Kodiak Island Housing Authority Kodiak, Alaska

Transcription

1 Kodiak Island Housing Authority Management Discussion and Analysis, Basic Financial Statements, Additional Supplementary Information and Compliance Reports

2 Table of Contents Exhibit Page Independent Auditors Report 1-3 Management Discussion and Analysis (MD&A) 5-12 Basic Financial Statements: Statement of Net Position A-1 13 Statement of Activities B-1 14 Balance Sheet Governmental Activities C-1 15 Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds D-1 16 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities D-2 17 Statement of Revenues, Expenditures and Changes in Fund Balance Original and Final Budget and Actual General Fund E-1 18 Statement of Net Position Proprietary Funds F-1 19 Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds G-1 20 Statement of Cash Flows Proprietary Funds H-1 21 Notes to Financial Statements Additional Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund I Combining Balance Sheet Other Governmental Funds J-1 39 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Other Governmental Funds J-2 40

3 Table of Contents, Continued Exhibit Page Additional Supplementary Information (Continued): Schedule of Expenditures of Federal Awards K-1 41 Notes to Schedule of Expenditures of Federal Awards 42 Compliance Reports: Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 43 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 47

4 Aldrich CPAs + Advisors LLP 800 East Dimond Blvd., #3-670 Anchorage, Alaska I NDEPENDENT A UDITORS REPORT To the Board of Commissioners Kodiak Island Housing Authority Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the remaining fund information of Kodiak Island Housing Authority, as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise Kodiak Island Housing Authority s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors 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 auditors 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 opinions. 1

5 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Kodiak Island Housing Authority, as of September 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4-11 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Kodiak Island Housing Authority s basic financial statements. The accompanying schedule of revenues, expenditures and changes in fund balance budget and actual, for the general fund, combining balance sheet other governmental funds, combining statement of revenues, expenditures, and changes in fund balances other governmental funds, and the schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administration Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The additional supplementary information as listed above is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the additional supplementary information as listed above is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2

6 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 31, 2017, on our consideration of Kodiak Island Housing Authority 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 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 Kodiak Island Housing Authority s internal control over financial reporting and compliance. Aldrich CPAs + Advisors LLP Anchorage, AK January 31,

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8 Management Discussion and Analysis of Financial Condition and Results of Operations For the Management s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided as a supplement to the accompanying financial statements and footnotes to help provide an understanding of Kodiak Island Housing Authority s (KIHA s) financial condition, changes in financial conditions and results of operations. Discussion of the Basic Financial Statements The governmental financial reporting model will present three separate sets of financial statements. They are as follows: Government-Wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of KIHA s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all KIHA s assets and liabilities, with the difference between the two reported as net position. Increases and decreases in net position may serve as a useful indicator of whether the financial position of KIHA is improving or deteriorating. The Statement of Activities presents information showing how the government s net position changed during the most recent fiscal year. Both of the government-wide financial statements distinguish functions of KIHA that are principally supported by grant revenue (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of KIHA include planning and administration, housing services, homebuyer assistance, housing management services and maintenance and rehabilitation. The business-type activities of KIHA include the Loan Program and Enterprise Rentals. Governmental Fund Financial Statements. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. This includes funds of the Government; i.e., General Fund, Capital Project Funds and Other Governmental Funds. 5

9 Management Discussion and Analysis KIHA adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule has been provided to demonstrate compliance with this budget. Proprietary Fund Financial Statements. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. KIHA uses enterprise funds to account for its Loan Program and Enterprise Rentals. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Loan Program and Enterprise Rentals, both of which are considered to be major funds of KIHA. Condensed Comparative Data The following presents condensed government-wide comparative data for both the current fiscal period and the prior fiscal period. Statement of Net Position Governmental Business-Type Activities Activities Totals Current and Noncurrent assets $ 13,696,421 13,276,103 2,983,586 3,053,291 16,680,007 16,329,394 Capital assets 12,366,650 12,731,926 10,841,630 10,972,354 23,208,280 23,704,280 Total assets 26,063,071 26,008,029 13,825,216 14,025,645 39,888,287 40,033,674 Current liabilities 6,546,338 6,464, , ,723 7,140,589 7,088,165 Noncurrent liabilities 108,076 97,737 1,691,147 1,710,791 1,799,223 1,808,528 Total liabilities 6,654,414 6,562,179 2,285,398 2,334,514 8,939,812 8,896,693 Net investment in capital assets 12,366,650 12,731,926 10,841,630 10,972,354 23,208,280 23,704,280 Restricted 6,115,412 6,050, ,219 87,901 6,779,631 6,138,448 Unrestricted 926, ,377 33, , ,564 1,294,253 Total net position $ 19,408,657 19,445,850 11,539,818 11,691,131 30,948,475 31,136,981 6

10 Management Discussion and Analysis Statement of Activities Changes in Net Position Governmental Business-Type Activities Activities Totals Program revenues: Charges for services $ 555, ,053 1,368,180 1,147,060 1,923,923 1,681,113 Operating grants and contributions 2,844,791 2,681, ,844,791 2,681,578 Capital grants and contributions 1,080, , ,080, ,029 General revenues: Investment earnings 25,183 20,583 13,617 17,075 38,800 37,658 Administrative fees 81, ,932 81, ,932 Other 58,194 99,802 47,935 42, , ,218 Transfers of capital assets/debt (8,278,607) 8,278,607 Total revenues 4,645,552 (4,197,630) 1,429,732 9,485,158 6,075,284 5,287,528 Expenses: Planning and administration 651, , , ,529 Housing services 975, , , ,115 Homebuyer assistance 2,161,183 2,115, ,161,183 2,115,215 Housing management services 239, , , ,839 Maintenance and rehabilitation 655, , , ,497 Loan program , , , ,952 Enterprise rentals - - 1,386,568 1,251,554 1,386,568 1,251,554 Total expenses 4,682,745 4,449,195 1,581,045 1,447,506 6,263,790 5,896,701 Change in net position (37,193) (8,646,825) (151,313) 8,037,652 (188,506) (609,173) Net position, beginning of year 19,445,850 28,092,675 11,691,131 3,653,479 31,136,981 31,746,154 Net position, ending $ 19,408,657 19,445,850 11,539,818 11,691,131 30,948,475 31,136,981 Government-Wide. KIHA s net assets exceed liabilities by $30,948,475 at the close of the fiscal year. The decrease of $188,506 is attributable to a decrease of $37,193 in Governmental Activities and a decrease of $151,313 in Business-Type Activities. Governmental Activities. Total assets increased $55,042 and liabilities increased $92,235 compared to FY2015. There were no significant changes from the prior year. Business-Type Activities. Current and Noncurrent Assets decreased $69,705 due to a siding, window and roofing project at Cliffwood and ongoing leasing of units at the Emerald Heights complex. Capital Assets decreased $130,724. Long-term Liabilities decreased with the pay down on the loans. 7

11 Management Discussion and Analysis Overall Analysis Governmental Activities. KIHA was established to administer Low Income Home Ownership and Rental Housing financed by the U. S. Department of Housing and Urban Development (HUD). The programs have been governed by the NAHASDA since Block grants are awarded only after an Indian Housing Plan (IHP) has been approved. NAHASDA Grant amounts are as follows: 2012 $4,165, $4,346, $4,183, $4,157, $3,986,672 Charges for services (rental income) increased 4% with the occupancy rate increasing 1% from 85% to 86%. Mutual Help administrative fee revenue decreased 30% due to several units becoming vacant and conveyance of four units during the fiscal year. Business-Type Activities. Enterprise Rentals Harborview consists of 48 units, Cliffwood 39 units and Emerald Heights 32 units of efficiencies, one-bedroom, and two-bedroom apartments. Emerald Heights, for those 55 and older was completed last year and had 66% occupancy at the end of this reporting period compared to 38% at the end of last year. Harborview and Cliffwood reported increases in rental income as rental increases went into effect February 1, Occupancy rates remained stable at 98% for Harborview and increased from 95% to 99% at Cliffwood. With the higher occupancy, rental income at Emerald Heights increased $149,785. Expenditures increased $214,840. Depreciation Expense increased $124,228 with a full year of depreciation expense for the Emerald Heights property. Completing the siding, window, roof projects and adding a unit at Cliffwood amounted to an additional expense of $79,830. Loan Program KIHA originates and services loans for Alaska Housing Finance Corporation (AHFC) and Fannie Mae. Total Revenue in 2016 was $212,531 including operating and non-operating revenues. This is a decrease of $17,835 from the prior fiscal year. Origination fee revenue dropped $15,076. KIHA closed 19 loans in 2016 compared to 24 in Service fee revenue remained stable and interest revenue was down $3,439 with the declining principal balances of LTS loans and continued low interest rates. Expenses for the year remained stable at $194,477 resulting in a net revenue of $18,054 a drop of $16,360 from the prior fiscal year. 8

12 Management Discussion and Analysis Fund Analysis Major governmental funds for 2016 are the General Fund, Old Harbor Duplex Capital Project Fund and Tribal Needs Capital Project Fund. The following is a comparison of General Fund expenditures: Net Increase (Decrease) Planning and administration $ 641,125 $ 606,844 $ 34,281 Housing services 975, ,115 53,601 Homebuyer assistance 1,354,732 1,390,334 (35,602) Housing management services 239, ,839 98,374 $3,210,786 $3,060,132 $ 150,654 The notable changes to expenditures are comprised of the following: Planning and Administration The increase can be attributed to Travel line items. A change in procedure requiring purchase of refundable airline tickets increased travel costs for staff and Board. Housing Services KIHA has been working closely with the tribal councils to promote and host activities to housing participants in their communities. This partnership has continued to promote culturally enriched and healthy activities and opportunities for the youth. Two Tribal Advocates were hired to assist members with their housing needs. These activities resulted in an increase in expenditures of $52,812 in Homebuyer Assistance Administrative time for housing personnel was shifted from Homebuyer Assistance to Housing Management Services. Housing Management Services Administrative Salaries and Fringe Benefits increased substantially with the shift in Administrative time from Homebuyer Assistance. Tribal Needs Capital Project Fund--Rehabilitation was completed on six privately-owned properties. These rehabs consisted of mold remediation, roofing, insulation, siding, and air sealing. One successful applicant purchased a home with the NAHASDA Home Start Loan program and construction on another home is just beginning. Other Governmental Funds includes Modernization of current assisted stock units. Woodstoves were installed in two residences. 9

13 Management Discussion and Analysis Budget Variances in the General Fund The following variances between the original budget and the final budget were notable: General Fund Operating. The projected Dwelling Rental revenue for Heritage Heights Project 17 was increased $19,000 with an equal decrease to Project 18. This is based on current occupancy levels and tenant incomes. Interest revenue was increased for the slightly higher interest rates. Administrative Salaries and Fringe Benefits were shifted between the rental and Mutual Help projects. The Fuel line items were decreased substantially for the mild winter, and Maintenance line items were reallocated based on planned work in Projects 18, 19 and a Mutual Help unit. Insurance line items were decreased based on lower Amerind contributions. The Non-Program Strategic Planning line item was increased $15,000 to cover costs for the remaining scheduled Forums. Housing Services. Resident Support Services lines items were increased $12,821 to meet staff salary and fringe benefit needs. Line items were added for Sun aq and the Old Harbor Tribal Housing Advocate based on tribal request. Housing Management Services. Life Builders Rental revenue projections were decreased based on year-to-date. The line items for new software were removed and will be included in next year s budget. Crime Prevention & Safety. The night Security Guard position was removed for this fiscal year. Planning and Administration. KIHA Board Travel and Travel Outside line items were increased to meet year to date and anticipated needs. Enterprise Rentals. Harborview and Cliffwood Dwelling Rental revenue projections were increased with the rent increase effective in February. Emerald Heights Rental Revenue was reduced as lease up of the new units has been slower than anticipated. Budget line items were increased for Salaries and Fringe Benefits due to the increased efforts to lease vacant units. Fuel line items were decreased for the mild winter. Maintenance and NonRoutine Maintenance line items were adjusted. Cliffwood Non Routine Maintenance was increased to complete the siding and window rehabilitation and add an additional dwelling unit this fiscal year. The Security Guard position and planned purchase of software was eliminated. The software line item will be included in next year s budget. Loan Program. Notable revisions to revenue were increases to FannieMae Pricing Fees and adding a line item for the Metals grant project. Increases to expenditures were to add Salaries and Fringe Benefit line items for the Metals grant project and increase Commissioner Stipends. 10

14 Management Discussion and Analysis Capital Asset and Long-Term Debt Activity Capital Assets Governmental Activities. Changes in capital assets are a result of Mutual Help conveyances and depreciation. Capital assets, net of depreciation, where applicable are as follows: Governmental Activities Land and site improvements $ 5,151,813 $ 5,237,753 Construction in progress $ 458,407 $ 0 Dwelling structures $ 5,837,342 $ 6,384,340 Non-dwelling structures $ 552,854 $ 578,701 Machinery, vehicles and equipment $ 366,234 $ 531,131 $12,366,650 $12,731,926 Capital asset value decreased $365,276. Four Mutual Help units conveyed in Mutual Help units will continue to convey at a steady rate over the next few years. Depreciation for 2016 totaled $563,135. Construction in Progress consists of a duplex in Old Harbor and the preliminary work for the purchase of single family residences in Larsen Bay and Old Harbor. Business-Type Activities. Capital assets, net of depreciation are as follows: Business-type Activities Land $ 1,175,997 $ 1,175,997 Buildings $ 9,385,808 $ 9,463,174 Improvements other than buildings $ 204,887 $ 242,382 Machinery and equipment $ 74,938 $ 90,801 $10,841,630 $10,972,354 Capital Asset value decreased $130,724. At Cliffwood, new siding, windows and roofing were installed on the last two buildings and an efficiency unit was added in what was previously a storage area. This additional efficiency unit has the potential to add $9,000 in rental income in FY 2017 and beyond. 11

15 Management Discussion and Analysis Long-Term Debt Activity Business-Type Activities. Enterprise Rentals has a note payable to First National Bank Alaska for the Emerald Heights complex. The original loan for $1,502,850 closed in Monthly installments have an interest rate of 6.25% with the note maturing May 1, The September 30, 2016, balance is $1,479,121 which is a reduction of $17,980 for the fiscal year. KIHA s Loan Program has a note payable to Alaska Housing Finance Corporation (AHFC). This note is due in quarterly installments based on loan principal and prepayments of houses constructed and conveyed by the Housing Authority to homeowners through AHFC s Loan-To-Sponsor Program. The September 30, 2016, balance is $231,163 which is a reduction of $17,694 for the fiscal year. This is a non-interest bearing note maturing April 15, Other Potentially Significant Matters Governmental Activities. NAHASDA Block Grant 55IH for fiscal year 2016 has been accepted by KIHA in the amount of $3,986,672. The NAHASDA grant is accounted for based on a 12-month program year. Economic Factors and Next Year s Budget As previously stated, NAHASDA Block Grant fiscal year 2016 funds have been accepted by KIHA in the amount of $3,986,672. An Indian Housing Plan has been submitted and approved for fiscal year 2017 funds. Alaska Housing Finance Corporation Supplemental Grant funds in the amount of $155,000 for State fiscal year 2014 and $106,000 for State fiscal year 2016 have been accepted by KIHA. KIHA has added no new major programs in the 2017 budget. Contacting the Housing Authority s Financial Management This financial report is designed to provide the readers with a general overview of the Housing Authority s finances and to demonstrate the Housing Authority s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Finance Department of Kodiak Island Housing Authority; 3137 Mill Bay Road; Kodiak, AK 99615; telephone number (907)

16 Exhibit A-1 Statement of Net Position September 30, 2016 ASSETS Governmental Business-type Activities Activites Total Current Assets: Cash and cash equivalents $ 13,580,578 $ 1,608,480 $ 15,189,058 Accounts receivable, net 28, , ,595 Internal balances (137,958) 137,958 - Prepaid items 3,958 17,421 21,379 Insurance deposits 88,820 18, ,082 Inventory 132,688 10, ,438 Total Current Assets 13,696,421 2,176,131 15,872,552 Noncurrent Assets: Restricted: Cash and cash equivalents - 576, ,292 Notes receivable, from homebuyers - 231, ,163 Capital assets, net 12,366,650 10,841,630 23,208,280 Total Noncurrent Assets 12,366,650 11,649,085 24,015,735 Total Assets 26,063,071 13,825,216 39,888,287 LIABILITIES AND NET POSITION Current Liabilities: Accounts payable 168,720 66, ,324 Deposits 67,991 47, ,286 Homebuyer reserves 194, ,214 Unearned grant revenue 6,115,413-6,115,413 Escrow accounts - 461, ,215 Notes payable - due within one year - 19,137 19,137 Total Current Liabilities 6,546, ,251 7,140,589 Noncurrent Liabilities: Accrued annual leave 108, ,076 Notes payable - 1,691,147 1,691,147 Total Noncurrent Liabilities 108,076 1,691,147 1,799,223 Total Liabilities 6,654,414 2,285,398 8,939,812 Net Position: Net investment in capital assets 12,366,650 10,841,630 23,208,280 Restricted: Maintenance - 87,927 87,927 Reserves - 576, ,292 NAHASDA 6,100,569-6,100,569 AHFC 11,243-11,243 Rural Cap 3,600-3,600 Unrestricted 926,595 33, ,564 Total Net Position $ 19,408,657 $ 11,539,818 $ 30,948,475 The notes to the financial statements are an integral part of this statement. 13

17 Exhibit B-1 Statement of Activities Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: Plannning and administration $ 651, ,459 - (5) - (5) Housing services 975, ,318 - (3,398) - (3,398) Homebuyer assistance 2,161, , ,120 - (623,468) - (623,468) Housing management services 239,213 7, ,894 - (171) - (171) Maintenance and rehabilitation 655, ,080, , ,460 Total Governmental Activities 4,682, ,743 2,844,791 1,080,629 (201,582) - (201,582) Business-type Activities: Loan program 194, , (2,025) (2,025) Enterprise rentals 1,386,568 1,175, (210,840) (210,840) Total Business-type Activities 1,581,045 1,368, (212,865) (212,865) $ 6,263,790 1,923,923 2,844,791 1,080,629 (201,582) (212,865) (414,447) General Revenues: Investment earnings 25,183 13,617 38,800 Administrative fees 81,012-81,012 Other 58,194 47, ,129 Total General Revenues 164,389 61, ,941 Change In Net Position (37,193) (151,313) (188,506) Net Position, Begninning 19,445,850 11,691,131 31,136,981 Net Position, Ending $ 19,408,657 11,539,818 30,948,475 The notes to the financial statements are an integral part of this statement. 14

18 Exhibit C-1 Balance Sheet - Governmental Funds ASSETS Other Total General Governmental Governmental Fund Funds Funds Cash and cash equivalents $ 13,580,578 $ - $ 13,580,578 Account receivable, net 28,335-28,335 Due from other funds - 4,557 4,557 Prepaid items 3,958-3,958 Insurance deposits 88,820-88,820 Inventory 132, ,688 Total Assets $ 13,834,379 $ 4,557 $ 13,838,936 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 164,163 4, ,720 Deposits 67,991-67,991 Homebuyer reserves 194, ,214 Due to other funds 142, ,515 Unearned grant revenue 6,115,413-6,115,413 Total Liabilities 6,684,296 4,557 6,688,853 Fund Balances: Nonspendable: Prepaid items 92,778-92,778 Inventory 132, ,688 Restricted: NAHASDA 6,100,569-6,100,569 AHFC 11,243-11,243 Rural Cap 3,600-3,600 Assigned - MH reserves 67,500-67,500 Unassigned 741, ,705 Total Fund Balances 7,150,083-7,150,083 Total Liabilities and Fund Balances $ 13,834,379 $ 4,557 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds. 12,366,650 Accrued leave is not due and payable in the current period and therefore is not reported in the funds. (108,076) Net position of governmental activities $ 19,408,657 The notes to the financial statements are an integral part of this statement. 15

19 Exhibit D-1 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Old Harbor Duplex Tribal Needs Other Total General Capital Project Capital Project Governmental Governmental Fund Fund Fund Funds Funds Revenues: Intergovernmental: Federal sources $ 2,844,791 $ 417,336 $ 477,149 $ 149,910 $ 3,889,186 State of Alaska - 32,334-3,900 36,234 Local sources: Charges for services - rental income 555, ,743 Administrative fees 81, ,012 Interest income 25, ,183 Other income 25,247-32,947-58,194 Total Revenues 3,531, , , ,810 4,645,552 Expenditures: Current: Planning and administration 641, ,125 Housing services 975, ,716 Homebuyer assistance 1,354, ,354,732 Housing management services 239, ,213 Capital outlay - 449, , ,810 1,113,576 Total Expenditures 3,210, , , ,810 4,324,362 Excess (Deficiency) of Revenues Over Expenditures 321, ,190 Other Financing Sources (Uses): Proceeds from sale of capital assets 17, ,232 Net Other Financing Sources (Uses) 17, ,232 Net Change in Fund Balances 338, ,422 Fund Balances, beginning 6,811, ,811,661 Fund Balances, ending $ 7,150,083 $ - $ - $ - $ 7,150,083 The notes to the financial statements are an integral part of this statement. 16

20 Exhibit D-2 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Net Change in Fund Balances -Total Governmental Funds $ 338,422 Amounts reported for governmental acitvities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period: Capital outlay 458,407 Depreciation (563,135) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: (104,728) Increase in accrued leave (10,339) Governmental funds only report the conveyance or improvement of assets to the extent proceeds are received for each conveyance or improvement. The net effect of transactions involving capital assets is to decrease net assets. Cost of assets disposed (738,682) Accumulated depreciation of disposed assets 478,134 (260,548) Change In Net Position of Governmental Activities $ (37,193) The notes to the financial statements are an integral part of this statement. 17

21 Exhibit E-1 Statement of Revenues, Expenditures and Changes in Fund Balance Original and Final - Budget and Actual - General Fund Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Intergovernmental: Federal sources $ 3,419,395 $ 3,447,413 $ 2,844,791 $ (602,622) Local sources: Charges for services - rental income 552, , ,743 12,304 Administrative fees 93,600 93,600 81,012 (12,588) Interest income 24,175 28,175 25,183 (2,992) Other income 20,592 20,422 25,247 4,825 Total Revenues 4,110,179 4,133,049 3,531,976 (601,073) Expenditures: Current: Planning and administration 643, , ,125 44,906 Housing services 1,086,480 1,150, , ,150 Homebuyer assistance 1,629,764 1,599,524 1,354, ,792 Housing management services 324, , ,213 43,053 Total Expenditures 3,683,886 3,718,687 3,210, ,901 Excess of Revenues Over Expenditures 426, , ,190 (93,172) Other Financing Sources: Proceeds from sale of capital assets ,232 17,232 Net Other Financing Sources ,232 17,232 Net Change in Fund Balance $ 426,293 $ 414, ,422 $ (75,940) Fund Balance, beginning 6,811,661 Fund Balance, ending $ 7,150,083 The notes to the financial statements are an integral part of this statement. 18

22 Exhibit F-1 Statement of Net Position - Proprietary Funds September 30, 2016 ASSETS Business-type Activities - Enterprise Funds Loan Enterprise Program Rentals Totals Current Assets: Cash and cash equivalents $ 1,226,862 $ 381,618 $ 1,608,480 Accounts receivable, net 381,857 1, ,260 Due from other funds 57,804 80, ,958 Prepaid items ,012 17,421 Insurance deposits - 18,262 18,262 Inventory - 10,750 10,750 Total Current Assets 1,666, ,199 2,176,131 Noncurrent Assets: Restricted: Cash and cash equivalents 576, ,292 Notes receivable from homebuyers 231, ,163 Capital assets, net 22,917 10,818,713 10,841,630 Total Noncurrent Assets 830,372 10,818,713 11,649,085 Total Assets 2,497,304 11,327,912 13,825,216 LIABILITIES AND NET POSITION Current Liabilities: Accounts payable 8,293 58,311 66,604 Tenant security deposits - 47,295 47,295 Escrow accounts 461, ,215 Notes payable - due within one year - 19,137 19,137 Total Current Liabilities 469, , ,251 Noncurrent Liabilities: Notes payable 231,163 1,459,984 1,691,147 Total Noncurrent Liabilities 231,163 1,459,984 1,691,147 Total Liabilities 700,671 1,584,727 2,285,398 Net Position: Net investment in capital assets 22,917 10,818,713 10,841,630 Restricted for maintenance - 87,927 87,927 Restricted for reserves 576, ,292 Unrestricted 1,197,424 (1,163,455) 33,969 Total Net Position $ 1,796,633 $ 9,743,185 $ 11,539,818 The notes to the financial statements are an integral part of this statement. 19

23 Exhibit G-1 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Business-type Activities - Enterprise Funds Loan Enterprise Program Rentals Totals Operating revenues: Charges for services - rents $ - $ 1,175,728 $ 1,175,728 Charges for services - loan servicing fees 192, ,452 Other 6,574 41,361 47,935 Total Operating Revenues 199,026 1,217,089 1,416,115 Operating Expenses: Salaries and benefits 141, , ,783 Staff training Travel 19,203 15,938 35,141 Publications Audit 1,980 1,760 3,740 Communications 2,515 2,236 4,751 Sundry 2,177 6,374 8,551 Dues and fees Supplies 8,204 54,938 63,142 Postage 897 1,161 2,058 Licensing requirements 3,099-3,099 Tenant screenings Utilities , ,562 Fuel ,775 79,959 Contractual - 24,371 24,371 Credit report fees 1,327-1,327 Insurance 10,686 77,001 87,687 Property taxes - 30,740 30,740 Interest - 92,966 92,966 Maintenance - 6,490 6,490 Depreciation 1, , ,233 Total Operating Expenses 194,477 1,386,568 1,581,045 Operating Income 4,549 (169,479) (164,930) Non-operating Revenues - investment earnings 13, ,617 Change in Net Position 18,054 (169,367) (151,313) Net Position, beginning 1,778,579 9,912,552 11,691,131 Net Position, ending $ 1,796,633 $ 9,743,185 $ 11,539,818 The notes to the financial statements are an integral part of this statement. 20

24 Exhibit H-1 Statement of Cash Flows - Proprietary Funds Business-type Activities - Enterprise Funds Loan Enterprise Program Rentals Totals Cash Flows from Operating Activities: Receipts from borrowers $ 145,490 $ - $ 145,490 Receipts from rentals - 1,217,429 1,217,429 Payments to suppliers (52,549) (649,875) (702,424) Payments to employees (141,914) (418,869) (560,783) Payments on escrow (13,559) - (13,559) Net Cash Provided (Used) by Operating Activities (62,532) 148,685 86,153 Cash Flows from Capital and Related Financing Activities: Collection on notes receivable 17,694-17,694 Principal payments on notes payable (17,694) (17,980) (35,674) Principal payments on long-term interfund borrowing (28,024) 69,803 41,779 Net Cash Provided (Used) by Capital and Related Financing Activities (28,024) 51,823 23,799 Cash Flows from Investing Activities: Purchase of capital assets - (180,509) (180,509) Interest and dividends 13, ,617 Net Cash Provided (Used) by Investing Activities 13,505 (180,397) (166,892) Net Change in Cash and Cash Equivalents (77,051) 20,111 (56,940) Cash and Cash Equivalents, beginning of year 1,880, ,507 2,241,712 Cash and Cash Equivalents, end of year $ 1,803,154 $ 381,618 $ 2,184,772 Balances are Comprised Of: Cash and cash equivalents 1,226, ,618 1,608,480 Restricted cash and cash equivalents 576, ,292 $ 1,803,154 $ 381,618 $ 2,184,772 Reconciliation of operating income to net cash provided (used) by operating activities: Operating Income 4,549 (169,479) (164,930) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 1, , ,233 Change in assets - (increase) decrease: Accounts receivable (53,536) 340 (53,196) Prepaid items 34 2,842 2,876 Inventory - 3,612 3,612 Change in liabilities - increase (decrease): Accounts payable (1,270) 7,644 6,374 Tenant security deposits - (6,257) (6,257) Escrow accounts (13,559) - (13,559) Net Cash Provided (Used) by Operating Activities $ (62,532) $ 148,685 $ 86,153 The notes to the financial statements are an integral part of this statement. 21

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26 Notes to Financial Statements I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements of Kodiak Island Housing Authority (the Housing Authority) have been prepared in conformity with generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the accepted standards-setting body for governmental accounting and financial principles, which are primarily set forth in GASB s Codification of Governmental Accounting and Financial Reporting Standards. A. Reporting Entity Kodiak Island Housing Authority was established to administer Low Income Home Ownership and Low Rent Housing programs financed by the U.S. Department of Housing and Urban Development (HUD). The programs are governed by the terms of the Native American Housing Assistance and Self Determination Act of 1996 (NAHASDA). The Housing Authority is not included in any other governmental reporting entity and the Housing Authority s Board of Commissioners has decision-making authority, the responsibility to significantly influence operations and primary accountability for fiscal matters. The Housing Authority does not exercise oversight responsibility over any other entity. NAHASDA became effective on October 1, The purpose of this law is to: (1) streamline the process of providing housing assistance to Native Americans, (2) facilitate, where possible, the development of private housing finance mechanisms, and (3) promote economic self-sufficiency and self-determination among Native Americans. Accordingly, it eliminates many of the compliance requirements under the U.S. Housing Act of 1937, as amended, as well as the associated regulations, handbooks and guidebooks that provided guidance in the past. While permitting the Tribal Entity greater latitude in establishing policies and procedures, it also created additional reporting and administrative requirements. Under NAHASDA, block grants are awarded directly to tribal entities and the amount of the block grant is determined by the number of current assisted stock within the village(s) and the unmet housing needs within the village(s). Tribes may designate Kodiak Island Housing Authority to be the Tribally Designated Housing Entity (TDHE). Block grants are awarded only after an Indian Housing Plan (IHP) has been submitted. The purpose of an IHP is to demonstrate that the TDHE has made or will make adequate provision to comply with the objectives and stewardship requirements of NAHASDA monies. The Housing Authority is an independent reporting entity with no component units. The Housing Authority is legally separate from and fiscally independent of other state and local governments. Consequently, the Housing Authority s financial statements present only funds for which its governing board is financially accountable. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e. the statement of net position and the statement of activities) report information on all activities of the Housing Authority. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which are normally supported by intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include charges to customers or applicants who use, purchase, or directly benefit from the goods, services, or privileges meeting the operations or capital requirements of a particular function or segment. Other items not properly included among program revenues are reported as general revenues. 23

27 Notes to Financial Statements Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as are the proprietary fund statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar programs are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measureable and available. Revenues are considered to be available when they are collectible in the current period or soon enough thereafter to pay liabilities of the current period. Measurable means the amount of the transaction can be determined. For this purpose, the Housing Authority considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred, except for unmatured principal and interest on long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Rental income, earnings on investments, and administration fees are recorded in the General Fund unless otherwise specified by the funding source, using the modified accrual basis of accounting. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the Loan Program and Enterprise Rentals enterprise funds are charges to customers for rents and services. Operating expenses for enterprise funds include the cost of rental operations and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The Housing Authority reports the following major governmental funds: The General Fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Old Harbor Duplex Capital Project Fund accounts for activities related to the construction of housing in Old Harbor. The Tribal Needs Capital Project Fund accounts for various construction projects of the Housing Authority. The Housing Authority reports the following major proprietary funds: The Loan Program Enterprise Fund accounts for the activities of the home loan programs administered by the Housing Authority on behalf of Alaska Housing Finance Corporation and Fannie Mae. The Enterprise Rentals Enterprise Fund accounts for the activities of three moderate-income housing developments operated by the Housing Authority. Summarized below are the major sources of revenue and the applicable recognition policies. 24

28 Notes to Financial Statements Intergovernmental Revenue U.S. Department of Housing and Urban Development and State of Alaska grants are susceptible to accrual and are recorded in the year to which they relate. Local Revenue Interest earned is recorded in the General Fund and Enterprise Funds unless otherwise specified by the funding source. Rental income from Housing Authority owned property is recorded in the period to which it relates. Both interest and rental income is susceptible to accrual. Proceeds from the sale of property and other miscellaneous revenues are recognized in the period received. As a general rule, the effect of inter-fund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between various function of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. When both restricted and unrestricted resources are available for use, it is the Housing Authority s policy to use restricted resources first, then unrestricted resources as they are needed. D. Use of Estimates The preparation of the basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual costs could differ from those estimates. E. Assets, Liabilities and Net Position/Fund Equity 1. Deposits and Investments For purposes of the Statement of Cash Flows, the Housing Authority s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Interest Rate Risk The Housing Authority limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates to two years or less. Credit Risk The Housing Authority can invest in obligations of the United States, the State of Alaska and its political subdivisions, savings accounts, certificates of deposit, banker s acceptances, repurchase agreements, and such other legal security instruments. The Housing Authority has a formal investment policy that restricts investments based on credit risk. Custodial Credit Risk Deposits In the case of deposits, there is the risk that in the event of a bank failure, the Housing Authority s deposits may not be returned to it. The Housing Authority requires all deposits to be insured or collateralized. The Federal Deposits Insurance Corporation insures $250,000 in the aggregate per institution. 25

29 Notes to Financial Statements 2. Receivables and Payables All outstanding balances between funds are reported as due to/from other funds on the balance sheet of the fund financial statements and are eliminated in the preparation of the government-wide financial statements. These balances represent the numerous transactions that occur during the course of operation between individual funds for goods provided or services rendered. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. All accounts receivables are shown net of allowance for uncollectible accounts. An allowance for uncollectible receivables is established by management based on historical information. 3. Inventories and Prepaid Items Office supplies are recorded as expenditures when purchased and there are no material inventory amounts of these supplies. Accounting for inventory of building materials is on the consumption method. The consumption method records the expenditure when consumed rather than when purchased. Inventories are valued at cost, which approximates fair value, using the first-in, first-out (FIFO) method. Reported inventories are equally offset by a portion of fund balance classified as non-spendable in the Fund Financial Statements, which indicates that they do not constitute available spendable resources even though they are a component of net position. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Prepaid items are recorded based on the consumption method. Prepaid assets do not reflect current available resources and therefore are equally offset by a portion of fund balance classified as non-spendable fund balance in the Fund Financial Statements. 4. Capital Assets Capital assets, which include property, plant and equipment, are reported in the applicable governmental activities or business-type activities columns in the government-wide financial statements. Capital assets are defined by the Housing Authority as assets with an initial, individual cost of more than $5,000 and estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. No interest was capitalized during the year. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Governmental Enterprise Assets Funds Funds Buildings and Dwelling Structures Mutual Help Homes 25 - Non-Dwelling Structures Vehicles Equipment and Furniture