HomeMy WebLinkAboutCity of Lansing Building Authority 2022 Audit CITY OF LANSING
BUILDING AUTHORITY
REPORT ON FINANCIAL STATEMENTS
(with required supplementary information)
YEAR ENDED JUNE 30, 2022
Ma n e r
Costerisan
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT.........................................................................................................................................1-3
MANAGEMENT'S DISCUSSION AND ANALYSIS....................................................................................................................4-5
BASIC FINANCIAL STATEMENTS...................................................................................................................................................6
Fund Financial Statements
Statementof Net Position..........................................................................................................................................................7
Statement of Revenues,Expenses,and Changes in Net Position.............................................................................8
Statementof Cash Flows............................................................................................................................................................9
Notesto Financial Statements................................................................................................................................................10-17
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......................................................................................................................18-20
2425 E.Grand River Ave.,
(00*M a n e r Suite 1,Lansing,MI 48912
n 517.323.7500
CosterisanED 517.323.6346
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 Audit of the Financial Statements
Opinion
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,
2022, and the related notes to the financial statements, which collectively comprise the Authority's basic
financial statements as listed in the table of contents.
In our opinion,the financial statements referred to above present fairly,in all material respects,the respective
financial position of the City of Lansing Building Authority as of June 30, 2022, 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.
Basis for Opinion
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. Our responsibilities under those standards are further described
in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required
to be independent of the City of Lansing Building Authority and to meet our other ethical responsibilities, in
accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
Exclusive Presentation
As discussed in Note 1,the financial statements referred to above present only the Authority and do not purport
to,and do not,present fairly the financial position of the City of Lansing, Michigan,as of June 30,2022,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.
1
Responsibilities of Management 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt about the Authority's ability to continue as a
going concern for twelve months beyond the financial statement date, including any currently known
information that may raise substantial doubt shortly thereafter.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a
guarantee that an audit conducted in accordance with generally accepted auditing standards and Government
Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are
considered material if there is a substantial likelihood that,individually or in the aggregate,they would influence
the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing
Standards,we:
➢ Exercise professional judgment and maintain professional skepticism throughout the audit.
➢ Identify and assess the risks of material misstatement of the financial statements,whether due to fraud
or error,and design and perform audit procedures responsive to those risks. Such procedures include
examining,on a test basis,evidence regarding the amounts and disclosures in the financial statements.
➢ Obtain an understanding of internal control relevant to the audit 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 Authority's internal control. Accordingly,no such opinion is expressed.
➢ Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management,as well as evaluate the overall presentation of the financial statements.
➢ Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that
raise substantial doubt about the Authority's ability to continue as a going concern for a reasonable
period of time.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control-related matters
that we identified during the audit.
2
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis, as identified in the table of contents, be presented to supplement the basic financial
statements. Such information is the responsibility of management and,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.
Other Reporting Required by Government Auditing Standards
In accordance with GovernmentAuditing Standards,we have also issued our report dated December 20,2022,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 20,2022
3
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 30,2022. 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$2,335,994(net position for all activities). All of this amount(unrestricted net position for
all activities)may be used to meet the Authorit/s ongoing obligations to citizens and creditors. Other highlights
include:
➢ The Authority's total net position increased by$2,010,700 during the most current fiscal year.
➢ The Authority's total outstanding long-term obligations decreased by a net of $2,024,675 during the
current fiscal year. There are outstanding long-term obligations at year-end in the amount of$20,360,271.
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$2,243,719
at the end of the fiscal year. The entire balance of the Authority's net position is considered unrestricted.
Net Position
2022 2021
Assets
Current and other assets $ 21,150,154 $ 21,662,447
Deferred Outflows 3,087,381 3,272,261
Liabilities
Current and other liabilities 1,878,125 3,046,147
Noncurrent liabilities 20,023,416 21,563,267
Total liabilities 21,901,541 24,609,414
Net Position
Unrestricted $ 2,335,994 $ 325,294
4
When comparing the current fiscal year to the previous fiscal year, current net position has increased by
$2,010,700 more in the current year than what it increased by in the prior year. The current year increase in
net position was more than the prior year increase due to an increase in lease revenue.
Net Position
2022 2021
Operating revenue $ 3,015,528 $ 1,170,509
Operating expenses 1,004,828 932,549
Change in net position 2,010,700 237,960
Net position,beginning of year 325,294 87,334
Net position,end of year $ 2,335,994 $ 325,294
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$20,360,271. 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 30,2021 Additions Deletions June 30,2022
Bonds Payable $ 22,530,641 $ - $ 2,048,908 $ 20,481,733
Unamortized discounts on bonds (145,695) 63,335 39,102 (121,462)
Total $ 22,384,946 $ 63,335 $ 2,088,010 $ 20,360,271
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-8th Floor, 124 W.Michigan Avenue, Lansing,Michigan.
5
BASIC FINANCIAL STATEMENTS
6
CITY OF LANSING BUILDING AUTHORITY
STATEMENT OF NET POSITION
JUNE 30,2022
ASSETS
Current
Cash and cash equivalents $ 4,166,365
Investments 550,354
Receivables
Interest 100,936
Contracts receivable,current 280,391
Total current assets 5,098,046
Noncurrent assets
Investments 430,064
Contracts receivable 15,622,044
Total noncurrent assets 16,052,108
TOTAL ASSETS 21,150,154
DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on bond refunding 3,087,381
LIABILITIES
Current liabilities
Current portion of accrued interest payable 1,067,045
Current portion of long-term obligations 811,080
Total current liabilities 1,878,125
Noncurrent liabilities
Accrued interest payable,net of current portion 474,225
Long-term obligations,net of current portion 19,549,191
Total noncurrent liabilities 20,023,416
TOTAL LIABILITIES 21,901,541
NET POSITION
Unrestricted $ 2,335,994
See accompanying notes to financial statements.
7
CITY OF LANSING BUILDING AUTHORITY
STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN NET POSITION
FOR THE YEAR ENDED JUNE 30,2022
OPERATING REVENUES
Contract revenue $ 1,333,708
Loss on investments (23,180)
Intergovernmental 1,705,000
TOTAL OPERATING REVENUES 3,015,528
OPERATING EXPENSES
Interest expenses and fees 1,000,678
Other expenses 4,150
TOTAL OPERATING EXPENSES 1,004,828
CHANGE IN NET POSITION 2,010,700
Net position,beginning of year 325,294
Net position,end of year $ 2,335,994
See accompanying notes to financial statements.
8
CITY OF LANSING BUILDING AUTHORITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2022
CASH FLOWS FROM OPERATING ACTIVITIES
Payments received on contract receivable $ 4,027,296
Interest and fees paid (1,478,913)
Contribution from other governments 1,705,000
NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,253,383
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Principal paid on general obligation bonds,net (2,048,908)
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of investments 339,411
NET INCREASE IN CASH AND
CASH EQUIVALENTS 2,543,886
Cash and cash equivalents,beginning of year 1,622,479
Cash and cash equivalents,end of year $ 4,166,365
Reconciliation of operating income to net cash
provided by operating activities
Operating income $ 2,010,700
Adjustments to reconcile operating income
to net cash provided by operating activities
Amortization of premiums and discounts on bond payable,net 24,233
Amortization of deferred charge on bond refunding 184,880
Decrease in:
Accrued interest receivable 9,437
Contract receivable 2,707,331
Increase (decrease) in:
Accrued interest payable (683,198)
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 4,253,383
See accompanying notes to financial statements.
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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 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.
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.
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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)
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.
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.
11
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -DEPOSITS AND INVESTMENTS
Following is a reconciliation of deposit balances as of June 30,2022:
Statement of net position
Cash and cash equivalents $ 4,166,365
Investments,current 550,354
Investments,noncurrent 430,064
Total $ 5,146,783
Deposits and investments
Cash and cash equivalents in money market accounts
and pooled cash at the City of Lansing $ 4,166,365
Investments 980,418
$ 5,146,783
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, none of the Authority's bank balance of $152,865 was exposed to custodial credit risk because it was
insured and collateralized 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.
Custodial Credit Risk-Investments
As of June 30,2022,the Authority's investments consisted of U.S.government debt securities totaling$980,418.
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.
12
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -DEPOSITS AND INVESTMENTS (continued)
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:
Assets not subject to credit risk $ 129,696
Unrated 850,722
Total $ 980,418
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 in 1 -5 years $ 850,722
No maturity 129,696
Total $ 980,418
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.
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, 2022, all of the
Authority's investments were classified as Level 2 fair value.
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CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 3 -CONTRACT RECEIVABLE
The Authority has entered into an agreement with the City for parking lots acquired or constructed by the
Authority. These agreements generally terminate with the retirement of the related bond issues. Annual
payments under these agreements are equal to the related bond principal and interest due each year. At
termination of agreement,title to the property is passed to the City.
Under the accrual basis of accounting the Authority's contract receivable are classified as financed purchase. As
a result,contract receivable is recognized in the accompanying statement of net position,whereas capital assets
are not.
The agreement provides for the City to use, operate, and maintain the property, at its own expense, subject to
the terms and conditions of the agreements.
Future minimum payments to be received under this agreement are as follows:
Year Ended
June 30, Amount
2023 $ 2,069,137
2024 1,508,136
2025 767,510
2026 1,242,510
2027 1,101,812
Thereafter 23,679,239
Total minimum payments 30,368,344
Less amount representing interest (14,465,909)
$ 15,902,435
NOTE 4-LONG-TERM OBLIGATIONS
The following is a summary of long-term obligation transactions of the Authority for the year ended June 30,2022:
Amounts
Balance Balance Due Within
July 1,2021 Additions Deletions June 30,2022 One Year
General Obligation Bonds $ 22,530,641 $ - $ 2,048,908 $ 20,481,733 $ 811,080
Unamortized premium/
(discount)on bonds (145,695) 63,335 39,102 (121,462) -
$ 22,384,946 $ 63,335 $ 2,088,010 $ 20,360,271 $ 811,080
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CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 4-LONG-TERM OBLIGATIONS(continued)
General Obligations Bonds
$8,161,692 2009 Building Authority refunding bonds, unrefunded portion, due in
amounts ranging from $430,653 to $711,080, plus interest ranging from 6.60% to
6.85%through 2024 (unlimited tax,general obligation).0 $ 1,141,733
$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
$8,735,000 2020 Building Authority refunding bonds due in amounts ranging from
$100,000 to $1,040,000,plus interest ranging from 0.721%to 2.793%through 2039
(unlimited tax,general obligation). 8,535,000
$ 20,481,733
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
2023 $ 811,080 $ 1,651,409 $ 2,462,489
2024 530,653 1,360,993 1,891,646
2025 100,000 635,602 735,602
2026 575,000 626,607 1,201,607
2027 450,000 611,375 1,061,375
2028-2032 3,015,000 2,889,529 5,904,529
2033-2037 10,545,000 1,857,310 12,402,310
2038-2040 4,455,000 299,871 4,754,871
$ 20,481,733 $ 9,932,696 $ 30,414,429
15
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 4-LONG-TERM OBLIGATIONS (continued)
Prior Year's Defeased Bonds
In 2019,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
defeased the remaining principal of the Authority's 2012 and 2018 refunding bonds in the amount of$4,775,000
and$5,750,000, respectively. The defeased bonds mature through 2027. Accordingly, $4,735,000 of defeased
debt remains outstanding at year-end related to this transaction.
As of June 30, 2022, defeased bonds related to the prior year refunding of the 2009 Building Authority Capital
Appreciation Bonds were still outstanding in the amount of$1,009,386. The defeased bonds are scheduled to
be paid by the escrow agent in installments on June 1 of years 2023 through 2024.
As of June 30,2022,defeased bonds related to the prior year refunding of the 2014 Building Authority Refunding
Bonds,were still outstanding in the amount of$7,245,000. The defeased bonds are scheduled to be paid by the
escrow agent in installments on June 1 of years 2023-2039.
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-UPCOMING ACCOUNTING PRONOUNCEMENTS
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 Building
Authority is currently evaluating the impact this standard will have on the financial statements when adopted
during the 2022-2023 fiscal year.
16
CITY OF LANSING BUILDING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
NOTE 6-UPCOMING ACCOUNTING PRONOUNCEMENTS (continued)
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.
NOTE 7- CHANGE IN ACCOUNTING PRINCIPLE
For the year ended June 30, 2022, the Authority implemented the following new pronouncement: GASB
Statement No. 87,Leases.
Summary:
Governmental Accounting Standards Board(GASB)Statement No.87,Leases,was issued by the GASB in June 2017.
The objective of this Statement is to increase 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. It
establishes a single model for lease accounting based on the foundational principle that leases are financing of the
right to use the underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an
intangible right-to-use lease asset,and a lessor is required to recognize a lease receivable and a deferred inflow of
resources,thereby enhancing the relevance and consistency of information about governments'leasing activities.
There was no material impact on the Authority's financial statement after the adoption of GASB Statement No.87.
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2425 E.Grand River Ave.,
(00*M a n e r Suite 1,Lansing,MI 48912
n 517.323.7500
CosterisanED 517.323.6346
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 GOVERNMENT AUDITING 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 30,2022,
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 20,2022.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Authority's internal control
over financial reporting (internal control) as a basis for designing 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 Authority's internal control. Accordingly,we do not express an
opinion on the effectiveness of 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 and therefore, material weaknesses or significant deficiencies may exist that were not
identified. We identified a certain deficiency in internal control, described below as item 2022-001, that we
consider to be a material weakness.
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2022-001 MATERIAL JOURNAL ENTRIES
Condition:Material journal entries for the proper recognition of various financial statement amounts within the
City's accounting records were recorded after year end, some of which were proposed by the auditors. In
addition,we received several revisions to the City's trial balance (the final version coming in early December
2022), each of which contained material corrections to previous trial balances.A similar issue was noted and
reported last year as 2021-001.
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. In addition,
the Finance Department relies significantly on other Departments providing information to them for proper
recording of transactions in the financial statements.A number of these Departments were behind in getting this
information to the Finance Department. These issues have placed a significant burden on the month and year
end close processes and have contributed to journal entries not being completed in a timely manner.We noted
that this process did improve in the current fiscal year,however this was still a systemic issue for the City.
Effect:The accounting records were initially misstated by amounts material to the financial statements.Certain
applicable adjustments were brought to the attention of management and were subsequently recorded in the
general ledger.
Recommendation: We recommend that the City take steps to assure that material journal entries are not
necessary at the time future audit analysis is performed.
Corrective Action Response: The Finance Team will continue the efforts begun this year regarding 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
bottlenecks that were encountered and will develop a plan to address the most significant issues in a more timely
manner going forward. Within budget constraints, Management will look to increase staffing levels and/or
obtain temporary assistance earlier in the fiscal year,both within the Finance Department as well as other key
departments, in order to perform more timely analyses of the various account balances. In FY23, Finance will
also begin working on the implementation of a new General Ledger software package,which ultimately will also
help to resolve this issue.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether 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 GovernmentAuditing Standards.
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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 20,2022
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