Agape Himbola Manor, Inc. HUD Project No. LA48M Financial Statements and Supplementary Information For the Year Ended December 31, 2017

Transcription

1 Financial Statements and Supplementary Information For the Year Ended December 31, 2017

2 December 31, 2017 Table of Contents Independent Auditor s Report Financial Statements Statement of Financial Position Statement of Activities... 5 Statement of Cash Flows Notes to Financial Statements Supplementary Information Supplementary Information Required by HUD Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Owner s Certification Management Agent s Certification Independent Accountant s Report on Applying Agreed-Upon Procedure Attachment to Independent Accountant s Report on Applying Agreed-Upon Procedure Page

3 To the Board of Directors San Antonio, Texas Independent Auditor s Report We have audited the accompanying financial statements of (Project), HUD Project No. LA48M000031, which comprise the statements of financial position as of December 31, 2017, and the related statement of activities and cash flow 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 about present fairly, in all material respects, the financial position of the Project as of December 31, 2017, 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

4 Independent Auditor s Report (Continued) Other Matters Other 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 12 to 20 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, 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 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 reported dated March 22, 2018 on our consideration of the Project 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 and opinion on the internal control over financial reporting or on compliance. This report is an integral part of Government Auditing Standards and should be considered is assessing the results of our audit. Seminole, Texas March 22,

5 Statement of Financial Position December 31, 2017 ASSETS Cash $ 121,422 Tenant accounts receivable 7,045 Accounts receivable--hud 8,287 Accounts receivable--operations 117 Miscellaneous prepaid expenses 32, ,938 Restricted Deposits Tenant deposits held in trust 26,719 Bond reserves 336, ,635 Property and Equipment Buildings and improvements 5,451,720 Building equipment--portable 282,707 Furnishings 27,501 5,761,928 Accumulated depreciation (372,347) 5,389,581 Land and improvements 477,500 5,867,081 Other Assets Utility deposits 27,779 27,779 TOTAL ASSETS $ 6,427,433 See accompanying notes to financial statements. 3

6 Statement of Financial Position December 31, 2017 LIABILITIES AND NET ASSETS LIABILITIES Bonds payable $ 6,166,708 Due to American Agape Foundation, Inc. 457,523 Accounts payable--operations 12,169 Accrued liabilities Interest 25,657 Asset management fees 54,000 Management fee payable 856 Tenant security deposits 23,381 Prepaid revenues 17,082 NET ASSETS (DEFICIT) (329,943) TOTAL LIABILITIES AND NET ASSETS (DEFICIT) $ 6,427,433 See accompanying notes to financial statements. 4

7 Statement of Activities For the Year Ended December 31, 2017 REVENUE Rent $ 1,009,957 Financial 1,067 Other 12,529 TOTAL REVENUE 1,023,553 EXPENSES Project Services Administrative 155,231 Asset management fee 24,000 Utilities 144,422 Operating and maintenance 210,759 Taxes and insurance 79,223 Financial 327,093 Depreciation 169,128 TOTAL EXPENSES 1,109,856 CHANGE IN NET ASSETS (86,303) NET ASSETS AT BEGINNING OF YEAR (243,640) NET ASSETS AT END OF YEAR $ (329,943) See accompanying notes to financial statements. 5

8 Statement of Cash Flows For the Year Ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Rental receipts $ 1,018,027 Interest received 1,067 Other cash received 12,529 1,031,623 Administrative (141,811) Utilities (144,422) Salaries and wages (125,786) Operating and maintenance (20,527) Property insurance (53,092) Miscellaneous taxes and insurance (26,841) Tenant deposits held in trust (938) Financial (321,198) (834,615) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 197,008 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of depreciable assets (35,956) Net deposits to bond reserves (85,428) NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (121,384) CASH FLOWS FROM FINANCING ACTIVITIES Mortgage principal payments (87,930) Advances from American Agape Foundation, Inc. 94,772 NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES 6,842 NET INCREASE (DECREASE) IN CASH 82,466 CASH AT BEGINNING OF YEAR 38,956 CASH AT END OF YEAR $ 121,422 See accompanying notes to financial statements. 6

9 Statement of Cash Flows (Continued) For the Year Ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in net assets $ (86,303) Adjustments to reconcile increase (decrease) in net assets to net cash provided by operating activities Depreciation 169,128 Amortization of debt issuance costs 6,302 Amortization of bond discount 4,197 Increase or decrease in: Tenant accounts receivable 3,895 Accounts receivable--other 126,805 Accounts receivable--hud 5,107 Prepaid expenses (5,765) Tenant security deposits held in trust 602 Accounts payable (48,907) Accrued liabilities 24,856 Accrued interest payable (437) Prepaid revenues (932) Tenant security deposits payable (1,540) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 197,008 See accompanying notes to financial statements. 7

10 Notes to Financial Statements Note 1 Summary of Significant Accounting Policies Nature of Organization and Operations ( Organization ) is organized as a nonprofit organization formed to acquire an interest in real property located in Lafayette, Louisiana and to operate thereon Himbola Manor Apartments ( Project ), an apartment complex of 136 units. Under the Section 8 program, the Project provides housing to low and moderate income families, subject to regulation by HUD as to rental charges and operating methods. Lower rental charges to tenants are recovered by the Project through rent subsidies provided by HUD. The Project s major program is the Section 8 rent subsidy. Legal title to the Project is held by, a non-profit corporation. Financial Statement Presentation adopted FASB ASC 958 (formerly SFAS No. 117), Financial Statements of Not-for- Profit Organizations. Under FASB ASC 958, is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. In addition, is required to present a statement of cash flows. Depreciation Property and equipment are recorded at cost and depreciated using the straight-line method. Bond Issuance Costs Costs related to obtaining Public Finance Authority Multifamily Housing Revenue Bonds Series 2015A and Series 2015B are amortized over the term of the related debt using the straight-line method. Accumulated amortization as of December 31, 2017 is $14,705. Original Issue Discount Original issue discount related to the sale of Public Finance Authority Multifamily Housing Revenue Bonds Series 2015A and Series 2015B is amortized over the term of the related debt using the straight-line method. Accumulated amortization of bond discount as of December 31, 2017 is $9,792. Income Taxes The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Therefore, income taxes are not provided for in the financial statements. The Organization files income tax returns in the U.S. federal jurisdiction. Since the Organization was created in 2015, there are no income tax returns subject to examination by the Internal Revenue Service prior to that year. 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 certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Cash and Cash Equivalents For cash flow purposes, the Organization considers all unrestricted cash on hand; cash in banks and temporary cash investments with an original maturity of three months or less to be cash equivalents. 8

11 Notes to Financial Statements (Continued) Note 2 Bond Reserve Funds Under the provisions of the bond indenture, the Organization is required to deposit with the bond issuer numerous amounts. These funds are under the control of the bond issuer and may be used only for items as specified in the bond indenture. Note 3 Bonds Payable Senior Series A Bonds The Public Finance Authority Multifamily Housing Revenue Bonds-Senior Series 2015A were originally issued on September 1, 2015 in original issue lot amounts totaling $6,195, at various interest rates ranging from 3.5% to 5.0% payable in semiannual interest payments. The bond principal is subject to mandatory sinking fund payments beginning June 1, 2016 until final maturity on December 1, The balance of the bonds outstanding as of December 31, 2017, net of related bond discount is $5,901,825. A schedule of principal maturities for the next five years is presented as follows: 2018 $ 94, , , , ,160 Thereafter 5,394,665 Total: 5,901,825 Less: Unamortized bond costs (190,227) Total bonds payable $ 5,711,598 The accrued interest on these obligations at December 31, 2017 is $23,733. Subordinate Series B Bonds The Public Finance Authority Multifamily Housing Revenue Bonds-Subordinate Series 2015B were originally issued on September 1, 2015 in original issue lot amounts totaling $494, at an interest rate of 6.0% payable in semiannual interest payments. The bond principal is subject to mandatory sinking fund payments beginning June 1, 2016 until final maturity on December 1, The balance of the bonds outstanding as of December 31, 2017, net of related bond discount is $470,756. 9

12 Notes to Financial Statements (Continued) Note 3 Bonds Payable (continued) Subordinate Series B Bonds (continued) A schedule of principal maturities for the next five years is presented as follows: 2018 $ 6, , , , ,240 Thereafter 439,316 Total: 470,756 Less: Unamortized bond costs (15,646) Total bonds payable $ 455,110 Accrued interest on these obligations at December 31, 2017 is $1,924. In 2016, the Organization adopted the requirements of FASB ASC to present debt issuance cost as a reduction of the carrying amount of the debt rather than as an asset. Amortization of the debt issuance costs is reported as interest expense in the statement of activities. Total bonds outstanding as of December 31, 2017, net of related bond discounts are $6,372,581 and total accrued interest payable is $25,657. Substantially all of the rental property and equipment is pledged as collateral. The fair value of the bonds payable is estimated based on the current rates offered to the Project for the debt of the same remaining maturities. At December 31, 2017 the fair value of the bonds payable approximates the amounts recorded in the financial statements. Note 4 Rent Increases Under the regulatory agreement, the Project may not increase rents charged to tenants without HUD approval. Note 5 Bond Escrow Deposits Under the provisions of the bond indenture, the Project is required to set aside amounts for hazard and liability insurance and the replacement of property. Note 6 Restrictions of Net Assets None of the Project s nets assets are subject to donor-imposed restrictions. Accordingly, all net assets are accounted for as unrestricted net assets under FASB ASC 958 (formerly SFAS No. 117). 10

13 Notes to Financial Statements (Continued) Note 7 Management Fee The Project pays a management fee equal to 4.5% of gross revenues to United Core Management, Inc. Note 8 Current Vulnerability Due to Certain Concentrations The Project s sole asset is a 136-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 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. Note 9 Related Party Accounts Payable-American Agape Foundation, Inc. In prior years, American Agape Foundation, Inc. advanced funds to the Organization to help facilitate the purchase of the property and cover operating shortfalls. Funds were also advanced in the current year to assist with general operating and building improvements. These advances are to be repaid without interest when cash flow becomes available. The Organization and American Agape Foundation, Inc. share some common board of directors and as of December 31, 2017, the amount owed to American Agape Foundation, Inc. was $457,523. Accounts Receivable-Related Party In the prior year, the Project advanced funds to Park Lake Apartments to assist with general operating expenses and major capital improvements. These advances were to be repaid without interest when cash flow became available. and Agape Park Lake, LLC share some common board of directors. These advances were paid in full during the current year. As of December 31, 2017, no amounts were due to the Project. Asset Management Fees The Organization is to pay an asset management fee to American Agape Foundation, Inc. of $2,000 per month for social service oversight and other management services. The Organization and American Agape Foundation, Inc. share some common board of directors and as of December 31, 2017, the amount owed to American Agape Foundation, Inc. was $54,000. Note 10 Commitment The Project entered into a contract with True Built to replace the fencing around the property. The contract was agreed upon in 2017; however, work did not start until January The total amount of the contract is $142,500 and a 50% down payment was paid on January 9, Note 11 Evaluation of Subsequent Events Management has evaluated subsequent events through March 22, 2018, the date the financial statements were available to be issued. No subsequent events were noted. 11

14 Supplementary Information 12

15 Supplementary Information Required by HUD Item Page Statement of Financial Position Data Statement of Activities Data Statement of Cash Flow Data Computation of Surplus Cash--Annual Schedule of Changes in Fixed Asset Accounts Schedule of Additions to Building Equipment Portable Account Schedule of Additions to Furnishings Account

16 Statement of Financial Position Data December 31, 2017 Account No. ASSETS CURRENT ASSETS 1120 Cash--operations $ 121, Tenant accounts receivable 7, Accounts receivable--hud 8, Accounts receivable--operations Miscellaneous prepaid expenses 32, T Total Current Assets 168, TENANT DEPOSITS HELD IN TRUST 26,719 RESTRICTED DEPOSITS 1355 Bond reserves 336, T Total Restricted Deposits 336,916 FIXED ASSETS 1410 Land and improvements 477, Buildings and improvements 5,451, Building equipment--portable 282, Furnishings 27, T Total Fixed Assets 6,239, Accumulated depreciation (372,347) 1400N Net Fixed Assets 5,867,081 OTHER ASSETS 1590 Utility deposits 27, T Total Other Assets 27, T TOTAL ASSETS $ 6,427,433 14

17 Statement of Financial Position Data (Continued) December 31, 2017 Account No. LIABILITIES AND NET ASSETS CURRENT LIABILITIES 2110 Accounts payable--operations $ 12, Accrued management fee payable Accrued interest payable 25, Current portion of bonds payable 100, Miscellaneous current liabilities 511, Prepaid rents 17, T Total Current Liabilities 668, TENANT SECURITY DEPOSITS 23,381 LONG-TERM LIABILITIES 2320 Bonds payable--less current portion 6,065, T Total Long-Term Liabilities 6,065, T TOTAL LIABILITIES 6,757, T NET ASSETS (DEFICIT) (329,943) 2033T TOTAL LIABILITIES AND NET ASSETS (DEFICIT) $ 6,427,433 15

18 Statement of Activities Data Year Ended December 31, 2017 Account No. REVENUE 5120 Rent revenue--gross potential $ 235, Tenant assistance payments 831, T Total Rent Revenue 1,066, Vacancies--apartments (56,603) 5200T Total Vacancies (56,603) 5152N Net Rental Revenue 1,009, Revenue from investments--project operations 1, T Total Financial Revenue 1, Tenant charges 11, Miscellaneous revenue 1, T Total Other Revenue 12, T TOTAL REVENUE 1,023,553 EXPENSES 6210 Advertising and marketing 1, Other renting expense 2, Office salaries 62, Office expenses 12, Management fees 47, Legal expense 3, Audit expense 7, Bookkeeping 8, Bad debts 3, Miscellaneous administrative expense 5, T Total Administrative Expenses 155, Electricity 12, Water 93, Gas 38, T Total Utility Expenses 144,422 16

19 Statement of Activities Data (Continued) Year Ended December 31, 2017 Account No Payroll $ 63, Supplies 22, Contracts 82, Garbage and trash removal 38, Heating/cooling repairs and maintenance 3, T Total Operating and Maintenance Expenses 210, Real estate taxes Payroll taxes 15, Property and liability insurance 52, Workmen's compensation 6, Health insurance and other employee benefits 4, T Total Taxes and Insurance 79, Interest on bonds payable 320, Miscellaneous financial expenses 6, T Total Financial Expenses 327, T Total cost of operations before depreciation 916, T Change in net assets before depreciation 106, Depreciation expense (169,128) 5060T Operating profit (62,303) 7100T Net entity expenses (24,000) 3250 Change in Net Assets $ (86,303) S Total bond principal payments required during the year. $ 87,930 S Total of 12 monthly deposits during the year into the replacement reserve account, as required by the regulatory agreement. - $ S Replacement reserve or residual receipts releases which are included as expense items on this profit and loss statement. $ - S Project improvement reserve releases under the flexible subsidy program that are included as expense items on this profit and loss statement. $ - 17

20 Statement of Cash Flows Data Year Ended December 31, 2017 Account No. CASH FLOWS FROM OPERATING ACTIVITIES S Rental receipts $ 1,018,027 S Interest received 1,067 S Other cash received 12,529 S Total Receipts 1,031,623 S Administrative (141,811) S Utilities (144,422) S Salaries and wages (125,786) S Operating and maintenance (20,527) S Property insurance (53,092) S Miscellaneous taxes and insurance (26,841) S Tenant deposits held in trust (938) S Interest payments--first mortgage (310,663) S Miscellaneous financial (10,535) S Total Disbursements (834,615) S NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 197,008 CASH FLOWS FROM INVESTING ACTIVITIES S Net deposits to bond reserves (85,428) S Net purchase of fixed assets (35,956) S NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (121,384) CASH FLOWS FROM FINANCING ACTIVITIES S Principal payments--bonds (87,930) S Other financing activities 94,772 S NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES 6,842 S NET INCREASE (DECREASE) IN CASH 82,466 S CASH AT BEGINNING OF YEAR 38,956 S1200T CASH AT END OF YEAR $ 121,422 18

21 Statement of Cash Flows Data (Continued) Year Ended December 31, 2017 Account No. CASH FLOWS FROM OPERATING ACTIVITIES 3250 Increase (decrease) in net assets $ (86,303) Adjustments to reconcile increase (decrease) in net assets to net cash provided by operating activities: 6600 Depreciation 169,128 S Amortization of debt issuance costs 6,302 Increase or decrease in: S Tenant accounts receivable 3,895 S Accounts receivable--other 131,912 S Prepaid insurance (5,765) S Cash restricted for tenant deposits held in trust 602 S Accounts payable (48,907) S Accrued liabilities 24,856 S Accrued interest payable (437) S Prepaid revenue (932) S Tenant deposits held in trust (1,540) S Amortization of bond discount 4,197 S NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 197,008 19

22 Year Ended December 31, 2017 Computation of Surplus Cash Annual Cash $ 148,141 A/R-HUD 8,287 Total Cash 156,428 Current Obligations Accounts payable due within 30 days 12,169 Accrued expenses 856 Accrued interest-bonds 25,657 Tenant security deposits 23,381 Prepaid rents 17,082 Other obligations-fence contract 142,500 Total Current Obligations 221,645 Surplus Cash (Deficiency) $ (65,217) Schedule of Changes in Fixed Asset Accounts Beginning Balance Additions Deductions Ending Balance Land and improvements $ 477,500 $ - $ - $ 477,500 Buildings and improvements 5,451, ,451,720 Building equipment--portable 262,097 20, ,707 Furnishings 12,155 15,346-27,501 Total $ 6,203,472 $ 35,956 $ - 6,239,428 Accumulated depreciation $ (203,219) $ (169,128) $ - (372,347) Net book value $ 5,867,081 Schedule of Additions to Building Equipment - Portable Account A/C units $ 12,582 Appliances 8,028 Total Additions to Building Equipment - Portable Account $ 20,610 Schedule of Additions to Furnishings Account Carpet/flooring $ 15,346 Total Additions to Furnishings Account $ 15,346 20

23 Schedule of Expenditures of Federal Awards Year Ended December 31, 2017 Federal Grantor/Pass-Through Grantor/Program Title Federal CFDA Number Federal Expenditures U.S. Department of Housing and Urban Development Section 8 Housing Assistance Payments $ 831,088 Total $ 831,088 See accompanying notes to schedule of expenditures of federal awards. 21

24 Notes to Schedule of Expenditures of Federal Awards Year Ended December 31, 2017 Note 1 - Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal award activity of Agape Himbola Manor, Inc.,, and is presented 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, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Note 2 - 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 the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. 22

25 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 San Antonio, Texas 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 (Project), HUD Project No. LA48M000031, which comprise the statement of financial position as of December 31, 2017,and the related statement of activities, and cash flow for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 22, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered 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 s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization 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 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 over financial reporting 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 s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and on compliance and the results of that testing, and not to provide an opinion on the effectiveness of Agape Himbola Manor, Inc. s internal control or on compliance. The report is an integral part of an audit performed in accordance with Governmental Auditing Standards in considering s internal control and on compliance. Accordingly, this communication is not suitable for any other purpose. Seminole, Texas March 22,

26 Independent Auditor s Report on Compliance with Requirements for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance To the Board of Directors San Antonio, Texas Report on Compliance for the Major Federal Program. We have audited s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on Agape Himbola Manor, Inc. s major federal program for the year ended December 31, s major federal program is 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 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 of 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 the major federal programs occurred. An audit includes examining, on a test basis, evidence about 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 the major federal program. However, our audit does not provide a legal determination of 's compliance. Opinion on the Major Federal Program In our opinion, 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 programs for the year ended December 31, Report on Internal Control Over Compliance Management of 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 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 circumstance 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 's internal control over compliance. 24

27 Independent Auditor s Report on Compliance with Requirements for Each Major Program and on Internal Control Over Compliance Required by Uniform Guidance (Continued) 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 programs 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 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Seminole, Texas March 22,

28 Schedule of Findings and Questioned Costs Year Ended December 31, 2017 SUMMARY OF AUDITOR S RESULTS 1. The auditor s report expresses an unmodified opinion on whether the financial statements of Agape Himbola Manor, Inc. were prepared in accordance with GAAP. 2. No material weaknesses were identified during the audit of the financial statements. 3. No instances of noncompliance material to the financial statements of Agape Himbola Manor, 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 Agape Himbola Manor, 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 were: CFDA Number Name of Federal Program or Cluster Section 8 Housing Assistance Payments 8. The threshold for distinguishing Types A and B programs was $750, was determined to be a high-risk auditee. FINANCIAL STATEMENT FINDINGS None FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None 26

29 Summary Schedule of Prior Audit Findings Year Ended December 31, 2017 Financial Statement Audit No matters were reported for the year ended December 31, Federal Award Programs Audit No matters were reported for the year ended December 31,

30 0 Owner s Certification I hereby certify that I have examined the accompanying financial statements and supplemental data of Agape Himbola Manor, Inc., and, to the best of my knowledge and belief, the same is accurate and complete. David Starr President Date: March 22, 2018 Telephone Number: (210)

31 0 Management Agent s Certification I hereby certify that I have examined the accompanying financial statements and supplemental data of Agape Himbola Manor, Inc. 0 and, to the best of my knowledge and belief, the same is accurate and complete. United Core Management, Inc. Carrie Girgus, President Tax Identification Number: Sharita Brown, Property Manager 29

32 Independent Accountant s Report on Applying Agreed-Upon Procedure To the Board of Directors San Antonio, Texas We have performed the procedure described in the second paragraph of this report, which was agreed to by and the U.S. Department of Housing and Urban Development, Public Indian Housing-Real Estate Assessment Center (PIH-REAC), solely to assist them in determining whether the electronic submission of certain information agrees with the related hard copy documents included within the Uniform Guidance reporting package. is responsible for accuracy and completeness of the electronic submission. This agreed-upon procedure engagement was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants and the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States. The sufficiency of the procedure is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedure described below either for the purpose for which this report has been requested or for any other purpose. We compared the electronic submission of the items listed in the UFRS Rule Information column with the corresponding printed documents listed in the Hard Copy Documents column. The results of the performance of our agreed-upon procedure indicate agreement or non-agreement of the electronically submitted information and hard copy documents as shown in the attached chart. We were engaged to perform an audit in accordance with OMB s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), by as of and for the year ended December 31, 2017, and have issued our reports thereon dated March 22, The information in the Hard Copy Documents column was included within the scope, or was a by-product of that audit. Further, our opinion on the fair presentation of the supplemental information dated March 22, 2018, was expressed in relation to the basic financial statements of taken as a whole. A copy of the financial statement package required by Uniform Guidance, which includes the auditor s reports, is available in its entirety from We have not performed any additional auditing procedures since the date of the aforementioned audit reports. Further, we take no responsibility for the security of the information transmitted electronically to the U.S. Department of Housing and Urban Development, PIH-REAC. This report is intended solely for the information and use of and the U.S. Department of Housing and Urban Development, PIH-REAC, and is not intended to be and should not be used by anyone other than these specified parties. Seminole, Texas March 22,

33 Attachment to Independent Accountant s Report on Applying Agreed-Upon Procedure UFRS Rule Information Hard Copy Document(s) Findings Balance Sheet, Revenue and Expense and Cash Flow Data (account numbers 1120 to 7100T and the S1200 series) Surplus Cash (S1300 series of accounts) Supplemental Schedules with Financial Statement Data Computation of Surplus Cash, Distributions and Residual Receipts (Annual) Agrees Agrees Footnotes (S3100 series of accounts) Notes to the Financial Statements Agrees Type of Opinion on the Financial Statements and Auditor Reports (S3400, S3500, and S3600 series of accounts) Auditor s Reports on the Financial Statements, Compliance and Internal Control Agrees Type of Opinion on Supplemental Data (account S ) Audit Findings Narrative (S3800 series of accounts) General information (S3300, S3700 and S3800 series of accounts) Auditor s Report on Supplemental Data Schedule of Findings and Questioned Costs Schedule of Findings and Questioned Costs and OMB Data Collection Form Agrees Agrees Agrees 31