AUDITED COMBINED FINANCIAL STATEMENTS NEIGHBORHOOD HOUSING SERVICES OF NEW HAVEN, INC. AND NEW HAVEN HOMEOWNERSHIP CENTER, INC.

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1 AUDITED COMBINED FINANCIAL STATEMENTS NEIGHBORHOOD HOUSING SERVICES OF NEW HAVEN, INC. AND YEARS ENDED DECEMBER 31, 2014 AND 2013

2 NEIGHBORHOOD HOUSING SERVICES OF NEW HAVEN, INC. AND TABLE OF CONTENTS Audited combined financial statements: Page Independent Auditors Report... 3 Combined Statement of Financial Position... 5 Combined Statement of Activities... 7 Combined Statement of Cash Flows... 9 Notes to Combined financial statements Supplementary Information: Supplementary Information: Combining Schedules of Functional Expense Schedule of NeighborWorks America Capital Grant Combining Statement of Financial Position Combining Statement of Activities Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Combined financial statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A Schedule of Expenditures of Federal Awards Note to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Report on Compliance for Each Major State Program and Report on Internal Control over Compliance Required by the State Single Audit Act Schedule of Expenditures of State Awards Note to Schedule of Expenditures of State Awards Schedule of Findings and Questioned Costs... 48

3 Ansonia 158 Main Street, Suite 301 Ansonia, Connecticut P: Killingworth 166 Route 81 Killingworth, Connecticut P: New Haven 900 Chapel Street, Suite 620 New Haven, Connecticut P: Westport 611 Riverside Avenue Westport, Connecticut P: Principals Francis H. Michaud Jr. CPA John A. Accavallo CPA Sandra M. Woodbridge CPA Dominic L. Cusano MBA CPA Darin L. Offerdahl MBA CPA Guiding Successful People To the Board of Directors of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. 333 Sherman Avenue New Haven, Connecticut INDEPENDENT AUDITORS REPORT Report on the combined financial statements We have audited the accompanying combined financial statements of Neighborhood Housing Services of New Haven, Inc. (a nonprofit organization) and New Haven HomeOwnership Center, Inc., (a nonprofit organization), which comprise the statement of financial position as of December 31, 2014 and 2013, and the related statements of activities, and cash flows for the years then ended, and the related notes to the combined financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our 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 opinion. American Institute of Certified Public Accountants Connecticut Society of Certified Public Accountants

4 Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. as of December 31, 2014 and 2013, and the combined changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the combined financial statements as a whole. The combined schedule of functional expenses, NeighborWorks America Capital Grant, combined statement of financial position and combined statement of activities is presented for purposes of additional analysis and is not a required part of the combined basic financial statements. The schedule of expenditures of federal awards is also presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, 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 combined financial statements. The information has been subjected to the auditing procedures applied in the audit of the combined financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the combined financial statements or to the combined 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 combined 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 June 24, 2015 on our consideration of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s internal control over financial reporting and compliance. Michaud Accavallo Woodbridge & Cusano, LLC Killingworth, Connecticut June 24,

5 COMBINED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2014 AND ASSETS CURRENT ASSETS Cash and cash equivalents $ 669,009 $ 811,359 Restricted cash 136, ,867 Grants and other receivables 1,673, ,319 Current portion of mortgage receivables 31,644 29,296 Accrued interest receivable on mortgage loans - 1,360 Prepaid expenses 6,670 6,859 Total current assets 2,517,364 1,573,060 NON-CURRENT ASSETS Property inventory Rehabilitation projects 8,464,410 6,844,102 Tax liens 10,019 10,019 Total property held for sale 8,474,429 6,854,121 Property, plant, and equipment, net 1,155,791 1,172,276 Other assets Pledged cash, CD's, and investments 950, ,000 Pledge receivable - non current portion 2,114 - Mortgage subsidy receivable 21,191 - Mortgage loans receivable 588, ,667 Mortgage receivable from West Haven Historical Society 477, ,754 Due from related party 2,382 - Total other assets 2,041,799 2,003,421 Total non-current assets 11,672,019 10,029,818 Total assets $ 14,189,383 $ 11,602,878 See notes to financial statements - 5 -

6 COMBINED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2014 AND LIABILITIES AND NET ASSETS CURRENT LIABILITIES Lines of credit $ 850,000 $ - Accounts payable 81, ,097 Accrued time off and other expenses 39, ,181 Customer deposits 49,593 11,850 Funds held in escrow 101, ,450 Current portion of long term debt 1,708,836 1,430 Total current liabilities 2,831, ,008 NON-CURRENT LIABILITIES Deferred revenue 3,673,081 2,694,619 Long term line of credit 500,000 1,100,000 Long term debt 1,413,830 1,791,570 Total non-current liabilities 5,586,911 5,586,189 NET ASSETS Unrestricted net assets 4,754,011 4,286,781 Temporarily restricted net assets 117, ,900 Permanently restricted net assets Capital grants fund 900,000 1,000,000 Total net assets 5,771,011 5,608,681 Total liabilities and net assets $ 14,189,383 $ 11,602,878 See notes to financial statements - 6 -

7 COMBINED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2014 Unrestricted Temporarily Restricted Permanently Restricted Total REVENUES AND OTHER SUPPORT: Contributions $ 557,422 $ - $ - $ 557,422 Grants - NeighborWorks America 303, ,363 Grants - state 400, ,953 Grants - federal 369, ,025 Tax credit programs 433, , ,000 Other grants 361, ,872 Income from special projects 380, ,000 Sales of rehabilitation projects 1,001, ,001,000 Home ownership fees 145, ,475 Investment income-mortgages 44, ,065 Investment income 56, ,627 Miscellaneous income 1, ,948 Net assets released from restrictions 421,900 (321,900) (100,000) - Total revenues and other support 4,476,650 (204,900) (100,000) 4,171,750 EXPENSES: Program services: Housing rehabilitation & development 2,673, ,673,057 Community building & organizing 240, ,899 Home ownership program 649, ,113 Total program services 3,563, ,563,069 Management and general 236, ,698 Fund raising 209, ,653 Total other expenses 446, ,351 Total expenses 4,009, ,009,420 Change in net assets 467,230 (204,900) (100,000) 162,330 Net assets - beginning of year 4,286, ,900 1,000,000 5,608,681 Net assets - end of year $ 4,754,011 $ 117,000 $ 900,000 $ 5,771,011 See notes to financial statements - 7 -

8 COMBINED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2013 Unrestricted Temporarily Restricted Permanently Restricted Total REVENUES AND OTHER SUPPORT: Contributions $ 920,363 $ - $ - $ 920,363 Grants - NeighborWorks America 200, , ,925 Grants - state 112, ,207 Grants - federal 278, ,410 Tax credit programs 378, , ,261 Other grants 357, ,263 Income from special projects 150, ,000 Sales of rehabilitation projects 1,100, ,100,000 Home ownership fees 100, ,822 Investment income-mortgages 41, ,268 Investment income 78, ,389 Miscellaneous income 6, ,087 Net assets released from restrictions 582,544 (365,278) (217,266) - Total revenues and other support 4,306,639 (43,378) (117,266) 4,145,995 EXPENSES: Program services: Housing rehabilitation & development 2,736, ,736,519 Community building & organizing 202, ,485 Home ownership program 753, ,754 Total program services 3,692, ,692,758 Management and general 231, ,888 Fund raising 165, ,928 Total other expenses 397, ,816 Total expenses 4,090, ,090,574 Change in net assets 216,064 (43,378) (117,266) 55,420 Net assets - beginning of year 4,070, ,278 1,117,266 5,553,261 Net assets - end of year $ 4,286,781 $ 321,900 $ 1,000,000 $ 5,608,681 See notes to financial statements - 8 -

9 COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2014 AND 2013 CASH FLOWS FROM OPERATING ACTIVITIES Increase in net assets $ 162,330 $ 55,420 Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation 55,485 53,835 (Increase) Decrease in operating assets: Grants and other receivables (1,088,597) 95,345 Pledges receivable (2,114) 10,465 Accrued interest receivable 1, Prepaid expenses (2,193) 3,026 Mortgage loan receivable (36,230) 101,837 Special rehabilitation projects (1,620,308) (1,020,985) Increase (Decrease) in operating liabilities: Accounts payable (28,816) 103,095 Accrued expenses (142,369) 110,158 Customer deposits 37,743 3,500 Funds held in escrow (511) (1,244) Deferred revenue 978,462 70,188 NET CASH USED IN OPERATING ACTIVITIES (1,685,758) (415,120) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (39,000) (33,440) Pledged cash for permanently restricted funds 2,742 (26,823) NET CASH USED IN OPERATING ACTIVITIES (36,258) (60,263) CASH FLOWS FROM FINANCING ACTIVITIES Loan proceeds 1,672, ,000 Loan repayments (93,000) (250,000) NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,579,666 93,000 NET CHANGE IN CASH (142,350) (382,383) Cash and cash equivalents at beginning of year 811,359 1,193,742 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 669,009 $ 811,359 Supplemental disclosure of cash flow information: Cash paid during the year for interest expense $ 182,377 $ 132,058 See notes to financial statements - 9 -

10 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 1 - Summary of Significant Accounting Policies Nature of Business Neighborhood Housing Services of New Haven, Inc. was incorporated in 1979 as a not-for-profit organization to promote the revitalization and preservation of neighborhoods within the City of New Haven. It develops affordable housing for low and moderate-income families, which includes both new construction and complete rehabilitation. Through various programs, it helps families purchase homes. New Haven HomeOwnership Center, Inc. was incorporated as a not-for-profit organization to provide lending services and related home ownership education to residents of, or prospective homebuyers in, the City of New Haven. The Organization helps homeowners who have fallen behind on their loan payments to help them restructure their loans and avoid foreclosure. In 2010, Neighborhood Housing added the Home Improvement & Energy Conservation Laboratory (the Lab ). The Lab serves as a hands-on training facility for residents to learn useful skills to maintain their homes and conserve energy. The Lab also incorporates an Identifying Home Health Hazards component into each of their classes. The Health Hazards program is designed to address the myriad of preventable health risks that are present in the home. In addition to offering hands-on classes in home repairs and energy conservation, the Lab serves as a green demonstration model. The building utilizes existing urban infrastructure and salvaged, reused, or repurposed materials from NHS rehabbed properties. It has been constructed as an energy-efficient structure. Energy conservation techniques are taught to their clients through the demonstration exhibits. The Community Building and Organizing activities include connecting owners and residents with available home repair and maintenance workshops; spreading the word about community activities such as local Urban Resources Initiative Community Greenspace projects; organizing sweat equity events such as resident gardening, fence repairs, clean-ups, and street beautification days. They also work with city housing officials and district police to cite housing code violations and enforce quality of life standards. The program supports residents by offering leadership training through the Resident Leadership Program and the NeighborWorks America Community Leadership Institutes. Revenues for Neighborhood Housing Services consist of both government and private grants. Revenue is also derived from the sale of rehabilitated property. Revenues for the HomeOwnership Center primarily consist of government and private grants and class fees. Both organizations also receive private donations. Basis of Accounting The combined financial statements include the accounts of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc., which are affiliated by virtue of common control and economic interest. These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America. All expenses for rehabilitated properties are capitalized until the properties are sold. Subsidies, for rehabilitated properties that are not sold, are carried as deferred revenue until the property has been sold

11 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Use of Estimates The accounting and financial reporting policies of the Organization conform to generally accepted accounting principles. The preparation of combined financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the combined financial statements and the reported amounts of support, revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial Statement Presentation Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. under generally accepted accounting principles are required to report information regarding their financial position and activities according to three classes of assets (unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets) based upon the existence or absence of donor-imposed restrictions. Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor imposed restrictions. Accordingly, net assets and changes therein are classified as follows: Permanently restricted net assets - Net assets subject to donor imposed stipulations that they be maintained permanently by the Organization. Generally, the donors of the assets permit the Organization to use all or part of the income earned and capital gains for general or specific purposes. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that are met by using the money for the donor intended purpose or the passage of time. Unrestricted net assets - Net assets not subject to donor imposed stipulations. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor stipulated purpose has been fulfilled and or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. NeighborWorks America Revolving Loan and Capital Projects Fund represent funds provided by NeighborWorks America for making loans and for capital projects. All resources granted to this fund must be maintained permanently. The organizations are permitted to transfer or expend only income or other economic benefits derived from capital assets in excess of the Capital Fund Agreement (corpus). Revenue Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Contributions are recognized when the donor makes a promise to give to the Organization that is in substance unconditional. Contributions received without donor restrictions are reported as unrestricted net assets. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction

12 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets must be maintained by the Organization in perpetuity. Donated Goods and Services Donated marketable securities and other non-cash donations are recorded as contributions at their estimated fair values at the date of donation. Donations of property and equipment are recorded as contributions at their estimated fair value at the date of donation when the estimated value is $1,500 or more. Such donations are reported as increases in unrestricted net assets unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted contributions. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time During the year ended December 31, 2014, the organization received two donated properties. The total estimated fair value of these properties was $65,000. Donated services are recognized as contributions in accordance the ASC, Accounting for Contributions Received and Contributions Made; the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Organization. Volunteers also provided support and services throughout the year that are not recognized as contributions in the financial statements, since the recognition criteria under the codification were not met. The organization utilized VISTA volunteers during the years ended December 31, 2014 and The fair value of each volunteer was determined to be $30,000 per year. They also had the full time services of a Yale Fellow for the summer. Management estimates the fair value of the Yale Fellow to be $5,000. During the year ended December 31, 2013, Yale students worked as volunteers on the houses at 116 Greenwood Street. The estimated value of this volunteer help was $40,000 for the year ended December 31, Donated services of $132,500 and $172,500 were included in donations for the years ended December 31, 2014 and 2013, respectively. The Vista students and Yale Fellow were included as payroll expenses, $132,500 for 2014 and 2013, respectively, and the Yale volunteer help was estimated to be $40,000 for 2013 and was capitalized. Cash and Cash Equivalents For purposes of the statement of cash flows, cash equivalents consist of highly liquid investments with an initial maturity of ninety days or less except for cash in the brokerage account being held for investment purposes. Fair market value approximates carrying amounts. At December 31, 2014 and 2013, the carrying amount of the Organization s cash and cash equivalents was $1,755,134 and $1,801,805, respectively, and balances in banks amounted to $2,262,629 and $2,095,289, respectively. Deposits in banks are insured by the Federal Deposit Insurance Corporation up to $250,000. As of December 31, 2014 and 2013, the uninsured deposit balances in banks were $694,984 and $211,245, respectively

13 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Investments The Organization records all investments in equity securities with readily determinable fair values in the statements of financial position. Realized and changes in unrealized investment gains, losses and income are included in the statements of activities and changes in net assets. Since income can be utilized for general operations of the Organization, realized and changes in unrealized gains and losses are included in unrestricted net assets. Accounts Receivable Accounts receivable balances are reviewed by management for collectability and management feels all amounts are collectable at December 31, 2014 and Pledges Receivable Pledges receivable are recorded at current value after an allowance for amounts deemed non-collectible. No discount for present value has been taken since it is immaterial to the financial statements. Fixed Assets and Depreciation Fixed assets are recorded at cost and all assets $1,500 or over with a useful life of greater than one year are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When fixed assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Income Tax Status Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. are exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code, and therefore have made no provision for Federal income taxes in the accompanying financial statements. Also, both organizations have been classified by the Internal Revenue Service not to be private foundations within the meaning of Section 509 (a) of the Internal Revenue Code. Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. accounts for uncertainty in income taxes in accordance with the Income Tax Topic of FASB ASC. The Organizations file Federal income tax returns. The years 2011 to 2013 remain open for audit under the various statutes of limitations. The organization does not believe there are any uncertain tax positions as of December 31, Advertising It is the policy of both organizations to expense the cost of advertising as incurred. There is no direct response advertising. During calendar years ended December 31, 2014 and 2013, there were no advertising costs

14 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the Statement of Activities and in the Statement of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Fair Value of Financial Instruments The Organization has established a framework for measuring fair value, based on a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows: Level 1 Inputs to the valuation methodology based on unadjusted quoted market prices in active markets that are accessible at the measurement date. Level 2 Inputs include the following: Quoted prices for similar assets and liabilities in active markets Quoted prices for identical or similar assets or liabilities in markets that are not active Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Unobserved inputs for the asset or liability (supported by little or no market activity). Level 3 inputs include managements own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). The fair value of investments, consisting of equity securities is estimated using the valuation methodology based on unadjusted quoted market prices in active markets that are accessible at the measurement date. Equity securities are generally categorized in Level 1 of the fair value hierarchy. Dissolution Statement In the event Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. shall dissolve, the Board of Directors shall determine the distribution of the net assets excluding permanently restricted assets belonging to NeighborWorks America, which must be returned to the organization. All assets must be given to an organization created and operated exclusively for charitable purposes as described in Section 501(c)(3) of the Internal Revenue Code

15 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 2 - Cash Cash consists of the following for the years ended December 31: Neighborhood Housing Services of New Haven, Inc. Wells Fargo Bank 355,754 $ 244,968 Bank of America 142, ,265 Start Community Bank 212, ,278 Citizens Bank 86, ,959 Webster Bank 27,446 54,131 Liberty Bank 52,365 77,170 Ion Bank 35,433 60,361 People s United Bank 53,820 53,709 First Niagara Bank 52,729 52,682 Santander Bank 50,239 50,114 TD Bank 50,559 50,466 Total 1,120,004 1,224,103 New Haven HomeOwnership Center, Inc. Webster Bank 48, ,183 Wells Fargo 90,902 - Citizens Bank 145, ,968 Start Community Bank 232, ,551 Total 517, ,702 Less amount pledged for capital certificate (832,618) (851,579) Less escrowed and deposit amounts held for others (136,125) (138,867) Total Cash $ 669,009 $ 811,359 Note 3 - Investments Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. estimate that the fair market value of all investments at December 31, 2014 and 2013 does not differ materially from the aggregate carrying values of its investments recorded in the combined statement of financial position. Investments consist primarily of equity securities and certificates of deposit over 90 days. Income from investments is recorded as unrestricted

16 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. Investment activity for the year ended December 31, 2014 and 2013 is summarized as follows: Estimated fair value at December 31, 2012 $ 69,060 Unrealized gains (losses) 15,515 Contribuitions received 10,079 Dividend and interest income 3,767 Estimated fair value at December 31, 2013 $ 98,421 Unrealized gains (losses) 8,412 Contribuitions received 9,487 Dividend and interest income 1,062 Estimated fair value at December 31, 2014 $ 117,382 Investments at market value are as follows for the years ended December 31: Cash $ 2,745 $ 1,683 Equity securities 114,637 96,738 $ 117,382 $ 98,421 All investments are pledged to pay the Capital Certificate due to Citizens Bank. There are no investment accounts for the New Haven HomeOwnership Center, Inc. Note 4 - Property and Equipment Property and equipment consist of the following as of December 31: Building $ 607,978 $ 571,978 Building improvements 297, ,624 Furniture and fixtures 59,947 69,293 Home maintenance laboratory 689, ,237 1,654,786 1,625,132 Less: Accumulated depreciation (498,995) (452,856) Net property and equipment $ 1,155,791 $ 1,172,276 Depreciation expense for the years ended December 31, 2014 and 2013 was $55,485 and $53,835, respectively

17 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 5 - Mortgage Loans Receivable New Haven HomeOwnership Center, Inc. holds seventeen mortgages on properties within its service district. During the years ended December 31, 2014 and 2013, the balances of the loans range from $1,215 to $477,739 and $2,160 to $482,615, respectively, and have terms from five to thirty years. Interest rates range from a low of 3.0% to a high of 7.875%. Interest on mortgages is recognized when earned. Any earned interest is accrued at the end of the year. No allowance has been made for uncollectible accounts since all mortgages are secured by homes whose value is estimated by management to be in excess of the amount owed. Mortgages would be written off after foreclosure and sale of the secured property. During the year ended 2007, Neighborhood Housing Services of New Haven, Inc. loaned the West Haven Historical Society $500,000 so it could acquire and renovate property on 686 Savin Avenue in West Haven. Neighborhood Housing Services of New Haven, Inc. managed the rehabilitation component of the project. This note is secured with a mortgage on the property. In April of 2011, the mortgage with West Haven Historical Society was renegotiated. The mortgage receivable is secured by the property at 686 Savin Avenue and an annual interest rate of 4.50%, payable monthly. The balance of the loan at December 31, 2014 and 2013 is $477,739 and $482,615 respectively. Principal is paid as the organization has funds. Mortgage loans receivable at December 31, 2014 and 2013 are comprised of: NeighborWorks America Capital Fund $ 359,550 $ 378,639 Other funds 615, ,478 Total 974,717 1,001,117 Current portion 31,644 29,296 Long term portion $ 943,073 $ 971,821 Mortgage loan delinquency status as of December 31, 2014 consist of: NeighborWorks America Capital Fund Other Funds Total Current $ 330,667 $ 619,539 $ 950,206 9 loans 6 loans 15 loans 33.92% 63.56% 97.49% Days Delinquent $ 21,032 $ 3,479 $ 24,511 1 loans 1 loan 2 loans 2.16% 0.36% 2.51% For the years ended December 31, 2014 and 2013, there were no loans foreclosed

18 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 6 - Inventory Rehabilitation Projects The following properties listed in the schedule below have been purchased by Neighborhood Housing Services of New Haven, Inc. for rehabilitation and sale. At December 31, 2014 and 2013, these properties were at various stages of completion. The amounts represent the Organization s total investment in each property. These properties are sold for less than the cost of acquisition and rehabilitation by Neighborhood Housing Services, however no allowance has been booked for this since the difference between the selling price and cost is funded by State, Federal and private subsidies Augur Street $ 106,534 $ 53, Bassett Street 90,229 80, Bassett Street 324,979 87, Bassett Street 45, Carmel Street 66, Carmel Street 29,751 2, County Street 383, , County Street 408, , Dixwell Avenue - 375, Edgewood Avenue 607, , Edgewood Avenue 639, , Edgewood Avenue 59,975 48, Frank Street 60,869 50, Frank Street 64,193 56, Greenwood Street 311, , Harding Place 2, Hotchkiss Street 94,113 79, Howard Avenue 66,464 48, Huntington Street 41,176 29, Huntington Street 167,471 95, Huntington Street 42,181 27, Huntington Street 93,769 85, Lilac Street 249,503 53, Lilac Street 309,730 55, Lilac Street 362, , Lilac Street 322, Lilac Street 89,392 72, Lilac Street 178, , Lloyd Street 27,

19 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 6 - Inventory Rehabilitation Projects, Con t Market Street - 330,980 7 Meadowbrook Road - 53, Newhall Street - 337, Newhall Street 89,096 45, Newhall Street 69,052 53, Newhall Street 59,478 43, Orchard Street 68,653 51, Orchard Street 65,406 43, Shelton Avenue 105,308 96, Shepard Street 71,866 62, Sherman Avenue - 417, Starr Street 403, , Starr Street 304, , Stevens Street 90,969 80, Stevens Street 38, Stevens Street - 306, Valley Street 47, W. Division Street 428, , W. Division Street 305, , W. Hazel Street Winchester Avenue 2, Winchester Avenue 437, , Winchester Avenue 138, , Winchester Avenue 116, , Winchester Avenue 375,983 55,926 $ 8,464,410 $ 6,844,102 Capitalized Interest The organization capitalized interest of approximately $182,377 and $132,058 during the years ended December 31, 2014 and The interest was included as part of the cost of rehabilitation projects. In addition, the properties listed in the above schedule were financed, in part, by NeighborWorks America Capital Grant Funds in the amount of $305,428 and $405,428 during the years then ended, respectively

20 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Property Held for Sale - Tax Liens In 2004, Neighborhood Housing Services of New Haven, Inc. bought tax liens on properties in the City of New Haven. From 2004 through 2007, payments on tax liens were received and, three of the properties were purchased for rehabilitation. The difference between the payments received on the tax liens and the cost of the tax liens plus any additional expenses incurred was recorded as revenue. The balance at cost remaining on tax liens as of December 31, 2014 and 2013 is $10,019. Note 7 - Deferred Revenue Deferred revenue represents subsidies, which are temporarily restricted funds, released from restrictions by incurring expenses satisfying the purpose specified by donors. Although the funds were expended to rehabilitate various properties in the special projects inventory, the properties were not sold as of the years ended December 31, 2014 or December 31, As the properties are sold, revenue will be recognized as well as the associated cost of the properties. Deferred Revenue as of December 31 is: State Tax Credits $ 1,048,109 $ 1,243,539 Affordable Housing Program 180, ,000 Lead Funds 379, ,500 DOH AHDP III 524, ,782 DOH CHAMP II 515,000 36,604 Historic Homes 450, ,000 Housing Trust Fund 119, ,500 LISC Lead Funds 11,000 11,000 City HOME Funds 62,500 62,500 Yale Building Subsidy 55,000 55,000 Yale Volunteer 80,000 80,000 IOREBTA 73,650 75,650 UI Energy CT 10,116 17,913 Seedlings Foundation 70,000 70,000 GNHCLF (DOH) 61,433 - Wells Fargo 32,200 - NSP funding Total $ 3,673,081 $ 2,694,

21 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 8 - Debt Lines of Credit The Organization has a line of credit with First Niagara Bank with a current interest rate of 3.50% that is due June 30, 2016 and is secured by the assets of the corporation. The outstanding balance at December 31, 2014 and 2013 is $500,000. In addition, the Organization established a mortgage line of credit with Webster Bank, secured by the offices owned by the Organization with an interest rate of 5.00% and an amended maturity date of August 31, The outstanding balance of the loan is $600,000 at December 31, 2014 and During the year ended December 31, 2014, the Organization established a revolving line of credit with the Connecticut Housing Investment Fund, secured by the assets of the Organization with an interest rate of 4.00% and a maturity date of June 30, The outstanding balance of the loan is $250,000 at December 31, The future maturities for the succeeding three years ending December 31 are as follows: Long-Term Debt , ,000 Total lines of credit 1,350,000 Less: current lines of credit (850,000) Total long term lines of credit $ 500,000 Greater New Haven Community Loan Fund In February of 2012, a previous cash flow loan from The Greater New Haven Community Loan Fund was rolled into a $750,000 line of credit for property development. The combined loan bears interest at 6% and interest on the loan is payable monthly, with the principal due by February 28, The loan is secured by assets of the Organization. The balance of the loan at December 31, 2014 and 2013 was $750,000. Subsequent to year-end, the line has been renewed for $1,000,000 with principal due by February 28, Capital Certificate Payable In May 2001, Neighborhood Housing Services of New Haven, Inc. sold a capital certificate of $1,000,000 to Citizens Bank of Connecticut. The certificate originally bore no interest. The certificate has been renewed several times since 2001 and is currently due August 8, The proceeds were originally designed to be maintained in a dividend paying account with Citizens Financial Services or an interest bearing account with Citizens Bank. The interest earned, but not the principal, shall be used to support the activities of the New Haven HomeOwnership Center, Inc. In May of 2012, Citizens Bank agreed to renew the capital certificate for $950,000 for three years. Interest will accrue at 0.5% per year. The note may be invested in the rehabilitation projects. Neighborhood Housing Services of New Haven, Inc. plans to use this money to replace some of the loans and pay the interest to the operating fund. Construction Loan Payable In October 2013, the Organization entered into an agreement for a construction loan with Ion Bank for $425,000. The interest rate on this loan is 5.0% and is currently due October

22 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Neighborworks Capital Line of Credit On April 1, 2014, the Organization obtained a $1,000,000 line of credit from NeighborWorks Capital Corporation. Proceeds are used for property acquisition, construction, rehabilitation and related costs associated with the Affordable Housing Development Program. The line bears interest at 5.5% per annum, with the principal due by April 1, The line is secured by the Organization s State of Connecticut Historic Homes Rehabilitation Tax Credits and the proceeds thereof. As of December 31, 2014, the balance of the loan is $1,000,000. Future maturities of long-term debt as of December 31, 2014 are as follows: 2015 $ 1,708, , , ,010,263 Thereafter 384,515 Total debt 3,122,666 Less current portion (1,708,836) Total long term debt $ 1,413,830 Note 9 - Temporarily Restricted Net Assets Neighborhood Housing Services of New Haven, Inc. received grants that are temporarily restricted in nature. These funds are for subsidizing project costs on certain properties, which enables Neighborhood Housing Services of New Haven to sell properties to qualified low-income buyers at less than the cost of rehabilitating the buildings. Funds, which have been utilized to rehab properties, are released from restrictions and are recorded as deferred income until the properties are sold. The HomeOwnership Center has grants to help homeowners facing foreclosure. These funds are temporarily restricted for that purpose only. Temporarily restricted net assets consist of the following at December 31: Connecticut Housing Tax Credit $ 117,000 $ 321,900 Temporarily restricted net assets released from donor restrictions by incurring expenses satisfying the purpose specified by donors as of December 31 were: Connecticut Housing Tax Credit $ 321,900 $ 234,172 Small Business Express Grant - 72,500 Hospital Of St. Raphael Down Payment Assistance - 25,000 RISC Rescue Funds - 16,799 United Way Rescue Funds - 6,807 City Lead Abatement Program - 5,000 NeighborWorks America strategic planning - 5,000 Total Net Asset Released from Restrictions $ 321,900 $ 365,

23 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 10 - Permanently Restricted Net Assets Permanently restricted net assets as of December 31, 2014 and 2013 consist of the NeighborWorks America Capital Grant in the amount of $900,000 and $1,000, Permanently restricted net assets at beginning of year $ 1,000,000 $ 1,117,266 Grant received - 100,000 Assets released by NeighborWorks America (100,000) (217,266) Total permanently restricted net assets $ 900,000 $ 1,000,000 Permanently restricted net assets are provided by NeighborWorks America Capital Grant for making affordable loans and capital projects. During the years ended December 31, 2014 and 2013, NeighborWorks America permitted $100,000 and $217,266, respectively, to be released from permanently restricted to provide additional operating revenue. The proceeds on capital projects, and interest earned, over and above the corpus, may be transferred to unrestricted net assets for furthering the Organizations mission. However, should the Organizations become defunct; all of the permanently restricted net assets received from NeighborWorks America will revert to NeighborWorks America. Note 11 - Grants Neighborhood Housing Services of New Haven, Inc. had the following grants awarded or active during the year ended December 31, Revenue from the grants are either recognized in revenue or deferred for recognition in a future period, depending on the terms of the grants. Federal Grants Expendable Fund Grants were received from NeighborWorks America in the amount of $141,349 during calendar year 2014 to absorb a portion of administrative expenses in support of the mission to revitalize neighborhoods. Lead Funds Grant in the amount of $83,050 was received to remove lead paint from the buildings being renovated. LISC Grant of $45,079. An Affordable Rental Project grant of $478,396. A Community Development Block Grant of $12,500. State Grants A grant of $403,710 from the Department of Housing (DOH) for the development of Newhallville section of New Haven. The entire grant is for $2,100,000. The balance is received as the properties are completed. A grant of $61,433 from the GNHCLF through the DOH for the development of 748 Winchester Ave

24 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Other Grants The Neighborhood Assistance Act provided $120,848 of funds to support the personnel involved in energy conservation for rehabilitation projects. Seedlings Foundation provided $78,500 for operating revenue. UI Energize CT grant of $6,902. Community Foundation provided $20,000 for the development of the various neighborhoods. LISC Metlife Foundation Community grant of $20,000 A grant received from Wells Fargo for the development of 221 Valley Street of $32,200. IOREBTA grant of $23,000. The New Haven HomeOwnership Center, Inc. had the following grants awarded or active during the year ended December 31, 2014: Federal Grants Expendable Fund Grants were received from NeighborWorks America in the amount of $120,044 to absorb a portion of the administrative expenses in support of the mission of homeowner education and counseling. A grant from NeighborWorks America and the Connecticut Housing Finance Authority in the amount of $41,970 during calendar year 2014 to fund foreclosure mitigation. State Grants DOH Housing and Counseling grant of $139,122. Other Grants Seedlings Foundation provided grant of $78,500 for operating revenue. NY State Mortgage Coalition grant of $27,094. Neighborhood Assistance Act grant of $70,824. Note 12 - Related Party Transaction New Haven HomeOwnership Center, Inc. loaned (from the Revolving Loan Account) to Neighborhood Housing Services of New Haven, Inc. (to the Special Project Fund) the sums of $200,000 and $180,000 which were originally due on June 30, 2008 and December 31, 2009 respectively. In December of 2011, the $180,000 loan was increased to $200,000. During January 2014 the loan was increased by $100,000, and then again during December 2014 by another $100,000, making total outstanding balance of $600,000 as of December 31, The loans bear interest at 3% and interest expense of $15,000 and $12,000 was accrued as of the year ended December 31, 2014 and 2013, respectively. The payment of principal and accrued interest on both loans has been extended to June 30, 2015 and June 30, 2016, respectively. Transactions between New Haven HomeOwnership Center, Inc. and Neighborhood Housing Services of New Haven, Inc. eliminate upon combination

25 NOTES TO THE COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 Note 13 - Pension Neighborhood Housing Services of New Haven, Inc. has an established Pension Plan. Effective January 1, 2009, the minimum contribution was raised to 5% for the second, third, and fourth year of employment, and subsequently increased by 1% for each additional year of service, to a maximum contribution of 15%. All participating employees are 100% vested in their respective accounts. Employer contributions for years ending December 31, 2014 and 2013 were $108,860 and $97,258, respectively. The organization also offers a salary deferral 403(b)(7) plan. Note 14 - Construction Administration Fee Neighborhood Housing Services of New Haven, Inc. allocates administration costs to the construction activity and charges the Special Projects Fund for these costs. The amount is $30,000 for a single-family house and up to $50,000 for a multi-family house. The fees are charged upon completion of the rehabilitation projects. The total fee charged for the years ended December 31, 2014 and 2013 was $380,000 and $150,000, respectively. Note 15 - Subsequent Events Subsequent events were considered through June 24, 2015, which is the date the combined financial statements were available to be issued

26 SUPPLEMENTARY INFORMATION

27 COMBINED SCHEDULE OF FUNCTIONAL EXPENSE FOR THE YEAR ENDED DECEMBER 31, 2014 Affordable Housing and Energy Cons. Program Services Community Building and Organizing Home Ownership Programs Total Program Services Supporting Services Management and General Fund Raising Total Expenses Salaries 397, , ,368 $ 1,017, , ,685 $ 1,311,847 Employee benefits 43,845 13, , ,912 29,840 26, ,541 Payroll taxes 25,604 7,946 30,455 64,005 11,017 9,729 84,751 Total compensation 466, , ,283 1,254, , ,203 1,626,139 Utilities 6,568 2,038 3,622 12,228 2,099 1,825 16,152 Insurance 13,014 4,039 5,834 22,887 9,591 3,402 35,880 Postage , ,369 Office supplies and expenses 22,995 7,351 8,886 39,232 5,825 5,490 50,547 Telephone 2, ,356 4, ,787 Travel 3, , ,494 Staff training 7,434 2,307 18,673 28,414 3,187 4,398 35,999 Professional services 13,218 4,102 23,819 41,139 7,091 6,318 54,548 Public relations 23,352 7,247 6,812 37,411 6,415 5,519 49,345 Cost of rehabilitation projects 2,072, ,072, ,072,255 Depreciation 40,504 3,884-44,388 7,768 3,329 55,485 Foreclosure prevention Totals $ 2,673,057 $ 240,899 $ 649,113 $ 3,563,069 $ 236,698 $ 209,653 $ 4,009,

28 COMBINED SCHEDULE OF FUNCTIONAL EXPENSE FOR THE YEAR ENDED DECEMBER 31, 2013 Affordable Housing and Energy Cons. Program Services Community Building and Organizing Home Ownership Programs Total Program Services Supporting Services Management and General Fund Raising Total Expenses Salaries $ 369,207 $ 155,180 $ 437,546 $ 961,933 $ 148,159 $ 108,273 $ 1,218,365 Employee benefits 64,513 18,432 92, ,106 32,256 23, ,402 Payroll taxes 21,573 6,164 30,818 58,555 10,786 7,705 77,046 Total compensation 455, , ,525 1,195, , ,018 1,525,813 Utilities 4,793 1,369 6,847 13,009 2,396 1,712 17,117 Insurance 7,304 2,087 10,434 19,825 3,652 2,609 26,086 Postage ,310 2, ,276 Office supplies and expenses 14,793 4,226 21,132 40,151 7,396 5,283 52,830 Telephone 1, ,322 4, ,804 Travel 1, ,507 2, ,767 Staff training 7,822 2,235 11,175 21,232 3,911 2,794 27,937 Professional services 15,016 4,290 21,452 40,758 7,508 5,363 53,629 Public relations 12,976 3,707 18,536 35,219 6,488 4,634 46,341 Cost of rehabilitation projects 2,199, ,199, ,199,313 Depreciation 15,612 3,768 23,687 43,068 7,537 3,230 53,835 Foreclosure prevention ,827 74, ,827 Totals $ 2,736,519 $ 202,485 $ 753,754 $ 3,692,759 $ 231,888 $ 165,928 $ 4,090,

29 SCHEDULE OF NEIGHBORWORKS AMERICA CAPITAL GRANT AS OF DECEMBER 31, 2014 ASSETS 2014 Cash $ - Money Market Account 145,241 Total Current Assets 145,241 Other Assets: Mortgage loans receivable 359,550 Investment - rehabilitation projects 395,209 Total Other Assets 754,759 Total Assets $ 900,000 LIABILITIES AND NET ASSETS Liabilities $ - Net Assets: Permanently restricted 900,000 Total Liabilities and Net Assets $ 900,000 STATEMENT OF CHANGES IN NET ASSETS Net Asset Balance - December 31, 2013 $ 1,000,000 Activity - January 1, 2013 to December 31, 2014 Assets added to capital grant - Assets released from restriction (100,000) Net Asset Balance December 31, 2014 $ 900,

30 COMBINING STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2014 Consolidated NHSNH HOC Total Eliminations Total ASSETS CURRENT ASSETS Cash and cash equivalents $ 246,996 $ 422,013 $ 669,009 $ - $ 669,009 Restricted cash 40,390 95, , ,125 Grants and other receivables 1,607,727 66,189 1,673,916-1,673,916 Current portion of mortgage receivables - 31,644 31,644-31,644 Prepaid expenses 6,670-6,670-6,670 Total current assets 1,901, ,581 2,517,364-2,517,364 NON-CURRENT ASSETS Property inventory Rehabilitation projects 8,464,410-8,464,410-8,464,410 Tax liens 10,019-10,019-10,019 Total property held for sale 8,474,429-8,474,429-8,474,429 Property, plant, and equipment, net 1,155,791-1,155,791-1,155,791 Other assets Pledged cash, CD's, and investments 950, , ,000 Pledge receivable - non current portion - 2,114 2,114-2,114 Mortgage subsidy receivable - 21,191 21,191-21,191 Mortgage loans receivable - 588, , ,373 Mortgage receivable - West Haven Historical Society - 477, , ,739 Due from related party , ,772 (513,390) 2,382 Total other assets 950,807 1,604,382 2,555,189 (513,390) 2,041,799 Total non-current assets 10,581,027 1,604,382 12,185,409 (513,390) 11,672,019 Total assets $ 12,482,810 $ 2,219,963 $ 14,702,773 $ (513,390) $ 14,189,

31 COMBINING STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2014 Consolidated NHSNH HOC Total Eliminations Total LIABILITIES AND NET ASSETS CURRENT LIABILITIES Lines of credit $ 850,000 $ - $ 850,000 $ - $ 850,000 Accounts payable 79,609 1,672 81,281-81,281 Accrued time off and other expenses 39,812-39,812-39,812 Customer deposits 9,850 39,743 49,593-49,593 Funds held in escrow 8,000 93, , ,939 Current portion of long term debt 1,708,836-1,708,836-1,708,836 Total current liabilities 2,696, ,354 2,831,461-2,831,461 NON-CURRENT LIABILITIES Deferred revenue 3,673,081-3,673,081-3,673,081 Long term line of credit 500, , ,000 Long term debt 1,413,830-1,413,830-1,413,830 Due to related party 513, ,390 (513,390) - Total non-current liabilities 6,100,301-6,100,301 (513,390) 5,586,911 NET ASSETS Unrestricted net assets 3,008,248 1,745,763 4,754,011-4,754,011 Temporarily restricted net assets 93,394 23, , ,000 Permanently restricted net assets Capital grants fund 584, , , ,000 Total net assets 3,686,402 2,084,609 5,771,011-5,771,011 Total liabilities and net assets $ 12,482,810 $ 2,219,963 $ 14,702,773 $ (513,390) $ 14,189,

32 COMBINING STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2014 NHSNH HOC Total Eliminations Total REVENUES AND OTHER SUPPORT: Contributions $ 438,393 $ 119,029 $ 557,422 $ - $ 557,422 Grants - NeighborWorks America 141, , , ,363 Grants - state 261, , , ,953 Grants - federal 369, , ,025 Tax credit programs 550, , ,000 Other grants 212, , , ,872 Income from special projects 380, , ,000 Sales of rehabilitation projects 1,001,000-1,001,000-1,001,000 Home ownership fees 7, , , ,475 Investment income-mortgages - 44,065 44,065-44,065 Investment income 8,451 48,176 56,627-56,627 Miscellaneous income 1,948-1,948-1,948 Total revenues and other support 3,371, ,440 4,171,750-4,171,750 EXPENSES: Program services: Housing rehabilitation & development 2,673,057-2,673,057-2,673,057 Community building & organizing 240, , ,899 Home ownership program - 649, , ,113 Total program services 2,913, ,113 3,563,069-3,563,069 Management and general 124, , , ,698 Fund raising 108, , , ,653 Total other expenses 233, , , ,351 Total expenses 3,147, ,400 4,009,420-4,009,420 Change in net assets 224,290 (61,960) 162, ,330 Net assets - beginning of year 2,146,569 3,462,924 5,608,681-5,608,681 Net assets - end of year $ 5,771,011 $ - $ 5,771,

33 SINGLE AUDIT

34 Ansonia 158 Main Street, Suite 301 Ansonia, Connecticut P: Killingworth 166 Route 81 Killingworth, Connecticut P: New Haven 900 Chapel Street, Suite 620 New Haven, Connecticut P: Westport 611 Riverside Avenue Westport, Connecticut P: Principals Francis H. Michaud Jr. CPA John A. Accavallo CPA Sandra M. Woodbridge CPA Dominic L. Cusano MBA CPA Darin L. Offerdahl MBA CPA Guiding Successful People INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To The Board of Directors Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. (a nonprofit organization), which comprise the combined statement of financial position as of December 31, 2014 and 2013, and the related combined statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated June 24, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. American Institute of Certified Public Accountants Connecticut Society of Certified Public Accountants

35 Compliance and Other Matters As part of obtaining reasonable assurance about whether Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Michaud Accavallo Woodbridge & Cusano, LLC Killingworth, Connecticut June 24,

36 FEDERAL SINGLE AUDIT

37 Ansonia 158 Main Street, Suite 301 Ansonia, Connecticut P: Killingworth 166 Route 81 Killingworth, Connecticut P: New Haven 900 Chapel Street, Suite 620 New Haven, Connecticut P: Westport 611 Riverside Avenue Westport, Connecticut P: Principals Francis H. Michaud Jr. CPA John A. Accavallo CPA Sandra M. Woodbridge CPA Dominic L. Cusano MBA CPA Darin L. Offerdahl MBA CPA Guiding Successful People INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To The Board of Directors Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. Report on Compliance for Each Major Federal Program We have audited Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s (the Organization ) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Organization s major federal programs for the year ended December 31, The Organization s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Organization s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Organization s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Organization s compliance. American Institute of Certified Public Accountants Connecticut Society of Certified Public Accountants

38 Opinion on Each Major Federal Program In our opinion, Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, Report on Internal Control Over Compliance Management of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Organization s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Michaud Accavallo Woodbridge & Cusano, LLC Killingworth, Connecticut June 24,

39 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2014 Federal Grantor Program Title Federal CFDA Number Federal Expenditures Connecticut Housing and Finance Authority (CHFA) Sub recipient of National Foreclosure Mitigation Counseling Program $ 5,565 Department of Housing and Urban Development Community Services Block Grants ,500 LISC Community Building Grant ,079 Lead Abatement Program ,050 DOH CHAMP ,396 NeighborWorks America National Foreclosure Mitigation Counseling Program ,705 Making Homes Affordable ,700 Expendable Grants ,393 Endowment funds: NeighborWorks America Revolving Loan Capital Projects Fund ,000 Total expenditures of federal awards $ 1,822,388 See note to the schedule of expenditure of federal awards

40 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2014 Note 1- Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Note 2 Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the (identify basis of accounting) basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-122, Cost Principles for Nonprofit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available

41 SCHEDULE OF FINDINGS AND QUESTION COSTS YEAR ENDED DECEMBER 31, 2014 I. SUMMARY OF AUDITORS RESULTS Combined financial statements Type of auditors report issued Unmodified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant Deficiencies identified that are not considered to be material weaknesses? Yes X None reported Noncompliance material to combined financial statements noted? Yes X No Federal Financial Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiencies identified? Yes X None reported Type of auditors report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section 510(a)? Yes X No The following schedule reflects the major programs included in the audit: Name of Federal Program or Title CFDA Number Expenditures NeighborWorks America Revolving Loan Capital Projects Fund $900,000 The dollar threshold for determining Type A and B programs is $300,000. Auditee qualified as low-risk auditee? Yes X No

42 SCHEDULE OF FINDINGS AND QUESTION COSTS YEAR ENDED DECEMBER 31, 2014 II. III. SUMMARY OF FINDINGS RELATED TO COMBINED FINANCIAL STATEMENTS REQUIRED UNDER GENERALLY ACCEPTED GOVERNMENT AUDITING STANDARDS We issued reports, dated June 24, 2015, on internal control over financial reporting and on compliance based on an audit of combined financial statements performed in accordance with Government Auditing Standards. Our report on compliance indicated no reportable instances of noncompliance. Our report on internal control over financial reporting indicated no reportable control deficiencies. SUMMARY OF FINDINGS RELATED TO FEDERAL AWARD FINDING AND QUESTION COSTS We issued reports, dated June 24, 2015, on compliance with requirements that could have a direct and material effect on each major program and on internal control over compliance in accordance with OMB Circular A-133. Our report on compliance indicated no reportable instances of noncompliance. Our report on internal control over compliance indicated no reportable control deficiencies

43 STATE SINGLE AUDIT

44 Ansonia 158 Main Street, Suite 301 Ansonia, Connecticut P: Killingworth 166 Route 81 Killingworth, Connecticut P: New Haven 900 Chapel Street, Suite 620 New Haven, Connecticut P: Westport 611 Riverside Avenue Westport, Connecticut P: Principals Francis H. Michaud Jr. CPA John A. Accavallo CPA Sandra M. Woodbridge CPA Dominic L. Cusano MBA CPA Darin L. Offerdahl MBA CPA Guiding Successful People INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR STATE PROGRAM; AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE STATE SINGLE AUDIT ACT To the Board of Directors of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. Report on Compliance for Each Major State Program We have audited Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s compliance with the types of compliance requirements described in the Office of Policy and Management s Compliance Supplement that could have a direct and material effect on each of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s major state programs for the year ended December 31, Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s major state programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its state programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s major state programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the State Single Audit Act (C.G.S. Sections to 4-236). Those standards and the State Single Audit Act require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state program occurred. An audit includes examining, on a test basis, evidence about of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s compliance with those requirements and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major state program. However, our audit does not provide a legal determination of Neighborhood Housing Services of New Haven, Inc. and New Haven HomeOwnership Center, Inc. s compliance. American Institute of Certified Public Accountants Connecticut Society of Certified Public Accountants