HAIGHT STREET SENIOR HOUSING, INC.

Transcription

1 HAIGHT STREET SENIOR HOUSING, INC. FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR S REPORT YEARS ENDED DECEMBER 31, 2016 AND 2015 With Supplementary Information Required by the U.S. Department of Housing and Urban Development and the Mayor s Office of Housing and Community Development

2 FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 TABLE OF CONTENTS Independent Auditor s Report...1 Statements of Financial Position...3 Statements of Activities...4 Statements of Functional Expenses...5 Statements of Cash Flows...6 Notes to Financial Statements...8 Supplementary Information Required by the U.S. Department of Housing and Urban Development...14 Balance Sheet Data, Including Account Numbers...15 Profit and Loss Data, Including Account Numbers...19 Equity Data, Including Account Numbers...23 Cash Flow Data, Including Account Numbers...24 Computation of Surplus Cash Annual...26 Schedule of Changes in Fixed Asset Accounts...26 Reserve for Replacements...27 Reserve for Residual Receipts...27 Supplementary Information Required by the Mayor s Office of Housing and Community Development (MOHCD)...28 Schedules of Operating Revenues...29 Schedules of Operating Expenses...30 Summary of Replacement Reserve and Other Reserve Activity...32 Certification of Officers...33 Certification of Management Agent...34 Lead Auditor Information...35 Schedule of Expenditures of Federal Awards...36 Notes to Schedule of Expenditures of Federal Awards...37 Schedule of Findings and Questioned Costs...38 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...39 Independent Auditor s Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance...41 Page * * * *

3 Board of Directors Haight Street Senior Housing, Inc. San Francisco, California INDEPENDENT AUDITOR S REPORT Report on the Financial Statements We have audited the accompanying financial statements of Haight Street Senior Housing, Inc., a California nonprofit public benefit corporation, HUD Project No.121-EE165-NP-WAH, which comprise the statements of financial position as of December 31, 2016 and 2015, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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. 1

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Haight Street Senior Housing, Inc., as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the financial statements, Haight Street Senior Housing, Inc. is controlled by the board of directors of Tenderloin Neighborhood Development Corporation, which is a nonprofit organization. Our opinion is not modified with respect to this matter. Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information on pages 15 through 27, 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 the Mayor s Office of Housing and Community Development, on pages 29 through 32, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards on page 36 is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects, in relation to the financial statements as a whole. Report on Other Legal and Regulatory Requirements In accordance with Government Auditing Standards, we have also issued a report dated March 20, 2017 on our consideration of Haight Street Senior Housing, 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 Haight Street Senior Housing, Inc. s internal control over financial reporting and compliance. March 20,

5 STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2016 AND ASSETS Current assets: Cash $ 7,440 $ 1,312 Receivables: Rent 1,496 1,824 Subsidy 3, Other Prepaid expenses 1,407 4,323 Total current assets 14,617 7,988 Restricted deposits (Note 3): Replacement reserve 172, ,313 Reserve for minimum capital investment - 10,352 Residual receipts 80,704 80,621 Tenant security deposits 14,001 13,656 Property and equipment net (Note 4) 11,353,953 11,609,149 Total assets $ 11,635,892 $ 11,883,079 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable and accrued expenses $ 21,885 $ 20,660 Deferred revenue 354 2,271 Related-party payable (Note 5) 89,320 78,108 Total current liabilities 111, ,039 Tenant security deposits 13,576 13,515 Interest payable (Note 6) 2,325,318 2,139,453 Notes payable (Note 6) 6,195,507 6,195,507 Total liabilities 8,645,960 8,449,514 Net assets unrestricted (Note 8) 2,989,932 3,433,565 Total liabilities and net assets $ 11,635,892 $ 11,883,079 The accompanying notes are an integral part of these financial statements. 3

6 STATEMENTS OF ACTIVITIES YEARS ENDED DECEMBER 31, 2016 AND Income: Gross potential rent residential $ 348,466 $ 348,468 Less: vacancies and concessions (1,387) (3,601) Interest income Other income 3,861 2,655 Total income 351, ,747 Expenses: Program services 778, ,242 Management and general 16,409 16,359 Total expenses 794, ,601 Change in unrestricted net assets (443,633) (466,854) Net assets, beginning of year 3,433,565 3,900,419 Net assets, end of year $ 2,989,932 $ 3,433,565 The accompanying notes are an integral part of these financial statements. 4

7 STATEMENTS OF FUNCTIONAL EXPENSES YEARS ENDED DECEMBER 31, 2016 AND Program Management Program Management Services and General Total Services and General Total Marketing $ 708 $ - $ 708 $ 667 $ - $ 667 Administrative 143,209 16, , ,633 16, ,992 Utilities 57,427-57,427 51,342-51,342 Operating and maintenance 75,621-75,621 92,933-92,933 Taxes and insurance 40,833-40,833 51,290-51,290 Total operating expenses 317,798 16, , ,865 16, ,224 Interest (Note 6) 185, , , ,865 Depreciation 274, , , ,512 Total expenses $ 778,459 $ 16,409 $ 794,868 $ 798,242 $ 16,359 $ 814,601 The accompanying notes are an integral part of these financial statements. 5

8 STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND Cash flows from operating activities: Rental receipts $ 342,089 $ 345,057 Interest receipts Laundry and vending 3,861 2,655 Total receipts 346, ,937 Marketing (708) (667) Management fee (32,640) (32,640) Administrative (111,340) (90,102) Utilities (55,967) (49,503) Salaries and wages (13,839) (18,801) Operating and maintenance (76,212) (145,619) Real estate taxes (1,491) (1,471) Property insurance (13,536) (17,084) Miscellaneous taxes and insurance (24,677) (585) Tenant security deposits (284) - Total disbursements (330,694) (356,472) Net cash provided by (used in) operating activities 15,551 (8,535) Cash flows from investing activities: Net increase in reserve for replacements (11,304) (3,300) Net (increase) decrease in reserve for minimum capital investment 10,352 (5) Net increase in reserve for residual receipts (83) (71) Purchase of property and equipment (19,600) (11,244) Net cash used in investing activities (20,635) (14,620) Cash flows from financing activities: Advances from related-party 11,212 23,108 Net cash provided by financing activities 11,212 23,108 Increase (decrease) in cash 6,128 (47) Cash, beginning of year 1,312 1,359 Cash, end of year $ 7,440 $ 1,312 The accompanying notes are an integral part of these financial statements. 6

9 STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND Reconciliation of change in net assets to net cash provided by (used in) operating activities: Change in net assets $ (443,633) $ (466,854) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation 274, ,512 (Increase) decrease in assets: Receivables: Rent 328 (1,524) Subsidy (3,401) (363) Others (344) - Prepaid expenses 2,916 1,005 Increase (decrease) in liabilities: Accounts payable and accrued expenses 1,225 (2,253) Deferred revenue (1,917) 1,888 Tenant security deposits net (284) 189 Interest payable 185, ,865 Net cash provided by (used in) operating activities $ 15,551 $ (8,535) The accompanying notes are an integral part of these financial statements. 7

10 NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 NOTE 1 ORGANIZATION AND NATURE OF ACTIVITIES Haight Street Senior Housing, Inc. (the Organization), a California nonprofit public benefit corporation, was formed on August 21, 2001 to develop and operate a 40-unit affordable housing development specifically for low-income, elderly persons located in San Francisco, California., which is currently operating under the name of Buena Vista Terrace (the Project). The construction of the Project was completed in August 2007, and occupancy began on October 18, The Organization is financed by a capital advance from the U.S. Department of Housing and Urban Development (HUD) under the provisions of Section 202 of the National Housing Act of 1959 and by mortgages held by the City and County of San Francisco s Mayor s Office of Housing (MOH). The Project also receives Section 202 Project Rental Assistance Contract (PRAC) payments from HUD and is subject to compliance with the requirements and regulations of HUD and MOH as to rent charges, operating methods, accounting procedures and other matters through The board of directors of Tenderloin Neighborhood Development Corporation (TNDC) serve as members of the board of directors of the Organization. All members of the board serve without compensation. The Organization is especially vulnerable to the inherent risks associated to revenue that is substantially dependent on government funding of the Section 202 PRAC program. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Method The Organization uses the accrual method of accounting, which recognizes income in the period earned and expenses when incurred regardless of the timing of payments. 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 amounts of income and expense during the reporting period. Actual results could differ from those estimates. Revenue Recognition Rental income is shown at its maximum gross potential. Vacancy loss is shown as a reduction in rental income. Rental units occupied by employees are included in rental income and as an expense of operations. Contributions are recognized as revenue when they are unconditionally communicated. Grants represent contributions if resource providers receive no value in exchange for the assets transferred. Contributions are recorded at their fair value as unrestricted support, temporarily restricted support or permanently restricted support, depending on the absence or existence of donor-imposed restrictions as applicable. 8

11 NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 Cash Cash is defined as cash in demand deposit accounts as well as cash on hand. Not included as cash are funds restricted as to their use, regardless of liquidity, such as residual receipts, replacement reserve, reserve for minimum capital investment, and tenant security deposits. The Organization occasionally maintains cash on deposit at a bank in excess of the Federal Deposit Insurance Corporation limit which was at $28,000 as of December 31, The Organization has not experienced any losses in such accounts. Accounts Receivable The Organization records an allowance for doubtful collections based on a review of outstanding receivables, historical collection information, and existing economic conditions. There was no balance for allowance for doubtful collections as of December 31, 2016 and 2015, respectively. Property and Equipment Property and equipment is stated at cost of acquisition or construction. The costs of maintenance and repairs are charged to expense as incurred. Depreciation is computed based on the straight-line method over the estimated useful lives of the assets. The useful lives of the assets are estimated as follows: Buildings and improvements Furniture, fixtures and equipment 10 to 40 years 7 years The Organization reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such property may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the property and equipment to the future net undiscounted cash flows expected to be generated by the property and any estimated proceeds from the eventual disposition of the property. If the property is considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the property exceeds the fair value of such property. There were no impairment losses recognized for the years ended December 31, 2016 and Income Taxes The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and the related California code sections. The Organization believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. The Organization s federal and state information tax returns for the years 2012 through 2015 are subject to examination by regulatory agencies, generally for three years and four years after they were filed for federal and state, respectively. Functional Expenses Allocation The costs of providing program services and supporting services are summarized on a functional basis in the statements of activities and statements of functional expenses. Accordingly, certain costs are allocated among program services and supporting services based on estimates of employees time incurred and on usage of resources. 9

12 NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 Subsequent Events Management has evaluated subsequent events through March 20, 2017, the date on which the financial statements were available to be issued. Reclassification Certain amounts previously reported in the 2015 financial statements were reclassified to conform to the 2016 presentation for comparative purposes. NOTE 3 RESTRICTED DEPOSITS Reserve for Replacements The Organization is required to maintain a reserve for replacement and repair of property and equipment in accordance with the HUD regulatory agreement. The reserve is required to be funded in the amount of $1,695 per month. Withdrawals from the account are subject to approval by HUD. Reserve for Minimum Capital Investment In accordance with the HUD regulatory agreement, a reserve of $10,000 plus interest earned must be retained as minimum capital investment. Release of any amounts from the reserve may only be made at the express direction of HUD. In 2015, the Organization received authorization from HUD to release of funds from minimum capital investment into replacement reserve. In 2016, the Organization transferred the account balance of $10,352 into replacement reserve. Residual Receipts The Organization is required to deposit surplus cash, as defined by HUD, into a separate bank account in accordance with the HUD regulatory agreement. Withdrawals from the account are subject to approval by HUD. Tenant Security Deposits In accordance with HUD regulations, the Organization is required to maintain on-deposit funds equal to the related liability for tenant security deposits. Security deposits are held in a separate cash account in the name of the Organization. In accordance with provisions of the agreements, restricted cash is held in separate bank accounts. 10

13 NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 NOTE 4 PROPERTY AND EQUIPMENT Property and equipment is summarized as follows: Land $ 2,975,629 $ 2,975,629 Buildings and improvements 10,896,437 10,876,837 Furniture, fixtures and equipment 67,728 67,728 13,939,794 13,920,194 Less: accumulated depreciation (2,585,841) (2,311,045) Total property and equipment $ 11,353,953 $ 11,609,149 NOTE 5 RELATED-PARTY TRANSACTIONS Related-party transactions are summarized as follows: Payable/Paid to Description Payable at December 31, Expense (Payment) Payable at December 31, Expense (Payment) Tenderloin Neighborhood Development Corporation Property management fee (1) $ - $ 32,640 $ - $ 32,640 (32,640) (32,640) Bookkeeping fee (1) - 4,560-4,560 (4,560) (4,560) Advances for operating costs 89,320 78,108 Total $ 89,320 $ 78,108 (1) Property management and bookkeeping of the Project are contracted with TNDC. The fees are limited to operating budgets approved by HUD. 11

14 NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 NOTE 6 NOTES PAYABLE Notes payable are secured by the property unless otherwise noted and consist of the following: Interest Payable Interest Principal Payable Principal City and County of San Francisco Hotel Tax Program Funds, bears simple interest at 3% per annum. The entire principal is due and payable on October 11, However, principal and interest payments should be made to the extent residual receipts, as defined, are available. Interest expense was $73,396 annually in 2016 and $ 1,112,917 $ 2,446,529 $ 1,039,521 $ 2,446,529 City and County of San Francisco HOME loan, bears simple interest at 3% per annum. The entire principal is due and payable on November 4, However, principal and interest payments should be made to the extent residual receipts are available. During 2009, a payment of principal equal to $256,762 was made using proceeds of the Affordable Housing Program forgivable loan (see Note 8). Interest expense was $112,469 annually in 2016 and ,212,401 3,748,978 1,099,932 3,748,978 Total $ 2,325,318 $ 6,195,507 $ 2,139,453 $ 6,195,507 Principal payments on notes payable for the next five years are subject to changes in net cash flow which is a contingency that cannot be reasonably predicted. NOTE 7 RETIREMENT PLAN The Organization participates in a retirement plan established by TNDC. The 403(b) retirement plan was established effective March 1, 2003 covering employees after one year of service, as defined in the plan. Employees are not required to contribute to the plan. Employee contributions are immediately vested, and employees are fully vested in employer contributions after three years. The plan allows for both matching contributions and an additional discretionary (non-matching) contribution from the employer. The employer contributions to the plan are determined on an annual basis; contributions totaled $3,008 and $2,967 for the years ending December 31, 2016 and 2015, respectively. 12

15 NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 NOTE 8 COMMITMENTS AND CONTINGENCIES HUD granted a Section 202 capital advance of $5,086,000 to the Organization. This advance is subject to repayment, along with interest, in the event that the Project is not made available to very low-income elderly households for forty years in accordance with Section 202. The Organization intends to comply with the capital advance requirements, and management expects the capital advance to be forgiven in The Organization was also awarded a $1,772,871 affordable housing bond program grant from the City and County of San Francisco with a compliance period of 50 years. During 2009, the Organization received a forgivable AHP loan from the Federal Home Loan Bank of San Francisco through Silicon Valley Bank totaling $320,000. A portion of the proceeds was used to pay the City and County of San Francisco HOME loan (see Note 6). The AHP loan will be forgiven by the lender if the project complies with lender restrictions for the period of 15 years starting from the date when the project was placed in service. The Organization intends to comply with the capital advance, AHP loan and grant requirements and management expects the capital advance and AHP loan to be forgiven at the end of its respective compliance period. Thus, the capital advance, AHP loan, grant, and other contribution totaling $7,276,305 were recorded as an increase in unrestricted net assets in a prior year. 13

16 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 14

17 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Balance Sheet Data, Including Account Numbers ASSETS Cash: 1120 Cash operations $ 7, Construction cash account Cash entity - Total cash 7,440 Resident accounts receivable: 1130 Resident accounts receivable 1, Allowance for doubtful accounts N Net resident accounts receivable 1,496 Other current assets: 1135 Accounts receivable HUD 3, Accounts and notes receivable operations Accounts and notes receivable entity Accounts receivable interest Interest reduction payment receivable Short-term investments operations Short-term investments entity Miscellaneous current assets Miscellaneous prepaid expenses see details 1,407 Total other current assets 5, T Total current assets 14, Resident deposits held in trust 14,001 Deposits: 1310 Escrow deposits Replacement reserve 172, Other reserves Residual receipts reserve 80, Bond reserves Management improvement and operating plan T Total deposits 253,321 15

18 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Fixed assets: 1410 Land 2,975, Buildings 10,896, Building equipment (portable) Furniture for project/tenant use Furnishings Office furniture and equipment 67, Maintenance equipment Motor vehicles Miscellaneous fixed assets T Total fixed assets 13,939, Accumulated depreciation (2,585,841) 1400N Net fixed assets 11,353,953 Other assets: 1510 Investments operations Investments entity Intangible assets, net Cash restricted for long-term investment Miscellaneous other assets T Total other assets T Total assets $ 11,635,892 16

19 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 LIABILITIES Current liabilities: 2105 Bank overdraft operations $ Accounts payable operations 21, Accounts payable construction/development Accounts payable project improvement items Accounts payable entity 89, Accounts payable 236 excess income due HUD Accounts payable Section 8 and other Accrued wages payable Accrued payroll taxes payable Accrued management fee payable Accrued interest payable Section Accrued interest payable first mortgage (or bonds) Accrued interest payable second mortgage Accrued interest payable other loans and notes (surplus cash) Accrued interest payable other loans and notes Accrued interest payable flexible subsidy loan Accrued interest payable capital improvements loan Accrued interest payable operating loss loan Accrued property taxes Notes payable (short term) Mortgage (or bonds) payable first mortgage (bonds) (short term) Mortgage payable second mortgage (short term) Other loans and notes payable surplus cash (short term) Other loans and notes (short term) Flexible subsidy loan payable (short term) Capital improvement loan payable (short term) Operating loss loan payable (short term) Utility allowances Miscellaneous current liabilities (accrued expenses) Prepaid revenue prepaid rent T Total current liabilities 111, Resident deposits held in trust (contra) 13,576 17

20 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Long-term liabilities: 2305 Accounts payable entity (long term) Notes payable surplus cash Mortgage (or bonds) payable first mortgage (or bonds) Mortgage payable second mortgage Other loans and notes payable surplus cash 6,195, Other loans and notes payable Flexible subsidy loan payable Capital improvement loan payable Operating loss loan payable Interest on loans or notes payable (long term) 2,325, T Total long-term liabilities 8,520, T Total liabilities 8,645,960 NET ASSETS 3131 Unrestricted net assets 2,989, Temporarily restricted net assets Permanently restricted net assets Total net assets 2,989, T Total liabilities and net assets $ 11,635,892 Details of miscellaneous prepaid assets (Account 1200): Prepaid insurance umbrella liability and property $ 657 Other prepaid expenses 750 Balance as of December 31, 2016 $ 1,407 18

21 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Profit and Loss Data, Including Account Numbers REVENUE Gross rent: 5120 Rent revenue gross potential $ 164, Resident assistance payments 184, Rent revenue stores and commercial Garage and parking spaces Flexible subsidy revenue Miscellaneous rent revenue Excess rent Rent revenue/insurance Special claims revenue Retained excess income Lease revenue (nursing homes) T Total rent revenue 348,466 Vacancies: 5220 Apartments (1,387) 5240 Stores and commercial Rental concessions Garage and parking space Miscellaneous T Total vacancies (1,387) 5152N Net rental revenue (rent revenue less vacancies) 347, Nursing homes/assisted living/board and care/other elderly care/co-op/ and other revenues - Financial revenue: 5410 Financial revenue project operations Revenue from investments residual receipts Revenue from investments replacement reserve Revenue from investments miscellaneous T Total financial revenue

22 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Other revenue: 5910 Laundry and vending revenue 1, Resident charges Interest reduction payments revenue Expiration of gift donor restrictions Gifts Miscellaneous revenue other income 2, T Total other revenue 3, T Total revenue 351,235 OPERATING EXPENSES Administrative expenses: 6203 Conventions and meetings Management consultants Advertising and marketing Other renting expenses (tenant services) 71, Office salaries 4, Office expenses 13, Office or model apartment rent Management fee 32, Manager or superintendent salaries 6, Administrative rent-free unit 7, Legal expense project Audit expense 11, Bookkeeping fees/accounting services 4, Bad debts Miscellaneous administrative expenses 6, T Total administrative expenses 160,326 Utilities expenses: 6420 Fuel oil/coal Electricity 18, Water 29, Gas 9, Sewer T Total utilities expenses 57,427 20

23 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Operating and maintenance expenses: 6510 Payroll 36, Supplies 1, Contracts 16, Operating and maintenance rent-free unit Garbage and trash removal 13, Security payroll/contract 5, Security rent-free unit Heating/cooling repairs and maintenance 1, Snow removal Vehicle and maintenance equipment operation and repairs Miscellaneous operating and maintenance expenses T Total operating and maintenance expenses 75,621 Taxes and insurance: 6710 Real estate taxes 1, Payroll taxes (project s share) 5, Property and liability insurance (hazard) 14, Fidelity bond insurance Workers compensation 8, Health insurance and other employee benefits 7, Miscellaneous taxes, licenses, permits and insurance 3, T Total taxes and insurance 40,833 Financial expenses: 6820 Interest on mortgage (or bonds) payable Interest on notes payable (other) Interest on notes payable (long term) Interest on notes payable (short term) Mortgage insurance premium/service charge Miscellaneous financial expenses T Total financial expenses Nursing homes/assisted living/board and care/other elderly care expenses T Total cost of operations before depreciation 334,207 21

24 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, T Income before depreciation and amortization 17, Depreciation expense 274, Amortization expense N Operating loss (257,768) OTHER REVENUE AND EXPENSES Entity revenue and expenses: 7105 Entity revenue Officer s salaries Legal expenses Federal, state and other income taxes Interest on notes payable Interest on mortgage payable 185, Other expenses tenant activities T Net entity expenses 185, Change in unrestricted net assets from operations (443,633) 3248 Change in temporarily restricted net assets from operations Change in permanently restricted net assets from operations Change in total net assets from operations $ (443,633) Details of miscellaneous revenue (Account 5990): Other revenue $ 2,109 S Total mortgage (or bond) principal payments required during the audit year [12 monthly payments]. This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD-approved second mortgages should be included in this figure. $ - S Total of monthly deposits in the audit year into the replacement reserve account, as required by the regulatory agreement even if payments may be temporarily suspended or reduced. $ 20,340 S Replacement reserves, or residual receipts and releases which are included as expense items on this profit and loss statement. $ - S Project improvement reserve releases under the flexible subsidy program that are included as expense items on this profit and loss statement. $ - 22

25 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Equity Data, Including Account Numbers Unrestricted net assets: S Previous year unrestricted net assets $ 3,433, Change in unrestricted net assets from operations (443,633) S Other changes in unrestricted net assets Unrestricted net assets $ 2,989,932 Temporarily restricted net assets: S Previous year temporarily restricted net assets $ Change in temporarily restricted net assets from operations - S Other changes in temporarily restricted net assets Temporarily restricted net assets $ - Permanently restricted net assets: S Previous year permanently restricted net assets $ Change in permanently restricted net assets from operations - S Other changes in permanently restricted net assets Permanently restricted net assets $ - Total net assets: S Previous year total net assets $ 3,433, Change in total net assets from operations (443,633) S Other changes in total net assets Total net assets $ 2,989,932 23

26 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Cash Flow Data, Including Account Numbers Cash flows from operating activities: S Rental receipts $ 342,089 S Interest receipts 295 S Other operating receipts 3,861 S Total receipts 346,245 S Administrative (112,048) S Management fee (32,640) S Utilities (55,967) S Salaries and wages (13,839) S Operating and maintenance (76,212) S Lease payments - S Real estate taxes (1,491) S Property insurance (13,536) S Miscellaneous taxes and insurance (24,677) S Tenant security deposits (284) S Other operating expenses - S Interest on first mortgage - S Interest payments second mortgage - S Interest on notes payable - S Mortgage insurance premium (MIP) - S Miscellaneous financial - S Total disbursements (330,694) S Net cash provided by operating activities 15,551 Cash flows from investing activities: S Net deposits to the mortgage escrow account - S Net deposits to the reserve for replacement account (11,304) S Net deposits to other reserves 10,352 S Net deposits to the residual receipts account (83) S Net purchase of fixed assets (19,600) S Other investing activities - S Net cash used in investing activities (20,635) 24

27 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Cash flows from financing activities: S Principal payments first mortgage - S Principal payments second mortgage - S Proceeds from mortgages, loans, or notes payable - S Principal payments on loans or notes payable - S Other financing activities 11,212 S Net cash provided by financing activities 11,212 S Net increase in cash 6,128 S Cash, beginning of year 1,312 S1200T Cash, end of year $ 7,440 Reconciliation of net loss to net cash provided by operating activities: 3250 Net loss $ (443,633) Adjustments to reconcile net loss to net cash provided by operating activities: 6600 Depreciation 274, Amortization - S Decrease (increase) in tenant/member accounts receivable 328 S Decrease (increase) in accounts receivable other (3,745) S Decrease (increase) in prepaid expense 2,916 S Decrease (increase) in cash restricted for tenant security deposits - S Increase (decrease) in accounts payable 1,225 S Increase (decrease) in accrued liabilities - S Increase (decrease) in accrued interest payable 185,865 S Increase (decrease) in tenant security deposits (284) S Increase (decrease) in prepaid revenue (1,917) S Other adjustments to reconcile net loss to cash provided by operating activities - S Net cash provided by operating activities $ 15,551 25

28 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Computation of Surplus Cash Annual Cash: Operating cash $ 7,440 Security deposits 14,001 Subsidy receivable 3,930 Total cash 25,371 Current obligations: Accounts payable and accrued expenses due within 30 days 15,341 Deferred revenue 354 Tenant security deposits 13,576 Related-party payable 89,320 Total current obligations 118,591 Surplus cash (deficit) $ (93,220) Deposit due residual receipts $ - Schedule of Changes in Fixed Asset Accounts Following are the details to property and equipment: Balance, December 31, 2015 Additions Deductions Balance, December 31, 2016 Land $ 2,975,629 $ - $ - $ 2,975,629 Building and improvements 10,876,837 19,600-10,896,437 Furniture and fixtures 67, ,728 Total 13,920,194 $ 19,600 $ - 13,939,794 Accumulated depreciation (2,311,045) $ (274,796) $ - (2,585,841) Net book value $ 11,609,149 $ 11,353,953 Details of additions to property and equipment: Building and improvements Interior painting $ 19,600 26

29 SUPPLEMENTARY INFORMATION REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT YEAR ENDED DECEMBER 31, 2016 Reserve for Replacements Balance, beginning of year $ 161,313 Total monthly deposits current year 20,340 Transfer from minimum capital investment 10,352 Withdrawals (capitalized) (19,600) Interest 212 Balance, end of year $ 172,617 Reserve for Residual Receipts Balance, beginning of year $ 80,621 Interest 83 Balance, end of year $ 80,704 27

30 SUPPLEMENTARY INFORMATION REQUIRED BY THE MAYOR S OFFICE OF HOUSING AND COMMUNITY DEVELOPMENT (MOHCD) 28

31 SUPPLEMENTARY INFORMATION REQUIRED BY MOHCD SCHEDULES OF OPERATING REVENUES YEARS ENDED DECEMBER 31, 2016 AND Rental revenue: 5120 Gross potential tenant rents $ 164,384 $ 165, Rental assistance payments (inc. LOSP) 184, , Commercial unit rents - - Total rent revenue 348, ,468 Vacancies: 5220 Apartments (1,387) (3,601) 5240 Stores and commercial - - Total vacancies (1,387) (3,601) Net rental income (rent revenue less vacancies) 347, ,867 Other revenue: 5170 Rent revenue garage and parking Miscellaneous rent revenue Supportive services income Interest revenue project operations (from operating account only) Interest revenue project operations (from all other accounts) Laundry and vending revenue 1,697 1, Tenant charges Miscellaneous revenue 2, Total other revenue 4,156 2,880 Total revenue $ 351,235 $ 347,747 29

32 SUPPLEMENTARY INFORMATION REQUIRED BY MOHCD SCHEDULES OF OPERATING EXPENSES YEARS ENDED DECEMBER 31, 2016 AND Management fees: 6320 Management fee $ 32,640 $ 32,640 Above the line asset management fee - - Total management expenses 32,640 32,640 Salaries/benefits: 6310 Office salaries 4,497 3, Manager s salary 6,875 35, Employee benefits: health insurance and disability insurance 4,435 9,494 Employee benefits: retirement and other salary/benefit expenses 3,008 2, Administrative rent free unit 7,044 7,044 Total salaries/benefit expenses 25,859 58,845 Administration: 6210 Advertising and marketing Office expenses 13,377 5, Office rent Legal expense project Audit expense 11,849 11, Bookkeeping/accounting services 4,560 4, Bad debts Miscellaneous administrative expenses 6,780 13,552 Total administrative expenses 37,569 36,678 Utilities: 6450 Electricity 18,568 17, Water 29,265 26, Gas 9,594 7, Sewer - - Total utilities expenses 57,427 51,342 Taxes and licenses: 6710 Real estate taxes 1,491 1, Payroll taxes 5,724 8, Miscellaneous taxes, licenses, and permits 3,134 2,763 Total taxes and licenses expenses 10,349 13,179 Insurance: 6720 Property and liability insurance 14,665 16, Fidelity bond insurance Workers compensation 8,376 8, Directors and officers liabilities insurance - - Total insurance expenses 23,041 25,650 30

33 SUPPLEMENTARY INFORMATION REQUIRED BY MOHCD SCHEDULES OF OPERATING EXPENSES YEARS ENDED DECEMBER 31, 2016 AND Maintenance and repairs: 6510 Payroll 36,165 48, Supplies 1,057 1, Contracts 16,776 12, Garbage and trash removal 13,402 13, Security payroll/contract 5,814 8, HVAC repairs and maintenance 1,408 3, Vehicle and maintenance equipment operation and repairs Miscellaneous operating and maintenance expenses 734 4,745 Total maintenance and repairs expenses 75,621 92, Supportive services 71,701 43,957 Capital and non-capital expenditures to be reimbursed from replacement reserve - - Total operating expenses 334, ,224 Financial expenses: 6820 Interest on first mortgage (or bonds) payable Interest on other mortgages Interest on notes payable (long term) 185, , Interest on notes payable (short term) Mortgage insurance premium/service charge Miscellaneous financial expenses - - Total financial expenses 185, , Total cost of operations before depreciation 520, , Operating loss (168,837) (193,342) Depreciation and amortization expenses: 6600 Depreciation expense 274, , Amortization expense - - Operating loss after depreciation and amortization (443,633) (466,854) Net entity expense - - Total net entity expense Change in total net assets from operations (net loss) $ (443,633) $ (466,854) 31

34 SUPPLEMENTARY INFORMATION REQUIRED BY MOHCD SUMMARY OF REPLACEMENT RESERVE AND OTHER RESERVE ACTIVITY YEARS ENDED DECEMBER 31, 2016 AND 2015 Replacement Reserve Residual Minimum Residual Receipt Investment Replacement Receipt Reserve Reserve Reserve Reserve Minimum Investment Reserve Balance, beginning of year $ 161,313 $ 80,621 $ 10,352 $ 158,013 $ 80,550 $ 10,347 Deposits 20, , Transfer (1) 10,352 - (10,352) Withdrawals (19,600) - - (17,189) - - Interest received Balance, end of year $ 172,617 $ 80,704 $ - $ 161,313 $ 80,621 $ 10,352 (1) In 2015, the Organization received authorization from HUD to release of funds from minimum capital investment into replacement reserve. In 2016, the Organization transferred the account balance of $10,352 into replacement reserve. 32

35 CERTIFICATION OF OFFICERS YEAR ENDED DECEMBER 31, 2016 We certify that we have examined the accompanying financial statements and accompanying supplementary information of Haight Street Senior Housing, Inc. as of and for the year ended December 31, 2016, and, to the best of our knowledge and belief, these financial statements are complete and accurate. Signature Title Date Signature Title Date Employer Identification Number:

36 CERTIFICATION OF MANAGEMENT AGENT YEAR ENDED DECEMBER 31, 2016 I hereby certify that I have examined the accompanying financial statements and supplementary information of Haight Street Senior Housing, Inc. and, to the best of my knowledge and belief, the same is complete and accurate. Signature Title Date Tenderloin Neighborhood Development Corporation Employer Identification Number:

37 LEAD AUDITOR INFORMATION YEAR ENDED DECEMBER 31, 2016 Lead Auditor: James M. Kraft, Partner Firm Name: Lindquist, von Husen & Joyce LLP Firm Address: 90 New Montgomery Street, 11th Floor San Francisco, California Telephone Number: (415) Employer Identification Number:

38 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2016 Federal Grantor/Pass-Through Grantor/Program Title Federal CFDA Number Federal Expenditures Expenditures to Subrecipients U.S. Department of Housing and Urban Development: Direct awards: Supportive Housing for the Elderly: Section 202 Capital Advance $ 5,086,000 $ - Section 202 Project Rental Assistance Contract ,082-5,270,082 - Pass-through awards from: City and County of San Francisco HOME loan ,748,978 - TOTAL FEDERAL AWARDS $ 9,019,060 $ - 36

39 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2016 NOTE 1 BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal grant and loan activity of Haight Street Senior Housing, Inc. and is presented on the accrual basis of accounting. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in the preparation of the basic financial statements. The purpose of the Schedule is to present a summary of those activities of Haight Street Senior Housing, Inc. for the year ended December 31, 2016, which have been financed by the U.S. Government. For purposes of the Schedule, federal awards include all federal assistance entered into directly and indirectly between Haight Street Senior Housing, Inc. and the federal government. Haight Street Senior Housing, Inc. did not elect to use 10% of de minimis indirect cost rate as allowed under the Uniform Guidance. NOTE 2 PRIOR YEARS EXPENDITURES The accompanying schedule of expenditures of federal awards includes $8,834,978 in expenditures from prior years for which continuing compliance is required. NOTE 3 YEAR-END LOAN AND FORGIVABLE LOAN BALANCES The loan and forgivable loan balances outstanding at year-end are summarized as follows: Section 202 capital advance Supportive Housing for the Elderly $ 5,086,000 HOME Investments Partnership Program 3,748,978 Total $ 8,834,978 37

40 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2016 Section I Summary of Auditor s Results Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None reported Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section of the Uniform Guidance? Yes X No Identification of major programs: CFDA # Name of Federal Program or Cluster U.S. Department of Housing and Urban Development Section 202 Capital Advance Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? X Yes No Section II Financial Statement Findings None noted. Section III Federal Award Findings None noted. 38