CONSOLIDATED FINANCIAL STATEMENTS DECATUR CHURCH OF CHRIST SENIOR HOUSING, INC. June 30, 2017

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1 CONSOLIDATED FINANCIAL STATEMENTS DECATUR CHURCH OF CHRIST SENIOR HOUSING, INC. June 30, 2017 Audit Partner in Charge of the Engagement: Firm: Seth D. Strongin, CPA P.C Ashford Dunwoody Road Suite A 628 Atlanta, Georgia Phone: (770) Federal I.D.#: Audit Partner: Seth Strongin

2 Consolidated Financial Statements June 30, 2017 Independent Auditor s Report... 1 Consolidated Statement of Financial Position... 3 Consolidated Statement of Net Assets... 5 Consolidated Statement of Activities... 6 Consolidated Statement of Cash Flows... 7 Notes to Consolidated Financial Statements... 9 Supplemental Schedules: Schedule of Expenditures of Federal Awards Decatur Church of Christ Senior Housing, Inc. d/b/a Decatur Christian Towers Statement of Financial Position Statement of Net Assets Statement of Activities Statement of Cash Flows Changes in Fixed Assets Schedule of Miscellaneous Income and Expense Computation of Surplus Cash, Distributions and Residual Receipts at the Statement of Financial Position Date Gwinnett Christian Terrace, LLC HUD Project No Statement of Financial Position Statement of Net Assets Statement of Activities Statement of Cash Flows Reserve for Replacements and Residual Receipts Reserve for Replacement Withdrawals Changes in Fixed Assets Schedule of Miscellaneous Income and Expense Computation of Surplus Cash, Distributions and Residual Receipts at the Statement of Financial Position Date Page

3 Consolidated Financial Statements June 30, 2017 Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Compliance for Each Major Federal Program and on Internal Control Over Compliance Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Certification by Sponsor... 46

4 INDEPENDENT AUDITOR S REPORT To the Board of Directors Decatur Church of Christ Senior Housing, Inc. Report on the Financial Statements I have audited the accompanying consolidated financial statements of Decatur Church of Christ Senior Housing, Inc. a nonprofit corporation, which comprise the consolidated statement of financial position as of June 30, 2017, and the related consolidated statements of net assets, activities and cash flows for the year then ended, and the related notes to the 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 My responsibility is to express an opinion on these consolidated financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I 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 consolidated 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 consolidated 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, I 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 consolidated financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Decatur Church of Christ Senior Housing, Inc. as of June 30, 2017, and the changes in its net assets and its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. 1

5 INDEPENDENT AUDITOR S REPORT Continued Other Matters Other Information My audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information shown on pages and is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. The schedule of expenditures of federal awards on page 15 is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the consolidated financial statements. The accompanying supplementary information on pages and and the schedule of expenditures of federal awards on page 15 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the accompanying supplementary information on pages and and the schedule of expenditures of federal awards on page 15 are fairly stated in all material respects in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated February 14, 2018 on my consideration of the Organization's internal control over financial reporting and on my 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 my 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 in considering the Organization s internal control over financial reporting and compliance. Atlanta, Georgia February 14,

6 Consolidated Statement of Financial Position June 30, 2017 ASSETS DCCSH, INC. GCT, LLC Total CURRENT ASSETS Cash in bank $ 311,059 $ 36,041 $ 347, Cash - entity 1,290, ,741 1,780,447 Total cash 1,601, ,782 2,127, Tenant accounts receivable 6, , Accounts receivable - HUD 0 1,214 1, Accounts receivable - other 722 (722) State unemployment security deposit 7,840 7,840 15, Prepaid expenses 27,173 24,089 51,262 Total current assets 1,644, ,203 2,202,648 DEPOSITS HELD IN TRUST - FUNDED Tenant security deposits 130,690 39, ,191 Total deposits held in trust 130,690 39, ,191 RESTRICTED DEPOSITS AND FUNDED RESERVES Escrow deposits 0 34,931 34, Reserve for replacements 779, ,504 1,032, Non-critical repair escrow 0 1,192,493 1,192,493 Total restricted deposits and funded reserves 779,810 1,479,928 2,259,738 FIXED ASSETS Land 116, , , Building and equipment 7,920,575 9,733,566 17,654,141 Total fixed assets 8,037,075 9,889,296 17,926,371 Less accumulated depreciation (6,316,254) (5,381,742) (11,697,996) Net fixed assets 1,720,821 4,507,554 6,228,375 OTHER ASSETS Deferred debt issuance costs 135, , Deferred renovation costs 80, ,593 Total other assets 216, ,277 Total Assets $ 4,492,043 $ 6,585,186 $ 11,077,229 The Notes to Financial Statements are an integral part of these Statements. 3

7 Consolidated Statement of Financial Position June 30, 2017 LIABILITIES AND NET ASSETS DCCSH, INC. GCT, LLC Total CURRENT LIABILITIES Accounts payable - operations $ 45,316 $ 39,528 $ 84, Accounts payable - renovations 0 546, , Accrued wages payable 8,760 3,531 12, Accrued interest payable - first mortgage 0 15,787 15, Mortgage payable -first mortgage - short term 0 103, , Loan payable - short term 1,916 1,916 3, Prepaid revenue 18, ,146 Total current liabilities 74, , ,042 DEPOSIT LIABILITIES Tenant security deposits held in trust 129,572 38, ,596 Total deposit liabilities 129,572 38, ,596 LONG-TERM LIABILITIES Mortgage payable - first mortgage 0 6,088,135 6,088, Loan payable 4,726 4,726 9, Debt issuance costs 0 (324,098) (324,098) Total long-term liabilities 4,726 5,768,763 5,773,489 Total liabilities 208,436 6,516,691 6,725,127 NET ASSETS Unrestricted net assets 4,283,607 68,495 4,352,102 Total Liabilities and Net Assets $ 4,492,043 $ 6,585,186 $ 11,077,229 The Notes to Financial Statements are an integral part of these Statements. 4

8 Consolidated Statement of Net Assets For the Year Ended June 30, 2017 DCCSH, INC. GCT, LLC Total NET ASSETS - June 30, 2016 $ 2,772,093 $ 1,199,753 $ 3,971,846 Change in net assets from operations 221, , ,256 Transfer of funds 1,290,082 (1,290,082) 0 NET ASSETS - June 30, 2017 $ 4,283,607 $ 68,495 $ 4,352,102 The Notes to Financial Statements are an integral part of these Statements. 5

9 Consolidated Statement of Activities For the Year Ended June 30, 2017 DCCSH, INC. GCT, LLC Total REVENUE Rental revenue $ 1,819,965 $ 1,484,647 $ 3,304,612 Financial revenue 5,025 2,311 7,336 Gifts 3,402 65,806 69,208 Other revenue 154,435 34, ,695 TOTAL INCOME 1,982,827 1,587,024 3,569,851 OPERATING EXPENSES Administrative expenses 443, , ,810 Utility expenses 307, , ,910 Operating and maintenance expenses 576, , ,748 Taxes and insurance expense 184, , ,937 Financial expenses , ,141 TOTAL OPERATING EXPENSES 1,513,507 1,152,039 2,665,546 CHANGE IN UNRESTRICTED NET ASSETS BEFORE DEPRECIATION 469, , ,305 DEPRECIATION EXPENSE 248, , ,673 OPERATING PROFIT (LOSS) 220, , ,632 CORPORATE REVENUE (EXPENSE) CHANGE IN UNRESTRICTED NET ASSETS $ 221,432 $ 158,824 $ 380,256 The Notes to Financial Statements are an integral part of these Statements. 6

10 Consolidated Statement of Cash Flows For the Year Ended June 30, 2017 DCCSH, INC. GCT, LLC Total CASH FLOWS FROM OPERATING ACTIVITIES: Revenues: Rental revenue $ 1,800,055 $ 1,454,324 $ 3,254,379 Financial revenue 5,663 2,311 7,974 Gifts 3,402 65,806 69,208 Other revenue 154,435 24, ,865 1,963,555 1,546,871 3,510,426 Expenses: Administrative expenses 202,557 99, ,816 Utility expense 308, , ,634 Payroll expenses 422, , ,736 Operating and maintenance expense 375, , ,360 Escrow deposits 0 34,931 34,931 Property insurance 70,267 41, ,689 Miscellaneous taxes and insurance 127,917 88, ,542 Tenant security and other deposits ,518 Interest on mortgage 0 158, ,108 Interest on loan ,244 Mortgage insurance premiums 0 17,244 17,2440 1,508,649 1,154,173 2,662,822 Net cash provided by operating activities 454, , ,604 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (321,259) (2,325,588) (2,646,847) Proceeds from sale of asset 0 13,410 13,410 Decrease (increase) in reserve for replacement 43, , ,612 Increase in other reserves 0 (1,192,493) (1,192,493) Net cash used by investing activities (277,454) (3,189,864) (3,467,318) CASH FLOWS FROM FINANCING ACTIVITIES: Mortgage principal payments 0 (136,012) (136,012) Proceeds from Section 223(f) mortgage 0 6,250,000 6,250,000 Payoff of Section 202 direct loan 0 (1,343,167) (1,343,167) Loan principal payments (1,766) (1,765) (3,531) Funds transfer 1,290,082 (1,290,082) 0 Increase (decrease) in advances payable 56,961 (56,961) 0 Debt issuance costs paid (127,684) (243,591) (371,275) Net cash used by financing activities 1,217,593 3,178,422 4,396,015 The Notes to Financial Statements are an integral part of these Statements. 7

11 Consolidated Statement of Cash Flows For the Year Ended June 30, 2017 DCCSH, INC. GCT, LLC Total NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 1,395,045 $ 381,256 $ 1,776,301 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 206, , ,246 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,601,765 $ 525,782 $ 2,127,547 CASH FLOWS FROM OPERATING ACTIVITIES: Change in unrestricted net assets from operations $ 221,432 $ 158,824 $ 380,256 Adjustments to reconcile change in unrestricted net assets from operations to net cash provided by operating activities: Depreciation 248, , ,673 Amortization of debt issuance costs 0 6,293 6,293 Gain on disposal of property and equipment 0 (9,830) (9,830) Decrease (increase) in: Accounts receivable - tenants (6,055) 0 (6,055) Accounts receivable - other Prepaid expenses (14,027) (14,147) (28,174) Tenant security deposits held in trust (2,632) 3, Escrow deposits 0 (34,931) (34,931) Increase (decrease) in: Accounts payable (1,163) 4,155 2,992 Accrued expenses Accrued interest payable 0 6,762 6,762 Tenant security deposits liability 1,990 (4,123) (2,133) Prepaid revenue 5, , , , ,348 Net cash provided by operating activities $ 454,906 $ 392,698 $ 847,604 Supplemental information regarding interest payments is as follows: Interest paid $ 622 $ 158,730 $ 159,352 The Notes to Financial Statements are an integral part of these Statements. 8

12 Notes to Consolidated Financial Statements June 30, 2017 Note A Organization Decatur Church of Christ Senior Housing, Inc. ( the Organization ) is a not-for-profit entity organized under the laws of Georgia. The Organization and Gwinnett Christian Terrace, LLC, a limited liability company of which the Organization is the sole member, operate two apartment communities ( the projects ) regulated by the U.S. Department of Housing and Urban Development ( HUD ). Accordingly, the projects are subject to restrictions as to rental charges and other operating procedures. Details of the projects are as follows: Decatur Christian Towers ("DCT") was owned directly by the Organization as of June 30, 2017, contains 216 rental units and is located in Decatur, Georgia. DCT has entered into a Section 8 Housing Assistance Payments Contract with HUD (Note D) and therefore is subject to restrictions contained therein as to rental charges and other operating procedures. Prior to October 21, 2016, Gwinnett Christian Terrace ("GCT") was owned directly by the Organization, was obligated under a Section 202 direct mortgage loan payable to HUD and regulated under the terms of a U.S. Department of Housing and Urban Development ( HUD ) Regulatory Agreement under Section 202 of the National Housing Act of On October 21, 2016, GCT refinanced its mortgage with a loan insured by HUD under Section 223(f) of the National Housing Act and ownership of GCT was transferred to Gwinnett Christian Terrace, LLC. The Organization is authorized to manage GCT as its administrator pursuant to a HUD approved Form HUD-9839-C, "Project Owner's/Borrowers Certification for Elderly Housing Projects Managed by Administrators." GCT has also entered into a Section 8 Housing Assistance Payments contract with HUD. (Note D.) GCT contains 125 rental units and is located in Lilburn, Georgia. The accompanying consolidated financial statements contain the accounts and transactions of Decatur Church of Christ Senior Housing, Inc. and Gwinnett Christian Terrace, LLC and reflect the operations of both projects for the entire fiscal year ended June 30, Certain transactions between Decatur Church of Christ Senior Housing, Inc, and Gwinnett Christian Terrace, LLC are eliminated in the preparation of the consolidated financial statements. The projects operate in a heavily regulated environment and their operations are subject to legislative and regulatory changes. 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. Note B Summary of Significant Accounting Policies Fixed Assets Fixed assets are recorded at historical cost. Expenditures for additions and significant improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of fixed assets as follows: 9

13 Notes to Consolidated Financial Statements Continued June 30, 2017 Note B Summary of Significant Accounting Policies Continued Fixed Assets Continued Depreciable Asset Buildings Building improvements Furniture, equipment, furnishings and vehicles Life 40 years 5-40 years 5-10 years Debt Issuance Costs Costs incurred in connection with obtaining the Section 223(f) HUD-insured mortgage for GCT (Note C) were capitalized and are being amortized using the straight-line method over 35 years, the term of the mortgage. The unamortized costs are reported as a reduction (discount) in the carrying value of long term liabilities on the accompanying consolidated statement of financial position. Amortization of $6,293 is recorded as mortgage interest expense and included in financial expenses on the accompanying consolidated statement of activities. Under generally accepted accounting principles, debt issuance costs are to be amortized using the effective interest method. The amounts resulting from the use of the straight-line method of amortization do not differ materially from the amounts that would be recorded using the effective interest method. Gwinnett Christian Terrace, LLC paid a developer fee of $680,000 to the Organization from the proceeds of the HUD-insured mortgage. The developer fee was recorded as entity revenue on the books of the Organization and debt issuance costs on the books of Gwinnett Christian Terrace, LLC. This transaction is eliminated on the accompanying consolidated financial statements. Additionally, debt issuance cost amortization of $12,952 computed on the developer fee and included in account 6820 "Interest on Mortgage Payable" on the books of Gwinnett Christian Terrace, LLC has been eliminated on the accompanying consolidated financial statements. Income Taxes The Organization is classified as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. The Organization is also exempt from state corporate income tax. Therefore, no provision for income taxes is included in the consolidated financial statements. As a single member limited liability company, Gwinnett Christian Terrace, LLC is an ignored entity for income tax reporting purposes and its assets, liabilities, net assets, revenue and expense are included on the Form 990 Return of Organization Exempt from Income Tax filed by the Organization. 10

14 Notes to Consolidated Financial Statements Continued June 30, 2017 Note B Summary of Significant Accounting Policies Continued Statement of Cash Flows Marketable securities that are highly liquid and have a maturity of three months or less at the date of purchase would be classified as cash equivalents. Restricted deposits, funded reserves and escrow accounts are not included in cash. Use of Estimates The preparation of financial statements requires the use of estimates and assumptions. Actual results could differ from those estimates. Subsequent Events In preparing the accompanying consolidated financial statements and notes, management has evaluated subsequent events through February 14, 2018, which represents the date the accompanying consolidated financial statements were available to be issued. Note C Mortgage Payable Prior to October 21, 2016, GCT was obligated under a Section 202 mortgage loan which was held by HUD and secured by a deed of trust on land and buildings. On October 21, 2016, Gwinnett Christian Terrace, LLC refinanced GCT s mortgage by obtaining a new mortgage in the amount of $6,250,000 insured by HUD under Section 223(f) of the National Housing Act. The new mortgage is secured by a multifamily deed to secure debt, security agreement and assignment of rents. Terms of the new mortgage are as follows: Interest rate per annum 3.06 percent Date of final monthly installment November 1, 2051 Monthly principal and interest installment $24,263 Amortization of principal subsequent to June 30, 2017 is scheduled as follows: Year Ended June 30, Payable From Operations 2018 $ 103, , , , ,552 Beyond 5,642,557 $ 6,191,275 11

15 Notes to Consolidated Financial Statements Continued June 30, 2017 Note C Mortgage Payable Continued As required under the terms of the HUD-insured mortgage, $3,141,065 of the mortgage proceeds were deposited in an escrow for non-critical repairs. During the year ended June 30, 2017, $1,950,606 was paid from the non-critical repair escrow for eligible repairs and interest totaling $2,034 was credited to the account, leaving a balance of $1,192,493 as of June 30, The fair value of the mortgage note payable is estimated based on the current rates offered to the Organization for debt of the same remaining maturities. The amount reflected for the mortgage in the accompanying consolidated statement of financial position approximates fair value as of the statement of financial position date. Note D National Housing Act Subsidies and Restrictions As described in Note C, Gwinnett Christian Terrace, LLC refinanced GCT's Section 202 HUDheld mortgage in October 2016 by obtaining a new mortgage insured by HUD under Section 223(f) of the National Housing Act. In connection with the refinancing, the Section 202 regulatory agreement on GCT was cancelled and Gwinnett Christian Terrace, LLC executed a new regulatory agreement with HUD under Sections 207 and 223(f) of the National Housing Act. The regulatory agreement for GCT includes provisions which: (1) establish the rental schedule; (2) prohibit the encumbering of the mortgaged property or the incurring of any liability other than for current operating expenses; (3) limit the owners liability to the mortgaged property and (4) require monthly deposits to a property replacement fund. Both projects have entered into Section 8 housing assistance payments contracts with HUD under which HUD provides assistance payments on behalf of eligible low income tenants for contract units, pursuant to Section 8 of the Housing Act of 1937, as amended by the Housing and Community Development Act of The maximum number of contract units and dollar amount of annual housing assistance payments are limited by HUD and the monthly rental charges on contract units must be approved by HUD. Terms of the contracts are as follows: Gwinnett Christian Terrace: Expiration Renewal Current Number of Contract No. Period Date Period Receipts Units GA06T years September 30, 2036 None $1,067, units Decatur Christian Towers: Expiration Renewal Current Number of Contract No. Period Date Period Receipts Units GA06M years July 31, 2034 None $292, units 12

16 Notes to Consolidated Financial Statements Continued June 30, 2017 Note E Copier Loan Payable In May 2015, the Organization entered into a financing arrangement for the purchase of new copiers for both projects. Under the terms of the arrangement, the Organization financed a total of $20,330, secured by the purchased assets, with interest at approximately 8.2% per annum to be repaid in monthly principal and interest installments of $398 from June 2015 through August Future scheduled principal payments on the obligation total $3,832 for the year ended June 30, 2018; $4,156 for the year ended June 30, 2019; $4,509 for the year ended June 30, 2020; and $787 thereafter. Note F Concentration of Credit Risk The Organization maintains its operating funds, escrows and required reserves in depository accounts. These accounts may entail concentration of credit risk at any given point in time. Note G Community Development Block Grant In August 2016, the Organization, as a subrecipient, received HUD Community Development Block Grant Funds in the amount of $64,568 from the Gwinnett County, Georgia Department of Financial Services. In accordance with the terms of the grant agreement, the funds were used in September 2016 to purchase a bus for Gwinnett Christian Terrace. The grant is included in gift revenue in the accompanying consolidated financial statements. Note H Commitments, Contingencies and Subsequent Events In June 2016, the Organization entered into an agreement to obtain a new mortgage insured by HUD under Section 223(f) of the National Housing Act for Decatur Christian Towers. Final closing for the new mortgage occurred in August The Organization was required to pay $1,548,367 at closing to fund required reserves. The new mortgage is in the amount of $4,476,700 with an interest rate of 3.45 per cent and is secured by a multifamily deed to secure debt, security agreement and assignment of rents. The new mortgage will be repaid in monthly principal and interest installments of $18,372 beginning October 2017 and continuing through September The Organization entered into a contract with a consultant for certain services related to obtaining the HUD-insured mortgage for Decatur Christian Towers. The agreement calls for a total fee of $50,000, consisting of a retainer of $6,000 followed by monthly payments of $2,000, for the refinancing related services. Payments made under this contract totaling $20,000 and other costs incurred pertaining to the DCT HUD-insured mortgage totaling $115,684 as of June 30, 2017 have been classified as "other assets - deferred debt issuance costs" on the accompanying consolidated statement of financial position. Subsequent to loan closing, the deferred debt issuance costs will be amortized over the 35 year term of the DCT HUD-insured mortgage and the amortization will be recorded as mortgage interest expense. In September 2016, Decatur Christian Towers, LLC, a limited liability company of which the Organization is the sole member, was formed. As part of the mortgage refinancing, ownership of the Decatur Christian Towers project and all related assets, liabilities and other rights and 13

17 Notes to Consolidated Financial Statements Continued June 30, 2017 Note H Commitments, Contingencies and Subsequent Events Continued obligations of the project were transferred to Decatur Christian Towers, LLC. The limited liability company will be an ignored entity for income tax reporting purposes. The Organization has entered into a contract with an architect for services related to renovation of DCT from the proceeds of the DCT Section 223(f) mortgage. The contract calls for total fees of $165,000 for the architectural services. Payments made under the contract totaling $80,593 as of June 30, 2017 have been classified as "other assets - deferred renovation costs" on the accompanying consolidated statement of financial position. 14

18 Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2017 Agency or Federal CFDA Pass-through Federal Federal Grantor & Program Title Number Number Expenditures U.S. Department of Housing and Urban Development: Direct Awards: Section 202 Direct Loan Balance EH014 $ 1,420,454 Section 223(f) Insured Loan Balance ,250,000 Section 8 Housing Assistance Payments GA06T ,067,161 Section 8 Housing Assistance Payments GA06M ,148 Subtotal - Direct Awards 9,029,763 Received as Subrecipient from Gwinnett County, Georgia Department of Financial Services: Community Development Block Grant GCT ,568 Total $ 9,094,331 Notes to the Schedule The information in the above schedule is presented on the accrual basis of accounting. The information presented in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards ("the Uniform Guidance"). Because the schedule presents only a selected portion of the Organization's operations, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Organization. Expenditures reported in the schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Organization has elected not to use the ten percent de minimis indirect cost rate allowed under the Uniform Guidance. The Organization was obligated under a U.S. Department of Housing and Urban Development direct loan under Section 202 of the National Housing Act. The balance of the loan at the beginning of the year is included in the federal expenditures presented in the schedule. During the year ended June 30, 2017, the Organization repaid the Section 202 loan in full and received a new mortgage loan in the amount of $6,250,000 insured under Section 223(f) of the National Housing Act. The balance of the insured loan outstanding at the statement of financial position date is as follows: CFDA Number: Program Name: Section 223(f) Insured Loan Balance Outstanding Balance at June 30, 2017: $ 6,191,275 15

19 SUPPLEMENTAL SCHEDULES D/B/A DECATUR CHRISTIAN TOWERS 16

20 Statement of Financial Position D/B/A DECATUR CHRISTIAN TOWERS June 30, 2017 ASSETS CURRENT ASSETS Cash - operations $ 311, Cash - entity 1,290,706 Total cash 1,601, Tenant accounts receivable 6, Allowance for doubtful accounts 0 Net tenant accounts receivable 6, Reimbursement receivable from Gwinnett Christian Terrace, LLC State unemployment security deposit 7, Prepaid expenses 27,173 Total current assets 1,644,445 DEPOSITS HELD IN TRUST - FUNDED Tenant deposits held in trust 130,690 FUNDED RESERVES Replacement reserve 779,810 Total funded reserves 779,810 FIXED ASSETS Land 116, Buildings 7,289, Building equipment (portable) 182, Furniture for project/tenant use 66, Furnishings 225, Office furniture and equipment 71, Maintenance equipment 17, Motor vehicles 67,697 Total fixed assets 8,037, Accumulated depreciation (6,316,254) Net fixed assets 1,720,821 OTHER ASSETS Deferred debt issuance costs 135, Deferred renovation costs 80,593 Total other assets 216,277 Total Assets $ 4,492,043 The Notes to Financial Statements are an integral part of these Statements. 17

21 Statement of Financial Position D/B/A DECATUR CHRISTIAN TOWERS June 30, 2017 LIABILITIES AND NET ASSETS (DEFICIT) CURRENT LIABILITIES Accounts payable - operations $ 45, Accrued wages payable 8, Other loans and notes - operations - short term 1, Prepaid revenue 18,146 Total current liabilities 74,138 DEPOSIT LIABILITIES Tenant deposits held in trust 129,572 LONG-TERM LIABILITIES Other loans and notes payable - operations 4,726 Total long-term liabilities 4,726 Total liabilities 208,436 NET ASSETS (DEFICIT) Unrestricted net assets (deficit) 4,283,607 Total Liabilities and Net Assets (Deficit) $ 4,492,043 The Notes to Financial Statements are an integral part of these Statements. 18

22 Statement of Net Assets (Deficit) D/B/A DECATUR CHRISTIAN TOWERS For the Year Ended June 30, 2017 NET ASSETS (DEFICIT) - BEGINNING OF YEAR $ 2,772,093 Change in net assets from operations 901,432 Transfer of funds from Gwinnett Christian Terrace, LLC 610,082 Distributions 0 NET ASSETS (DEFICIT) - END OF YEAR $ 4,283,607 The Notes to Financial Statements are an integral part of these Statements. 19

23 Statement of Activities D/B/A DECATUR CHRISTIAN TOWERS For the Year Ended June 30, 2017 RENT REVENUE Rent revenue $ 1,539, Tenant assistance payments 292,148 Total rent revenue 1,831,422 VACANCIES Apartments 11, Rental concessions 129 Total vacancies 11,457 NET RENTAL REVENUE 1,819,965 FINANCIAL REVENUE Financial revenue - project operations 1, Revenue from investments - miscellaneous 3,774 Total financial revenue 5,025 OTHER REVENUE Laundry and vending revenue 8, Tenant charges 7, Gifts 3, Miscellaneous revenue 138,851 Total other revenue 157,837 TOTAL REVENUE 1,982,827 ADMINISTRATIVE EXPENSES Conventions and meetings 6, Management consultants 7, Advertising and marketing 3, Other renting expenses 4, Office salaries 239, Office expenses 34, Office or model apartment rent 4, Audit expense 5, Miscellaneous administrative expenses 138,473 Total administrative expenses 443,965 The Notes to Financial Statements are an integral part of these Statements. 20

24 Statement of Activities - Continued D/B/A DECATUR CHRISTIAN TOWERS For the Year Ended June 30, 2017 UTILITIES EXPENSE Electricity 218, Water 19, Gas 8, Sewer 62,015 Total utilities expense 307,948 OPERATING AND MAINTENANCE EXPENSES Payroll 184, Supplies 55, Contracts 163, Garbage and trash removal 7, Security payroll/contract 83, Security rent-free unit 15, Heating/cooling repairs and maintenance 25, Vehicle and maintenance equipment operation and repairs 5, Miscellaneous operating and maintenance expenses 37,075 Total operating and maintenance expenses 576,515 TAXES AND INSURANCE Payroll taxes 42, Property and liability insurance 55, Workers' compensation 6, Health insurance and other employee benefits 74, Miscellaneous taxes, licenses, permits and insurance 5,633 Total taxes and insurance 184,457 FINANCIAL EXPENSES Interest on notes payable (long-term) 622 Total financial expenses 622 TOTAL COST OF OPERATIONS BEFORE DEPRECIATION 1,513,507 CHANGE IN UNRESTRICTED NET ASSETS BEFORE DEPRECIATION 469, Depreciation expense 248,512 OPERATING PROFIT (LOSS) 220,808 CORPORATE OR MORTGAGOR REVENUE AND EXPENSES Entity revenue - developer's fee (680,000) Entity revenue (638) Bank charges 14 Net mortagor expense (revenue) (680,624) CHANGE IN UNRESTRICTED NET ASSETS FROM OPERATIONS $ 901,432 The Notes to Financial Statements are an integral part of these Statements. 21

25 Statement of Cash Flows D/B/A DECATUR CHRISTIAN TOWERS For the Year Ended June 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Revenues: Rental revenue $ 1,800,055 Financial revenue 5,663 Gifts 3,402 Other revenue 834,435 2,643,555 Expenses: Administrative expenses 202,557 Utility expense 308,662 Payroll expenses 422,883 Operating and maintenance expense 375,099 Property insurance 70,267 Miscellaneous taxes and insurance 127,917 Tenant security and other deposits 642 Interest on copier loan 622 1,508,649 Net cash provided (used) by operating activities 1,134,906 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (321,259) Decrease (increase) in reserve for replacement 43,805 Net cash provided (used) by investing activities (277,454) CASH FLOWS FROM FINANCING ACTIVITIES: Copier loan principal payments (1,766) Repayment of advances by Gwinnett Christian Terrace, LLC 56,961 Funds transferred from Gwinett Christian Terrace, LLC 610,082 Debt issuance costs paid (127,684) Net cash provided (used) by financing activities 537,593 The Notes to Financial Statements are an integral part of these Statements. 22

26 Statement of Cash Flows - Continued D/B/A DECATUR CHRISTIAN TOWERS For the Year Ended June 30, 2017 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 1,395,045 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 206,720 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,601,765 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets from operations $ 901,432 Adjustments to reconcile change in net assets from operations to net cash provided (used) by operating activities: Depreciation 248,512 Decrease (increase) in: Accounts receivable - tenants (6,055) Accounts receivable - other 649 Prepaid expenses (14,027) Tenant security deposits held in trust (2,632) Increase (decrease) in: Accounts payable (1,163) Accrued expenses 495 Tenant security deposits liability 1,990 Prepaid revenue 5, ,474 Net cash provided (used) by operating activities $ 1,134,906 Supplemental information regarding interest payments is as follows: Interest paid $ 622 The Notes to Financial Statements are an integral part of these Statements. 23

27 Supplemental Schedules D/B/A DECATUR CHRISTIAN TOWERS CHANGES IN FIXED ASSETS Assets Balance Balance 7/1/2016 Additions Disposals 6/30/2017 Land $ 116,500 $ 0 $ 0 $ 116,500 Building 7,110,402 (1) 179, ,289,684 Building equipment (portable) 167,118 (2) 14, ,096 Furniture 61,794 (3) 5, ,994 Furnishings 197,451 (4) 27, ,369 Office furniture and equipment 56,961 (5) 14, ,051 Maintenance equipment 17, ,684 Motor vehicles 67, ,697 $ 7,795,607 $ 241,468 $ 0 $ 8,037,075 Accumulated Depreciation Balance Balance 7/1/2016 Additions Disposals 6/30/2017 Land $ 0 $ 0 $ 0 $ 0 Building 5,788, , ,963,216 Building equipment (portable) 89,516 16, ,240 Furniture 37,431 8, ,348 Furnishings 91,950 29, ,590 Office furniture and equipment 22,650 9, ,469 Maintenance equipment 16, ,972 Motor vehicles 21,216 8, ,419 $ 6,067,742 $ 248,512 $ 0 $ 6,316,254 (1) - Wireless call system $85,964; wiring $53,000; HVAC units $10,018; driveway $6,650; railing $4,840; sidewalk $2,300; cameras and, DVD's $3,815; flooring $6,671; water heater power, water meter, trash receptacles/standing ashtrays $6,024 (2) - Refrigerators and ranges (3) - Conference tables and chairs (4) - Flooring (5) - Media equipment $5,418; computers $3,810; file cabinet $1,319; Accushield kiosk $1,800; wireless radios $1,743 24

28 Schedule of Miscellaneous Income and Expense D/B/A DECATUR CHRISTIAN TOWERS DETAIL SCHEDULE OF MISCELLANEOUS REVENUE FROM INVESTMENTS (5490) Interest on escrow deposits $ 3,774 DETAIL SCHEDULE OF MISCELLANEOUS REVENUE (5990) Roof/antenna leases $ 97,766 Cable T.V. 28,135 Tenant meal plan program 11,818 Miscellaneous 1,132 $ 138,851 DETAIL SCHEDULE OF MISCELLANEOUS ADMINISTRATIVE EXPENSES (6390) Service coordinator salary and expenses $ 86,245 Resident activities and programs 17,919 Tenant meal plan program 11,909 Affiliation dues 3,529 Staff events and programs 5,223 Resource center 8,644 Miscellaneous 5,004 $ 138,473 DETAIL SCHEDULE OF MISCELLANEOUS OPERATING AND MAINTENANCE EXPENSES (6590) Cable T.V. $ 37,075 DETAIL SCHEDULE OF MISCELLANEOUS TAXES, LICENSES, PERMITS AND INSURANCE (6790) Other insurance $ 5,633 OTHER INFORMATION Total principal payments required under the mortgage: $ -0- Replacement reserve deposits required by the regulatory agreement: $ -0- Replacement reserve or residual receipts releases included as expense items on the profit and loss statement: $ -0- Project improvement reserve releases under the flexible subsidy program included as expense items on the profit and loss statement: $ -0-25

29 COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS Project Name Fiscal Period Ended: Project Number DECATUR CHRISTIAN TOWERS June 30, 2017 Part A - Compute Surplus Cash Cash 1. Cash (Accounts 1120 and 1191) $ 441, Tenant subsidy vouchers due for period covered by financial statement $ 3. Other : Replacement Reserve withdrawals in transit. $ (a) Total Cash (Add Lines 1, 2 and 3) $ 441,749 Current Obligations 4. Accrued mortgage interest payable. $ 5. Delinquent mortgage principal payments. $ 6. Delinquent deposits to reserve for replacements $ 7. Accounts payable (due within 30 days). $ 45, Loans and notes payable (due within 30 days). $ 9. Deficient tax insurance or MIP escrow deposits $ 44, Accrued expenses (not escrowed). $ 8, Prepaid revenue (Account 2210). $ 18, Tenant deposits held in trust (Account 2191) $ 129, Other- Adjustment - project not subject to residual receipts requirements $ 195,954 (b) Less Total Current Obligations (Add lines 4 through 13) $ 441,749 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ Part B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS 1. Surplus Cash $ 2a. Annual Distribution Earned During Fiscal Period Covered by the statement $ 2b. Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period $ 2c. Distributions Paid During Fiscal Period Covered by Statement $ 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (Line 2a plus 2b minus 2c). $ 4. Amount Available for Distribution During Next Fiscal Period. $ 5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ Note: The project's only business agreement with HUD is the Section 8 contract and, accordingly, the project is not subject to residual receipts restrictions or requirements. The above schedule is prepared solely to provide information required for HUD processing and validation purposes when the financial statements are submitted electronically to HUD as required by HUD's Uniform Financial Reporting Standards. 26

30 SUPPLEMENTAL SCHEDULES GWINNETT CHRISTIAN TERRACE, LLC HUD PROJECT NO. 061-EH014-L8-WAC 27

31 Statement of Financial Position HUD PROJECT NO GWINNETT CHRISTIAN TERRACE, LLC June 30, 2017 ASSETS CURRENT ASSETS Cash - operations $ 36, Cash - entity 489,741 Total cash 525, Accounts receivable - HUD 1, State unemployment security deposit 7, Prepaid expenses 24,089 Total current assets 558,925 DEPOSITS HELD IN TRUST - FUNDED Tenant deposits held in trust 39,501 FUNDED RESERVES Escrow deposits 34, Replacement reserve 252, Non-critical repair escrow 1,192,493 Total funded reserves 1,479,928 FIXED ASSETS Land 155, Buildings 9,172, Building equipment (portable) 200, Furniture for project/tenant use 69, Furnishings 147, Office furniture and equipment 67, Maintenance equipment 5, Motor vehicles 72,037 Total fixed assets 9,889, Accumulated depreciation (5,381,742) Net fixed assets 4,507,554 Total Assets $ 6,585,908 The Notes to Financial Statements are an integral part of these Statements. 28

32 Statement of Financial Position HUD PROJECT NO GWINNETT CHRISTIAN TERRACE, LLC June 30, 2017 LIABILITIES AND NET ASSETS (DEFICIT) CURRENT LIABILITIES Accounts payable - operations $ 39, Accounts payable - renovation costs 546, Accrued wages payable 3, Accrued interest payable - first mortgage 15, Mortgage payable - first mortgage - short term 103, Other loans and notes - operations - short term 1, Reimbursement payable to Decatur Christian Towers 722 Total current liabilities 710,626 DEPOSIT LIABILITIES Tenant deposits held in trust 38,024 LONG-TERM LIABILITIES Mortgage payable - first mortgage 6,088, Other loans and notes payable - operations 4, Debt issuance costs (991,146) Total long-term liabilities 5,101,715 Total liabilities 5,850,365 NET ASSETS (DEFICIT) Unrestricted net assets (deficit) 735,543 Total Liabilities and Net Assets (Deficit) $ 6,585,908 The Notes to Financial Statements are an integral part of these Statements. 29

33 Statement of Net Assets (Deficit) HUD PROJECT NO GWINNETT CHRISTIAN TERRACE, LLC For the Year Ended June 30, 2017 NET ASSETS (DEFICIT) - BEGINNING OF YEAR $ 1,199,753 Change in net assets from operations 145,872 Contributions 0 Transfer of funds to Decatur Church of Christ Senior Housing, Inc. (610,082) NET ASSETS (DEFICIT) - END OF YEAR $ 735,543 The Notes to Financial Statements are an integral part of these Statements. 30

34 Statement of Activities HUD PROJECT NO GWINNETT CHRISTIAN TERRACE, LLC For the Year Ended June 30, 2017 RENT REVENUE Rent revenue $ 507, Tenant assistance payments 1,067,161 Total rent revenue 1,575,000 VACANCIES Apartments 90,353 Total vacancies 90,353 NET RENTAL REVENUE 1,484,647 FINANCIAL REVENUE Financial revenue - project operations Revenue from investments - replacement reserve Revenue from investments - miscellaneous 2,041 Total financial revenue 2,311 OTHER REVENUE Laundry and vending revenue 8, Tenant charges Gifts 65, Miscellaneous revenue 24,965 Total other revenue 100,066 TOTAL REVENUE 1,587,024 ADMINISTRATIVE EXPENSES Conventions and meetings 3, Management consultants 12, Advertising and marketing Other renting expenses 3, Office salaries 189, Office expenses 21, Office or model apartment rent 4, Legal expense - project Audit expense 7, Bad debts 1, Miscellaneous administrative expenses 52,976 Total administrative expenses 296,845 The Notes to Financial Statements are an integral part of these Statements. 31

35 Statement of Activities - Continued HUD PROJECT NO GWINNETT CHRISTIAN TERRACE, LLC For the Year Ended June 30, 2017 UTILITIES EXPENSE Electricity 87, Water 28, Gas 20, Sewer 18,483 Total utilities expense 153,962 OPERATING AND MAINTENANCE EXPENSES Payroll 126, Supplies 46, Contracts 124, Garbage and trash removal 3, Security payroll/contract 38, Security rent-free unit 25, Heating/cooling repairs and maintenance 6, Vehicle and maintenance equipment operation and repairs 1, Miscellaneous operating and maintenance expenses 20,027 Total operating and maintenance expenses 393,233 TAXES AND INSURANCE Payroll taxes 30, Property and liability insurance 33, Workers' compensation 4, Health insurance and other employee benefits 51, Miscellaneous taxes, licenses, permits and insurance 5,633 Total taxes and insurance 125,480 FINANCIAL EXPENSES Interest on mortgage payable 184, Interest on notes payable (long-term) Mortgage insurance premium/service charge 10,734 Total financial expenses 195,471 TOTAL COST OF OPERATIONS BEFORE DEPRECIATION 1,164,991 CHANGE IN UNRESTRICTED NET ASSETS BEFORE DEPRECIATION 422, Depreciation expense 276,161 CHANGE IN UNRESTRICTED NET ASSETS FROM OPERATIONS $ 145,872 The Notes to Financial Statements are an integral part of these Statements. 32

36 Statement of Cash Flows HUD PROJECT NO GWINNETT CHRISTIAN TERRACE, LLC For the Year Ended June 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Revenues: Rental revenue $ 1,454,324 Financial revenue 2,311 Gifts 65,806 Other revenue 24,430 1,546,871 Expenses: Administrative expenses 99,259 Utility expense 155,972 Payroll expenses 315,853 Operating and maintenance expense 241,261 Escrow deposits 34,931 Property insurance 41,422 Miscellaneous taxes and insurance 88,625 Tenant security and other deposits 876 Interest on mortgage 158,108 Interest on copier loan 622 Mortgage insurance premiums 17,244 1,154,173 Net cash provided (used) by operating activities 392,698 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,325,588) Proceeds from sale of bus 13,410 Decrease (increase) in reserve for replacement 314,807 Decrease (increase) in non-critical repair escrow (1,192,493) Net cash provided (used) by investing activities (3,189,864) CASH FLOWS FROM FINANCING ACTIVITIES: Mortgage principal payments (136,012) Proceeds from Section 223(f) mortgage 6,250,000 Payoff of Section 202 direct loan (1,343,167) Copier loan principal payments (1,765) Transfer of funds to Decatur Church of Christ Senior Housing, Inc. (610,082) Repayment of advances to Decatur Church of Christ Senior Housing, Inc. (56,961) Debt issuance costs paid (923,591) Net cash provided (used) by financing activities 3,178,422 The Notes to Financial Statements are an integral part of these Statements. 33

37 Statement of Cash Flows - Continued HUD PROJECT NO GWINNETT CHRISTIAN TERRACE, LLC For the Year Ended June 30, 2017 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 381,256 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 144,526 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 525,782 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets from operations $ 145,872 Adjustments to reconcile change in net assets from operations to net cash provided (used) by operating activities: Depreciation 276,161 Amortization of debt issuance costs 19,245 Gain on disposal of assets (9,830) Decrease (increase) in: Accounts receivable - other 287 Prepaid expenses (14,147) Tenant security deposits held in trust 3,247 Mortgage escrow deposits (34,931) Increase (decrease) in: Accounts payable 4,155 Accrued interest payable 6,762 Tenant security deposits liability (4,123) 246,826 Net cash provided (used) by operating activities $ 392,698 Supplemental information regarding interest payments is as follows: Interest paid $ 158,730 The Notes to Financial Statements are an integral part of these Statements. 34