ALBANY HOUSING AUTHORITY Albany, New York. COMPARATIVE FINANCIAL STATEMENTS For the Years Ended June 30, 2011 and 2010

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1 Albany, New York COMPARATIVE FINANCIAL STATEMENTS For the Years Ended and 2010

2 Albany, New York FINANCIAL STATEMENTS TABLE OF CONTENTS PAGE Management's Discussion and Analysis Independent Auditors' Report FINANCIAL STATEMENTS Comparative Statements of Net Assets Comparative Statements of Revenues, Expenses and Changes in Net Assets Comparative Statements of Cash Flows Notes to Financial Statements SUPPLEMENTAL INFORMATION Schedule of Expenditures of Federal Awards Financial Data Schedule Combining Component Unit Schedules OTHER REPORTS AND COMMENTS Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements Applicable to each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A Schedule of Findings and Questioned Costs 65

3 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2011 As Management of the Authority, we offer readers of the Authority's financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended June 30, We encourage readers to consider the information presented here in conjunction with the Authority's financial statements as presented elsewhere in this Report. A- Financial Highlights 1- The assets of the Authority exceeded its liabilities at the close of the most recent fiscal year by $37,447,502 (net assets) as opposed to $40,512,824 for the prior fiscal year. 2 - As of the close of the current fiscal year, the Authority reported ending Unrestricted Net Assets of $8,874, The Authority's cash and cash equivalent and investment balance at was $11,730,765 (excluding tenant security deposits) representing a decrease of $991,118 from the prior fiscal year. The decrease is partially attributed to the acquisition of fixed assets from operations. 4 - The Authority had Total Operating Revenues of $34,854,083 and Total Operating Expenses of $36,395,898 for the year ended. 5 - The Authority's capital outlays for the fiscal year were $4,103,576 of which $2,519,667 was funded by the Capital Fund Program and Stimulus Grants, 116,427 was funded by CDBG and the remaining $1,467,482 was funded through operating reserves on the Low Rent Program. 6 - The Authority's Expenditures of Federal Awards amounted to $27,983,303 for the fiscal year. B- Using the Annual Report 1 - Management's Discussion and Analysis The Management's Discussion and Analysis is intended to serve as an introduction to the Authority's financial statements. The Authority's Financial Statements and Notes to Financial Statements included in the this Report were prepared in accordance with Generally Accepted Accounting Principles (GAAP) applicable to governmental entities in the United States of America for Proprietary Fund types. 2 -Financial Statements The financial statements are designed to provide readers with a broad overview of the Authority's finances, in a manner similar to a private-sector business. They consist of Comparative Statements of the Net Assets, Comparative Statements of Revenues, Expenses and Changes in Net Assets and Comparative Statements of Cash Flows. 1

4 MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED The Comparative Statements of Net Assets presents information on all the Authority's assets and liabilities, with the difference between the two reported as net assets. Increases or decreases in net assets will serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. The Comparative Statements of Revenues, Expenses and Changes in Net Assets presents information showing how the Authority's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of unrelated cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g.; depreciation and earned but unused vacation leave). The financial statements report on the Authority's activities. The activities are primarily supported by HUD subsidies and grants. The Authority's function is to provide decent, safe and sanitary housing to low income and special needs populations. The financial statements can be found on pages 13 through Notes To Financial Statements The Notes to Financial Statements provide additional information that is essential to a full understanding of the data provided in the financial statements. The Notes to Financial Statements can be found in this report after the financial statements. 4- Supplemental Information C -The Authority as a Whole The Schedule of Expenditures of Federal Awards is presented for purpose of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-profit Organizations. The schedule of expenditures of Federal awards can be found on page 51 of this report. The Authority's Net Assets decreased during the fiscal year by $3,065,322 as detailed below. The Authority's revenues consist primarily of rents and subsidies and grants received from HUD. The Authority receives subsidies each month based on a preapproved amount by HUD. Grants are drawn down based on need against a preauthorized funding level. The Authority's operating revenues of $34,854,083 were sufficient to cover operating expenses totaling $34,298,560 excluding $2,097,338 in depreciation expense during the fiscal year. During the current year, the Authority was required to record a liability for Other Post Employee Retirement Benefits (OPEB) which amounted to $605,789. Additionally, the Authority posted as one time charge for $4,348,854 for the loss incurred in the disposition of the Ezra Prentice Project and the write down of construction in progress for Replacement Housing Factor funds used for the development of Swan Street Homes, LLC, a component unit of the Authority. Those construction costs are now reported on the financial statements of the tax credit entity. 2

5 D - Budgetary Highlights ALBANY HOUSING AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED For the year ended, individual project budgets were prepared by the Authority and were approved by the Board of Commissioners. The budgets were primarily used as a management tool and have no legal stature. The budgets were prepared in accordance with the accounting procedures prescribed by the applicable funding agency. Below is a consolidated summary of the project Budgets exclusively. Comparison Budget vs. Actual - Low Income Public Housing Exculding the COCC Tenant Rental Revenue Investment Income Fee For Service Other Income Total Operating Revenue Operating Expenses: Administrative Asset Management Fee Tenant Services Utilities Maintenance Protective Services General Expense Nonroutine Expenditures Interest Expense Bad Debt Total Operating Expenses Residual Receipts/(Deficit) Operating Subsidy Budget $ 4,070, , ,300 4,559,001 3,950, , '135 2,055,950 4,258, ,550 1,101,200 12,010,802 (7,451,801) 5,497,577 Capital Fund Operating Grants 1,954,224 Capital Fund Capital Grants & NYSERDA Loss on Sale of Assets Depreciation Expense Residual Receipts/(Deficit) $ Actual $ 4,484,583 11, ,932 5,364,314 4,214, , ,608 2,321,826 4,782, ,468 1 '131 '166 53, ,371 45,347 13,417,257 (8,052,943) 6,357,134 1,954, ,554 (4,349,380) {1,739,870) $ (5,002,281) Fav./(Unfav.) Variance $ 413,978 11, , , ,313 (264,234) (73,473) (265,876) (524,471) (13,918) (29,966) (53,799) (135,371) (45,347) (1,406,455) (601,142) 859, ,554 (4,349,380) (1,739,870) $ (5,002,281) The Authority has transitioned to asset management and in accordance with HUD guidelines and has included the Capital Fund Program activities with the Low Rent Activities. Accordingly, $828,554 and $4,349,380 must be deducted and added back, respectively from operations since capital grants loss on sale of assets do not affect unrestricted net assets. Although the Authority does not budget for depreciation, it has recorded $1,739,870 for the fiscal year. Since depreciation and capital grants and loss on sale of assets do not affect unrestricted net assets, the residual receipts when adjusted for both would be equal to $258,415. 3

6 MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED Statements of Net Assets 6/30/2011 6/30/2010 Net Change Cash & Equivalents $ 8,206,367 $ 9,023,065 $ (816,698) Current Assets 6,588,162 6,730,377 (142,215) Non Current Assets 2,873,626 2,897,393 (23,767) Capital Assets 30,403,172 32,745,809 (2,342,637) Total Assets $ 48,071,327 $ 51,396,644 $ (3,325,317) Current Liabilities 3,402,390 3,699,417 (297,027) Non Current Liabilities 7,221,435 7,184,403 37,032 Total Liabilities 10,623,825 10,883,820 (259,995) Net Capital Assets 27,690,602 29,203,331 (1,512,729) Restricted Net Assets 882,852 1,710,118 (827,266) Unrestricted Net Assets 8,874,048 9,599,375 (725,327) Total Net Assets 37,447,502 40,512,824 (3,065,322) Net Assets and Liabilities $ 48,071,327 $ 51,396,644 $ (3,325,317) Statements of Revenues, ExQenses and Net Assets Tenant Rental Revenue $ 5,280,781 $ 5,826,128 $ (545,347) HUD Operating Grants 25,277,725 23,881,941 1,395,784 Other Revenue 4,295,577 3,375, ,544 Total Operating Revenue 34,854,083 33,083,102 1,770,981 Operating Expenses: Administrative 8,231,677 6,974,374 1,257,303 Tenant Services 390, ,610 (18,477) Utilities 2,577,112 2,595,149 (18,037) Maintenance 4,924,309 4,793, ,489 General Expenses 1,501, , ,918 Housing Assistance Payments 14,366,205 13,873, ,475 Tenant Bad Debt 52,737 44,670 8,067 Bad Debt - Other 1,928,398 4,320,648 (2,392,250) Non-Routine Maintenance 75, ,469 (137,434) Depreciation 2,097,338 2,448,042 (350,704) Protective Services 204, ,317 9,603 Interest Expense 135, ,071 (21,700) Total Operating Expenses 36,484,501 36,920,248 (435,747) Operating Revenue (1,630,418) {3,837,146) 2,206,728 Interest Income 277,856 90, ,104 (Loss) on Sale of Fixed Assets (4,348,854) (1,099,876) (3,248,978) Capital Grants 2,636,094 3,920,566 (1,284,472) Decrease in Net Assets (3,065,322) (925,704) (2,139,618) Beginning Net Assets 40,512,824 41,826,410 (1,313,586) Prior Period Adjsutment (387,882) 387,882 Ending Net Assets $ 37,447,502 $ 40,512,824 $ (3,065,322) 4

7 MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED The Following Charts illustrate the Authority's financial activity on the previous page. Revenues By Funding Source 2011 Shelter Care Plus VASH Mod Rehab & New Construction 2% Capital Fund Grants 4% 10% Other Tenant Revenue 17% Housing Choice Voucher 41% PHA Operating Grants 22% 2011 Revenues vs Revenues $30,000,000., C1l ::1 s:::: C1l > C1l cc: $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- Tenant Rental Revenue 2011 $5,280,781 HUD Operating Grants 25,277,725 Other Revenue 4,295,577 HUD Capital 2,636, $5,826,128 23,881,941 3,375,033 3,920,566 5

8 MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED Maintenance 14% Operating Expenses 2011 Depreciation 6% Bad Debt 6% Administration 23% Tenant Utilities 7% 3% ==-----Housing Assistance Payments 38% 2011 Expenses Vs Expenses 1/) Q) 1/) 1: Q) 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 c. )( w 6,000,000 4,000,000 2,000,000 6

9 MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED E. Summary of Programs Administered Conventional Public Housing - Under the Conventional Public Housing Program, the Authority rents units that it owns to low-income households. The Conventional Public Housing Program is operated under an Annual Contributions Contract (ACC) with HUD, and HUD provides Operating Subsidy and Capital Grant funding to enable the PHA to provide the housing at a rent that is based upon 30% of household income. The Conventional Public Housing Program also includes the Capital Fund Program, which is the primary funding source for physical and management improvements to the Authority's properties. Housing Choice Voucher Program - Under the Housing Choice Voucher Program, the Authority administers contracts with independent landlords that own the property. The Authority subsidizes the family's rent through a Housing Assistance Payment made to the landlord. The program is administered under an Annual Contributions Contract (ACC) with HUD. HUD provides Annual Contributions Funding to enable the Authority to structure a lease that sets the participants' rent at 30% of household income. Other Non-major Programs - In addition to the major programs above, the Authority also maintains the following non-major programs. Non-major programs are defined as programs that have assets, liabilities, revenues, or expenses of less than 5% of the Authority's total assets, liabilities, revenues or expenses: Summer Food Service Program for Children - Assists States through grants-in-aid and other means, to conduct nonprofit food service programs for low-income children during the summer months and at other approved times, when schools are out of session or are closed for vacation. Shelter Plus Care- Provides rental assistance, in connection with supportive services funded from sources other than this program, to homeless persons with disabilities (primarily persons who are seriously mentally ill; have chronic problems with alcohol, drugs, or both, or have acquired immunodeficiency syndrome and related diseases) and their families. The program provides assistance through four components: (1) Tenant-based Rental Assistance (TRA); (2) Sponsor-based Rental Assistance (SRA); (3) Projected-based Rental Assistance (PRA); (4) and Single Room Occupancy for Homeless Individuals (SRO). Capital Fund Stimulus and Competitive Stimulus Grants - Grants provided by the American Recovery Reinvestment Act to stimulate the economy by funding for 'shovel ready projects." Projects funded by the Stimulus funds must have been included in the Authority's annual plan submitted to HUD each year. During the fiscal year, the Authority received a combined total of $3,407,403 of which the majority went to developing the Ezra Prentice Project discussed below. Community Development Block Grants (CDBG) - A flexible program that provides communities with resources to address community development needs. 7

10 MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED E. Summary of Programs Administered -continued Business Activities - activities. Represents non-hud resources developed from a variety of Ezra Prentice Project - During the prior fiscal year, the Authority applied for and received permission from the United States Department of Housing and Urban Development to "De-federalize" one of its Projects commonly known as Ezra Prentice. The Authority applied for and was awarded tax credits under Section 42 of the IRS Code of 1986 as amended. On December 30, 2009, the Authority sold the Ezra Prentice Building to Ezra Prentice Homes Redevelopment, LLC (the Company) in return for a promissory note and mortgage in the amount of $3,150,000. The Authority is partners in the Company with PNC Bank who is the Equity Partner. F- Summary of Significant Changes from Fiscal Year June 30, 2010: 1. The decrease in restricted cash is attributed to the release of State & Local Funds by the State of New York. The restriction on those funds was released when the Authority received permission to "federalize" Townsend Homes. 2. Accounts Receivable -Other is comprised of salary allocations other costs as well as management fees due from the Authority's component units. 3. Land and Buildings increased by a net amount of $3,332,349 due to the sale of the Ezra Prentice Project and the transfer of construction in progress to the buildings line item.. 4. Construction in Progress decreased due to the transfer of Construction costs to fixed assets. 5. Accounts Payable decreased in the current year because the Authority recorded the construction payables as other current liabilities instead of accounts payable. 6. Other non-current liabilities increased due to the Authority implementing GASB-45. Under GASB-45 the Authority was required to record a liability for Other Post Employee Retirement Benefits (OPES) in the amount of $605, Accounts Receivable- HUD- The increase represents operating subsidy related to the Low Rent Public Housing Program. 8 Accounts Payable HUD decreased for amounts related to Supportive Housing Program. 9 Deferred Revenues increased by $107,334 primarily because of deferred operating subsidy received in advance for AMPS 4 & 7. 8

11 MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED F- Summary of Significant Changes from Fiscal Year September 30, Administrative costs increased due to increases in employee health and pension benefits. Additionally, the FDS line item other increased by $586,784. This amount represents the increase operating subsidy transferred to the Authority's component units which have ACC contracts. 11 Loss on Sale of Assets pertains to the sale of the Ezra Prentice Project. 12 Bad Debts decreased because in the prior year the Authority provided for a reserve for the entire note receivable from the sale of the Ezra Prentice Project. 13 General Expense increased primarily because of the inclusion of the capital fund grant costs provided to finance the construction loan on Ezra Prentice Tax credit project. The amount of funding provided was $547, Utility costs have continued to decrease due to a decrease in gas prices and a decrease in consumption because of energy efficiency improvements. G- Capital Assets and Debt Administration 1 - Capital Assets As of the Authority's investment in capital assets for its Proprietary Fund was $30,403,172 (net of accumulated depreciation). This investment in capital assets includes land, buildings, equipment and construction in progress. Major capital assets purchased from grants of $2,636,094 during the fiscal year pertained to expenditures made in accordance with the Authority's Capital Fund and Federal Stimulus Programs. These activities are funded by grants from HUD. Additional informational on the Authority's capital assets can be found in Note 7 to the Financial Statements which is included in this Report. 2- Long Term Debt The Authority has a capital lease obligation for energy saving equipment installed at the Authority's properties in the amount of $5,651,541. Additional information can be found in Note 16 to the Authority's financial statements. 9

12 MANAGEMENT'S DISCUSSION AND ANALYSIS- CONTINUED H - Economic Factors and Next Year's Budgets and Rates The following factors were considered in preparing the Authority's budget for the fiscal year ending June 30, The state of the economy, particularly in light of current world and domestic affairs. 2 - The need for Congress to balance the budget and the possible cut-back on HUD subsidies and grants. 3- The use of the Authority's Unrestricted Net Assets to fund any shortfalls rising from a possible economic downturn and reduced subsidies and grants. The Authority's Unrestricted Net Assets appear sufficient to cover shortfalls. I - Contacting the Authority's Financial Management The financial report is designed to provide a general overview of the Authority's finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Albany Housing Authority, attention Steven T. Longo, Executive Director 200 South Pearl Street Albany, New York

13 CERTIFIED PUBLIC ACCOUNTANTS 2035 HAMBURG TURNPIKE, UNIT H WAYNE, NEW JERSEY TELEPHONE: (973) FAX: (973) POLCARICO~OPTONLINE.NET INDEPENDENT AUDITORS' REPORT Board of Commissioners Albany Housing Authority Albany, New York We have audited the accompanying Statements of Net Assets of the Albany Housing Authority, herein referred to as the Authority, as of and 2010 and the related statements of revenue, expenses and changes in net assets and cash flows and the aggregate discretely presented component units which collectively comprise the Authority's basic financial statements. These financial statements are the responsibil.ity of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audits. As described in the notes to financial statements, the Authority includes eight partnerships and three not for profits in its financial statements as Component Units. We audited the financial statements of ten of those Component Units. We did not audit the financial statements of Ezra Prentice Homes Redevelopment, LLC, which statements reflect fourteen percent and less than one percent of total assets as of December 31, 2010 and 2009 respectively, and total revenues of less than one percent for the years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Ezra Prentice Redevelopment, LLC, is based solely on the report of the other auditors. We conducted our audits 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 we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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, based on our audits and the report of other auditors the financial statements referred to above present fairly, in all material respects, the financial position of the Authority as of and 2010 and the results of its operations, changes in net assets and cash flows for the years then ended in conformity with generally accepted accounting principles generally accepted in the United States of America. 11

14 INDEPENDENT AUDITORS' REPORT (Continued) In accordance with governmental Auditing Standards, we have also issued our report dated March 31, 2011 on our consideration of the Authority's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants 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 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 issued by the Comptroller General of the United States and should be read in conjunction with this report in considering the results of our audit. The Management's Discussion and Analysis as detailed in this report is not a required Part of the financial statements, but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audits were performed for the purpose of forming an opm1on on the financial statements of the Authority. The supplemental information contained in this Report is presented for the purposes of additional analysis and is not a required part of the financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for the purposes of additional analysis as required by the Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements of the Authority. Lastly, the supplemental information on the accompanying Financial Data Schedule is presented for the purpose of additional analysis and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. 62 /ccu&rc!' ~;? POLCARI & COMPANY CERTIFIED PUBLIC ACCOUNTANTS Wayne, New Jersey March 29, ~~~oo.l CERTIFIED PUBLIC ACCOUNTANTS

15 Albany, New York COMPARATIVE STATEMENTS OF NET ASSETS At and 2010 ASSETS Albany Housing Albany Housing Restated Authority Component Combined Authority Component Combined 2011 Units Total 2010 Units Total CURRENT ASSETS Cash and Cash Equivalents- Unrestricted $ 6,761,656 $ 2,324,947 $ 9,086,603 $ 6,946,410 $ 1,739,489 $ 8,685,899 Cash and Cash Equivalents- Restricted 1,042,387 9,107,874 10,150,261 1,710,118 2,327,488 4,037,606 Cash- Tenant Security Deposits & FSS Deposits 402, , , , , ,336 Investments 3,926,722-3,926,722 4,065,355-4,065,355 Accounts Receivable- Tenants (Net of Allowance for Doubtful Accounts of $27,011 and $23,556 Respectively) 121,324 92, , ,041 54, ,637 Accounts Receivable- HUD 1 '193,613-1,193, , ,731 Accounts Receivable - Other 978, ,051 1,131,710 1,546, ,757 1,699,661 Interest Receivable 109, , , ,468 Inventories Net of Obsolete Inventory of ($1 05,676 & $84,470) 226, , , ,409 Prepaid Expenses and Deferred Charges 31, , , ,469 89, ,399 Total Current Assets 14,794,529 12,130,786 26,925,315 15,753,442 4,659,059 20,412,501 FIXED ASSETS Land 2,151,155 4,459,953 6,611 '108 2,472,304 5,046,241 7,518,545 Buildings 112,362,148 89,409, ,771, ,302,799 89,595, ,898,059 Furniture, Equipment and Machinery 2,090, ,491 2,994,249 1,831, ,007 2,737,006 Construction in Progress 15,310,128 16,551,585 31,861,713 18,552,389-18,552,389 Total Fixed Assets 131,914, ,324, ,238, ,159,491 95,546, ,705,999 Less: Accumulated Depreciation (1 01,511,017) (16,692,437) (118,203,454) (99,413,682) (13,975,020) (113,388,702) Net Fixed Assets 30,403,172 94,631, ,034,767 32,745,809 81,571, ,317,297 OTHER ASSETS Due from Affiliated Not for Profit 2,694,265-2,694,265 2,694,265-2,694,265 Forgivable Mortgages Receivable 179, , , ,128 Intangible Assets - 1,940,494 1,940,494-1,266,514 1,266,514 Accumulated Amortization - (331,600) (331,600) - (235,347) (235,347) Notes, Mortgages & Interest Receivable- Component Units 66,125,496-66,125,496 48,399,259-48,399,259 Allowance for Mortgages (66, 125,496) - (66, 125,496) (48,399,259) - (48,399,259) Total Other Assets 2,873,626 1,608,894 4,482,520 2,897,393 1,031,167 3,928,560 TOTAL ASSETS $ 48,071,327 $108,371,275 $ 156,442,602 $ 51,396,644 $ 87,261,714 $ 138,658,358 The accompanying notes are an integral part of these financial statements. 13

16 Albany, New York COMPARATIVE STATEMENTS OF NET ASSETS At and 2010 LIABILITIES AND NET ASSETS Albany Housing Albany Housing Restated Authority Component Combined Authority Component Combined 2011 Units Total 2010 Units Total CURRENT LIABILITIES Accounts Payable: Vendors and Contractors $ 958,447 $ 693,378 $ 1,651,825 $ 1,869,998 $ 970,280 $ 2,840,278 Accrued Expenses 405,024 3,881,464 4,286, , , ,397 Due to Tenants: Security Deposits and Escrow Deposits 402, , , , , ,589 Due to HUD 93,335-93, , ,553 Accrued Liabilities: Compensated Absences - Current Portion 35,314 34,537 69,851 32,375 28,536 60,911 Due to Other Governments 225,219 79, , ,133 74, ,472 Other Current Liabilities 503, ,880 1 '110, ,759 2,539,604 2,591,363 Deferred Revenues 168,650 32, ,666 61,316 46, ,543 Current Portion of Long Term Debt 610,781 1,997,669 2,608, , , ,168 Total Current Liabilities 3,402,391 7,593,857 10,996,248 3,699,417 4,280,857 7_,980,274 NON CURRENT LIABILITIES Long Term Debt (Net of Current Portion) 5,040,760 68,469,058 73,509,818 5,651,681 54,839,853 60,491,534 Accrued Compensated Absences - Noncurrent 317,820 32, , ,931 29, ,928 Accrued Interest- Non Current - 10,399,286 10,399,286 8,580,753 8,580,753 Other Long Term Liabilities 11,710 2,065,793 2,077,503-1,904,574 1,904,574 OPES Liability 1,691,609-1,691,609 1,085,820-1,085,820 Obligations Under Interest Rate Swap - 134, , , ,916 FSS and Home-ownership Escrow Deposits 159, , , ,971 Total Non-Current Liabilities 7,221, '101,735 88,323,169 7,184,403 65,470,093 72,654,496 TOTAL LIABILITIES 10,623,825 88,695,592 99,319,417 10,883,820 69,750,950 80,634,770 NET ASSETS Invested in Net Fixed Assets Net of Related Debt 27,690,602 27,234,008 54,924,610 29,203,331 26,576,529 55,779,860 Restricted Net Assets 882,852 2,846,074 3,728,926 1,710,118 2,327,488 4,037,606 Unrestricted Net Assets 8,874,048 (1 0,404,399) (1,530,351) 9,599,375 (11,393,253) (1,793,878) Total Net Assets 37,447,502 19,675,683 57,123,185 40,512,824 17,510,764 58,023,588 TOTAL LIABILITIES AND NET ASSETS $ 48,071,327 $108,371,275 $ 156,442,602 $ 51,396,644 $ 87,261,714 $ 138,658,358 The accompanying notes are an integral part of these financial statements. 14

17 Albany, New York COMPARATIVE STATEMENTS OF REVENUES, EXPENSES AND NET ASSETS For the Years Ended and 2010 Albany Housing Albany Housing Restated Authority Component Combined Authority Component Combined 2011 Units Total 2010 Units Total OPERATING REVENUES Tenant Rental Revenue $ 5,280,781 $ 5,537,953 $ 10,818,734 $ 5,826,128 $ 4,211,632 $ 10,037,760 HUD Grants- Operating 25,277,725-25,277,725 23,881,941-23,881,941 Other Government Grants 332,730 1,089,873 1,422,603 81,057-81,057 Fraud Recovery 57,508-57,508 28,031-28,031 Mortgage Interest Income 1,928,398-1,928,398 1,170,648-1,170,648 Management Fees , ,121 Other Income 1,976, ,171 2,193,112 1,066,286 1,061,357 2,127,643 Total Revenues li,854,083 6,843,997 41,698,080 32,175,212 5,272,989 37,448,201 OPERATING EXPENSES Administration 8,231,677 2,295,483 10,527,160 6,974,374 1,234,325 8,208,699 Housing Assistance Payments 14,366,205-14,366,205 13,873,730-13,873,730 Tenant Services 390, , , ,610 Utilities 2,577, ,207 3,561,319 2,595, ,375 3,370,524 Ordinary Maintenance and Operations 4,924,309 1,888,145 6,812,454 4,793,820 1,912,958 6,706,778 Protective Services 204, , ,317 2, ,191 General Expense 1,501, ,030 1,842, , ,328 1,469,676 Bad Debt Tenants 52, , ,652 44,670 40,159 84,829 Bad Debt - Other 1,928,398-1,928,398 4,320,648-4,320,648 Extraordinary Maintenance 75,035-75, , ,469 Depreciation Expense 2,097,338 2,804,205 4,901,543 2,448,042 2,675,139 5,123,181 Interest Expense 135, , , ,071 Total Operating Expenses 36,484,501 8,531,985 45,016,486 36,920,248 7,214,158 44,134,406 EXCESS OF OPERATING EXPENSES OVER REVENUES (1,630,418) (1,687,988) (3, 318,406) (4,745,036) (1,941, 169) (6,686,205) Non Operating Revenuesi(Expenses) Interest Income 277,409 12, ,569 90,752 14, ,838 Interest income- Restricted (Loss) Gain on Derivatives - (19,903) (19,903) - 35,358 35,358 Interest Expense - (2, 156,583) (2, 156,583) - (1,684,195) (1,684, 195) Gain I (Loss) on the Sale of Fixed Assets (4,348,854) - {4,348,854) {1,099,876) - (1,099,876) Income I (Loss) Before Contributions and Transfers (5,701,416) (3,852,314) (9,553,730) (5,754,160) (3,575,920) (9,330,080) Capital Grants 2,636,094-2,636,094 4,828,456-4,828,456 INCREASE (DECREASE) IN NET ASSETS (3,065,322) (3,852,314) (6,917,636) (925,704) (3,575,920) (4,501,624) Beginning Net Assets 40,512,824 17,510,764 58,023,588 41,826,410 13,544,915 55,371,325 Prior Period Adjustments and Contributed Capital - 6,017,233 6,017,233 {387,882) 7,541,769 7,153,887 Ending Net Assets $ 37,447,502 $ 19,675,683 $ 57,123,185 $ 40,512,824 $ 17,510,764 $ 58,023,588 The accompanying notes are an integral part of the financial statements. 15

18 Albany, New York COMPARATIVE STATEMENTS OF CASH FLOWS For the Years Ended and 2010 Albany Housing Albany Housing Restated Authority Component Combined Authority Component Combined CASH FLOWS FROM OPERATING ACTIVITIES 2011 Units Total 2010 Units Total Cash Received: From Tenants for Rental and Other Income 5,382,832 4,352,894 9,735,726 5,541,381 4,264,098 9,805,479 From Government Agencies for Operating Grants 25,048,313 1,063,461 26,111,774 22,874, ,593 23,840,355 For Other Operating Revenues 4,255, ,698 4,360, ,102 95, ,473 Cash Paid: To Employees for Operations (5,727,778) (973,537) (6,701,315) (5,036,485) (833,887) (5,870,372) To Related Party (547,838) - (547,838) To Suppliers for Operations (13,289,619) (4,253,487) (17,543,106) (9,491,434) (3,575,309) (13,066,743) For Housing Assistance Payments {14,366,205) - (14,366,205) (13,873,730) - (13,873,730) Net Cash Provided by Operating Activities 754, ,029 1,049,86~ 487, ,866 1,403,462 CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 287, , ,869 15, ,108 Loaned to Related Parties (245,000) - (245,000) Interest Expense - (238,945) (238,945) - (334,147) (334,147) Advances From /(To) Affiliated Program (HCV) , ,000 Payments for Permanent Loan Financing - (684,870) (684,870) Cash Paid to Reserve Accounts - (7,131,545) (7, 131,545) - (575,672) (575,672) Purchases of Property and Equipment (4, 1 03,576) (15,598,947) (19,702,523) (3,826,956) (5,161,205) (8,988,161) Proceeds (Purchase) of Investments- Net 138, ,633 1,051, ,000 1,201,962 Net Cash Used in Investing Activities (3,677,540) (23,653,995) (27,331,535) (2,468, 125) (5,905,785) (8,373,91 0) CAPITAL AND RELATED FINANCING ACTIVITIES HUD Capital Grants Received and Other 2,636,094-2,636,094 4,828,456-4,828,456 Proceeds From Construction Loans - 21,613,362 21,613,362-3,150,000 3,150,000 Principal Payments on Construction Loans - (346,118) (346,118) Cash Received from Borrowings - 3,169,000 3,169,000-5,874,662 5,874,662 Capital Contributions - 6,342,323 6,342,323-4,267,323 4,267,323 Principal Payments Paid on Notes (575,442) (6, 163,327) (6,738,769) (560,433) (7, 117,332) (7,677,765) Payment of Financing Fees and Tax Credit Fees - (672,504) (672,504) - (705,864) (705,864) FSS Escrow Deposits/(Payments) 9,564-9,564 (37,047) - (37,047) Tenant Security Deposits 35,787 1,688 37,475 8,159 3,239 11,398 Net Cash Provided For Capital and Related Financing Activities 2,106,003 23,944,424 26,050,427 4,239,135 5,472,028 9,711,163 lncrease/(decrease) in Cash and Cash Equivalents (816,698) 585,458 (231,240) 2,258, ,109 2,740,715 Cash and Cash Equivalents- Beginning of Year 9,023,065 1,739,489 10,762,554 6,764,459 1,257,380 8,021,839 Cash and Cash Equivalents- End of Year $ 8,206,367 $ _2.~24,94~ $ 10,531,314 $ 9,023,065 $ 1,739,489 $ 10,762,554 The accompanying notes are an integral part of the financial statements. 16

19 Albany, New York COMPARATIVE STATEMENTS OF CASH FLOWS For the Years Ended and 2010 RECONCILIATION OF OPERATING INCOME(LOSS) TO NET CASH PROVIDED (USED} BY OPERATIONS Albany Housing Albany Housing Restated Authority Component Combined Authority Component Combined 2011 Units Total 2010 Units Total Operating Income lncrease/(decrease) in Net Assets $ (1,630,418) $ (1,281,564) $ (2,911,982) $ (4,745,036) $ (1,912,679) $ (6,657,715) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 2,097, ,529 2,771,867 2,448,042 2,651,263 5,099,305 Amortization - 5,813 5,813-23,876 23,876 Provision for Bad Debts 23, ,798 4,338,588 1,649 4,340,237 Ground Lease - 9,642 9,642 Interest - 614, ,893 Decrease /(Increase) in Assets Accounts Receivable- Tenants (5,283) (23,938) (29,221) 14,705 24,865 39,570 Other Accounts Receivable (180,637) (59, 155) (239,792) (2,069,940) (17,693) (2,087,633) Prepaid Expenses and Deferred Charges 88,329 (34,726) 53,603 10,814 (167,993) (157, 179) Inventories 91,647-91,647 6,288-6,288 lncrease/(decrease) in Liabilities Accounts Payable (911,551) 678,702 (232,849) 184, , ,468 Accrued Expenses 130, ,340 61,921 25,525 87,446 Compensated Absences 23,828 15,043 38,871 (64,740) 17,353 (47,387) Deferred Revenue 107,334 (14,903) 92,431 (276,246) 27,601 (248,645) Due to HUD (89,218) - (89,218) 127, ,992 Other Current Liabilities 451,538 (298,372) 153,166 (149,363) (112,752) (262, 115) Other Non-Current Liabilities 607,739 4, , ,082 (4,091) 559,991 Due to Other Governments {49,914) 4,943 (44,971) 36,343 (380) 35,963 Net Cash Provided by Operating Activities $ 754,839 $ 295,029 $ 1,049,868 $ 487,596 $ 915,866 $ 1,403,462 The accompanying notes are an integral part of the financial statements. 17

20 NOTE 1 -Summary of Organization, Activities and Significant Accounting Policies: 1. Organization - The Albany Housing Authority (the Authority) is a governmental, public corporation created under federal and state housing laws. The Authority is governed by a board of seven members two of whom are residents. The non resident members serve five year terms and the resident members serve two year terms. The governing board is essentially autonomous but is responsible to the U.S. Department of Housing and Urban Development. An executive director is appointed by the Authority's Board to manage the dayto-day operations of the Authority. The Authority is responsible for the development, maintenance and management of public housing for low and moderate income families residing Albany. Operating and modernization subsidies are provided to the Authority by the federal government. The Authority has identified ten entities for inclusion in the Authority's reporting entity. The Authority has concluded that it is excluded from the City's reporting entity since the City does not designate management, does not influence operations, does not have responsibility for fiscal matters and does not have a funding relationship with the Authority. The combined financial statements include all accounts of the Authority. The Authority is the lowest level of government over which the Authority's Board of Commissioners and Executive Director exercise oversight responsibility. 2. Significant Accounting Policies a. Basis of Accounting - The financial statements of the Authority are prepared using the accrual basis of accounting in order to recognize the flow of economic resources. Under the accrual basis of accounting, transactions are recognized when they occur, regardless of when cash is received or disbursed. Revenues are recognized in the accounting period in which they are earned and become measurable, and expenses recognized in the period incurred, if measurable. Operating revenues and expenses consist of those revenues and expenses that result from the ongoing principal operations of the Authority. Non-operating revenues and expenses consist of those revenues and expenses that are related to financing and investing types of activities and result from non-exchange transactions or ancillary activities. All assets, liabilities, net assets, revenue and expenses are accounted for using a single enterprise fund for the primary government. 18

21 NOTE 1 -Summary of Organization, Activities and Significant Accounting Policies (Continued): Revenue - The major sources of revenue are various subsidies and grants received from the United States Department of Housing and Urban Development, charges to tenants and other miscellaneous revenues discussed below. Federal Grant Revenue - Operating subsidies, Housing Choice Voucher housing assistance grants and Capital Fund Program revenue received from HUD are recorded under the accrual method of accounting and are recognized in the period earned in accordance with applicable HUD guidelines. The Authority is generally entitled to receive funds from HUD under an established payment schedule, or as funds are expended funds are received under the Capital Fund Program. HUD subsidizes the Authority's Housing Choice Voucher Program based on the prior year Voucher Management Submission (VMS Report). Authorities exceeding funding levels must use reserves to fund the shortage. Authorities whose funding exceeds utilization, retain the excess amounts. However, the amounts retained must be segregated between HAP and administrative payments. Tenant Charges - Rental charges to tenants are determined and billed monthly and are recognized as revenue when billed since they are measurable and collectible within the current period. Amounts not collected at year-end are included in the balance sheet as accounts receivable, and amounts paid by tenants for the subsequent fiscal year are recorded as deferred revenue. Miscellaneous Income - Miscellaneous revenue consists primarily of miscellaneous service fees. The revenue is recorded as earned since it is measurable and available. Using the accrual basis of accounting is consistent with the proprietary fund focus on measuring all the costs of providing goods or services for the period and matching those costs with the revenues earned during the period by providing the goods or services. Report Presentation - The financial statements included in this Report were prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America applicable to governmental entities for Proprietary Fund Types. The Authority implemented the provisions of Governmental Accounting Standards Board Statement No. 34 "Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments" (Statement No. 34). The Authority also adopted the provisions of Statement No. 37 "Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments: Omnibus" and Statement NO. 38 "Certain Financial Statement Note Disclosures", which supplement Statement No. 34. Statement No. 34 established standards for all state and local governmental entities that includes a statement of net assets, a statement of activities and a statement of cash flows. It requires the classification of net assets into three components - Invested in Capital Assets, Net of Related Debt; Restricted Net Assets and Unrestricted Net Assets. These classifications are defined as follows: Invested in Capital Assets, Net of Related Debt- This component consists of land, construction in progress and depreciable assets, net of accumulated depreciation and net of the related debt outstanding. If there are significant unspent related debt proceeds as of year-end, the portion of the debt related to the unspent proceeds is not included in the calculation of Invested in Capital Assets, Net of Related Debt. Rather, that portion of the debt is included in the same net asset component as the unspent proceeds. 19

22 NOTE 1 -Summary of Organization, Activities and Significant Accounting Policies (Continued): Restricted Net Assets- This component includes net assets subject to restrictions placed on net asset use through external constraints imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by the law through constitutional provisions or enabling legislation. Unrestricted Net Assets- This component consists of net assets that do not meet the definition of Restricted Net Assets or Invested in Capital Assets, Net of Related Debt. The adoption of Governmental Accounting Standards Board Statements 34, 37 and 38 have no significant effect on the basic financial statements, except for the classification of net assets in accordance with Statement No. 34. Significant accounting policies are as follows: 1 - Cash and cash equivalents are stated at cost, which approximates market. Cash and cash equivalents include cash in banks, petty cash and certificates of deposit, and other investments with original maturities of less than three months from the date of purchase. Investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. 2 - Collection losses on accounts receivable are charged against an allowance for doubtful accounts. 3 - Buildings and equipment are recorded at cost for all programs and depreciation is computed on the straight line basis. 4 - Repairs funded out of operations, such as painting, roofing and plumbing, are charged against income for all programs. 5 - The Authority 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. 6- Operating subsidies received form HUD are recorded as income when earned. 7 - The cost of accumulated unpaid compensated absences, including fringe benefits, are reported in the period earned rather than in the period paid. 8 - Prepaid expenses represent payments made by the Authority in the current year to provide services occurring in the subsequent fiscal year. 9 - Inventories in the Proprietary Fund consist of supplies and are recorded at the lower of first-in first-out, cost or market The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. 20

23 NOTE 1 -Summary of Organization, Activities and Significant Accounting Policies (Continued): 11 - The Authority has elected not to apply to its proprietary activities Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, The Authority does not have any infrastructure assets for its Proprietary Fund. 13- Inter-fund receivables and payables arise from inter-fund transactions and are recorded by all funds affected in the period in which the transactions are executed. b. Budgetary Policy Control - The housing authority submits its annual operating and capital budgets in accordance with HUD requirements. However, HUD only approves the operating subsidy. The budget is formally adopted by resolution of the Authority's Board of Commissioners. Once adopted, the Board of Commissioners may amend the adopted budget when unexpected modifications are required in estimated revenues and expenses. Each fund's budget is prepared on a detailed line item basis. Revenues are budgeted by source and expenditures are budgeted by expense classification within each revenue source. Accounting for Impairment or Disposal of Long Lived Assets The Authority has given consideration to the Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets (SFAS 144) in its preparation of these financial statements. As of and 2010, the Authority has not recognized any reduction in the carrying value of its fixed assets when considering SFAS 144. NOTE 2- Cash and Cash Equivalents The Authority maintains cash, cash equivalents and investments in local banks. These funds are covered by collateral agreements and requires the institutions to pool collateral for all governmental deposits and have the collateral held by an approved custodian in the Authority's name. Cash and Cash Equivalents of $8,206,367 and $9,023,065 at and 2010 respectively consisted of the following: Checking/Money Market Restricted Cash Security Deposits FSS Escrow Petty Cash June $ 6,648,732 1,042, , ,686 2,277 $ 8,206,367 June 30, 2010 $ 6,944,888 1,710, , ,346 $ 1,522 9,023,065 21

24 NOTE 2- Cash and Cash Equivalents ALBANY HOUSING AUTHORITY The carrying amount of the Authority's cash and cash equivalents on deposit as of was $8,206,367 and the bank balances were $8,665,647. Of the bank balances, $299,216 was covered by FDIC insurance and $8,366,431 was covered by a collateral pool. Restricted Cash for the Low Rent Public Housing Program at pertains to funds related to Pieter Schuyler replacement and operating reserves. The funds restricted in the HCV Program are restricted as described in Note 13. The Authority's cash and cash equivalents are categorized as prescribed in GASB 40 to give an indication of the level of risk assumed by the Authority. As described above, $8,366,431 of the Authority's deposits exceeded FDIC insurance ($250,000) and was covered under a collateral pool which requires the institutions to pool collateral for all of governmental deposits and has the collateral held by an approved custodian in the institution's name. 2. Component Units The Component Units had the following cash and cash equivalents which consisted of the following: December31, 2010 December31, 2009 Checking $ 2,237,712 $ 1,547,929 Development Cash 87, ,560 Tenants Security Deposits 268, ,799 Replacement & Debt Service Reserves 9,107,874 2,327,488 $ 11,701,452 $ 4,361,776 Note 3 - Investments At and 2010 the Authority held the following investments. June June US Treasury Bills $ $ ,.:_$,4,_06,5''---35_5 3,926,722 ~$ =~4,,;,;06~5,~35~5 22

25 Note 4- Accounts Receivable Miscellaneous - Net A. Accounts Receivable Miscellaneous consisted of the following at and 2010: Due From Corning Homes Associates, LP Due From Lark Drive Associates, LP Due From McCarty Housing Development Fund Company, Inc. Due From Creighton Storey Homes, LP Due From South End Associates, LP Miscelleanous Swan Street Homes, LLC Swan Mixed Use, LLC Due From Ezra Prentice Homes Development, LLC Due From Academy Lofts Due From South Myers Housing Program Due From NYSERDA $ ,945 17,173 74,732 26,195 84,189 2,730 92, ,248 67,489 38,637 June $ 51,641 67,527 36,589 30,585 76, ,972 68,205 98, , ,271 $ 978,659 ~$==1~,5=46="'=,9=0=4 Note 5 -Loans Receivable Forgivable Mortgages Home-buyers forgiveness loans totaled $67,443 and $78,345 at and 2010 respectively. This loan remains forgivable if the homeowner remains in the home for a period of 15 years. Each year the Authority forgives one fifteenth of the outstanding loans. Sharp forgivable loans totaled $111,918 and $124,783 at and 2010 respectively. These loans remain forgivable if the homeowner remains in the home for a period of 15 years. Each year the Authority forgives one fifteenth of the outstanding loans. Total forgivable loans at and 2010 totaled $179,361 and $203,128 respectively. Accounts Receivable - Notes At June 30, 2010 and 2009 the Authority has outstanding $50,052,633 and $34,254,794 in notes receivable from its component units of which $29,689,907 are HOPE VI loans. These loans bear interest at various rates, and monthly payments are due from available cash flow. All unpaid accrued interest and principal is due in thirty to forty years. The Authority has determined that collection of these loans is doubtful and accordingly has reserved an allowance for the entire amount of the loans. Accrued interest on the loans for and 2010 amounted to $10,045,846 and $8,258,753 respectively and the Authority has reserved the entire amount. 23

26 Accounts Receivable - Mortgage Creighton Storey - Mortgage During the fiscal year ended June 30, 2006, the Authority received permission from the State of New York to convey property commonly known as Creighton Storey Homes to Creighton Storey Homes, LP for a money purchase mortgage in the amount of $2,950,000. All principal and interest due and payable shall be paid only to the extent of available cash flow until maturity. The loan matures on November 9, 2045 at which time all unpaid interest and principal will become due and payable. The authority believes that the project will not generate excess cash flow sufficient to repay the mortgage, and accordingly has reserved the entire amount of the mortgage. At and 2010, accrued interest totaled $797,017 and $655,711 all of which was reserved. Ezra Prentice - Mortgage The Authority received permission to "de-federalize" one of its projects commonly known as Ezra Prentice and convey such property to Ezra Prentice Homes Redevelopment, LLC for a money purchase mortgage in the amount of $2,280,000. All principal and interest due and payable on the maturity date. Interest shall accrue at a rate of 3% per annum. Total Mortgages, notes and HOPE VI receivables, including accrued interest, due the Authority, from all its component units at and 2010 were $66,125,496 and $48,339,259, respectively. Note 6 Intangible Assets - Component Units Net Intangible assets at December 31, 2010 and 2009 were $1,940,494 and $1,266,514 respectively, include costs of obtaining long term mortgages and are being amortized over the life of the mortgages. At December 31, 2010 and 2009, the accumulated amortization amounted to $331,600 and $235,347 respectively. Note 7- FIXED ASSETS Fixed Assets consist primarily of expenditures to acquire, construct, place in operation and improve the facilities of the Authority and are stated a cost, less accumulated depreciation. The following is a summary of the changes in general fixed assets for the fiscal year ended June 30, 2011 and 2010: 24

27 Note 7 - FIXED ASSETS - Continued ALBANY HOUSING AUTHORITY Balance at June 30, 2010 Additions DisQosals Land $ 2,472,304 $ 25,000 $ Buildings 109,302,799 96,625 (3,400,825) Furniture, Equipment and Machinery 1,831, ,759 Construction In Progress 18,552,389 3,723,191 (948,052) Total Fixed Assets 132,159,491 4,103,575 (4,348,877) Accumulated Depreciation (99,413,682) (2,097,338) 3 $ 32,745,809 $ 2,006,237 $ (4,348,874) Balance at Transfers $ (346, 149) $ 2,151 I 155 6,363, ,362,148 2,090,758 (6,017,400) 15,310, ,914,189 (1 01,511,017) $ $ 30,403,172 Balance at July 1, 2009 Additions Land $ 5,231,869 $ Buildings 115,112, ,782 Furniture, Equipment and Machinery 1,795,945 83,201 Construction in Progress 13,807,387 4,745,002 Total Fixed Assets 135,947,823 5,020,985 Accumulated Depreciation {1 01,572,027) (2,448,042) Net Fixed Assets $ 34,375,796 $ 2,572,943 Balance at DisQosals June 30, 2010 $ (2,759,565) $ 2,472,304 (6,002,605) 109,302,799 (47,147) 1,831,999 18,552,389 (8,809,317) 132,159,491 4,606,387 (99,413,682) $ (4,202,930) $ 32,745,809 Depreciation expense for the year ended and 2010 was $2,097,338 and $2,448,042 respectively. Expenditures are capitalized when they meet the Authority's Capitalization Policy requirements. Depreciation of Capital Assets is provided using the straight-line method for reporting purposes at rates based upon the following estimated useful lives: Buildings Leasehold Improvements Office Furniture Equipment Vehicles Computers Years

28 Fixed Assets - Component Units Fixed Assets consist primarily of expenditures to acquire, construct, place in operation and improve the facilities of the Authority and are stated at cost, less accumulated depreciation. The following is a summary of the changes in general fixed assets for the fiscal year ended December 31, 2010 and December 31, 2011: 12/31/ /31/ /31/ /31/ /31/ /30/2011 Corning Homes Lark Drive McCarty Swan St. LLC Creighton Storey F. Douglas _and $ 2,733,736 $ 105,317 $ 1,003,000 $ 60,934 $ 209,450 $ 41,687 3uildings 27,407,190 12,337,559 4,349,950 9,601,699 14,704,037 =urniture, Equipment and Machinery 46,322 95, , ,422 ::;onstruction in Progress 63,877 5,074 1,766 rotal Fixed Assets 30,251 '125 $ 12,538,074 5,358,024 9,981,538 15,319,675 41,687!\ccumulated Depr. {7,576,425) $ {4,303,912) $ {1,168,787) $ {1,083,740) $ {1,453,066) \let Fixed Assets $ 22,674,700 $ 8,234,162 $ 4,189,237 $ 8,897,798 $ 13,866,609 $ 41,687 Sub Total $ 4, 154,124 68,400, ,847 70,717 73,490,123 {15,585,930) $ 57,904,193 )epreciation Expense for December 31,2010 and 2009 totaled $2,707,952 and $2,675,139 respectively. Subtotal 12/31/ /31/ /31/ /31/2010 Carried Frwd Swan St, Mixed South End I South End II Ezra Prentice Land $ 4,154,124 $ 76,055 $ 151,062 $ 78,712 $ $ Buildings 68,400,435 5,725,925 12,670,125 2,612,518 Furniture, Fixtures and Machinery 864,847 38,644 Construction In Progress 70,717 3,500 5,539,395 10,937,973 Total Fixed Assets 73,490,123 5,840,624 12,824,687 5,618,107 13,550,491 Accumulated Depreciation {15,585,930) {329,349) {702,266) {74,892) Net Fixed Assets $ 57,904,193 $ 5,511,275 $ 12,122,421 $ 5,618,107 $ 13,475,599 $ Total 4,459,953 89,409, ,491 16,551, ,324,032 {16,692,437) 94,631,595 Fixed Assets -Component Units -Continued Fixed Assets consist primarily of expenditures to acquire, construct, place in operation and improve the facilities of the Authority and are stated at cost, less accumulated depreciation. The following is a summary of the changes in general fixed assets for the fiscal year ended December 31, 2009 and December 31, 2010: 26

29 Fixed Assets- Component Units- Continued ALBANY HOUSING AUTHORITY 12/31/ /31/ /31/ /31/ /31/ /30/2010 Corning Homes Lark Drive McCarty Swan St. LLC Creighton Storey F. Douglas Land $ 2,733,736 $ 105,317 $ 1,003,000 $ 60,934 $ 209,450 $ 41,687 Buildings 27,323,605 12,337,559 4,262,079 9,601,699 14,590,027 Furniture, Equipment and Machinery 43,716 95,198 63, , ,049 Total Fixed Assets 30,101,057 $ 12,538,074 5,329,077 9,956,035 15,169,526 41,687 Accumulated Depreciation {6,652,880) $ {3,961,555) $ {1,000,428) $ {829,296) $ {1,032,973) Net Fixed Assets $ 23,448,177 $ 8,576,519 $ 4,328,649 $ 9,126,739 $ 14,136,553 $ 41,687 Sub Total $ 4,154,124 68,114, ,363 73,135,456 {13,477,132) $ 59,658,324 Depreciation Expense for December 31, 2009 and 2008 totaled $2,675,139 and $1,933,902 respectively. Subtotal 12/31/ /31/ /31/2009 Carried Frwd Swan St, Mixed South End Ezra Prentice Total Land $ 4,154,124 $ 76,055 $ 191,062 $ 625,000 $ 5,046,241 Buildings 68,114,969 5,717,146 12,625,060 3,138,085 89,595,260 Furniture, Fixtures and Machinery 866,363 38, ,007 Total Fixed Assets 73,135,456 5,831,845 12,816,122 3,763,085 95,546,508 Accumulated Depreciation {13,477,132) {170,766) {326,944) {178) {13,975,020) Net Fixed Assets $ 59,658,324 $ 5,661,079 $ 12,489,178 $ 3,762,907 $ 81,571,488 Note 8 - lnventort The Authority maintains a perpetual inventory system. At and 2010 the Authority maintained an inventory with a value totaling $ 322,438 and $402,879, respectively. The Authority has recorded an allowance for obsolete inventory estimated to be $105,676 and $84,470 respectively. NOTE 9 - Payment in Lieu of Taxes (PILOT) Under Federal, State and local law, the Authority's programs are exempt form income, property and excise taxes. However, the Authority is required to make a payment in lieu of taxes (PILOT) for the PHA Owned Program in accordance with the provisions of its Cooperation Agreements with the City. Under the Cooperation Agreements, the Authority must pay the City the lesser of 1 0% of its net shelter rent or the approximate full real property taxes. Accrued PI LOT during the fiscal years ended and 2010 amounted to $225,219 and $232,339 respectively. NOTE 10 -Accrued Compensated Absences Unused sick leave may be carried to future periods and used in the event of extended illness. Upon normal retirement employees are not entitled to compensation for unused sick days. Generally, employees may be compensated for unused vacation in the event of retirement or termination of service. The amount of vacation which may be carried over from one year to another is subject to certain limitations. The Authority has determined that the potential liability for accumulated vacation at and 2010 amounted to $353,134 and $329,306 respectively. 27

30 NOTE 11 - Pension Plan Plan Description The Albany Housing Authority contributes to the New York State Employees Retirement System, a cost-sharing multiple-employer defined benefit pension plan. The Comptroller of the State of New York serves as sole trustee of the Common Retirement Fund (Fund) and administrative head of the New York State and Local Police and Fire Retirement System (PFRS), and the Public Employees' Group Life Insurance. These entities are collectively referred to as the New York State Local Employees' Retirement System or the "System". All net assets of the System are held in the Common Retirement Fund which was established to hold all net assets and changes in net plan assets allocated to the System. Membership Tiers-Pension legislation enacted in 1973, 1976, and 1983 established distinct classes of membership. For convenience, the System uses a tier concept to distinguish these groups, generally: Tier 1 -Those persons who last became members of the ERS before July 1, Tier 2 -Those persons who last became members on or after July 1, 1973, but before July 27, Tier 3- Generally those persons who are State correction officers who last became members on or after July 27, 1976, and all others who last became members on or after July 27, 1976, but before September 1, Tier 4 - Generally, except for correction officers, those persons who last became members on or after September 1, Tier 5- Those persons who last became members on or after January 1, 2010 Benefits- (1) Tier 1 and Tier 2 Most Tier 1 and Tier 2 members are on a plan with minimum retirement age of 55 which provides for 1.67% of final average salary for each year of service less than 20 years. Generally, the benefit with more than 20 years is 2% of final average salary for each year of service. Tier 2 members retiring between age 55 to age 62, with less than 30 years of service receive reduced benefits. As a result of Article 19 of the Retirement and Social Security Law, eligible Tier 1 and Tier 2 members, whose date of membership is prior to July 27, 1976, will receive an additional month of service credit for each year of credited service they have at retirement, up to a maximum of 24 months. 28

31 NOTE 11 - Pension Plan - Continued (2) Tier 3, Tier 4 and Tier 5 Except for Tier 3 correction officers, generally the benefit is 1.67% of final average salary for each year of service if the service is less than 20 years. For 20 to 30 years service, the benefit is 2% of the final average salary. An additional benefit of 1.5% of final average salary is applied for each year of service in excess of 30 years. A member must be age 62 with 5 years of service or at least age 55 with 30 years service to retire with full benefits. Reduced retirement benefits are available if retirement occurs between the ages of 55 to 62. Tier 5 members are eligible to retire starting at age 55. Retiring between the ages of 55 to 62 will lead to permanently reduced benefits between 38.33% and 6.67 % depending on the age of retirement. The benefit will be based on the member's final average salary for each year of service. (3) Ordinary Disability Benefits Generally, ordinary disability benefits, usually 1/3 of salary, are provided after 10 years of service; in some cases, after 5 years. (4) Accidental Disability Benefits For all eligible Tier 1 members and Tier 2 ERS members, the benefit is a pension of 75% of final average salary with offset for any worker's compensation benefits received. The Tier 3 and Tier 4 benefit is the ordinary benefit with the years of service eligibility requirement dropped. For Tier 5, the benefit is one half (50%) of the employee's wages during the last year of active service. (5) Ordinary Death Benefits Death benefits are payable upon the death, before retirement, of a member who meets eligibility requirements as set forth by law. The fist $50,000 of an ordinary death benefit is paid in the form of group term life insurance. The benefit is generally three times salary. For most members there is also a reduced post-retirement death benefit. Death benefits for Tier 5 employees are equal to your salary multiplied by your years of service not to exceed three years. (6) Post-retirement Benefit Increases A cost of living adjustment is provided to: (i) all pensioner who have attained age 62 and have been retired for five years; (ii) all pensioners who have attained age 55 and have been retired for ten years; (iii) all disability pensioners regardless of age who have been retired for five years; and (iv) ERS recipients of an Accidental Death Benefit regardless of age who have been receiving such benefit for five years. This cost of living adjustment is a percentage of the annual retirement allowance of the eligible member as computed on a base benefit amount not to exceed $18,000 of the annual retirement allowance. The cost of living percentage shall be 50% of the annual Consumer Price Index as published by the U.S. Bureau of Labor. 29

32 NOTE 11- Pension Plan- Continued ALBANY HOUSING AUTHORITY Funding Policy Participating employers are required under the New York State Retirement and Social Security Law to contribute annually to the System. The funding of the System is accomplished through member and employer contributions and the investment earnings on these contributions, according to the New York State Retirement and Social Security Law. The Aggregate Actuarial funding method is used by the System. Generally, participating employers that have adopted the same benefit plan contribute at the same rate of payroll. The total employer contribution rate as a percentage of salary includes rates for administrative expenses, Group Life Insurance "GLIP", and supplemental benefits. GLIP is a one year term insurance plan. Consequently the GLIP rates are determined so as to pay for the current year's GLIP costs. Similarly, the administrative rates are determined so as to pay the current year's administrative expenses. Employers may make other contributions due to legislation, such as retirement incentives, the 17 year amortization (discussed in (e) below), and deficiency payments (which an employer may incur when joining the System and are payable for up to 25 years.) The average employer contribution rates below exclude certain contributions such as the 17 year amortization. The average contribution rate for ERS for fiscal year ended, including incentive contributions, was approximately 10.3% to 15.1% of payroll depending on the tier. The Albany Housing Authority's contribution to the Fund for the years ending and 2010 was $496,718 and $546,318 respectively. At and 2010, there were 127 and 116 plan members respectively. The New York State Employees Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the Fund. That report may be obtained by writing to the New York State Local Retirement System, 110 State Street, Albany, New York , or by calling NOTE 12- Other Post Employee Retirement Benefits (OPEB) ANNUAL OPEB COST AND NET OPEB OBLIGATON The Authority's annual other postemployment benefit ("OPEB") cost (expense) is calculated based on the annual required contribution of employer ("ARC"), an amount actuarially determined in accordance with parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty (30) years. The following table shows the components of the Authority's annual OPEB costs for the fiscal year, the amount actually contributed to the plan and changes in the Authority's net OPEB obligation to the plan: 30

33 NOTE 12 - Other Post Employee Retirement Benefits (OPEB) - Continued Annual Required Contribution Interest on net OPES obligation Adjustment to annual required contribution Annual OPES cost (expense) Contributions made Increase in net OPES obligation Net OPES Obligation - beginning of year Net OPES Obligation -end of year-2011 $ 1,029,452 $ 65,149 $0 $ 1,094,601 $ 488,812 $ 605,789 $ 1,085,820 $1,691,609 The Authority's annual OPES cost, the percentage of the annual OPES cost contributed to the plan, and the net OPES obligation for the 2010 and 2009 fiscal year and the two preceding years were as follows: Fiscal Year Ended Annual OPES Cost Percentage of Annual OPES Cost Contributed Net OPES Obligation 6/30/2008 6/30/2009 6/30/2010 6/30/2011 N/A $ 944,385 $ 987,590 $1,029,452 N/A N/A $521,738 $1,085,820 $1,691,609 FUNDED STATUS AND FUNDING PROGRES As of July 1, 2010 and 2009, the most recent valuation dates, the plan was 0.0% funded. The actuarial liability for benefits was $14,867,556 and $13,974,285 respectively, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $14,867,556 $13,974,285 respectively. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrences of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contribution of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented in the required supplementary information following the financial statements, presents multiyear trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 31

34 NOTE 12- Other Post Employee Retirement Benefits COPEB) EFFECT OF 1% CHANGE IN HEALTHCARE TREND RATES In the event that healthcare trend rates were 1% higher than forecast and employee contributions were to increase at the forecast rates, the Actuarial Accrued Liability would increase to $16,358,158 for 2011 and $16,196,196 for 2010 ACTUARIAL METHODS AND ASSUMPTIONS Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by employer and plan members) and include the types of benefits provided at the time each valuation and the historical pattern of sharing benefit costs between employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Actuarial Cost Method Investment Rate of Return Projected Unit Credit 6.00% per annum Healthcare Trend Rates Year Actuarial Value of Assets: Amortization of UAAL: Remaining Amortization Period: Medical Including Prescription Costs are Known Costs are Known Costs are Known 9.0% 8.0% 7.0% 6.0% 5.0% Market Value Amortized as level dollar amount over 30 years at transition 28 years at July 1, 2010 Reconciliation of Plan Participation ACTIVE EMPLOYEES A. Average Age at Hire B. Average Service C. Average Current Age July July

35 NOTE 13- Risk Management ALBANY HOUSING AUTHORITY During the year ended and 2010 the Authority's risk management program, in order to deal with potential liabilities, consisted of various insurance policies for fire, general liability, crime, auto and public-officials errors and omissions. Periodically, but not less than once annually, the Authority conducts a physical inspection of its Projects for the purpose of determining potential liability issues. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Settled claims relating to the commercial insurance have not exceeded the amount of insurance in any of the past three fiscal years. NOTE 14- Construction Commitments At and 2010, the Authority's outstanding construction commitments pertaining to its HOPE VI and Capital Fund Programs were not material. The costs pertaining to such commitments will be paid by grants approved and committed to the Authority by the U.S. Department of Housing and Urban Development NOTE 15- Housing Choice Voucher Fund Balance- (Restricted & Unrestricted) Prior to January 1, 2005 excess funds advanced by HUD to the Authority for the payment of housing assistance payments were returned to HUD at the end of the Authority's fiscal year. In accordance with HUD's PIH Notice , starting January 1, 2005 excess funds disbursed by HUD to the Authority for the payment of Housing Assistance Payments that are not so utilized are not returned to HUD, but become part of the undesignated fund balance and may only be used to assist additional families up to the number of units under contract. As of November 2007, HUD is reverting to treating these funds as restricted in order to comply with generally accepted accounting principles. HUD has indicated that any HAP amounts received by a PHA and not expended should be reported as restricted cash and restricted net assets. Administrative fees paid by HUD to the Authority in excess of administrative expenses are part of the undesignated fund balance and are considered to be "administrative fee reserves". Administrative fee reserves accumulated prior to January 1, 2005 are subject to all requirements applicable to administrative fee reserves including, but not limited to, 24 CFR i.e. "other housing purposes permitted by state or local law". Excess administrative fees earned in 2005 and subsequent years must be used for activities related to the provision of tenant-based rental assistance authorized under Section 8 of the United States Housing Act of 1937, including related development activities. Housing Assistance Payments (HAP) (Restricted) Administrative (Unrestricted) Total Unrestricted Net Assets $ 832,005 1,360,728 June $ 370,734 1,273,795 $ 2,192, 733 $ 1,644,529 33

36 Note 16 - Long Term Debt Housing Authority Energy Loan - Loan 1 The Authority entered into a capital lease agreement for the installation of energy saving equipment. The lease termination date is November 11, Payments for the lease will be derived from additional HUD subsidy and from energy savings costs. The lease bears interest at 5.18% with fixed monthly payments of $12, The principal balance at is $453,964. The following is a schedule of remaining principal and interest payments: Energy Loan - Loan 1 Principal Interest 2012 $ 124,532 $ 20, ,142 13, ,098 4, , $ 453,964 $ 39,332 Energy Loan - Loan 2 The Authority entered into a second capital lease agreement for the installation of energy saving equipment on December 28, The lease termination date is February 28, Payments for the lease will be derived from additional HUD subsidy and from energy savings cots. The lease bears interest at 4.08% with fixed monthly payments of $56,646 beginning March 28, The loan shall be interest only until March 28, The principal balance at is $4,952,871. The following is a schedule of principal and interest payments: Date Principal Interest 2012 $ 486,250 $ 193, , , , , , , , , ,310, ,493 $ 4,952,579 $ 926,887 34

37 Note 16 - Long Term Debt - Continued On December 30, 2009, the Authority received $245,000 from the Federal Home Loan Bank through HSBC Mortgage Corporation under the Affordable Housing Program (AFP), 12 CFR Part 1291, in conjunction with the Ezra Prentice Project. The mortgage is secured by the Project. The loan is subject to a recapture agreement for 15 years and at the end of the fifteen year period, the note shall be deemed satisfied and the Owner, Ezra Prentice Homes Redevelopment, LLC and the Authority shall be entitled to a release from the note. Total long term debt amounted to $5,651,541 and $6,236,743 at and 2010 respectively. The current portion of the long term debt at 2011 and 2010 amounted to $610,781 and $585,062 respectively. The following is a summary of the Authority's Long Term Liabilities at and 2010: Balance Due in Balance 6/30/2010 Advances Repayments Other One Year 6/30/2011 Transamerica - EPC $ 571,718 $ $ 117,756 $ $ 124,531 $ 329,431 M&T Bank- EPC 5,420, , ,250 4,466,329 Federal Home Loan Bank 245, ,000 Total Loan Liabilities 6,236, , ,781 5,040,760 OPES Liabilities 1,085, ,789 1,691,609 Compensated Absences 329,306 23,828 35, ,820 Other 11,710 11,710 FSS Escrows 149,971 9, ,535 Total Other Long Term Liabilities 1,565,097 45, ,789 35,314 2,180,674 Total All Long Term Liabilities $ 7,801,840 $ 45,102 $ 585,202 $ 605,789 $ 646,095 $ 7,221,434 35

38 Note 16- Long Term Debt- Continued Component Units ALBANY HOUSING AUTHORITY Beginning Balance Additions Retirement Ending Balance Corning Homes, Associates, LP HOPE VI Loan - AHA $ 15,345,490 $ $ $ 15,345,490 NY Housing Trust Fund 3,943,750 3,943,750 Lark Drive Associates, LP Tax Exempt Bonds 2,195,000 70,000 2,125,000 Mortgage Payable - AHA 4,510,658 4,510,658 McCarty Housing Development Company Bond Swap 1,390,000 60,000 1,330,000 HOPE VI Loan - AHA 3,831,462 3,831,462 Creighton Storey Housing Development Company Promissory Note - AHA 2,950,000 2,950,000 Berkadia Mortgages 1,486,145 24,746 1,461,399 NY State Housing Trust Fund Through AHA 3,750,000 3,750,000 NYSERDA Grant Loaned by the AHA 675, ,187 Weatherization Grant 174, ,700 Swan Street Homes LLC NY State Housing Trust Fund - Through AHA 1,795,000 1,795,000 Swan Street Mixed, LLP HOPE VI Loan - AHA 3,052,297 3,052,297 Federal Home Loan Through AHA 250, ,000 AHA South End, LP Key Bank Promissory Note 5,409,734 5,409,734 Community Preservation Corporation 1,188,000 10,578 1,177,422 Capital City Housing Development 500, ,000 Key Development Community Developemnt 585, ,536 Housing Trust Fund Corporation Notes 1,981,000 1,981,000 Subtotal 51,844,959 3,169,000 6,160,594 48,853,365 36

39 Note 16- Long Term Debt- Continued Component Units ALBANY HOUSING AUTHORITY Beginning Balance Additions Retirement Ending Balance Subtotal From Page 35 $ 51,844,959 $ 3,169,000 $ 6,160,594 $ 48,853,365 South End II PNC Bank Construction Loan PNC Bank Bridge Loan 2,400, ,579 2,400, ,579 Ezra Prentice Homes Redevelopment, LLC PNC Bank - Bridge Loan Tax Credit Assistance Progam (TCAP) Through HTFC Capital Fund Finance Program "A" Loan -Through AHA Capital Fund Finance Program "B" Loan -Through AHA Federal Home Loan (HSBC) Through AHA CFP Debt Service Advances -Through AHA Land Lease CFRC Note -Through AHA Money Purchase Note 245, ,000 2,280,000 1,823,015 2,856,929 8,375,000 50, ,839 2,250,000 1,823,015 2,856,929 8,375,000 50, , , ,000 2,250,000 2,280,000 Total 54,994,959 $ 21,632,362 $ 6,160,594 70,466,727 1,997,669 68,469,058 Less the Current Portion of LTD 155,106 Amount of Debt Classified as Long Term $ 54,839,853 $ A. Corning Homes Associates, L.P The Authority's Hope VI Program provided $15,345,490 in loans to the partnership at a fixed rate of 3.75%. Interest and principal shall be paid annually subject to certain cash flow considerations, as defined in the loan agreement. Any outstanding principal balance and unpaid interest becomes due and payable at maturity, December 12, As of December 31, 2010 and 2009 accrued interest was $6,257,184 and $5,681,728 respectively. In addition, the New York Housing Trust Corporation has provided financing to the Partnership in the amount of $4,000,000 under the Low Income Turnkey-Enhanced Housing Trust Fund Program. As of December 31, 2010 and 2009, $3,943,750 has been released to the Partnership. The Partnership's real estate is security for this loan. The principal balance together with any outstanding accrued interest is payable in April 30, 2043, the loan bears interest at 1%, which is payable to the extent of 50% of annual excess income as defined in the Regulatory Agreement, accrued interest was $302,536 and $263,098 at December 31, 2010 and 2009 respectively. 37

40 Note 16- Long Term Debt- Continued B. Lark Drive Associates, L.P Bonds Series A ALBANY HOUSING AUTHORITY The Authority issued 1998 Series A tax-exempt bonds in the aggregate amount of $2,700,000 with a stated initial interest rate of 4.00% gradually increasing to 5.50% and maturing December 1, Interest is to be calculated on a 360-day year, payable semiannually, with such interest accruing from the date of initial delivery. During 2010 and 2009, the interest rate was 5.2% and 5.2% respectively and interest incurred was $119,047 and $122,448 respectively. The bonds are subject to mandatory redemption in whole or in part in the event of casualty or condemnation as set forth in the Indenture, Loan Agreement and Mortgage. The borrower has the option of redemption of bonds prior to their maturity, on December 1, 2010, or any payment date thereafter, at a stated rate as defined in the agreement. The bonds are subject to mandatory sinking fund redemption on each December 1, commencing in 2009 and on the dates and in the amounts specified in the Indenture of Trust, at a redemption price equal to the principal amount thereof without premium plus interest accrued to the date of redemption. Lark Drive Associates, L.P - Continued Principal and interest payments due are as follows: Principal Interest $ 75,000 $ 115,710 75, ,810 80, ,910 85, ,750 90,000 99, , , , , ,000 57,200 $ 2,125,000 ~$=~1,:;;;;,26;;,;8;b;,7~8.;;.0 Mortgage Payable The Partnership has received a mortgage from the Albany Housing Authority in the amount of $4,510,658 dated September 14, The outstanding portion of the mortgage accrues interest at 1% per year. There is no requirement for monthly payments of principal and interest. During and 2009 interest of $45,1 07 and $48,866 was incurred. As of December 31, 2010 and 2009, the mortgage balance was $4,510,658 and accrued interest was $466,952 and $421,845 respectively. 38

41 Note 16- Long Term Debt- Continued ALBANY HOUSING AUTHORITY C. McCarty Housing Development Fund Co. The Company has entered in to a Series 2005 variable rate demand revenue bond agreement with the Albany Housing Authority, as issuer, and Bank of New York, as trustee, in the aggregate amount of $1,600,000. The bonds are secured by a letter of credit from Citizens Bank and mature on December 1, The bond proceeds together with additional Hope VI funds, received from the Department of Housing and Urban Development, were used to refinance a mortgage note held by the New York Housing Fund administration. The balance of the loan repaid was $2,425,000. However, the Company entered into an interest rate swap contract that effectively converts the variable interest rate to a fixed interest rate. Under the Swap contract, the Company pays interest at 4.08% and receives interest at the BMA Swap Index rate which is reset each month. At December 31, 2010 and 2009 the rate approximated.5% and1.07% respectively. The notional amount under the swap decreases as principal payments are made on the bonds so that the notional amount equals the principal amount outstanding under the bonds. The swap is designed to hedge the risk of changes in interest payments on the bonds caused by changes in interest rates. The swap was issued at market terms so that it had no fair value at its inception. The carrying amount of the swap has been adjusted to its fair value at the end of each year, which because of changes in forecasted levels of BMA resulted in a reporting a liability for the fair value of the future net payments forecasted under the swap. The liability is classified as non-current since management did not intend to settle it during 2011 or Since the critical terms of the swap and the note are the same, the swap is assumed to be effective as a hedge. Principal and Interest payments are as follows: Year Principal Interest 2011 $ 60,000 $ 54, ,000 51, ,000 49, ,000 46, ,000 43, , , , '196 $ 1,330,000 $ 485,520 39

42 McCarty Housing Development Fund Co.- Continued The Company has received a Hope VI mortgage from the Albany Housing Authority in the amount of $3,831,462 dated December 27, There is no requirement for monthly payments of principal and interest. Principal and 9% interest will not be due until such time as the Company is in default of the terms of the Regulatory Agreement. At December 31, 2010 and 2009, the balance of the loan payable to Albany Housing Authority was $3,831,462 and accrued interest totaled $1,724,159 and $1,379,327 respectively. During the year of 2005, the Company repaid a mortgage note held by the New York Housing Fund Administration. Proceeds for the repayment came from the $1,600,000 bond issue detailed in paragraph "A" above and $970,680 in Hope VI funds. This project, through the Albany Housing Authority, has a Mixed-Financed Amendment to Consolidated Annual Contributions Contract in the amount of $4,193,427. $3,831,462 in Hope VI funding has been drawn down as of 2010 and D. Creighton Story Housing Development Company 1. The Partnership has a promissory note payable to the Albany Housing Authority in the amount of $2,950,000 dated December 9, The note bears interest at 4. 79% and is due in forty years. Principal and interest shall be due and payable only to the extent of available cash flow, if any, until the maturity date at which time the entire amount of unpaid principal and interest shall be immediately due and payable. At December 31, 2006, the Company transferred all its equity interests including the note payable to the Authority to Creighton Homes, L.P which at December 31, 2007 was a component unit of the Authority. During the Fiscal year 2008 all units came on-line and were transferred back to the new partnership which is treated as a component unit of the Albany Housing Authority. As of December 31, 2010 and 2009 interest of $726,364 and $585,059 respectively was accrued on this note. Permanent Financing Permanent financing was achieved by securing both a first and a second mortgage. On May 1, 2009 the Partnership secured a 30 year first mortgage for $860,000 which bears interest at a fixed rate of 5.41 %. On June 1, 2009 the Partnership secured a 30 year second mortgage for $640,000 which bears interest at a fixed rate of 3.00%. The annual principal payments to maturity are as follows: 40

43 D. Creighton Story Housing Development Company - Continued 1st Mortage 2nd Mortgage Year Principal Principal ,118 14, ,671 14, ,514 14, ,273 15, ,076 15,835 Thereafter 774, ,507 $ 842,257 $ 619, Additional Financing was provided by the New York State Housing Trust Fund in the form of a 40 year $3, note loaned to the Partnership by the AHA which bears interest at a rate of 1% per annum. 3. Additional financing was provided by NYSERDA grant loaned to the Partnership by the AHA in the form of a 40 year note which is secured by the property and bears interest at a rate of 1% per annum. As of December 31, 2010and 2009, $675,000 has been drawn down on the note. Additionally at December 31, 2010 and 2009 interest of $20,016 and $7,938 respectively, has been accrued of which $516 has been capitalized as a component of buildings and improvements. 4. On April 28, 2008, the Partnership received a $174,700 weatherization loan from the Albany Housing Authority. The loan bears interest at 1% per annum and matures on May 1, Interest and principal is to be paid from available cash flow. All unpaid interest and principal shall be due and payable on the maturity date. At December 31, 2010 and 2009 accrued interest payable amounted to $4,659 and $2,912 respectively. E. Swan Street Homes, LLC Permanent financing is provided by the New York State Housing Finance Trust Fund Corporation (HTF) in the form of a 30 year $1,795,000 mortgage note loaned to the Partnership by the AHA. The note is secured by the property and bears interest at an uncompounded rate of 1% per annum. Interest is to be paid within 120 days after the borrower's fiscal year from excess income prior to distribution of any return on equity. Not withstanding the above principal and interest will be due and payable on the thirtieth anniversary of this note. At December 31, 2010 $35,990 in interest has been accrued. 41

44 E. Swan Street Homes, LLC - Continued Secondary financing: The U.S. Department of Housing and Urban Development (HUD) has granted the Albany Housing Authority (AHA), an affiliate of the managing member, $2,764,415 of HOPE V1 and HUD replacement housing funds on behalf of the Company, who in turn, has loaned these proceeds to the managing member (Swan Street Housing Development Fund Corp.). The managing member has agreed to pay $2,764,415 to the Partnership in the form of a capital contribution. F. Swan Street Mixed Use, LLP 1. The Authority's Hope VI Program is providing a $3,120,000 loan to the project which is secured by the rental property and bears interest at a rate of.5% per annum. Commencing on the first day of April following the conversion date, annual payments of principal and interest are due from available cash flow. Any unpaid principal and accrued interest shall be due and payable on January 1, 2060, the maturity date. As of December 31, 2010 and 2009, loan proceeds of $3,052,297 have been received. As of December 31, 2010 and 2009, interest of $292,070 and $139,451, respectively, has been accrued. 2. Additional financing is provided by AHA in the amount of $250,000 through the Federal Home Loan Bank of New York's (FHLBNY) Affordable Housing Program. The loan is secured by the rental property and is non-interest bearing. Commencing on the first day of April following the conversion date, annual payments of principal and interest are due from available cash flow. Any unpaid principal and accrued interest shall be due and payable on January 1, 2025, the maturity date. As of December 31, 2010, loan proceeds of $250,000 have been received. G. South End Associates, LP On September 14, 2007, the Partnership has secured a Promissory Note, in the amount of $3,750,000, from KeyBank National Association, to provide funds to reimburse the Partnership and finance the development costs incurred during the construction phase of the project. On August 14, 2008, the Note was amended to provide additional funds of $1,659,734, therefore totaling $5,409,734. The Note was amended on October 30, 2009 to extend the maturity date until February 28, 2010 and a bear interest at one month London Interbank Offered Rate (LIBOR) plus 2.20%, and is secured by a mortgage, pledge and guarantees. Monthly payments of interest only are due in arrears on the first day of every month. At maturity the unpaid balance of principal and the monthly accrued interest is due in full. For the year ending December 31, 2009, the amount of interest incurred was $141,666 of which $39,845 was capitalized. At December 31, 2009, the interest rate was 2.45% and the outstanding balance of the Note was $5,409,734. The Note will be converted to a permanent mortgage upon completion of construction. 42

45 G. South End Associates. LP ALBANY HOUSING AUTHORITY On August 13, 2008, the Partnership has secured a Promissory Note, in the amount of $500,000, from Capital City Housing Development Fund Company, Inc., to provide funds to reimburse the Partnership and finance the development costs incurred during the construction phase of the project. The Note matures on the 30 1 h anniversary of the Conversion Date, first day of first month immediately following construction completion date, and bears interest at the monthly long-term applicable federal rate (AFR) and is secured by a mortgage, pledge and guarantees, subordinate to Key Bank. At maturity the principal and the cumulative accrued interest is due in full. On February 22, 2010, the Promissory Note was paid in full with the proceeds from the permanent financing and the investor partner's final equity contribution. On October 31, 2008, the Partnership obtained a promissory note from Key Community Development Corporation for a bridge loan in an amount not to exceed $652,209 and the note shall bear interest at the prime rate. The maturity date for the note shall be the earlier of: a. the date upon which otherwise uncommitted funds are available to the borrower b. payment of the third installment of the capital contributions by the limited partner c. eighteen months from the date of origination d. the date all obligations evidenced by this note become due and payable On February 22, 2010, the principal advanced of $585,536 and all accrued interest were repaid with proceeds from the permanent financing and the last installment of equity contributions from the investor partner. On February 22, 2010, the construction loan was repaid with funds received from the investor partner's capital contributions and three permanent loans described below. On February 22, 2010, the Partnership secured a thirty year note from the Community Preservation Corporation for $1,188,000. The interest rate is equal to 61/4% per annum and the first principal and interest payment was due on April 1, Monthly interest and principal payments amount to $7, The note cannot be repaid without incurring a prepayment penalty which ranges from 5% of the amount prepaid from the day preceding the 1 51 anniversary of the date of the note to 0% from the h anniversary forward. The following is a schedule of estimated payments for the next five years and thereafter: 43

46 G. South End Associates, LP ALBANY HOUSING AUTHORITY Community Preservation Corporation 30 Year Note Year Principal Interest 2011 $ 13,490 $ 73, ,358 72, ,281 71, ,264 70, ,310 69,449 Thereafter 1,100,719 1,147,038 $ 1 '177,422 $ 1,504,130 On February 22, 2010, the Partnership secured two promissory notes from the Housing Trust Fund Corporation (HTFC). The first note is in the amount of $1,300,000 and the second in the amount of $681,000. Both are secured by a Mortgage and Security Agreement and a Regulatory Agreement on the property and improvements. The notes bear interest at an annual uncompounded rate of 1% on the outstanding principal of the loans. Interest shall be calculated on an annual basis and the first payment of interest shall be due 120 days after the Partnerships year end from excess income prior to distribution of any return on equity as defined in the Regulatory and Operating Agreement. All principal and accrued interest shall be payable on the 30th anniversary of the notes. The notes may not be prepaid in whole or in part at any time unless expressly agreed to in writing by HTFC. H. Ezra Prentice Homes Redevelopment, LLC Note payable - HTFC TCAP loan Pursuant to the promissory note dated December 30, 2009, the Company entered into a Tax Credit Assistance Program loan (the "TCAP Loan") with the Housing Trust Fund Corporation ("HTFC") in the amount of $3,500,000 in connection with Section 1602 of the American Reinvestment and Recovery Act of The TCAP Loan funds are to be used for eligible rehabilitation costs as defined in Section 42 of the Internal Revenue Code. Additionally, the property must be operated in a manner consistent with the requirements for low income housing tax credits under Section 42 of the Internal Revenue Code. During the construction period, the TCAP Loan shall be non-interest bearing. At the end of the construction period, the loan shall convert to a permanent loan and bear simple interest at 1% per annum. All debt service shall be deferred until the deferred development fee is paid or the 16th anniversary of Conversion, as defined in the TCAP Loan agreement. Once interest payments commence, a one-time interest payment of $35,000 shall be made. All remaining interest shall be paid out of Net Cash Flows, as defined in the Operating Agreement. All principal and interest on the TCAP Loan are due on the 401h anniversary of conversion. 44

47 H. Ezra Prentice Homes Redevelopment, LLC The TCAP Loan is secured by a Mortgage and Security Agreement and a TCAP Written Agreement. As of December 31, 2010, the Company had been advanced $2,856,929 of the total principal balance. For the period beginning December 31, 2009 (inception) and ending December 31, 2010 no interest was charged on the outstanding balance. Bridge loan- PNC Bank. N.A. Pursuant to the Bridge Loan Note Agreement dated December 30, 2009, the Company entered into a bridge loan agreement (the "Bridge Loan") with PNC Bank, N.A, an affiliate of the Investment Member, in the amount of $1,823,015. The Bridge Loan bears interest at the variable rate equal to the greater of (A) the Prime Rate plus 1%, (b) the Federal Funds Open Rate plus 1.5% or (c) LIBOR plus 3%. As of December 31, 2010, the interest rate on the Bridge Loan was 4.25% per annum. The Company is required to make interest only payments on the Bridge Loan. The principal and all unpaid interest are due at the maturity date of December 1, 2011 and are payable out of the proceeds from the Third Installment of the Capital Contributions of the Investment Member. The Bridge Loan is secured by the Funding Agreement and the Assignment of Capital Contributions. As of December 31, 2010, the outstanding principal balance was $1,823,015 and accrued interest was $3,821. For the period beginning December 30, 2009 and ending December 31,2010, interest of $3,821 was incurred, of which $1,061 had been capitalized to construction in progress. Future minimum annual principal payments on the Bridge Loan are as follows: Year ended December 31, 2011 $ Note payable -AHA CFFP Bond A loan Pursuant to the Fannie Mae Capital Fund Finance Program ("CFFP") Bond A Loan Agreement dated December 30, 2009, the Company entered into a construction loan agreement (the "CFFP Bond A Note") with the Albany Housing Authority, an affiliate of the Managing Member, ("AHA") in the amount of $8,375,000. The CFFP Bond A Note bears interest at the fixed rate of 6.05% per annum until June 1, 2012 (the "Conversion Date") and is non-interest bearing after the Conversion Date. Pursuant to the CFFP Bond A Note, the Company prepaid $365,226 of interest on the loan. The Company is required to make interest-only payments until the Conversion Date. After the Conversion Date, payments shall be made out of Net Cash Flows as defined in the Operating Agreement in the following order: (i) payment of default interest if any; (ii) payment of all amounts due and owing for attorney fees and cost; (iii) payments toward interest other than default interest; and (iv) payment toward the outstanding principal balance. The principal and all unpaid interest are due on the maturity date of December 30,2059. The CFFP Bond A Note is secured by a co-second mortgage and security agreement on the Property. As of December 31, 2010, the outstanding principal balance was $8,375,000. As of December 31, 2010, accrued interest was $0. For the period beginning December 30, 2009 (inception) and ending December 31, 2010, interest of $509,843 was incurred, of which $141,532 had been capitalized to construction in progress. 45

48 Note payable - AHA CFFP Bond B loan ALBANY HOUSING AUTHORITY Pursuant to the CFFP Bond B Loan Agreement dated December 30, 2009, the Company entered into a construction loan agreement (the "CFFP Bond B Loan") with AHA in the amount of $4,625,000. The CFFP Bond B Loan bears interest at the fixed rate of 4.05% per annum. The Company was required to fund an escrow account in the amount of $5,078,193 to be used to repay the CFFP Bond B Loan at maturity. Payments are made in the following order: (i) payment of default interest if any; (ii) payment of all amounts due and owing for attorney fees and cost; (iii) payment toward interest other than default interest; and (iv) payment toward the outstanding principal balance. The principal and all unpaid interest are due on the maturity date of June 1, The CFFP Bond B Loan is secured by a co-second mortgage and security agreement on the Property. As of December 31, 2010, the outstanding principal balance was $50,000 and accrued interest was $169. For the period beginning December 30, 2009 (inception) and ending December 31, 2010, interest of $1,190 was incurred, of which $330 had been capitalized to construction in progress. Future minimum annual principal payments on the CFFP Bond B Loan are as follows: Year ended December 31, * $ - $ * The balance due at maturity on June 1, 2012 is subject to change, based on the future loan draws for the rehabilitation and construction of the Property. Note payable- AHA AHP owner loan Pursuant to the Affordable Housing Program Owner Note dated December 30, 2009, the Company entered into a promissory note (the "AHP Owner Note") with AHA in the amount of $537,000. The AHP Owner Note is non-interest bearing and is payable out of Net Cash Flows, as defined in the Operating Agreement. The AHP Owner Note is secured by a mortgage on the Property. All principal and unpaid interest is due at the maturity date of December 30, As of December 31, 2010, the outstanding principal balance was $245,000. Note payable - AHA base rent loan Pursuant to the Base Rent Note Agreement dated December 30, 2009, the Company entered into a promissory note (the "Base Rent Note") with AHA in the amount of $625,000 in connection with the land lease entered into by the Company. The Base Rent Note bears interest at the fixed rate of 4.17% per annum. The Base Rent Note is payable out of Net Cash Flow, as defined in the Operating Agreement, in the following order: (i) payment of default interest if any; (ii) payment of all amounts due and owing for attorney fees and cost; (iii) payments toward interest other than default interest; and (iv) payment toward the outstanding principal balance. All principal and unpaid interest is due at the maturity date of December 30, The Base Rent Note is secured by an acquisition mortgage and security agreement on the Property. As of December 31, 2010, the outstanding principal balance was $625,000 and accrued interest was $26,063. For the period beginning December 30, 2009 (inception) and ending December 31, 2010, interest of $26,063 was incurred, of which $7,235 had been capitalized to construction in progress. 46

49 Ezra Prentice Homes Redevelopment, LLC - continued Note payable - AHA purchase money loan Pursuant to the Purchase Money Note Agreement dated December 30, 2009, the Company entered into a promissory note (the "Purchase Money Note") with AHA in the amount of $2,280,000 in connection with the acquisition of the building. The Purchase Money Note bears interest at the fixed rate of 4.17% per annum. The Purchase Money Note is payable out of Net Cash Flows, as defined in the Operating Agreement, in the following order: (i) payment of default interest if any; (ii) payment of all amounts due and owing for attorney fees and cost; (iii) payments toward interest other than default interest; and (iv) payment toward the outstanding principal balance. All principal and unpaid interest is due at the maturity date of December 30,2059. The Purchase Money Note is secured by an acquisition mortgage and security agreement on the Property. As of December 31, 2010, the outstanding principal balance was $2,280,000 and accrued interest was $95,076. For the period beginning December 30, 2009 (inception) and ending December 31, 2010, interest of $95,076 was incurred, of which $26,393 had been capitalized to construction in progress. Note payable- AHA CFRC loan Pursuant to the CFRC Note Agreement dated December 30, 2009, the Company entered into a promissory note (the "CFRC Note") with AHA in the amount of $2,250,000. The CFRC Note is non-interest bearing. The CFRC Note is payable out of Net Cash Flows, as defined in the Operating Agreement, in the following order: (i) payment of default interest if any; (ii) payment of all amounts due and owing for attorney fees and cost; (iii) payments toward interest other than default interest; and (iv) payment toward the outstanding principal balance. All principal and unpaid interest is due at the maturity date of December 30, The CFRC Loan is secured by a mortgage and security agreement. As of December 31, 2010, the outstanding principal balance was $2,250,000. Due to AHA AHA has provided advances to the Company to pay for the Company's debt service during the construction period. These advances do not bear interest and are due upon demand. As of December 31, 2010, AHA had advanced $547,839 to the Company. South End Associates II, LLC Construction loan- PNC Bank. N.A. On May 25, 2010, the Company entered into a construction loan agreement (the "Construction Loan") with PNC Bank, National Association (the "Lender''), an affiliate of the Investor Member, in the amount of $2,400,000. Under the terms of the agreement, the Company is required to make interest only payments at the beginning of each month with principal and accrued interest due on the maturity date of May 26, The Construction Loan is secured by the Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing. 47

50 South End Associates II, LLC - Continued Construction loan - PNC Bank. N.A. ALBANY HOUSING AUTHORITY The Construction Loan bears interest at the greater of (i) the Base Rate, which is equal to the greater of (a) the Prime rate, (b) the sum of the Federal Funds Open Rate plus 50 basis points (.50%) or (c) the Daily LIBOR Rate plus 100 basis points (1%) or (ii) the Prime Rate plus 150 basis points (1.5%). As of December 31,2010, the interest rate was 4.75%. As of December 31, 2010, the principal balance was $2,400,000, and accrued interest was $9,404. For the period beginning May 25, 2010 (inception) and ending December 31, 2010, the Company incurred $23,978 of interest, which has been capitalized to construction in progress. Future minimum principal payments for the next two years are due as follows: Year ending December 31, Total $ 2, $ Bridge loan - PNC Bank. N.A. On May 25, 2010, the Company entered into a promissory note agreement with the Lender in the amount of $5,428,311 (the "Bridge Loan"). Under the terms of the agreement, the Company is obligated to make interest only payments at the beginning of each month with principal and accrued interest due on the maturity date of May 26, The Bridge Loan is secured by the Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing. The loan bears interest at the greater of (i) the Base Rate, which is equal to the greater of (a) the Prime rate, (b) the sum of the Federal Funds Open Rate plus 50 basis points (.50%) or (c) the Daily LIBOR Rate plus 100 basis points (1%}, or (ii) the Prime Rate plus 150 basis points (1.5%). As of December 31, 2010, the interest rate was 4.75%. As of December 31, 2010, the principal balance was $160,579, and accrued interest was $376. For the period beginning May 25, 2010 (inception) and ending December 31, 201 0, the Company incurred $376 of interest, which has been capitalized to construction in progress Future minimum principal payments for the next two years are due as follows: Year ending December 31, Total $ 160,579 $

51 Note 17 - Other Income Other Income includes office rental income for the second floor of the Authority's administration building as well as rental income from the State Employees Federal Credit Union (SEFCU).In addition the Authority has lease contracts with both Cingular and Nextel for rooftop rental space for cellular antennas. The Authority has management contracts with its component units, and the HCV Program. Note 18- Economic Dependency For the Years ended and 2010 the Authority's revenues were primarily received from HUD, which are subject to the availability of funds based on congressional approval, and the Authority's compliance with Federal rules and regulations. Note 19- Component Units The Authority has determined that the following partnerships and not for profit organizations should be included in its financial statements. Corning Homes Associates, L. P whose fiscal year end is December 31, operates a 160 unit apartment complex. The units include 134 units of public housing and 26 tax credit units. Lark Drive Associates, L.P whose fiscal year end is December 31, operates a 140 unit complex. McCarty Housing Development Fund Company, Inc, whose fiscal year is December 31, operates a 56 unit complex. Peter Schuyler Housing Development Fund Inc., whose fiscal year is June 30, is involved in the construction of nine modular single family homes. Creighton Storey Homes L.P whose fiscal year is December 31, operates 128 residential apartment units located in 10 buildings and was placed in service during The project qualifies for low income housing tax credits under Section 42 of the Internal Revenue Code. Swan Street Homes, LLC whose fiscal year end is December 31, operates 54 residential apartments which qualify for low income housing tax credits under IRS section 42. Swan Street Mixed Use, LP whose fiscal year end is December 31, operates 23 residential apartments which qualify for low income housing tax credits under IRS section 42. South End Associates, LP whose fiscal year end is December 31, operates 10 single family rental homes and 2 buildings containing 42 rental units which qualify for low income housing tax credits under IRS section

52 Ezra Prentice Homes Redevelopment, LLC whose fiscal year end is December 31, operates 176 rental units which qualify for low income housing tax credits under IRS section units will be designated as public housing rental units and 7 units will utilize project based section 8 vouchers. South End Associates II, LLC whose fiscal year end is December 31, operates a 43 unit project which qualifies for low income housing tax credits under IRS section 42 and the historical tax credit program as described in IRS Section 48. The individual financial statements for the component units listed above can be obtained by contacting the Authority located at 200 S. Pearl Street, Albany, NY. Note 20- Restricted Cash Restricted cash is comprised of the following at and 2010: HAP Townsend Pieter Schuyler Replacement Reserve Pieter Schuyler Operating Reserve NYSERDA Grant- Modernization $ 832,005 39,780 11,067 $ 882,852 June 30, 2010 $ 520,315 1,149,967 39,836 $ 1,710,118 Note 21- Deferred Revenues Deferred Revenue was comprised of the following at and 2010: Operating Subsidy AMP 4 & 7 Tenant Prepaid Rent State & Local Program Other Tenant Prepaid Rent June 30, 2010 $ 98,311 $ 58,319 10,327 12,020 50,989 $ ~$~~~61"=",3~1~6 50

53 Note 22 - Subsequent Events ALBANY HOUSING AUTHORITY (Continued) The Authority has evaluated subsequent events through March 31, 2012, the date on which the financial statements were available to be issued. Note 23- Prior Period Adjustments During the fiscal year ended June 30, 2010 the Authority made net adjustments of ($378,937) to the opening balance equity. The adjustments are comprised of the following: June Low Rent Public Housing To adjust for Fedeal Home Loan Bank loan recorded as a grant in a prior year Construction in progess related to the RHF Grant recorded twice Mise Total $ (245,000) (134,334) (8,548) $ (387,882) 51

54 Albany, New York SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended Funds Expended LOW INCOME HOUSING PROGRAM Operating Subsidy (CFDA#14.850a) $ Capital Fund Program (CFDA# ) Formula Capital Stimulus Grant (CFDA#14.885) Subtotal CFP Cluster Home Investment Partnership (CFDA# ) Supportive Housing Program (CFDA # ) Community Development Block Grants (CFDA#14.218) Shelter Care Plus (CFDA#14.238) 6,357,134 2,519,532 2,184,455 4,703,987 23, , , ,460 HOUSING ASSISTANCE PAYMENTS PROGRAM Section 8 Housing Choice Voucher (CFDA # ) Section 8 Moderate Rehabilitation (CFDA#14.856) Subtotal 14,747, ,897 14,882,795 Department of Veteran Affairs Veteran Affairs Supportive Housing (CFDA#14.VSH) 516,544 DEPARTMENT OF AGRICULTURE Summer Food Program of Children (CFDA# ) 69,484 TOTAL FEDERAL ASSISTANCE $ 27,983,303 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 1. Basis of Presentation - The Schedule of Expenditures of Federal Awards is presented in accordance with generally accepted accounting principles and is presented in accordance with the requirements of OMS Circular A-133. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the general purpose financial statements. 2. There were no subrecipient activities during the audit period. 52

55 Albany Housing Authority (NY009) ALBANY, NY Entity Wide Balance Sheet summary ( T~: ~: ; ::-;-r-::~:: :-- ;-~~~~:;r ~~~-;; :~--r,~~~ -r ;~::::~; T Submission Type: Audlted/A-133 Fiscal Year End: 06/ r "- ~ ~ -... _...,, ~ r G~-;;;;,:;-! T l r -~ ~;;- -r !...! , I 1 ProJect Total l Houslng I FoodServlt4! f'VCS/R 11~.238ShelterPIUI! Rf:VItaUzatlonof! 2Stato/LOCill i1euslnossactmtlosiscom onentunlts!ho~sln for~:rs::si c.pllll~:da IDCMIIoprnentBiockl ll!'lesl,ent I! AFFAIRS! Asalste.nco f ecce ; SUblolal ] ELIM! Total I j I,l CholeeVoucho~ / P~~~:~or jsoctt0118pfnqrom~. Cara ~So~=~::~od/! J P ) wtth~tsabllltlol / StlmuiUsGrant i Grant~~t!omont j Paprl~;:';;; i H~~;;~;J~~!Prog~~:~lon8j i I / J -~~~ r==~~::=~:f "-~~,:.~]=~~~:~!~~~~~~I~i~~~~E:~-~:~~::;:J~~~~~~:-:t~~;;~.. ~~.~:Y-=~-~~:d~~~~~-I~:~=::::'l~~~t:~-:.-J 53

56 r ~.-... _ Albany Housing Authority (NY009) ALBANY, NY Entity Wide Balance Sheet Summary Submission Type: Audlted/A 133 Flscar Year End: 06' _..._ ~-----~ l... ~~;;; ~:;;;;;;-l- ----r ---~~- -;,;;;;- -r r , J~: :~::~l..-~:~=l~~~~:~~~t... ~.~~;; ~-~~~... r..,~~;~~--.. [-~:=~=~-r r r r II! Project Total! Holllllng I FoiXISeNico! NfC SIR She~erPius I Rll'llta~zatlonof! 2Slete/local!, BuslnoasAellvltloa! 6Component UnltsiHoWIIngforPoraons! Cllplte.l Fund I Oevc!opmenl. Block I IIIVMiment ' Al'FAIRS ; Assistance i COCC i Subtotal j ELIM j Total. I CholcoVoudlora 1 Pro~ramfor 1Soc1lon8Programs C.rG!SeverelyDiatressed! 1 ; wlthdisabwues i StlmuluiGrnnt : Grani~Hemenll Partncr.hlpa I SUPPORTIVE!PI'llgrv..m_SectlonBf 5 i ; I 1! ; i Clllldrell! I! PublltHouslng!, l 1!! Granta, Progrom.~':~~~-G-~:'~.! ~~~~~!~ i 1 j ~M MM.. ~O- ~== F -~ 54

57 r ~ I Albany Housing Authority (NY009) ALBANY, NY Entity Wide Revenue and Expense Summary ;~~=-=~ - r r r r.-... l! Project Tota[! 1M71 Hol.llllng I Food Sorvlcll i NIC SIR ; Sheftor Plu& I Revlllltza1ion ol I 2 Stale/Local i1 SUIInottAt:UviiiH113 Component Units!Housln lor Persons~ ca It&t Fund I Devclopmem Blodl! Investment I AFFAIRS I ASSistance l ecce r Sub!otal I EUM! Totol I I I CholceVoueh ~ i ~~;!~or ]Sa~lor>SProgramel Care ~S~~~~~:~: di I I ~ ltilh~lsablllllas j Stlr:ut.J Grant : Gn~nt=1 ~amanlj P=~~ i H~'tj;~:J:i'u~ fprog~~de~~lon8! 1 t 1 ~ -r T-~~~-;~;:;-r r r- -7;_ ~=- -l r l r:~:::::r ::~;~= : T~;;~~-~:::~r-~:;~-~~ ; - r~~~~-- r.. Submission Type: Audlted/A-133 Fiscal Year End: : ' : : ' : - - i - -w ~.. w ~ w l w -~ ;ow ~ H -~ + $147:36o -t- :;;~~j6q""""""""~ :::::: l::::::::~:~:::==::::::r::=-~=:~~e::~;:;;;;:::~::::~~~;~~~=e~:=::::::::::l 55

58 Albany Housing Authority (NYOOS) ALBANY, NY Entity Wide Revenue and Expense Summary Submission Type: Audlted/A-133 Fiscal Year End: :2011 r r r- ---r7;;-;;::;;;l r r~:;~-- --r ,----r ~:::--: -r-:::--:r ~-~~~:~;;:~r..:-~;;-r~~=--r~:==~-r r--... i I CM!IcaVouchcru i Programtor!S{Ictlon8Progn~mt! C8ro :SovorotyDiatrossod, I'. j wuhditabi~u~! stlmuluigi1int! GrantS/Enllllsment: Partnen.hlpt 1 I r l , I! Pro]octTolal I Housing 1 FoodServltt~ I NIC SIR! 1.C.238She~erPius I Ro-.1!allza11onot 'II 2Stlle/Local!, Btr!lnonActlviUoal' 6Ccmponent Unl~!Hou'slogfou~~:ru;:,[ Capital~:~! Devolopmont BICICk I lnve tmen! I AFFAIRS! Alllli~~neo J ecce! Sublota! I EL!M i Total I SUPPORTIVE fprogram_sectlon8! j! 'i!! 1 ChJTdron 1 i I Pub~c Housing!,!! 1 Gran~! Program [. ~~~-~~-G_C:'~~- i :!!~J!... -~ l ; - -;o- - ".. r- ~ '... I _ ;--i - --;0""~"""1 :i=-- c~:~~~~:~~j ---~~ ~.. ~~~ J $0 I $5MS9! ~.. so -r--wo.a;5 ~..., -so... T~-;; ~ ; r ~... ~T""'-"'"""~8- -.., ].!~fu=:t=pi~~~" "-~ $0 I i ~~:.::~::~:==-==! $0 ; $ i _...;o ~ r-.. ~ ::~~~:~:::t... :::::.:::=l ~~!:~~~ !!:~~=~~-.. ~._!.~.:::t:=:::-..:::::::::1 so l I... ~s o -~--- - r ::~:~:=:f:~-==~0 -~,.._,..,_... ~... ~- "-"""'-"'8' ~~!~:!~~... t... 8!!:~!!~~?.?.-..-f 56