Seagirt Housing Development Fund Corporation HUD Project No.:

Transcription

1 Financial Statements (With Supplementary Information) and Independent Auditor's Report June 30, 2015 and 2014

2 Index Page Mortgagor's Certification 3 Managing Agent's Certification 4 Independent Auditor's Report 5 Financial Statements Statements of Financial Position 7 Statements of Activities 9 Statements of Cash Flows 11 Notes to Financial Statements 13 Supplementary Information Statement of Financial Position Data 24 Statement of Activities Data 26 Statement of Cash Flows Data 30 Reserve for Replacements 32 Residual Receipts Reserve 32 Computation of Surplus Cash, Distributions and Residual Receipts 33 Changes in Fixed Asset Accounts 34 Detail of Accounts - Statement of Financial Position 36 Detail of Accounts - Statement of Activities 37 Other Information 38 Schedule of Expenditures of Federal Awards 39 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 40 1

3 Index Page Independent Auditor's Report on Compliance for Each Major Federal Program and on Internal Control over Compliance Required by OMB Circular A Schedule of Findings and Questioned Costs 45 Schedule of the Status of Prior Audit Findings, Questioned Costs and Recommendations 48 2

4 June 30, 2015 and 2014 Mortgagor's Certification I hereby certify that I have examined the accompanying financial statements and supplementary data of Seagirt Housing Development Fund Corporation and, to the best of my knowledge and belief, the same are complete and accurate. OFFICER Heidi Aro in Chief Administrative Officer Telephone Number: (212)

5 June 30, 2015 and 2014 Managing Agent's Certification I hereby certify that I have examined the accompanying financial statements and supplementary data of Seagirt Housing Development Fund Corporation and, to the best of my knowledge and belief, the same are complete and accurate. MANAGING AGENT JASA Housing Management Services for the Aged, Inc. Director of Housing Launthia Wellington Property Manager Managing Agent Taxpayer Identification Number:

6 Independent Auditor's Report To the Board of Trustees Seagirt Housing Development Fund Corporation Report on the Financial Statements We have audited the accompanying financial statements of Seagirt Housing Development Fund Corporation, which comprise the statements of financial position as of June 30, 2015 and 2014, and the related statements of activities and cash flows for the year ended June 30, 2015 and the period January 1, 2014 through June 30, 2014, 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation 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. 5

7 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Seagirt Housing Development Fund Corporation as of June 30, 2015 and 2014, and the changes in its net assets and its cash flows for the year ended June 30, 2015 and the period January 1, 2014 through June 30, 2014 in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information on pages 24 to 38 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 U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, 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 audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 25, 2015, on our consideration of Seagirt Housing Development Fund Corporation'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 Seagirt Housing Development Fund Corporation's internal control over financial reporting and compliance. Baltimore, Maryland Taxpayer Identification Number: September 25, Lead Auditor: Michael A. Cumming 6

8 Statements of Financial Position June 30, 2015 and 2014 Assets Current assets Cash - operations $ 312,702 $ 227,558 Tenant accounts receivable 21,914 13,722 Allowance for doubtful accounts (16,094) (10,727) Accounts receivable - HUD 7,015 16,470 Accounts and notes receivable - operations ,820 Due from affiliates 122,594 - Prepaid expenses 161, ,222 Total current assets 609, ,065 Deposits held in trust - funded Tenant deposits 33,462 32,629 Restricted deposits and funded reserves Escrow deposits 86,094 48,363 Reserve for replacements 435, ,653 Other reserves 535, ,496 Residual receipts reserve 226, ,782 Total restricted deposits and funded reserves 1,284,316 1,396,294 Rental property Land 49,100 49,100 Buildings 11,465,656 11,408,032 Building equipment - portable 112, ,737 Office furniture and equipment 12,500 12,500 Miscellaneous fixed assets 278,790-11,918,876 11,573,369 Less accumulated depreciation (7,595,971) (7,235,067) Total rental property 4,322,905 4,338,302 Other assets Deferred financing costs, net of accumulated amortization of $49,041 and $39, , ,985 Total other assets 272, ,985 Total assets $ 6,523,396 $ 6,478,275 7

9 Statements of Financial Position June 30, 2015 and 2014 Liabilities and Net Assets (Deficit) Current liabilities Accounts payable - operations $ 129,949 $ 172,775 Accrued wages payable 50,821 48,004 Accrued payroll taxes payable 3,884 3,668 Accrued management fee payable 4,338 1,847 Accrued interest payable - first mortgage 39,877 40,428 Mortgage payable - first mortgage, current maturities 133, ,084 Prepaid revenue 2,591 3,496 Total current liabilities 365, ,302 Deposits liability Tenant deposits held in trust (contra) 33,462 32,629 Long-term liabilities Mortgage payable - first mortgage, net of current maturities 9,068,571 9,202,424 Total long-term liabilities 9,068,571 9,202,424 Total liabilities 9,467,345 9,632,355 Net assets (deficit) Unrestricted net assets (deficit) (2,986,409) (3,204,080) Temporarily restricted net assets 42,460 50,000 Total net assets (deficit) (2,943,949) (3,154,080) $ 6,523,396 $ 6,478,275 See Notes to Financial Statements. 8

10 Statement of Activities Year Ended June 30, 2015 Temporarily Unrestricted Restricted Total Revenue Rental $ 2,691,291 $ - $ 2,691,291 Vacancies (46,007) - (46,007) Net rental revenue 2,645,284-2,645,284 Nursing home/assisted living and other revenue 62,820-62,820 Financial Satisfaction of restrictions 7,540 (7,540) - Other 9,577-9,577 Total revenue 2,725,929 (7,540) 2,718,389 Expenses Administrative 327, ,258 Utilities 201, ,374 Operating and maintenance 607, ,776 Taxes and insurance 607, ,462 Financial (including interest of $481,583) 523, ,255 Nursing home/assisted living and other elderly care 142, ,284 Total cost of operations before depreciation and amortization 2,409,409-2,409,409 Income (loss) before depreciation and amortization 316,520 (7,540) 308,980 Depreciation and amortization 370, ,099 Operating income (loss) (53,579) (7,540) (61,119) Contribution revenue (271,250) - (271,250) Change in net assets (deficit) 217,671 (7,540) 210,131 Net assets (deficit), beginning (3,204,080) 50,000 (3,154,080) Net assets (deficit), end $ (2,986,409) $ 42,460 $ (2,943,949) 9

11 Statement of Activities Period January 1, 2014 through June 30, 2014 Temporarily Unrestricted Restricted Total Revenue Rental $ 1,323,370 $ - $ 1,323,370 Vacancies (15,102) - (15,102) Net rental revenue 1,308,268-1,308,268 Nursing home/assisted living and other revenue 31,172-31,172 Financial Other 25,722-25,722 Total revenue 1,365,517-1,365,517 Expenses Administrative 172, ,206 Utilities 104, ,872 Operating and maintenance 262, ,369 Taxes and insurance 306, ,082 Financial (including interest of $243,233) 264, ,257 Nursing home/assisted living and other elderly care 71,189-71,189 Total cost of operations before depreciation and amortization 1,180,975-1,180,975 Income (loss) before depreciation and amortization 184, ,542 Depreciation and amortization 184, ,727 Change in net assets (deficit) (185) - (185) Net assets (deficit), beginning (3,203,895) 50,000 (3,153,895) Net assets (deficit), end $ (3,204,080) $ 50,000 $ (3,154,080) See Notes to Financial Statements. 10

12 Statements of Cash Flows Year Ended June 30, 2015 and Period January 1, 2014 through June 30, Cash flows from operating activities Rental receipts $ 2,623,753 $ 1,280,494 Interest receipts Other operating receipts 93,705 31,470 Total receipts 2,718,166 1,312,319 Administrative expenses paid (102,341) (35,205) Management fees paid (107,538) (56,817) Utilities paid (198,490) (112,841) Salaries and wages paid (457,082) (215,675) Operating and maintenance paid (222,860) (93,098) Real estate taxes paid (259,209) (129,605) Property insurance paid (103,291) (53,495) Miscellaneous taxes and insurance paid (719) (2,826) Other operating expenses paid (386,923) (190,643) Interest paid on first mortgage (482,134) (243,498) Mortgage insurance premium paid (41,286) (41,865) Total disbursements (2,361,873) (1,175,568) Net cash provided by operating activities 356, ,751 Cash flows from investing activities Net (deposits to) withdrawals from mortgage escrows (37,731) 12,499 Net withdrawals from (deposits to) reserve for replacements 253,802 (43,531) Net deposits to other reserves (103,979) (51,997) Net deposits to residual receipts reserve (114) (206,965) Net purchases of fixed assets (133,448) (29,386) Net cash used in investing activities (21,470) (319,380) Cash flows from financing activities Mortgage principal payments - first mortgage (127,085) (61,111) Entity/construction financing activities (include detail) Due from affiliates (122,594) - Net cash used in financing activities (249,679) (61,111) Net increase (decrease) in cash 85,144 (243,740) Cash, beginning 227, ,298 Cash, end $ 312,702 $ 227,558 Significant noncash investing and financing activities Additions to fixed assets included in accounts payable $ - $ 59,191 Payments for additions to fixed assets previously included in accounts payable $ (59,191) $ - Contributed rental property improvements $ 271,250 $ - 11

13 Statements of Cash Flows Year Ended June 30, 2015 and Period January 1, 2014 through June 30, Reconciliation of change in net assets (deficit) to net cash provided by operating activities Change in net assets (deficit) $ 210,131 $ (185) Adjustments to reconcile change in net assets (deficit) to net cash provided by operating activities Depreciation 360, ,129 Amortization 9,195 4,598 Bad debts 9,730 10,206 Contributions (271,250) - Changes in asset and liability accounts (Increase) decrease in assets Tenant accounts receivable (12,555) (7,345) Accounts receivable - other 30,763 (33,303) Prepaid expenses (1,058) (18,856) Tenant security deposits funded (833) 149 Increase (decrease) in liabilities Accounts payable 16,365 (1,740) Accrued liabilities 5,524 7,422 Accrued interest payable (551) (265) Tenant security deposits held in trust 833 (149) Prepaid revenue (905) (306) Other adjustments (include detail) Advances for insurance related expense - (3,604) Total adjustments 146, ,936 Net cash provided by operating activities $ 356,293 $ 136,751 See Notes to Financial Statements. 12

14 Notes to Financial Statements June 30, 2015 and 2014 Note 1 - Organization Seagirt Housing Development Fund Corporation (the "Corporation") was organized in 1982 as a nonstock, nonprofit corporation for the purpose of developing and operating housing and auxiliary facilities for aged persons of low income under Section 223(f) of the National Housing Act. Such projects are regulated by the U.S. Department of Housing and Urban Development ("HUD") as to rent charges and operating methods. The project consists of 152 units located in Far Rockaway, New York and is currently operating under the name of Evelyn and Louis Green Residence at Seagirt (the "Project"). The Corporation receives a significant portion of its revenue from government subsidy payments. Surplus cash, as defined by HUD, is required to be deposited into a residual receipts reserve. The Corporation is wholly controlled by the JASA Corporation, its sole member. JASA Corporation also wholly controls the Jewish Association Serving the Aging ("JASA"), JASA Housing Management Services for the Aged, Inc. ("JHM") and other housing companies, in its capacity as their sole member. The Corporation is related to JASA, JHM and the other housing companies by virtue of this control. During 2014 the Corporation changed its fiscal year end to June 30 to correspond with the fiscal year end of JASA, JHM and other affiliated entities. The readers of the financial statements should be aware that the change in fiscal year results in a statement of activities and statement of cash flows showing twelve months of activity, while the comparative column represents six months of activity. Note 2 - Summary of significant accounting policies Basis of presentation The Corporation presents its financial statements in accordance with the accounting guidance for nonprofit entities. Under this guidance, the organization 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. Furthermore, information is required to segregate program service expenses from management and general expenses. The Corporation conforms to accounting guidance on revenue recognition for nonprofit entities. Under this guidance, contributions received, if any, are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported 13

15 Notes to Financial Statements June 30, 2015 and 2014 amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Accounts receivable and allowance for doubtful accounts Tenant receivables are reported net of an allowance for doubtful accounts. Management's estimate of the allowance is based on historical collection experience and a review of the current status of tenant accounts receivable. It is reasonably possible that management's estimate of the allowance will change. As of June 30, 2015 and 2014, the balance in the allowance for doubtful accounts was $16,094 and $10,727, respectively. Rental property Rental property is carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated useful lives by use of the straight-line method. It is the Corporation's policy to capitalize items of $5,000 or greater and items purchased with replacement reserve that have a useful life that is greater than one year. Impairment of long-lived assets The Corporation reviews its rental property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. When recovery is reviewed, if the undiscounted cash flows estimated to be generated by the property are less than its carrying amount, management compares the carrying amount of the property to its fair value in order to determine whether an impairment loss has occurred. The amount of the impairment loss is equal to the excess of the asset's carrying value over its estimated fair value. No impairment loss was recognized during the year ended June 30, 2015 or the period January 1, 2014 through June 30, Deferred financing costs and amortization Financing costs are amortized over the term of the loan using the straight-line method. Accounting principles generally accepted in the United States of America require that the effective yield method be used to amortize financing costs; however, the effect of using the straight-line method is not materially different from the results that would have been obtained under the effective yield method. The amortization expense for the year ended June 30, 2015 and the period January 1, 2014 through June 30, 2014, is $9,195 and $4,598, respectively. Estimated annual amortization expense for each of the ensuing years through June 30, 2020 is $9,195. Income taxes The Corporation has applied for and received a determination letter from the Internal Revenue Service ("IRS") to be treated as a tax exempt entity pursuant to Section 501(c)(3) of the Internal Revenue Code and did not have any unrelated business income for the year ended June 30, 2015 or the period January 1, 2014 through June 30, Due to its taxexempt status, the Corporation is not subject to income taxes. The Corporation is required to file and does file tax returns with the IRS and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Corporation has no 14

16 Notes to Financial Statements June 30, 2015 and 2014 other tax positions which must be considered for disclosure. Income tax returns filed by the Corporation are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2012 remain open. During 2014, the Corporation requested a change in tax year end to June 30, and the request was approved. Revenue recognition Rental income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Corporation and the tenants of the property are operating leases. Grant income The Corporation was awarded a cost reimbursed grant from HUD (see note 6). Revenue is recognized as costs are incurred. The Corporation was awarded a grant from the Fund for the City of New York (see note 10). Revenue was recognized as the funds became unconditionally committed for a specific purpose and unspent funds are included as temporarily restricted net assets. Advertising costs Advertising costs are expensed as incurred. Functional expenses The costs of providing various programs and other activities as for the year ended June 30, 2015 and the period January 1, 2014 through June 30, 2014 are summarized on a functional basis as follows: Program services HUD-assisted elderly housing project $ 2,609,758 $ 1,275,240 Supporting services Management fee 110,029 54,353 Accounting 59,721 36, $ 2,779,508 $ 1,365,702 Fair value measurements The accounting guidance for fair value measurements and disclosures emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumption in fair value measurements, the guidance establishes a fair value hierarchy that distinguishes between market participants' assumptions based on market

17 Notes to Financial Statements June 30, 2015 and 2014 data obtained from sources independent of the reporting entity (observable inputs that are classified with Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about the market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Note 3 - Mortgage payable The Corporation has a mortgage in the original amount of $9,810,000 under Section 207 pursuant to Section 223(f) of the National Housing Act. The note bears interest at 5.2%. Commencing March 1, 2010, the mortgage required monthly installments of principal and interest of $50,768 through maturity on February 1, The mortgage is collateralized by the Corporation's fixed assets. The Corporation entered into a regulatory agreement with the Secretary of HUD which prohibits, among other matters, (i) distributions (as defined) without prior written approval; (ii) the sale, assignment, disposal, or alteration of the real and personal property covered by the mortgage; and (iii) the Corporation's engaging in other business activities or incurring any liabilities not connected with the operation and rental of the building without prior written consent from HUD. Under agreements with the mortgage lender and HUD, the Corporation is required to make monthly escrow deposits for taxes, insurance and replacement of project assets, and is subject to restrictions as to operating policies, rental charges, operating expenditures and distributions. The Corporation is also required by HUD to use the funds saved by a reduction in the debt service cost for programs and building improvements for the benefit of the tenants. As a provision of refinancing the Corporations original mortgage into the current mortgage in 2010, the Corporation is also required by HUD to use the funds saved by a reduction in the debt service cost for programs and building improvements for the benefit of the tenants, as outlined in the agreement. The Corporation is required to make monthly deposits into debt service/capital repair reserve, as described in note 4. In addition, annual required expenditures are $79,400 with any unspent funds required to be deposited to the replacement reserve in the subsequent year. For the year ended June 30, 2015 and the period January 1, 2014 through June 30, 2014, $79,464 and $40,017, respectively, were used for program services and are included in the statements of activities as nursing home/assisted living and other elderly care expenses. As of June 30, 2015, no deposit was due to the replacement reserve. As of June 30, 2014, a deposit of $8,983 was due to the replacement reserve and this amount was deposited in The liability of the Corporation under the mortgage note is limited to the underlying value of the real estate collateral plus other amounts deposited with the lender. 16

18 Notes to Financial Statements June 30, 2015 and 2014 Aggregate annual maturities of the mortgage payable over each of the next five years and thereafter are as follows: 2016 $ 133, , , , ,767 Thereafter 8,457,937 $ 9,202,423 Note 4 - Reserves Replacement reserve In accordance with provisions of the HUD regulatory agreement, the Corporation is required to make monthly deposits to a replacement reserve escrow account which consists of restricted cash that is to be used for the replacement of the property and equipment. The use of these funds requires prior approval from HUD. As of June 30, 2015 and 2014, the balance of the replacement reserve was $435,851 and $689,653, respectively. During the year ended June 30, 2015, HUD approved a withdrawal of $300,000 to advance to JASA to fund resiliency efforts at the project (as further described in note 12). JASA must return the funds to the replacement reserve by October 31, As of June 30, 2015, $122,594 is due from JASA and included in due from affiliates on the statement of financial position and $177,406 is in operating cash and included as a reduction on the computation of surplus cash, distributions and residual receipts. Other reserves The Corporation is required by HUD to fund a reserve to be used for debt service, to enhance the building and the services provided to the tenants, and noncritical repairs. The use of the funds requires prior approval from HUD. The required monthly deposit was $8,645 as of June 30, 2015 and As of June 30, 2015 and 2014, the balance in other reserves was $535,475 and $431,496, respectively. Residual receipts The Corporation is required by HUD to deposit surplus cash, as defined by HUD, into a residual receipts reserve to be used for capital improvements. The use of these funds requires prior approval from HUD. As of June 30, 2015 and 2014, the balance in the residual receipts reserve was $226,896 and $226,782, respectively. Note 5 - Related party transactions JASA The Corporation is a participant in a general insurance plan with JASA, sponsored by the UJA-Federation, which also includes health insurance and worker's compensation. Property and liability insurance expense for the year ended June 30, 2015 and the period 17

19 Notes to Financial Statements June 30, 2015 and 2014 from January 1, 2014 through June 30, 2014 were $103,291 and $53,495, respectively. Health insurance and other employee benefits for the year ended June 30, 2015 and the period from January 1, 2014 through June 30, 2014 were $28,455 and $12,679, respectively. The Corporation pays JASA, through a HUD grant, for the Service Coordinator Program, which provides social services for the tenants (see note 6). The program expenses for the year ended June 30, 2015 and the period from January 1, 2014 through June 30, 2014 were $62,820 and $31,172, respectively. As of June 30, 2015 and 2014, $5,736 and $9,816, respectively, remained due to JASA and are included in accounts payable - operations on the statements of financial position. JHM The property is managed by JHM pursuant to a management agreement approved by HUD. The current management agreement provides for a management fee of 4.206% of rental receipts. Management fees earned for the year ended June 30, 2015 and the period from January 1, 2014 through June 30, 2014 were $110,029 and $54,353, respectively. The property pays a HUD-approved monthly fee to JHM for accounting and bookkeeping services. Fees earned for the year ended June 30, 2015 and the period from January 1, 2014 through June 30, 2014 were $36,924 and $17,088, respectively, and are included in administrative expenses on the statement of activities. As of June 30, 2015 and 2014, $4,338 and $1,847, respectively, remain due to JHM and are included as accrued management fee payable on the statements of financial position. Note 6 - Grant revenue The Corporation was awarded a service coordinator grant from HUD to use toward payment of the service coordinator's salary, benefits and other administrative costs. The Corporation reimburses JASA from the grant proceeds for these costs. The Corporation received a one-year renewal grant totaling $60,059 for the period from May 1, 2015 through April 30, 2016 and $59,055 for the period from May 1, 2014 through April 30, For the year ended June 30, 2015 and the period January 1, 2014 through June 30, 2014, revenue recognized and grant expense were $62,820 and $31,172, respectively. As of June 30, 2015 and 2014, $7,015 and $16,470, respectively, remain receivable from HUD and are included in accounts receivable - HUD. Note 7 - Housing assistance payment contract agreement HUD has contracted with the Corporation pursuant to Section 8 of the Housing Act of 1937 to make housing assistance payments to the Corporation on behalf of qualified tenants. The agreement expires on April 17,

20 Notes to Financial Statements June 30, 2015 and 2014 Note 8 - Pension plan The Corporation is a participant in a multiemployer pension plan covering its union employees under a Collective Bargain Agreement. This plan is not controlled or administered by the Corporation. The information as to the Corporation's portion of accumulated plan benefits and plan assets is not determinable. The monthly required contribution was 15.80% of the covered employees' payroll. This resulted in contributions of $64,359 and $30,654, for the year ended June 30, 2015 and the period from January 1, 2014 through June 30, 2014, respectively. These amounts are included in taxes and insurance in the statements of activities. Note 9 - Concentration of credit risk The Corporation maintains its cash balances in several accounts in one bank. The cash balances are insured by the Federal Deposit Insurance Corporation. At times, these balances may exceed the federal insurance limits; however, the Corporation has not experienced any losses with respect to its bank balances in excess of government provided insurance. Management believes that no significant concentration of credit risk exists with respect to these cash balances as of June 30, In accordance with the regulatory agreement and other loan documents, the Corporation has escrow deposits, reserve for replacements, residual receipts reserves, and other reserves in the amount of $1,284,316 deposited with the mortgagee at June 30, Investment options on these deposits are limited to those provided by the mortgagee. Note 10 - Superstorm Sandy The Corporation is linked with other properties and businesses through the UJA- Federation, which settled the Superstorm Sandy-related insurance claim with these businesses. JASA was the recipient of a portion of the settlement and allocated the insurance proceeds based upon a percentage of total costs incurred. As of June 30, 2014, JASA had advanced $19,581 to the Corporation from total insurance proceeds received. After determining the final allocations between all JASA entities, an additional $21,820 was allocated to the Corporation and was included in other revenue. As of June 30, 2014 the additional $21,820 of funds to be received on the final allocation is due from JASA and was included in accounts receivable - operations. For the year ended June 30, 2015, no additional insurance proceeds were allocated to the Corporation and the final $21,620 was received. During the year ended December 31, 2013, the Corporation received a grant from the Fund for the City of New York in the amount of $50,000, which was included in other revenue. Use of the $50,000 is restricted by the grantor for resiliency planning (equipping the project to reduce the impact of future natural disasters) and is included as temporarily restricted net assets. In the year ended June 30, 2015, $7,540 of qualified expenditures were incurred. The remaining balance of the restricted funds as of June 30, 2015 is $42,

21 Notes to Financial Statements June 30, 2015 and 2014 Note 11 - Contingency The Corporation has entered into a housing assistance payments contract under the revised regulations of 24 CFR. As such, upon termination of the contract, whether initiated by the Corporation opting out of the contract or by HUD, any unused balance in the residual receipts reserve must be remitted to HUD. Note 12 - Contributions During fiscal year 2015, JASA obtained a cost reimbursement Social Service Block Grant ("the SSBG") from the New York State Office for the Aging. The purpose of the grant was to allow JASA to incur resiliency costs to better prepare the housing companies it sponsors for potential future weather events like Superstorm Sandy. JASA incurs the costs under various contracts with unrelated third parties and simultaneously contributes the resulting assets to the housing companies. The assets contributed are recorded as contribution revenue and as additions to rental property at fair value, as determined by management and further discussed in note 13. During the year ended June 30, 2015, noncash contributions related to the SSBG of $264,250 were recognized by the Corporation. Additionally, the Corporation received a noncash contribution of $7,000 related to the NYC Housing Neighborhood Recovery Donors Collaborative grant. Note 13 - Fair value The accounting standard for fair value measurement and disclosures defines fair value, establishes a framework for measuring fair value, and provides for expanded disclosure about fair value measurements. Fair value is defined by the accounting standard for fair value measurement and disclosures as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels. The following summarizes the three levels of inputs and hierarchy of fair value the Company uses when measuring fair value: Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access; Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as interest rates and yield curves that are observable at commonly quoted intervals; and Level 3 inputs are unobservable inputs for the asset or liability that are typically based on an entity's own assumptions as there is little, if any, related market activity. 20

22 Notes to Financial Statements June 30, 2015 and 2014 In instances where the determination of fair value measurement is based on inputs from different levels of the fair value hierarchy, the fair value measurement will fall within the lowest level input that is significant to the fair value measurement in its entirety. As a result of the assets contributed by JASA, as further described in note 12, the Corporation has recognized the assets received at fair value at the date of the contributions using the following inputs: Fair value measurements using: Total Quoted prices in active markets for identical assets/liabilities (Level 1) Significant other observable inputs (Level 2) Unobservable inputs (Level 3) 2015 Real estate assets contributed $ 271,250 $ 271,250 $ - $ Real estate assets contributed $ - $ - $ - $ - In determining the fair value of the real estate assets contributed, management gave consideration to the price charged under contracts between JASA and unrelated third party vendors to produce and deliver these assets. These costs are considered quoted prices in active markets for identical assets, thus the resulting fair value is considered to be based on Level 1 inputs. Note 14 - Current vulnerability due to certain concentrations The Corporation's principal asset is a 152-unit apartment project. The Corporation's operations are concentrated in the multifamily real estate market. In addition, the Corporation operates in a heavily regulated environment. The operations of the Corporation are subject to the administrative directives, rules and regulations of federal 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. 21

23 Notes to Financial Statements June 30, 2015 and 2014 Note 15 - Subsequent events Events that occur after the statement of financial position date but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the statement of financial position date are recognized in the accompanying financial statements. Subsequent events which provide evidence about conditions that existed after the statement of financial position date require disclosure in the accompanying notes. Management evaluated the activity of the Corporation through September 25, 2015 (the date the financial statements were available to be issued) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements. 22

24 Supplementary Information Supporting Data Required by HUD

25 Supplementary Information Statement of Financial Position Data June 30, 2015 Assets Account No. Current assets 1120 Cash - operations $ 312, Tenant accounts receivable $ 21, Allowance for doubtful accounts (16,094) 1130N Net tenants accounts receivable 5, Accounts receivable - HUD 7, Accounts and notes receivable - operations Accounts and notes receivable - entity 122, Prepaid expenses 161, T Total current assets 609,923 Deposits held in trust - funded 1191 Tenant deposits 33,462 Restricted deposits and funded reserves 1310 Escrow deposits 86, Reserve for replacements 435, Other reserves 535, Residual receipts reserve 226, T Total deposits 1,284,316 Rental property 1410 Land 49, Buildings 11,465, Building equipment - portable 112, Office furniture and equipment 12, Miscellaneous fixed assets 278, T Total fixed assets 11,918, Less accumulated depreciation (7,595,971) 1400N Net fixed assets 4,322,905 Other assets 1520 Deferred financing costs, net of accumulated amortization of $49, , T Total other assets 272, T Total assets $ 6,523,396 24

26 Supplementary Information Statement of Financial Position Data June 30, 2015 Liabilities and Net Assets (Deficit) Account No. Current liabilities 2110 Accounts payable - operations $ 129, Accrued wages payable 50, Accrued payroll taxes payable 3, Accrued management fee payable 4, Accrued interest payable - first mortgage 39, Mortgage payable - first mortgage, current maturities 133, Prepaid revenue 2, T Total current liabilities 365,312 Deposits liability 2191 Tenant deposits held in trust (contra) 33,462 Long-term liabilities 2320 Mortgage payable - first mortgage, net of current maturities $ 9,068, T Total long-term liabilities 9,068, T Total liabilities 9,467, Unrestricted net assets (2,986,409) 3132 Temporarily restricted net assets 42, Total net assets (deficit) (2,943,949) 2033T Total liabilities and net assets (deficit) $ 6,523,396 25

27 Supplementary Information Statement of Activities Data Year Ended June 30, 2015 Account No. Rental revenue 5120 Rent revenue - gross potential $ 465, Tenant assistance payments 2,223, Garage and parking spaces 2, T Total rental revenue $ 2,691,291 Vacancies 5220 Apartments (46,007) 5200T Total vacancies (46,007) 5152N Net rental revenue 2,645, Nursing home/assisted living/board and care/other elderly care/coop and other revenue 62,820 Financial revenue 5430 Revenue from investments - residual receipts Revenue from investments - replacement reserve Revenue from investments - miscellaneous T Total financial revenue 708 Other revenue 5910 Laundry and vending 8, Tenant charges 1, Miscellaneous revenue T Total other revenue 9, T Total revenue 2,718,389 26

28 Supplementary Information Statement of Activities Data Year Ended June 30, 2015 Account No. Administrative expenses 6203 Conventions and meetings Management consultants 4, Other renting expenses 1, Office salaries 74, Office expenses 17, Management fee 110, Manager or superintendent salaries 21, Administrative rent free unit 17, Legal expense - project 6, Auditing expense 13, Bookkeeping fees/accounting services 46, Bad debts 9, Miscellaneous administrative expenses 4, T Total administrative expenses 327,258 Utilities expense 6450 Electricity 51, Water 34, Gas 60, Sewer 54, T Total utilities expense 201,374 Operating and maintenance expenses 6510 Payroll 192, Supplies 43, Contracts 180, Security payroll/contract 170, Heating/cooling repairs and maintenance 14, Snow removal 6, T Total operating and maintenance expenses 607,776 27

29 Supplementary Information Statement of Activities Data Year Ended June 30, 2015 Account No. Taxes and insurance 6710 Real estate taxes 259, Payroll taxes 35, Property and liability insurance 103, Workmen's compensation 18, Health insurance and other employee benefits 191, Miscellaneous taxes, licenses, permits and insurance T Total taxes and insurance 607,462 Financial expenses 6820 Interest on first mortgage payable 481, Mortgage insurance premium/service charge 41, T Total financial expenses 523, Nursing home/assisted living/board and care/other elderly care expenses 142, T Total cost of operations before depreciation and amortization 2,409, T Income (loss) before depreciation and amortization 308,980 Depreciation and amortization 6600 Depreciation expense 360, Amortization expense 9,195 Total depreciation and amortization 370, N Operating income (loss) (61,119) Corporate or mortgagor entity revenue and expenses 7105 Entity revenue (271,250) 7100T Net entity expenses (271,250) Total expenses 2,508, Change in net assets $ 210,131 28

30 Supplementary Information Statement of Activities Data Year Ended June 30, 2015 Account No. S Total first mortgage (or bond) principal payments required during the audit year (12 monthly payments). Applies to all direct loans and HUD-held and fully-insured first mortgages. $ 127,085 S S Total of 12 monthly deposits in the audit year made to the replacement reserve account, as required by the regulatory agreement, even if payments may be temporarily suspended or reduced. Replacement reserve, or residual receipts and releases which are included as expense items on the statement of activities. $ $ 82,879 - S Project improvement reserve releases under the flexible subsidy program which are included as expense items on the statement of activities. $ - S Mortgage payable note detail (Section 236 only) Interest reduction payments from subsidy. $ - 29

31 Supplementary Information Statement of Cash Flows Data Year Ended June 30, 2015 Account No. Cash flows from operating activities S Rental receipts $ 2,623,753 S Interest receipts 708 S Other operating receipts 93,705 S Total receipts 2,718,166 S Administrative expenses paid (102,341) S Management fees paid (107,538) S Utilities paid (198,490) S Salaries and wages paid (457,082) S Operating and maintenance paid (222,860) S Real estate taxes paid (259,209) S Property insurance paid (103,291) S Miscellaneous taxes and insurance paid (719) S Other operating expenses paid (386,923) S Interest paid on first mortgage (482,134) S Mortgage insurance premium paid (41,286) S Total disbursements (2,361,873) S Net cash provided by operating activities 356,293 Cash flows from investing activities S Net deposits to mortgage escrows (37,731) S Net withdrawals from reserve for replacements 253,802 S Net deposits to other reserves (103,979) S Net deposits to residual receipts reserves (114) S Net purchases of fixed assets (133,448) S Net cash used in investing activities (21,470) Cash flows from financing activities S Mortgage principal payments - first mortgage (127,085) S Entity/construction financing activities (include detail) S Due from affiliates $ (122,594) (122,594) S Net cash used in financing activities (249,679) S Net increase (decrease) in cash 85,144 S Cash, beginning 227,558 S1200T Cash, ending $ 312,702 Significant noncash investing and financing activities Contributed rental property improvements $ 271,250 30

32 Supplementary Information Statement of Cash Flows Data Year Ended June 30, 2015 Account No. Reconciliation of change in net assets to net cash provided by operating activities 3250 Change in net assets (deficit) $ 210,131 Adjustments to reconcile change in net assets to net cash provided by operating activities 6600 Depreciation 360, Amortization 9,195 Bad debts 9,730 Contributions (271,250) Changes in asset and liability accounts (Increase) decrease in assets S Tenant accounts receivable (12,555) S Accounts receivable - other 30,763 S Prepaid expenses (1,058) S Tenant security deposits funded (833) Increase (decrease) in liabilities S Accounts payable 16,365 S Accrued liabilities 5,524 S Accrued interest payable (551) S Tenant security deposits held in trust 833 S Prepaid revenue (905) Total adjustments 146,162 S Net cash provided by operating activities $ 356,293 31

33 Supplementary Information Year Ended June 30, 2015 Reserve for Replacements Account No. 1320P Balance at June 30, 2014 $ 689, DT Total monthly deposits 82, ODT Other deposits 1320ODT-010 Unused debt service savings funds 8, INT Interest income WT Approved withdrawals (346,019) 1320 Balance at June 30, 2015 $ 435,851 Residual Receipts Reserve Account No. 1340P Balance at June 30, 2014 $ 226, INT Interest income Balance at June 30, 2015 $ 226,896 32

34 Supplementary Information Year Ended June 30, 2015 Computation of Surplus Cash, Distributions and Residual Receipts Account No. Part A - Compute Surplus Cash S Cash (Accounts 1120, 1170 and 1191) $ 346, Accounts receivable - HUD 7,015 S Total cash 353,179 S Accrued mortgage interest payable 39,877 S Delinquent mortgage principal payments - S Delinquent deposits to reserve for replacements - S Accounts payable (due within 30 days) 129,949 S Loans and notes payable (due within 30 days) - S Deficient tax, insurance or MIP escrow deposits - S Accrued expenses (not escrowed) 59, Prepaid revenue (Account 2210) 2, Tenant security deposits liability (Account 2191) 33,462 S Other current obligations (describe in detail) S Restricted funds received but unspent - Fund for the City of New York grant $ 42,460 S Operating cash required to be deposited in replacement reserves 177, ,866 S Less total current obligations 484,788 S Surplus cash (deficiency) $ (131,609) S Part B - Deposit Due Residual Receipts Reserve $ - 33