ROPS Certification Presentation Final

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ROPS Certification Presentation Final Powered By Docstoc
					  Presentation to the Oversight Board
Santa Clara County Auditor-Controller




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Overview
 The Audit Process

 Overview of Recognized Obligation Payment Schedule
 (ROPS) Certification

 Certified ROPS Approval




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The Audit Process
 H&S Code section 34182(a)(1): “The county auditor-
  controller shall conduct or cause to be conducted an agreed
  upon procedures audit of each redevelopment agency . . . .”
 Four Parts(§ 34182(a)(2)):
    Establish each RDA’s assets and liabilities
    Document and determine each RDA’s passthrough
     obligations
    Document and determine the amount and terms of any
     indebtedness
    Certify the initial ROPS
 Final deadline: July 1, 2012
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What are ROPS?
 Six-month schedules of “enforceable obligation”
 payments. (§ 34171(h))

 Beginning May 1, 2012, “only those payments listed in
 the [ROPS] may be made by the successor agency . . . .”
 (§ 34177(a)(3))




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What are ROPS? (Cont’d)
 The ROPS must identify the source of funds, and monies
  from the Redevelopment Property Tax Trust Fund are to be
  used “only to the extent no other funding source is
  available or when payment from property tax revenues is
  required by an enforceable obligation or by the provisions
  of this part.” (§ 34177(l)(1))
 Property tax money will flow from the trust funds
  maintained by the County Auditor-Controller to trust
  funds maintained by the successor agencies every six
  months to pay only those items on ROPS; this is the second
  priority distribution from the trust fund. (§ 34183(a)(2))

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What are ROPS? (Cont’d)
 The initial certified and approved ROPS is due April 15,
  2012. (§ 34177(l)(3))
 The initial ROPS is certified only for payments
  between January 1, 2012 and June 30, 2012.
 Amounts will be “trued up” based on actual payments
  and final, approved ROPS with every ROPS period.
  (§ 34186)
 Future ROPS must still be certified, based on the final
  audit establishment of assets and liabilities and
  determination of indebtedness.
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Mandatory Conditions for a Valid
ROPS - § 34177(l)(2):
A [ROPS] shall not be deemed valid unless all of the
following conditions have been met:
 (A) A draft [ROPS] is prepared by the successor agency for
       the enforceable obligations of the former [RDA] . . . .
       [T]he initial draft of that schedule . . . shall be
       reviewed and certified, as to its accuracy, by an
       external auditor designated pursuant to Section 34182.
 (B) The certified [ROPS] is submitted to and duly
       approved by the oversight board.
 (C) A copy of the approved [ROPS] is submitted to the
       county auditor-controller and both the Controller’s
       office and Department of Finance and must be posted
       on the successor agency’s Internet Web site.

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Audit Phase 1: ROPS Certification
 Timeline:
    County CPRA Request for Underlying Documents –
     January 11th
    Fieldwork Started – Early March
    Fieldwork Completed – March 29th
    Exit Conference/Draft Report – Early April
    Certified ROPS to Oversight Boards – Starting April 5th
    Approved, Certified ROPS Submitted to State Dept. of
     Finance et al. – April 15th


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Item Review – Overview
 ROPS may only include “enforceable obligations” of
  the former RDA.
 “Enforceable obligation” is specifically defined by law
  in ABX1 26.
 Legal review by the Office of the County Counsel
  examined underlying documentation using a multi-
  step process.
 An identical, consistent process was used countywide
  to examine every item listed on the draft ROPS by
  successor agencies to ensure that the statutory criteria
  were met.
                                                             9
Item Review Steps
 Step 1: Does item meet threshold qualification as an
  “enforceable obligation” under section 34171(d)(1)?

 Step 2: Is the item excluded by the statute?




                                                         10
Item Review – Step 1
Does the item meet the threshold qualification under
section 34171(d)(1)?
 The most common problems included:
    Successor agency was unable to provide documentation
     to support the existence of the obligation.
    Documentation provided shows that the obligation was
     a city obligation, not an RDA obligation.
    Documentation describes an item that is not a current
     or future obligation of the agency (e.g., the obligation
     ended).

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Item Review – Step 2
Is the item excluded by the statute?
 Most activity initiated after June 28, 2011 violates the
  “freeze” provisions. (Part 1.8)
     After June 28, 2011, ABX1 26 prohibited RDAs from
      entering into new enforceable obligations or expanding
      any existing obligations.
     This issue did not arise often as most jurisdictions
      complied with the freeze and the California Supreme
      Court’s order keeping the freeze in place while the
      statute was under review.

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Item Review – Step 2 (Cont’d)
Is the item excluded by the statute?
 “[A]greements, contracts, or arrangements between the [City]
   that created the redevelopment agency and the redevelopment
   agency are invalid and shall not be binding on the successor
   agency . . . .” (§ 34178(a); see also § 34171(d)(2))
     There are limited exceptions for loans entered into within two years
      of the RDA’s formation and for certain agreements related to
      “indebtedness obligations.”
     Section 34178(a) allows successor agencies to enter or reenter into
      agreements with the host city, but only with oversight board
      approval.
     Certain indebtedness-related obligations did not meet the narrow
      exception but are likely strong candidates for certification if the
      oversight board approves reentering into the relevant agreements.

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Item Review – Step 2 (Cont’d)
Is the item excluded by the statute?
 Certain agreements or contracts with other public
  agencies are invalid. (§ 34171(d)(3))
     These agreements concern services or funding for
      governmental or private services or capital projects
      outside of RDA project areas.
     These agreements rarely arose during the review.




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Payment Review – Overview
 Documentation was examined to ensure that obligation dollar
  amounts for the six month period covered by the ROPS were
  accurate.
 Adjustments were made:
   To account for reserves;
   To match the underlying documentation;
   To ensure that estimates and other amounts were based on
    reasonable data; and,
   Where obligations were only partially certifiable (e.g., only part of
    the amount was an agency obligation).
 Total obligation amounts, beyond the six month period, have
  not yet been certified – they will be reviewed in the audit as part
  of the establishment of assets and liabilities and determination
  of indebtedness.

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Reclassifications
 Certain items listed on draft ROPS were reclassified:
    Passthrough payments are not ROPS items and are now
     the responsibility of the County Auditor-Controller.
     They are not part of the certified ROPS and are subject
     to a separate phase of the audit.
    Amounts not currently payable are excluded in the
     certified ROPS for this time period but will be subject to
     the final audit determination of liabilities.
    Administrative costs are listed separately, because they
     are paid out pursuant to the administrative cost
     allowance, as a lower priority, and only upon oversight
     board approval of the administrative budget.
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Administrative Costs
 The oversight board must approve the administrative
  budget. (§§ 34171(b), 34177(j))
 Administrative costs are subject to a 5% cap on the
  ROPS amount in this fiscal year, and 3% thereafter,
  with a minimum of $250,000 each fiscal year subject to
  oversight board approval. (§ 34171(b))
 Administrative cost items cannot be certified until the
  oversight board approves the administrative budget
  and approves entering into appropriate agreements for
  staffing.

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Certified ROPS Approval Process
 Oversight boards are asked to approve the certified ROPS.
 Notwithstanding certification, oversight boards can remove any
  item that is terminable or renegotiable. (§ 34181(d), (e))
 Oversight boards cannot approve an item that is not an
  “enforceable obligation.” (§ 34181(b))
    Consistent with its fiduciary obligations, an oversight board can
     approve entering or reentering agreements between the successor
     agency and the host city; the county auditor-controller can
     subsequently certify the item and it may be added to this or a
     subsequent ROPS. (§ 34178(a))
    If there is a disputed item, we recommend that the board discuss it
     and provide specific direction to the successor agency staff to work
     with the county auditor-controller to review the item for potential
     certification, if appropriate.

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Questions?
The County Auditor-Controller’s financial, legal, and
internal and external audit staff are available to answer
questions related to ROPS certification.




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