HomeMy WebLinkAboutCity of Lansing Building Authority 2020 Audit - Final CITY OF LANSING
BUILDING AUTHORITY
REPORT ON FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2020
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Zusiness F Technology Advisors
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT.........................................................................................................................................1-2
MANAGEMENT'S DISCUSSION AND ANALYSIS....................................................................................................................3-4
BASIC FINANCIAL STATEMENTS...................................................................................................................................................5
Fund Financial Statements
Statementof Net Position..........................................................................................................................................................6
Statement of Revenues,Expenses,and Changes in Net Position.............................................................................7
Statementof Cash Flows............................................................................................................................................................8
Notesto Financial Statements.................................................................................................................................................9-16
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENTAUDITING STANDARDS......................................................................................................................17-19
M a n e r
Maner CQsterisan PC
2425 E.Grand River Ave.
Suite 1
sterisan
Lansing,M1 489 1
T.517 323 750 7500
Certified Public Accountants F.517 323 6346
Business&Technology Advisors www manercpa.com
INDEPENDENT AUDITOR'S REPORT
The Honorable Mayor,Members of the City Council
of the City of Lansing,and Members of the Board of
Directors of the City of Lansing Building Authority
Lansing,Michigan
Report on the Financial Statements
We have audited the accompanying financial statements of the City of Lansing Building Authority (the
"Authority"), a blended component unit of the City of Lansing, Michigan, as of and for the year ended June 30,
2020, and the related notes to the financial statements, which collectively comprise the Authority'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.
Auditor's Responsibility
Our responsibility is to express an opinion 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 GovernmentAuditing 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.
1
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion,the financial statements referred to above present fairly, in all material respects, the financial
position of the City of Lansing Building Authority as of June 30, 2020, and the respective changes in financial
position and cash flows thereof for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Other Matters
Report on Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis as listed in the table of contents be presented to supplement the basic financial
statements. Such 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. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America,which consisted of inquiries of management about
the methods of preparing the information and comparing the information for consistency with management's
responses to our inquiries,the basic financial statements,and other knowledge we obtained during our audit of
the basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.
Emphasis of Matter
Exclusive Presentation
As discussed in Note 1, the financial statements referred to above present only the City of Lansing Building
Authority and do not purport to,and do not,present fairly the financial position of the City of Lansing,Michigan,
as of June 30, 2020, and the changes in its financial position for the year then ended, in conformity with
accounting principles generally accepted in the United States of America. Our opinion is not modified with
respect to this matter.
Other Reporting Required by Government Auditing Standards
In accordance with Govern men tAuditing Standards, we have also issued our report dated on our consideration
of the City of Lansing Building Authority's internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, 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.
December 18,2020
2
CITY OF LANSING BUILDING AUTHORITY
MANAGEMENT'S DISCUSSION AND ANALYSIS
The City of Lansing Building Authority (the "Authority") was established pursuant to Act 31, Public Acts of
Michigan,as amended,and is a blended component unit of the City of Lansing,Michigan. The Building Authority
presents this management discussion and analysis of its financial performance as an overview of financial
activities for the fiscal year ended June 30,2020. We encourage readers to consider the information presented
here in conjunction with the accompanying basic financial statements.
Financial Highlights
The assets and deferred outflows of resources of the Authority exceeded its liabilities at the close of the most
recent fiscal year by$87,334 (net position for all activities). All of this amount(unrestricted net position for all
activities) may be used to meet the Authority's ongoing obligations to citizens and creditors. Other highlights
include:
➢ The Authority's total net position increased by$41,402 during the most current fiscal year.
➢ The Authority's total outstanding long-term obligations decreased by a net of $1,128,722 during the
current fiscal year. There are outstanding long-term obligations at year-end in the amount of$23,026,648.
Overview of the Financial Statements
Basic Financial Statements. The Authority's financial statements are prepared on the accrual basis in
accordance with generally accepted accounting principles promulgated by the Government Accounting
Standards Board. The Authority is structured as a single enterprise fund with revenues recognized when earned,
not when received. Expenses are recognized when incurred,not when they are paid. See Note 1 to the financial
statements for a summary of the Authority's significant accounting policies.
Notes to the Financial Statements. The notes provide additional information that is essential to a full
understanding of the data provided in the financial statements.
Financial Analysis
The net position of the Authority is summarized for the purpose of determining the overall fiscal position. As
shown below,the Authority's total assets and deferred outflows of resources exceeded liabilities by$87,334 at
the end of the fiscal year. The entire balance of the Authority's net position is considered unrestricted.
Net Position
2020 2019
Assets
Current and other assets $ 22,887,220 $ 23,472,472
Deferred Outflows 3,007,730 3,168,852
Liabilities
Current and other liabilities 2,780,968 2,440,022
Long-term obligations 23,026,648 24,155,370
Total liabilities 25,807,616 26,595,392
Net Position
Unrestricted $ 87,334 $ 45,932
3
When comparing the current fiscal year to the previous fiscal year net position has increased by$41,402. The
current year increase in net position was more than the prior year decrease due to a reduction in interest
expense.
Net Position
2020 2019
Operating revenue $ 1,315,161 $ 1,658,884
Operating expenses 1,273,759 2,007,219
Change in net position 41,402 (348,335)
Net position,beginning of year 45,932 394,267
Net position,end of year $ 87,334 $ 45,932
Capital Assets. The Authority has no capital assets at this time.
Long-term Obligation Administration
At the end of the current fiscal year, the City of Lansing Building Authority had total long-term obligations
outstanding, net of unamortized discounts, of$23,026,648. General obligation bonds were issued to provide
funds for the construction and acquisition of major capital facilities for the City of Lansing, Michigan. General
obligation bonds are direct obligations and pledge the full faith and credit of the City of Lansing,Michigan. These
bonds are outstanding with varying amounts of principal maturing until 2040.
Balance Balance
June 30,2019 Additions Deletions June 30,2020
Bonds Payable $ 24,282,490 $ - $ 1,130,000 $ 23,152,490
Unamortized discounts on bonds (127,120) 63,334 62,056 (125,842)
Total $ 24,155,370 $ 63,334 $ 1,192,056 $ 23,026,648
Additional information on the Authority's long-term debt can be found in Note 4 to the financial statements.
Economic Factors and Next Year's Budget and Rates
City of Lansing Building Authority expenses are governed by the laws of the State of Michigan and bond
indenture covenants. These laws and covenants determine how bond proceeds are spent and how and when
debt retirement payments are made.
Requests for Information
This financial report is designed to provide a general overview of the City of Lansing Building Authority finances
and to show accountability for the money it receives and expends. Questions concerning any of the information
provided in this report or requests for additional financial information should be made with the City of Lansing
Finance Department at(517)483-4500.
4
BASIC FINANCIAL STATEMENTS
5
CITY OF LANSING BUILDING AUTHORITY
STATEMENT OF NET POSITION
JUNE 30,2020
ASSETS
Current
Cash and cash equivalents $ 482,144
Investments 156,395
Receivables
Interest 113,692
Leases receivable, current 1,742,982
Total current assets 2,495,213
Noncurrent assets
Investments 1,782,241
Leases receivable 18,609,766
Total noncurrent assets 20,392,007
TOTAL ASSETS 22,887,220
DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on bond refunding 3,007,730
LIABILITIES
Current liabilities
Current portion of accrued interest payable 983,907
Current portion of long-term debt 2,011,849
Total current liabilities 2,995,756
Noncurrent liabilities
Accrued interest payable,net of current portion 1,797,061
Long-term debt,net of current portion 21,014,799
Total noncurrent liabilities 22,811,860
TOTAL LIABILITIES 25,807,616
NET POSITION
Unrestricted $ 87,334
See accompanying notes to financial statements.
6
CITY OF LANSING BUILDING AUTHORITY
STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN NET POSITION
FOR THE YEAR ENDED JUNE 30,2020
OPERATING REVENUES
Lease revenue $ 1,214,888
Interest revenue 100,273
TOTAL OPERATING REVENUES 1,31S,161
OPERATING EXPENSES
Interest expenses and fees 1,271,6S9
Other expenses 2,100
TOTAL OPERATING EXPENSES 1,273,7S9
CHANGE IN NET POSITION 41,402
Net position,beginning of year 4S,932
Net position,end of year $ 87,334
See accompanying notes to financial statements.
7
CITY OF LANSING BUILDING AUTHORITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2020
CASH FLOWS FROM OPERATING ACTIVITIES
Payments received on capital leases $ 1,481,463
Cash received from the City of Lansing,Michigan 362,225
Interest and fees paid (768,168)
Principal paid on general obligation bonds (1,130,000)
Payment of bond costs (2,100)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (56,580)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments (1,938,636)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (1,995,216)
Cash and cash equivalents,beginning of year 2,477,360
Cash and cash equivalents,end of year $ 482,144
Reconciliation of operating income to net cash
(used) by operating activities
Operating income $ 41,402
Adjustments to reconcile operating income
to net cash (used) by operating activities
Amortization of premiums and discounts on bond payable 1,278
Amortization of deferred charge on bond refunding 161,122
Decrease in:
Accrued interest receivable 86,680
Due from City of Lansing,Michigan 362,225
Lease receivable 79,622
Increase (decrease) in:
Accrued interest payable 341,091
Long-term obligations (1,130,000)
NET CASH (USED) BY
OPERATING ACTIVITIES $ (56,580)
See accompanying notes to financial statements.
8
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Lansing Building Authority (the "Authority") was established pursuant to Act 31, Public Acts of
Michigan, as amended. The Authority has entered into various lease agreements with the City of Lansing,
Michigan (the "City") covering buildings, parking lots, recreation facilities, and stadiums constructed by the
Authority.
Reporting Entity
These financial statements represent the financial position and the results of operations of a blended component
unit of the City and are an integral part of that reporting entity. A blended component unit is a legally separate
entity from the City but is so intertwined with the City that it is,in substance,the same as the City. It is reported
as part of the City and its financial data is combined with data of the appropriate funds.
Basis of Presentation
All operations of the Authority are accounted for in a single enterprise fund (a type of proprietary fund).
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues
and expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund's principal ongoing operations. All revenues and expenses not meeting this definition are
reported as nonoperating revenues and expenses.
Measurement Focus.Basis of Accounting.and Financial Statement Presentation
The economic resources measurement focus and the accrual basis of accounting are used in preparing the
financial statements. Revenues are recorded when earned and expenses are recorded when a liability is
incurred,regardless of the timing of related cash flows.
Restricted net position is reported for assets that are subject to restrictions beyond the Authority's control,less
any liabilities payable from such restricted assets. The restrictions may be externally imposed or imposed by
law. When both restricted and unrestricted resources are available for use, it is the Authority's policy to use
restricted resources first,then unrestricted resources as they are needed.
Assets.Deferred Outflows of Resources.Liabilities.and Equity
Deposits and Investments
The Authority's cash and cash equivalents are considered to be demand deposits and amounts held by the City
of Lansing,Michigan for the benefit of the Authority.
Investments are stated at fair value. Securities traded on a national or international exchange are valued at the
last reported sales price at current exchange rates. Investments that do not have established market values are
reported at estimated fair value.
9
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Assets,Deferred Outflows of Resources, Liabilities,and Equity(continued)
Deposits and Investments(continued)
In accordance with Michigan Compiled Laws,the Authority is authorized to invest in the following investment
vehicles:
a. Bonds,securities,and other obligations of the United States or an agency or instrumentality of the United
States.
b. Certificates of deposit,savings accounts,deposit accounts,or depository receipts of a State or nationally
chartered bank or a State or Federally chartered savings and loan association, savings bank, or credit
union whose deposits are insured by an agency of the United States government and which maintains a
principal office or branch office located in this State under laws of this State or the United States, but
only if the bank,savings and loan association,savings bank or credit union is eligible to be a depository
of surplus funds belonging to the State under Section 6 of 1855 PA 105,MCL 21.146.
c. Commercial paper rated at the time of purchase within the two highest classifications established by not
less than two standard rating services and that matures not more than 270 days after the date of
purchase.
d. Bankers'acceptances of United States banks.
e. The United States government or Federal agency obligations repurchase agreements.
f. Mutual funds composed of investment vehicles,which are legal for direct investment by local units of
government in Michigan.
The Authority follows the investment policy of the City of Lansing.
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)until then. The Authority only has one item that qualifies for reporting in this category. It
is the deferred charge on bond refunding reported in the statement of net position. A deferred charge on bond
refunding results from the difference in the carrying value of refunded debt and its reacquisition price.
Long-term Obligations
In the financial statements,long-term debt is reported as a liability. Bond discounts and premiums are deferred
and amortized over the life of the applicable bonds using the effective interest method. Bonds payable are
reported net of the applicable bond discount and premium. Bond issuance costs are reported as expenses as
incurred.
10
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
Assets.Deferred Outflows of Resources. Liabilities.and Equity(continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 2 - DEPOSITS AND INVESTMENTS
Following is a reconciliation of deposit balances as of June 30, 2020:
Statement of net position
Cash and cash equivalents $ 482,144
Investments,current 156,395
Investments,noncurrent 1,782,241
Total $ 2,420,780
Deposits and investments
Cash and cash equivalents in money market accounts
and pooled cash at the City of Lansing $ 482,144
Investments 1,938,636
$ 2,420,780
Custodial Credit Risk-Deposits
Custodial credit risk is the risk that in the event of a bank failure,the Authority's deposits may not be returned.
State law does not require,and the Authority does not have a policy for deposit custodial credit risk. As of year-
end, $2,069,862 of the Authority's bank balance of$2,222,450 was exposed to custodial credit risk because it
was uninsured and uncollateralized for the accounts that were specifically held in the Authority's name.
A portion of the above deposits and investments are held by the City of Lansing,Michigan. Those specific deposit
and investment accounts are not held in the name of the Authority. The amount of federal depositary insurance
and custodial credit risk of investments is determined for the City of Lansing, Michigan as a whole,and cannot
be separately identified for the Authority related to these accounts.
The Authority's investment policy does not specifically address this risk, although the Authority believes that
due to the dollar amounts of cash deposits and the limits of FDIC insurance,it is impractical to insure all bank
deposits. As a result,the Authority evaluates each financial institution with which it deposits Authority funds
and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level
are used as depositories.
11
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - DEPOSITS AND INVESTMENTS (continued)
Custodial Credit Risk-Investments
As of June 30, 2020, the Authority's investments consisted of U.S. government debt securities totaling
$1,938,636.
For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the
Authority will not be able to recover the value of its investments or collateral securities that are in the possession
of an outside party. State law does not require,and the Authority does not have a policy for investment custodial
credit risk. On the investments listed above, there is no custodial credit risk, as these investments are
uncategorized as to credit risk.
Credit Risk
State law limits investments to specific government securities, certificates of deposit and bank accounts with
qualified financial institutions, commercial paper with specific maximum maturities and ratings when
purchased,bankers acceptances of specific financial institutions, qualified mutual funds and qualified external
investment pools as identified in the list of authorized investments in the summary of significant accounting
policies. The Authority's investment policy does not have specific limits in excess of state law on investment
credit risk. Credit risk ratings,where applicable,are summarized as follows:
S&P AA+ $ 1,030,974
Unrated 907,662
Total $ 1,938,636
Interest Rate Risk
State law limits the allowable investments and the maturities of some of the allowable investments as identified
in the summary of significant accounting policies. The Authority's investment policy does not have specific limits
in excess of state law on investment maturities as a means of managing its exposure to fair value losses arising
from increasing interest rates. For investments held at year-end maturities are as follows:
Due within 1 year $ 156,395
Due in 1 -5 years 1,782,241
Total $ 1,938,636
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of the Authority's investment in a
single issuer. State law limits allowable investments but does not limit concentration of credit risk as identified
in the list of authorized investments in the summary of significant accounting policies. The Authority's
investment policy does not have specific limits in excess of state law on concentration of credit risk. All
investments held at year-end are reported above.
12
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - DEPOSITS AND INVESTMENTS (continued)
Fair Value Measurements
The Authority categorizes its fair value measurements within the fair value hierarchy established by generally
accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of
the asset. Level 1 inputs are quoted prices in active markets for identical assets; level 2 inputs are significant
other observable inputs; level 3 inputs are significant unobservable inputs. As of June 30, 2020, all of the
Authority's investments were classified as level 2 fair value.
NOTE 3 -LEASES RECEIVABLE
The Authority has entered into various lease agreements with the City for buildings, parking lots, recreation
facilities, and stadiums acquired or constructed by the Authority. These agreements generally terminate with
the retirement of the related bond issues. Annual lease payments under these agreements are equal to the
related bond principal and interest due each year. At termination of a lease,title to the leased property is passed
to the City.
Under the accrual basis of accounting the Authority's leases are classified as sales leases. As a result, leases
receivable are recognized in the accompanying statement of net position,whereas capital assets are not.
All lease agreements provide for the lessee to use,operate and maintain the property,at its own expense,subject
to the terms and conditions of the agreements.
Future minimum lease payments to be received under these lease agreements are as follows:
Year Ended
June 30, Amount
2021 $ 3,292,035
2022 3,269,687
2023 2,069,136
2024 1,508,136
2025 767,510
Thereafter 25,980,374
Total minimum lease payments 36,886,878
Less amount representing interest (16,534,130)
$ 20,352,748
13
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 4-LONG-TERM OBLIGATIONS
The following is a summary of long-term obligation transactions of the Authority for the year ended June 30,2020:
Amounts
Balance Balance Due Within
July 1,2019 Additions Deletions June 30,2020 One Year
General Obligation Bonds $ 24,282,490 $ - $ 1,130,000 $ 23,152,490 $ 2,011,849
Unamortized premium/
(discount) on bonds (127,120) 63,334 62,056 (125,842) -
$ 24,155,370 $ 63,334 $ 1,192,056 $ 23,026,648 $ 2,011,849
General Obligations Bond
$8,161,692 2009 Building Authority refunding bonds, unrefunded portion, due
in amounts ranging from $430,653 to $861,849 plus interest ranging from
6.25%- 6.85%through 2024 (unlimited tax,general obligation). $ 2,767,490
$7,245,000 2014 Building Authority refunding bonds due in amounts ranging
from $0 to $1,060,000 plus interest of 4.75% through 2039 (unlimited tax,
general obligation). 7,245,000
$6,765,000 2015 Building Authority refunding bonds due in amounts ranging
from$1,150,000 to $1,185,000 plus interest of 3.0%through 2022 (limited tax,
general obligation). 2,335,000
$10,805,000 2017 Building Authority refunding bonds due in amounts ranging
from $200,000 to $1,200,000 starting on June 1, 2026 and continuing through
2040. Interest is payable semi-annually at rates from 3.305% to 4.075%
(limited tax,general obligation). 10,805,000
$ 23,152,490
14
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 4-LONG-TERM OBLIGATIONS (continued)
Annual debt service requirements to maturity for general obligation bonds are as follows:
Business-type Activities
General Obligations Bonds
Year Ended
June 30, Principal Interest Total
2021 $ 2,011,849 $ 1,740,710 $ 3,752,559
2022 1,948,908 1,744,152 3,693,060
2023 711,080 1,781,431 2,492,511
2024 430,653 1,491,857 1,922,510
2025 - 767,510 767,510
2026-2030 1,460,000 3,691,143 5,151,143
2031-2035 7,170,000 3,040,431 10,210,431
2036-2040 9,420,000 1,054,734 10,474,734
$ 23,152,490 $ 15,311,968 $ 38,464,458
Prior Year Defeased Debt
In the prior year,the City of Lansing,Michigan sold one of the City-owned parking structures. The construction
of this structure was initially financed by bonds issued by the Authority. The proceeds from this sale were used
to defease the remaining principal of the Authority's 2012 and 2018 refunding bonds in the amounts of
$4,775,000 and $5,750,000, respectively. The defeased bonds mature on May 1, 2020 through 2027.
Accordingly,$9,600,000 of defeased debt remains outstanding at year-end related to this transaction.
Also, as of June 30, 2020, defeased bonds related to the prior year refunding of the 2005 Building Authority
Refunding Bonds were still outstanding in the amount of$2,555,000. The defeased bonds are scheduled to be
paid by the escrow agent in installments on June 1 of years 2021 through 2022.
NOTE 5 -RISK MANAGEMENT
The Authority as a blended component unit of the City of Lansing, is exposed to various risks that are covered
by the City's policies including losses related to issues of cyber security, liability, errors and omissions, flood,
boiler and machinery, property, employee bonding,crime,and workers' compensation. Settled claims relating
to the commercial insurance have not exceeded the amount of insurance coverage during the past three years.
NOTE 6-SUBSEQUENT EVENT
Subsequent to year end, the Authority has approved borrowing $8,735,000 of refunding bonds to refund the
2014 Building Authority Refunding Bonds as described in Note 4.
15
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 7-UPCOMING CHANGES IN ACCOUNTING STANDARDS/REGULATIONS
In June 2017,the GASB issued Statement No.87,Leases. This Statement increases the usefulness of governments'
financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were
classified as operating leases and recognized as inflows of resources or outflows of resources based on the
payment provisions of the contract. The Authority is currently evaluating the impact this standard will have on
the financial statements when adopted during the 2021-2022 fiscal year.
In May 2019,the GASB issued Statement No.91,Conduit Debt Obligations. This Statement will improve financial
reporting by eliminating the existing option for issuers to report conduit debt obligations as their own liabilities,
thereby ending significant diversity in practice. The clarified definition will resolve stakeholders'uncertainty as
to whether a given financing is, in fact, a conduit debt obligation. Requiring issuers to recognize liabilities
associated with additional commitments extended by issuers and to recognize assets and deferred inflows of
resources related to certain arrangements associated with conduit debt obligations also will eliminate diversity,
thereby improving comparability in reporting by issuers. Revised disclosure requirements will provide financial
statement users with better information regarding the commitments issuers extend and the likelihood that they
will fulfill those commitments. That information will inform users of the potential impact of such commitments
on the financial resources of issuers and help users assess issuers' roles in conduit debt obligations. The
Authority is currently evaluating the impact this standard will have on the financial statements when adopted
during the 2022-2023 fiscal year.
In May 2020,the GASB issued Statement No.96,Subscription-based Information Technology Arrangements. This
Statement provides guidance on the accounting and financial reporting for subscription-based information
technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a
SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset - an intangible asset - and a
corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription
payments,including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To
the extent relevant,the standards for SBITAs are based on the standards established in Statement No.87,Leases,
as amended. The Authority is currently evaluating the impact this standard will have on the financial statements
when adopted during the 2022-2023 fiscal year.
16
Maner Maner Costerisan PC
2425 E.Grand River Ave.
Suite 1
sterisan Lansing,M1 489 1
T.517 323 750 7500
Certified Public Accountants F.517 323 6346
Business&Technology Advisors www manercpa.com
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND
ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENTA UDITING STANDARDS
The Honorable Mayor,Members of the City Council
of the City of Lansing,and Members of the Board of
Directors of the City of Lansing Building Authority
Lansing,Michigan
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 Lansing Building Authority(the
Authority),a blended component unit of the City of Lansing,Michigan,as of and for the year ended June 30,2020,
and the related notes to the financial statements, which collectively comprise the Authority's basic financial
statements and have issued our report thereon dated December 18,2020.
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) as a basis for designing the audit procedures that are appropriate in
the circumstances for the purpose of expressing our opinion 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 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 and therefore, material weaknesses or significant deficiencies may exist that were not
identified. However,as described below,we identified certain deficiencies in internal control that we consider
to be material weaknesses:
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2020-001 MATERIAL JOURNAL ENTRIES PROPOSED BY AUDITORS
Condition: Material journal entries for the proper recognition of various financial statement amounts within
the City's accounting records were proposed by the auditors. In addition,we received several revisions to
the City's trial balance(the final version coming in early December 2020),each of which contained material
corrections to previous trial balances.
Criteria: Management is responsible for establishing,maintaining,and monitoring internal controls,and for
the fair presentation in the financial statements of financial position, results of operations,and cash flows,
including the recording of all appropriate journal entries to assure the trial balance from which the financial
statements are prepared, reflect amounts that are in conformity with U.S. generally accepted accounting
principles.
Cause: Over the past several years,the City's Finance Department,who prepares the reconciliations of all
accounts, has reduced in size due to budget reductions, staffing reductions and staffing turnover. These
changes have placed a significant burden on the month and year end close processes,and have contributed
to journal entries not being completed or reviewed timely.
Effect: The Authority's accounting records were initially misstated by amounts material to the financial
statements. Necessary adjustments were brought to the attention of management and were subsequently
recorded in the Authority's general ledger.
Recommendation: We recommend that the Authority take steps to assure that material journal entries are
not necessary at the time future audit analysis is performed.
Corrective Action Response: Management of the Authority will continue to review auditor recommendations/
corrections and internal procedures related to the identification and correction of potential errors in the
financial statements prior to the beginning of future audits. The Finance team will meet to review adjustments
made to this year's financial statements and will develop a plan to address the most significant issues in a
timelier manner going forward. Within budget constraints, Management will look to increase staffing levels
and/or obtain temporary assistance earlier in the fiscal year,in order to perform more timely analyses of the
various account balances.
2020-02 BANK RECONCILIATIONS
Condition: Throughout the year,the City failed to complete bank reconciliations on a timely basis for most
of its cash accounts, including the pooled account which the Authority is part of. Several individual bank
account reconciliations were not completed for the entire fiscal year until approximately four months after
fiscal year end while audit fieldwork was ongoing.
Criteria: Completion of timely bank account reconciliations and review thereof, represent an important
control used to detect and prevent misstatements and errors. Such reconciliations should be completed and
reviewed monthly for all accounts.
Cause: Over the past several years,the City's Finance Department,who prepares the reconciliations of all
entity accounts, has reduced in size due to staffing reductions and staffing turnover. These changes have
placed a significant burden on the month and year end close processes, and have contributed to
reconciliations not being completed or reviewed timely.
Effect: As a result of this condition, all activities that have cash transactions have an increased risk that
misstatements in the accounting records, whether caused by error or fraud, would not be detected and
corrected on a timely basis.
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2020-02 BANK RECONCILIATIONS (continued)
Recommendation: We recommend the City take steps to assure all bank reconciliations are completed and
tied to the general ledger in a timely fashion and all differences be resolved in a timely manner.
Correction Action Response: Management of the City will work on several areas of improvement to alleviate
this issue.
a. We will continue to review the need for the various bank accounts that have been established over
the years with the view toward more consolidation.
b. We will assign the responsibility for each of the bank accounts to various Finance staff members,
including using City Treasury staff, who will be responsible for reconciling those statements in a
timely manner.
c. We will review the old outstanding reconciling items with the view toward clearing them up before
the end of the next fiscal year.
d. We will look to increase staffing levels in Finance and/or obtain temporary assistance earlier in the
fiscal year,in order to perform more timely analyses of the various bank statements.
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
financial statements. 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 Governmental Auditing Standards.
Authority's Responses to Findings
The Authority's responses to the findings identified in our audit are described above. The Authority's responses
were not subject to the auditing procedures applied in the audit of the financial statements and,accordingly,we
express no opinion on them.
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.
December 18,2020
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M a n e r
Maner Cosierisan PC
2425 E.Grand River Ave.
Suite 1
sterisan
Lansing,MI 4891
T.517 323 750 T500
C:ertilicil Public AC.COLI[llit[;Lti F.5173236346
Business&-Technology Advisors www.manercpa.com
December 18,2020
To the Honorable Mayor,Members of the City Council
of the City of Lansing,and Members of the Board of
Directors of the City of Lansing Building Authority
Lansing,Michigan
We have audited the financial statements of the City of Lansing Building Authority for the year ended June 30,
2020. Professional standards require that we provide you with information about our responsibilities under
generally accepted auditing standards and Govern men tAuditing Standards,as well as certain information related
to the planned scope and timing of our audit. We have communicated such information in our letter to City
Council dated May 5, 2020. Professional standards also require that we communicate to you the following
information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by City of Lansing Building Authority are described in Note 1 to the financial statements.
No new accounting policies were adopted, and the application of existing policies was not changed during the
year ended June 30, 2020. We noted no transactions entered into the Building Authority during the year for
which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized
in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based
on management's knowledge and experience about past and current events and assumptions about future
events. Certain accounting estimates are particularly sensitive because of their significance to the financial
statements and because of the possibility that future events affecting them may differ significantly from those
expected. The most sensitive estimate affecting the financial statements was:
Lease receivable balances are based on past experience and future estimates of lease collections.
We evaluated the key factors and assumptions used to develop this estimate in determining that it is reasonable
in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral,consistent,and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely
misstatements identified during the audit, other than those that we believe are trivial, and communicate them
to the appropriate level of management. Further, professional standards require us to also communicate the
effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account
balances or disclosures,and the financial statements as a whole and each applicable opinion unit. In addition,
professional standards require us to communicate to you all material, corrected misstatements that were
brought to the attention of management as a result of our audit procedures. The material misstatements
detected as a result of audit procedures and corrected by management are described in connection with our
report on internal control over financial reporting.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing
matter,whether or not resolved to our satisfaction,that could be significant to the financial statements or the
auditor's report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated December 18,2020.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of
an accounting principle to the Building Authority's financial statements or a determination of the type of
auditor's opinion that may be expressed on those statements,our professional standards require the consulting
accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge,there
were no such consultations with other accountants.
OtherAudit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards,with management each year prior to retention as the Building Authority's auditors. However,these
discussions occurred in the normal course of our professional relationship and our responses were not a
condition to our retention.
Other Matters
We applied certain limited procedures to the required supplementary information (RSI) that supplement the
basic financial statements. Our procedures consisted of inquiries of management regarding the methods of
preparing the information and comparing the information for consistency with management's responses to our
inquiries,the basic financial statements,and other knowledge we obtained during our audit of the basic financial
statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
Restriction on Use
This information is intended solely for the use of the City Council of the City of Lansing,the Board of Directors,
and management of the City of Lansing and the City of Lansing Building Authority and is not intended to be,and
should not be,used by anyone other than these specified parties.
Very truly yours,
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