Shoals Presbyterian Apartments, Inc. HUD Project Number Financial Statements and Additional Information. June 30, 2016

Transcription

1 Shoals Presbyterian Apartments, Inc Financial Statements and Additional Information

2 Shoals Presbyterian Apartments, Inc TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT 1 STATEMENT OF FINANCIAL POSITION 3 STATEMENT OF ACTIVITIES 4 STATEMENT OF CASH FLOWS 5 NOTES TO FINANCIAL STATEMENTS 6 ADDITIONAL INFORMATION 9 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 21 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE 23 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 25 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 CERTIFICATIONS 27

3 BROWDER & ASSOCIATES, PC Certified Public Accountants and Business Consultants To Shoals Presbyterian Apartments, Inc INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of Shoals Presbyterian Apartments, Inc, HUD Project No , which comprise the statement of financial position as of, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 audit We conducted our 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 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 the entity 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 entity s internal control Accordingly, we express no such opinion An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Shoals Presbyterian Apartments, Inc as of, 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 1 One Independence Plaza Suite 820 Homewood, Alabama fax

4 Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole The accompanying additional information shown on pages 9 to 20 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the US 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 Title 2 US 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 a report dated August 16, 2016 on our consideration of Shoals Presbyterian 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 the 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 Shoals Presbyterian Apartments, Inc s internal control over financial reporting and compliance Homewood, Alabama Federal Employer Identification Number: Date: August 16, Audit Principal: EO Browder, Jr 2 One Independence Plaza Suite 820 Homewood, Alabama fax

5 Shoals Presbyterian Apartments, Inc STATEMENT OF FINANCIAL POSITION Assets Property and equipment, net $ 1,702,744 Cash and cash equivalents 54,289 Restricted cash and funded reserves Tenant security deposits 28,271 Escrow deposits 41,053 Replacement reserve 433,369 Residual receipts 40,735 Prepaid expenses 31,233 Deferred financing costs, net 102,361 Other assets 10,000 $ 2,444,055 Liabilities Mortgage note payable $ 4,479,656 Prepaid rent 109 Accounts payable and accrued expenses 30,678 Tenant security deposit liability 28,271 Accrued interest payable 23,145 Other liabilities 15,735 4,577,594 Net Assets - Unrestricted (2,133,539) $ 2,444,055 See Accompanying Report and Notes 3

6 Shoals Presbyterian Apartments, Inc STATEMENT OF ACTIVITIES For the year ended Revenue Rent $ 1,079,310 Financial 175 Other 10,417 1,089,902 Expenses Administrative expenses 172,051 Utilities 146,442 Operating and maintenance 242,104 Taxes and insurance 53,050 Interest expense 279,380 Other financial expenses 36,037 Depreciation and amortization 170,748 Elderly services 46,223 1,146,035 Change in Unrestricted Net Assets (56,133) Net Assets - Unrestricted - Beginning of Year (2,077,406) Net Assets - Unrestricted - End of Year $ (2,133,539) See Accompanying Report and Notes 4

7 Shoals Presbyterian Apartments, Inc STATEMENT OF CASH FLOWS For the year ended Cash Flows from Operating Activities Decrease in total net assets $ (56,133) Adjustments to Reconcile Decrease in Total Net Assets to Net Cash Provided by Operating Activities Depreciation expense 167,037 Amortization expense 3,711 Increase or decrease in: Prepaid expenses 706 Tenant security deposits 1,098 Accounts payable and accrued expenses 23,940 Accrued interest payable (354) Tenant security deposits held in trust (1,098) Prepaid revenue (191) Net Cash Provided by Operating Activities 138,716 Cash Flows from Investing Activities Net deposits to the mortgage escrow account (5,747) Deposits to the reserve for replacement account (46,282) Withdrawals from the reserve for replacement account 7,800 Deposits to the residual receipts account (13) Withdrawals from the residual receipts account 3 Purchase of fixed assets (12,512) Net Cash Used in Investing Activities (56,751) Cash Flows from Financing Activities Principal payments on mortgages, loans or notes payable (58,877) Net Cash Used in Financing Activities (58,877) Net increase in cash 23,088 Cash, Beginning of Period 31,201 Cash, End of Period $ 54,289 Supplemental Disclosures: Cash Paid for Interest $ 279,734 See Accompanying Report and Notes 5

8 Shoals Presbyterian Apartments, Inc NOTES TO FINANCIAL STATEMENTS NOTE 1 ORGANIZATION Montreat Apartments (the Project) is a 100 unit apartment project that provides housing for the elderly in Florence, Alabama Legal title to the Project is held by Shoals Presbyterian Apartments, Inc, a nonprofit corporation The Project operates under Section 223(f) of the National Housing Act and is regulated by the Department of Housing and Urban Development (HUD) with respect to rental charges and operating methods The Section 223(f) loan is a major program The Project is subject to a Section 8 Housing Assistance Payments agreement with HUD, which provides for rental subsidy to the Project on behalf of qualified tenants occupying 100 units During the year ended, rental revenue from HUD totaled $ 760,779 which represented 70% of total rental revenue Section 8 is considered a major program The Project is subject to a Use Agreement with HUD which restricts the use of the property to rental housing for low income elderly or disabled persons through March 1, 2023 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America Cash Equivalents For the statement of cash flows, all unrestricted investment instruments with original maturities of three months or less are considered cash equivalents The Project has no cash equivalents at Rental Property Rental property is carried at cost Maintenance and repairs are charged to expense as incurred and improvements that significantly increase the useful life of the asset are capitalized Depreciation is computed using the straight-line method over the estimated useful lives as follows: Building and Improvements Furniture and Equipment years 5-10 years Rental property consists of: Land $ 225,000 Buildings 5,560,767 Building Equipment (Portable) 5,309 Furniture for Project/Tenant Use 37,485 Furnishings 59,381 Motor Vehicles 25,669 Total Fixed Assets 5,913,611 Accumulated Depreciation (4,210,867) Net Fixed Assets $ 1,702,744 Rental Income Rental income is recognized as rentals become due Rental payments received in advance are deferred until earned All leases between the Project and the tenants of the property are operating leases Under the Regulatory Agreement, the Project may not increase rents charged to tenants without HUD approval 6

9 Shoals Presbyterian Apartments, Inc NOTES TO FINANCIAL STATEMENTS - continued NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Income Taxes The Corporation has elected tax exempt status under Section 501(c)(3) of the Internal Revenue Code; therefore, no provision or liability for income taxes has been included in the financial statements The Corporation is required to file and does file returns with the IRS and other taxing authorities The Corporation did not have any unrelated business income for the year ended and has no other tax positions which must be considered for disclosure With few exceptions, the entity s federal and state income tax returns remain open to examination by tax authorities for three years after they were filed Amortization Loan Costs are amortized using the straight-line method over the term of the mortgage loan Accumulated amortization totaled $ 27,523 at Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain 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 revenue and expenses during the reporting period Actual amounts could differ from those estimates Subsequent Events Subsequent events have been evaluated through August 16, 2016, which is the date the financial statements were available to be issued NOTE 3 RESTRICTED DEPOSITS AND FUNDED RESERVES Under the terms of the mortgage note and the Regulatory Agreement with HUD, the Project is required to maintain the following restricted deposits: Tenant security deposits Escrow for the payment of annual insurance premiums Replacement reserve (currently funded by monthly deposits of $3,845 ) for the replacement, improvement, or major repair of the Project s property and equipment Residual receipts Notice H , issued by HUD in August 2012, sets forth the policy and procedures for HUD s use of Residual Receipts to offset housing assistance payment under Section 8 HAP contracts The policy states that Residual Receipts account balances in excess of $250 per unit must be applied on a monthly basis to offset Section 8 HAP payments and are therefore not considered to be assets of the Project At June 30, 2016 excess Residual Receipts funds total $ 15,735 and are available to offset future HAP payments The excess funds are included in other liabilities on the balance sheet The $ 15,735 loss due to recapture of residual receipts is recorded in other financial expenses on the income statement 7

10 NOTE 4 Shoals Presbyterian Apartments, Inc NOTES TO FINANCIAL STATEMENTS - continued MORTGAGE NOTE PAYABLE The 620 % mortgage note in the original amount of $4,834,400 is insured by HUD as provided by Section 223(f) of the National Housing Act and is collateralized by virtually all of the assets of the corporation Principal and interest are payable by the Project in equal monthly installments of $ 28,218 through March 2044 Annual principal maturities of the mortgage payable over the next five years and in the aggregate are as follows: 2017 $ 62, , , , ,210 Thereafter 4,123,908 TOTAL $ 4,479,656 NOTE 5 MANAGEMENT FEE The Project is managed by SPM, LLC pursuant to an agreement which provides for a management fee of 503% of monthly collections, as defined The current management agreement originated November 1, 2013 and expires October 31, 2018 NOTE 6 DISTRIBUTIONS TO OFFICERS AND DIRECTORS The Regulatory Agreement with HUD provides, among other things, that the Project will not make distributions of assets or income because Shoals Presbyterian Apartments, Inc is a nonprofit organization All surplus cash, as defined by HUD, must be deposited into a residual receipts account Use of the residual receipts account is contingent upon HUD s prior written approval As of, there was $357 surplus cash NOTE 7 UNRESTRICTED NET ASSETS None of the Project s net assets are subject to donor-imposed restrictions Accordingly, all net assets are accounted for as unrestricted net assets NOTE 8 FUNCTIONAL ALLOCATION OF EXPENSES Expenditures incurred in connection with project operations and expenditures made for corporate (mortgagor entity) purposes have been summarized on a functional basis in the statement of activities NOTE 9 CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The entity s sole asset is a 100 unit apartment complex Florence, Alabama Future operations could be affected by changes in economic or other conditions in that geographical area or by changes in federal low-income housing subsidies or the demand for such housing In addition, the entity operates in a heavily regulated environment The operations of the Project 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, to comply with a change 8

11 Shoals Presbyterian Apartments, Inc INDEX TO ADDITIONAL INFORMATION REQUIRED BY HUD Balance Sheet Data 10 Profit and Loss Data 12 Equity Data 14 Statement of Cash Flow Data 15 Schedule of Reserve for Replacements 17 Schedule of Residual Receipts 17 Computation of Surplus Cash 18 Schedule of Changes in Fixed Assets 19 Schedule of Miscellaneous Details 20 9

12 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION Balance Sheet Data ASSETS CURRENT ASSETS 1120 Cash - Operations $ 54, Miscellaneous Prepaid Expenses 31, T Total Current Assets 85, Tenant/Patient Deposits Held in Trust 28,271 RESTRICTED DEPOSITS 1310 Escrow Deposits 41, Replacement Reserve 433, Residual Receipts Reserve 40, T Total Deposits 515,157 PROPERTY AND EQUIPMENT 1410 Land 225, Buildings 5,560, Building Equipment (Portable) 5, Furniture for Project/Tenant Use 37, Furnishings 59, Motor Vehicles 25, T Total Fixed Assets 5,913, Accumulated Depreciation 4,210, N Net Fixed Assets 1,702, Deferred Financing Costs 102, Miscellaneous Other Assets 10, T Total Other Assets 112, T TOTAL ASSETS $ 2,444,055 10

13 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Balance Sheet Data - continued LIABILITIES AND NET ASSETS CURRENT LIABILTIES 2110 Accounts Payable - Operations $ 27, Accrued Wages Payable 3, Accrued Payroll Taxes Payable Accrued Interest Payable - First Mortgage (or Bonds) 23, Mortgage (or Bonds) Payable - First Mortgage (Bonds) (Short Term) 62, Miscellaneous Current Liabilities 15, Prepaid Revenue T Total Current Liabilities 132, Tenant/Patient Deposits Held In Trust (Contra) 28,271 LONG-TERM LIABILITIES 2320 Mortgage (or Bonds) Payable - First Mortgage (or Bonds) 4,417, T Total Long Term Liabilities 4,417, T Total Liabilities 4,577,594 NET ASSETS 3131 Unrestricted Net Assets (2,133,539) 3130 Total Net Assets (2,133,539) 2033T TOTAL LIABILITIES AND NET ASSETS $ 2,444,055 11

14 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Profit and Loss Data REVENUE 5120 Rent Revenue - Gross Potential $ 342, Tenant Assistance Payments 754, Special Claims Revenue 6, T Total Rent Revenue 1,103,401 Vacancies 5220 Apartments 24, T Total Vacancies 24, N Net Rental Revenue (Rent Revenue Less Vacancies) 1,079,310 Financial Revenue 5410 Financial Revenue - Project Operations Revenue from Investments - Residual Receipts Revenue from Investments - Replacement Reserve T Total Financial Revenue 175 Other Revenue 5910 Laundry and Vending Revenue 9, Tenant Charges Miscellaneous Revenue T Total Other Revenue 10, T TOTAL REVENUE 1,089,902 EXPENSES Administrative Expenses 6203 Conventions and Meetings Advertising and Marketing Other Renting Expenses Office Salaries 39, Office Expenses 21, Management Fee 54, Manager or Superintendent Salaries 39, Legal Expense - Project Audit Expense 8, Bookkeeping Fees/Accounting Services 4, Miscellaneous Administrative Expenses 1, T Total Administrative Expenses 172,051 Utilities Expenses 6450 Electricity 93, Water 8, Gas 31, Sewer 12, T Total Utilities Expense 146,442 12

15 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Profit and Loss Data - continued Operating & Maintenance Expenses 6510 Payroll 53, Supplies 33, Contracts 99, Garbage and Trash Removal 19, Security Payroll/Contract 11, Heating/Cooling Repairs and Maintenance 23, Vehicle and Maintenance Equipment Operation and Repairs 1, T Total Operating and Maintenance Expenses 242,104 Taxes & Insurance 6711 Payroll Taxes (Project's Share) 11, Property & Liability Insurance (Hazard) 22, Fidelity Bond Insurance Workmen's Compensation 5, Health Insurance and Other Employee Benefits 9, Miscellaneous Taxes, Licenses, Permits and Insurance 4, T Total Taxes and Insurance 53,050 Financial Expenses 6820 Interest on Mortgage (or Bonds) Payable 279, Mortgage Insurance Premium/ Service Charge 20, Miscellaneous Financial Expenses 15, T Total Financial Expenses 315,417 Elderly Care Expenses 6990 Other Service Expenses 46, Total Elderly Care Expenses 46,223 Operating Results 6000T Total Cost of Operations before Depreciation 975, T Profit (Loss) before Depreciation 114, Depreciation Expense 167, Amortization Expense 3, N Operating Profit or (Loss) $ (56,133) 3247 Change in Unrestricted Net Assets from Operations (56,133) 3250 Change in Total Net Assets from Operations $ (56,133) Part II S Total mortgage principal payments required during the year $ 58,877 S Total of 12 monthly deposits during the year into the replacement reserve account, as required by the regulatory agreement $ 46,140 S Replacement reserve or residual receipts releases, which are included as expense items on profit and loss statement $ - S Project improvement reserve releases under the flexible subsidy program that are included as expense items on the profit and loss statement $ - 13

16 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Equity Data S Previous Year Unrestricted Net Assets $ (2,077,406) 3247 Change in Unrestricted Net Assets from Operations (56,133) 3131 Unrestricted Net Assets $ (2,133,539) S Previous Year Total Net Assets $ (2,077,406) 3250 Change in Total Net Assets from Operations (56,133) 3130 Total Net Assets $ (2,133,539) 14

17 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Statement of Cash Flow Data CASH FLOWS FROM OPERATING ACTIVITIES S Rental Receipts $ 1,079,119 S Interest Receipts 175 S Other Operating Receipts 10,417 S Total Receipts 1,089,711 S Administrative (76,228) S Management Fee (54,468) S Utilities (144,853) S Salaries and Wages (95,997) S Operating and Maintenance (180,620) S Property Insurance (21,753) S Miscellaneous Taxes and Insurance (31,042) S Other Operating Expenses (46,223) S Interest on First Mortgage (279,734) S Mortgage Insurance Premium (MIP) (20,077) S Total Disbursements (950,995) S Net Cash Provided by (Used in) Operating Activities 138,716 CASH FLOWS FROM INVESTING ACTIVITIES S Net Deposits to the Mortgage Escrow account (5,747) S Net Deposits to the Reserve for Replacement account (38,482) S Net Deposits to the Residual Receipts account (10) S Net Purchase of Fixed Assets (12,512) S Net Cash Provided by (Used in) Investing Activities (56,751) CASH FLOWS FROM FINANCING ACTIVITIES S Principal Payments - First Mortgage (or Bonds) (58,877) S Net Cash Provided by (Used in) Financing Activities (58,877) S NET INCREASE (DECREASE) IN CASH 23,088 S Beginning of Period Cash 31,201 S1200T END OF PERIOD CASH $ 54,289 15

18 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Statement of Cash Flow Data RECONCILIATION OF NET PROFIT (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES 3250 Change in Total Net Assets $ (56,133) Adjustments to Reconcile Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 6600 Depreciation Expenses 167, Amortization Expense 3,711 S Decrease (increase) in Prepaid Expenses 706 S Decrease (increase) in Tenant Security Deposits 1,098 S Increase (decrease) in Accounts Payable 11,348 S Increase (decrease) in Accrued Liabilities 12,592 S Increase (decrease) in Accrued Interest Payable (354) S Increase (decrease) in Tenant Security Deposits held in trust (1,098) S Increase (decrease) in Prepaid Revenue (191) S NET CASH PROVIDED BY OPERATING ACTIVITIES $ 138,716 16

19 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Schedule of Reserve for Replacements 1320P Balance at beginning of year $ 394, DT Total monthly deposits 46, ODT Other deposits INT Interest on Replacement Reserve Accounts WT Approved withdrawals 7, OWT Other withdrawals Balance at end of year $ 433, R Deposits Suspended or Waived Indicator No Other Replacement Reserve Withdrawals 1320OW-010 Description Service Charge 1320OW-020 Amount 36 Total $ 36 Schedule of Residual Receipts 1340P Balance at beginning of year $ 40, DT Total deposits 1340ODT Other deposits INT Interest on Residual Receipts Account WT Approved withdrawals 1340OWT Other withdrawals Balance at end of year $ 40,735 Other Residual Receipts Withdrawals 1320OW-010 Description Service Charge 1320OW-020 Amount 3 Total $ 3 17

20 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Computation of Surplus Cash S Cash $ 82,560 S Total Cash 82,560 S Accrued mortgage interest payable 23,145 S Accounts payable - 30 days 27,253 S Accrued expenses (not escrowed) 3, Prepaid revenue Tenant security deposits liability 28,271 S Total Current Obligations 82,203 S Surplus Cash (Deficiency) $ 357 S Deposit Due Residual Receipts $

21 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Schedule of Changes in Fixed Assets Beginning Balance Additions Deletions Ending Balance 1410 Land $ 225, $ 225, Buildings 5,548,255 12,512-5,560, Building Equipment (Portable) 5, , Furniture for Project/Tenant Use 37, , Furnishings 59, , Office Furniture and Equipment Maintenance Equipment Motor Vehicles 25, , Miscellaneous Fixed Assets Total Fixed Assets 5,901,099 12,512-5,913,611 Accumulated Depreciation 4,043, ,037-4,210,867 Net Fixed Assets $ 1,857,269 $ 1,702,744 Schedule of Fixed Asset Additions Account Description Amount Flooring - 1st Floor Common Area and Hall $ 12,512 $ 12,512 19

22 Shoals Presbyterian Apartments, Inc ADDITIONAL INFORMATION - CONTINUED Schedule of Miscellaneous Details Miscellaneous Other Assets Type of Asset Utility Deposits Amount 10,000 Total $ 10,000 Miscellaneous Current Liabilities Description Liability for Residual Receipts Funds Available for Recapture Amount 15,735 Total $ 15,735 Miscellaneous Financial Expenses Description Loss Due to Recapture of Residual Receipts Amount 15,735 Total 15,735 $ 20

23 BROWDER & ASSOCIATES, PC Certified Public Accountants and Business Consultants 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 Shoals Presbyterian Apartments, Inc We have audited, 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, the financial statements of Shoals Presbyterian Apartments, Inc, which comprise the statement of financial position as of, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated August 16, 2016 Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Shoals Presbyterian 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 Shoals Presbyterian Apartments, Inc s internal control Accordingly, we do not express an opinion on the effectiveness of Shoals Presbyterian 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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity 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 weakness 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 Compliance and Other Matters As part of obtaining reasonable assurance about whether Shoals Presbyterian 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 21 One Independence Plaza Suite 820 Homewood, Alabama fax

24 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 entity 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 entity s internal control and compliance Accordingly, this communication is not suitable for any other purpose Homewood, Alabama Federal Employer Identification Number: August 16, One Independence Plaza Suite 820 Homewood, Alabama fax

25 BROWDER & ASSOCIATES, PC Certified Public Accountants and Business Consultants INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE To the Board of Directors of Shoals Presbyterian Apartments, Inc Report on Compliance for Each Major Program We have audited Shoals Presbyterian 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 Shoals Presbyterian Apartments, Inc s major federal programs for the year ended June 30, 2016 Shoals Presbyterian Apartments, Inc 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 requirements of laws, regulations, contracts, and grants applicable to its federal programs Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Shoals Presbyterian 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 US 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 Shoals Presbyterian Apartments, Inc s compliance with those requirements and performing such other procedures as we consider 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 Shoals Presbyterian Apartments, Inc s compliance Opinion on Each Major Program In our opinion, Shoals Presbyterian 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 23 One Independence Plaza Suite 820 Homewood, Alabama fax

26 Report on Internal Control over Compliance Management of Shoals Presbyterian Apartments, Inc 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 Shoals Presbyterian Apartments, Inc 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 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 Shoals Presbyterian Apartments, Inc 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 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 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 Uniform Guidance Accordingly, this report is not suitable for any other purpose Homewood, Alabama Federal Employer Identification Number: August 16, One Independence Plaza Suite 820 Homewood, Alabama fax

27 Shoals Presbyterian Apartments, Inc SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended A SUMMARY OF AUDIT RESULTS 1 The auditor s report expresses an unmodified opinion on the financial statements of Shoals Presbyterian Apartments, Inc 2 No material weaknesses were identified during the audit of the financial statements 3 No instances of noncompliance material to the financial statements of Shoals Presbyterian Apartments, Inc were disclosed during the audit 4 No material weaknesses were identified during the audit of the major federal award programs 5 The auditor s report on compliance for the major federal award programs for Shoals Presbyterian Apartments, Inc expresses an unmodified opinion 6 Audit findings that are required to be reported in accordance with 2 CFR section (a) are reported in this Schedule 7 The programs tested as major programs included: Section 223(f)/207 Mortgage Insurance Section 8 New Construction 8 The threshold for distinguishing Types A and B programs was $750,000 9 Shoals Presbyterian Apartments, Inc qualified as a low risk auditee B FINDINGS FINANCIAL AUDIT NONE C FINDINGS AND QUESTIONED COSTS MAJOR FEDERAL AWARD PROGRAMS AUDIT NONE D PRIOR YEAR FINDINGS There were no audit findings for the period ended June 30,

28 Shoals Presbyterian Apartments, Inc SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended Federal Grantor/Pass-through Grantor/ Federal CFDA Federal Program Title Number Expenditures US Department of Housing and Urban Development Section 223(f)/207 Mortgage Insurance $ 4,538,533 Section 8 New Construction ,779 TOTAL $ $5,299,312 Shoals Presbyterian Apartments, Inc NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended NOTE A - Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of Shoals Presbyterian Apartments, Inc HUD Project No , and is presented on the accrual basis of accounting The information in this schedule is presented in accordance with the requirements of Title 2 US Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Because the Schedule presents only a selected portion of the operations of Shoals Presbyterian Apartments, Inc, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Shoals Presbyterian Apartments, Inc NOTE B Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting Such expenditures are recognized following the cost principles contained in Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement NOTE C US Department of Housing and Urban Development Loan Program Shoals Presbyterian Apartments, Inc has received a US Department of Housing an Urban Development direct loan under Section 223(f) of the National Housing Act The loan balance outstanding at the beginning of the year is included in the federal expenditures presented in the Schedule Shoals Presbyterian Apartments, Inc received no additional loans during the year The balance of the loan outstanding at was $ 4,479,656 26

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