dated January 27, 2004, all development mitigation fees must be remitted to the RCA within 90 days of the earlier of the date they were collected or should have been collected. No exceptions were noted. 8. Determine additional amounts, if any, which should be returned to the Member Agency for building permits. Findings – None noted. 9. If amounts are due to the RCA on building permits, calculate interest owed, based on the RCA’s Resolution No. 07-04 adopted on September 10, 2007, using the interest rate paid by Riverside County Treasury on amounts held by the County. Findings – Not applicable. 10. Obtain a list of all construction contracts awarded by the member Agency during the fiscal year. Findings – We obtained listing list of 12 construction contracts awarded by the City during the year ended June 30, 2014. 11. Select a sample of 10% of the contracts for testing, selecting no less than three contracts, or 100% of contracts if the total number of contracts is less than three. Findings – We haphazardly selected three construction contracts from the list provided. WESTERN RIVERSIDE COUNTY REGIONAL CONSERVATION AUTHORITY AGREED-UPON PROCEDURES AND FINDINGS – CITY OF LAKE ELSINORE FOR THE YEAR ENDED JUNE 30, 2014 ATTACHMENT A     5 12. Compute the amount of MSHCP contributions on the construction contracts that should have been remitted. Findings – The City asserted that each of the three contracts selected was exempt. We inspected the contracts, project descriptions, and other supporting documentation summarized as follows:  Construction of Solar Powered Speed Reader/Feedback Signs – The City asserted that this project was exempt under Section 1.A.2 of the RCA’s fee collection and remittance policy as a maintenance and safety project. The project was for the purchase and installation of 18 speed reader/feedback signs at seven Lake Elsinore Unified School District elementary and middle schools. No exceptions were noted.  Sidewalk Project – The City asserted that this project was exempt under Section 1.A.2 of the RCA’s fee collection and remittance policy as a maintenance and safety project. The project was for the construction of sidewalks on Heald Avenue from Lewis Street to Lowell Street, Lowell Street from Heald Avenue to Sumner Avenue and Mill Street from Avenue 7 to Avenue 9 as well as related street improvements including curb and gutter and minor paving. No exceptions were noted.  Main Street Overlay from Sulphur Street to Heald Avenue – The City asserted that this project was exempt under Section 1.A.1 of the RCA’s fee collection and remittance policy as an existing facility. The project was for the removal and reconstruction of paved areas, asphalt leveling, crack sealing, and application of Petromat pavement fabric, as well as ancillary improvements including modification of Americans with Disabilities Act ramps to current standards, crosswalk enhancements including colored asphalt crosswalks with stamped brick design and City logo, and signing and striping in accordance with California Department of Transportation standards and specifications on Main Street from Sulphur Street to Heald Avenue. No exceptions were noted. 13. Determine if the MSHCP contributions on the construction contracts were remitted to the RCA within 90 days of contract award. Findings – Not applicable. 14. Determine additional amounts on construction contracts, if any, which should be remitted to the RCA or returned to the Member Agency. Findings – Not applicable. 15. If additional amounts are due to the RCA on construction contracts, calculate interest owed, using the interest rate paid by Riverside County Treasury on amounts held by the County. Findings – Not applicable.