Blackman Limited Dividend Housing Association Limited Partnership (a Michigan limited partnership) MSHDA Development No. 3047

Transcription

1 Blackman Limited Dividend Housing Association (a Michigan limited partnership) MSHDA Development No Financial Report with Additional Information December 31, 2010

2 MSHDA Development No Partnership Certification I hereby certify that I have examined the accompanying financial statements and supplemental data of Blackman Limited Dividend Housing Association, MSHDA Project No. 3047, and, to the best of my knowledge and belief, they represent a true statement of the data set forth therein for the year ended December 31, Brian W. Carnaghi General Partner Representative PV West LLC ID# Partnership Employer Identification Number February 15, 2011 Date

3 MSHDA Development No Contents Report Letter 1 Financial Statements Balance Sheet 2 Statement of Operations 3 Statement of Partners' Equity 4 Statement of Cash Flows 5 Notes to Financial Statements 6-13 Additional Information 14 Report Letter 15 Schedule of Unadjusted Items 16 Schedules I & II - Funds Available for Distribution Report on Compliance with Laws and Regulations and Internal Control 20-23

4 Independent Auditor's Report To the Partners Blackman Limited Dividend Housing Association We have audited the accompanying balance sheet of Blackman Limited Dividend Housing Association (the "Partnership"), MSHDA Development No. 3047, as of December 31, 2010 and 2009 and the related statements of operations, partners' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blackman Limited Dividend Housing Association, MSHDA Development No. 3047, as of December 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated February 15, 2011 on our consideration of Blackman Limited Dividend Housing Association 's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audits. February 15,

5 MSHDA Development No Balance Sheet Assets December 31, 2010 December 31, 2009 Cash and cash equivalents: Cash $ 591 $ 35,897 Operating reserve cash (Note 2) 8, Resident accounts receivable - Net 14,306 - Accounts receivable - Other - 3,600 Prepaid expenses 9,372 17,974 Escrows (Note 2) 268, ,691 Tenant security deposit accounts - Savings 2,538 2,537 Deferred mortgage costs - Net of accumulated amortization 76,569 78,392 Monitoring fees - Net of accumulated amortization 33,803 36,700 Investment in rental property - At cost: Land 357, ,857 Building and land improvements 7,693,698 7,679,704 Equipment and fixtures 38,668 25,138 Less accumulated depreciation (731,236) (462,204) Total assets $ 7,773,774 $ 8,006,172 Liabilities and Partners' Equity Liabilities Accounts payable $ 40,525 $ 40,525 Advances from affiliate - Operating (Note 3) 96,254 14,644 Developer fee payable (Note 3) 629, ,565 Accrued liabilities and other: Payment in lieu of taxes 33,025 31,139 Mortgage interest (Note 4) 146, ,764 Payroll 2,762 2,013 Prepaid resident rent 1, Other accrued liabilities - Operating Tenant security deposits Mortgage note payable 4,028,686 4,066,392 HOME loan 1,095,988 1,095,988 Total liabilities 6,075,963 5,996,032 Partners' Equity 1,697,811 2,010,140 Total liabilities and partners' equity $ 7,773,774 $ 8,006,172 See Notes to Financial Statements. 2

6 MSHDA Development No Statement of Operations December 31, 2010 Year Ended December 31, 2009 Revenue Rental income $ 600,599 $ 601,862 Vacancy loss (52,383) (86,646) Net rental income 548, ,216 Other income: Interest income 22,154 14,098 Tenant charges 6,134 7,133 Total other income 28,288 21,231 Total revenue 576, ,447 Expenses Administrative 9,408 11,953 Management fee - Development's operating account (Note 3) 36,936 31,280 Salaries and wages (Note 3) 75,004 57,704 Audit fee 10,400 10,000 Bad debt 5,100 1,678 Operating and maintenance 60,807 78,715 Utilities 57,381 68,598 Depreciation and amortization 273, ,559 Property taxes 32,027 31,189 Payroll taxes (Note 3) 16,469 7,180 Insurance 27,636 26,158 Interest 275, ,270 Marketing 4,128 1,231 Other 4,136 3,427 Total expenses 888, ,942 Net Loss $ (312,329) $ (414,495) See Notes to Financial Statements. 3

7 MSHDA Development No Statement of Partners' Equity General Partner Limited Partner Total Balance - January 1, 2009 $ 333,931 $ 1,988,492 $ 2,322,423 Contributions 97,212 5, ,212 Net loss (41) (414,454) (414,495) Balance - December 31, ,102 1,579,038 2,010,140 Net loss (31) (312,298) (312,329) Balance - December 31, 2010 $ 431,071 $ 1,266,740 $ 1,697,811 See Notes to Financial Statements. 4

8 MSHDA Development No Statement of Cash Flows December 31, 2010 Year Ended December 31, 2009 Cash Flows from Operating Activities Net loss $ (312,329) $ (414,495) Adjustments to reconcile net loss to net cash from operating activities: Depreciation 269, ,020 Bad debt expense 5,100 1,678 Deferred interest 32,691 54,335 Amortization 4,720 4,539 Changes in operating assets and liabilities which provided (used) cash: Accounts receivable (15,806) 32,806 Prepaid expenses 8,602 (14,730) Operating reserves (5,649) 45,764 Funded residents' security deposits (1) (2) Payment in lieu of taxes 1,886 (7,103) Other accrued liabilities 1,450 1,378 Net cash used in operating activities (10,304) (14,810) Cash Flows from Investing Activities Escrow funding (41,382) (31,372) Investment in building and land improvements (27,524) (17,767) Net cash used in investing activities (68,906) (49,139) Cash Flows from Financing Activities Construction payables - (66,238) Proceeds from mortgage note payable - 59,415 Payments on mortgage note payable (37,706) - Advances from (repayments to) affiliates 81,610 (24,705) Contributions - 102,212 Net cash provided by financing activities 43,904 70,684 Net Decrease (Increase) in Cash (35,306) 6,735 Cash - Beginning of year 35,897 29,162 Cash - End of year $ 591 $ 35,897 Supplemental Cash Flow Information - Cash paid for interest - Net of capitalized interest $ 242,958 $ 281,935 See Notes to Financial Statements. 5

9 Notes to Financial Statements December 31, 2010 and 2009 Note 1 - Organization and Summary of Significant Accounting Policies Blackman Limited Dividend Housing Association (the "Partnership") was formed as a limited partnership in April 2006 under the laws of the Michigan Uniform Partnership Act as regulated by the Michigan State Housing Development Authority (MSHDA) for the purpose of constructing and operating a rental housing project. The project consists of 80 units located in Blackman Township, Michigan and is currently operating under the name of The Village of Spring Meadows. Operations began in September Under the terms of the Regulatory Agreement executed in connection with obtaining the mortgage loan, MSHDA regulates rental rates and distributions to owners. The Regulatory Agreement contains requirements including operating policies, maintaining a reserve fund for replacement, maintaining an operating assurance escrow, and limiting distributions to partners. Each building of the project has qualified for and been allocated low-income housing tax credits pursuant to Internal Revenue Code Section 42 (Section 42), which regulates the use of the project as to occupant eligibility and unit gross rent, among other requirements. Each building of the project must meet the provisions of these regulations during each of 15 consecutive years in order to remain qualified to receive the credits. In addition, Blackman Limited Dividend Housing Association Limited Partnership has executed an extended low-income housing agreement which requires the utilization of the project pursuant to Section 42 for a minimum of 30 years, even if the Partnership disposes of the project. Significant accounting policies are as follows: Basis of Accounting - The Partnership maintains its accounting records and prepares its financial statements on an accrual basis, which is in accordance with accounting principles generally accepted in the United States of America. Classification - The financial affairs of the Partnership do not generally involve a business cycle. Accordingly, the classification of assets and liabilities between current and long term is not used. As required by MSHDA, certain items in the financial statements have been designated as operating items as they relate to the operation of the housing project, and certain items have been designated as partnership items as they relate to the operation of the partnership that owns the housing project. 6

10 Notes to Financial Statements December 31, 2010 and 2009 Note 1 - Organization and Summary of Significant Accounting Policies (Continued) Resident Accounts Receivable - The resident accounts receivable are stated at net rent amounts. An allowance for doubtful accounts is established based on specific assessments of all invoices that remain unpaid following normal resident payment periods. All amounts deemed uncollectible are charged against the allowance for doubtful accounts in the period the determination is made. The allowance for doubtful accounts was $5,100 and $0 for the years ended December 31, 2010 and 2009, respectively. Investment in Rental Property - Rental property is recorded at cost. Depreciation is calculated using the straight-line basis for financial reporting purposes. Buildings are depreciated over 40 years, land improvements are depreciated over 15 years, and furniture, fixtures, and equipment are depreciated over seven years. Depreciation expense was $269,032 and $281,020 for the years ended December 31, 2010 and 2009, respectively. For income tax purposes, accelerated lives and methods are used. Maintenance, repairs, and renewals that do not involve any substantial betterments are charged to expense when incurred. Expenditures that increase the useful life of the property are capitalized. Impairment of Assets - The Partnership recognizes impairment of long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. No impairment of the Partnership's rental property has occurred. Deferred Costs - Mortgage costs of $82,038 are amortized over the term of the mortgage loan using the straight-line method. Total accumulated amortization related to these costs is $5,469 and $3,646 at December 31, 2010 and 2009, respectively. Tax credit monitoring fees of $43,461 are amortized over 15 years using the straightline method. Total accumulated amortization related to these costs is $9,658 and $6,761 for 2010 and 2009, respectively. Partnership Interests and Contributions - The Partnership has one general partner, PV West LLC, which has.01 percent interest. The Partnership has one limited partner, Michigan Capital Fund for Housing XV, which has percent interest. According to the partnership agreement, the limited partner is required to make capital contributions of $2,555,290 in installments. The capital contributions are subject to adjustment depending on certain conditions being met, primarily related to the amount and timing of low-income housing tax credits the Partnership is able to obtain. As of December 31, 2010 and 2009, the limited partner had contributed $2,375,290. 7

11 Notes to Financial Statements December 31, 2010 and 2009 Note 1 - Organization and Summary of Significant Accounting Policies (Continued) Allocation of Profits and Losses - Generally, profits and losses are allocated.01 percent to the general partner and percent to the limited partner. Profits and losses arising from the sale, refinancing, or other disposition of all or substantially all of the Partnership's assets will be specially allocated as prioritized in the partnership agreement. Additionally, the partnership agreement provides for other instances in which special allocation of profits, losses, and distributions may be required. Cash flow, as defined by the partnership agreement, is distributed as follows: 1. First, to the limited partner to the extent of any amount which the limited partner is entitled to receive from cash flow as payment to satisfy any tax credit reduction payment 2. Second, to Great Lakes Capital Fund, an investor service fee pursuant to the investor services agreement in an amount not to exceed $3,000, which shall be paid annually but is noncumulative 3. Third, to the developers to pay any unpaid and deferred development fee payable pursuant to the development agreement 4. Fourth, to the general partner, a partnership management fee pursuant to the partnership management services agreement in an annual, noncumulative amount not to exceed $30, Fifth, 90 percent of the balance to the general partner as an incentive management fee pursuant to the incentive management fee agreement in an annual, noncumulative amount not to exceed $30, The remainder shall be distributed to the partners in accordance with the following percentages: general partner, 90 percent and limited partner, 10 percent. Syndication Costs - Syndication costs of $14,173 are allocated directly to the limited partner on the statement of partners' equity. Rental Income - The Partnership records apartment rentals at gross potential rent as adjusted for vacancy loss. Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the project are operating leases. Income Taxes - No provision has been made in the financial statements for income taxes because, as a partnership, all income and expenses are allocated to the partners for inclusion on their respective income tax returns. 8

12 Notes to Financial Statements December 31, 2010 and 2009 Note 1 - Organization and Summary of Significant Accounting Policies (Continued) Payment in Lieu of Taxes - The Partnership is a participant in a tax abatement program providing for an assessed service charge in lieu of property taxes. The service charge of 4 percent is assessed based on net shelter rents. Net shelter rents are the total collections during the year from all occupants of the development representing rent or occupancy charges excluding charges for utilities. The estimated service charge in lieu of taxes is recorded in the year paid. In addition, the Partnership is required to fund the Public Safety Improvement Fund of the Charter Township of Blackman at a fixed rate of $12,292 in the initial year and an increase at a rate of 3 percent each year thereafter. 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events - The financial statements and related disclosures include evaluation of events up through and including February 15, 2011, which is the date the financial statements were available to be issued. Reclassification - Certain 2009 amounts have been reclassified to conform to the 2010 presentation. Note 2 - Escrows and Reserves Escrows for real estate taxes, insurance, other escrows, and replacement reserves are maintained under the control of the mortgagee for the benefit of the project. According to the Regulatory Agreement, the Partnership will fund the operating reserve cash account annually from available surplus cash. No amounts have been funded to date under this provision. Under the Regulatory Agreement, the Partnership's replacement reserve funding requirement shall be equal to 1/12 of 3.4 percent of the gross annual potential rent. The balance in this reserve at December 31, 2010 and 2009 was $44,767 and $20,620, respectively. 9

13 Notes to Financial Statements December 31, 2010 and 2009 Note 2 - Escrows and Reserves (Continued) According to the Regulatory Agreement, the Partnership will establish an operating assurance reserve equal to $188,943 at the time of the initial disbursement of the mortgage proceeds. The funds are to assist in the payment of operating expenses during the first 10 years of operations, upon consent of MSHDA. The reserve was funded as required. The balance is $204,854 and $199,205 for December 31, 2010 and 2009, respectively. During December 2008, the Partnership made a monthly payment to MSHDA to cover principal, interest, real estate tax, insurance escrow, and replacement reserve amounts in accordance with the loan agreements. As of December 31, 2008, MSHDA had not applied the payments since the loan had not converted to a permanent loan. The Partnership's payments were placed into an escrow account established by and held by MSHDA until closing, at which time the funds were appropriately applied. As of December 31, 2009, the escrow accounts have been properly funded. The balance in the insurance and tax escrows was $19,048 and $9,866 at December 31, 2010 and 2009, respectively. It is MSHDA's position, under Michigan statute, that project cash surplus cannot be used to pay off the MSHDA mortgage, and upon such payoff from other funds, MSHDA is entitled to any surplus cash, including reserves and escrows remaining at such time as is in excess of the maximum cash return allowable to the property owners set forth in the Regulatory Agreement at such time as the loan was consummated. The potential amount to be returned upon such an event cannot be determined and, as such, no related amounts have been reflected in the financial statements. Note 3 - Related Party Transactions Affiliate Advances - Affiliate advances consist of advances made by Presbyterian Villages of Michigan (PVM), an affiliate of the general partner, to cover operating disbursements of the Partnership when the need arises due to lags in cash receipts. The amount outstanding at December 31, 2010 and 2009 was $96,254 and $14,644, respectively, which is due upon demand and noninterest-bearing. In addition, during 2010 and 2009, the Partnership paid Presbyterian Villages of Michigan $90,724 and $63,734, respectively, for reimbursable payroll costs. 10

14 Notes to Financial Statements December 31, 2010 and 2009 Note 3 - Related Party Transactions (Continued) Developer Fees - Developer fees are payable to an affiliate of the general partner for services rendered in negotiating, coordinating, and supervising the planning, architectural, engineering, and construction services necessary for construction of the project and other related development activities. According to the development agreement, the Partnership will pay the developer, PV West, an affiliate of the general partner, developer fees in the amount of $1,112,833. The developer fees are capitalized as part of the building and improvements and have been earned and recognized in accordance with the development fee agreement. At December 31, 2009, the full amount of the developer fee has been earned. At December 31, 2010 and 2009, $629,565 remains payable. Partnership Management Fees - According to the partnership management service agreement, the Partnership shall pay the general partner an annual partnership management fee of $30,000. This fee is paid out of cash flow and is noncumulative. As there were no funds available from cash flow in 2010 or 2009, no amounts were incurred or accrued at December 31, 2010 and Property Management Fee - According to the partnership management agreement, the Partnership shall pay Presbyterian Villages of Michigan, an affiliate of the general partner, a property management fee of $456 and $391 per unit annually for 2010 and 2009, respectively. During 2010 and 2009, total management fees incurred and paid were $36,936 and $31,280, respectively. Incentive Partnership Management Fee - The Partnership incurs an annual incentive management fee in an amount equal to the lesser of (i) 90 percent of the Partnership's cash flow, as defined in the partnership agreement, or (ii) $30,000. In accordance with provisions in the partnership agreement, unpaid incentive management fees at the end of each year may only be paid to the extent funds are available from current year's cash flow after payment of the annual partnership management fee detailed above. As there were no funds available from cash flow in 2010 and 2009, no amounts were incurred or accrued at December 31, 2010 and Investor Service Fees - According to the partnership agreement, the Partnership shall pay Great Lakes Capital Fund an annual noncumulative asset management fee of $3,000, payable from cash flow as defined in the partnership agreement. As there were no funds available from cash flow in 2010 and 2009, no amounts were incurred or accrued at December 31, 2010 and Operating Deficit Guaranty - As provided for in the partnership agreement, the general partner will provide loans to the Partnership for operating deficits incurred in the 15 years after breakeven operations has occurred if such deficits are not paid from the operating assurance reserve. Such loans shall not exceed $167,000. At December 31, 2010 and 2009, no such loans have been made. 11

15 Notes to Financial Statements December 31, 2010 and 2009 Note 3 - Related Party Transactions (Continued) Following is a summary of fees paid or accrued to related parties: Name of Related Party Relationship Brief Description of Work/Services Performed General Ledger Account Partnership or Operating Account Transaction Amount Terms of Settlement 2010 PVM Affiliate of the general partner Advances to affiliate Accounts payable Operating $ 96,254 Current payable PVM Affiliate of the general partner Developer fee Developer payable Partnership 629,565 Outstanding portion of deferred developer fee PVM Affiliate of the general partner Management fee Management fee expense Operating 36,936 Expensed 2009 PVM Affiliate of the general partner Advances to affiliate Accounts payable Operating 14,644 Current payable PVM Affiliate of the general partner Developer fee Developer payable Partnership 629,565 Outstanding portion of deferred developer fee PVM Affiliate of the general partner Management fee Management fee expense Operating 31,280 Expensed Note 4 - Mortgage Note Payable - MSHDA The Partnership's construction loan converted to permanent financing in The loan is evidenced by a mortgage note document and bears an annual effective interest rate of 6 percent. Monthly principal and interest payments totaling $23,389 began in January The loan matures on August 1, The loan is collateralized by real and personal property of the project. At December 31, 2010 and 2009, the balance payable was $4,028,686 and $4,066,392, respectively. Accrued interest on this loan was $20,143 and $20,332 at December 31, 2010 and 2009, respectively. The second mortgage is a HOME loan held by MSHDA in the amount of $1,095,988. The mortgage bears interest at 3 percent per annum. Annual payments of principal and interest will commence once the deferred developer fee is paid in full or November 1, 2018, whichever comes first; annual payments of principal and interest will be paid from available cash flow. Once the first mortgage is paid in full, annual principal and interest payments required on the HOME loan will equal the payments required under the first mortgage. Deferred interest accrued on the loan totaled $126,312 and $93,432 at December 31, 2010 and and 2009, respectively. The loan is expected to be paid in full by October 1,

16 Notes to Financial Statements December 31, 2010 and 2009 Note 4 - Mortgage Note Payable - MSHDA (Continued) Minimum principal payments to maturity on the debt as of December 31, 2010 are as follows: Note 5 - Contingency 2011 $ 40, , , , ,860 Thereafter 4,898,254 Total $ 5,124,674 The project's low-income housing tax credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest. In addition, such potential noncompliance may require an adjustment to the contributed capital by the investor limited partner. 13

17 Additional Information 14

18 To the Partners Blackman Limited Dividend Housing Association We have audited the financial statements of Blackman Limited Dividend Housing Association (a Michigan limited partnership), MSHDA Development No. 3047, for the year ended December 31, Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The information on pages 16 through 19 is presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. February 15,

19 MSHDA Development No Schedule of Unadjusted Items December 31, 2010 Description of Variances Amount of Overstatement (Understatement) None $ - 16

20 VILLAGE OF SPRING MEADOWS MSHDA NO SCHEDULE I-J DEVELOPMENTS WITH MODIFICATIONS FOR DEFERRED DEVELOPER FEES FUNDS AVAILABLE FOR DISTRIBUTION December 31, 2010 SECTION 1 1 Operating Cash $ MSHDA-Held Operating Reserve Account 8,939 3 Other Non-Restricted Cash Reserve Accounts -0-4 TOTAL AVAILABLE CASH (PER AUDIT) (ADD Lines 1 through Line 3) $ 9,530 SECTION 2 ADD: 5 Resident Rent Receivable $ 14,306 6 Other Resident Charges -0-7 Non-Resident Receivable -0-8 Unadjusted Items-Accounts Receivable -0-9 Subsidy Receivable Tax/Insurance Escrow Surplus (Deficit) Escrow Draws Receivable TOTAL ADDITIONS (ADD Lines 5 through 11) $ 14, TOTAL CASH AND ADDITIONS (Line 4 PLUS Line 12) 23,836 SECTION 3 DEDUCT: 14 Trade Accounts And Surcharges Payable, Accrued Expenses Liabilities And and Other Short-term Operating $ 99, Subsidy Payable Unadjusted Items-Liabilities Approved Undisbursed Limited Dividend (L.D.) Payments Prepaid Rent/Unearned Rental Income 1, Delinquent Mortgage Principal Payments Delinquent Interest Payment R/R Deferrals, Delinquent MSHDA Loans/ Grants Security Deposit Not Funded (Over Funded) (1,585) 23 One Month s Gross Rent Potential 52, TOTAL DEDUCTIONS (ADD Lines 14 through Line 23) $ 151, SURPLUS FUNDS (LINE 13 MINUS LINE 24). Insert the actual amount even if it is negative. $ (127,543) SECTION 4 26 Replacement Reserve Needs $ Subtotal (Line 25 minus Line 26) (127,543) 28 Amenity Improvement/Deferred Maintenance Loan Subtotal (Line 27 Minus Line 28) (127,543) 30 Amount of Workout Repayment Obligations SURPLUS FUNDS AVAILABLE FOR DISTRIBUTION (LINE 29 MINUS LINE 30). Insert the actual amount even if it is negative. $ (127,543)

21 32 Deferred Developer Fee beginning Balance $ Deferred Developer Fee Payments or amounts waived in current year Deferred Developer Fee Ending Balance -0- *** The following developments can only defer developer fees for a specified time listed in HOME note. Emerald Woods Senior #3098 (June 1, 2019) 35 Deferred Developer Fee Payment Available From Surplus Cash $ SURPLUS FUNDS (Line 31 Minus Line 35) $ (127,543) SECTION 5 37 Balance of Preservation Fund Loan $ All Developments EXCEPT Carrington and Lincolnshire: 25% of Preservation Fund Loan Lincolnshire ONLY: Less of 25% of Line 36 or Line Carrington Place ONLY: Amount to amortize Principal Balance of the Preservation Fund Loan over 50 years at the Stated Interest Rate Carrington Place ONLY: Lesser of Line 36 or Line Preservation Fund Loan Payment Available From Surplus Cash $ SURPLUS FUNDS (Line 36 Minus Line 42) $ (127,543) 44 Park Terrace ONLY: Deferred Principal $ SURPLUS FUNDS (Line 43 Minus Line 44) $ (127,543) SECTION 6 Line 46 thru 48 is applicable only to the following developments with HOME loans. All others go to Line 49. Village of Spring Meadows #3047 Emerald Woods Senior # Deferred Interest $ Subtotal (Line 45 Minus Line 46) (127,543) 48 Deferred Principal SURPLUS FUNDS AVAILABLE FOR OWNER DISTRIBUTION (LINE 47 MINUS LINE 48). $ (127,543) 50 Current Years Maximum Potential Limited Dividend Payment $ 357,741 SECTION 7 SUMMARY OF CHECKS AND/OR MSHDA-HELD RESERVE TRANSFERS DUE: A SEPARATE CHECK AND/OR MSHDA-HELD RESERVE TRANSFER REQUEST MUST BE SUBMITTED FOR EACH AMOUNT REPORTED ON LINES 51 THROUGH 57 WITHIN 120 DAYS AFTER THE DEVELOPMENT S YEAR-END. PLEASE INDICATE THE PURPOSE ON EACH CHECK OR MSHDA-HELD RESERVE TRANSFER REQUEST. FAILURE TO COMPLY WITH THIS REQUEST WILL AFFECT THE MANAGEMENT AGENT S ELIGIBILIGY FOR PREMIUM MANAGEMENT FEES. 51 The amount from Line 10, if a deficit (Tax/Insurance Escrow) $ The lesser of Line 27 or Line 28-Amenity Improvement/Deferred Maintenance Loan (If Line 27 is negative, insert "0") $ The lesser of Line 29 or Line 30-Workout Repayment Obligations (If Line 29 is negative, insert "0") $ The lesser of Line 25 or Line 26-Replacement Reserve Needs (If Line 25 is negative, insert 0 ). $ The amount from Line 42 (Preservation Fund Loan) $ The lesser of Line 45 or Line 46-Deferred Mortgage Interest (If Line 45 is negative, insert "0") $ The lesser of Line 47 or Line 48-Deferred Mortgage Principal (If Line 47 is negative, insert "0") $ -0-

22 VILLAGE OF SPRING MEADOWS SCHEDULE II FUNDS AVAILABLE FOR DISTRIBUTION December 31, 2010 MSHDA NO OWNER INITIAL EQUITY $ 2,555,290 1a. SECTION 8/236 PRESERVATION $ MAXIMUM L.D. PAYMENT: $ 357, CUMULATIVE % 14% $ 357, NON-CUMULATIVE % 0% $ -0- CUT-OFF DATE: November 29, SALE/PRESERVATION TRANSACTION CLOSING DATE: I. II. III. SURPLUS FUNDS YEAR OF AVAILABLE FOR OPERATION DISTRIBUTION POTENTIAL L.D , (27,081) 332, (127,543) 357,741 IV. V. L.D./HOME LOAN PAID CARRY FORWARD 0 25, , ,481

23 Report on Compliance with Laws and Regulations and Internal Control 20

24 Report on Compliance with Laws and Regulations and Internal Control To the Partners Blackman Limited Dividend Housing Association We have audited the financial statements of Blackman Limited Dividend Housing Association, MSHDA Development No. 3047, as of and for the year ended December 31, 2010 and have issued our report thereon dated February 15, We have conducted our audit in accordance with auditing standards generally accepted in the United States of America and 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 of material misstatement. Compliance Compliance with laws, regulations, contracts, and grants applicable to the Blackman Limited Dividend Housing Association is the responsibility of Blackman Limited Dividend Housing Association 's management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the Partnership's compliance with certain provisions of laws, regulations, contracts, and grants, including compliance with specific provisions of the MSHDA Regulatory Agreement, MSHDA directives, HOME requirements, and MSHDA multifamily audit guidelines. However, our objective was not to provide an opinion on compliance or the effectiveness of the Partnership s internal control over compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards referred to in the second paragraph. We have compared the December 31, 2010 monthly income and expense (MIE) report submitted to MSHDA with balances in the financial statements for the year ended December 31, 2010, audited by us and covered by our report dated February 15, The account balances set forth therein are in material agreement (defined by MSHDA as differences not exceeding 10 percent and $3,000), except as noted below. 21

25 To the Partners Blackman Limited Dividend Housing Association Other Receivables Classification Only: Other receivables on the MIE report included syndication costs which are included in equity on the audited balance sheet, prepaid expenses, tax credit fees and prepaid expenses, which are all classified separately on the audited balance shet. Additionally, bad debt expense was netted in the other receivables balance in the MIE report vs. reported separately on the audited balance sheet. Balance per the MIE report $ 48,168 Reconciling items: Syndication costs (14,173) Tax credit fees (43,461) Accumulated amortization - Tax credit fees 9,658 Amortization expense - Tax credit fees (2,892) Prepaid expenses (2,400) Bad debt expense 5,100 Balance per the balance sheet $ - Accounts Payable/Accrued Liabilities Classification Only: In the MIE report, accounts payable included advances from affiliates, which is reported separately on the financial statements, and did not include current accounts payable which were reported as long-term liabilities on the MIE report. Balance per the MIE report $ 8,831 Reconciling items: Included in MIE reconciliation in other long-term liabilities 40,525 Included in advances from affiliate on financial statements (5,826) Balance per the balance sheet $ 43,530 Miscellaneous Expenses Classification Only: Various operating and maintenance expenses are separately categorized on the financial statements while they are grouped together on the MIE report. Balance per the MIE report $ 18,918 Reconciling items: Expense classified as operating and maintenance on income statement (11,785) Expenses classified as various operating expenses on income statement (2,997) Expense classified as other on income statement (4,136) Balance per the balance sheet $ - 22

26 To the Partners Blackman Limited Dividend Housing Association Internal Control Over Financial Reporting Management of Blackman Limited Dividend Housing Assocation is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit of the financial statements, we considered Blackman Limited Dividend Housing Association 's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements but not for the purpose of expressing an opinion on the effectiveness of Blackman Limited Dividend Housing Association 's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Blackman Limited Dividend Housing Association 's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements of the entity's financial statements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Additionally, no management letter was issued in relation to our audit of the financial statements of Blackman Limited Dividend Housing Association as of and for the year ended December 31, This report is intended solely for the information and use of the partners, management, others within the entity, and the Michigan State Housing Development Authority and is not intended to be, and should not be, used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. February 15,