19D - EXHIBIT FY 10-11 RDA Annual Report

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COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Management's Discussion and Analysis (Continued) Year Ended June 30, 2011 (Unaudited) Government -wide Financial Statements: The government -wide financial statements are designed to provide readers with a broad overview of the Agency's finances. These statements include all assets and liabilities using the full accrual basis of accounting, which is similar to the accounting used by most private- sector companies. All of the fiscal year's revenues and expenses are included, regardless of when monies are received or paid. • The statement of net assets presents all of the Agency's assets and liabilities, with the difference reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator to determine whether the financial position of the Agency is improving or deteriorating. • The statement of activities presents information showing the Agency's revenues and expenses for the fiscal year. All revenues and expenses are reported as soon as the underlying event giving rise to them occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and incurred but unpaid interest expense). The basic services of the Agency are considered to be governmental activities, including community redevelopment, low and moderate income housing, and interest expense on long -term debt. All Agency activities are financed with property tax increment, operating grants and contributions, transfers from the City of Santa Ana and investment income. Fund Financial Statements: A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Agency uses fund accounting to ensure and demonstrate compliance with legal requirements. The Agency only has governmental fund types. Governmental funds — All of the Agency's services are reported in governmental funds. These funds are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental funds statements provide a detailed view of the Agency's operations. The governmental funds information helps to determine the amount of financial resources used to finance the Agency's programs. • We describe the differences between government -wide governmental activities (reported in the statement of net assets and the statement of activities) and governmental funds (segregated by major fund) in a reconciliation shown on the page following each of the fund financial statements. This reconciliation identifies the differences between the "modified" accrual basis of accounting and "full" accrual accounting. The major differences include recognition of accrued expenses, capital assets, and long -term debt liabilities, shown in the statement of net assets and statement of activities, which are not shown in the fund financial statements. Notes to the Basic Financial Statements: The notes provide additional information that is essential for a full understanding of the data provided in the government -wide and fund financial statements. 11