CASA MIA SENIOR APARTMENTS, INC. (AN ARIZONA NOT-FOR-PROFIT CORPORATION) dba CASA MIA APARTMENTS HUD PROJECT NUMBER 123-EE086

Transcription

1 (AN ARIZONA NOTFORPROFIT CORPORATION) dba CASA MIA APARTMENTS HUD PROJECT NUMBER 123EE086 REPORT ON AUDIT OF FINANCIAL STATEMENTS, ACCOMPANYING INFORMATION AND COMPLIANCE AND INTERNAL CONTROL YEARS ENDED JUNE 30, 2017 AND 2016 Program: Section 202 of the National Affordable Housing Act accompanied with a Project Rental Assistance Contract ("PRAC")

2 (AN ARIZONA NOTFORPROFIT CORPORATION) TABLE OF CONTENTS Page Independent auditor s report 12 Financial statements Statements of financial position 34 Statements of profit and loss changes in net assets 56 Statements of changes in net assets 7 Statements of cash flows 89 Notes to financial statements 1016 Accompanying information for the year ended June 30, 2017 Accompanying information required by HUD 17 Computation of surplus cash, distributions and residual receipts 18 Supplemental information 1933 Schedule of changes in property and equipment 34 Schedule of expenditures of federal awards 35 Independent auditor's report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards 3637 Independent auditor's report on compliance for each major program and on internal control over compliance required by the Uniform Guidance 3839 Summary of auditor s results 4041 Corrective action plan 42 Summary schedule of prior audit findings 43 Management agent certification 44 Certification of officer 45

3 INDEPENDENT AUDITOR S REPORT To the Board of Directors of Casa Mia Senior Apartments, Inc. (An Arizona NotForProfit Corporation) Report on the Financial Statements We have audited the accompanying financial statements of Casa Mia Senior Apartments, Inc., which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of profit and loss changes in net assets, changes in net assets, and cash flows for the years 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 financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Casa Mia Senior Apartments, Inc. s preparation and fair presentation of the 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 Casa Mia Senior Apartments, Inc. 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 Casa Mia Senior Apartments, Inc. Page Two Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Casa Mia Senior Apartments, Inc. as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 17 to 34 is presented for purposes of additional analysis as required by the Uniform Financial Reporting Standards issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required by the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the 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 financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 20, 2017, on our consideration of Casa Mia Senior Apartments, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Casa Mia Senior Apartments, Inc. s internal control over financial reporting and compliance. September 20, 2017 Carmel, Indiana Dauby O Connor & Zaleski, LLC Certified Public Accountants 2

5 (AN ARIZONA NOTFORPROFIT CORPORATION) ASSETS STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 AND Current assets Cash and cash equivalent $ 3,285 $ 1,926 Accounts receivable residents 5,542 4,148 Accounts receivable HUD 132 1,044 Accounts receivable other 198 Prepaid expenses 2,665 1,188 Total current assets 11,624 8,504 Deposits held in trustfunded Resident security deposits 15,561 15,354 Restricted deposits and funded reserves Reserve for replacements 141, ,829 Property and equipment Land 450, ,000 Buildings and improvements 4,370,353 4,366,500 Furniture and equipment 34,769 34,769 4,855,122 4,851,269 Less: Accumulated depreciation (1,089,300) (977,730) Total property and equipment, net 3,765,822 3,873,539 $ 3,934,670 $ 4,103,226 See notes to financial statements 3

6 (AN ARIZONA NOTFORPROFIT CORPORATION) STATEMENTS OF FINANCIAL POSITION (CONTINUED) JUNE 30, 2017 AND 2016 LIABILITIES AND NET ASSETS Current liabilities Accounts payable operations $ 28,424 $ 20,266 Accrued management fees 31,290 37,565 Accrued payroll and benefits 3,573 5,423 Deferred revenue 4, Land loan, current portion 22,537 22,537 Total current liabilities 89,842 86,669 Deposit liabilities Resident security deposits 15,401 13,842 Long term liabilities Land loan, net of current portion 191, ,105 HUD capital advance 5,601,900 5,601,900 Due to CPLC 71,660 71,660 Total long term liabilities 5,865,128 5,887,665 Total liabilities 5,970,371 5,988,176 Net assets unrestricted (2,035,701) (1,884,950) $ 3,934,670 $ 4,103,226 See notes to financial statements 4

7 (AN ARIZONA NOTFORPROFIT CORPORATION) Rental revenue Vacancies Financial revenue Other revenue Admin. expenses Utilities expenses STATEMENTS OF PROFIT AND LOSS CHANGES IN NET ASSETS YEARS ENDED JUNE 30, 2017 AND Rent revenue gross potential $ 211,437 $ 213,750 Tenant assistance payments $ 195,603 $ 186,378 Rent revenue stores and commercial $ $ Garage and parking spaces $ $ Flexible subsidy revenue $ $ Miscellaneous rent revenue $ $ Excess rent $ $ Rent revenue/insurance $ $ Special claims revenue $ $ Retained excess income $ $ Lease revenue (nursing home or section 232B&C or AL) $ $ Total rent revenue potential at 100% occupancy $ 407,040 $ 400,128 Apartments ( 15,015 ) ( 16,688 ) Stores and commercial ( ) ( ) Rental concessions ( ) ( ) Garage and parking spaces ( ) ( ) Miscellaneous ( ) ( ) Total vacancies ( 15,015 ) ( 16,688 ) Net rental revenue rent revenue less vacancies $ 392,025 $ 383,440 Nursing homes and other elderly care revenues $ $ Financial revenue property operations $ $ 15 Revenue from investments residual receipts $ $ Revenue from investments reserve for replacements $ 127 $ 165 Revenue from investments miscellaneous $ $ Total financial revenue $ 127 $ 180 Laundry and vending revenue $ 4,246 $ 3,578 Resident charges $ 2,245 $ 2,962 Interest reduction payments revenue $ $ Expiration of gift donor restrictions $ $ Gifts $ $ Miscellaneous revenue $ 23,480 $ 23,393 Total other revenue $ 29,971 $ 29,933 Total revenue $ 422,123 $ 413,553 Conventions and meetings $ $ Management consultants $ $ Advertising and marketing $ 740 $ 1,125 Other renting expenses $ 113 $ Office salaries $ 14,043 $ 14,109 Office expenses $ 24,678 $ 20,331 Office or model apartment rent $ $ Management fee $ 30,280 $ 30,720 Manager or superintendent salaries $ 36,860 $ 34,706 Administrative rent free unit $ 6,252 $ 6,252 Legal expenses (property) $ 1,522 $ 1,420 Audit expenses $ 6,060 $ 5,735 Bookkeeping fees/accounting services $ 1,226 $ 1,795 Bad debts $ 1,155 $ 2,815 Miscellaneous administrative expenses $ 4,499 $ 2,832 Total administrative expenses $ 127,428 $ 121,840 Fuel oil/coal $ $ Electricity $ 66,296 $ 68,761 Water $ 17,270 $ 11,669 Gas $ 5,658 $ 4,863 Sewer $ 5,303 $ 5,064 Total utilities expense $ 94,527 $ 90,357 See notes to financial statements 5

8 (AN ARIZONA NOTFORPROFIT CORPORATION) Operating and maint. expenses Taxes and insurance Financial expenses Entity income and expenses Change in net assets from operations STATEMENTS OF PROFIT AND LOSS CHANGES IN NET ASSETS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND Payroll $ 45,022 $ 24,708 Supplies $ 23,534 $ 26,097 Contracts $ 32,880 $ 30,489 Operating and maintenance rent free unit $ $ Garbage and trash removal $ 13,979 $ 12,590 Security payroll/contract $ 26,000 $ 22,358 Security rent free unit $ $ Heating/cooling repairs and maintenance $ 1,574 $ 7,417 Snow removal $ $ Vehicle and maint. equipment operation and repairs $ 794 $ Lease expense $ $ Miscellaneous operating and maintenance expenses $ 53,942 $ 5,202 Total operating and maintenance expenses $ 197,725 $ 128,861 Real estate taxes $ $ Payroll taxes (property's share) $ 5,311 $ 8,022 Property and liability insurance (hazard) $ 15,695 $ 14,063 Fidelity bond insurance $ $ Workmen's compensation $ 1,840 $ 1,842 Health insurance and other employee benefits $ 9,999 $ 14,406 Miscellaneous taxes, licenses, permits and insurance $ 147 $ 140 Total taxes and insurance $ 32,992 $ 38,473 Interest on first mortgage (or bonds) payable $ $ Interest on other mortgages $ $ Interest on notes payable (longterm) $ $ Interest on notes payable (shortterm) $ $ Interest on capital recovery payment (M2M) $ $ Mortgage insurance premium/service charge $ $ Miscellaneous financial expenses $ $ Total financial expenses $ $ Nursing homes and other elderly care expenses $ $ Total cost of operations before depreciation $ 452,672 $ 379,531 Profit (loss) before depreciation $ (30,549) $ 34,022 Depreciation $ 120,202 $ 186,782 Amortization $ $ Operating profit or (loss) $ (150,751) $ (152,760) Entity revenue $ $ Officer's salaries $ $ Incentive performance fee (M2M) $ $ Legal expenses $ $ Federal, state, and other income taxes $ $ Interest on notes payable $ $ Interest on mortgage payable $ $ Other expenses $ $ Net entity expenses $ $ Change in unrestricted net assets from operations $ (150,751) $ (152,760) Change in temporarily restricted net assets from operations $ $ Change in permanently restricted net assets from operations $ $ Change in total net assets from operations $ (150,751) $ (152,760) See notes to financial statements 6

9 (AN ARIZONA NOTFORPROFIT CORPORATION) STATEMENTS OF CHANGES IN NET ASSETS YEARS ENDED JUNE 30, 2017 AND 2016 Balance, July 1, 2015 $ (1,732,190) Change in unrestricted net assets (152,760) Balance, June 30, 2016 (1,884,950) Change in unrestricted net assets (150,751) Balance, June 30, 2017 $ (2,035,701) See notes to financial statements 7

10 (AN ARIZONA NOTFORPROFIT CORPORATION) STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2017 AND Cash flow from operating activities Revenue: Rental revenue $ 387,276 $ 374,280 Financial Other revenue 7,434 7, , ,855 Expenditures: Administrative (36,903) (32,829) Management fees (36,555) (47,760) Utilities (100,325) (83,414) Salaries and wages (86,181) (73,392) Operating and maintenance (101,335) (100,543) Property insurance (17,172) (13,072) Miscellaneous taxes and insurance (16,672) (24,410) Resident security deposits 1,352 (380) (393,791) (375,800) Net cash provided by (used in) operating activities 1,046 6,055 Cash flow from investing activities Purchase of property and equipment (63,853) Change in reserve for replacements 64,166 (7,541) Net cash provided by (used in) investing activities 313 (7,541) Net cash flow from financing activities Net change in cash and cash equivalents 1,359 (1,486) Cash and cash equivalents at beginning of year 1,926 3,412 Cash and cash equivalents at end of year $ 3,285 $ 1,926 See notes to financial statements 8

11 (AN ARIZONA NOTFORPROFIT CORPORATION) Reconciliation of change in unrestricted net assets to net cash provided by (used in) operating activities Change in unrestricted net assets $ (150,751) $ (152,760) Adjustments to reconcile change in unrestricted net assets to net cash provided by (used in) operating activities: STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND 2016 Depreciation 120, ,782 Forgiveness of debt (22,537) (22,538) Disposal of property and equipment 51,368 Changes in: Accounts receivable residents (1,394) 35 Accounts receivable HUD 912 (552) Accounts receivable other 198 (198) Prepaid expenses (1,477) 991 Resident security deposits funded (207) (322) Accounts payable operations 8,158 11,160 Accrued liabilities (8,125) (16,909) Deferred revenue 3, Resident security deposit liability 1,559 (58) Total adjustments 151, ,815 Net cash provided by (used in) operating activities $ 1,046 $ 6,055 See notes to financial statements 9

12 (AN ARIZONA NOTFORPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Casa Mia Senior Apartments, Inc. (an Arizona NotForProfit Corporation) (the "Corporation") was organized to own and operate a 64 unit apartment community in Phoenix, Arizona, known as Casa Mia Apartments (the "Community"), pursuant to Section 202 of the National Affordable Housing Act, as amended. The assets and liabilities of the apartment community were transferred from Casa Mia Mutual Housing Association, Inc. to the Corporation on August 2, The Transfer of Physical Assets to the Corporation was approved by HUD on June 23, The Corporation has entered into the standard Federal Housing Administration ("FHA") Regulatory Agreement governing the operation of the Community with the FHA Section of the U.S. Department of Housing and Urban Development ("HUD"). The Community has also entered into a Project Rental Assistance Contract ( PRAC ) with HUD. The PRAC is a rent assistance program for lowincome families (or persons). Eligible lowincome residents pay 30% of their income as rent, while HUD pays the difference between this rental income and contract rent (as defined). The Corporation can request from HUD an amount equal to 50% of contract rent during periods that the unit is vacant if certain conditions are met, but not to exceed 60 days ( Special Claim ). If a unit continues to be vacant after the 60day period, the Corporation may submit a claim and receive additional housing assistance payments on a semiannual basis if certain conditions are met as outlined in the PRAC Contract. The PRAC Contract covers 63 of the 64 units at the Community and expires April 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation of the financial statements The primary intent of the financial statements is for the U.S. Office of Management and Budget. The financial statements will also be used by HUD; therefore, the presentation and account descriptions have been established to conform to their reporting guidelines. In addition, the financial statements are in conformity with the provisions required by the NotforProfit Entities Presentation of Financial Statements topic of the FASB Accounting Standards Codification ("ASC") This statement established standards for external financial reporting for NotforProfit Organizations. The NotforProfit Entities Presentation of Financial Statements topic of the FASB ASC primarily affects the display of the financial statements and requires that the amounts for each of three classes of net assetsunrestricted, temporarily restricted and permanently restrictedbe displayed in an aggregate statement of financial position and the amounts of change in each of those classes of net assets be displayed in a statement of changes in net assets. All assets held by the Corporation at June 30, 2017 and 2016, are classified as unrestricted. The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. 10

13 (AN ARIZONA NOTFORPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash and cash equivalents For the Statement of Cash Flows, all unrestricted investments with original maturities of three months or less are cash equivalents. At June 30, 2017 and 2016, cash and cash equivalents consist of an unrestricted checking account and petty cash. Resident receivable and bad debt policy Resident rent charges for the current month are due on the first of the month. Residents who are evicted or moveout are charged with damages and cleaning fees, if applicable. Resident receivables consist of amounts due for rental revenue or the charges for damages and cleaning fees. The Corporation does not accrue interest on the resident receivable balances. Resident receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review of the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct writeoff method is not material to the financial statements for the years ended June 30, 2017 and Bad debts expensed for the years ended June 30, 2017 and 2016 totaled $1,155 and $2,815, respectively. Property and equipment Land, buildings and improvements are recorded at cost. Building costs are depreciated under the straightline method over an estimated useful life of forty years. Land improvements are depreciated under the straightline method over an estimated useful life of ten years. Personal property and equipment are depreciated under the straightline method over an estimated useful life of five years. The Corporation is subject to the provisions of the Impairment or Disposal of LongLived Assets topic of the FASB ASC Impairment or Disposal of LongLived Assets has no retroactive impact on the Corporation's financial statements. The standard requires impairment losses to be recorded on longlived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets (excluding interest) are less than the carrying amount of the assets. In such cases, the carrying value of assets to be held and used are adjusted to their estimated fair value and assets held for sale are adjusted to their estimated fair value less selling expenses. No impairment losses were recognized during the years ended June 30, 2017 and Change in accounting principle During the year ended June 30, 2017, the Corporation adopted the InterestImputation of Interest topic of the FASB ASC ("ASC 83530") related to the presentation of debt of issuance costs. Management has evaluated ASC and has concluded there has been no impact on the financial statements for the years ended June 30, 2017 and

14 (AN ARIZONA NOTFORPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Rental revenue Rental revenue is recognized as rents become due. Rental payments received in advance are deferred until earned. All leases between the Corporation and the residents of the Community are operating leases. Advertising costs Advertising costs are expensed as incurred and are included in Advertising and Marketing in the Statements of Profit and Loss Changes in Net Assets. Real estate taxes The Corporation is exempt from real estate taxes. Accordingly, no provision for real estate taxes has been recognized in the accompanying financial statements. Concentration of credit risk The Corporation deposits its cash in financial institutions. At times, deposits may exceed federally insured limits. The Corporation has not experienced any losses in such accounts. The Corporation received approximately 50% and 49% of net rental revenue from the PRAC for the years ended June 30, 2017 and 2016, respectively. The Corporation s operations are concentrated in the multifamily real estate market. In addition, the Corporation operates in a heavily regulated environment. The operations of the Corporation are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to, HUD. Such administrative directives, rules and regulations are subject to change by an act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, if any, to comply with a change. Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with accounting standards generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 12

15 (AN ARIZONA NOTFORPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair value The Corporation is subject to the provisions of the Fair Value Measurement topic of the FASB ASC which provides guidance for assets and liabilities which are required to be measured at fair value and requires expanded disclosure for fair value measurement. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value and does not require any new fair value measurements. The Fair Value Measurement did not have a material impact on the Corporation s financial statements for the years ended June 30, 2017 and 2016, respectively. Accounting for uncertainty in income taxes The Corporation is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and state income tax and has been classified as an other than private foundation. Accordingly, no provision for federal and state taxes on revenue and income has been recognized in the accompanying financial statements. Generally, the Federal and State tax returns are subject to examinations for three years after the later of the original or extended due date or the date filed with the applicable tax authorities. Subsequent events Management performed an evaluation of the Corporation s activity through September 20, 2017, the audit report date, and has concluded that there are no significant subsequent events requiring disclosure through the date these financial statements were available to be issued. Reclassification Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. These reclassifications had no effect on the reported change in total net assets from operations of the Corporation. NOTE 2FINANCING HUD capital advance The Corporation has entered into a Capital Advance Program Mortgage Note (the Note ) for a capital advance not to exceed $5,601,987, which was subsequently modified to $5,601,900. The Note bears no interest and repayment is not required so long as the housing property remains available for very lowincome elderly persons in accordance with Section 202 of the National Housing Act of 1990 and the PRAC, and is operated in accordance with the Regulatory Agreement and HUD Regulations. The Note is collateralized by the mortgage upon the land, building and equipment and other amounts held by the Corporation. 13

16 (AN ARIZONA NOTFORPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 2FINANCING (CONTINUED) HUD capital advance (continued) The debt evidenced by this Note may not be prepaid prior to the maturity date of April 1, 2046, without the prior written approval of HUD. Provided (1) the housing property has remained available for very lowincome elderly persons until the maturity date of the Note; and (2) the Note has not otherwise become due and payable by reason of defaults under the Note, mortgage or Regulatory Agreement or that date the Note shall be deemed to be paid and discharged. If a default occurs under the terms of this Note, mortgage, the Regulatory Agreement or the regulations, at the option of the holder of this Note, the entire principal and accrued interest (at 5.25%) could at once become due and payable without notice. Land loan The land and associated closing costs were financed with proceeds from a promissory note executed with the City of Phoenix, Arizona. The original note was in the amount of $480,000. Proceeds of $29,254 withheld at closing were subsequently applied against the principal balance. The note is noninterest bearing and the Corporation receives a 5% principal credit per annum provided it complies with the provisions of the note. The note is subordinate to the Capital Advance Program Mortgage Note described above. At June 30, 2017 and 2016, the outstanding note balance was $214,105 and $236,642, respectively. During the years ended June 30, 2017 and 2016, 5% or $22,537 and $22,538, respectively, of principal was forgiven and is included in Miscellaneous Revenue on the Statements of Profit and Loss Changes in Net Assets. Estimated loan forgiveness for the next five years and thereafter is approximately as follows: 2018 $ 22, , , , ,537 Thereafter 101,420 Reserve for replacements $ 214,105 Pursuant to the terms of the Regulatory Agreement, the Corporation is required to make monthly deposits of $1,500 to the Reserve for Replacements Fund. This fund is under the control of HUD. Disbursements from such fund may only be made for the purpose of effecting replacement of structural elements and mechanical equipment of the Community and after receiving the written consent of the Secretary of HUD. Reserve for replacements funds totaled $141,663 and $205,829 at June 30, 2017 and 2016, respectively. 14

17 (AN ARIZONA NOTFORPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 3CASH DISTRIBUTIONS AND RESIDUAL RECEIPTS FUND Pursuant to the terms of the Regulatory Agreement, no cash distributions may be made to nonprofit owners, nor can they incur obligations on behalf of the Community, to themselves or any officers, directors, stockholders, trustees, partners, beneficiaries under a trust, or any of their nominees without prior written approval of HUD. Residual receipts ("Surplus Cash") as defined by HUD, existing at the end of the fiscal year must be deposited in an interest bearing residual receipts fund in the name of the Corporation. Withdrawals from the residual receipts fund may only be made with the approval of HUD. At June 30, 2017 and 2016, there was no balance in the residual receipts fund nor was there a required deposit to such fund. In accordance with the PRAC, if HUD determines at any time that residual receipt funds are more than the amount needed for Community purposes, HUD may require any excess to be placed in an account to be used to reduce HUD payments or for other Community purposes. Upon termination of the PRAC, any excess funds must be remitted to HUD upon notice. In accordance with HUD Memorandum issued June 19, 2015, upon termination of the PRAC residual receipt funds in excess of $250 per unit must be remitted to HUD on an annual basis. At the end of the Regulatory Agreement any funds remaining in the residual receipt fund must be remitted to HUD. HUD has the right upon notice to request the entire residual receipt balance be remitted to HUD. NOTE 4MANAGEMENT CONTRACT AND RELATED PARTIES The Community is managed by Tiempo, Inc. (the Agent ), an affiliated entity through common board members. This agreement has been approved by HUD. The agreement provides for management fees of $40 per unit per month. During the years ended June 30, 2017 and 2016, management fees of $30,280 and $30,720 were earned, and $36,555 and $47,760 were paid, all respectively. At June 30, 2017 and 2016, $31,290 and $37,565, respectively, remain payable. The onsite personnel are employees of Chicanos Por La Causa, Inc. ("CPLC"), an affiliated entity, through common board members. As such, CPLC is reimbursed the actual cost of salaries and benefits. In accordance with HUD regulations, the CPLC is also entitled to be reimbursed for the actual costs incurred for frontline management activities performed at the central office (as these activities are defined by HUD). During the years ended June 30, 2017 and 2016, $19,354 and $18,662, respectively, was reimbursed by the Community for central office management functions and bookkeeping. These reimbursements are included in the following accounts: Office salaries Bookkeeping fees/accounting services Payroll taxes Workmen's compensation Health insurance and other employee benefits 15

18 (AN ARIZONA NOTFORPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 4MANAGEMENT CONTRACT AND RELATED PARTIES (CONTINUED) Due to CPLC In prior years, CPLC advanced the Corporation $71,660 to pay for construction costs. This advance does not bear interest and is repayable to the extent cash flow is available and with HUD approval. At June 30, 2017 and 2016, $71,660 remains payable. 16

19 (AN ARIZONA NOTFORPROFIT CORPORATION) ACCOMPANYING INFORMATION REQUIRED BY HUD YEAR ENDED JUNE 30, 2017 Reserve for replacements In accordance with provisions of the Regulatory Agreement, restricted cash is held by Wells Fargo Bank, N.A. to be used for replacement of property with the approval of HUD, as follows: Balance at July 1, 2016 $ 205,829 Monthly deposits ($1,500 x 12) 18,000 Interest 127 Bank service fees (30) Withdrawals (82,263) Balance at June 30, 2017 $ 141,663 17

20 (AN ARIZONA NOTFORPROFIT CORPORATION) COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS YEAR ENDED JUNE 30, 2017 Part A Compute Surplus Cash 1. Cash $ 18, Accounts receivable HUD $ Other $ (a) Total Cash (Add Lines 1, 2, and 3) $ 18,978 Current Obligations 4. Accrued mortgage (or bond) interest payable $ 5. Delinquent mortgage (or bond) principal payments $ 6. Delinquent deposits to reserve for replacements $ 7. Accounts payable (due within 30 days) $ 28, Loans and notes payable (due within 30 days) $ 9. Deficient Tax Insurance or MIP Escrow Deposits $ 10. Accrued expenses (not escrowed) $ 34, Prepaid Revenue $ 4, Resident/Patient deposits held in trust (contra) $ 15, Other current obligations $ (b) Less Total Current Obligations (Add Lines 4 through 13) $ 82,706 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ (63,728) PART B Compute Distributions to Owners and Required Deposit to Residual Receipts 1. Deposit Due Residual Receipts $ 0 18

21 BALANCE SHEET DATA SUPPLEMENTAL INFORMATION Organization Name Casa Mia Senior Apartments, Inc. For Year Ending June 30, 2017 ASSETS FHA/Contract Number See cover page Acct No. Description of Account 1120 Cash Operations 3, Construction Cash Account 1125 Cash Entity 1130 Tenant/Member Accounts Receivable (Coops) 5, Allowance for Doubtful Accounts 1130N Net Tenant Accounts Receivable 5, Accounts Receivable HUD Medicare/Medicaid/Other Insurance Receivable 1138 Allowance for Doubtful Accounts (Medicare/Medicaid/Other Insurance Receivable) 1137N Net Medicare/Medicaid/Other Insurance Receivable 1140 Accounts and Notes Receivable Operations 1145 Accounts and Notes Receivable Entity 1160 Accounts Receivable Interest 1165 Interest Reduction Payment Receivable 1170 Short Term Investments Operations 1175 Short Term Investments Entity 1180 Inventory 1190 Miscellaneous Current Assets 1200 Prepaid Expenses 2, T Total Current Assets 11, Tenant/Patient Deposits Held in Trust 15, Escrow Deposits 1320 Replacement Reserve 141, Other Reserves 1340 Residual Receipts Reserve 1355 Bond Reserves 1367 Sinking Fund 1381 Management Improvement and Operating Plan 1300T Total Deposits 141, Land 450, Buildings 4,370, Building Equipment (Portable) 1450 Furniture for Project/Tenant Use 34, Furnishings 1465 Office Furniture and Equipment 1470 Maintenance Equipment 1480 Motor Vehicles 1490 Miscellaneous Fixed Assets 1400T Total Fixed Assets 4,855, Accumulated Depreciation 1,089, N Net Fixed Assets 3,765, Investments Operations 1515 Investments Entity 1525 Cash Restricted for Longterm Investment 1590 Miscellaneous Other Assets 1500T Total Other Assets 1000T Total Assets $ 3,934,670 19

22 LIABILITIES 2105 Bank Overdraft Operations 2110 Accounts Payable Operations 28, Accounts Payable Construction/Development 2112 Accounts Payable Project Improvement Items 2113 Accounts Payable Entity 2114 Incentive Performance Fee Payable 2115 Accounts Payable 236 Excess Income due HUD 2116 Accounts Payable Section 8 & Other 2120 Accrued Wages Payable 3, Accrued Payroll Taxes Payable 2123 Accrued Management Fee Payable 31, Accrued Lease Payments Payable 2130 Accrued Interest Payable Section Accrued Interest Payable First Mortgage (or Bonds) 2132 Accrued Interest Payable Other Mortgages 2133 Accrued Interest Payable Other Loans and Notes (Surplus Cash) 2134 Accrued Interest Payable Other Loans and Notes 2135 Accrued Interest Payable Flexible Subsidy Loan 2136 Accrued Interest Payable Capital Improvements Loan 2137 Accrued Interest Payable Operating Loss Loan 2139 Accrued Interest Payable Capital Recovery Payment (M2M) 2150 Accrued Property Taxes 2160 Notes Payable (Shortterm) 22, Mortgage (or Bonds) Payable First Mortgage (Bonds) (Short Term) 2172 Other Mortgages Payable (Short Term) 2173 Other Loans and Notes Payable Surplus Cash (Short Term) 2174 Other Loans and Notes (Short Term) 2175 Flexible Subsidy Loan Payable (Short Term) 2176 Capital Improvement Loan Payable (Short Term) 2177 Operating Loss Loan Payable (Short Term) 2179 Capital Recovery Payment Payable (Short Term M2M) 2180 Utility Allowances 2190 Miscellaneous Current Liabilities 2210 Prepaid Revenue 4, T Total Current Liabilities 89, Tenant/Patient Deposits Held In Trust (Contra) 15, Accounts Payable Entity (Long Term) 2306 Accrued Lease Payments Payable Long Term 2310 Notes Payable (LongTerm) 191, Notes Payable Surplus Cash 2320 Mortgage (or Bonds) Payable First Mortgage (or Bonds) 2322 Other Mortgages Payable (Long Term) 2323 Other Loans and Notes Payable Surplus Cash 71, Other Loans and Notes Payable 5,601, Flexible Subsidy Loan Payable 2326 Capital Improvement Loan Payable 2327 Operating Loss Loan Payable 2329 Capital Recovery Payment (M2M) 2330 Interest on Loans or Notes Payable (Long Term) 2331 Accrued Interest Other Mortgages Payable (Long Term) 2332 Accrued Interest Notes Payable (Surplus Cash) (Long Term) 2340 Debt Issuance Costs 2390 Miscellaneous Long Term Liabilities 2300T Total Long Term Liabilities 5,865, T Total Liabilities $ 5,970,371 NET ASSETS 3131 Unrestricted Net Assets (2,035,701) 3132 Temporarily Restricted Net Assets 3133 Permanently Restricted Net Assets 3130 Total Net Assets (2,035,701) 2033T Total Liabilities and Equity/Net Assets $ 3,934,670 20

23 PROFIT AND LOSS DATA SUPPLEMENTAL INFORMATION Organization Name Casa Mia Senior Apartments, Inc. For Year Ending June 30, 2017 FHA/Contract Number See cover page Acct No. Description of Account Rent Revenue 5120 Rent Revenue Gross Potential 211, Tenant Assistance Payments 195, Rent Revenue Stores and Commercial 5170 Garage and Parking Spaces 5180 Flexible Subsidy Revenue 5190 Miscellaneous Rent Revenue 5191 Excess Rent 5192 Rent Revenue/Insurance 5193 Special Claims Revenue 5194 Retained Excess Income 5195 Lease Revenue (Nursing Home or Section 232 B&C or AL) 5100T Total Rent Revenue 407,040 Vacancies 5220 Apartments 15, Stores and Commercial 5250 Rental Concessions 5270 Garage and Parking Space 5290 Miscellaneous 5200T Total Vacancies 15, N Net Rental Revenue (Rent Revenue Less Vacancies) 392, Revenue 5300 Nursing Homes/ Assisted Living/Board & Care/Other Elderly Care/Coop/ and Other Revenues Financial Revenue 5410 Financial Revenue Project Operation 5430 Revenue from Investments Residual Receipts 5440 Revenue from Investments Replacement Reserve Revenue from Investments Miscellaneous 5400T Total Financial Revenue 127 Other Revenue 5910 Laundry and Vending Revenue 4, Tenant Charges 2, Interest Reduction Payments Revenue 5560 Expiration of Gift Donor Restrictions 5970 Gifts 5990 Miscellaneous Revenue 23, T Total Other Revenue 29, T Total Revenue 422,123 Administrative Expenses 6203 Conventions and Meetings 6204 Management Consultants 6210 Advertising and Marketing Other Renting Expenses Office Salaries 14, Office Expenses 24, Office or Model Apartment Rent 6320 Management Fee 30, Manager or Superintendent Salaries 36, Administrative Rent Free Unit 6, Legal Expense Project 1, Audit Expense 6, Bookkeeping Fees/Accounting Services 1, Bad Debts 1, Miscellaneous Administrative Expenses 4, T Total Administrative Expenses 127,428 Utilities Expenses 6420 Fuel Oil/Coal 6450 Electricity 66, Water 17, Gas 5, Sewer 5, T Total Utilities Expense 94,527 21

24 Operating & Maintenance Expenses 6510 Payroll 45, Supplies 23, Contracts 32, Operating and Maintenance Rent Free Unit 6525 Garbage and Trash Removal 13, Security Payroll/Contract 26, Security Rent Free Unit 6546 Heating/Cooling Repairs and Maintenance 1, Snow Removal 6570 Vehicle and Maintenance Equipment Operation and Repairs Lease Expense 6590 Miscellaneous Operating and Maintenance Expenses 53, T Total Operating and Maintenance Expense 197,725 Taxes & Insurance 6710 Real Estate Taxes 6711 Payroll Taxes (Project's Share) 5, Property & Liability Insurance (Hazard) 15, Fidelity Bond Insurance 6722 Workmen's Compensation 1, Health Insurance and Other Employee Benefits 9, Miscellaneous Taxes, Licenses, Permits and Insurance T Total Taxes and Insurance 32,992 Financial Expenses 6820 Interest on First Mortgage (or Bonds) Payable 6825 Interest on Other Mortgages 6830 Interest on Notes Payable (Long Term) 6840 Interest on Notes Payable (Short Term) 6845 Interest on Capital Recovery Payment (M2M) 6850 Mortgage Insurance Premium/ Service Charge 6890 Miscellaneous Financial Expenses 6800T Total Financial Expenses 6900 Expenses 6900 Nursing Homes/Assisted Living/ Board & Care/Other Elderly Care Expenses Operating Results 6000T Total Cost of Operations before Depreciation 452, T Profit (Loss) before Depreciation (30,549) 6600 Depreciation Expenses 120, Amortization Expense 5060N Operating Profit or (Loss) (150,751) Corporate or Mortgagor Revenue/Expenses 7105 Entity Revenue 7110 Officer's Salaries 7115 Incentive Performance Fee 7120 Legal Expenses 7130 Federal, State, and Other Income Taxes 7141 Interest on Notes Payable 7142 Interest on Mortgage Payable 7190 Other Expenses 7100T Net Entity Expenses Change in Net Assets from Operations 3247 Change in Unrestricted Net Assets from Operations (150,751) 3248 Change in Temporarily Restricted Net Assets from Operations 3249 Change in Permanently Restricted Net Assets from Operations 3250 Change in Total Net Assets from Operations $ (150,751) Part II Total first mortgage (or bond) principal payments required during the audit period (usually 12 months). This applies to all S direct loans, HUDheld and HUDinsured first mortgages. $ The total of all monthly reserve for replacement deposits (usually 12 months) required during the audit period even if S deposits have been temporarily waived or suspended. $ 18,000 Replacement Reserves, or Residual Receipts and Releases which are included as expense items on this Profit and Loss S statement. $ 22,313 Project Improvement Reserve releases under the Flexible Subsidy Program that are included as expense items on this S Profit and Loss statement. $ 22

25 EQUITY DATA SUPPLEMENTAL INFORMATION Organization Name FHA/Contract Number Casa Mia Senior Apartments, Inc. See cover page For Year Ending June 30, 2017 Acct No. Description of Account S Previous Year Unrestricted Net Assets (1,884,950) 3247 Change in Unrestricted Net Assets from Operations (150,751) S Other Changes in Unrestricted Net Assets 3131 Unrestricted Net Assets (2,035,701) S Previous Year Temporarily Restricted Net Assets 3248 Change in Temporarily Restricted Net Assets from Operations S Other Changes in Temporarily Restricted Net Assets 3132 Temporarily Restricted Net Assets S Previous Year Permanently Restricted Net Assets 3249 Change in Permanently Restricted Net Assets from Operations S Other Changes in Permanently Restricted Net Assets 3133 Permanently Restricted Net Assets S Previous Year Total Net Assets (1,884,950) 3250 Change in Total Net Assets from Operations (150,751) S Other Changes in Total Net Assets 3130 Total Net Assets $ (2,035,701) 23

26 CASH FLOW DATA SUPPLEMENTAL INFORMATION Organization Name FHA/Contract Number Casa Mia Senior Apartments, Inc. See cover page For Year Ending June 30, 2017 Acct No. Description of Account Cash Flow from Operating Activities S Rental Receipts 387,276 S Interest Receipts 127 S Gifts S Other Operating Receipts 7,434 S Entity/Construction Receipts S Total Receipts 394,837 S Administrative (36,903) S Management Fee (36,555) S Utilities (100,325) S Salaries and Wages (86,181) S Operating and Maintenance (101,335) S Lease Payments S Real Estate Taxes S Property Insurance (17,172) S Miscellaneous Taxes and Insurance (16,672) S Tenant Security Deposits 1,352 S Other Operating Expenses S Interest on Mortgages S Interest Payments Second Mortgage S Interest Payments Third Mortgage S Interest on Notes Payable S Interest on Capital Recovery Payment S Mortgage Insurance Premium (MIP) S Miscellaneous Financial S Entity Incentive Performance Fee S Entity/Construction Disbursements S Total Disbursements (393,791) S Net Cash provided by (used in) Operating Activities 1,046 Cash Flow from Investing Activities S Net Deposits to the Mortgage Escrow account S Net Deposits to the Reserve for Replacement account 64,166 S Net Deposits to Other Reserves S Net Deposits to the Residual Receipts account S Net Deposits to the Management Improvement and Operating Plan account S Net Deposits to the Long Term Investment account S Net Purchase of Fixed Assets (63,853) S Other Investing Activities S Entity/Construction Investing Activities S Net Cash provided by (used in) Investing Activities

27 Cash Flow from Financing Activities S Principal Payments First Mortgage (or Bonds) S Principal Payments Second Mortgage S Principal Payments Third Mortgage S Proceeds from Mortgages, Loans or Notes Payable S Principal Payments on Loans or Notes Payable S Proceeds from Flexible Subsidy Loans S Flexible Subsidy Loan principal payments S Proceeds from Capital Improvement Loans S Principal payments on Capital Improvement Loan Payable S Proceeds from Operating Loss Loans S Principal payments on Operating Loss Loan Payable S Proceeds from Capital Recovery Payment S Principal Payments on Capital Recovery Payment S Distributions S Contributions S Other Financing Activities S Entity/Construction Financing Activities S Net Cash provided by (used in) Financing Activities S Net increase (decrease) in Cash and Cash Equivalents 1,359 Cash and Cash Equivalents S Beginning of Period Cash 1,926 S Gifts of Investment S1200T End of Period Cash $ 3,285 Reconciliation of Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 3250 Change in Total Net Assets from Operations (150,751) Adjustments to Reconcile Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 6600 Depreciation Expenses 120, Amortization Expense S Amortization of Debt Issuance Costs S Decrease (increase) in Tenant/Member Accounts Receivable (1,394) S Decrease (increase) in Accounts Receivable Other 1,110 S Increase in Gifts Receivable S Decrease (increase) in Accrued Receivable S Decrease (increase) in Prepaid Expenses (1,477) S Decrease (increase) in Cash Restricted for Tenant Security Deposits (207) S Decrease (increase) in Entity/Construction Asset Accounts S Increase (decrease) in Accounts Payable 8,158 S Increase (decrease) in Accounts Payable HUD Excess Rents S Increase (decrease) in Accrued Liabilities (8,125) S Increase (decrease) in Accrued Interest Payable S Increase (decrease) in Tenant Security Deposits held in trust 1,559 S Increase (decrease) in Prepaid Revenue 3,140 S Other adjustments to reconcile net profit (loss) to Net Cash provided by (used in) Operating Activities 28,831 S Increase (decrease) in Entity/Construction Liability accounts Net Cash provided by (used in) Operating Activities S Net Cash provided by (used in) Operating Activities $ 1,046 S Comments 25

28 DETAIL OF ACCOUNTS SUPPLEMENTAL INFORMATION Organization Name FHA/Contract Number Casa Mia Senior Apartments, Inc. See cover page For Year Ending June 30, 2017 Acct No. Detail Description Balance Sheet Data 1140 Accounts and Notes Receivable Operations Capital advance receivable Commercial rents receivable Grant receivable Insurance refund Insurance settlement Intercompany receivable Laundry revenue receivable Lessee receivable Management fee overpayment receivable Mortgage insurance premium refund Mortgage proceeds receivable Other tenant receivables Overpaid/prepaid distributions Partner/officer/sponsor receivable Property tax refund Receivable from other project or business Related party receivable Sales tax refund Reserve withdrawals receivable Service coordinator receivable Syndication proceeds receivable Vendor rebate Vendor refund Other (must detail) 1140 Total Accounts and Notes Receivable Operations 1145 Accounts and Notes Receivable Entity Asset management fee receivable Capital contributions receivable Income taxes receivable Entity interest receivable Leasee receivable Partner/officer/sponsor receivable Related party receivable Syndication proceeds receivable Other (must detail) 1145 Total Accounts and Notes Receivable Entity 1190 Miscellaneous Current Assets Payroll deposits Utility deposits Other (must detail) 1190 Total Miscellaneous Current Assets 1330 Other Reserves 1330 Total Other Reserves 26

29 1590 Miscellaneous Other Assets Construction in progress Notes receivable related parties Offering costs Utility deposits Tax credit fees Other (must detail) Other (must detail) 1590 Total Miscellaneous Other Assets 2132 Accrued Interest Payable Other Mortgages Second Mortgage Third Mortgage Fourth Mortgage Fifth Mortgage 2132 Total Accrued Interest Payable Other Mortgages 2172 Other Mortgages Payable (Short Term) Second Mortgage Third Mortgage Fourth Mortgage Fifth Mortgage 2172 Total Other Mortgages Payable (Short Term) 2190 Miscellaneous Current Liabilities 2190 Total Miscellaneous Current Liabilities 2322 Other Mortgages Payable (Long Term) Second Mortgage Third Mortgage Fourth Mortgage Fifth Mortgage 2322 Total Other Mortgages Payable (Long Term) 2331 Accrued interest Other Mortgages Payable (Long Term) First Mortgage Second Mortgage Third Mortgage Fourth Mortgage Fifth Mortgage 2331 Total Accrued interest Other Mortgages Payable (Long Term) 2390 Miscellaneous Longterm Liabilities 2390 Total Miscellaneous Longterm Liabilities Profit and Loss Data 5190 Miscellaneous Rent Revenue 5190 Total Miscellaneous Rent Revenue 5290 Miscellaneous 5290 Total Miscellaneous 27

30 5490 Revenue from Investments Miscellaneous 5490 Total Revenue from Investments Miscellaneous 5990 Miscellaneous Revenue Forgiveness of debt 22,537 Miscellaneous Total Miscellaneous Revenue 23, Miscellaneous Administrative Expenses 6390 Total Miscellaneous Administrative Expenses 6590 Miscellaneous Operating and Maintenance Expenses Disposal of property and equipment 51,368 Alarm systems 2,380 Miscellaneous Total Miscellaneous Operating and Maintenance Expenses 53, Miscellaneous Taxes, Licenses, Permits and Insurance 6790 Total Miscellaneous Taxes, Licenses, Permits and Insurance 6890 Miscellaneous Financial Expenses 6890 Total Miscellaneous Financial Expenses 7190 Other Expenses 7190 Total Other Expenses Equity Data S Other Changes in Total Net Assets S Total Other Changes in Total Net Assets Cash Flow Data S Entity/Construction Receipts S Total Entity/Construction Receipts 28

31 S Entity/Construction Disbursements S Total Entity/Construction Disbursements S Net Deposits to Other Reserves S Total Net Deposits to Other Reserves S Other Investing Activities S Total Other Investing Activities S Entity/Construction Investing Activities S Total Entity/Construction Investing Activities S Other Financing Activities S Total Other Financing Activities S Entity/Construction Financing Activities S Total Entity/Construction Financing Activities S Decrease (increase) in Entity/ Construction Asset accounts S Total Decrease (increase) in Entity/ Construction Asset accounts S Other adjustments to reconcile net profit (loss) to Net Cash provided by (used in) Operating Activities Forgiveness of debt (22,537) Disposal of property and equipment 51,368 S Total Other adjustments to reconcile net profit (loss) to Net Cash provided by (used in) Operating Activities 28,831 S Increase (decrease) in Entity/Construction Liability accounts S Total Increase (decrease) in Entity/Construction Liability accounts 29

32 SCHEDULE OF REQUIRED RESERVES SUPPLEMENTAL INFORMATION Organization Name FHA/Contract Number Casa Mia Senior Apartments, Inc. See cover page For Year Ending June 30, 2017 SCHEDULE OF RESERVE FOR REPLACEMENT Acct No. Description of Account 1320P Balance at Beginning of Year 205, DT Total Monthly Deposits 18, ODT Other Deposits 1320INT Interest on Replacement Reserve Accounts RGL Realized Gain or (Loss) 1320UGL Unrealized Gain or (Loss) 1320WT Approved Withdrawals 82, OWT Other Withdrawals Balance at End of Year 141, R Deposits suspended or waived indicator No Reserve for Replacements Details 1320ODT Other Deposits 1320ODT Total Other Deposits 1320OWT Other Withdrawals Bank service fees OWT Total Other Withdrawals 30 SCHEDULE OF RESIDUAL RECEIPTS 1340P Balance at Beginning of Year 1340DT Total Deposits 1340ODT Other Deposits 1340INT Interest on Residual Receipts Accounts 1340RGL Realized Gain or (Loss) 1340UGL Unrealized Gain or (Loss) 1340WT Approved Withdrawals 1340OWT Other Withdrawals 1340 Balance at End of Year Residual Receipts Details 1340ODT Other Deposits 1340ODT Total Other Deposits 1340OWT Other Withdrawals 1340OWT Total Other Withdrawals 30

33 COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS, AND RESIDUAL RECEIPTS SUPPLEMENTAL INFORMATION Organization Name FHA/Contract Number Casa Mia Senior Apartments, Inc. See cover page For Year Ending June 30, 2017 COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS, AND RESIDUAL RECEIPTS Acct No. Description of Account S Cash 18, Tenant subsidy due for period covered by financial statement 132 S Other S Total Cash 18,978 S Accrued Mortgage Interest Payable S Delinquent Mortgage Principal Payments S Delinquent Deposits to Reserve for Replacements S Accounts Payable (due within 30 days) 28,424 S Loans and Notes Payable (due within 30 days) S Deficient Tax Insurance or MIP Escrow Deposits S Accrued Expenses [not escrowed] 34, Prepaid Revenue 4, Tenant Security Deposits Liability 15,401 S Other Current Obligations S Total Current Obligations 82,706 S Surplus Cash (Deficiency) (63,728) S Annual Distribution Earned During Fiscal Period Covered by the Statement S Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period S Distributions and Entity Expenses Paid During Fiscal Period Covered by Statement S Distribution Earned but Unpaid S Amount Available for Distribution During Next Fiscal Period S Incentive Performance Fee Payable (M2M) S Percentage Surplus Cash Split (M2M) 0% S Surplus Cash Available for Second Mortgage Payments (M2M) S Surplus Cash Available for Distribution (M2M) S Deposit Due Residual Receipts Surplus Cash Details (Annual) S Other Cash S Total Other Cash S Other Current Obligations S Total Other Current Obligations 31

34 SCHEDULE OF CHANGES IN FIXED ASSET ACCOUNTS SUPPLEMENTAL INFORMATION Organization Name FHA/Contract Number Casa Mia Senior Apartments, Inc. See cover page For Year Ending June 30, 2017 SCHEDULE OF CHANGES IN FIXED ASSET ACCOUNTS Acct No. Description of Account 1410P Beginning Balance for , AT Additions for DT Deductions for Land 450, P Beginning Balance for ,366, AT Additions for , DT Deductions for , Buildings 4,370, P Beginning Balance for AT Additions for DT Deductions for Building Equipment (Portable) 1450P Beginning Balance for , AT Additions for DT Deductions for Furniture for Project/Tenant Use 34, P Beginning Balance for AT Additions for DT Deductions for Furnishings 1465P Beginning Balance for AT Additions for DT Deductions for Office Furniture and Equipment 1470P Beginning Balance for AT Additions for DT Deductions for Maintenance Equipment 1480P Beginning Balance for AT Additions for DT Deductions for Motor Vehicles 1490P Beginning Balance for AT Additions for DT Deductions for Miscellaneous Fixed Assets 1400PT Total Beginning Balance for Fixed Assets 4,851, AT Total Asset Additions 63, DT Total Asset Deductions 60, T Total Fixed Assets 4,855, P Beginning Balance for Accumulated Depreciation 977, Total Provisions 120, ADT Total Accumulated Depreciation from Disposed Assets. 8, Ending Balance for Accumulated Depreciation 1,089, N Total Net Book Value 3,765,822 32

35 SCHEDULE OF CHANGES IN FIXED ASSET ACCOUNTS (CONTINUED) SUPPLEMENTAL INFORMATION Organization Name FHA/Contract Number Casa Mia Senior Apartments, Inc. See cover page For Year Ending June 30, 2017 SCHEDULE OF CHANGES IN FIXED ASSET ACCOUNTS (CONTINUED) Acct No. Description of Account Fixed Asset Details 1410AT 1410DT 1420AT Roof 63, DT Roof 60, AT 1440DT 1450AT 1450DT 1460AT 1460DT 1465AT 1465DT 1470AT 1470DT 1480AT 1480DT 1490AT 1490DT 33

36 (AN ARIZONA NOTFORPROFIT CORPORATION) SCHEDULE OF CHANGES IN PROPERTY AND EQUIPMENT YEAR ENDED JUNE 30, 2017 ASSETS Balance Balance 7/1/2016 Additions Deletions 6/30/2017 Land $ 450,000 $ $ $ 450,000 Buildings and improvements 4,366,500 63,853 (1) (60,000) (2) 4,370,353 Furniture and equipment 34,769 34,769 $ 4,851,269 $ 63,853 $ (60,000) $ 4,855,122 Accumulated depreciation $ 977,730 $ 120,202 $ (8,632) $ 1,089,300 Net Book Value $ 3,765,822 Additions (1) Roof Disposal (2) Roof 34

37 (AN ARIZONA NOTFORPROFIT CORPORATION) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEARS ENDED JUNE 30, 2017 AND 2016 U.S. Department of Housing and Urban Development Supportive Housing for the Elderly (CFDA No ) Balance of HUD Capital Advance as of July 1, 2016, under Section 202 of the National Affordable Housing Act $ 5,601,900 Project Rental Assistance Contract 195,603 $ 5,797,503 Notes to the Schedule of Expenditures of Federal Awards Note 1: The schedule of expenditures of federal awards is prepared on the accrual basis of accounting. Note 2: The Corporation has elected to not use the 10% deminimus cost rate. Note 3: The balance of HUD Capital Advance under Section 202 of the National Affordable Housing Act at June 30, 2017 is $5,601,

38 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors of Casa Mia Senior Apartments, Inc. (An Arizona NotForProfit Corporation) We have audited, in accordance with the 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, the financial statements of Casa Mia Senior Apartments, Inc., which comprise the statement of financial position as of June 30, 2017, and the related statements of profit and loss changes in net assets, changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated September 20, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Casa Mia Senior Apartments, Inc. s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Casa Mia Senior Apartments, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Casa Mia Senior Apartments, Inc. s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of Casa Mia Senior Apartments, Inc. s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 36

39 Casa Mia Senior Apartments, Inc. Page Two Compliance and Other Matters As part of obtaining reasonable assurance about whether Casa Mia Senior Apartments, Inc. s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Casa Mia Senior Apartments, Inc. s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Casa Mia Senior Apartments, Inc. s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. September 20, 2017 Carmel, Indiana Dauby O Connor & Zaleski, LLC Certified Public Accountants 37

40 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Directors of Casa Mia Senior Apartments, Inc. (An Arizona NotForProfit Corporation) Report on Compliance for Each Major Federal Program We have audited Casa Mia Senior Apartments, Inc. s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Casa Mia Senior Apartments, Inc. s major federal programs for the year ended June 30, Casa Mia Senior Apartments, Inc. s major federal programs are identified in the summary of auditor s results section of the accompanying summary of auditor s results. Management s Responsibility Management is responsible for compliance with the federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Casa Mia Senior Apartments, Inc. s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Casa Mia Senior Apartments, Inc. s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Casa Mia Senior Apartments, Inc. s compliance. Opinion on Each Major Federal Program In our opinion, Casa Mia Senior Apartments, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30,