COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC.

Transcription

1 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. CONSOLIDATED FINANCIAL STATEMENTS With Independent Auditor's Report Years ended December 31, 2017 and 2016

2 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Years Ended December 31, 2017 and 2016 TABLE OF CONTENTS Independent Auditor's Report 1-2 Consolidated Financial Statements: Consolidated Statements of Financial Position Consolidated Statements of Activities and Changes in Net Assets Consolidated Statements of Functional Expenses Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Audited Supplementary Information: Consolidating Statement of Financial Position Consolidating Statement of Activities Statement of Functional Expenses for Community Partners for Affordable Housing, Inc. - Operations 27

3 & Markusen St:hwina SW Beaverton-Hillsdale Hwy., Suite 350, Beaverton, Oregon phone (503) fax (503) INDEPENDENT AUDITOR'S REPORT June 19, 2018 Board of Directors Community Partners for Affordable Housing, Inc. Tigard, Oregon Report on the Financial Statements We have audited the accompanying consolidated statements of financial position of Community Partners for Affordable Housing, Inc. (CPAH, Inc.), a nonprofit organization, and affiliated entities as of December 31, 2017 and 2016, and the related consolidated statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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. Pagel Certified Public Accountants and Consultants

4 Board of Directors Community Partners for Affordable Housing, Inc. June 19, 2018 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of CPAH, Inc. as of December 31, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matter Report on Supplemental Information Our audits were performed for the purpose of forming an opinion on the consolidated financial statements of CPAH, Inc. and affiliated entities taken as a whole. The accompanying Audited Supplementary Information on pages 24 to 27 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. 711~rJvLc; Markusen & Schwing Page2

5 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. DECEMBER 31, 2017 and 2016 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ASSETS Assets Cash $ 2,080,857 $ 2,021,010 Cash - restricted 2,245,562 2,115,349 Receivables - operating 14,408 21,539 Receivables - grants 96, ,102 Prepaid expenses 38,745 37,067 Tenant security deposits held in trust 209, ,034 Predevelopment costs 795, ,485 Fixed assets - net 39,537,822 40,972,545 Tax credit fees - net 183, ,378 Total Assets $ 45,202,133 $ 46,448,509 LIABILITIES AND NET ASSETS Liabilities Accounts payable $ 67,808 $ 58,715 Accrued liabilities 43,419 46,601 Prepaid rents 7,796 3,393 Refundable security deposits 209, ,034 Mortgages and notes payable 19,245,774 19,521,616 Accrued interest 598, ,035 Total Liabilities 20,173,229 20,434,394 Commitments and Contingencies Net Assets Un restricted Controlling interests 2,815,010 2,419,888 Noncontrolling interests 18,376,219 19,692,667 Tota I Un restricted 21,191,229 22,112,555 Temporarily Restricted - controlling interests 3,837,675 3,901,560 Total Net Assets 25,028,904 26,014,115 Total Liabilities and Net Assets $ 45,202,133 $ 46,448,509 See notes to consolidated financial statements Page3

6 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Years Ended December 31, 2017 and 2016 CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS Unrestricted Net Assets: Support and Revenues Support Grants $ 164,020 $ 124,255 Contributions 25,621 45,220 In-kind donations 1,885 Total Support 189, ,360 Revenues Net rental revenue 3,395,264 3,175,946 Laundry and tenant charges 86,180 86,303 Interest income 6,838 2,172 Special events - net of expenses 85,480 77,700 Other income 1,932 10,652 Total Revenues 3,575,694 3,352,773 Net assets released from restrictions 169,713 55,047 Total Support and Revenues 3,935,048 3,579,180 Expenses Program Services Property operations 2,670,458 2,565,573 Housing education and outreach 107, ,030 Resident services 194, ,142 Housing development 118, ,560 Asset management 153, ,437 Total Program Services 3,243,546 3,096,742 Support Services Management and general 89,433 79,566 Fundraising 22,070 20,184 Total Support Services 111,503 99,750 Total Expenses before depreciation and amortization 3,355,049 3,196,492 Change in Unrestricted Net Assets before depreciation and amortization 579, ,688 Less depreciation and amortization 1,609,220 1,616,682 Change in Unrestricted Net Assets $ (1,029,221) $ (1,233,994) Temporarily Restricted Net Assets: Grants and contributions $ 105,828 $ 157,633 Net assets released from restrictions (169,713} (55,047) Change in Temporarily Restricted Net Assets $ (63,885} $ 102,586 Total Change in Net Assets $ (1,093,106) $ (1,131,408) See notes to consolidated financial statements Page4

7 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Years Ended December 31, 2017 and 2016 CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS - CONTINUED TEMPORARILY UNRESTRICTED RESTRICTED CONTROLLING NONCONTROLLING TOTAL CONTROLLING TOTAL INTERESTS INTERESTS UNRESTRICTED INTERESTS NET ASSETS Net Assets, December 31, 2015 $ 2,859,104 $ 13,852,454 $ 16,711,558 $ 3,798,974 $ 20,510,532 Change in net assets for the year ended December 31, 2016 (439,216) (794,778) (1,233,994) 102,586 (1,131,408) Capital contributions 6,634,991 6,634,991 6,634,991 Net Assets, December 31, ,419,888 19,692,667 22,112,555 3,901,560 26,014,115 Change in net assets for the year ended December 31, ,122 {1,424,343) (1,029,221) (63,885) (1,093,106) Capital contributions 107, , ,895 Net Assets, December 31, 2017 $ 2,815,010 $ 18,376,219 $ 21,191,229 $ 3,837,675 $ 25,028,904 See notes to consolidated financial statements Pages

8 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Year Ended December 31, 2017 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES PROGRAM SERVICES SUPPORT SERVICES HOUSING PROPERTY EDUCATION RESIDENT HOUSING ASSET MANAGEMENT FUND- GRAND OPERATIONS &OUTREACH SERVICES DEVELOPMENT MANAGEMENT TOTAL &GENERAL RAISING TOTAL TOTALS Personnel costs $ 441,986 $ 86,282 $ 116,567 $ 55,659 $ 99,833 $ 800,327 $ 36,434 $ 18,601 $ 55,035 $ 855,362 Professional fees 104, ,553 4,855 15, ,235 43, , ,148 Program supplies 9,784 9,784 9,784 Telephone 31,902 1,593 4, ,872 40, ,131 41,967 Office supplies 21, , ,704 Utilities 492, , , ,065 Bad debt expense 53,789 53,789 53,789 Administrative expenses 32,478 4, ,706 1, ,750 40,456 Insurance 126,593 1,597 2, , , , ,143 Maintenance and repairs 531, , , , ,021 Property management fee 183,073 7, , ,188 Real property taxes 5,357 5,649 11,006 11,006 Miscellaneous 11,023 5,605 2,102 3,067 5,931 27,728 1, ,984 29,712 Mortgage interest 603,748 4,978 9,006 47,039 8, ,122 3,314 1,197 4, ,633 Fees - Limited Partners 21,007 21,007 21,007 Monitorin~ fees - LIHTC 15,064 15,064 15,064 Functional Expenses before deereciation and amortization 2,670, , , , ,542 3,243,546 89,433 22, ,503 3,355,049 Depreciation 1,497,208 6,052 10,965 3,183 65,615 1,583,023 2,362 1,569 3,931 1,586,954 Amortization 22,266 22,266 22,266 Total Deereciation and Amortization 1,519,474 6,052 10,965 3,183 65,615 1,605,289 2,362 1,569 3,931 1,609,220 Functional Expenses before fundraising event expenses 4,189, , , , ,157 4,848,835 91,795 23, ,434 4,964,269 Fundraising event exeenses 21,277 21,277 21,277 Total Expenses $ 4,189,932 $ 113,142 $ 205,163 $ 121,441 $ 219,157 $ 4,848,835 $ 91,795 $ 44,916 $ 136,711 $ 4,985,546 See notes to consolidated financial statements Page6

9 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Year Ended December 31, 2016 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES PROGRAM SERVICES SUPPORT SERVICES HOUSING PROPERTY EDUCATION RESIDENT HOUSING ASSET MANAGEMENT FUND- GRAND OPERATIONS &OUTREACH SERVICES DEVELOPMENT MANAGEMENT TOTAL &GENERAL RAISING TOTAL TOTALS Personnel costs $ 411,617 $ 92,475 $ 110,793 $ 95,516 $ 86,708 $ 797,109 $ 36,606 $ 16,646 $ 53,252 $ 850,361 Professional fees 105, ,296 4,363 11, ,539 35, , ,454 Program supplies 25,980 25,980 25,980 Telephone 36,325 1,626 2,555 1,316 1,724 43, ,475 Office supplies 26, , ,062 Utilities 450, , ,472 Bad debt expense 78,660 78,660 78,660 Administrative expenses 32,637 2, , ,882 37,354 Insurance 97,673 1,418 2,254 1,200 1, , ,737 Maintenance and repairs 433, , so 433,648 Property management fee 176, , ,010 Real property taxes 8,246 6,583 14,829 14,829 Miscellaneous 7,824 7,821 3,499 1,217 4,273 24,634 2, ,450 28,084 Mortgage interest 660,864 5,341 8,473 36,616 5, ,950 1, , ,780 Fees - limited Partners 23,488 23,488 23,488 Monitoring fees- LIHTC 17,098 17,098 17,098 Functional Expenses before deereciation and amortization 2,565, , , , ,437 3,096,742 79,566 20,184 99,750 3,196,492 Depreciation 1,513,740 6,644 10,542 5,605 53,817 1,590,348 2,252 1,817 4,069 1,594,417 Amortization 22,265 22,265 22,265 Total Deereciation and Amortization 1,536,005 6,644 10,542 5,605 53,817 1,612,613 2,252 1,817 4,069 1,616,682 Functional Expenses before fund raising event expenses 4,101, , , , ,254 4,709,355 81,818 22, ,819 4,813,174 Fundraising event exeenses ,261 21,261 21,371 Total Expenses $ 4,101,578 $ 119,784 $ 168,684 $ 153,165 $ 166,254 $ 4,709,465 $ 81,818 $ 43,262 $ 125,080 $ 4,834,545 See notes to consolidated financial statements Pagel

10 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Years Ended December 31, 2017 and 2016 CONSOLIDATED STATEMENTS OF CASH FLOWS Cash Flows From Operating Activities Change in net assets $ (1,093,106) $ (1,131,408) Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation and amortization 1,609,220 1,616,682 Interest-amortized debt issuance costs 50,635 57,010 (Increase) decrease in Receivables 24,982 (27,420) Prepaid expenses (1,678) (2,039) Tenant security deposits held in trust (5,781) (7,140) Increase (decrease) in Accounts payable 9,093 (57,697) Accrued liabilities (3,182) 2,925 Accrued interest (1,418) 46,187 Prepaid rents 4,403 (14,233} Refundable security deposits 5,781 8,086 Net Cash Provided by Operating Activities 598, ,953 Cash Flows From Investing Activities (Increase) decrease in cash - restricted (130,213) (490,977) (Increase) decrease in predeveloment costs (38,076) (741,930) Purchases of fixed assets (152,231) (140,326) Decrease in accounts payable related to purchases of fixed assets (1,121,959) Net Cash Used by Investing Activities (320,520) (2,495,192) Cash Flows From Financing Activities Proceeds from mortgages and notes payable borrowings 40,521 2,350,877 Principal payments of mortgages and notes payable (365,948} (6,807,635) Financing fees paid (1,050) (178,500} Capital contributions 107,895 6,634,991 Net Cash Provided (Used) by Financing Activities (218,582) 1,999,733 Net Change in Cash 59,847 (4,506) Cash at Beginning of Year 2,021,010 2,025,516 Cash at End of Vear $ 2,080,857 $ 2,021,010 Supplemental Cash Flows Disclosures Cash paid for interest charged to expense $ 747,581 $ 669,722 See notes to consolidated financial statements PageB

11 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (1) The Organization and Nature of Activities Community Partners for Affordable Housing, Inc. (CPAH} is a nonprofit Corporation, incorporated under the laws of the State of Oregon. CPAH is focused on the development of permanent affordable housing for low-income individuals, families and seniors in Washington and Multnomah Counties. CPAH also supports CPAH residents with housing services, community building, and skill building activities to promote housing and life success. Property Operations: CPAH and Affiliates own 372 units of affordable rental housing in eight multi-family communities, and four single family homes, provided to households below specified income limits. Housing Education and Outreach: CPAH provides information to the community related to the role affordable housing plays in building and maintaining vibrant and resilient communities. CPAH also provides opportunities for volunteers to connect with CPAH projects and programs. Resident Services: In order to support CPAH residents, CPAH provides skill building and support programs, assists residents in maintaining their housing, and partners with a variety of community service providers. Housing Development: CPAH is committed to adding affordable housing units in the communities it serves. In 2015, CPAH completed the rehabilitation of Metzger Park Apartments (32 units} and the construction of The Barcelona at Beaverton Apartments (47 units). CPAH began pre-development work in 2015 on the Red Rock Creek Commons and Cedar Grove projects, which continued through Asset Management: CPAH provides asset management for the 372 units in its portfolio, ensuring fiscal and physical compliance and a high quality of life for its residents. CPAH owns a general partnership interest in each of five Limited Partnerships with a total of 262 units. These partnerships own and operate low-income housing facilities developed and managed by CPAH. The Limited Partnership companies have been included in the accompanying consolidated financial statements. CPAH is affiliated with two single asset not-for-profit Corporations with a total of 80 units. These corporations own and operate low-income housing facilities managed by CPAH. The Single Asset not-for-profit Corporations have been included in the accompanying consolidated financial statements. Page9

12 (1) The Organization and Nature of Activities - continued In addition, CPAH owns The Village at Washington Square Apartments {26 units), four single-family low-income rental homes, and its own office space. Tax Credit Entities Tax Credit Entities include five limited partnerships in which CPAH or a single member LLC formed by CPAH as the general partner hold controlling general partner interests (ranging from 0.01% to 0.1%). In accordance with accounting principles generally accepted in the United States of America, the Limited Partnerships have been included in the consolidated financial statements because CPAH, as the general partner, is deemed to control the Limited Partnerships. The Tax Credit Entities are as follows: Villa La Paz Limited Partnership Oleson Woods Limited Partnership Bertha Senior Housing Limited Partnership The Knoll at Tigard Limited Partnership The Barcelona at Beaverton Limited Partnership CPAH has the option to purchase 100% of the ownership interest in each of the Limited Partnerships at the end of their respective 15-year compliance periods. Single Asset HUD Projects Single Asset Housing and Urban Development (HUD) Projects include two not-for-profit corporations, each of which owns a HUD Sections 220 and 236 multi-family housing complex designed to serve low-income persons, with a total of 80 units. CPAH was approved as the HUD-designated "Project Sponsor." These other entities have been included in the consolidated financial statements of CPAH because CPAH is deemed to control these entities through common board members. These entities are as follows: Metzger Park Apartments, Inc. Preserve Spencer House, Inc. (2) Summarv of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of CPAH and its single member LLCs, Tax Credit Entities and Single Asset HUD Projects that are controlled by CPAH. The limited partnership interests generally range from 0.01% to 0.1% with the remainder of the partnership's equity generally held by a limited partner and shown as non-controlling interest in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Tax Credit Entities and the Single Asset HUD Projects included in the consolidated financial statements are collectively referred to as "Affiliated Entities" in these financial statements. Page 10

13 (2) Summary of Significant Accounting Policies - continued Non-controlling Interests The amounts shown as non-controlling interests represent the aggregate balance of limited partner equity interests in the non-wholly owned limited partnerships that are included in the consolidated financial statements. Basis of Presentation In accordance with accounting principles generally accepted in the United States of America for not-for-profit organizations, the consolidated financial statements are presented on the basis of unrestricted, temporarily restricted and permanently restricted net assets predicated on the existence of donor-imposed restrictions. Unrestricted net assets consist of all resources of CPAH which have not been specifically restricted by a donor. Temporarily restricted net assets consist of cash and other assets received with donor stipulations that limit their use. Donor restrictions are stipulated by either a time restriction or a purpose restriction. Upon expiration of a time restriction or completion of a purpose restriction, temporarily restricted net assets are reclassified to unrestricted net assets. Permanently restricted net assets consist of assets whose use has been restricted for investment in perpetuity. CPAH has no permanently restricted net assets. Revenue Recognition Rental Income Rental income, principally short-term leases on apartment units and commercial space, is recognized as the rentals become due. Grants and Contributions CPAH receives grants and contributions from private foundations and government sources. Government grants, which generally reflect cost reimbursement agreements, are recognized when earned. Contributions, which include unconditional promises to give, are recorded as revenue at estimated net realizable value in the period CPAH is notified of the commitment. Conditional promises to give are not included as revenue until the conditions are substantially met. At December 31, 2017 and 2016, CPAH had no conditional promises to give. Grants and contributions whose restrictions, if any, are met in the same reporting period are reported as unrestricted revenue in the period of receipt. Page 11

14 (2) Summary of Significant Accounting Policies - continued Revenue Recognition - continued Development Fees CPAH earns fees for development of properties and generally recognizes development fees as earned over the period of development. Development fees earned by CPAH, which are included in development costs of consolidated low-income housing projects, have been eliminated in consolidation. CPAH provides asset management and tenant services directly to the Affiliated Entities. Income is earned in accordance with the terms of the agreements and recorded as revenue when earned. Such intercompany revenue has been eliminated in the consolidated financial statements. Donated Goods and Services Donated goods and services are recorded as support at their estimated fair value at the date of donation. Such donations are reported as unrestricted support unless the donor has restricted the use of donated goods to a specific purpose. CPAH recognizes donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. No amounts have been reflected in the statements for donated services by the Board members involved in Board activities or from unpaid volunteers unless the criteria for recognition has been met. Functional Expenses The costs of providing program services and supporting services have been summarized on a functional basis in the statement of activities and changes in net assets. Accordingly, certain costs have been allocated among the program services and supporting services based on an allocation of employees' time incurred and on usage of resources. Costs allocated to the property operations and other program services include an allocation of operating costs of CPAH and all of the expenses of the Affiliated Entities that have been included in the consolidated financial statements. Amounts allocated to support services represent allocations of the operating costs of CPAH. The 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Page 12

15 (2) Summary of Significant Accounting Policies - continued Fixed Assets Fixed assets are recorded at cost. Depreciation is computed on the straight-line and accelerated methods over the estimated useful lives of the related assets, which are as follows: 27.5 to 45 years for buildings, 15 years for site and land improvements and 5 to 15 years for furnishings. and equipment. Maintenance, repairs and minor replacements are charged to expense when incurred. Major replacements and betterments in excess of $1,000 are capitalized. Management reviews fixed assets for financial impairment and will continue to evaluate assets if events or circumstances indicate the carrying amount of an asset may not be fully recoverable. Management believes there was no impairment of assets at December 31, 2017 and Predevelopment Costs Predevelopment costs in the amount of $795,561 and $757,485 related to the Red Rock Creek Commons and Cedar Grove projects, are capitalized in the accompanying Consolidated Statement of Financial Position as of December 31, 2017 and 2016, respectively. The projects are intended to be structured as tax credit limited partnerships. Cash and Equivalents Cash and cash equivalents include cash-on-hand, cash deposited with banks and financial institutions and money market funds with maturities of three months or less. Cash equivalents are recorded at cost, which approximates market value. Receivables and Bad Debts Receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review of the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. Tax Credit Fees Certain of the Tax Credit Entities have received an allocation of Low-Income Housing Tax Credits ("LIHTC") for their. qualifying rental property. The benefits of the LIHTC are provided to the Tax Credit Entities' owners through the Tax Credit Entities' annual federal income tax return filing and are not reflected in the accompanying consolidated financial statements. Page 13

16 (2) Summary of Significant Accounting Policies - continued Tax Credit Fees-continued The LIHTC is a 15-year credit that is generally claimed by the Tax Credit Entities over a 10- year period. The credit is a certain percentage (as determined by the Internal Revenue Service) of the qualified basis of the property. The Tax Credit Entities may only lease qualified units to tenants who meet certain income restrictions and whose rent payments also are restricted under guidelines set by the Internal Revenue Service. Tax Credit Fees are recorded at cost and are amortized over a 15-year period. Accumulated amortization was $150,883 and $128,617 at December 31, 2017 and 2016, respectively. Amortization expense was $22,266 and $22,265 for the years ended December 31, 2017 and 2016, respectively. Cash - Restricted Restricted deposits at December 31 include the following: Operating reserves $ 843,883 $ 843,130 Replacement reserves 1,043, ,081 Residual receipts reserve 91,304 91,264 Mortgage escrow deposits 156, ,874 Other reserves 110, ,000 $ s 2,115,349 Operating reserves are required by certain limited partnership agreements. Such funds are available to pay operating expenses to the extent that collected gross revenues are insufficient for such purposes. Withdrawals from operating reserves generally require the approval and consent of the Investor Limited Partner. Replacement reserves are required by various loan and regulatory agreements and are to be used for the replacement or repair of capital assets. Residual receipts reserve is the accumulation of surplus cash, which is calculated annually and transferred to the account after the year end for the two single asset HUD projects. Disbursements from the reserve require approval of HUD. Mortgage escrow deposits, sufficient to pay annual property taxes and insurance when due, are required by certain loan and regulatory agreements. Other reserves include funds set aside by tax credit entities in anticipation of required future secondary debt payments and also for any potential revenue deficits. Page 14

17 (2) Summarv of Significant Accounting Policies - continued Concentration of Credit Risk CPAH and Affiliated Entities maintain cash balances with banks and other financial institutions, which may exceed federal depository insurance limits. CPAH and Affiliated Entities have not experienced any losses from these accounts and do not believe that they are exposed to significant credit risk. Fair Value of Financial Instruments Generally accepted accounting principles require disclosure of fair value information about financial instruments when it is practicable to estimate that value. The operations generated by the investment in real estate are subject to various government rules, regulations, and restrictions which make it impracticable to estimate the fair value of the notes payable and related accrued interest. The carrying amount of other assets and liabilities reported on the statement of financial position that requires such disclosure approximates fair value. The Financial Accounting Standards Board (FASB) Accounting Standards Codification established a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 - Valuation is based upon quoted prices (unadjusted} for identical assets or liabilities in active markets. Level 2 - Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 - Valuation is based upon other unobservable inputs that are significant to the fair value measurement. The carrying amounts for cash, receivables, prepaid expenses, restricted cash, accounts payable and other accrued liabilities approximate their fair value due to their short maturities. It is impractical to estimate the fair value of financing fees, tax credit fees, and mortgages and notes payable because there are no quoted market prices for transactions that are similar in nature. Federal and State Taxes No provision for income taxes has been provided because CPAH is exempt from paying income taxes under Internal Revenue Code 501(c)(3) and is not classified as a private foundation. The income or loss from Limited Partnerships is reported by the partners on their income tax returns. Page 15

18 (2) Summary of Significant Accounting Policies - continued Federal and State Taxes - continued It is management's opinion that none of CPAH's present activities are subject to unrelated business income taxes; therefore, no provision for income taxes has been made in the accompanying consolidated financial statements. CPAH and its affiliates file returns in the U.S. federal jurisdiction as well as the state of Oregon jurisdiction. Generally, tax filings are subject to federal and state examination for three years after they are filed. The returns filed for periods prior to December 31, 2014 are considered closed and management believes those returns are no longer subject to income tax examination. In the event penalties and interest are assessed by income taxing authorities, it is CPAH's policy to include these in operating expenses. No penalties and interest were assessed for the years ended December 31, 2017 and Accounting principles generally accepted in the United States of America require organization's management to evaluate tax positions taken by the organization and recognize a tax liability (or asset) if the tax payer has taken an uncertain position that, more likely than not, would not be sustained upon examination by the Internal Revenue Service. Management has analyzed the tax positions taken and has concluded that as of December 31, 2017 and 2016, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. Compensated Absences Compensated absences for vacation pay are charged to expense when earned by the employee. Advertising Expenses Advertising costs are charged to expense as they are incurred. Page 16

19 (3) Receivables - Grants and Conditional Promise to Give Grant receivables at December 31, 2017 and 2016 consist of the following: 2017 Washington County Community Development Block Grant $ 23,662 Community Housing Development Organization 29,923 City of Beaverton Community Development Block Grant 7,414 Metro Nature in Neighborhoods Grant Meyer Memorial Trust Resident Services Grant Enterprise Community Partners Housing Stability Eviction Programming Grant 35,252 Genentech Foundation Housing and onsite Social Services Grant s $ 17, ,350 6,077 23,978 45, s (4) Fixed Assets Fixed assets at December 31, 2017 and 2016 consist of the following: Land and improvements Site improvements Building and improvements Furnishings and equipment Total fixed assets Less accumulated depreciation Fixed assets - net (5) Mortgages and Notes Payable 2017 $ 3,367,633 2,911,267 47,703,225 1A ,440, s 39,537! $ 3,362,573 2,887,937 47,593,046 1A ,288, s 40, Mortgages and notes payable at December 31, 2017 and 2016 consist of the following: Washington County Mortgages payable generally out of project cash flow, interest ranging from 0% to 3%, maturing $ 6,052,561 $ 6,052,561 Oregon Housing and Community Services Mortgages payable in aggregate monthly installments of $21,874, interest ranging from 0% to 6.0%, maturing ,657,697 3,792,595 Page 17

20 (5) Mortgages and Notes Pa~able - continued Network for Oregon Affordable Housing Mortgages payable in monthly installments of $12, 718, interest ranging from 3.5% to 4.6%, maturing 2036 Walker & Dunlop Mortgage payable in monthly installments of $8,276, interest 3.95%, maturing 2053 Banner Bank Mortgages payable in aggregate monthly installments of $7,048, interest ranging from 3.25% to 4.5%, maturing PNC Bank, N.A. Mortgage payable in monthly installments of $9,989, interest 7.31%, maturing 2038 Portland Housing Bureau Mortgage payable out of project cash flow, interest 0.5%, maturing 2058 Umpqua Bank Mortgage payable in monthly installments of $3,626, interest 4.5%, maturing 2026 US National Bank Mortgage payable in monthly installments of $4,759, interest 3. 76%, maturing 2023 Bank of the West Mortgages payable in aggregate monthly installments of $3,314, interest 4.94%, maturing 2022 Enterprise Community Loan Fund Note payable, interest 5.75%, maturing 2019, unsecured Community Housing Fund Notes payable, interest ranging from 3% to 4.5%, maturing , unsecured Less: unamortized debt issuance costs ,166,896 2,233,381 1,906,287 1,929,794 1,369,988 1,408,697 1,273,868 1,299, , , , , , , , , , , ,079 62,558 19, 734, ,060, , ,582 $ $ Page 18

21 (5) Mortgages and Notes Payable - continued Debt issuance costs are being amortized to interest expense over the term of the loan. Amortization expense for debt issuance costs during 2017 and 2016 was $50,635 and $57,010, respectively. The above mortgages and notes payable are substantially collateralized by investments in real estate. A summary of mortgages and notes payable by group of entities at December 31, 2017 and 2016 is as follows: CPAH $ 2,201,341 $ 1,079,013 Tax Credit Entities 14,111,852 15,518,930 Single Asset HUD Projects 3.421,523 3, $ $ Annual maturities of mortgages and notes payable less unamortized debt issuance costs for years subsequent to December 31, 2017 are as follows: Year ending December 31, Thereafter $ 453, , , , ,840 16,430,431 $ (6) Temporarily Restricted Net Assets Temporarily restricted net assets at December 31, 2017 and 2016 consist of the following: Section 220 Preservation Grants Restricted for use by HUD Neighborhood Stabilization Program Restricted for use by HUD Oregon Housing and Community Services Restricted for use by OHCS Housing Development Program Grant Low-Income Weatherization Program Housing Preservation Fund Other donor-restricted grants $ 2,012, 750 $ 2,012, , , , , , , , , s 3,837,675 s 3,901,560 Page 19

22 {6} Temporarily Restricted Net Assets - continued The HUD Preservation Grants were used for the purchase and rehabilitation of HUD entity projects and are not required to be repaid as long as the housing remains available to eligible very low-income households for the remaining useful life of the projects. The Neighborhood Stabilization Grants were utilized for the purchase of three single-family houses and are not required to be repaid as long as the housing remains available to eligible very low-income households for a period of 20 years. The Oregon Housing and Community Services grants were utilized for significant renovation of a HUD entity project. The project is not required to repay these grants as long as the housing remains available to eligible very low-income households for a period of 60 years. {7} Commitments and Contingencies Lease Commitment The Barcelona at Beaverton project leases land and parking under the terms of a noncancellable operating lease. The term of the lease is seventy-five years beginning October 2014 and ending October There is an option to extend for an additional twenty-four years. The lease calls for annual payments of $30. If at any time the land ceases to be used as multifamily housing, primarily for persons of lower income, the minimum rent shall increase to $12,000 per year in 2015 dollars adjusted annually to reflect changes in the Portland consumer price index, increasing 3% per year for the remainder of the lease term. Grant and Property Use Restrictions Certain of the properties operated by CPAH and Affiliated Entities were developed using funds provided by grants and low-interest rate loans. The terms of these grants and loans restrict the use of the property and generally require the property to be rented to lowincome qualified tenants for the period of the grant or related loan term. Failure to comply with the terms of the grants or the loans may result in a requirement to repay a portion or all of the proceeds received. Rental Assistance Contracts Certain of the properties have entered into rental assistance contracts with HUD. The rental assistance contracts require that the property be operated as low-income housing and that any rent increases be approved by HUD. Page 20

23 (7) Commitments and Contingencies - continued As the general partner in various Limited Partnerships, CPAH may be subject to other liabilities should an affected partnership's assets become insufficient to meet its obligations. This includes guarantees to fund future operating deficits of certain Tax Credit Entities over the periods as defined under the limited partnership agreements. The operating deficit guarantee periods typically require the Limited Partnerships to meet certain conditions based on the operational results. CPAH has generally not been required to fund any amounts associated with the operating deficit guarantees to date. (8) Property Tax Exemption Most of the affiliates' low-income housing projects have been granted exemption from real property taxes. Property tax exemptions are generally granted annually and there is no assurance the exemption will continue in future years. The savings from the property tax exemptions has not been determined. In the opinion of management, the projects should continue to be granted exemption from real property taxes. (9) Current Vulnerability Due To Certain Concentrations CPAH's operations are concentrated in the multifamily real estate market. In addition, the projects operate in a heavily regulated environment. The operations of the projects are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to, HUD. Such administrative directives, rules and regulations are subject to change by an act of Congress or an administrative change. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change. (10) Retirement Plan CPAH established a 403(b) retirement plan covering substantially all employees. Under the plan, CPAH's employees can elect to defer compensation up to limits established by the Internal Revenue Code. CPAH contributes 5% of an employee's salary to the plan. Contributions made by CPAH amounted to $15,886 and $16,961 during the years ended December 31, 2017 and 2016, respectively. (11) Tax Credit Entity Termination On January 1, 2017 the Limited Partner entered into an agreement to sell 100% of its Limited Partnership interest in Village at Washington Square Limited Partnership to CPAH Village at Washington Square LLC for $1, of which Community Partners for Affordable Housing, Inc. is the sole member. The sale took place January 1, 2017 at which time, the Village at Washington Square Limited Partnership was terminated, and the assets and liabilities were merged into CPAH at book value. Page 21

24 {12) Red Rock Creek Commons Funding On June 7, 2018 CPAH was awarded $2,160,000 in LIFT bond funds from Oregon Housing and Community Services to support the development of the Red Rock Creek Commons project. Construction of the project is planned to commence in early {13) Subsequent Events Management of CPAH has evaluated events and transactions occurring after December 31, 2017 through June 19, 2018, the date the consolidated financial statements were available for issuance, for potential recognition or disclosure in the consolidated financial statements and has concluded that, except for the matter disclosed in Note 12, no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements. Page 22

25 AUDITED SU PPLEMENTARV INFORMATION

26 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Decernber31,2017 CONSOLIDATING STATEMENT OF FINANCIAL POSITION TAX CREDIT SINGLE ASSET ASSETS CPAH ENTITIES HUD PROJECTS ELIMINATIONS CONSOLIDATED Cash $ 1,266,003 $ 799,986 $ 14,868 $ $ 2,080,857 Cash - restricted 122,785 1,681, ,018 2,245,562 Receivables - operating 1,493 8,980 3,935 14,408 Receivables - grants 96,251 96,251 Prepaid expenses 11,421 16,308 11,016 38,745 Tenant security deposits 22, ,604 32, ,815 Predeveloprnent costs 795, ,561 Tax credit fees - net 183, ,112 Receivables from affiliates 1,994,676 (1,994,676} Investments in affiliates 1,404,909 (1,404,909) Subtotal 5,715,271 2,845, ,876 (3,399,585) 5,664,311 Fixed assets Land and improvements 739,859 2,524, ,603 (220,000) 3,367,633 Site improvements 700,044 1,936, ,458 2,911,267 Buildings and improvements 4,020,870 39,282,572 8,434,081 (4,034,298) 47,703,225 Furnishings and equipment 149,001 1,103, ,941 1,458,374 Total fixed assets 5,609,774 44,846,940 9,238,083 (4,254,298) 55,440,499 Less accumulated depreciation 2,236,593 12,410,472 2,214,184 (958,572) 15,902,677 Fixed assets - net 3,373,181 32,436,468 7,023,899 (3,295, 726} 39,537,822 Total Assets $ 9,088,452 $ 35,282,217 $ 7,526,775 $ (6,695,311) $ 45,202,133 Page24

27 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. December 31, 2017 CONSOLIDATING STATEMENT OF FINANCIAL POSITION - CONTINUED LIABILITIES TAX CREDIT SINGLE ASSET AND NET ASSETS CPAH ENTITIES HUD PROJECTS ELIMINATIONS CONSOLIDATED Liabilities Accounts payable $ 16,870 $ 33,654 $ 17,284 $ $ 67,808 Accrued liabilities 21,412 21,007 1,000 43,419 Prepaid rents 4,423 3,373 7,796 Refundable security deposits 22, ,604 32, ,815 Mortgages and notes payable 2,142,391 13,831,289 3,272,094 19,245,774 Accrued interest 110, ,647 67, ,617 Deferred revenue 220,000 (220,000) Payables to affiliates 1,993,121 1,555 (1,994,676) Total Liabilities 2,533,524 16,459,745 3,394,636 (2,214,676) 20,173,229 Net Assets Unrestricted Controlling interests 6,061,782 1,404, ,610 {5,439,207) 2,815,010 Noncontrolling interests 17,417, ,572 18,376,219 Total Unrestricted 6,061,782 18,822, ,610 (4,480,635) 21,191,229 Temporarily restricted - controlling 493,146 3,344,529 3,837,675 Total Net Assets 6,554,928 18,822,472 4,132,139 (4,480,635) 25,028,904 Total Liabilities and Net Assets $ 9,088,452 $ 35,282,217 $ 7,526,775 $ (6,695,311) $ 45,202,133 Page 25

28 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. Year Ended December 31, 2017 CONSOLIDATING STATEMENT OF ACTIVITIES Support and Revenues TAX CREDIT SINGLE ASSET CPAH ENTITIES HUD PROJECTS ELIMINATIONS CONSOLIDATED Support Grants $ 269,848 $ $ $ $ 269,848 Contributions 25,621 25,621 Total Support 295, ,469 Revenues Net rental revenue 275,276 2,511, ,481 3,395,264 Laundry and tenant charges 76,803 9,377 86,180 Fees and losses - affiliates 135,605 (135,605) Interest income 5,277 1, ,838 Interest income - affiliates 73,295 (73,295) Special events - net 85,480 85,480 Other revenue 81 1,851 1,932 Total Revenues 575,014 2,589, ,878 (208,900) 3,575,694 Total Support and Revenues 870,483 2,589, ,878 (208,900) 3,871,163 Expenses Personnel costs 440, ,183 88, ,362 Professional fees 124,119 71,889 20, ,148 Program supplies 9,784 9,784 Telephone 12,556 25,760 3,651 41,967 Office supplies 2,148 13,371 7,185 22,704 Utilities 40, ,663 88, ,065 Bad debt expense 25,997 27,792 53,789 Administrative expenses 15,593 15,527 9,336 40,456 Insurance 15,605 82,578 37, ,143 Maintenance and repairs 49, , , ,021 Property management fee 18, ,995 38, ,188 Real property taxes 11,006 11,006 Miscellaneous 18,851 6,682 4,179 29,712 Mortgage interest 117, , , ,633 Interest expense - affiliates 73,295 (73,295) Fees - affiliates 67,175 12,440 (79,615) Fees - Limited Partners 21,007 21,007 Monitoring fees - LIHTC 15,064 15,064 Total Expenses before depreciation and amortization 876,810 2,024, ,817 (152,910) 3,355,049 Change in Net Assets before depreciation and amortization (6,327) 565,370 13,061 (55,990) 516,114 Depreciation and Amortization Depreciation 182,915 1,304, ,267 (119,354) 1,586,954 Amortization 22,266 22,266 Total Depreciation and Amortization 182,915 1,326, ,267 (119,354) 1,609,220 Change in Net Assets $ (189,242) $ (761,022) $ (206,206) $. 63,364 $ (l,093,106) Page26

29 COMMUNITY PARTNERS FOR AFFORDABLE HOUSING, INC. - Operations Year Ended December 31, 2017 STATEMENT OF FUNCTIONAL EXPENSES PROGRAM SERVICES HOUSING PROPERTY EDUCATION RESIDENT HOUSING ASSET MANAGEMENT OPERATIONS &OUTREACH SERVICES DEVELOPMENT MANAGEMENT TOTAL &GENERAL SUPPORT SERVICES FUND- GRAND RAISING TOTAL TOTALS Personnel costs $ Professional fees Program supplies Telephone Office supplies Utilities Administrative expenses Insurance Maintenance and repairs Property management fee Real property taxes Miscellaneous Mortgage interest 27,243 $ 86,282 $ 116,567 $ 55,659 $ 99,833 $ 385,584 $ 36,434 12, ,553 4,855 15,668 80,206 43,751 9,784 9,784 2,491 1,593 4, ,872 11, , , , , ,615 4, ,843 1,767 6,055 1,597 2, ,237 14, , , ,655 49, ,593 7,115 18,708 5,357 5,649 11, ,605 2,102 3,067 5,931 16,867 1,844 43,837 4,978 9,006 47,039 8, ,211 3,314 $ 18,601 $ 55,035 $ 440, , ,119 9, ,131 12, , , ,750 15, ,008 15, ,899 18,708 11, ,984 18,851 1,197 4, ,722 Functional Expenses before depreciation Depreciation Totals before fundraising event expenses Fundraising event expenses 192, , , , , ,307 89,433 93,169 6,052 10,965 3,183 65, ,984 2, , , , , , ,291 91,795 22, , ,810 1,569 3, ,915 23, ,434 1,059,725 21,277 21,277 21,277 Total Expenses 285, , , , , ,291 91,795 44, ,711 1,081,002 Percentage of 2017 Grand Totals 26.4% 10.5% 19.0% 11.2% 20.3% 87.4% 8.5% 4.2% 12.6% 100.0% Page27