WEST PALM BEACH HOUSING AUTHORITY FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED MARCH 31, 2016

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1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED MARCH 31, 2016

2 TABLE OF CONTENTS YEAR ENDED MARCH 31, 2016 INDEPENDENT AUDITORS REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS 4 FINANCIAL STATEMENTS STATEMENT OF NET POSITION 10 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION 12 STATEMENT OF CASH FLOWS 13 NOTES TO FINANCIAL STATEMENTS 15 SUPPLEMENTARY INFORMATION FINANCIAL DATA SCHEDULE SCHEDULE OF NET POSITION 35 FINANCIAL DATA SCHEDULE SCHEDULE OF REVENUE, EXPENSES, AND CHANGES IN NET POSITION 37 SCHEDULE OF GRANT STATUS CAPITAL FUND CLUSTER 39 SUPPLEMENTARY REPORTS INDEPENDENT AUDITORS 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 40 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE 42 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 44 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 45 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 46

3 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of Commissioners West Palm Beach Housing Authority West Palm Beach, Florida Report on the Financial Statements We have audited the accompanying financial statements of the West Palm Beach Housing Authority (the Authority), which consist of the statement of net position as of March 31, 2016, and the related statements of revenues, expenses and changes in net position, and cash flows for the year then ended, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audit contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. (1)

4 Board of Commissioners West Palm Beach Housing Authority Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority as of March 31, 2016, and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management s discussion and analysis on pages 4 through 9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority s basic financial statements. The accompanying supplementary financial data schedules are presented for purposes of additional analysis as required by the U.S. Department of Housing and Urban Development and are not a required part of the financial statements. The schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), is also presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary financial data schedules, schedule of grant status and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary financial data schedules, schedule of grant status and the schedule of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. (2)

5 Board of Commissioners West Palm Beach Housing Authority Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2016, on our consideration of West Palm Beach Housing Authority s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 result 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 West Palm Beach Housing Authority s internal control over financial reporting and compliance. CliftonLarsonAllen LLP Lakeland, Florida December 14, 2016 (3)

6 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED MARCH 31, 2016 As Management of the West Palm Beach Housing Authority (the Authority), we offer the readers of the Authority s financial statements this narrative overview and analysis of the financial activities of the Authority for the year ended March 31, We encourage readers to consider the information presented here in conjunction with the Authority s financial statements. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Executive Director, West Palm Beach Housing Authority, 1715 Division Ave, West Palm Beach, FL FINANCIAL HIGHLIGHTS The Authority s total net position as of March 31, 2015 was $22,917,265 as compared to total net position of $27,083,127 at March 31, This represents an increase from the prior year of $4,165,862. During the year, the Authority s operating expenses were $40,336,044 which is less than the $42,082,614, generated in subsidy, grant, rental, and miscellaneous operating revenues resulting in a net operating income of $1,746,570. The previous year s operating expenses of $40,839,812 were more than operating revenues of $40,432,500 resulting in an operating loss of $407,312. OVERVIEW OF FINANCIAL STATEMENTS The financial statements included in this annual report are those of a government engaged in a business-type activity. The following statements are included: Statement of Net Position reports the Authority s assets and liabilities at the end of the year and provides information about the nature and amounts of investment of resources and obligations to creditors. Statement of Revenue, Expenses, and Change in Net Position report the results of activity over the course of the year. It details the costs associated with operating the Authority and how those costs were funded. It also provides an explanation of the change in net position from the previous operating period to the current operating period. Statement of Cash Flows reports the Authority s cash flows in and out from operating, noncapital financing, capital related financing and investing activities. It details the sources of the Authority s cash, what it was used for, and the change in cash over the course of the operating year. The notes to the financial statements explain some of the information in the financial statements and provide more detailed data. The statements are followed by supplementary information that presents the Authority s electronic data submitted to HUD s Real Estate Assessment Center, schedule of grant status and schedule of expenditures of federal awards. The attached analysis of net position, revenue, and expenses are detailed and provide a comprehensive portrayal of financial conditions and related trends. The analysis includes all assets and liabilities using the accrual basis of accounting. Our analysis of the Authority as a whole begins on the next page. (4)

7 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED MARCH 31, 2016 OVERVIEW OF FINANCIAL STATEMENTS (CONTINUED) Accrual accounting is similar to the accounting used by most private sector companies. Accrual accounting recognizes revenue when earned and expenses when incurred regardless of when cash is received or paid. Our analysis presents the Authority s net position, which can be thought of as the difference between what the Authority owns (assets) to what the Authority owes (liabilities). The net position analysis will allow the reader to measure the health or financial position of the Authority. Over time, significant changes in the Authority s net position are an indicator of whether its financial health is improving or deteriorating. To fully assess the financial health of any Authority, the reader must also consider other non-financial factors such as changes in family composition, fluctuations in the local economy, HUD mandated program administrative changes, and the physical condition of the Authority s capital assets. At March 31, 2016, total assets were $39,952,248; current assets were $8,862,569; net capital assets were $28,222,315 and other non-current assets of $2,867,364, which consists largely of a $1,121,000 note receivable from a related party MerryPlace at Pleasant City Associates, LTD., a low-income housing tax credit development. In addition, total liabilities were $12,869,121; total current liabilities were $3,220,134 and total long-term (non-current) liabilities were $9,648,987, consisting largely of $8,965,883 in long-term debt (net of the current portion, $1,967,183). Net Position The difference between an organization s assets and its liabilities equals its net position. There are three categories in which to classify net position and they are the following: Investment in Capital Assets Capital assets, net of accumulated depreciation and reduced by debt attributable to the acquisition of those assets; Restricted Net position whose use is subject to constraints imposed by law or agreement; Unrestricted Net position that is not invested in capital assets or subject to restrictions. Our analysis of the Authority as a whole begins on the next page. The most important question asked about the Authority s finances is, Is the Authority, as a whole, better or worse off as a result of the year s activities? (5)

8 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED MARCH 31, 2016 FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of the Authority s financial position. In the case of the Authority, assets exceeded liabilities by $27,083,127 at March 31, By far the largest portion of the Authority s net position ($17,289,249 or 64%) reflects the investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The Authority uses these capital assets to provide services to its program participants. Although the Authority s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. The remaining balance of unrestricted net position ($7,346,491 or 27%) may be used to meet the Authority s ongoing obligations to program participants and creditors. At the end of the current fiscal year, the Authority is able to report positive net position. The same situation held true for its prior fiscal year. West Palm Beach Housing Authority Statement of Net Position Condensed Financial Information March 31, $ Change % Change ASSETS Current Assets $ 8,862,569 $ 3,031,364 $ 5,831, % Capital Assets, Net 28,222,315 33,735,516 (5,513,201) (16.3) Other Assets 2,867,364 2,948,846 (81,482) (2.8) Total Assets $ 39,952,248 $ 39,715,726 $ 236, % LIABILITIES Current Liabilities $ 3,220,134 $ 4,564,191 $ (1,344,057) (29.4)% Non-Current Liabilities 9,648,987 12,234,270 (2,585,283) (21.1) Total Liabilities 12,869,121 16,798,461 (3,929,340) (23.4) NET POSITION Investment in Capital Assets 17,289,249 19,248,454 (1,959,205) (10.2) Restricted Net Position 2,447,387-2,447,387 #DIV/0! Unrestricted Net Position 7,346,491 3,668,811 3,677, Total Net Position 27,083,127 22,917,265 4,165, Total Liabilities and Net Position $ 39,952,248 $ 39,715,726 $ 236, % (6)

9 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED MARCH 31, 2016 FINANCIAL ANALYSIS (CONTINUED) Current assets of the Authority increased by $5,831,205, or 192.4%, as a result of the sale of the Royal Poinciana Place Apartments. Capital assets decreased by $5,513,201 or 16.3% due to the sale of the Royal Poinciana Place Apartments, $987,556 of additions, which was reduced by $1,883,366 of depreciation expense. Current liabilities decreased by $1,344,057 or 29.4% primarily due to sale of the Royal Poinciana Place Apartments and the renewal of the Newton Woods loan, Non-current liabilities decreased by $2,585,283 or 21.1% primarily due to sale of the Royal Poinciana Place Apartments and the renewal of the Newton Woods loan, In addition, there was $3,553,996 in loan payment during the year. Investment in Capital Assets decreased by $1,959,205 or 10.2% as a result of sale of the Royal Poinciana Place Apartments. There was $941,502 of additions, which was reduced by $1,883,366 of depreciation expense and payments on capital debt of $3,553,997 (including a $3,135,927 loan payment to paid off the existing Royal Poinciana Place loan at closing). Total net position increased $4,165,862 or 18.2% mostly as a result of the gain on sale of the Royal Poinciana Place Apartments and current year operations. See the analysis of Authority s changes in net position on the following page. (7)

10 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED MARCH 31, 2016 FINANCIAL ANALYSIS (CONTINUED) West Palm Beach Housing Authority Changes in Net Position Condensed Financial Information Fiscal Year Ended March 31, $ Change % Change OPERATING REVENUES Net Tenant Revenue $ 3,519,254 $ 3,588,134 $ (68,880) (1.9)% Operating Grants and Subsidies - HUD 36,474,302 35,854, , Other Revenue 1,589, , , Other Government Grants 500, , Total Operating Revenues 42,082,614 40,432,500 1,650, OPERATING EXPENSES Administrative 3,888,216 3,807,469 80, Tenant Services 53,200 61,814 (8,614) (13.9) Utilities 708, ,886 (91,134) (11.4) Maintenance and Operations 1,828,954 1,942,881 (113,927) (5.9) Protective Services - 62,161 (62,161) (100.0) Insurance Premiums 365, ,358 57, General Expenses 310, ,503 (108,865) (26.0) Housing Assistance Payments 31,297,837 31,422,976 (125,139) (0.4) Depreciation Expense 1,883,366 2,015,764 (132,398) (6.6) Total Operating Expenses 40,336,044 40,839,812 (503,768) (1.2) Operating Income (Loss) 1,746,570 (407,312) 2,153,882 (528.8) NON-OPERATING REVENUE (EXPENSES) Interest Expense (760,009) (710,418) (49,591) 7.0 Interest Income 51,737 55,807 (4,070) (7.3) Gain on Sale of Capital Assets 2,813, ,812, ,567.8 Total Non-Operating Revenue (Expenses) 2,105,067 (654,111) 2,759,178 (421.8) Capital Contributions 314,225 1,887,781 (1,573,556) (83.4) CHANGE IN NET POSITION 4,165, ,358 3,339, Net Position, Beginning of Year 22,917,265 22,090, , NET POSITION, END OF YEAR $ 27,083,127 $ 22,917,265 $ 4,165, % (8)

11 MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED MARCH 31, 2016 FINANCIAL ANALYSIS (CONTINUED) Rental revenues decreased by $68,880 or 1.9% due to sale of the Royal Poinciana Place Apartments early in 2016 Operating grants and revenues increased by $619,346 or 1.7% due to increased funding from HUD. Other income increased by $599,648 or 60.6% due to the one-time State Energy Grant received of $500, Administrative expenses increased by $80,747 or 2.1% mainly due to inflation. Maintenance and operations decreased by $113,927 or 5.9% due to removal by sale of the Royal Poinciana Place Apartments General expense decreased by $108,865 or 26.0% due to increased efforts by the Housing Authority to reduces costs and the removal by sale of the Royal Poinciana Place Apartments. Housing assistance payments decreased by $125,139 or 0.4% CAPITAL ASSET AND DEBT ADMINISTRATION The Authority s capital assets as of March 31, 2016, amounted to $28,222,315 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, and furniture and equipment. The total decrease in the Authority s capital assets for the current operating year was $5,513,201 or 16.3%. The Authority incurred no new debt in 2016 and made $3,553,996 of principal payments during the year. Interest expense for the year ended March 31, 2016 was $760,009. ECONOMIC FACTORS Significant economic factors affecting the Authority are as follows: Federal funding provided by Congress to the Department of Housing and Urban Development, Local labor supply and demand, which can affect salary and wage rates, Local inflationary, recessionary and employment trends, which can affect resident incomes and therefore tenant rental income, Natural disasters which can have a devastating impact on the local economy, Locality issues which result from goods and services often being required to be imported, Inflationary pressure on utility rates, supplies and other costs. (9)

12 STATEMENT OF NET POSITION MARCH 31, 2016 ASSETS CURRENT ASSETS Cash - Unrestricted $ 5,092,524 Cash - Other Restricted 2,447,387 Cash - Restricted for Family Self Sufficiency Payments 520,608 Cash - Restricted for Tenant Security Deposits 152,070 Receivables, Net 314,788 Investments - Unrestricted 5,376 Inventories, Net of Allowance for Obsolete Inventory of $22, ,379 Prepaid Expenses 129,437 Total Current Assets 8,862,569 NON-CURRENT ASSETS Capital Assets: Capital Assets Not Being Depreciated 7,523,234 Capital Assets Being Depreciated, Net 20,699,081 Net Capital Assets 28,222,315 Note Receivable 1,121,000 Developer Fee Receivable 1,244,682 Accrued Interest Receivable 501,682 Total Non-Current Assets 31,089,679 Total Assets $ 39,952,248 See accompanying Notes to Financial Statements. (10)

13 STATEMENT OF NET POSITION (CONTINUED) MARCH 31, 2016 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts Payable $ 35,839 Accrued Liabilities 660,013 Accrued Compensated Absences, Current Portion 261,562 Accounts Payable - Other Government 95,092 Accrued Interest Expense 51,485 Current Portion of Long-Term Debt 1,967,183 Tenant Security Deposits (Payable from Restricted Assets) 148,960 Total Current Liabilities 3,220,134 NON-CURRENT LIABILITIES Long-Term Debt, Net of Current Portion 8,965,883 Accrued Compensated Absences, Net of Current Portion 162,496 Family Self Sufficiency Liability (Payable from Restricted Assets) 520,608 Total Non-Current Liabilities 9,648,987 Total Liabilities 12,869,121 NET POSITION Net Investment in Capital Assets 17,289,249 Restricted 2,447,387 Unrestricted 7,346,491 Total Net Position 27,083,127 Total Liabilities and Net Position $ 39,952,248 See accompanying Notes to Financial Statements. (11)

14 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED MARCH 31, 2016 OPERATING REVENUES Net Tenant Revenue $ 3,519,254 Operating Grants and Subsidies - HUD 36,474,302 Other Revenue 1,589,058 Other Government Grants 500,000 Total Operating Revenues 42,082,614 OPERATING EXPENSES Administrative 3,888,216 Tenant Services 53,200 Utilities 708,752 Maintenance and Operations 1,828,954 Insurance Premiums 365,081 General Expenses 310,638 Housing Assistance Payments 31,297,837 Depreciation Expense 1,883,366 Total Operating Expenses 40,336,044 INCOME FROM OPERATIONS 1,746,570 NON-OPERATING REVENUES (EXPENSES) Investment Income - Unrestricted 51,737 Interest Expense (760,009) Gain on Sale of Capital Assets 2,813,339 Total Non-Operating Revenues (Expenses) 2,105,067 INCOME BEFORE CAPITAL GRANTS 3,851,637 Capital Grants 314,225 CHANGE IN NET POSITION 4,165,862 Net Position - Beginning of Year 22,917,265 NET POSITION - END OF YEAR $ 27,083,127 See accompanying Notes to Financial Statements. (12)

15 STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Receipts: Dwelling Rent Receipts $ 3,318,874 Operating Subsidy and Grant Receipts 37,037,252 Other Income Receipts 2,829,681 Total Receipts 43,185,807 Disbursements: Payments to and Benefits for Employees 3,851,032 Payments to Suppliers 3,765,936 Payments to Landlords 31,297,837 Total Disbursements 38,914,805 Net Cash Provided by Operating Activities 4,271,002 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal Paid on Debt (2,341,398) Interest Paid on Debt (717,745) Net Borrowings on Line of Credit (193,930) Proceeds from Capital Grants 314,225 Proceeds from Sale of Capital Assets 4,243,020 Purchase of Capital Assets 987,556 Net Cash Provided by Capital and Related Financing Activities 2,291,728 CASH FLOWS FROM INVESTING ACTIVITIES Interest Income Received 3,219 NET INCREASE IN CASH 6,565,949 Cash - Beginning of Year 1,646,640 CASH - END OF YEAR $ 8,212,589 REPORTED AS: Cash - Unrestricted $ 5,092,524 Cash - Other Restricted 2,447,387 Cash - Restricted for Family Self Sufficiency Payments 520,608 Cash - Restricted for Tenant Security Deposits 152,070 Total - End of Year $ 8,212,589 See accompanying Notes to Financial Statements. (13)

16 STATEMENT OF CASH FLOWS (CONTINUED) YEAR ENDED MARCH 31, 2016 RECONCILIATION OF INCOME FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Income from Operations $ 1,746,570 Adjustments to Reconcile Income from Operations to Net Cash Provided by Operating Activities: Depreciation Expense 1,883,366 (Increase) Decrease in: Accounts Receivable - PHA Projects 62,950 Accounts Receivable - HUD Other Projects 86,467 Accounts Receivable - Other Government 714,113 Accounts Receivable - Miscellaneous 80,591 Accounts Receivable - Tenant (66,778) Prepaid Expenses and Other Assets 13,550 Inventory (26,149) (Increase) Decrease in: Accounts Payable 90 Days (542,898) Accrued Wage / Payroll Taxes Payable 63,918 Accrued Compensated Absences 40,939 Accounts Payable - Other Government (21,110) Tenant Security Deposits (149,749) Unearned Revenues (19,009) Unearned Revenue - Other 394,608 Accrued Liabilities - Other 37,073 Noncurrent Liabilities - Other (27,450) Net Cash Provided by Operating Activities $ 4,271,002 See accompanying Notes to Financial Statements. (14)

17 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The West Palm Beach Housing Authority (the Authority) is a public body corporate and politic pursuant to Chapter 421, Laws of the State of Florida, which was organized to provide low rent housing for qualified individuals in accordance with the rules and regulations prescribed by the Department of Housing and Urban Development. The Authority is governed by a seven-member Board of Commissioners (the Board). The Commissioners are appointed by the Mayor of West Palm Beach, Florida for four-year terms. The Board exercises all powers granted to the Authority pursuant to Chapter 421, of the Florida Statutes. The Board has the final responsibility for: 1. Approving budgets 2. Exercising control over facilities and properties 3. Controlling the use of funds generated by the Authority 4. Financing improvements Reporting Entity The Governmental Accounting Standards Board has established criteria for determining the governmental reporting entity and component units that should be included within the reporting entity. Under these criteria, the Authority is considered to be a primary government, it is a special-purpose government that has a separate governing body, is legally separate and is fiscally independent of other state or local governments. The Authority is a related organization of the City of West Palm Beach, Florida since the members of its Board of Commissioners (the Board) are appointed by the Mayor with the approval of the City Commission. The City of West Palm Beach, Florida is not financially accountable for the Authority as it cannot impose its will on the Authority and there is no potential for the Authority to provide financial benefit to, or impose financial burdens on the City of West Palm Beach, Florida. Accordingly, the Authority is not a component unit of the City of West Palm Beach, Florida. In determining how to define the reporting entity, management of the Authority has considered all potential component units. The determination to include a component unit in the reporting entity was made by applying the criteria established by the Governmental Accounting Standards Board. These criteria include manifestation of oversight responsibility including financial accountability, appointment of a voting majority, imposition of will, financial benefit to or burden on a primary organization, financial accountability as a result of fiscal dependency, potential dual inclusion, and organizations included in the reporting entity although the primary organization is not financially accountable. (15)

18 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reporting Entity (Continued) Based on the application of these criteria, the Authority has the following component units. Blended Component Units Baobab Development Inc. (Baobab) was formed in April of 2001 as a Florida Non- Profit Corporation. It is a development company formed for the purpose of creating affordable and low-income housing projects. Baobab is a 50% owner of MerryPlace Development, LLC, which was formed in January of 2005 as a Florida Limited Liability Company and is the Master Developer of the MerryPlace project. Baobab is the codeveloper and receives development fees from MerryPlace at Pleasant City Associates, Ltd. West Palm Beach Housing Authority at MerryPlace, Inc. was formed in April of 2002 as a Florida Non-Profit Corporation. The West Palm Beach Housing Authority is the sole owner of the corporation. This entity was formed in order to create a tax credit applicant entity. This entity formed MerryPlace at Pleasant City, LLLP, which is the general partner of the tax credit applicant, MerryPlace at Pleasant City Associates, Ltd. There is no financial activity in this entity. MerryPlace at Pleasant City, LLLP was formed in January of 2005 as a Florida Limited Liability Limited Partnership. It is the Co-General Partner of MerryPlace at Pleasant City Associates, Ltd, a tax credit applicant for the development of MerryPlace, an affordable housing development in West Palm Beach, Florida. There is no financial activity in this entity. West Palm Beach Housing Authority at Dunbar Village, Inc. was formed in March of 2008 as a Florida Non-Profit Corporation. This entity was created as a single asset entity, originally created for the purpose of a tax credit application. This entity is now being used as part of the applicant structure for the Paul Lawrence Dunbar Senior Complex. This entity is a partner of Dunbar Development at Coleman Park, LLLP. There is no financial activity in this entity. WPBHA Enterprise, Inc. was formed in March of 2008 as a Florida Non-Profit Corporation. This entity was created as a single asset entity, originally created for the purpose of a tax credit application. This entity is now being used as part of the applicant structure for the Paul Lawrence Dunbar Senior Complex. This entity is a partner of Dunbar Development at Coleman Park, LLLP. There is no financial activity in this entity. West Palm Beach Housing Authority at Coleman Park, Inc. was formed in March of 2008 as a Florida Non-Profit Corporation. This entity was created for a tax credit application submitted for the redevelopment of multifamily housing in Dunbar Village. The application was not funded. This entity is also a partner of Zora Development at Coleman Park, LLLP. There is no financial activity in this entity. (16)

19 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reporting Entity (Continued) Blended Component Units (Continued) Dunbar Development at Coleman Park, LLLP was formed in March of 2008 as a Florida Limited Liability Limited Partnership. This entity was created to be the general partner in the ownership entity for the Paul Lawrence Dunbar Senior Complex. There is no financial activity in this entity. Zora Development at Coleman Park, LLLP was formed in March of 2008 as a Florida Limited Liability Limited Partnership. This entity was created for a tax credit application submitted for the redevelopment of multifamily housing in Dunbar Village. The application was not funded. There is no financial activity in this entity. MerryPlace Property Owners Association, Inc. was formed in February of 2009 as a Florida Non-Profit Corporation. The entity was formed to provide oversight and coordination for the rental apartments and the homeownership apartments, including common maintenance issues and community coordination. There is no financial activity in this entity. Paul Laurence Dunbar Senior Complex, Ltd. was formed in January of 2013 as a Florida Limited Liability Limited Partnership. This entity was created to be the ownership entity for the Paul Lawrence Dunbar Senior Complex. Financing applications are still pending approval for this project. There is no financial activity in this entity. WPBHA at Silver Palm, Inc. was formed in October of 2013 as a Florida Non-Profit Corporation. This entity was created as a single asset entity, originally created for the purpose of pursuing mixed finance low income housing developments. This entity is now being used as part of the applicant structure for the Silver Palm Place. This entity is a partner of Silver Palm Place, LLLP. There is no financial activity in this entity. Silver Palm Place at Coleman Park, Inc. was formed in October of 2013 as a Florida Non-Profit Corporation. This entity was created as a single asset entity, originally created for the purpose of pursuing mixed finance low income housing developments. This entity is now being used as part of the applicant structure for the Silver Palm Place. This entity is a partner of Silver Palm Place, LLLP. There is no financial activity in this entity. Silver Palm Place, LLLP was formed in October of 2013 as a Florida Limited Liability Limited Partnership. It is the Co-General Partner of Silver Palm Place Associates, LTD, an entity pursing the development of Silver Palm Place, an affordable housing development in West Palm Beach, Florida. There is no financial activity in this entity. WPBHA at Royal Palm Place, Inc. was formed in September 2014 as a Florida Not- For-Profit corporation. This entity was created to engage in activities for charitable, educational and residential purposes or for the distributions of funds for charitable, educational, and residential programs to serve underprivileged persons (17)

20 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reporting Entity (Continued) Blended Component Units (Continued) Related Organization MerryPlace at Pleasant City Associates, Ltd. (the Partnership) was formed in January of 2005 as a Florida Limited Liability Partnership. It is the tax credit applicant for the development of MerryPlace, an affordable housing development in West Palm Beach, Florida. Basis of Presentation and Accounting In accordance with uniform financial reporting standards for HUD housing programs, the financial statements of the Authority are prepared in accordance with accounting principles generally accepted in the United States of America. Based on compelling reasons offered by HUD, the Authority reports its operations under the governmental proprietary fund type (enterprise fund), which uses the full accrual basis of accounting. The enterprise fund emphasizes the flow of economic resources measurement focus. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. Revenues are recorded when they are earned and expenses are recorded at the time liabilities are incurred. Enterprise Fund The enterprise fund is used to account for those operations that are financed and operated in a manner similar to private business or where the Board has decided that the determination of revenues earned, costs incurred, and/or change in net position necessary for management accountability is appropriate. The intent of the governing body is that the costs (expenses including depreciation) of providing services to the public on a continuing basis be financed or recovered primarily through user charges. Program/Activity Accounting The accounting records are established in a manner which enables the Authority to ensure observance of limitations and restrictions placed on the use of resources available to it. The accounting records are also maintained in a manner that provides the Authority with the ability to monitor the financial results associated with certain other activities or otherwise provide for management accountability. Separate identifiable accounts are maintained within the accounting records for each program/activity. However, all of the programs/activities are part of a single enterprise fund for financial reporting purposes. The programs/activities included in the accompanying financial statements include all programs/activities of the Authority that relate to providing housing assistance to lowerincome families and all other programs, functions and activities over which the Board has oversight responsibility and financial accountability. These programs/activities are as follows: (18)

21 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation and Accounting (Continued) Program/Activity Accounting (Continued) Section 8 Housing Choice Vouchers (CFDA ) This program accounts for the activity associated with the projects and other facilities subsidized by HUD under an Annual Contributions Contract. The purpose of Section 8 housing is to aid very-low income families in obtaining decent, safe, and sanitary rental housing. Section 8 housing allows very-low income families to rent privately-owned housing in the neighborhood of their choice. Public and Indian Housing (CFDA ) This program accounts for the project owned by the Authority that is subsidized by HUD under an Annual Contributions Contract. The program collects operating subsidy from HUD and also collects rent from tenants. The purpose of public housing is to provide decent and affordable dwelling for lower-income families. The development is owned and maintained by the Authority. Public Housing Capital Fund (CFDA ) This program is used to account for the activities of the Authority s capital improvement program. The Authority has received several grants from HUD to make improvements to its public housing complexes and to pay for certain management improvements. The capital fund provides funds annually to the Authority for capital and management activities, including modernization and development of public housing. Community Development Block Grant (CFDA ) This program accounts for capital grants provided as a pass-through from Palm Beach County, Florida. Resident Opportunity and Supportive Services Service Coordinators (ROSS Service Coordinators) (CFDA ) The ROSS Service Coordinators program assists public housing residents by providing service coordinator positions to coordinate supportive services, resident empowerment activities and/or assisting residents in becoming economically selfsufficient or age-in-place. Central Office Cost Center The Central Office Cost Center (COCC) is a business unit within the Authority that generates revenues from fee income and other business activities. The COCC consists of activities funded through these revenue sources. (19)

22 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation and Accounting (Continued) Program/Activity Accounting (Continued) Business Activities These activities account for the operations of the various affordable housing complexes operated by the Authority and the other resources received by the Authority that are not restricted by outside sources as to expenditure for the benefit of specific projects or purposes. The Authority has three affordable housing complexes. Newton Woods, Colony Oaks and Royal Poinciana, which respectively are 60-, 65- and 144-unit multi-family, non-federally subsidized low-income housing complexes, which were purchased by the Authority. The projects are operated solely by the Authority. HOME Investment Partnership Program (14.239) The HOME Investments Partnership Program accounts for the Tenant Based Rental Assistance (TBRA) program. The TBRA program provides funding for funding activities including building, buying, and/or rehabilitating affordable housing for rent or homeownership or providing direct rental assistance to low-income people. PIH Family Self-Sufficiency (14.896) The PIH Family Self Sufficiency Program enables families assisted through the Housing Choice Voucher (HCV) and Public Housing (PH) programs to increase their earned income and reduce their dependency on social services and rental subsidies. Section 8 Housing Assistance Payment Program (14.195) This program accounts for program assistance to aid-low and very low-income families in obtaining decent, safe, and sanitary rental housing through the provision of housing assistance payments to participating owners on behalf of eligible tenants. State Energy Grant (81.041) The State Energy Grant is used to increase market transformation of energy efficiency and renewable energy technologies through financing institutional retrofit programs. Budgets Budgets are prepared on an annual basis for each program/activity and are used as a management tool throughout the accounting cycle. The budgets for the Capital Fund Program and certain other multi-year grant programs are adopted on a project length basis. Budgets are not, however, legally adopted nor legally required for financial statement presentation. Cash and Cash Equivalents The Authority considers all highly liquid instruments, including all certificates of deposit and short-term investments with an original maturity of three months or less to be cash equivalents. The Authority does not have any cash equivalents as of March 31, (20)

23 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Restricted Assets (Continued) Restricted Assets Certain assets are classified as restricted assets in the accompanying statement of net position when constraints are placed on their use by external parties or law. The assets that are classified as restricted include the following: Restricted Cash Restricted cash is comprised of the following: Tenant Security Deposits $ 152,070 Family Self Sufficiency Payments 520,608 Housing Asistance Payments 222,331 Replacement Reserves 2,225,056 Total Cash Restricted $ 3,120,065 Inventory and Prepaid Items All inventories are valued on a first-in first-out (FIFO) basis using the weighted average method. Inventories consist of expendable building materials and supplies held for consumption in the course of the Authority s operations. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. Receivables All tenant receivables are shown net of an allowance for uncollectibles. Tenant accounts receivable in excess of 60 days comprise the tenant s accounts receivable allowance for uncollectibles. No allowance is established for HUD and other governmental receivables since management believes that these amounts are fully collectible. Capital Assets The Authority capitalizes capital assets with a cost of $500 or more and a useful life of one year or more. The Authority capitalizes as capital assets the costs of land acquisition and improvement, structures, equipment and direct development costs. Capital assets are recorded at cost or estimated historical cost if actual historical cost is not available. Land contributed by third parties or obtained in an asset exchange is recorded at fair value (appraised value) at the date of contribution or the date of the exchange. The cost of buildings and equipment is depreciated over the estimated useful lives of the related assets on a composite basis using the straight-line method. Depreciation on modernization and development assets commences in the year following completion. The Authority capitalizes as capital assets the cost of the site acquisition and improvement, structures, equipment and direct development costs. As construction in progress is completed it is transferred out of construction in progress to the appropriate fixed asset category. (21)

24 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets (Continued) The useful lives of capital assets for purposes of computing depreciation are as follows: Buildings Land Improvements Building Modernization Office and Other Equipment 40 Years 15 Years 15 Years 3-10 Years When property is disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss on disposition is reflected in the results of operations. Interest is capitalized on assets, other than infrastructure assets, acquired with tax-exempt debt. The amount of interest capitalized is the net interest expense incurred (interest expense less interest income) from the date of the borrowing until completion of the project. Inter-Program Transactions Due to/from Other Programs/Activities In the normal course of operations, programs may temporarily advance cash to other programs. These inter-program receivables or payables are eliminated for the presentation of the Authority as a whole. For the fiscal year ended March 31, 2016, offsetting amounts were eliminated. Fee for Service The Authority s Central Office Cost Center internally charges fees to Public Housing and programs of the Authority. These charges include management fees, bookkeeping fees and asset management fees. For financial reporting purposes, the fees for service charges have been eliminated for the fiscal year ended March 31, Compensated Absences Compensated absences represent vacation and sick leave liability accrued for each employee for services already rendered and that are not contingent on a specific future event that is outside the control of the Authority and its employees. In addition, compensated absences are accrued as employees earn the rights to the benefits. Compensated absences that relate to future services or that are contingent on a specific event that is outside the control of the Authority and its employees are accounted for in the period in which such services are rendered or in which such events take place. (22)

25 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Position Net position represents the difference between assets and liabilities in the financial statements and is classified into three components: Invested in Capital Assets This component consists of capital assets net of accumulated depreciation, less debt related to the acquisition of capital assets. Restricted Net position with constraints placed on the use either by external groups such as creditors, grantors, or laws or regulations of other governments; or law through constitutional provisions or enabling legislation are reflected in this component. Unrestricted All other net position that does not meet the definition of restricted or invested in capital assets. The Authority applies restricted resources first when an expense or expenditure is incurred for the purpose of which both restricted and unrestricted net position is available. Tenant Revenue In accordance with GASB Statement No. 34 and related guidance, tenant revenue is presented in the financial statements net of the bad debt expense for uncollectible amounts of $113,142. Operating and Non-Operating Revenue and Expenses The Authority recognizes operating revenue and expenses as a result of providing low rent housing and other services. The principal operating revenues of the Authority consist of tenant rental charges, operating subsidies and fees received from the federal government and other grantor organizations and other revenue received from ancillary operations such as maintenance charges to tenants, laundry operations and similar operations. Operating expenses include the costs of operating the Authority owned housing complexes, housing assistance payments to landlords, administrative expenses, and costs associated with providing program services and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Government Operating Grants and Subsidies The subsidies and grants received by the Authority from HUD under Annual Contributions Contracts and other grantor entities are recorded as revenue in the period earned in accordance with accounting principles generally accepted in the United States of America. Income Taxes The Authority is a public body corporate and politic pursuant to Chapter 421, Laws of the State of Florida, which is subsidized by the Federal Government. The Authority is not subject to Federal or state income taxes, nor is it required to file Federal and State income tax returns, as a public body corporate and politic pursuant to Chapter 423, Laws of the State of Florida, and applicable provisions of the Internal Revenue Code of 1986, as amended. (23)

26 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the 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. NOTE 2 CASH Custodial Credit Risk Custodial credit risk for cash is the risk that, in the event of the failure of the counterparty, the Authority will not be able to recover the value of deposits that are in the possession of an outside party. The Authority s proprietary fund does not have a formal policy for custodial credit risk. Deposits All cash deposits are carried at cost and are in financial institutions whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC) and collateralized. Florida Statutes Chapter 280 sets forth the qualifications and requirements that a financial institution must meet in order to become a qualified depository. The Statute also defines the amount and type of collateral that must be pledged in order to remain qualified. Florida Statute requires deposits of governmental entities be made only with Qualified Public Depositories (QPDs). Public funds on deposit in QPDs are protected against loss due to insolvency by: (1) federal deposit insurance; (2) the pledge of securities as collateral; and (3) a contingent liability agreement that allows the Chief Financial Officer of the State of Florida to assess QPDs if the securities pledged by an insolvent QPD are insufficient. The agreement for collateralization of public funds is with the State of Florida and not with the Authority. Similar to FDIC, the State of Florida is guaranteeing the deposit. At March 31, 2016, the Authority s book balance of cash was $8,212,589 and the bank balance was $8,520,604. The Authority s cash accounts are covered by federal depository insurance or by collateral pledged with the State Treasurer pursuant to Chapter 280, Florida Statutes. Under this Chapter, in the event of default by a participating financial institution (a qualified public depository), all participating institutions are obligated to reimburse the Authority for the loss. (24)