ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS

Transcription

1 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS FMHA Project # FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016 TOGETHER WITH INDEPENDENT AUDITORS REPORT, FEDERAL SINGLE AUDIT REPORTS, AND SUPPLEMENTARY INFORMATION

2 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS DECEMBER 31, 2016 TABLE OF CONTENTS INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6 FEDERAL SINGLE AUDIT REPORTS Federal Internal Control and Compliance Reports Independent Auditors 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 12 Independent Auditors Report on Compliance for each Major Federal Program; Report on Internal Control over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 14 Schedule of Expenditures of Federal Awards Schedule of Expenditures of Federal Awards 17 Notes to Schedule of Expenditures of Federal Awards 18 Schedule of Federal Findings and Questioned Costs 19 Summary of Prior Year Audit Findings 21 Supplemental Data Required by the USDA Rural Development Borrower Balance Sheet (Form RD ) 22 Cash Flow Statement (Form RD ) 24 Directors Certification 29 Management Agent s Certification / Audit Firm Information 30 Borrower Self-Certification Letter (Form HB , Attachment 4-C) 31

3 INDEPENDENT AUDITORS REPORT

4

5 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Acadia Housing, Inc. d/b/a Nutmeg Park Apartments as of December 31, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, 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 the supplemental information required by USDA included on pages 22 through 32, inclusive, are presented for purposes of additional analysis 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. 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 March 18, 2017 on our consideration of Acadia Housing, Inc. d/b/a Nutmeg Park Apartments 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 Acadia Housing, Inc. d/b/a Nutmeg Park Apartments internal control over financial reporting and compliance. Hoyt, Filippetti & Malaghan, LLC Groton, Connecticut March 18,

6 FINANCIAL STATEMENTS

7 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2016 ASSETS CURRENT ASSETS Cash $ 28,334 Accounts receivable 5,212 Total current assets 33,546 PROPERTY AND EQUIPMENT Land 594,000 Building and improvements 1,675,293 Furniture and equipment 59,864 2,329,157 Less accumulated depreciation 70,258 Total property and equipment 2,258,899 RESTRICTED DEPOSITS AND FUNDED RESERVES Reserve for replacement 32,684 Escrow deposits 21,522 Security deposits 16,078 Total restricted deposits and funded reserves 70,284 Total assets $ 2,362,729 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Current maturities of long-term debt $ 15,789 Accounts payable and accrued expenses 8,114 Tenant security deposits 15,293 Total current liabilities 39,196 LONG-TERM DEBT, less current maturities 1,834,475 Total liabilities 1,873,671 NET ASSETS Unrestricted 489,058 Total net assets 489,058 Total liabilities and net assets $ 2,362,729 The accompanying notes are an integral part of these financial statements

8 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2016 SUPPORT AND REVENUE Net rental income $ 193,070 Interest subsidy 28,166 Laundry and other income 4,082 Interest income 11 Total support and revenue 225,329 EXPENSES Program services: USDA-RD-assisted housing project 222,264 Supporting services: General and administrative 35,277 Total expenses 257,541 Change in net assets (32,212) UNRESTRICTED NET ASSETS, beginning of year 521,270 UNRESTRICTED NET ASSETS, end of year $ 489,058 The accompanying notes are an integral part of these financial statements

9 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (32,212) Adjustments to reconcile the change in net assets to net cash provided by operating activities: Depreciation 52,964 Changes in operating assets and liabilities: Increase in: Accounts receivable (1,437) Increase in: Accounts payable and accrued expenses 1,670 Tenant security deposits 2,259 Net cash provided by operating activities 23,244 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (9,864) Decrease in reserve for replacement 10,995 Increase in escrow deposits (13,849) Increase in security deposits (1,872) Net cash used in investing activities (14,590) CASH FLOWS FROM FINANCING ACTIVITIES Long-term debt principal payments (15,284) Net cash used in financing activities (15,284) NET DECREASE IN CASH (6,630) CASH, beginning of year 34,964 CASH, end of year $ 28,334 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 32,239 NON-CASH TRANSACTIONS Interest subsidy $ 28,166 Subsidized interest expense (28,166) $ - The accompanying notes are an integral part of these financial statements

10 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS Nutmeg Park Apartments (the Project) is a division of Acadia Housing, Inc. (the Company). The Company is organized as a not for profit organization formed to acquire interests in real estate for the purpose of operating apartments under Section 515 of the National Housing Act of Such projects are regulated by the United States Department of Agriculture Rural Development (USDA-RD), (formerly Farmers Home Administration) as to rent charges and operating methods. The Project is a 27 unit residential facility located in Colchester, Connecticut. The Project receives federal financial assistance from the USDA-RD through subsidized interest on a mortgage held by the USDA-RD and through rental assistance payments made on behalf of qualified low income tenants. Under the program, assisted tenants pay the landlord a calculated portion of the rent and USDA-RD contracts to pay the difference. Assisted tenants pay no more than thirty percent (30%) of their adjusted gross income as rental payments. Approximately fifty-three percent (53%) of the Project s net rental income was obtained through housing assistance payments from USDA-RD for the year ended December 31, USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. NET ASSET CATEGORIES To ensure observance of limitations and restrictions placed on the use of resources available to the Project, the accounts of the Project are maintained in the following net asset categories: Unrestricted Unrestricted net assets represent available resources other than donor restricted contributions. Included in unrestricted net assets are grants and contracts which may be earmarked for specific purposes. Revenue Revenue is recognized monthly as rental services are provided. Rental increases must be USDA-RD approved. -6-

11 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) RECOGNITION OF SUPPORT AND REVENUE Contributions Contributions are defined as voluntary, nonreciprocal transfers. The Project records contributions of cash and other assets as restricted support if they are received with donor stipulations that limit the use of such assets. When a restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. The Project s policy is to present temporarily restricted net assets received during the current year whose restrictions are also met during the current year with unrestricted net assets. Contributions received that are contingent on the occurrence of a future event are presented as deferred support until such conditions are substantially met, at which time they are recognized as support. Donated Assets Donated assets, including the usage of assets such as rent, are recognized as support at their estimated fair market value. The Project reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as temporarily restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Project reports expirations of donor restrictions in full when the donated or acquired long-lived assets are placed in service. Donated Services The Project recognizes donated services if they create or enhance nonfinancial assets or require specialized skills and would typically need to be purchased if not provided by donation. General volunteer services do not meet the criteria for recognition in the financial statements. No donated services have been recognized in the accompanying financial statements for the year ended December 31,

12 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing program and supporting services have been reported on a functional basis which has been allocated to program and supporting services by management for the accompanying statement of activities. CASH EQUIVALENTS For the purpose of the statement of cash flows, cash equivalents are defined as highly liquid instruments with an original maturity of three months or less, exclusive of restricted deposits and funded reserves which are not available for operations. The Project had no cash equivalents at December 31, PROPERTY AND EQUIPMENT Property and equipment are carried at cost, if purchased or at its estimated fair market value if donated. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the related assets. Deferred charges relate to closing costs incurred in the purchase of Nutmeg Park Apartments and are being amortized over the life of the related property. Depreciation expense for the year ended December 31, 2016 totaled $52,964. Maintenance, repairs and minor renewals are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. The Project uses the direct expense method for planned major maintenance activities. Funds for these future expenditures are accumulated in a reserve for replacement account. ALLOWANCE FOR DOUBTFUL ACCOUNTS Management asserts that all accounts receivable are fully collectable, therefore no allowance for doubtful accounts has been established. RESTRICTED DEPOSITS AND FUNDED RESERVES The Project has deposited certain amounts into escrow accounts under terms of its mortgage financing arrangement (see Note 4). Such funds are restricted for allowable purposes as approved by the United States Department of Agriculture Rural Development (USDA-RD). ADVERTISING Advertising costs are expensed as incurred. Advertising expense for the year ended December 31, 2016 was $

13 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) INCOME TAXES The Company is a non-stock, non-profit corporation, which is exempt from federal and state income taxes on exempt function income as a public charity under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for income taxes has been made in the accompanying financial statements. The Project did not recognize any liability for uncertain tax positions as defined by accounting principles generally accepted in the United States of America. The federal tax return of the Company for the year ended December 31, 2016 is subject to examination by the IRS, generally for three years after it has been filed. SUBSEQUENT EVENTS The Project has performed an evaluation of subsequent events through March 18, 2017, which is the date the financial statements were available to be issued. There were no subsequent events identified that require disclosure. NOTE 2 - CONCENTRATIONS CREDIT RISK Financial instruments that are exposed to concentrations of credit risk consist primarily of cash, accounts receivable, restricted deposits and funded reserves. Cash - The Project places its cash deposits with a high credit quality institution and such deposits are covered by federal depository insurance. The Project has not experienced any losses in this area and management believes its cash deposits are not subject to significant credit risk. At December 31, 2016, there were no cash deposits that were in excess of federal depository insurance. Accounts receivable Amounts due from tenants for delinquent rent are considered by management to be fully collectible. No allowance for doubtful accounts has been established. Restricted deposits and funded reserves - Restricted deposits and funded reserves are placed with a high credit quality institution and such deposits are covered by federal depository insurance. The Project has not experienced any losses in this area and management believes its restricted deposits and funded reserves are not subject to significant credit risk. At December 31, 2016, there were no restricted deposits and funded reserves that were in excess of federal depository insurance limits. -9-

14 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTE 2 - CONCENTRATIONS (Continued) SUPPORT AND REVENUE CONCENTRATION Financial assistance from USDA-RD comprises a substantial portion of the Project s cash flows for the year ended December 31, As with all government grants and contracts, this funding is subject to reduction or termination in future years. Any significant reduction in this funding would have an adverse impact on the Project s operations. NOTE 3 - ACCOUNTS RECEIVABLE At December 31, 2016, accounts receivable totaled $5,212 and consisted of amounts due from tenants for rent and damages. NOTE 4 - LONG-TERM DEBT The Project s long-term debt consists of two (2) mortgage notes payable to USDA-RD in the original amount of $709,573 and $1,159,720. The terms and balances of the Project s long-term debt are as follows: USDA USDA Total Original amount $ 709,573 $ 1,159,720 $ 1,869,293 Stated interest rate 3.250% 3.250% Year of maturity Monthly payment $ 2,394 $ 3,913 $ 6,307 Principal outstanding at December 31, 2016: Current portion $ 5,993 $ 9,796 $ 15,789 Long-term portion 696,356 1,138,119 1,834,475 Total $ 702,349 $ 1,147,915 $ 1,850,264 Future maturities Year ending December 31, 2017 $ 5,993 $ 9,796 $ 15, ,191 10,119 16, ,395 10,453 16, ,606 10,797 17, ,824 11,154 17,978 Thereafter 670,340 1,095,596 1,765,936 $ 702,349 $ 1,147,915 $ 1,850,

15 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTE 4 - LONG-TERM DEBT (Continued) All mortgage notes are secured by the Project s real estate. Total interest incurred for the year ended December 31, 2016 was $63,069. The Project receives interest reduction payments from USDA-RD which reduces the effective interest rate on these notes over the life of the mortgage notes payable. This interest subsidy has been recognized on an as received basis. The interest subsidy recognized for the year ended December 31, 2016 was $28,166. NOTE 5 - COMMITTMENTS In June 2015, the Project entered into a five (5) year management agreement with a property manager which may be renewed automatically in one (1) year increments subject to certain terms and conditions. The agreement requires the payment of a management fee in an amount set by USDA-RD each year ($63.00 per occupied unit per month for the year ended December 31, 2016). Total management fees charged by the management agent in 2016 was $19,

16 FEDERAL SINGLE AUDIT REPORTS

17 FEDERAL INTERNAL CONTROL AND COMPLIANCE REPORTS

18

19 COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the Project 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. ACADIA HOUSING, INC. D/B/A NUTMEG PARK APARTMENTS RESPONSE TO FINDINGS Acadia Housing, Inc. d/b/a Nutmeg Park Apartments response to the finding identified in our audit is described in the accompanying schedule of federal findings and questioned costs. Acadia Housing, Inc. d/b/a Nutmeg Park Apartments response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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 the Project 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 Project s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Hoyt, Filippetti & Malaghan, LLC Groton, Connecticut March 18,

20

21 Opinion on the Major Federal Program In our opinion, the Project complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended December 31, REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the Project is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Project s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Project s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE We have audited the financial statements of the Project as of and for the year ended December 31, 2016, and have issued our report thereon dated March 18, 2017, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance 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 schedule of expenditure of federal awards is fairly stated in all material respects in relation to the financial statements as a whole. -15-

22 The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Hoyt, Filippetti & Malaghan, LLC Groton, Connecticut March 18,

23 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2016 Grantor; Program Title; Description Contract Number Federal CFDA Number Expenditures U.S. DEPARTMENT OF AGRICULTURE Direct: Rural Rental Housing Loans $ 1,850,264 * Rural Rental Interest Subsidy ,166 Rural Rental Assistance Payments ,777 Total $ 1,980,207 * Represents balance of loans at December 31, (Beginning 2016 balance was $1,865,548.) The accompanying note is an integral part of this schedule

25 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS DECEMBER 31, 2016 NOTE A - ACCOUNTING BASIS BASIC FINANCIAL STATEMENTS The accounting policies of Acadia Housing, Inc. d/b/a Nutmeg Park Apartments conform to accounting principles generally accepted in the United States of America as applicable to nonprofit organizations. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS The accompanying schedule of expenditures of federal awards has been prepared on the accrual basis consistent with the preparation of the basic financial statements. Information included in the schedule of expenditures of federal awards is presented in accordance with the requirements Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). For cost reimbursement awards, revenues are recognized to the extent of expenditures. Expenditures have been recognized to the extent the related obligation was incurred within the applicable grant period and liquidated within 90 days after the end of the grant period. For performance-based awards, revenues are recognized to the extent of performance achieved during the grant period. Acadia Housing, Inc. d/b/a Nutmeg Park Apartments has not elected to use the 10% de Minimis indirect cost rate. The accompanying schedule of expenditures of federal awards includes the December 31, 2016 ending U.S. Department of Agriculture loan balances of $1,850,

26 SCHEDULE OF FEDERAL FINDINGS AND QUESTIONED COSTS

27 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS SCHEDULE OF FEDERAL FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2016 SECTION I SUMMARY OF AUDITORS RESULTS FINANCIAL STATEMENTS Type of auditors report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? Yes No None Significant deficiency(ies) identified? Yes reported Noncompliance material to financial statements noted? Yes No FEDERAL AWARDS Internal control over major programs: Material weakness(es) identified? Yes No Significant deficiency(ies) identified? Yes None reported Type of auditors report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with the Uniform Guidance? Yes No Identification of major programs: CFDA Number Name of Federal Program Rural Rental Housing Loans $1,850,264 Auditee qualified as low-risk auditee? Yes No Dollar threshold used to distinguish between Type A and Type B program: $750,

28 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS SCHEDULE OF FEDERAL FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2016 SECTION II FINANCIAL STATEMENT FINDINGS MATERIAL WEAKNESS SEGREGATION OF DUTIES Criteria: Effective internal control requires a sufficient number of individuals within the accounting functions to segregate the responsibilities for receipts, payments, recording of transactions, maintenance of records, and performing account reconciliations. Condition: During our risk assessment procedures in connection with the planning of the audit, we noted that there were no segregation of duties among the accounting functions. Effect: Transactions could be mishandled. Cause: There is only one individual tasked with accounting functions. Recommendation: The Project should consider allocating the accounting functions among more than one individual. Views of Responsible Officials: SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No findings are reported -20-

29 ACADIA HOUSING, INC. d/b/a NUTMEG PARK APARTMENTS SUMMARY OF PRIOR YEAR AUDIT FINDINGS FOR THE YEAR ENDED DECEMBER 31, 2016 PRIOR YEAR AUDIT FINDINGS RESOLVED There were no prior year audit findings. -21-

30 SUPPLEMENTAL DATA REQUIRED BY USDA-RURAL DEVELOPMENT

31 Form RD (02-05) Position 3 Multi-Family Housing Borrower Balance Sheet PART1-BALANCE SHEET FORM APPROVED OMBDNO Project Name: Nutmeg Park Apartments Borrower Name: Borrowed ID and Project Number: Acadia Housing, Inc Current Year Prior Year Comments Beginning Dates> ( ) ( ) Assets Ending Dates> ( ) ( ) Current Assets 1. GENERAL OPERATING ACCOUNT 2. R.E. TAX & INSURANCE ACCOUNT 3. RESERVE ACCOUNT 4. SECURITY DEPOSIT ACCOUNT 5. OTHER CASH (identify) 6. OTHER (identify) 7. TOTAL ACCOUNTS RECEIVABLE ( Attach list) ACCTSRCVBL 0-30 DAYS $ ACCTSRCVBL DAYS $ 5,212 ACCTSRCVBL DAYS $ ACCTSRCVBL OVER 90 DAYS $ 8. LESS: ALLOWANCE FOR DOUBTFUL ACCOUNTS. 9. INVENTORIES (supplies) 10. PREPAYMENTS TOTAL CURRENT ASSETS (Add 1thru 11) 28,334 34,964 21,522 7,673 32,684 43,679 16,078 14, ,212 3, , ,297 Fixed Assets 13. LAND 14. BUILDINGS 15. LESS: ACCUMULATED DEPRECIATION 16. FURNITURE & EQUIPMENT 17. LESS: ACCUMULATED DEPRECIATION TOTAL FIXED ASSETS (Add 13 thru 18) OTHER ASSETS TOTAL ASSETS (Add 12, 19, and 20) LIABILITIES AND OWNERS EQUITY CURRENT LIABILITIES 22. TOTAL ACCOUNTS PAYABLE (Attach List) ACCTS PAYABLE 0-30 DAYS $ ACCTS PAYABLE DAYS $ ACCTS PAYABLE DAYS $ ACCTS PAYABLE OVER 90 DAYS $ 23. NOTES PAYABLE (Attach list) 24. SECURITY DEPOSITS 25. TOTAL CURRENT LIABILITIES (Add 22 thru 24) 594, ,000 1,675,293 1,675,293 (55,843) (13,961) 59,864 50,000 (14,415) (3,333) 2,258,899 2,301, ,362,729 2,406,296 8,114 6, ,293 13,034 23,407 19,478 See Independent Auditors' Report - 22-

32

33 USDA Form RD Form Approved OMB NO PROJECT NAME BORROWER NAME BORROWER ID AND PROJECT NO Nutmeg Park Apartments Acadia Housing, Inc Loan/Transfer Amount Note Rate Payment IC Payment $ Reporting Period Budget Type Project Rental Type Profit Type The following utilities X Annual Quarterly Monthly Initial X Regular Report Rent Change X Family X Elderly Full Profit Limited Profit X Non-Profit are master metered Electricity Water I hereby request units of RA. Current Member of RA units _18. SMR Congregate Sewer Borrower Accounting Method Other Servicing Group Home Other Cash X Accrual PART I - CASH FLOW STATEMENT CURRENT PROPOSED BUDGET ACTUAL BUDGET COMMENTS or (YTD) Beginning Dates> 1/1/2016 1/1/2016 ( / / ) ( - - ) Ending Dates> 12/31/ /31/2016 ( / / ) ( - - ) OPERATIONAL CASH SOURCES 1. RENTAL INCOME 199, , RHS RENTAL ASSISTANCE RECEIVED 3. APPLICATION FEES RECEIVED 4. LAUNDRY AND VENDING 2,100 4, INTEREST INCOME TENANT CHARGES 7. OTHER- PROJECT SOURCES 8. LESS (Vacancy and Contingency Allowance) (9,990) (6,730) 9. LESS (Agency Approved Incentive Allowance) 10. SUB-TOTAL [(1 thru 7) -(8 &9)] 191, ,163 NON-OPERATIONAL CASH SOURCE 11. CASH-NON PROJECT 12. AUTHORIZED LOAN (Non-RHS) 13. TRANSFER FROM RESERVE 27,380 20, SUB-TOTAL (11 THRU 13) 27,380 20, TOTAL CASH SOURCES (10+14) 219, ,158 OPERATIONAL CASH USES 16. TOTAL O&M EXPENSES(From Part II) 133, , RHS DEBT PAYMENT 47,523 47, RHS PAYMENT (overage) 19. RHS PAYMENT (Late Fee) 20. REDUCTIONS IN PRIOR YEARS PAYABLES 21. TENANT UTILITY PAYMENTS 22. TRANSFER TO RESERVE 10,000 10, RETURN TO OWNER SUB-TOTAL (16 THRU 23) 191, ,068 NON-OPERATIONAL CASH USES 25. AUTHORIZED DEBT PAYMENT (Non-RHS) 26. CAPITAL BUDGET (III 4-6) 27,380 21, MISCELLANEOUS 28. SUB-TOTAL (25 THRU 27) 27,380 21,026 USDA P & I 29. TOTAL CASH USES (24+28) 218, , NET CASH (DEFICIT) (15-29) ,064 CASH BALANCE 31. BEGINNING CASH BALANCE 30,000 42, ACCRUAL TO CASH ADJUSTMENT (3,845) 33. ENDING CASH BALANCE ( ) 30,718 49,856 Checking and Insurance Escrow Statement of Cash Flows Checking and Insurance Escrow See Independent Auditors' Report - 24-

34 PART II - OPERATING AND MAINTENANCE EXPENSE SCHEDULE CURRENT PROPOSED BUDGET ACTUAL BUDGET 1. MAINTENANCE AND REPAIRS PAYROLL 3,360 3, MAINTENANCE AND REPAIR SUPPLIES MAINTENANCE AND CONTRACT 9,500 8, PAINTING AND DECORATING 2,500 2, SNOW REMOVAL 7,500 9, ELEVATORS MAINTENANCE/CONTRACT 7. GROUNDS 4,800 4, SERVICE CPTL BGT (PART V OPERATING) 5,150 2, OTHER OPERATING EXPENSE (itemize) 11. SUB-TOTAL MAINT. & OPERATING (1 thru 10) 33,610 31,749 COMMENTS or (YTD) 12. ELECTRICITY 3,500 5, WATER If master metered check box 7,500 5, SEWER on front 6,800 4, FUEL (oil/coal/gas) 16. GARBAGE AND TRASH REMOVAL 5,200 4, OTHER UTILITIES 18. SUB-TOTAL UTILITIES (12 thru 17) 23,000 20, SITE MANAGEMENT PAYROLL 8,750 8, MANAGEMENT FEE 20,412 19, PROJECT AUDITING EXPENSE 5,000 5, PROJECT BOOKKEEPING/ACCOUNTING 23. LEGAL EXPENSE ADVERTISING TELEPHONE AND ANSWERING SERVICE OFFICE SUPPLIES OFFICE FURNITURE & EQUIPMENT 28. TRAINING EXPENSE 29. HEALTH INS. & OTHER EMP. BENEFITS 30. PAYROLL TAX 31. WORKMAN'S COMP. 32. OTHER ADMINISTRATIVE EXPENSE SUB-TOTAL ADMINISTRATIVE (19 thru 32) 35,609 35,277 Postage and Credit Reports 34. REAL ESTATE TAXES 28,500 27, SPECIAL ASSESSMENTS 36. OTHER TAXES, LICENSES & PERMITS 37. PROPERTY & LIABILITY INSURANCE 12,950 12, FIDELITY COVERAGE INSURANCE 39. OTHER INSURANCE 40. SUB-TOTAL TAXES AND INSURANCE (34 thru 39) 41,450 40, TOTAL O&M EXPENSES ( ) 133, ,545 See Independent Auditors' Report - 25-

35 Form RD Page 2 PART III - ACCOUNT BUDGETING/STATUS CURRENT BUDGET ACTUAL Reserve Account 1. BEGINNING BALANCE 45,000 43, TRANSFER TO RESERVE 10,000 10,000 TRANSFER FROM RESERVE 3. OPERATING DEFICIT 4. CAPITAL BUDGET (Part V reserve) 27,380 21, EQUIPMENT REPAIR & REPLACEMENTS OTHER NON-OPERATING EXPENSES 7. TOTAL (3 THRU 6) 27,380 20, Ending Balance [(1+2)-7] 27,620 32,684 GENERAL OPERATING ACCOUNT: * BEGINNING BALANCE 34,964 ENDING BALANCE 28,334 REAL ESTATE TAX AND INSURANCE ESCROW ACCOUNT:* BEGINNING BALANCE 7,673 ENDING BALANCE 21,522 TENANT SECURITY DEPOSIT ACCOUNT: * BEGINNING BALANCE 14,206 ENDING BALANCE 16,078 *Complete upon submission of actual expenses. NUMBER OF APPLICANTS ON THE WAITING LIST RESERVE ACCT. REQ. BALANCE NUMBER OF APPLICANTS NEEDING RA AMOUNT AHEAD/BEHIND PROPOSED BUDGET COMMENTS or (YTD) Capital Budget Exp not transferred See Independent Auditors' Report - 26-

36 PART IV - RENT SCHEDULE A. CURRENT APPROVED RENTS POTENTIAL INCOME FROM UNIT DESCRIPTION RENTAL RATES EACH RATE UNIT NOTE NOTE UTILITY BR SIZE TYPE NUMBER BASIC RATE HUD BASIC RATE HUD ALLOWANCE (1) 1 BR N , , (2) 2 BR HC ,280 9, (1) 1 BR HC ,960 8, (2) 2 BR N ,240 76, CURRENT RENT TOTALS 199, ,172 0 BASIC NOTE HUD B. PROPOSED CHANGE TO RENTS/UTILITY ALLOWANCE POTENTIAL INCOME FROM UNIT DESCRIPTION RENTAL RATES EACH RATE UNIT NOTE NOTE BR SIZE TYPE NUMBER BASIC RATE HUD BASIC RATE HUD CURRENT RENT TOTALS BASIC NOTE HUD EFFECTIVE DATE OF RENT/UTILITY ALLOWANCE CHANGE UTILITY ALLOWANCE DETAIL CURRENT PROPOSED MONTHLY DOLLAR ALLOWANCES UNIT BR SIZE TYPE NUMBER ELECTRIC GAS WATER SEWER TRASH OTHER TOTAL (1) 1 BR N (2) 2 BR HC (1) 1 BR HC (2) 2 BR N See Independent Auditors' Report -27-

37 PART V - ANNUAL CAPITAL BUDGET PROPOSED/ACTUAL PROPOSED/ACTUAL PROPOSED/ACTUAL FROM RESERVE FROM OPERATING NUMBER OF UNITS TOTAL Appliances: Proposed Actual Proposed Actual Proposed Actual Proposed Actual Range Refrigerator 1, , ,100 1,377 Range Hood Washers & Dryers Carpet & Vinyl: 1 Bed Room 1,500 1,086 1, ,000 1,086 2 Bed Room 2,000 1,929 2,000 1, ,000 3,488 3 Bed Room Other Cabinets: Kitchens 7,000 5, ,000 5,869 Bathroom 1, , Doors: Exterior - 1, ,090 Interior Window Coverings: Detail Heating & Air Conditioning Heating Air Conditioning Plumbing: Water Heater 2,025 1, ,025 1,520 Bath Sinks Kitchen Sinks Faucets Toilets 900 1, ,268 Other: Septic Work Major Electrical: Systems Int. Lighting Ext. Lighting Structures: Windows Screens Walls - 2, ,156 Roofing 7, ,000 - Siding Exterior Painting Other 2,500 2, ,500 2,146 Paving: Asphalt Concrete Seal & Stripe Other Landscape & Grounds: Landscaping Lawn Equipment Fencing Recreational Area Signs Other Accessibility Features: Accessibility Features-Detail Accessibility Features-Other Reasonable Accomodations Automation Equipment: Site Managemnt Common Area Other: Capital Needs Assessment BedBug Treatment Total Capital Expense: 27,380 21,026 5,150 2, ,530 23,971 See Independent Auditors' Report -28-

38

39

40 HB Attachment 4-C Page 1 of 2 Attachment 4-C Performance Standards Borrower Self-Certification Letter Date USDA Rural Development Office Address Address In accordance with the criteria specified in Section 5; Paragraph 4.32 C. of the USDA Rural Development Handbook (HB ) for the year ended the borrower must self-certify that is in compliance with the nine performance standards. The following is a summary of our compliance with the performance standards. 1. The required accounts are (are not) properly maintained and tracked separately. The accounts we maintain are marked below: Operating Account(s) Security Deposit Account Tax & Insurance Account Reserve Account Other Accounts: 2. The payments from operating account(s) are (are not) disclosed and accurately represented. 3. The reserve account(s): a. is on (not on) schedule with the Agency required minimum funding requirements; b. is (is not) maintained in a supervised bank account that requires the Agency s countersignature on all withdrawals; c. is on (not on) schedule with contributions to the reserve account for the current year with the Agency required minimum funding; and d. has no (has) encumbrances on the reserve funds. 4. The tenant security deposits accounts are (are not) fully funded and are (are not) maintained in separate accounts. 5. The payment of owner return was: paid in the amount of $ for 20XX fiscal year and was (was not) in accordancewith the Agency s requirements OR not paid during the reporting year OR not allowable due to our nonprofit status OR ( ) SPECIAL PN Added ( ) PN

41

42

43