CHRISTIAN COUNTY HOUSING AUTHORITY PANA, ILLINOIS REPORT ON EXAMINATION OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

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1 REPORT ON EXAMINATION OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA TWELVE MONTHS ENDED SEPTEMBER 30, 2016

2 TABLE OF CONTENTS Auditor's Report Management s Discussion and Analysis FINANCIAL STATEMENTS Statement of Fund Net Position - Twelve Months Ended September 30, Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds - Twelve Months Ended September 30, Statement of Cash Flows - Twelve Months Ended September 30, Notes to Financial Statements SUPPLEMENTAL DATA Schedule of Expenditure of Federal Awards PHA s Statement and Certification of Actual Modernization Cost - Phase IL06P Phase IL06P Phase IL06P 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 Independent Auditor s Report on Compliance Applicable to Each Major Program and on Internal Control Over Compliance Required by Uniform Guidance Status of Prior Audit Findings Schedule of Findings and Questioned Costs - Summary Current Findings and Recommendations Financial Data Schedule - REAC Electronic Submission

3 AMELA gmpson Certified Public Accountant Independent Auditor s Report Board of Commissioners Christian County Housing Authority Pana, Illinois I have audited the accompanying financial statements of the business type activities of the Christian County Housing Authority, as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the Christian County Housing Authority s basic financial statements as listed in the table of contents. 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 My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 the Christian County Housing Authority 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 the Christian County Housing Authority s internal control. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. 920 West Pershing Road Decatur, Illinois Office: (217) Fax: (217) pjscpa31@aol.com

4 Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the net position of the Christian County Housing Authority, as of September 30, 2016 and the changes in its net position and its cash flows for the year end in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 3 through 7 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. I have applied certain limited procedures on the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I do not express an opinion or provide any assurance on the information because the limited procedures do not provide me with sufficient evidence to express an opinion or provide any assurance. Other Information My audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Christian County Housing Authority s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is not a required part of the financial statements. Further, the financial data schedules shown on pages 34 to 38, the Certification of Actual Modernization Costs on pages 24 to 26 and other supplemental information as listed in the table of contents are presented for purposes of additional analysis as required by Uniform Financial Reporting Standards issued by the U.S. Department of Housing and Urban Development, and are 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. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the above described supplemental information is fairly stated in all material respects in relation to the financial statements as a whole. Other Reports Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated June 1, 2017 on my consideration of the Christian County Housing Authority s internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Christian County Housing Authority s internal control over financial reporting. Decatur, Illinois June 1, 2017 Certified Public Accountant

5 HOUSING AUTHORITY OF CHRISTIAN COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, Management s Discussion and Analysis As management of the Housing Authority of Christian County, we offer the readers of the Authority s financial statements this narrative overview and analysis of the financial activities of the Authority for the year ended September 30, We encourage readers to consider the information presented here in conjunction with the Authority s financial statements. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Executive Director, Housing Authority of Christian County, P. O. Box 86, Pana, Illinois (217) Overview of the Financial Statements The financial statements included in this annual report are those of a special-purpose government engaged in a business-type activity. The following statements are included: Statement of Fund Net Position reports the Authority s current financial resources (short term spendable resources) with capital assets and long-term debt obligations. Statement of Revenues, Expenses, and Changes in Fund Net Position reports the Authority s operating and non-operating revenues, by major source along with operating and non-operating expenses and capital contributions. Statement of Cash Flows reports the Authority s cash flows from operating, investing, capital and non-capital activities. Financial Highlights The Housing Authority of Christian County's net position decreased from $2,350,634 to $92,693, a decrease of $2,257,941 or 96%. The total assets decreased by $2,242,380 or 93%. Total revenues increased from $1,494,911 to $1,867,999, an increase of $657,494, or 54%. comprised of rental income, HUD PHA operating grants, interest income and other revenue. Revenues Total expenses decreased by $204,174, from $1,483,814 to $1,279,640 for the current year. represents a decrease of 14%. This Future Events (New Business) On July 5, 2016, the Housing Authority received permission from the Department of Housing and Urban Development (HUD) to dispose of two developments. The Housing Authority is under no obligation to replace these units and the disposal eliminates subsidy eligibility. At the year end, the Housing Authority of Christian County received project based Section 8 Vouchers to replace the units. The management/ administration of the Voucher Program has been turned over to Montgomery County Housing Authority.

6 HOUSING AUTHORITY OF CHRISTIAN COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, Condensed Comparative Financial Statements Analysis of Entity Wide Net Position Total Assets for FYE 2016 were $175,943 and at FYE 2015 the amount was $2,418,323. This represents a net decrease of $2,242,380 or 93%. Cash decreased by $2,295 or 2%. Other Current Assets decreased by $815,059. receivables. The major cause was a decrease in investments and Current Liabilities increased $15,561 or 23% because of an increase in payables. Capital Assets decreased by $1,425,026. The change in Capital Assets will be presented in the section of this analysis entitled Analysis of Capital Assets and the Notes to Financial Statements. The table below illustrates our analysis: Net Change Percent Variances Cash 149, ,980 (2,295) -2% Other Current Assets 26, ,317 (815,059) -97% Capital Assets 0 1,425,026 (1,425,026) -100% Total Assets 175,943 2,418,323 (2,242,380) -93% Deferred Outflows of Resources % TOTAL 175,943 2,418,323 (2,242,380) -93% Current Liabilities 83,250 67,689 15,561 23% Noncurrent Liabilities % Total Liabilities 83,250 67,689 15,561 23% Deferred Inflows of Resources % Net Investment in Capital Assets 0 1,425,026 (1,425,026) -100% Restricted 33,392 14,050 19, % Unrestricted 59, ,558 (852,257) -94% Total Net Position 92,693 2,350,634 (2,257,941) -96% TOTAL 175,943 2,418,323 (2,242,380) -93%

7 HOUSING AUTHORITY OF CHRISTIAN COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, Analysis of Entity Wide Revenues The Authority administers the following programs and the revenues generated from these programs during Fiscal Year Ending 2016 were as follows: Program Revenues Generated Public and Indian Housing $633,835 Section 8 Housing Choice Vouchers $406,916 Capital Funds Program $827,248 Total $1,867,999 Total revenues for Fiscal Year Ending September 30, 2016 were $1,867,999 as compared to the total revenues for Fiscal Year Ending September 30, 2015 of $1,210,505. Comparatively, Fiscal Year Ending 2016 revenues exceeded Fiscal Year Ending 2015 revenues by $657, Variance Percentage Change Total Tenant Revenue 335, ,340 (50,297) -13% HUD Operating Grants 1,510, , ,008 89% Investment Income 836 7,098 (6,262) -88% Other Gain/loss Revenue on sale of capital assets 22, , , % 16% Total Revenue 1,867,999 1,210, ,494 54%

8 HOUSING AUTHORITY OF CHRISTIAN COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, Analysis of Entity Wide Expenditures Total Expenses for Fiscal Year Ending September 30, 2016 were $1,279,640 as compared to $1,483,814 of total expenditures for Fiscal Year Ending September 30, Comparatively, Fiscal Year Ending 2015 expenditures exceeded Fiscal Year Ending 2016 expenditures by $204,174. Changes by major expense category will be presented below. Administrative expenditures increased by $1,807 or 1%. administrative benefits. The cause for this was an increase in Tenant Services increased by $1,026. Utilities decreased by $2,851. This was due to the normal fluctuation of utility costs and consumption. Ordinary Maintenance and Operation expenditures decreased by $41,115 or 14%. The major cause for this was a decrease in maintenance materials. General Expense decreased by $134,432 or 56% due to expenses related to the disposition of units under RAD. Many pre-disposal expenses were paid in the prior year. Housing Assistance Payments decreased by $26,099 or 7%. Leased units for the Voucher Program changed as the Housing Authority adapted to the new budgeting process of funds received from HUD. The table below illustrates our analysis: Variance Percentage Change Administative 233, ,224 1,807 1% Tenant Services 11,885 10,859 1,026-30% Utilities 157, ,571 (2,851) -17% Ordinary Maintenance and Operation 256, ,772 (41,115) -14% General Expense 107, ,349 (134,432) -56% Housing Assistance Payments 337, ,492 (26,099) -7% Depreciation Expense 175, ,547 (2,510) -1% Total Expenses $1,279,640 $1,483,814 ($204,174) -14%

9 HOUSING AUTHORITY OF CHRISTIAN COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, Budgetary Analysis The Authority adopts a consolidated annual operating budget for all programs. The budget for Low Income Public housing is adopted on the basis of accounting prescribed by the Housing and Urban Development, which differs in some respects from generally accepted accounting principles. Program budgets for the Section 8 Programs are set by the U.S. Department of Housing and Urban Development. The Authority prepares a budget for each fiscal year of Capital Fund Grant Program that is approved. The Authority is permitted four years to expend theses funds. Income is only recognized as funds are expended. For the purposes of this analysis, the amount budget is equal to the actual expense (excludes depreciation expense and transfers). Analysis of Capital Asset Activity Buildings decreased by $5,757,630 due to the deposition of all units under a HUD approved RAD. Furniture, Equipment & Machinery Dwelling decreased by $102,705 due to the deposition of all units under a HUD approved RAD. Furniture, Equipment & Machinery Administration decreased by $276,569 due to the donation of all equipment when the units were transferred under RAD. Accumulated Depreciation decreased by $5,177, Variance Percentage Change Land 0 465,253 (465,253) -100% Buildings 0 5,757,630 (5,757,630) -100% Furniture, Equipment, & Machinery - Dwelling 0 102,705 (102,705) -100% Furniture, Equipment, & Machinery - Administration 0 276,569 (276,569) -100% Total Fixed Assets 0 6,602,157 (6,602,157) -100% Accumulated Depreciation 0 5,177,131 (5,177,131) -100% Net Fixed Assets 0 1,425,026 (1,425,026) -100% Additional information regarding capital assets can be found in "Notes to Financial Statements". Outstanding Debt Activity There is no outstanding debt for fiscal year ended September 30, 2015 or September 30, 2016.

10 8 STATEMENT OF FUND NET POSITION - PROPRIETARY FUNDS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 ASSETS Cash - operating $ 116,293 Cash - restricted 33,392 Accounts receivable (net) 149 Investments 26,109 Capital assets: Land, land improvements and construction in progress $ 0 Other assets, net of depreciation 0 Total Capital Assets $ 0 Total Assets $ 175,943 DEFERRED OUTFLOWS OF RESOURCES $ 0 TOTAL $ 175,943 LIABILITIES Accounts payable $ 32,024 Other liabilities 51,266 Total Liabilities $ 83,250 DEFERRED INFLOWS OF RESOURCES $ 0 NET POSITION Net investment in capital assets $ 0 Restricted 33,392 Unrestricted 59,301 Total Net Position $ 92,693 TOTAL $ 175,943 The notes to financial statements are an integral part of this statement.

11 9 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION - PROPRIETARY FUNDS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 Operating Income Tenant rental revenue $ 319,881 Tenant revenue - other 15,162 Total Tenant Revenue $ 335,043 HUD grants - operating 1,510,092 Other revenue 22,028 Total Operating Income $ 1,867,163 Operating Expenses Administration $ 233,031 Tenant services 11,885 Utilities 157,720 Ordinary maintenance and operation 256,657 General expense 107,917 Housing assistance payments 337,393 Depreciation 175,037 Total Operating Expenses $ 1,279,640 Net Operating Income (Loss) $ 587,523 Nonoperating Income (Expense) Special items (Note 18) $ -2,846,300 Interest income 836 Nonoperating Income (Expense) $ -2,845,464 Changes in net position $ -2,257,941 Net position, beginning of year 2,350,634 Net position, end of year $ 92,693 The notes to financial statements are an integral part of this statement.

12 10 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 Operating Activities Operating grants $ 1,568,796 Tenant revenue 320,953 Other revenue 22,028 Housing assistance payments -337,393 Payments to employees -162,454 Payments to suppliers and contractors -1,797,388 Net Cash Provided (Used) by Operating Activities $ -385,458 Investing Activities Investments (purchased) redeemed $ 727,555 Interest income 1,930 Net Cash Provided (Used) by Investing Activities $ 729,485 Capital and Related Financing Activities Special items - transfer of RAD assets $ -346,322 Net Cash Provided (Used) by Capital and Related Financing Activities $ -346,322 Net Change in Cash $ -2,295 Cash Balance at September 30, ,980 Cash Balance at September 30, 2016 $ 149,685 The notes to financial statements are an integral part of this statement.

13 11 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Net operating income (loss) $ 587,523 Adjustment to Reconcile Operating Income (Loss) to Net Cash Flows from Operating Activities: Depreciation 175,037 Special items - RAD transfer of capital assets -1,249,989 (Increase) decrease in accounts receivable 70,630 (Increase) decrease in prepaid expenses 15,024 (Increase) decrease in inventory 756 Increase (decrease) in accounts payable 39,399 Increase (decrease) in other liabilities -20,394 Increase (decrease) in unearned revenues -3,444 Net Cash Provided (Used) by Operating Activities $ -385,458 The notes to financial statements are an integral part of this statement.

14 12 NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 Note 1 - Summary of Significant Accounting Policies (a) Organization and Reporting Entity - The Christian County Housing Authority was established by the County pursuant to the laws of the State of Illinois, to transact business and to have powers as defined therein. The Housing Authority was established to provide low-rent housing for qualified individuals in accordance with the rules and regulations prescribed by the Department of Housing and Urban Development and other applicable Federal Agencies. Under the United States Housing Act of 1937, as amended, the U.S. Department of Housing and Urban Development (HUD) had direct responsibility for administering low-rent housing programs in the United States. Accordingly, HUD has entered into a contract with the Authority for the purpose of assisting in financing the acquisition, construction and leasing of housing units and to make annual contributions (subsidies) to the program for the purpose of maintaining its low-rent character. In evaluating the Authority as a reporting entity, management has addressed its relationship with the County of Christian and concluded that the County does not maintain an oversight responsibility for the Authority's operations. An independent Board of Commissioners, appointed by the County, is responsible for the activities of the Authority. The Authority recruits and employs its executive staff and has substantial legal authority to control its affairs without requiring approval of the County government. Debt incurred by the Authority is not an obligation of the County; the County does not review or approve the Authority's budget, is not entitled to any surplus funds generated by the Authority's operations and is not responsible for any deficits incurred by the Authority. The Authority is governed by a Board of Commissioners appointed by the office of the County Board, and has governance responsibilities over all activities related to all housing activities within the County, The Board of Commissioners has decision making authority and the power to designate management. The members do not serve at the discretion of the County, i.e. they can only be removed for cause. The Authority s Board elects its own chairperson. Consequently, in accordance with evaluating the criteria set forth in Section 2100 and 2600 of the Governmental Accounting Standards Board Codification, management has concluded that the Christian County Housing Authority is a separate reporting entity. The Housing Authority has no component units. (b) Method of Accounting - The financial statements of the Housing Authority have been prepared on the accrual basis of accounting and accordingly, reflect all significant receivables, payables and other liabilities. The Housing Authority applies all relevant Governmental Accounting Standards Board (GASB) pronouncements.

15 13 NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) Note 1 - Summary of Significant Accounting Policies (c) Financial Statement Presentation Although a formal policy has not been adopted, in financial statement preparation the Authority distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the Authority s principal ongoing operations. Principal operating revenues are tenant rents and HUD grants. Operating expenses include administration, maintenance, insurance, depreciation, utilities, housing assistance payments and other general expenses. All revenues and expenses not meeting these definitions are reported as non-operating revenues and expenses. (d) Funds - Each of the programs of the Housing Authority are organized on a basis of fund accounting, using a separate set of self balancing accounts as prescribed by HUD. The programs of the Housing Authority are: * Public and Indian Housing * Capital Funds Program * Section 8 Housing Choice Vouchers These programs are all accounted for within the Proprietary (enterprise) fund as described below: Proprietary Fund Types: Proprietary funds use the economic resources measurement focus and utilize the accrual basis of accounting. All assets and liabilities associated with a proprietary fund s activities are included on the fund statement. Proprietary fund equity is segregated into Net Investment in Capital Assets, Restricted and Unrestricted. (e) Cash and Cash Equivalents - For purposes of the statement of cash flows, the practice of the Housing Authority is to consider all highly liquid investments to be cash equivalents. The term highly liquid refers to investments with a maturity of one (1) month or less when purchased to be cash equivalents. (f) Interprogram Receivables and Payables During the course of operations, numerous transactions occur within individual programs that may result in amounts owed between these programs. These receivables and payables are classified as due from other programs or due to other programs on the combining statement of net position in the REAC Financial Data Schedule and have been eliminated in the basic financial statements.

16 14 NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) Note 1 - Summary of Significant Accounting Policies (g) Investments - Investments are stated at cost which approximates market. (h) Capital Assets - For the purpose of determining, distinguishing and recording materials and non-expendable equipment and personal property purchased or acquired in connection with development, management, and maintenance of public housing developments owned or operated, the Housing Authority follows the following capitalization policy: If the initial cost of a piece of equipment and/or other personal property (except ranges and refrigerators) is three hundred dollars ($300) or more and the anticipated life or useful life of said equipment or property is more than one (1) year, the same shall be capitalized and recorded as non-expendable equipment and charged as a capital expenditure. Land, buildings and equipment contains the following: 1) The total development construction costs incurred for each project at the end of the initial operating period, 2) nonexpendable equipment, and 3) property betterments and additions 4) land acquisitions. These are recorded at cost. Depreciation of property and equipment is provided using the straight line method for financial reporting purposes at rates based on the following estimates: Buildings 27.5 years Equipment 5-7 years Transportation equipment 5-7 years Furniture and fixtures 5-7 years Leasehold improvements 15 years

17 15 NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) Note 1 - Summary of Significant Accounting Policies (i) Net Position - GASB Statement 63 requires the classification of net position into three components as defined below: 1) Net investment in capital assets - capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt and deferred inflows of resources related to the acquisition, construction or improvement of those assets. 2) Restricted - restricted assets reduced by liabilities and deferred inflows of resources related to those assets. 3) Unrestricted - amounts not required to be reported in the other components of net position. (j) Income Tax - The Authority, organized under Illinois state law as a municipal corporation subsidized by the Federal government, is exempt from Federal and State income taxes. (k) Annual Contributions/Subsidies and Other Grants Annual contributions and subsidies received from the Department of HUD are recorded as grant revenues. Other grants (such as CFP grants) are recognized when program expenditures are incurred. Such revenue is subject to review by the Department of Housing and Urban Development and may result in disallowance in subsequent periods. (l) The Housing Authority adopts a budget annually. The budget is submitted to the Board of Commissioners for approval. Subsequent budget revisions may also be required to be submitted to the Board for approval. The original budget was adopted by the Board of Commissioners on September 23, (m)the preparation of financial statements in conformity with generally accepted accounting principles require the Housing Authority to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. (n) Leasing activities (as lessor) - the Authority is the lessor of dwelling units mainly to low income and/or elderly and disabled residents. The rents under the lease are determined generally by the resident s income as adjusted by eligible deductions regulated by HUD, although the resident may elect for a flat rent option. Leases may be cancelled by the lessee at any time. The Authority may cancel the lease only for cause.

18 16 NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) Note 1 - Summary of Significant Accounting Policies (o) Rental income is recognized as rents become due. (p) At any time during the year and at year end, there are construction projects in process. These projects include modernizing rental units. The projects are funded by HUD and funds are requested periodically as costs are incurred. Note 2 - Cash and Investments Statutes authorize the Housing Authority to invest in certificates of deposit, money market funds, United States government securities and repurchase agreements fully collateralized by United States government securities. All cash and investments are entirely insured or collateralized. The Department of Housing and Urban Development requires financial institutions to secure the PHA's deposits by pledging government securities as collateral. The Housing Authority may waive the collateral requirements that are fully insured by the Federal Deposit Insurance Corporation (FDIC) or the Federal Savings and Loan Insurance Corporation (FSLIC) or other equivalent insurance coverage. Custodial Credit Risk a. Deposits - Custodial credit risk is the risk that in the event of a financial institution failure, the Authority s deposits may not be returned to or that the Authority will not be able to recover collateral securities in the possession of an outside party. b. Investments - Custodial credit risk is the risk that in the event of the failure of the depository, the Authority will not be able to recover the value of its investments or collateral securities that are in the possession of the outside party. Credit Risk Investments, Concentration of Credit Risk and Interest Rate Risks - Investments Credit Risk is the risk that an issuer or other counter party to an investment will not fulfill its obligations. The Housing Authority has no investment policy that limits its investment choices other than the limitation of state law and/or the Department of Housing and Urban Development regulations. Concentrations of Credit Risk is the risk of loss attributed to the amount of the investment in a single issuer. The Authority does not have a formal investment policy covering the concentration of credit risk. Investment Rate Risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Housing Authority has no formal policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

19 17 NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) Note 2 - Cash and Investments (Continued) The cash deposits held at financial institutions can be categorized according to three levels of risk. These three levels of risk are as follows: Category 1 - Category 2 - Category 3 - Deposits which are insured or collateralized with securities held by the Housing Authority or by its agent in the Housing Authority s name. Deposits which are collateralized with securities held by the pledging financial institution s trust department or agent in the Housing Authority s name. Deposits which are not collateralized or insured. Based on the three levels of risk, all of the Housing Authority s funds are classified as Category 1. Program Book Balance Bank Balance Public and Indian Housing $ 98,718 $ 102,855 Section 8 Housing Choice Vouchers 77,076 79,477 Total $ 175,794 $ 182,332 Note 3 - Compensated Absences All regular employees shall accrue leave from the date of employment. Regular employees shall earn vacation leave based on length of service with the agency according to the schedule below: Authority Years of Service Days per Year After (1) year of continuous employment 5 After (2-4) years of continuous employment 10 After (5-14) years of continuous employment 15 After 15 years of continuous employment 20 Regular employees are encouraged to take annual leave to the extent of the amount it is earned. If a regular employee is required by management to work during a scheduled vacation leave and is unable to reschedule the annual leave during the year, then he or she will be compensated for that annual leave, in excess of the allowed accumulated days, earned but not taken.

20 18 Note 4 - Defined Contribution Plan NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) The Housing Authority participates in a defined contribution plan administered by MG Trust Company. The Housing Authority is required to contribute 13.5% of each regular full time employee s gross wages. This rate was established by the Board of Commissioners at the inception of the plan and can only be amended by Board action. For the fiscal year ended September 30, 2016, actual contributions by the Housing Authority and plan participants were $19,442. Total annual payroll expense was $144,016. Note 5 - Post-Employment Benefits The Housing Authority does not provide post employment retirement benefits. As a result there are no disclosures included in these statements as required by GASB 45. Note 6 - Accounts Receivable Accounts receivable consists of the following accounts: Miscellaneous $ 149 Note 7 - Investments At September 30, 2016 investments consist of the following: Rate Cost Fair Value Super First Summary 0.31% $ 26,109 $ 26,109 Note 8 - Capital Assets Balance as of September 30, 2016 $ 0 Balance as of September 30, ,425,026 Reconciliation Net Increase (Decrease) $ -1,425,026 Transfer of capital assets - RAD conversion $ -1,249,989 Current year depreciation expense -175,037 * Net Increase (Decrease) $ -1,425,026

21 19 Note 8 - Capital Assets (Continued) NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) Analysis 10/01/2015 Additions/ Deletions/ 09/30/2016 Balance Transfers Transfers Balance Land $ 465,253 $ 0 $ 465,253 $ 0 Buildings 5,757, ,757,630 0 Equipment and furniture 379, ,274 0 Total $ 6,602,157 $ 0 $ 6,602,157 $ 0 Accumulated depreciation -5,177,131 5,352, ,037 * 0 Total Net Assets $ 1,425,026 $ 5,352,168 $ 6,777,194 $ 0 *Current year depreciation expense recognized. Note 9 - Accounts Payable This classification includes the following accounts: Vendors and contractors $ 3,943 Accounts payable - Montgomery County 4,107 Accounts payable - Shelby County 23,974 Total $ 32,024 Note 10 - Other Liabilities Accrued liabilities consists of the following: Current Portion: Payment in lieu of taxes $ 18,406 Payable to CCICS 32,820 Total $ 51,226 Note 11 - Administrative Fee The PHA receives an "Administrative Fee" as part of the annual contribution from HUD to cover the costs (including overhead) of administering the HAP Program. The fee is determined by HUD on a quarterly/annual basis.

22 20 Note 12 - Allocation of Costs NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) The PHA allocated expenses not attributable to a specific program to all programs under management. The basis for this allocation was the number of units in each program. Management considers this to be an equitable method of allocation. Note 13 - Contingencies Federal Grants In the normal course of operations, the Housing Authority receives grant funds from the Department of Housing and Urban Development. The programs are subject to audit by agents of HUD, the purpose of which is to ensure compliance with conditions precedent to the granting of funds. Any liability for reimbursement which may arise as a result of these audits is not believed to be material. Note 14 - Contracts/Commitments As of September 30, 2016, the Housing Authority had entered into the following pending capital fund projects: Funds Funds Expended Approved To Date CFP $ 259,557 $ 194,668 Note 15 - Risk Management The Housing Authority carries commercial insurance coverage to cover exposure and the risk of losses related to torts, thefts, damages, destruction of assets, errors and omissions, injuries, natural disasters and defalcation. Settled claims have not exceeded insurance coverage or the risk pool coverage in the current or past three years and there has been no significant reduction in insurance coverage during the fiscal year. Note 16 - Economic Dependency The Housing Authority received a large percentage of its revenue (81%) from the United State Department of Housing and Urban Development. This funding is subject to federal government appropriations and potential funding reductions.

23 21 Note 17 - Restricted Net Position NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED SEPTEMBER 30, 2016 (CONTINUED) Restricted net position is restricted for the following: HAP $ 33,392 When both restricted and unrestricted reserves are available for use, the Housing Authority s policy is to use restricted resources to fund restricted costs and then unrestricted resources as they are needed. Note 18 - Asset Disposals - RAD Conversion On July 5, 2016, Christian County Housing Authority (CCHA) received a fully executed RAD Conversion Commitment from the Department of Housing and Urban Development for their projects known as Hershey Towers and Senior Village, both located in Taylorville, Illinois for 139 units to be converted under Project Number IL The Commitment provided for the transfer of the units to Christian County Integrated Community Services (CCICS), a not-for-profit, 501(c)3 organized under the State of Illinois. The related RAD Use Agreement was signed on September 1, CCHA selected a Project-Based Rental Assistance conversion resulting in 134 one bedroom contract units and 5 two bedroom contract units. The related RCC amendment was signed September 2, All capital assets related to the two public housing projects were transferred by CCHA to CCICS on September 9, In a separate agreement, the Board of Commissioners also transferred all personal/administrative assets (office equipment and furniture) to CCIS. Note 19 - Subsequent Events In March 2016 the Board of Commissioners of the Christian County Housing Authority entered into an agreement with the Montgomery County Housing Authority to administer their Housing Choice Voucher Program. The Housing Authority no longer retains any employees. The management contract between Shelby County Housing Authority and Christian County Housing Authority was terminated subsequent to the fiscal year end. CCHA has applied for a permanent transfer of all vouchers to Montgomery County Housing Authority. The application is pending HUD approval.

24 SUPPLEMENTAL DATA

25 23 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2016 Federal Receipts or Expenditures CFDA Contract Grant Program Revenue Disbursements/ to Federal Grantor/Program Number Number Period Amount Recognized Expenditures Sub-Recipients U.S. Department of HUD Direct Programs: FYE Public and Indian Housing C /30/16 $ 276,098 $ 276,098 $ 276,098 $ 0 Voucher Cluster: FYE Housing Choice Vouchers* C /30/16 $ 406,746 $ 406,746 $ 391,670 $ 0 Public Housing FYE Capital Funds C /30/16 $ 996,992 $ 827,248 $ 827,248 $ 0 Total Housing Assistance $ 1,679,836 $ 1,510,092 $ 1,495,016 $ 0 *Denotes major program. Note 1 Basis of Presentation NOTES TO THE SCHEDULE OF FEDERAL AWARDS (SEFA) TWELVE MONTHS ENDED SEPTEMBER 30, 2016 The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Christian County Housing Authority (Authority) and is presented on the accrual basis of accounting. The schedule summarizes the federal funds expended by the Authority under the programs of the federal government during the year ended September 30, The schedule of expenditures of federal awards displays the Authority s expenditures charged to federal programs for the year ended September 30, 2016, the cost principals in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Authority has not implemented the 10% de minimis indirect cost rate allowed under the Uniform Guidance. Note 2 Sources of Funding The schedule includes all grants and contracts entered into directly between the Authority and agencies and departments of the federal government, as well as federal funds passed-through to the Authority by primary recipients. The Authority provided no part of its direct grant federal dollars to sub-recipients. The Authority did not receive any non-cash assistance from federal funds, had no federal insurance, nor have any loan or loan guarantees outstanding as of September 30, 2016.

26 24 PHA s STATEMENT AND CERTIFICATION OF ACTUAL MODERNIZATION COST PHASE IL06P The Actual Modernization Costs of Phase IL06P are as follows: Funds approved $ 228,357 Funds expended 228,357 Excess of Funds Approved $ 0 Funds advanced $ 228,357 Funds expended 228,357 Excess of Funds Advanced $ 0 2. The distribution of costs by project, as shown on the final Statement of Modernization Cost, dated May 31, 2017, accompanying the Actual Modernization Cost Certificate submitted to HUD for approval, is in agreement with the PHA s records. 3. All modernization costs have been paid and all related liabilities have been discharged through payment.

27 25 PHA s STATEMENT AND CERTIFICATION OF ACTUAL MODERNIZATION COST PHASE IL06P The Actual Modernization Costs of Phase IL06P are as follows: Funds approved $ 255,424 Funds expended 255,424 Excess of Funds Approved $ 0 Funds advanced $ 255,424 Funds expended 255,424 Excess of Funds Advanced $ 0 2. The distribution of costs by project, as shown on the final Statement of Modernization Cost, dated May 31, 2017, accompanying the Actual Modernization Cost Certificate submitted to HUD for approval, is in agreement with the PHA s records. 3. All modernization costs have been paid and all related liabilities have been discharged through payment.

28 26 PHA s STATEMENT AND CERTIFICATION OF ACTUAL MODERNIZATION COST PHASE IL06P The Actual Modernization Costs of Phase IL06P are as follows: Funds approved $ 253,654 Funds expended 253,654 Excess of Funds Approved $ 0 Funds advanced $ 253,654 Funds expended 253,654 Excess of Funds Advanced $ 0 2. The distribution of costs by project, as shown on the final Statement of Modernization Cost, dated May 31, 2017, accompanying the Actual Modernization Cost Certificate submitted to HUD for approval, is in agreement with the PHA s records. 3. All modernization costs have been paid and all related liabilities have been discharged through payment.

29 AMELAY SMPSON Certified Public Accountant 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 Board of Commissioners Christian County Housing Authority Pana, Illinois I 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 the Christian County Housing Authority, which comprise the statement of net position as of September 30, 2016, and the related statements of changes in net position and cash flows for the year then ended, and the related notes to the financial statements, which collectively comprise the Christian County Housing Authority s basic financial statements and have issued my report thereon dated June 1, Internal Control Over Financial Reporting In planning and performing my audit of the financial statements, I considered the Christian County Housing Authority s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Christian County Housing Authority s internal control. Accordingly, I do not express an opinion on the effectiveness of the Christian County Housing Authority s internal control over financial reporting. 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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Christian County Housing Authority 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. My 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 my audit I did not identify any deficiencies in internal control over financial reporting that I consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 920 West Pershing Road Decatur, Illinois Office: (217) Fax: (217) pjscpa31@aol.com

30 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Christian County Housing Authority s financial statements are free from material misstatement, I 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 my audit, and accordingly, I do not express such an opinion. The results of my 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 my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Christian County Housing Authority s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Christian County Housing Authority s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Decatur, Illinois June 1, 2017 Certified Public Accountant

31 AMELA cfcmpson Certified Public Accountant Independent Auditor s Report on Compliance Applicable to Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Board of Commissioners Christian County Housing Authority Pana, Illinois Report on Compliance for Each Major Federal Program I have audited the Christian County Housing Authority 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 the Christian County Housing Authority s major federal programs for the year ended September 30, The Christian County Housing Authority s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. 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 My responsibility is to express an opinion on compliance for each of the Christian County Housing Authority s major federal programs based on my audit of the types of compliance requirements referred to above. I conducted my 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 I 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 material effect on the major federal programs occurred. An audit includes examining, on a test basis, evidence about the Christian County Housing Authority s compliance with those requirements and performing such other procedures as I considered necessary in the circumstances. I believe that my audit provides a reasonable basis for my opinion on compliance for each major program. However, my audit does not provide a legal determination of the Christian County Housing Authority s compliance. Opinion on Each Major Federal Program In my opinion, the Christian County Housing Authority 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 September 30, West Pershing Road Decatur, Illinois Office: (217) Fax: (217) pjscpa31@aol.com