WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2015

2 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 Report 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, 2015, 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, 2015, 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 June 10, 2016 Member of Kreston International a global network of independent accounting firms - 1 -

3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, 2015 A S S E T S CURRENT ASSETS Cash and cash equivalents $ 306,310 Restricted deposits 153,161 Grants receivable 56,086 Trade accounts receivable, net of allowance of $10,944 35,530 Revolving loan funds 93,578 Construction in progress and property available for sale, at net realizable value 297,470 Prepaid expenses 3,104 TOTAL CURRENT ASSETS 945,239 TENANT DEPOSITS HELD IN TRUST 41,910 REPLACEMENT RESERVE 87,961 NOTES RECEIVABLE, net 274,171 PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation 4,945,740 INTANGIBLE ASSETS, net 133,103 OTHER ASSETS, net 237 TOTAL ASSETS $ 6,428,361 L I A B I L I T I E S CURRENT LIABILITIES Accounts payable $ 89,337 Accrued expenses 110,293 Other liabilities 75,284 Lines of credit 236,611 Current portion of long-term debt 48,921 TOTAL CURRENT LIABILITIES 560,446 TENANT DEPOSITS HELD IN TRUST 37,406 LONG-TERM LIABILITIES Long-term debt, less current portion above 2,364,650 Other long-term liabilities 234,320 TOTAL LONG-TERM LIABILITIES 2,598,970 TOTAL LIABILITIES 3,196,822 N E T A S S E T S UNRESTRICTED NET ASSETS Unrestricted 757,384 Noncontrolling interest 890,525 TOTAL UNRESTRICTED NET ASSETS 1,647,909 TEMPORARILY RESTRICTED NET ASSETS 120,968 PERMANENTLY RESTRICTED NET ASSETS 1,462,662 TOTAL NET ASSETS 3,231,539 TOTAL LIABILITIES AND NET ASSETS $ 6,428,361 See Notes to Consolidated Financial Statements - 2 -

4 CONSOLIDATED STATEMENT OF ACTIVITIES Year Ended December 31, 2015 UNRESTRICTED NET ASSETS Grant revenue $ 547,622 Rent income 573,851 Management fee income 162,358 Interest income 2,165 Other income 47,644 TOTAL REVENUES 1,333,640 EXPENSES Program 1,341,860 Management and general 100,679 Fundraising 75,674 TOTAL EXPENSES 1,518,213 CHANGE IN UNRESTRICTED NET ASSETS BEFORE OTHER REVENUE (184,573) OTHER REVENUE Change in fair value of derivative 4,205 CHANGE IN UNRESTRICTED NET ASSETS BEFORE NONCONTROLLING INTEREST (180,368) Noncontrolling interest in subsidiary earnings 200,826 CHANGE IN UNRESTRICTED NET ASSETS $ 20,458 See Notes to Consolidated Financial Statements - 3 -

5 CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, 2015 Temporarily Permanently Unrestricted Restricted Restricted Net Assets Net Assets Net Assets Total Balance, January 1, 2015 $ 1,828,277 $ 120,968 $ 1,462,662 $ 3,411,907 Changes in net assets 20, ,458 Noncontrolling interest in earnings of subsidiary (200,826) - - (200,826) Balance, December 31, 2015 $ 1,647,909 $ 120,968 $ 1,462,662 $ 3,231,539 See Notes to Consolidated Financial Statements - 4 -

6 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2015 Neighborhood and Housing Program Rental Production Total Program Management and General Fundraising Total Salaries and wages $ 395,822 $ - $ 395,822 $ 36,341 $ 28,922 $ 461,085 Payroll taxes 40,292-40,292 3,194 2,637 46,123 Employee benefits 18,562-18,562 3,194 2,542 24,298 Contract services 14,095 21,153 35,248 6,100 15,047 56,395 Home improvement expenses 218, ,860-19, ,693 Interest 13,489 68,447 81,936 3,865-85,801 Advertising 2, , ,133 Community organizing expenses - 8,156 8, ,156 Professional services 37,615 48,616 86, ,231 Insurance 3,300 47,862 51,162 8,962-60,124 Telephone 3, ,494 1,167-4,661 Utilities 15,315 69,533 84,848 4,599-89,447 Office supplies 3, ,044 3, ,106 Dues and memberships Meeting and conferences 2,093-2,093 8,512 5,591 16,196 Maintenance and repairs 7,313 23,558 30, ,871 Training and workshops 6, ,149 3,325-10,474 Real estate taxes 6,948 16,678 23, ,251 Other 4,087-4, ,087 Depreciation 22, , , ,667 Amortization - 9,532 9,532 17,500-27,032 TOTAL FUNCTIONAL EXPENSES $ 817,631 $ 524,229 $ 1,341,860 $ 100,679 $ 75,674 $ 1,518,213 PERCENTAGE OF EXPENSES 53.85% 34.53% 88.38% 6.63% 4.99% % See Notes to Consolidated Financial Statements - 5 -

7 CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 20,458 Change in net assets attributable to noncontrolling interest (200,826) Adjustments to reconcile change in net assets to net cash flows from operating activities Depreciation 232,667 Amortization 27,032 Change in note receivable discount amortization (11,609) Change in fair value of derivative (4,205) Decrease (increase) in operating assets Trade accounts and grants receivable (2,025) Prepaids (1,670) Tenant deposits held in trust 1,363 Property held for sale/development (233,364) Increase (decrease) in operating liabilities Accounts payable 9,654 Accrued expenses 18,674 Other liabilities 63,031 Tenant deposits held in trust (342) NET CASH FLOWS FROM OPERATING ACTIVITIES (81,162) CASH FLOWS FROM INVESTING ACTIVITIES Net activity in revolving loan funds 24,411 Net activity in replacement reserve 8,890 Net activity in restricted deposits 7,489 Purchases of property and equipment (74,285) NET CASH FLOWS FROM INVESTING ACTIVITIES (33,495) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on lines of credit 174,483 Repayments on lines of credit (28,221) Borrowings on long-term debt 41,000 Principal repayments on long-term debt (52,659) NET CASH FLOWS FROM FINANCING ACTIVITIES 134,603 NET CHANGE IN CASH AND CASH EQUIVALENTS 19,946 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 286,364 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 306,310 SUPPLEMENTAL CASH FLOW DISCLOSURES Cash paid for interest $ 85,802 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: Description 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 2014, 2013, and 2012 remain open as of June 10, 2016, 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 Partnerships 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 file income tax returns in the U.S. federal jurisdiction and the Missouri state jurisdiction. The Partnerships are 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 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) Grant accounts receivable The following is a summary of grants receivable as of December 31, 2015: Funding Source Number of Loans Outstanding Balance NeighborWorks America (permanently restricted funding) 8 $ 93,578 (3) Revolving loan funds 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. (4) Restricted deposits Restricted deposits represent funds that are held and restricted for use either by the Partnership agreement or the loan agreement. Operating reserves $ 152,816 Other deposits 345 Total $ 153,161 (5) Notes receivable 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 (2,105,330) Subtotal 249,693 Other Notes Receivable 44,478 Allowance for doubtfull accounts (20,000) Total $ 274,

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, 2015: Land $ 470,608 Buildings and building improvements 6,392,001 Furniture and equipment 215,447 Maintenance equipment 18,771 Total cost 7,096,827 Accumulated depreciation (2,151,087) Net property and equipment $ 4,945,740 Depreciation expense for the year ended December 31, 2015 amount to $232,667. (7) Intangible assets Intangible assets consisted of the following at December 31, 2015: Deferred tax credit fees $ 24,761 Loan fees 88,217 Development Plan 105,000 Accumulated amortization (84,875) Total $ 133,103 Deferred tax credit fees costs totaling $24,761 are capitalized and are being amortized over the ten-year tax credit period commencing in Amortization expense is anticipated to approximate $2,476 during each of the next four years. Loan fees 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 four 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. $ 58,500 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. 29,109 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 4329 Tracy, 4331 Tracy, and 4237 Tracy, maturing upon sale of the related real estate. 149,002 $ 236,611

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 September $ 8,035 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, maturing in ,356 Note payable to Missouri Bank & Trust, with a maximum amount of $31,000, and an interest rate of 5.75%; monthly payments at $386, including interest, secured by real estate at 2301, 2303, and 2305 Summit, maturing in ,851 Jefferson Place Associates, L.P. 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 ,247 Westside Apartment Associates, L.P. 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, ,

14 (9) Long-term debt (continued) WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 11 regarding the interest rate swap. 815,645 Total 2,413,571 Less current portion 48,921 Non-current debt $ 2,364,650 Future maturities of long-term debt are as follows: Years Ending December 31, 2016 $ 48, , , , ,162 Thereafter 1,947,221 Total $ 2,413,571 (10) Restricted net assets Temporarily restricted net assets consisted of the following at December 31, 2015: 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, 2015: Capital projects - NeighborWorks America $ 1,068,452 Revolving loan funds - NeighborWorks America 69,210 Capital projects - CFRAH Grant 325,000 $ 1,462,

15 (11) Interest rate swaps WESTSIDE HOUSING ORGANIZATION, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, included within other long-term liabilities, in the consolidated statement of financial position, with a value of $234,320 at December 31, The change in the fair value of the interest rate swap has been reflected as a non-operating activity in the consolidated statement of activities. (12) Retirement plan 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 developments within the Westside neighborhood. During 2015, $20,000 was remitted to WHO by the City. (14) Subsequent events The Organization has evaluated subsequent events through June 10, 2016 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: 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, 2015 and our report thereon dated June 10, 2016, 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. Kansas City, Missouri June 10, 2016 Member of Kreston International a global network of independent accounting firms

18 CONSOLIDATING STATEMENT OF FINANCIAL POSITION December 31, 2015 WHO JPALP WAALP Eliminations TOTAL ASSETS CURRENT ASSETS Cash and cash equivalents $ 300,705 $ 243 $ 5,362 $ - $ 306,310 Restricted deposits , ,161 Grants receivable 56, ,086 Trade accounts receivable, net of allowance of $10, ,503 10,470 19,444 (371,887) 35,530 Revolving loan funds 93, ,578 Construction in progress and property available for sale, at net realizable value 297, ,470 Prepaid expenses - - 3,104-3,104 TOTAL CURRENT ASSETS 1,125,437 10, ,726 (371,887) 945,239 TENANT DEPOSITS HELD IN TRUST 4,500 7,782 29,628-41,910 REPLACEMENT RESERVE - 3,158 84,803-87,961 NOTES RECEIVABLE, net 908, (634,316) 274,171 PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation 517, ,469 3,785,356-4,945,740 INTANGIBLE ASSETS, net 70,000 1,061 62, ,103 OTHER ASSETS, net 184, (184,217) 237 TOTAL ASSETS $ 2,810,793 $ 665,433 $ 4,142,555 $ (1,190,420) $ 6,428,361 LIABILITIES CURRENT LIABILITIES Accounts payable $ 34,139 $ 21,344 $ 33,854 $ - $ 89,337 Accrued expenses 16,274 32, ,953 (178,126) 110,293 Affiliate advances - 2,686 - (2,686) - Other liabilities 73,809-19,909 (18,434) 75,284 Lines of credit 236, ,611 Current portion of long-term debt 15,173 14,177 19,571-48,921 TOTAL CURRENT LIABILITIES 376,006 70, ,287 (199,246) 560,446 TENANT DEPOSITS HELD IN TRUST - 7,778 29,628-37,406 LONG-TERM LIABILTLIES Long-term debt 190, ,356 2,673,274 (714,049) 2,364,650 Other long-term liabilities , ,320 TOTAL LONG-TERM LIABLITIES 190, ,356 2,907,594 (714,049) 2,598,970 TOTAL LIABILITIES 566, ,533 3,250,509 (913,295) 3,196,822 NET ASSETS UNRESTRICTED Unrestricted 661, ,900 1,521 (277,125) 757,384 Noncontrolling interest , ,525 TOTAL UNRESTRICTED NET ASSETS 661, , ,046 (277,125) 1,647,909 TEMPORARILY RESTRICTED 120, ,968 PERMANENTLY RESTRICTED 1,462, ,462,662 TOTAL NET ASSETS 2,244, , ,046 (277,125) 3,231,539 TOTAL LIABILITIES AND NET ASSETS $ 2,810,793 $ 665,433 $ 4,142,555 $ (1,190,420) $ 6,428,

19 CONSOLIDATING STATEMENT OF ACTIVITIES Year Ended December 31, 2015 WHO JPALP WAALP Eliminating Entries Consolidated Balance UNRESTRICTED NET ASSETS REVENUE Grant revenue $ 547,622 $ - $ - $ - $ 547,622 Rent income 86,700 99, , ,851 Management fee income 357, (195,560) 162,358 Interest income 2, ,165 Other income 40,122 12,634 14,888 (20,000) 47,644 TOTAL REVENUES 1,034, , ,240 (215,560) 1,333,640 EXPENSES Program 817, , ,291 (215,560) 1,341,860 Management and general 100, ,679 Fundraising 75, ,674 TOTAL EXPENSES 993, , ,291 (215,560) 1,518,213 CHANGE IN UNRESTRICTED NET ASSETS BEFORE OTHER REVENUE 40,489 (20,011) (205,051) - (184,573) OTHER EXPENSE Change in fair value of derivative - - 4,205-4,205 CHANGE IN UNRESTRICTED NET ASSETS BEFORE NONCONTROLLING INTEREST 40,489 (20,011) (200,846) - (180,368) Noncontrolling interest in subsidiary earnings , ,826 CHANGE IN NET ASSETS $ 40,489 $ (20,011) $ (20) $ - $ 20,