WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2014

2 I Mayer Hoffman McCann P.C. An Independent CPA Firm 700 West 47th Street, Suite 1100 Kansas City, MO Main: Fax: INDEPENDENT AUDITORS' REPORT To the Board of Directors WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES Reporl on the Financial Statements We have audited the accompanying consolidated financial statements of Westside Housing Organization, Inc. & Subsidiaries (the "Organization"), which comprise the consolidated statement of financial position as of December 31, 2014, and the related consolidated statements of activities, changes in net assets, functional expenses and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Westside Housing Organization, Inc. & Subsidiaries as of December 31, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Kansas City, Missouri May 28, 2015 Member of Kreston International a global network of independent accounting firms - 1 -

3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, 2014 A S S E T S CURRENT ASSETS Cash and cash equivalents $ 286,364 Grant accounts receivable 67,845 Trade accounts receivable, net of allowance of $10,609 21,746 Revolving loan funds 113,396 Property held for sale/development 64,106 Prepaid expenses 6,027 TOTAL CURRENT ASSETS 559,484 TENANT DEPOSITS HELD IN TRUST 38,273 REPLACEMENT RESERVE AND RESTRICTED DEPOSITS 262,501 NOTES RECEIVABLE, net 262,562 PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation 5,104,122 INTANGIBLE ASSETS, NET 160,135 OTHER ASSETS, net 237 TOTAL ASSETS $ 6,387,314 L I A B I L I T I E S CURRENT LIABILITIES Accounts payable $ 79,683 Accrued expenses 91,619 Other liabilities 12,253 Lines of credit 90,349 Current portion of long-term debt 43,323 TOTAL CURRENT LIABILITIES 317,227 TENANT DEPOSITS HELD IN TRUST 37,748 LONG-TERM LIABILITIES Long-term debt, less current portion above 2,381,907 Other long-term liabilities 238,525 TOTAL LONG-TERM LIABILITIES 2,620,432 TOTAL LIABILITIES 2,975,407 N E T A S S E T S UNRESTRICTED NET ASSETS Unrestricted 736,926 Noncontrolling interest 1,091,351 TOTAL UNRESTRICTED NET ASSETS 1,828,277 TEMPORARILY RESTRICTED NET ASSETS 120,968 PERMANENTLY RESTRICTED NET ASSETS 1,462,662 TOTAL NET ASSETS 3,411,907 TOTAL LIABILITIES AND NET ASSETS $ 6,387,314 See Notes to Consolidated Financial Statements - 2 -

4 CONSOLIDATED STATEMENT OF ACTIVITIES Year Ended December 31, 2014 UNRESTRICTED NET ASSETS REVENUE Home sales $ 133,000 Direct funding of home sales 122,181 Direct cost of home sales (168,449) Net Housing Activity 86,732 Grant revenue 563,996 Rent income 560,216 Rebate income 22,323 Management fee income 145,963 Interest income 4,202 Other income 53,824 TOTAL REVENUES 1,437,256 EXPENSES Program 1,309,900 Management and general 176,256 Fundraising 66,063 TOTAL EXPENSES 1,552,219 CHANGE IN UNRESTRICTED NET ASSETS BEFORE OTHER REVENUE (114,963) OTHER REVENUE Change in fair value of derivative (54,552) CHANGE IN UNRESTRICTED NET ASSETS BEFORE NONCONTROLLING INTEREST (169,515) Noncontrolling interest in subsidiary earnings 199,286 CHANGE IN NET ASSETS $ 29,771 See Notes to Consolidated Financial Statements - 3 -

5 CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, 2014 Temporarily Permanently Unrestricted Restricted Restricted Net Assets Net Assets Net Assets Total Balance, January 1, 2014 $ 1,997,792 $ 120,968 $ 1,462,662 $ 3,581,422 Changes in net assets 29,771-29,771 Noncontrolling interest in earnings of subsidiary (199,286) - - (199,286) Balance, December 31, 2014 $ 1,828,277 $ 120,968 $ 1,462,662 $ 3,411,907 See Notes to Consolidated Financial Statements - 4 -

6 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2014 Neighborhood and Housing Program Rental Production Total Program Management and General Fundraising Total Salaries and wages $ 333,162 $ - $ 333,162 $ 23,596 $ 28,452 $ 385,210 Payroll taxes 29,860-29,860 5,419 2,643 37,922 Employee benefits 14,051-14,051 4,829 4,829 23,709 Contract services 38,331 28,139 66,470 58,954 3, ,654 Neighborhood & housing programs 291, , ,646 Interest 16,454 68,230 84,684 2,299-86,983 Advertising 1,185-1, ,185 Community organizing expenses ,963 24,963 Professional services - 38,580 38, ,580 Insurance 5,160 41,667 46,827 15,221-62,048 Telephone 2, ,145 2, ,683 Utilities 7,259 62,583 69,842 8,040-77,882 Office supplies - 8,664 8,664 6, ,071 Dues and memberships Meeting and conferences 2,555-2, ,555 Maintenance and repairs 13,451 41,949 55,400 4, ,522 Training and workshops 7,397-7, ,397 Real estate taxes 10,521 3,586 14,107 1,429-15,536 Bad debt expense ,000-20,000 Other ,321-7,754 Depreciation 14, , ,942 8, ,412 Amortization 10,943 9,645 20,588 6,557-27,145 Subtotal before cost of home sales 799, ,524 1,309, ,256 66,063 1,552,219 Direct cost of home sales 168, , ,449 TOTAL FUNCTIONAL EXPENSES $ 967,825 $ 510,524 $ 1,478,349 $ 176,256 $ 66,063 $ 1,720,668 PERCENTAGE OF EXPENSES 56.25% 29.67% 85.92% 10.24% 3.84% % See Notes to Consolidated Financial Statements - 5 -

7 CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31, 2014 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 29,771 Change in net assets attributable to noncontrolling interest (199,286) Adjustments to reconcile change in net assets to net cash flows from operating activities Depreciation 229,412 Amortization 27,145 Change in fair value of derivative 54,552 Decrease (increase) in operating assets Trade accounts and grants receivable 89,228 Prepaids (6,026) Tenant deposits held in trust 15,058 Work in progress 172,254 Property held for sale/development (490) Increase (decrease) in operating liabilities Accounts payable (1,959) Accrued expenses 3,955 Other liabilities (1,468) Tenant deposits held in trust (12,703) NET CASH FLOWS FROM OPERATING ACTIVITIES 399,443 CASH FLOWS FROM INVESTING ACTIVITIES Net activity in revolving loan funds 8,846 Net activity in replacement reserve 11,966 Repayments of notes receivable 6,666 Purchases of property and equipment (49,551) NET CASH FLOWS FROM INVESTING ACTIVITIES (22,073) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on line of credit (122,004) Borrowings on long-term debt 16,675 Principal repayments on long-term debt (203,638) NET CASH FLOWS FROM FINANCING ACTIVITIES (308,967) NET CHANGE IN CASH AND CASH EQUIVALENTS 68,403 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 217,961 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 286,364 SUPPLEMENTAL CASH FLOW DISCLOSURES Cash paid for interest $ 86,983 See Notes to Consolidated Financial Statements - 6 -

8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies Nature of operations Westside Housing Organization, Inc. (WHO) is a not-for-profit corporation organized for the purpose of improving the quality of life for residents of Kansas City, Missouri, primarily in the areas known as Midtown, Historic Northeast, Westside Neighborhoods, and in other areas specified by funding sources. WHO provides residential construction and rehabilitation property management services, housing assistance/neighborhood conservation, neighborhood organizing and emergency home repair to community residents. Funding for WHO s activities is provided in part by Community Development Block Grant Funds obtained through the City of Kansas City, Missouri. In this regard, WHO serves as a sub-grantee for such funds received by the City from the U.S. Department of Housing and Urban Development under terms of annual contracts with Kansas City, Missouri. WHO also receives funding in the form of grants, recoverable grants and loans from local businesses, institutions, and other organizations. WHO is a charter member of Neighborhood Reinvestment Corporation, d/b/a NeighborWorks America (NeighborWorks), which has provided the funding for WHO s Permanently Restricted Capital Fund, together with substantial expendable grant funds, technical support, and related services. The purpose of NeighborWorks is to promote reinvestment in older neighborhoods by local financial institutions working cooperatively with community people and local governments, relying on local initiative or area residents for the specific design of local programs. Principles of consolidation The Westside Housing Organization, Inc. and Subsidiaries (the Organization) consolidated financial statements include the accounts of WHO and its whollyowned subsidiaries, which include Westside Preservation, LLC (WPLLC), Jefferson Place Redevelopment Corporation (JPRC), Jefferson Place Associates L.P. (JPALP), Villa Loma Incorporated (VLI), and Westside Redevelopment Corporation (WRC). Intercompany transactions and balances have been eliminated in consolidation. WHO owns 100% of Westside Preservation, LLC (WPLLC), which is the 0.01% general partner in Westside Apartment Association, L.P., the ownership entity for the multi-family property commonly known as Westside Apartments, a 75 unit apartment complex. WHO owns 100% of Villa Loma Incorporated (VLI), which is the 0.01% neighborhood general partner in Pennway Plaza Associates, L.P., the ownership entity for the multifamily property commonly known as Pennway Plaza Apartments, a 120 unit apartment complex. WHO owns 100% of Jefferson Place Redevelopment Corporation (JPRC), which is the 1% general partner in Jefferson Place Associates, L.P., the ownership entity of the multifamily property commonly known as Jefferson Place Apartments. WHO owns the 99% limited partner interest in Jefferson Place Associates, L.P., which results in an effective 100% ownership of Jefferson Place Associates as a wholly-owned subsidiary. Method of accounting The Organization s consolidated financial statements are prepared on the accrual basis of accounting, which conforms to U.S. generally accepted accounting principles. Use of estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates

9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Recognition of donor restricted contributions The Organization follows Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958, Not-for-Profit Entities. Under FASB ASC 958, the Organization is required to report information regarding its financial positions and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Unrestricted net assets are not subject to donor-imposed restrictions. Changes to this category of net assets include certain types of philanthropic support, including unrestricted contributions. Temporarily restricted net assets are net assets subject to donor-imposed restrictions that may or will be met either by actions of WHO and/or the passage of time. Items that affect this net asset category are restricted contributions and grants. Contributions and grants received with donorimposed restrictions are reported as support in the temporarily restricted net assets class. These amounts are reclassified to unrestricted net assets when such restrictions are met or have expired. Permanently restricted net assets are designated as permanently restricted by the donor for use in acquiring certain capital property. Permanently restricted net assets consist of capital funds that were funded by grants from NeighborWorks. Investment income from this fund is available for unrestricted purposes Cash and cash equivalents For purposes of the consolidated statement of cash flows the Organization considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. Property held for sale/development Property held for sale consists of finished residential lots available for sale which are carried at the lower of market value or acquisition cost of the land plus development costs (including capitalized interest incurred during construction). Land development costs are assigned to a project using the specific identification method. Property and equipment The Organization capitalizes and depreciates operating assets that cost in excess of $2,000. Operating assets that cost less than $2,000 and repairs are expensed as incurred. The Organization capitalized its multi-family buildings at the time of acquisition and capitalizes improvements made to the buildings over time. The Organization has adopted the straight-line method of depreciation and has assigned the following useful lives to the following classes of fixed assets: Real property Improvements to real property Furniture, fixtures, and equipment Useful Life 40 years 10 years 3-7 years Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their useful lives. The useful lives of the assets for depreciation purposes may be different than their actual economic useful lives. Rental income and prepaid rents Rental income is recognized as rent becomes due. Rental payments received in advance are deferred until earned. All leases with the tenants are operating leases. Long term assets WHO receives certain grants from time to time in connection with its multifamily properties from NeighborWorks. WHO is a member of NeighborWorks National Multifamily Initiative. Grants received for these purposes are set up as long term assets via the establishment of long term, non-amortizing cash flow credit facilities (i.e., notes receivable) for the subject properties

10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Impairment of long-lived assets In accordance with the FASB ASC 360, Impairment or Disposal of Long-Lived Assets, the Organization monitors the carrying value of long-lived assets for potential impairment based on whether certain trigger events have occurred. These events may include current period losses consolidated with a history of losses or a projection of continuing losses or a significant decrease in the market value of an asset. When a triggering event occurs, an impairment calculation is performed by comparing the carrying amount of the real estate to the future net undiscounted cash flows expected to be generated by the rental property and any estimated proceeds from the eventual disposition of the real estate. If the real estate is considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the real estate exceeds the fair value of such property. No impairment has been recognized through December 31, Income taxes WHO is a not-for-profit organization as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes on related income pursuant to Section 501(a) of the Internal Revenue Code. Income tax returns filed by WHO on Form 990 are subject to examination by the Internal Revenue Services (IRS) for three years after the date filed, with the result that the fiscal years ended 2013, 2012, and 2011 remain open as of May 28, 2015, although no returns have been selected for examination by the IRS. Management has evaluated tax positions taken or expected to be taken in the course of preparing WHO s tax returns with assistance from its tax preparer to determine whether its tax positions are more likely than not to be sustained by applicable taxing authorities; likely tax positions are reported in these financial statements, and management is not aware of any material uncertain tax positions. Jefferson Place Apartments, L.P. and Westside Apartment Associates L.P. are operated as a partnership and are not specifically taxed as a separate entity; rather, the net income or loss is included in the income tax returns of the partners. Therefore, no provision is made for income taxes in these statements. The Partnership has adopted the standards requiring disclosure of uncertain tax positions under the FASB ASC 740 Income Taxes. There have been no interest or penalties recognized in the statements of profit and loss or in the balance sheets related to uncertain tax positions. In addition, no material tax positions exist for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Partnerships files income tax returns in the U.S. federal jurisdiction and the Missouri state jurisdiction. The Partnership is no longer subject to U.S. federal, state and local, or non-u.s. income tax examinations by tax authorities for years before Functional allocation of expenses The Organization allocates expenses on a functional basis between its programs and support services. The cost of providing such services is reported on a functional basis in the consolidated statement of functional expenses. Expenses that can be identified with a specific service are allocated directly according to their natural expenditure classification. Other expenses that are common to more than one function are allocated based upon relevant criteria. Management fees The Organization s management fee revenue is derived primarily from providing management services under fixed fee arrangements. The revenue is recognized on a monthly basis based on the gross receipts of each managed entity and the contracted management fee rate determined in the individual management agreements. Accounts Receivable Accounts receivable are at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the consolidated financial statements

11 (2) Grant accounts receivable WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of grants receivable as of December 31, 2014: (3) Revolving loan funds City of Kansas City, Missouri contracts $ 50,693 Economic Development Corporation of Kansas City, Missouri TIF contract Others 6,713 10,439 Total $ 67,845 Loans are approved by the loan committee and made in accordance with particular grant restrictions. Interest rates range from 0% to 7%, with maturity dates ranging from 2015 to Each loan is collateralized by residential real estate occupied by the borrower. Funding Source Number of Loans Outstanding Balance NeighborWorks America (permanently restricted funding) 10 $ 111,417 MO Housing Trust Fund (unrestricted funding) 1 1,979 (4) Replacement reserves and restricted deposits 11 $ 113,396 Replacement reserves and restricted deposits represent funds that are held and restricted for use either by the Partnership agreement or the loan agreement. (5) Notes receivable Reserves for replacement $ 96,851 Operating reserves 160,305 Insurance and tax escrows 5,345 Total $ 262,501 Notes receivable consists of four unsecured notes made by the Organization. The Penway Plaza Associates note consists of an unsecured 84% undivided interest in a non-interest bearing note with a face value of $2,884,000 from Pennway Plaza Associates L.P. This note receivable has been discounted to net present value at a rate of 6.0%, which will mature in Other notes receivable consists of loans made to borrowers for the purchase of properties previously owned by the Organization. These 0% notes receivable have a third position on the underlying assets, with repayment due after the first and second mortgages are repaid. Penway Plaza Associates note $ 2,355,023 Discount on note (2,119,464) Subtotal 235,559 Other Notes Receivable 47,003 Allowance for doubtfull accounts (20,000) Total $ 262,

12 (6) Property and equipment WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of property and equipment as of December 31, 2014: (7) Other assets Other assets consisted of the following at December 31, 2014: Land $ 470,608 Buildings 6,322,984 Furniture and equipment 210,178 Maintenance equipment 18,771 Total cost 7,022,541 Accumulated depreciation (1,918,419) Net property and equipment $ 5,104,122 Deferred tax credits $ 24,761 Loan fees 88,217 Development Plan 105,000 Accumulated amortization (57,843) Total $ 160,135 Deferred tax credit costs totaling $24,761 are capitalized and are being amortized over the tenyear tax credit period commencing in Amortization expense is anticipated to approximate $2,476 during each of the next four years. Loan costs totaling approximately $88,217 consist of fees for obtaining various mortgage loans which are being amortized using the straight-line method over the life of each mortgage loan. Amortization started in 2009 when principal and interest payments began. Amortization expense is anticipated to approximate $3,338 during each of the next five years. Development plan costs totaling approximately $105,000 consist of fees for a neighborhood area development plan which are being amortized using the straight-line method over six years. Amortization started in 2014 when the plan was completed. Amortization expense is anticipated to approximate $17,500 during each of the next five years. (8) Lines of credit Line of credit with Missouri Bank & Trust with an interest rate of 5.5%, requiring payments of interest only until maturity. Secured by construction deeds of trust and security agreements on 2034 Summit, maturing upon sale of the related real estate. $ 59,500 Line of credit with Missouri Bank & Trust with an interest rate of 5.5%, requiring payments of interest only until maturity. Secured by construction deeds of trust and security agreements, maturing upon sale of the related real estate. 30,849 $ 90,

13 (9) Long-term debt WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note payable to Missouri Bank & Trust, with an original amount of $75,000, and an interest rate of 5.5%; monthly payments at $876, including interest, secured by real estate at 2034 Summit, maturing in $ 18,058 Note payable to Missouri Bank & Trust, with an original amount of $175,775, and an interest rate of 5.5%; monthly payments at $1,000, including interest, secured by real estate at 2301/2305 West Chavez. 170,180 Note Payable to Brotherhood Bank and Trust with a maximum amount of $250,000 and an annual interest rate of 4.75%; interest only for 12 months, then payable in 35 monthly installments of $1,625, including interest, with a balloon payment of $227,631 at maturity; secured by real estate at 1647, 1653, 1655 & 1657 Jefferson maturing in ,874 Note payable to the City of Kansas City, Missouri, issued September 15, 1998, secured by a second deed of trust on the Signal Hill property, and amended on October 18, 2007 and assumed by WAALP. As defined in the agreement, payments of 10.02% of Net Surplus Cash due through 2012, with an additional 20.04% of Net Surplus Cash due through maturity. Simple interest at 1.0%, note is due in full on December 1, ,000 Note payable to the City of Kansas City, Missouri, issued February 6, 1991 to WHO with an original amount of $180,000, secured by a second deed of trust on the Take Part II property, and amended on October 18, 2007 and assumed by WAALP with a balance of $170,437. As defined in the agreement, payments of 3.139% of Net Surplus Cash due through 2012, with an additional 6.278% of Net Surplus Cash due through maturity. Simple interest at 1.0%, note is due in full on December 1, ,437 Note payable to the City of Kansas City, Missouri, issued February 6, 1991 with an original amount of $706,000, secured by a second deed of trust on the Nottingham Apartments property, and amended on October 18, 2007 and assumed by WAALP with a balance of $706,000. As defined in the agreement, payments of % of Net Surplus Cash due through 2012, with an additional % of Net Surplus Cash due through maturity. Simple interest at 1.0%, note is due in full on December 1, ,000 Note payable to the Greater Kansas City Community Foundation with an original amount of $80,000, issued to February 6, 1991 to WHO, secured by the Take Part II property, and amended on October 18, 2007 and assumed by WAALP with a balance of $80,000. No payments are due until maturity, and no interest accrues. Loan is due in full on October 1, ,000 MHDC Multifamily Housing Revenue Bonds Series 2007V-A carrying interest at 6.12%, with monthly interest and principal payments of $2,040 required through maturity in 2027, secured by real estate. See Note 10 regarding the interest rate swap. 831,681 Total 2,425,230 Less current portion 43,323 Non-current debt $ 2,381,

14 (9) Long-term debt (continued) WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future maturities of long-term debt are as follows: (10) Restricted net assets Years Ending December 31, 2015 $ 43, , , , ,516 Thereafter 2,123,938 Total Temporarily restricted net assets consisted of the following at December 31, 2014: $ 2,425,230 Community programs $ 37,518 Revolving loan fund 1,157 Program coordination 82,293 $ 120,968 Permanently restricted net assets consisted of the following at December 31, 2014: (11) Interest rate swaps Capital projects - NeighborWorks America $ 1,068,452 Revolving loan funds - NeighborWorks America 69,210 Capital projects - CFRAH Grant 325,000 $ 1,462,662 WHO accounts for interest rate swaps at fair value as required by FASB ASC 815, Derivatives and Hedging. The fair values of the interest rate swaps were determined through pricing received from the counterparty, which develops the values based on inputs observable in active markets, such as interest rates. As the significant inputs are observable, the fair values of these derivatives are considered to be Level 2, as defined by FASB ASC 820, Fair Value Measurements. Westside Apartments Associates L.P. (WAALP) entered into two interest swap agreements with US Bank fixing the interest rate on the Series 2007V-A bonds issued by the Missouri Housing Development Commission (MHDC) to finance the construction of Westside Apartments (owned by WAALP) to 5.31% until April 2009, then increasing to 6.12% through maturity from the variable rate included on the bonds. The original rates on the Series 2007V-A bonds was 84.82% of the sum of (i) the one-month LIBOR rate, and (ii) 150 basis points, resetting on the first calendar day of each month. The fair value of the interest rate swap has been valued on a mark to market basis and has been recorded as a derivative liability in the consolidated statement of financial position. The change in the fair value of the interest rate swap has been reflected as a nonoperating activity in the consolidated statement of activities

15 (12) Retirement plan WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WHO sponsors a defined contribution SIMPLE IRA plan that covers eligible full-time salaried employees. Under this plan, WHO contributes on behalf of each participant an amount equal to 3% of eligible employees gross wages. The plan was suspended during 2012 and has not been reinstated as of December 31, (13) Commitments Subsidiaries of WHO have entered into several land use restriction agreements with the Missouri Housing Development Commission (MHDC), which regulate, among other things, the rents which may be charged for apartment units in various housing properties, and otherwise regulate the relationship between the Partnerships and MHDC. The agreements require a specified number of units shall be made available for rent solely to eligible low-income individuals or families, as defined in the agreements. The subsidiaries low-income housing tax credits will be contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct noncompliance within the specified time period could result in recapture of previously taken credits, plus interest. WHO entered into a cooperative agreement with the City of Kansas City, Missouri in which the City provides annual funding to WHO for the operation and maintenance of WAALP and JPALP. During 2014, $20,000 was remitted to WHO by the City, and passed through to WAALP and JPALP. (14) Subsequent events The Organization has evaluated subsequent events through May 28, 2015 which is the date the consolidated financial statements were available to be issued. There were no matters identified for disclosure during this evaluation

16 SUPPLEMENTAL INFORMATION

17 Mayer Hoffman McCann P.C. An Independent CPA Firm 700 West 47th Street, Suite 1100 Kansas City, MO Main: Fax: I 1~ INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL INFORMATION To the Board of Directors WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES We have audited the consolidated financial statements of Westside Housing Organization, Inc. & Subsidiaries (the "Organization") as of and for the year ended December 31, 2014 and our report thereon dated May 28, 2015, which contained an unmodified opinion on those financial statements. Our audit was performed for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The accompanying supplemental information on pages 16 through 17 is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole. /14 ;" /!K-- l 1 1vl -- f/ Kansas City, Missouri May 28, 2015 Member of Kreston International a -global 15 -network of independent accounting firms

18 CONSOLIDATING STATEMENT OF FINANCIAL POSITION December 31, 2014 CURRENT ASSETS ASSETS WHO JPALP WAALP Eliminations TOTAL Cash and cash equivalents $ 265,455 $ 6,832 $ 14,077 $ - $ 286,364 Grant accounts receivable 67, ,845 Trade accounts receivable, net 361,252 1,171 15,156 (355,833) 21,746 Revolving loan funds 113, ,396 Property held for sale/development 64, ,106 Prepaid expenses 1,434-4,593-6,027 TOTAL CURRENT ASSETS 873,488 8,003 33,826 (355,833) 559,484 TENANT DEPOSITS HELD IN TRUST - 8,203 30,070-38,273 REPLACEMENT RESERVE AND RESTRICTED DEPOSITS 5,095 15, , ,501 NOTES RECEIVABLE, net 898, (635,763) 262,562 PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation 508, ,345 3,939,203-5,104,122 INTANGIBLE ASSETS, NET 87,500 2,333 70, ,135 OTHER ASSETS, net 184, (184,217) 237 TOTAL ASSETS $ 2,557,436 $ 690,325 $ 4,315,366 $ (1,175,813) $ 6,387,314 CURRENT LIABILITIES LIABILITIES Accounts payable $ 51,811 $ 19,794 $ 8,078 $ - $ 79,683 Accrued expenses 11,746 32, ,296 (169,615) 91,619 Affiliate advances - 2,686 - (2,686) - Other liabilities 11,063-19,624 (18,434) 12,253 Lines of credit 90, ,349 Current portion of long-term debt 13,825 13,520 15,978-43,323 TOTAL CURRENT LIABILITIES 178,794 68, ,976 (190,735) 317,227 TENANT DEPOSITS HELD IN TRUST - 7,678 30,070-37,748 LONG-TERM LIABILTLIES Long-term debt 174, ,544 2,692,903 (707,953) 2,381,907 Other long-term liabilities , ,525 TOTAL LONG-TERM LIABLITIES 174, ,544 2,931,428 (707,953) 2,620,432 TOTAL LIABILITIES 353, ,414 3,222,474 (898,688) 2,975,407 NET ASSETS UNRESTRICTED Unrestricted 620, ,911 1,541 (277,125) 736,926 Noncontrolling interest - - 1,091,351-1,091,351 TOTAL UNRESTRICTED NET ASSETS 620, ,911 1,092,892 (277,125) 1,828,277 TEMPORARILY RESTRICTED 120, ,968 PERMANENTLY RESTRICTED 1,462, ,462,662 TOTAL NET ASSETS 2,204, ,911 1,092,892 (277,125) 3,411,907 TOTAL LIABILITIES AND NET ASSETS $ 2,557,436 $ 690,325 $ 4,315,366 $ (1,175,813) $ 6,387,

19 CONSOLIDATING STATEMENT OF ACTIVITIES Year Ended December 31, 2014 WHO JPALP WAALP Eliminating Entries Consolidated Balance UNRESTRICTED NET ASSETS REVENUE Home sales $ 133,000 $ - $ - $ - $ 133,000 Direct funding of home sales 122, ,181 Direct cost of home sales (168,449) (168,449) Net housing activity 86, ,732 Grant revenue 563, ,996 Rent income 83,967 91, , ,216 Rebate income 22, ,323 Management fee income 343, (197,698) 145,963 Interest income 4, ,202 Other income 17,684 11,585 44,555 (20,000) 53,824 TOTAL REVENUES 1,122, , ,452 (217,698) 1,437,256 EXPENSES Program 819, , ,206 (217,698) 1,309,900 Management and general 176, ,256 Fundraising 66, ,063 TOTAL EXPENSES 1,061, , ,206 (217,698) 1,552,219 CHANGE IN UNRESTRICTED NET ASSETS BEFORE OTHER REVENUE 60,794 (31,003) (144,754) - (114,963) OTHER EXPENSE Change in fair value of derivative - - (54,552) - (54,552) CHANGE IN UNRESTRICTED NET ASSETS BEFORE NONCONTROLLING INTEREST 60,794 (31,003) (199,306) - (169,515) Noncontrolling interest in subsidiary earnings , ,286 CHANGE IN NET ASSETS $ 60,794 $ (31,003) $ (20) $ - $ 29,