OUR LADY OF GUADALUPE HUD PROJECT NO. 122-EH FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION June 30,2016 and 2015

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1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION June 30,2016 and 2015

2 TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT 1-2 FINANCIAL STATEMENTS Statements of Financial Position Statements of Activities Statements of Cash Flows Notes to Financial Statements SUPPLEMENTARY INFORMATION Supplementary Data Required by HUD Schedule of Expenditures of Federal Awards 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 Independent Auditors' Report on Compliance for Each Major HUD Program and on Internal Control Over Compliance Required by the Consolidated Audit Guide for Audits of HUD Programs Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by The Uniform Guidance Schedule of Findings and Questioned Costs Schedule of Prior Audit Findings and Questioned Costs Officers' Certification Management Agent's Certification

3 Forman Richter &Rubin An Accountancy Corporation Certified Public Accountants INDEPENDENT AUDITORS' REPORT To the Board of Directors Our Lady of Guadalupe Report on the Financial Statements We have audited the accompanying financial statements of Our Lady of Guadalupe (the Project), HUD Project No. 122-EH , which comprise the statements of financial position as of June 30, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits 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 ofthe 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 the 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 Our Lady of Guadalupe as of June 30, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 858 South Oak Park Rd. Suite 200. Covina, CA (626) Fax (626)

4 Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 14 to 21 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards shown on page 22, 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, 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 ofthe 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. The schedule of prior audit findings and questioned costs has not been subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards I n accordance with Government Auditing Standards, we have also issued our report dated September 23, 2016, on our consideration of Our Lady of Guadalupe's internal control over financial reporting and on our 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 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 Our Lady of Guadalupe's internal control over financial reporting and compliance. FORMAN RICHTER & RUBIN AN ACCOUNTANCY CORPORATION Covina, California September 23, 2016

5 STATEMENTS OF FINANCIAL POSITION June 30, 2016 and 2015 ASSETS 2016 CURRENT ASSETS Cash - operations $ 53,071 Accounts receivable - residents Grant receivable (Note 3) Prepaid expenses 8,165 Total Current Assets 61,236 TENANT DEPOSITS HELD IN TRUST 16,758 RESTRICTED DEPOSITS (Note 4) Replacement reserves 521,245 Escrow deposits - impounds 33,138 Escrow deposits - repairs 47,894 Total Restricted Deposits 602,277 PROPERTY AND EQUIPMENT (Notes 2 and 5) Land 2,286,128 Building 4,944,460 Improvements 344,116 Furniture and equipment 153,054 Total Property and Equipment 7,727,758 Less: accumulated depreciation 1,162,478 Net Property and Equipment 6,565,280 OTHER ASSETS Loan costs, less accumulated amortization of $5,733 in 2016 and $3,549 in 2015 (Note 2) 70,700 Total Assets $ 7,316, $ 40, ,417 7,101 59,641 17, ,364 33,221 47, ,439 2,286,128 4,944, , ,054 7,727, ,299 6,771,459 72,884 $ 7,494,647 The accompanying Notes to Financial Statements are an integral part of this statement -3-

6 STATEMENTS OF FINANCIAL POSITION June 30, 2016 and 2015 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable - operations $ Accrued interest Current portion of mortgage payable (Note 5) Accrued audit fees Prepaid revenue Total Current Liabilities TENANT SECURITY DEPOSITS LONG-TERM LlABIL TIES Mortgage note payable, less current portion (Note 5) Total Liabilities NET ASSETS Total Liabilities and Net Assets $ ,899 23,956 77,544 7, ,098 16,758 5,874,187 6,006,043 1,310,208 7,316, $ 12,862 24,253 73,895 8, ,010 17,224 5,951,731 6,087,965 1,406,682 $ 7,494,647 The accompanying Notes to Financial Statements are an integral part of this statement -4-

7 STATEMENTS OF ACTIVITIES Years Ended June 30,2016 and REVENUES Rent revenue - tenants Rental assistance payments Gross Potential Rent Revenue Vacancies - apartments Net Rent Revenue Revenue from investments - reserve for replacements Revenue from investments - miscellaneous Total Financial Revenue Laundry and vending revenue Damages and cleaning fees Service coordinator grant revenue (Note 3) Miscellaneous revenue Total Other Revenue Total Revenue EXPENSES Advertising Other renting expenses Office salaries Office expense Management fees Manager / superintendent salaries Manager rent-free unit Legal Audit Bookkeeping fees / accounting services Miscellaneous administrative Total Administrative Expenses Electricity Water Gas Sewer $ 252,421 $ 249, , , , ,790 {2,999} {5,554} 926, , , ,584 1,603 3,798 47, , ,960 1,019,439 2,595 3, ,684 19,842 4,481 5,551 37,072 36,388 39,079 36,521 27,292 26, ,374 7,700 8,000 6,390 5,858 18,826 16, , ,415 13,261 14,315 18,001 17,344 7,570 8,591 4,991 5,385 Total Utilities Expenses The accompanying Notes to Financial Statements are an integral part of this statement 43,823 45,635-5-

8 STATEMENTS OF ACTIVITIES (CONTINUED) Years Ended June 30, 2016 and 2015 Payroll $ Supplies Contracts Garbage and trash removal Miscellaneous operating and maintenance Total Operating and Maintenance Expenses Real estate taxes Payroll taxes Property and liability insurance Workmen's compensation Health insurance and other benefits Miscellaneous taxes, licenses and permits Total Taxes and Insurance Expenses Interest on mortgage payable (Note 5) Mortgage insurance premium Miscellaneous financial expense Total Financial Expenses Service coordinator expenses Total Cost of Operations Before Depreciation and Amortization Change in Net Assets Before Depreciation and Amortization Depreciation Amortization Change in Net Assets ,571 37,446 83,606 7,753 7, ,067 17,027 11,393 19,303 11,676 27, , ,119 26, ,489 44, , , ,179 2,184 (96,474) 2015 $ 70,411 10,202 47,548 7,744 4, ,250 15,788 16,464 19,103 17,209 18,869 1,670 89, ,611 30,443 1, ,164 78, , , ,700 2,184 (27,738) Net Assets at Beginning of Year 1,406,682 Net Assets at End of Year $ 1,310,208 1,434,420 $ 1,406,682 The accompanying Notes to Financial Statements are an integral part of this statement -6-

9 STATEMENTS OF CASH FLOWS Years Ended June 30, 2016 and CASH FLOWS FROM OPERATING ACTIVITIES Rental receipts Interest received Other receipts Total Receipts Ad m in istration Management fees Utilities Salaries Operating and maintenance Real estate taxes Property insurance Miscellaneous taxes and insurance Service coordinator fees Interest on mortgage Mortgage insurance premium Miscellaneous financial expense Total Disbursements Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Deposits from mortgage escrow reserves, net Deposits (to) the replacement reserves account, net Deposits (to) the other reserves account, net Deposits from restricted cash Purchase of property and equipment Net Cash (Used in) Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on mortgage note payable Net Cash (Used in) Financing Activities Net Increase in Cash $ 928,075 $ 909, ,768 97, ,263 1,007,077 67,974 79,115 37,072 36,388 43,045 45, , , , ,924 17,027 15,788 20,367 18,738 50,890 54,212 44,726 78, , ,894 26,768 30, ,11 871, , , , ,183 (28,881) (28,757) (40) (41) 126,213 {150,903} (28,838) (48,305) {73,895} {70,417} (73,895) (70,417) 12,835 4,883 Cash at Beginning of Year Cash at End of Year $ 40,236 35,353 53,071 $ 40,236 The accompanying Notes to Financial Statements are an integral part of this statement -7-

10 STATEMENTS OF CASH FLOWS (CONTINUED) Years Ended June 30, 2016 and CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation Amortization (Increase) decrease in assets: Tenant accounts receivable Grant receivable Prepaid expenses Cash restricted for tenant security deposits Increase (decrease) in liabilities: Accounts payable Accrued interest Tenant deposits held in trust Prepaid revenue Net Cash Provided by Operating Activities $ (96,474) 206,179 2, ,417 (1,064) 466 (8,263) (297) (466) ,568 $ (27,738) 204,700 2,184 (887) (11,417) 365 (752) (43,261) (283) 752 {58} $ 123,605 The accompanying Notes to Financial Statements are an integral part of this statement - 8-

11 NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2016 and ORGANIZATION Our Lady of Guadalupe (the Project) is a non-profit organization which was incorporated in November 10,2008. The Project is a 71-unit apartment complex for the elderly located in Fountain Valley, California. The Project operates under Section 223(f) HUD Insured Loan and is regulated by the U.S. Department of Housing and Urban Development (HUD) with respect to rental charges and operating methods. The Project's major program is its Section 223(f) Insured Loan. The Project's other major program is its Section 8 Housing Assistance Payments contract with HUD. This contract was also transferred upon purchase of property from its existing owners. A significant portion of the Project's rental revenue is received from HUD, which was $676,767 and $666,539 forthe years ended June 30, 2016 and 2015, respectively. Legal title to the Project is held by Our Lady of Guadalupe a nonprofit corporation. The accompanying financial statements are those of the Project and do not represent the financial statements of Our Lady of Guadalupe. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements are prepared on the accrual basis of accounting and in accordance with U.S. generally accepted accounting principles. Accounts Receivable and Bad Debts Accounts receivable are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review of the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. Investment in Real Estate Investment in real estate is carried at cost. Management does not believe that there are any current facts or circumstances that would indicate impairment of the rental property in accordance with U.S. generally accepted accounting principles. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Capitalization and Depreciation Depreciation of furniture and equipment is computed by the straight-line method over 5-7 years. The building is computed by the straight-line method over 40 years. Major additions, betterments and improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon disposal of depreciable property, the appropriate property accounts are reduced by the related costs and accumulated depreciation. The resulting gains and losses are reflected in the statements of activities. Rental Revenue Rental revenue is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Project and tenants of the property are operating leases. - 9-

12 NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2016 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes The Project is exempt from federal and state income taxes under Section 501 (c)(3) of the Internal Revenue Code and Section (d) of the California Revenue and Taxation Code, respectively. Accordingly, no provision for income taxes is included in the financial statements. In addition, the Project has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a) of the Code. The Project's federal and state income tax returns are subject to possible examination by the taxing authorities until the expiration of the related statutes of limitations on those tax returns. In general, the federal income tax returns have a three year statute of limitations, and the state income tax returns have a four year statute of limitations. The Project evaluates all significant tax positions. As of June 30, 2016 and 2015, the Project does not believe that it has taken any positions that would require the recording of any additional tax liability nor does it believe that there are any unrealized tax benefits that would either increase or decrease within the next year. It is the Project's policy to recognize any interest and penalties in the year incurred. There was no interest or penalties incurred in 2016 and Net Assets None of the Project's assets are subject to donor-imposed stipulations and may be expendable for any purpose in performing the primary objectives of the Project, and are accordingly accounted for as unrestricted net assets. Distributions The Project's regulatory agreement with HUD stipulates, among other things, that the Project will not make distributions of assets or income to any of its officers or directors. Cash and Cash Equivalents For the purposes of the statements of cash flows, the Project considers all highly liquid debt instruments with an initial maturity of three months or less to be cash equivalents. Use of Estimates Management uses estimates and assumptions in preparing financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Actual results could vary from the estimates that were utilized in preparing the financial statements. Fair Value Measurement In accordance with U.S. generally accepted accounting principles, valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs are internally derived, reflecting what the reporting entity believes to be market assumptions. U.S. generally accepted accounting principles classifies these inputs into the following hierarchy: - 10-

13 NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2016 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value Measurement (continued) Level One Inputs - Quoted prices for identical instruments in active market. Level Two Inputs - Quoted prices for identical instruments in active market; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations whose inputs are observable or whose significant value drivers are observable. Level Three Inputs - Instruments with primarily unobservable value drivers. In adopting the fair value measurement in accordance with U.S. generally accepted accounting principles, related disclosures are segregated for assets and liabilities measured at fair value based on the level used within the hierarchy to determine their fair values. These standards do not have any financial impact on the Project's financial statements. 3. SERVICE COORDINATOR REVENUE GRANT The Project was awarded a Service Coordinator Revenue (SCR) contract including extension expiring May 31, The contract provided funding for social services staff personnel hired to administer social activities programs for the elderly residents of the Project. Total revenue earned from this contract was $44,726 and $104,584 for the years ended June 30, 2016 and 2015, respectively. 4. RESTRICTED DEPOSITS Replacement Reserves In accordance with the HUD Regulatory Agreement, the Project is required to set aside $28,502 annually for the replacement of property and other project expenditures as approved by HUD. HUD-restricted deposits of $521,245 and $492,364 as of June 30, 2016 and 2015, respectively, are held in separate interest-bearing accounts and generally are not available for operating purposes and require lender approval prior to disbursement. Escrow Deposits - Impounds In accordance with the HUD Regulatory Agreement, the Project is required to make monthly escrow deposits for taxes and insurance. At close of refinance escrow the account was established with a transfer of funds in the amount of $85,409, with monthly deposits of $4,506, starting January 1, All escrow deposit accounts are held by the lender and disbursements from these accounts are to comply with the terms of the HUD regulatory agreement. As of June 30,2016 and 2015, there was $33,138 and $33,221 held in these accounts, respectively. Escrow Deposits - Repairs As part of the refinancing transaction in November 2013, the Project was required to establish $47,788 in an escrow repair account for potential future expansion of the community room to be completed within one year from closing date. On April 17, 2014, the Project entered into a contract to build and expand the existing community room for a contract price of $206,242, part of which will be funded from proceeds from this account. The community room expansion was completed in January 2015 and release of these funds is pending approval from HUD. As of June 30, 2016 and 2015, there was $47,894 and $47,854 held in this account, respectively

14 5. MORTGAGE NOTE PAYABLE OUR LADY OF GUADALUPE NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2016 and 2015 The Project was originally funded under a permanent building loan provided by HUD until November 2013 when it was refinanced to obtain a lower interest rate. On November 20, 2013, the Organization acquired financing for the building in the amount of $6,130,000, secured by the apartment building, under Section 207/223(f) pursuant to Section 223(a)(7) HUD Insured Mortgage Loan Program. The monthly installment for principal and interest are $30,276 with a maturity date of December 1, Interest is being charged at 4.83% per annum. As of June 30, 2016 and 2015, total outstanding balance was $5,951,731 and $6,025,626, respectively. Maturities of the mortgage note in each of the next five years and in the aggregate are as follows: Years Ending June 30, Thereafter Total Amount $ 77,544 81,374 85,392 89,609 94,035 5,523,777 $ 5,951,731 Total mortgage interest was $289,119 and $292,611 as of June 30, 2016 and 2015, respectively. 6. MANAGEMENT FEE The Project entered into an agreement with Creative Housing & Services (CHS, formerly Community Management Housing Services) in connection with the management of the rental operations of the Project. The agreement provides for a management fee of 4.0% of collections from rental activity. For the purposes of calculation of management fees, gross collections include housing assistance payments released from residual receipts. The total management fees expensed for the years ended June 30, 2016 and 2015 was $37,072 and $36,388, respectively. 7. RENT INCREASES Under the regulatory agreement, the Project may not increase rents charged to tenants without HUD approval. 8. RESIDUAL RECEIPTS ACCOUNT Surplus cash, as defined by HUD, is required to be deposited into a residual receipts bank account annually. Use of the residual receipts account is contingent upon HUD's prior written approval

15 NOTES TO FINANCIAL STATEMENTS Years Ended June 30,2016 and CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The Project's sole asset 'is a 71-unit apartment project. The Project's operations are concentrated in the multifamily real estate market. In addition, the Project 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 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. 10. SUBSEQUENT EVENTS The Project has evaluated events and transactions occurring subsequent to the statement offinancial position date of June 30, 2016 for items that should potentially be recognized or disclosed in these financial statements. The evaluation was conducted through September 23, 2016, the date these financial statements were available to be issued. No such material events or transactions were noted to have occurred

16 SUPPLEMENTARY INFORMATION TABLE OF CONTENTS Statement of Financial Position Data Statement of Activities Data Statement of Cash Flows Data Schedule of Reserve for Replacement Schedule of Changes in Property and Equipment Computation of Surplus Cash, Distributions, and Residual Receipts (Annual)

17 STATEMENT OF FINANCIAL POSITION DATA June 30,2016 Account No. ASSETS CURRENT ASSETS 1120 Cash - operations $ 53, Prepaid expenses 8, T Total Current Assets 61, TENANT DEPOSITS HELD IN TRUST 16,758 RESTRICTED DEPOSITS 1310 Escrow deposits 33, Replacement reserves 521, Other reserves 47, T Total Restricted Deposits 602,277 PROPERTY AND EQUIPMENT 1410 Land 2,286, Building 4,944, Improvements 344, Furniture and equipment 153, T Total Property and Equipment 7,727, Less: accumulated depreciation 1,162, N Net Property and Equipment 6,565,280 OTHER ASSETS 1520 Loan costs, less accumulated amortization of $5,733 70, T Total Other Assets 70, T Total Assets $ 7,316,251 See Independent Auditors' Report -14 -

18 STATEMENT OF FINANCIAL POSITION DATA June 30, 2016 Account No. LIABILITIES AND NET ASSETS CURRENT LIABILITIES 2110 Accounts payable - operations $ 4, Accrued interest 23, Current portion of mortgage payable 77, Accrued audit fees 7, Prepaid revenue T Total Current Liabilities 115, TENANT SECURITY DEPOSITS 16,758 LONG-TERM LIABILITIES 2320 Mortgage note payable, less current portion 5,874, T Total Long-Term Liabilities 5,874, T Total Liabilities 6,006, NET ASSETS 1,310, T Total Liabilities and Net Assets $ 7,316,251 See Independent Auditors' Report - 15-

19 STATEMENT OF ACTIVITIES DATA Year Ended June 30,2016 Account No REVENUES Rent revenue - tenants Rental assistance payments $ 252, , T Gross Potential Rental Revenue 929, Vacancies - apartments (2,999) 5152N Net Rental Revenue 926, Revenue from investments - replacement reserve Revenue from investments - other reserves T Tota! Financial Revenue Laundry and vending revenue Tenant charges Service coordinator grant revenue Miscellaneous revenue ,726 1, T Total Other Revenue 47, T Total Revenue 973, EXPENSES Advertising Other renting expenses Office salaries Office expense Management fee Managers salaries Manager rent-free unit Legal Audit Bookkeeping fees / accounting services Miscellaneous administrative Resident relations Telephone and cable Miscellaneous ,314 7,095 2, ,684 4,481 37,072 39,079 27, ,700 6,390 18, T Total Administrative Expenses 162,746 See Independent Auditors' Report - 16-

20 STATEMENT OF ACTIVITIES DATA (CONTINUED) Year Ended June 30, 2016 Account No Electricity $ 13, Water 18, Gas 7, Sewer 4, T Total Utilities Expenses 43, Payroll 70, Supplies 37, Contracts 83, Garbage and trash removal 7, Miscellaneous operating and maintenance 7, T Total Operating and Maintenance Expenses 207, Real estate taxes 17, Payroll taxes 11, Property and liability insurance 19, Workmen's compensation 11, Health insurance and other benefits 27, Miscellaneous taxes, licenses, permits & insurance T Total Taxes and Insurance Expenses 87, Interest on mortgage payable 289, Mortgage insurance premium 26, Miscellaneous financial expense T Total Financial Expenses 316, Service coordinator expenses 44, T 5060T Total Cost of Operations Before Depreciation and Amortization 862,071 Change in Net Assets Before Depreciation and Amortization 111, Depreciation 206, Amortization 2, N Change in Net Assets (96,474) Net Assets at Beginning of Year 1,406, Net Assets at End of Year $ 1,310,208 See Independent Auditors' Report

21 STATEMENT OF ACTIVITIES DATA (CONTINUED) Year Ended June 30, 2016 Account No. S S S S OTHER INFORMATION Total first mortgage principal payments required during the audit period. The total of all monthly reserve for replacement deposits (usually 12) required during the audit period even if deposits have been temporarily waived or suspended. Replacement Reserve or Residual Receipts and Releases which are included as expense items on this Profit and Loss statement. Project Improvement Reserve releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss statement. $ 73,895 28,502 See Independent Auditors' Report

22 STATEMENT OF CASH FLOWS DATA Year Ended June 30,2016 Account No. CASH FLOWS FROM OPERATING ACTIVITIES Rental receipts $ 928, Interest received Other cash received 58, Total Receipts 987, Administration 67, Management fees 37, Utilities 43, alaries 136, Operating and maintenance 136, Real estate taxes 17, Property insurance 20, Miscellaneous taxes and insurance 50, ervice coordinator fees 44, Interest on mortgage 289, Mortgage insurance premium 26, Miscellaneous financial expense Total Disbursements 871, Net Cash Provided by Operating Activities 115,568 CASH FLOWS FROM INVESTING ACTIVITIES Deposits from the mortgage escrow reserves, net Deposits (to) the replacement reserves account, net (28,881) Deposits (to) the other reserves account, net {40} Net Cash (Used in) Investing Activities (28,838) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on mortgage note payable {73,895} Net Cash (Used in) Financing Activities (73,895) Net Increase in Cash 12, Cash at Beginning of Year 40,236 S1200T Cash at End of Year $ 53,071 8ee Independent Auditors' Report - 19-

23 STATEMENT OF CASH FLOWS DATA (CONTINUED) Year Ended June 30,2016 Account No S S S S S S S S CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation Amortization Increase or decrease in: Tenant accounts receivable Grant receivable Prepaid expenses Cash restricted for tenant security deposits Accounts payable Accrued interest Tenant deposits held in trust Prepaid revenue Net Cash Provided by Operating Activities $ (96,474) 206,179 2, ,417 (1,064) 466 (8,263) (297) (466) 999 $ 115,568 See Independent Auditors' Report - 20-

24 Schedule of Reserve for Replacement OUR LADY OF GUADALUPE SUPPLEMENTARY DATA REQUIRED BY HUD June 30, 2016 Balance at Beginning of Year Total monthly deposits Investment income Balance at End of Year $ 492,364 28, $ 521,245 Schedule of Changes in Property and Eguipment Beginning Balance Additions Deductions Ending Balance Land Building Building improvements Furniture and equipment $ 2,286,128 4,944, , ,054 $ $ $ 2,286,128 4,944, , ,054 Total Accumulated Depreciation $ $ 7,727, ,299 $ $ ===== $ 206,179 $ ===== $ 7,727,758 $ 1,162,478 Computation of Surplus Cash, Distributions, and Residual Receipts (Annual) Cash Total Cash Current Obligations Accounts payable due within 30 days Accrued interest Accrued expenses Prepaid revenue Tenant security deposits Total Current Obligations Surplus Cash $ 69,829 69,829 4,899 23,956 7, ,758 54,312 $ 15,517 See Independent Auditors' Report

25 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS June 30,2016 Federal Grantor/Pass-through GrantorlProgram Title U.S. Department of Housing and Urban Development Section 223(f)/207 Mortgage Insurance Section 8 Housing Assistance Payments Resident Service Coordinator Grant Total Federal CFDA Number Federal Expend itu res $ 5,951, ,767 44,726 $ 6,673,224 BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of Our Lady of Guadalupe, HUD Project No. 122-EH , under programs of the federal government for the year ended June 30, Expenditures reported on the schedule are reported on the accrual basis of accounting. The information in this schedule is presented in accordance with the 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). Because the schedule presents only a selected portion of the operations of the Project, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Project. See Independent Auditors' Report - 22-

26 Forman Richter &Rubin An Accountancy Corporation Certified Public Accountants 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 To the Board of Directors Our Lady of Guadalupe We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Our Lady of Guadalupe (the Project), HUD Project No. 122-EH , which comprise the statement of financial position as of June 30, 2016, 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 September 23, Internal Control Over Financial Reporting I n planning and performing our audit of the financial statements, we considered the Project'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 the Project's internal control. Accordingly, we do not express an opinion on the effectiveness of the Project'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 Project's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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. 858 South Oak Park Rd. Suite 200. Covina, CA (626) Fax (626) covina@frrcpa.com

27 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. FORMAN RICHTER & RUBIN AN ACCOUNTANCY CORPORATION Covina, California September 23, 2016

28 Forman Richter &Rubin An Accountancy Corporation Certified Public Accountants INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR HUD PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE CONSOLIDA TED AUDIT GUIDE FOR AUDITS OF HUD PROGRAMS To the Board of Directors Our Lady of Guadalupe Report on Compliance for Each Major HUD Program We have audited Our Lady of Guadalupe's (the Project), HUD Project No. 122-EH , compliance with the compliance requirements governing federal financial reports, mortgage status, replacement reserve, residual receipts, distributions to owners, equity skimming, cash receipts, cash disbursements, resident application, eligibility, and recertification, security deposits, management functions, unauthorized change of ownership/acquisition of liabilities, unauthorized loans of project funds and excess income described in the Consolidated Audit Guide for Audits of HUD Programs (the Audit Guide) that could have a direct and material effect on each of the Project's major U.S. Department of Housing and Urban Development (HUD) programs for the year ended June 30, The Project's major HUD programs are the Section 221 (f)/207 Mortgage Insurance and Section 8 Housing Assistance Payments Program. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its HUD programs. Auditors' Responsibility Our responsibility is to express an opinion on compliance for each ofthe Project's major HUD programs based on our audit of the 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 Guide. Those standards and the Audit Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on a major HUD program occurred. An audit includes examining, on a test basis, evidence about the Project's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major HUD program. However, our audit does not provide a legal determination of the Project's compliance. Opinion on Each Major HUD Program In our opinion, the Project complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major HUD programs identified above for the year ended June 30, South Oak Park Rd Suite 200 Covina, CA (626) Fax (626) Covina@FRRcpa.com

29 Report on Internal Control Over Compliance Management of the Project is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Project's internal control over compliance with the requirements that could have a direct and material effect on each major HUD program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major HUD program and to test and report on internal control over compliance in accordance with the Audit Guide, 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 compliance requirement of a HUD 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 compliance requirement of a HUD 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 compliance requirement of a HUD 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 compiiance was for the iimited 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 our testing based on the requirements of the Audit Guide. Accordingly, this report is not suitable for any other purpose. FORMAN RICHTER & RUBIN AN ACCOUNTANCY CORPORATION Covina, California September 23,2016

30 Forman Richter &Rubin An Accountancy Corporation Certified Public Accountants INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Directors Our Lady of Guadalupe Report on Compliance for Each Major Federal Program We have audited Our Lady of Guadalupe's (the Project), Hue Project No. 122-EH , 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 Project's major federal programs for the year ended June 30, The Project's major federal programs are identified in the summary of auditors' 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. Auditors'Responsibility Our responsibility is to express an opinion on compliance for each of the Project's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Project's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Project's compliance. Opinion on Each 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 each of its major federal programs for the year ended June 30, South Oak Park Rd. Suite 200. Covina, CA (626) Fax (626) Covina@FRRcpa.com

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 our 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 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 the 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 our testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. FORMAN RICHTER & RUBIN AN ACCOUNTANCY CORPORATION Covina, California September 23, 2016