White River Regional Housing Authority Melbourne, Arkansas. Financial Statements and Supplemental Financial Information

Transcription

1 White River Regional Housing Authority Melbourne, Arkansas Financial Statements and Supplemental Financial Information Year Ended June 30, 2016

2 TABLE OF CONTENTS PAGE Financial Section 3 Independent Auditors' Report 4 Management Discussion and Analysis 6 Basic Financial Statements 15 Statement of Net Position 16 Statement of Revenues, Expenses, and Changes in Net Position 17 Statement of Cash Flows 18 Notes to the Financial Statements 19 Supplemental Financial Information 26 Financial Data Schedule 27 Schedule of Modernization Grant Activity 47 Schedule of Expenditures of Federal Awards 48 Notes to the Schedule of Federal Awards 49 Non-Financial Section 50 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. 51 Independent Auditors' Report on Compliance for Each Major Program and on the Internal Control Over Compliance Required by the Uniform Guidance 53 Schedule of Findings and Questioned Costs 55 Summary of Prior Audit Findings 56

3 ! ~. ~ Financial Section 3

4 STEAVEN E. MILLER, JR., CPA L. SCOTT ROSE, CPA 1309 E. RACE AVENUE SEARCY, AR T F Independent Auditors' Report Board of Commissioners White River Regional Housing Authority 1327 E. Main Street Melbourne, AR Report on the Financial Statements We have audited the accompanying financial statements of White River Regional Housing Authority as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the 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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of White River Regional Housing Authority as of June 30, 2016, and the changes in financial position, and its cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 4

5 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Qur audit was conducted for the purpose of forming an opinion on the basic financial statements of the White River Regional Housing Authority. The accompanying financial information listed as supplemental financial information in the_table of qontents is presented for purposes of additional an~lysis and is not a required part of the basic financial stateniehts. The schedule of expenditures of federal awards is presented for purposes of ~ddit!onal analysi.~. as crequired by. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative. Requirements, Cost Principles, and Avdit Reqyiierrients for Federal Awards (Unif9rm Guidance) and is also not a required part of the financlal statements. ' -~ _. - '. ',.,. '.1", >.. -. '. ' '" " '- ' The s upplemen~al'firi.=mcial ihformi!it19~ \~ndthe. schedule cwexpenditures offederal a.wards:'ilr~.the responsibility of management and were derived from and relate directly to the underlying accounting. and other records used to prepare thei basic financial statements. Such information has' been subjected to the auditing procedures applied in the audit' of the basic financial statements and certain; additional procedures, including comparing and reconciling such information directly to Jhe underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental financial information and the schedule of expenditures of federals awards are fairly stated in all material. respects in relation to the basic financial statements as a whole. Other Reportins,;~ Require~ by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 30, 2017, on our consideration White River Regional Housing Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scop~ of our testing of internal. control over financial reporting and compliance and the results of that testing an.d not to provide an opinion on the 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 the entity's internal control over financial reporting and compliance. March 30,.2017 ~rj_ ti mer& Rose, P.A.. Certified Public Accountants 5

6 MANAGEMENT DISCUSSION AND ANAL.YSIS -WHITE RIVER REGIONAL HOUSING AUTHORITY The White River Regional Housing Authority's (the "Authority") management discussion and analysis is designed to (a) assist the reader in focusing on significant fmancial issues, (b) provide an overview ofthe Authority's financial activity, (c) identify changes in the Authority's financial position (its ability to address the next and subsequent year challenges), and (d) identify individual fund issues or concerns. Since the Management Discussion and Analysis (MD&A) is designed to focus on the current year's activities, resulting changes and currently known facts, please read it in conjunction with the Authority's fmancial statements. FINANCIAL IDGHLIGHTS The Authority's Net Position decreased ~y $71,031 (or 1.02%) during the fiscal year ending June. 3 0, The decrease is primarily due to recording depreciation of assets purchased in prior years. Net Position was $6,949,319 and $6,878,288 for FYE 6/30/2015 and FYE 6/30/2016, respectively. Total revenue increased by $30,842 (or 0.40%) during the fiscal year.ending June 30, 2016, and was $7,797,891 and $7,828,733 for FYE 6/30/2015 and FYE 6/30/2016, respectively. The primary increase is attributed to an increase in other revenue. The Authority received dividend proceeds during FYE 6/30/16 due to participating in an insurance pool that were recorded in other revenue. Total expenses of all Authority programs increased by $40,528 (or 0.52% ). Total expenses were $7,859,236 and $7,899,764 for FYE 6/30/2015 and FYE 6/30/2016, respectively. Lowering of payment standards in the Housing Choice Voucher program resulted in a decrease ofhousing Assistance Payments in the amount of $82,7 46 which is offset by increases in administrative expenses of$101,803 and maintenance expense of$9,814 during FYE 6/30/16. 6

7 USING TIDS ANNUAL REPORT This is a very different presentation of the Authority's previous financial statements. The following graphic outlining these changes is provided for your review: MD&A Management Discussion and Analysis Basic Financial Statements Authority-wide Financial Statements - Notes to Financial Statements Fund Financial Statements (Financial Data Schedule) - Other Required Supplementary Information Required Supplementary Information including Schedule and Certification of Actual Modernization Costs Schedule of Expenditures of Federal Awards and Auditor's Reports 7

8 Authority-Wide Financial Statements The Authority-wide financial statements ~~~~)Ill~) are designed to be corporate-like in that all activities are consolidated into a total for the entire Authority. These Statements include a Statement of Net Position, which is similar to a Balance Sheet. The Statement ofnet Position reports all financial and capital resources for the Authority. The statement is presented in the format where assets minus liabilities, equals "Net Position," formerly known as equity. Assets and liabilities are presented in order of liquidity, and are classified as "Current" (convertible into cash within one year) and "Non-current." The focus of the Statement ofnet Position is the representation of the ''Net Position" which is reported in three broad categories: Net Investment in Capital Assets: This component of Net Position consists of all Capital Assets, reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted Net Position: This component ofnet Position consists of restricted assets, such as when constraints are placed on the asset by creditors, grantors, contributors, laws, regulations, etc. Unrestricted Net Position: Consists ofnet Position that do not meet the definition of"net Investment in Capital Assets," or "Restricted Net Position." The Authority-wide fmancial statements also include a Statement of Revenues, 'Expenses and Changes in Net Position (similar to an Income Statement). This Statement includes Operating Revenues, such as rental income, operating expenses, such as administrative, utilities, and maintenance, and depreciation, and Non-Operating Revenues and Expenses, such as interest expense. The focus of the Statement of Revenues, Expenses and Changes in Net Position is the "Change in Net Position," which is similar to Net Income or Loss. Finally, a Statement of Cash Flows is included, which discloses net cash provided by, or used for, 1) operating activities, 2) capital and related financing activities, and 3) investing activities. Fund Financial Statements (Financial Data Schedule) Traditional users of governmental financial statements will find the Fund Financial Statements presentation more familiar. The focus is now on Major Funds, rather than fund types. The Authority consists of exclusively Enterprise Funds and utilizes the full accrual basis of accounting. The Enterprise method of accounting is similar to accounting utilized by the private sector accounting. Many of the funds maintained by the Authority are required by the Department of Housing and Urban Development. Others are segregated to enhance accountability and control. 8

9 The Authority's Funds Business Activities- represents non-hud resources developed from a variety of activities. HOME Investment Partnerships Program -Under a contract with the Arkansas Development Finance Authority, the Authority administers contracts with independent landlords to provide tenant-based rental assistance (TBRA) for qualifying families. Housing Choice Vouchers -Under the Housing Choice Voucher Program, the Authority administers contracts with independent landlords that own the property. The Authority subsidizes the family's rent through a Housing Assistance Payment made to the landlord. The program is administered under an Annual Contributions Contract (ACC) with HUD. HUD provides Annual Contributions Funding to enable the Authority to structure a lease that sets the participants' rent at 30% of household income. Section 8 Moderate Rehabilitation-Single Room Occupancy- Under the Single Room Occupancy program, the Authority administers HAP contracts at two locations to provide rental subsidy for homeless or mentally ill individuals. Funding for the program is provided through an annual contributions contract with HUD. Low Rent Public Housing -Under the conventional Low Rent Public Housing Program, the Authority rents units that it owns to low-income households. This program is operated under an Annual Contributions Contract (ACC) with HUD, and HUD provides Operating Subsidy to enable the PHA to provide the housing at a rent that is based upon 30% of household income. Public Housing Capital Fund Program - The conventional Low Rent Public Housing Program also includes the Capital Fund Program, which is the primary funding source for physical and management improvements to the Authority's Low Rent Public Housing properties. Component Unit- Blended- White River Regional Housing Authority has assumed management of the Housing Authority of the City ofmelbourne. The units will be transferred into White River Regional Housing Authority's inventory until which time they will be reported as a component unit. 9

10 AUTHORITY-WIDE FINANCIAL STATEMENTS Statement of Net Position The following table reflects the condensed Statement of Net Position compared to the prior year. TABLE 1 STATEMENT OF NET POSITION FYE 6/30/2016 FYE 6/30/2015 Current and Other Assets $2,953,298 $2,865,561 Capital Assets (Net) 4,151,155 4,279,875 Total Assets $7,104,453 $7,145,436 Current and Other Liabilities 185, ,549 Long-Term Liabilities 40,845 37,568 Total Liabilities $226,165 $196,117 Net Position: Net Investment in Capital Assets 4,151,155 4,279,875 Restricted 29,045 48,537 Unrestricted 2,698,088 2,620,907 Total Net Position $6,878,288 $6,949,319 For more detailed information see for the Statement of Net Position. Major Factors Affecting the Statement of Net Position Current assets increased by $87,737, while capital assets decreased by $128,720, representing a net decrease in total assets of $40,983. The primary increase can be attributed to an increase in Housing Choice Voucher cash while the decrease in capital assets is a result of increases in accumulated depreciation of assets purchased through the Capital Fund Program for major improvements to Low Rent Public Housing structures. Liabilities increased by $30,048 primarily due to the increase in unearned revenue of$37,504 during FYE 6/30/16. Unearned revenue is from advanced funding in the Section 8 Moderate Rehabilitation Single Room Occupancy and the HOME Investment Partnership Programs. 10

11 TABLE2 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION The following schedule compares the revenues and expenses for the current and previous fiscal year. Revenues Tenant Revenue- Rents and Other Operating Subsidies and Grants Investment Income Other Revenues Total Revenue FYE 6/30/2016 $271,924 7,176,842 17, ,410 7,828,733 FYE 6/30/2015 $274,253 7,196,700 7, ,497 7,797,891 Expenses Administrative Tenant Services Utilities Maintenance Insurance General Housing Assistance Payments Depreciation Total Expenses Net Increase (Decrease) 1,471,973 2, , ,;213 61,634 65,135 5,619, ,355 7,899,764 $(71,031) 1,370,170 3, , ,399 58,947 62,315 5,701, ,289 7,859,236 $(61,345) Major Factors Affecting the Statement of Revenue, Expenses and Changes in Net Position Tenant revenue decreased by $2,329 (approximately 0.85%) as a result of changes in tenant incomes and household composition which decreased the tenants' portion of rent payments. Operating Subsidies and Grants decreased overall by approximately 0.27% due to incremental changes in funding provided across the various program. Other revenue increased $42,913 primarily due to dividend proceeds received from participating in an insurance pool. Some expenses increased moderately due to inflation with an overall increase of approximately 0.52%. Housing Assistance Payments were reduced by approximately 1.45% due to lowering of payment standards in an effort to reduce costs as a result of lower funding levels. Administrative expenses increased $101,803 primarily due to the additional staff position created during FYE 6/30/16 as well as standard cost of living raises. 11

12 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of year-end, the Authority had approximately $4.15 million invested in a variety of capital assets as reflected in the following schedule, which represents a net decrease (addition, deductions and depreciation) of $128,720 or 3.01% from the end oflast year. TABLE3 CAPITAL ASSETS AT YEAR-END (NET OF DEPRECIATION) 6/30/2016 Land and Land Improvements $1,034,828 Buildings 8,281,207 Equipment- Dwelling 452,791 Equipment - Administration 184,246 Accumulated Depreciation (5,813,437) 6/30/2015 $1,009,620 8,185, , ,885 (5,542,565) Construction In Progress 11,520 Total $4,151,155 $4,279,875 12

13 The following reconciliation summarizes the change in Capital Assets, which is presented in detail in Note 4 of the amjit. TABLE4 CHANGE IN CAPITAL ASSETS Beginning Balance Additions Retirements Net of Depreciation Depreciation $4,279, ,635 (37,874) 37,874 (305,355) Ending Balance $4,151,155 This year's major additions are: Capital Improvements Programs (modernization activities completed on Authority's Public Housing complexes Capital Fund Program (CFP) Buildings Furniture and Equip Site Improvements Construction In Progress (CFP) Total $ 125,208 22,153 14,754 3,000 11,520 $ 176,635 Debt Outstanding The Authority had no debt outstanding at the beginning or at the end of the fiscal year. 13

14 ECONOMIC FACTORS Significant economic factors affecting the Authority are as follows: Federal funding of the Department of Housing and Urban Development. Local labor supply and demand, which can affect salary and wage rates. Local inflationary, recessionary and employment trends, which can affect resident incomes and therefore the amount of rental income. Inflationary pressure on utility rates, supplies and other costs. FINANCIAL CONTACT The individual to be contacted regarding this report is Dennis Wiles, Executive Director of the White River Regional Housing Authority at (870) Specific requests may be submitted to Dennis Wiles, Executive Director, White River Regional Housing Authority, 1327 East Main Street, PO Box 650, Melbourne, AR

15 Basic Financial Statements 15

16 White River Regional Housing Authority Statement of Net Position Proprietary Funds June 30, 2016 ASSETS Current Assets Cash Restricted cash Total cash Investments Receivables Tenants Other governments Miscellaneous Prepaid expenses Total current assets Noncurrent Assets Capital Assets Nondepreciable Depreciable, net of accumulated depreciation Total noncurrent assets Total Assets LIABILITIES Current Liabilities Accounts payable Security deposits Accrued liabilities Current portion of accrued compensated absences Unearned revenue Due to other governments Other current liabilities Total current liabilities Noncurrent Liabilities Compensated absences, net of current portion Total noncurrent liabilities $ 866, ,927 1,008,747 1,833,787 5,818 48, ,956 2,953, ,711 3,779,444 4,151,155 7,104,453 31,350 41,873 8,856 19,221 46,627 18,131 19, ,320 40,845 40,845 Total Liabilities 226,165 NET POSITION Investment in capital assets Restricted for housing assistance payments Unrestricted Total net position $ 4,151,155 29,045 2,698,088 6,878,288 See accomf&nying notes.

17 White River Regional Housing Authority Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds Year Ended June 30, 2016 Operating Revenues Tenant revenue, gross Governmental operating grants Miscellaneous Total operating revenues $ 271,924 7,040, ,610 7,673,647 Operating Expenses Administrative Tenant services Utilities Maintenance Insurance General Housing assistance payments Depreciation Total operating expense 1,471,973 2, , ,213 61,634 65,135 5,619, ,355 7,899,764 Operating Income (Loss) Non-Operating Revenues (Expenses) Interest income Gain on disposition of equipment Total non-operating revenue (expenses) (226, 117) 17, ,357 Income (loss) before contributions (207,760) Capital Contributions 136,729 Increase (decrease) in net position Net Position - Beginning of Period (71,031) 6,949,319 Net Position - End of Period $ 6,878,288 See accom~f1ying notes.

18 White River Regional Housing Authority Statement of Cash Flows Proprietary Funds Year Ended June 30, 2016 Cash Flow from Operating Activities Receipts from tenants Operating subsidies Payments to suppliers Payments to employees Other receipts (payments) Net cash provided (used) by operating activities $ 272,767 7,077,617 (891,909) (1,01 0,704) (5,336, 1 02) 111,669 Cash Flows from Capital and Related Financing Activities Purchases of capital assets Capital contributions Net cash provided (used) by capital and related financing activities (180,026) 173,990 {6,036) Cash Flows from Investing Activities Redemption of investments Interest earned on invested cash Net cash provided (used) by investing activities 3,846 17,557 21,403 Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents -Beginning of Year 127, ,711 Cash and Cash Equivalents - End of Year $ 1,008,747 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used In) Operating Activities Operating income (loss) Adjustments Not Affecting Cash Depreciation and amortization Change in Assets and Liabilities (Increase) Decrease in accounts receivable- tenants {Increase) Decrease in other receivables (Increase) Decrease in prepaid expenses Increase (Decrease) in accounts payable Increase (Decrease) in accrued expenses Increase (Decrease) in accrued compensated absences Increase (Decrease) in security deposits Increase (Decrease) in unearned revenue Increase (Decrease) in due to other governments Total adjustments $ (226,117) 305,355 1, ,214 1,581 (19,723) 4,818 (308) 37,504 6, ,786 Net Cash Provided by (Used In) Operating Activities $ 111,669 See accom~ranying notes.

19 White River Regional Housing Authority Notes to the Financial Statements June 30, 2016 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Introduction. The financial statements of the White River Regional Housing Authority are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The more significant accounting policies established in GAAP and used by the White River Regional Housing Authority are discussed below. Under the United States Housing Act of 1937, as amended, the U.S. Department of Housing and Urban Development (HUD) has direct responsibility for administering low income housing programs in the United States. Accordingly, HUD has contracted with the entity to administer certain HUD funds. A. Reporting Entity.. :..:.. These financial statements present the ne(positioh ~hd results of operations of White River Regional Housing Authority, a primary government. Housing Authority of the City of Melbourne has been absorbed and,. is a component unit to be included in.. the White River R~gional Housing Authority's reporting entity. The component unit has a March 31, 2016'year end \1\fhich. has been incorporated into the Financial Statements of the primary government.. '' ' B. Basic Financial Statements.. :.. ' a Board of Commissioners. As such, White River Regional Housing. Authority is considered a special-purpose government.. All pctivities of authority a~e) considered business type activities. ' '. -~ '.. '.. '_,,., The authority' is a public' co~po'ration:,; legally separa'te, fiscally indepeh,dent and governed. ~y All activities of the authority. are. reported as a proprietary. fund.type.. The foc4s of proprietary fund measurement is upon determination of operating income; changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The entity's proprietary fund authority is classified as an enterprise fund. An enterprise funds is required to be.used to account for operations for which a fee is charged to external users for goods or services and the activity (a) is financed with debt that is solely secured by a pledge of the net revenues, (b) has third party requirements that the cost of providing services, including capital costs, be recovered with fees and charges or '(c) establishes fees pnd charges based on a pricing policy designed to recover similar costs. The White River Regional Housing Authority is considered to be a special-purpose government since its existence is to satisfy a very specific and narrow purpose. As such, the authority presents a single set of enterprise fund financial statements. The Statement of Net Position is reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as weu as long-term debt and obligations. The.authority's net position is reported in three components: 1. Investment in capital assets- Consists of the historical cost of capital assets and related deferred outflows of resources, net of accumulated depreciation and related deferred inflows of resources and reduced by the outstanding bai?jnces of any borrowings that are attributable to the acquisition, construction, or improvements of those assets. 2. Restricted net position - Net position is considered restricted if their use is constrained to a particular purpose. Restrictions are imposed by external organizations such as creditors, grantors, contributors, or laws and regulations. of other governments. Restricted net position is reduced by liabilities and deferred inflows of resources related to the restricted assets. '... ' 19

20 White River Regional Housing Authority Notes to the Financial Statements (Continued) June 30, 2016 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Authority Activities. 3. Unrestricted net position - Consists of all other net position that does not meet the definition of the above two components and is available for general use. The authority is administering the following activities and programs: Public Housing (commonly referred to as Low-income housing or Low Rent) - The Public Housing Program provides and operates cost-effective, decent, safe and affordable housing to low-income households. The Public Housing Program is operated under an Annual Contributions Contract (ACC) with HUD who provides Operating Subsidy and Capital Grant funding to enable the PHA to provide the housing at a rent that is based upon 30% of househol(l income. The Public Housing Program also includes the Capital Fund Program (CFP); which is the primary funding source for physical and management improvements to the Authority's properties. The Capital Fund Program provides annual grant funds to the Authority for capital and management activities including modernization and correcting physical deficiencies. The CFP is awarded non-competitively and is based upon a formula that considers existing and accrual (future) modernization needs of. the Authority. Housing Authority of the City of Melbourne is included in the Public Housing Program. Housing Choice Voucher Program -.The Housing Choice Voucher Program is designed to aid very lo~income families in obtaining decent, safe, and sanitary rental housing. The Authority administers contracts with independent landlords that own property and rent that property to families that have applied for housing assistance through the Authority. The Authority subsidizes the family's rent through a Housing Assistance Payment made to the landlord. The. program is administered under an Annual Contributions Contract (ACC) with HUD. HUD provides Annual Contributions Funding to enable the Authority to structure a lease that sets the participants' rent at 30% of household income...- Business Activities- represents non-hud resources developed from a variety of activities. :; '.. '., '. ADFA Home - a program under the Tenant Based Rental Assistance Program in which the Authority administers contracts with independent landlords that own the property. The Authority subsidizes the family's rent through a Housing Assistance Payment made to the landlord. The program is administered under contract with ADFA (Arkansas Development Finance Authority). ADFA provides funds to enable the Authority to structure a lease that sets the participants rent at 30% of household income.. Section 8 Moderate Rehabilitation Single Room Occupancy (SRO) - The objective of the Section 8 project-based rental assistance programs is to aid low and very low-income families in obtaining decent, safe, and sanitary rental housing through the provision of housing assistance payments to participating owners on behalf of eligible tenants. Family Self-Sufficiency (FSS) -The purpose of the FSS program is to promote the development of local strategies to coordinate the use of assistance under the Housing Choice Voucher and Public Housing programs with public and private resources to enable participating families to increase earned income and financial literacy, reduce or eliminate the need for welfare assistance, and make progress toward economic independence and self-sufficiency. 20

21 I~ ~- -~-- -- ~---- White River Regional Housing Authority Notes to the Financial Statements (Continued) June 30, 2016 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Accrual Basis of Accounting. Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made regardless of the measurement focus applied. Proprietary fund financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. E. Budget. Enterprise Fund service delivery levels are determined, by the extent of consumer demand. Because Enterprise Fund revenues and_ expenses fluctuate with changing service delivery levels, generally accepted accounting principles do not require the financial statements to include budgetary comparisons and, accordingly, these comparisons have not been included: Budgets are prepared. for regulatory purposes in accordance withjhe_authority's contract with HUD. The --entity prepares aririual budgets for each program. Prior to the beginning of each budget year, the entity's annual budget is.approved by the entity's governing body. Budgetary amendments require approval by the governing body. All budgetary appropriations lapse at the end of each year. Budgets for Capital Fund Programs are approve(j. in the Authority's.S-year and annual plans.. '.. ~ '. F. Financial Statement Arnounts. ~. \, Cash and_ Cash E,Quivalents. The White Riv~r ~13gional _Housing Authority defines cash to include certificates of' deposit, money market accounts,' savings accounts, demand deposits, and other short:. term securities with original maturities of three months or less; consequently, the cost, carrying value, and market value are equivalent. 2. ~-- Investments. The authority defines investments to include certificates of. deposit with maturities of greater than three months; conse3quently, the cost, carrying value; and market value are equivalent. 3. Accounts Receivable. Accounts receivable consists of amounts due from tenants for rental, excess utilities and repair charges. No provision for an allowance for doubtful accounts has been made since these amounts are considered fully couectible. 4. Due from Other Governments. Due from other governments consists of amounts due from HUD for, operational subsidies. No provision for an allowance for doubtful accounts has been made since these amounts are considered fully collectible: 5. Restricted Assets. Restricted assets consist of cash and investments that are held in trust or to satisfy specific program or purpose restrictions: 6. Capital Assets, Gapital assets purchased or acquired with an original cost of $500 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided Ol) the straight-line basis over the following estimated usefullives: Land improvements Buildings _ Buildings- refurbishing and improvements Furniture and equipment- dwelling 15 Years 40 Years 15 Years 7 Years 21

22 White River Regional Housing Authority Notes to the Financial Statements (Continued) June 30, 2016 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Furniture and equipment- administrative 3-7 Years 7. Construction in Progress. Construction in progress consists of expenditures under HUD's Capital Fund Program (CFP). Certain expenditures under these programs are not capitalizable expenditures, and therefore are expensed as incurred. 8. Security Deposit. Security deposits consist of amounts held in trust with the White River Regional Housing Authority in order for tenants to secure apartment leases. 9. Compensated Absences. The authority's policy allows employees to accumulate unused sick leave and vacation leave. Sick leave is not paid upon termination, but will be paid only upon illness while employed. 10. Due to Other Governments. Due to other governments consists of amounts due local governments for payments in lieu of taxes (PILOT). 11. Long-term. Liabilities. Long-term liabilities expected to be financed from proprietary funds are accounted for in the proprietary fund. Expenditures related to such debt are also included in the proprietary fund. 12. Restricted Net Position. Restricted net position represents cumulative funding provided by HUD in excess of cumulative housing assistance payments. These funds are restricted by HUD program rules. 13. Use of Restricted Resources. When an expense is incurred that can be paid using either restricted or unrestricted resources (net position), the White River Regional Housing Authority's policy is to first apply the expense toward restricted resources and then towar~ unrestricted resources. 14. Defining Operating Revenues and Expenses. The authority distinguishes between operating and nonoperating revenues and expenses. Operating revenues and expenses consist of charges for services and the costs of provided those services, including depreciation and excluding interest cost. All other revenues and expenses are reported as nonoperating. 15. Revenues. All authority revenues are accrued. These revenues consist of user charges for rents, utilities, repairs and other miscellaneous charges. Monies received from customers for security deposits are recorded as a liability upon receipt. Subsidies and grants, which finance current operations, are reported as operating revenues. Subsidies and grants, which finance capital operations, are reported as non-operating revenues. Revenues for government-mandated and voluntary exchange transaction are recorded when all applicable eligibility requirements, including time requirements are met. Resources received before all eligibility requirements are met are reported as unearned revenues. 16. Expenditures. Expenditures are recognized when the liability is incurred. Inventory costs are reported in the period when inventory items are used, rather than in the years purchased Depreciation. Depreciation expense of $305,355 has been recognized during the year ended June 30, Income taxes. The authority is not subject to federal or state income taxes. 19. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles as applied to governmental units require management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 22

23 White River Regional Housing Authority Notes to the Financial Statements (Continued) June 30, 2016 NOTE 2 - DEPOSITS AND INVESTMENTS Deposits Regulations require that deposits with financial institutions be collateralized with collateral whose market value is equal to the uninsured amount of the deposits. The collateral must be placed by the depository bank in an escrow account in a second bank for the benefit of the Authority. Uninsured deposits at June 30, 2016 totaled $1,724. Investments Investing is performed in accordance with HUD regulations and State Statues. Funds may be invested in the following type of investments: 1. Direct obligations of the United States pledged by its full f!:lith and credit Obligations of Federal government agencies and government sponsored agencies. 3. Demand, savings, money-market, certificates of deposit, and Super NOW deposits at federally chartered banks, and savings and loan association. 4. Certain municipal depositary funds and local government investment pools provided that all investments.made by these funds or pools are on approved list of investment securities. The entity must limit its investments in this category to no more than 30 percent of the entity's available investment funds. p. c:;ertain repurchase agreements in accordance with state law.. l.nvestments at June 30, 2016 consist of the following:,... :.,:. Type of Investments Certificates of deposits at federally insured depositories NOTE 3 - RESTRICTED CASH Restricted cash consist of the following:. >. Fair Value/ Carrying Value $ 1,833,787 $ '.".". ''.Cost 1,833,787 Security deposits Housing assistance payments FSS Escrow Section 8 Single Room Occupancy (SRO) Total NOTE 4 - CAPITAL ASSETS Changes in capital assets are as follows: $ $ 41,458 52,760 19, , ,927 Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Beginning Balance $ 360, ,191 Additions Reclassifications and Retirements $ 0 $ 0 11, ,520 0 $ Ending Balance 36.0,191 11, ,711 Capital assets being depreciated: Land improvements Building Equipment 649;429 8,185, ,891 25, , ,020 {37,874) 674,637 8,281, ,037 23

24 White River Regional Housing Authority Notes to the Financial Statements (Continued) June 30, 2016 NOTE 4- CAPITAL ASSETS (CONTINUES) Total capital assets being depreciated 9,462, ,506 (37,874) Less accumulated depreciation for: Land improvements (423,238) (26,579) 0 Building (4,665,883) (228,054) 0 Equipment (453,444} (50,722} 34,483 Total accumulated depreciation (5,542,565} (305,355} 34,483 Total capital assets being depreciated, net 3,919,684 (136,849} (3,391} Total business-type activities capital assets, net $ 4,279,875.,, $ (125,329} $!3,391} 9,592,881 (449,817) (4,893,937) (469,683} (5,813,437} 3,779,444 $ 4,151,155 Construction in progress is composed of expenditures related to major renovation of certain buildings owned by the entity, said renovation to be fully financed by grants from HUD. All land and buildings are encumbered by a Declaration of Trust in favor of the United States of America as security f9r. obligations guaranteed by the federal government and to protect other interests of the federal government... NOTE 5- NONCURRENT LIABILITIES... Noncurrent liabilities consist of the following:... :.. Compensatect absences Less current portion Net noncurrent liabilities Interest Rate None.. $ $ Principal Balance 60,066 (19,221) 40,845 Accrued compensated absences consist of estimated liability for employees accrued vacation and sick leave for which e~ployees are entitled to be paid upon terf!!ination. Changes in noncurrent liabilities are as follows: Description Beginning. Balance Additions Reductions Ending. Balance. One Year Compensated absences $ 55,448 $ 4,618 $ 0 $ 60,066 $ 19,221 NOTE 6 - RISK MANAGEMENT The Authority is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions and natural disasters for which the Authority insures itself against loss participation in a public entity risk. pool. The Authority also. insures itself against workers' compensation claims through participation in a public entity risk pool. There have been no significant reductions in coverage from the prior year and settlements have not exceeded coverage in the past three years. The Authority participates in the public entity risk pool managed by the Arkansas Housing Authorities Property and Casualty Self- Insured Fund, Inc. (AHASIF) for its property and liability risk of loss coverage. The Authority, along with other participating entities, is responsible for paying annual premiums to the pool as determined by AHASIF. The pool administers the pooled resources to provide risk of loss protection for each participating 24

25 White River Regional Housing Authority Notes to the Financial Statements (Continued) June 30, 2016 NOTE 6 - RISK MANAGEMENT (CONTINUED) municipality by purchasing commercial excess insurance. The Authority participates in the public entity risk pool managed by the Municipal League Workers Compensation Trust for its workers compensation risk of loss coverage. The Authority, along with other participating entities, is responsible for paying annual premiums to the pool as determined by the Municipal League. The pool administers the pooled resources to provide risk of loss protection for each participating municipality by purchasing commercial excess insurance. NOTE 7- RETIREMENT PLAN The entity provides pension benefits for all of its full-time employees through the White River Regional Housing Authority 458 (b) Plan. The Plan is a singl~-employer- defined contribution plan and ls administered by the White River Regional Housing Authority. The Plan was established July. 1, :2005 and is authorized and may be amended by the entity's Board of Commissioners. In a defined contribution plan, benefits depend solely on amounts contribute(:! to the plan, plus investment.earnings, and th~ forfeitures of other. partipipant's benefits that may be allocated to such participant's account. Forfeitures of accounts of not fully vested terminated participants in excess of plan expenses shall be reallocated among the accounts of the remaining participants in accordance with the plan. There are no forfeitures reflected ih pension expense recognized by the employer during the current fiscal year. Employees are eligible to participate. immediately.. The employees are allowed t() contribute up to the maximum amounts allowed by the IRS. The entity matches up to 10% of the employees base salary each month. The entity's C()ntributi9iis for each employee. (and inter~st allocated to the employee's account) are Ve!;ted 100% immediately. ' ' '. The entity's total payroll 'in. fiscal year ended June 30, :2016 was $1,424,985. The entity's contributions were calculated using the base salary amount of $1,156,570. Contributions to the plan were $138,957 and $115,657 by the employee and.the entity, respectively. NOTE 8 - COMMITMENTS Commitments arise primarily from construction in progress. All project funds are provided by grant from HUD; therefore no additional funding is required to satisfy outstanding comm.itments at June 30, NOTE 9- CONTINGENCIES The entity is subject b possible examinations made by federal regulators who determine compliance with terms, conditions, laws and regulations governing grants given to the entity in the current and prior years. These.examinations may result in required refunds by the entity to federal grantors and/or program beneficiaries.... ' 25

26 Supplemental Financial Information 26

27 ' White River Regional Housing Authority (AR 197) MELBOURNE, AR Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 06/30/2016 Project Total Section HOME Housing Moderate 6.2 Component Unit- Investment Choice Vouchers Rehabilitation Single Blended Partnerships Program Room Occupancy 111 Cash - Unrestricted $82,602 $174,764 $267, Cash - Restricted - Modernization and Development 113 Cash - Other Restricted $29,045 $28, Cash - Ten ant Security Deposits $30,567 $10, Cash - Restricted for Payment of Current Liabilities $19, Total Cash $113,169 $223,071 $28,447 $278,832 $23,715 $23,715 ""'-.~ "' 121 Accounts Receivable- PHA Projects 122 Accounts Receivable ~ HUD Other Projects $8,493 $31, Accounts Receivable- Other Government 125 Accounts Receivable - Miscellaneous $7 126 Accounts Receivable- Tenants $2,692 $3, Allowance for Doubtful Accounts -Tenants Allowance for Doubtful Accounts- Other 127 Notes, Loans, & Mortgages Receivable - Current 128 Fraud Recovery $1, Allowance for Doubtful Accounts - Fraud -$1, Accrued Interest Receivable 120 Total Receivables, Net of Allowances for Doubtful Accounts $2,692 $8,500 $34,764 ' 131 Investments- Unrestricted $20, Investments - Restricted 135 Investments - Restricted for Payment of Current Liability 142 Prepaid Expenses and Other Assets $19,032 $21,143 $7, Inventories

28 White River Regional Housing Authority (AR 197) MELBOURNE, AR Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 06/30/2016 Project Total Section HOME Housing Moderate 6.2 Component Unit- Investment Choice Vouchers Rehabilitation Single Blended Partnerships Program Room Occupancy Allowance for Obsolete Inventories 144 Inter Program Due From 145 Assets Held for Sale 150 Total Current Assets $134,893 $252,714 $28,447 $340,983 $23,715 CX> "' 161 Land $334,144 $167,617 $533, Buildings $5,234,299 $516,077 $2,530, Furniture, Equipment & Machinery- Dwellings $271,564 $125,811 $55, Furniture, Equipment & Machinery -Administration $86,299 $97, Leasehold Improvements 166 Accumulated Depreciation -$3,715,644 -$315,338 -$1 7 82, Construction in Progress $11, Infrastructure 160 Total Capital Assets, Net of Accumulated Depreciation $2,222,182 $494,167 $1,434, Notes, Loans and Mortgages Receivable- Non-Current 172 Notes, Loans, & Mortgages Receivable - Non Current- Past 173 Grants Receivable- Non Current 174 Other Assets 176 Investments in Joint Ventures 180 Total Non-Current Assets $2,222,182 $494,167 $1,434, Deferred Outflow of Resources 290 Total Assets and Deferred Outflow of Resources $2,357,075 $746,881 $28,447 $1,775, $23,715

29 White River Regional Housing Authority (AR 197) MELBOURNE, AR Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 06/30/2016 Project Total Section HOME Housing Moderate 6.2 Component Unit- Investment Choice Vouchers Rehabilitation Single Blended Partnerships Program Room Occupancy 1\.) CD 311 Bank Overdraft 312 Accounts Payable<= 90 Days $11,065 $6,176 $1, Accounts Payable >90 Days Past Due 321 Accrued Wage/Payroll Taxes Payable $6, Accrued Compensated Absences - Current Portion $2,714 $10,111 $1, Accrued Contingency Liability 325 Accrued Interest Payable 331 Accounts Payable- HUD PHA Programs 332 Account Payable - PHA Projects 333 Accounts Payable - Other Government $12,138 $ Tenant Security Deposits $30,518 $11, Unearned Revenue $28,447 $ Current Portion of Long-term Debt - Capital 344 Current Portion of Long-term Debt- Operating Borrowings 345 Other Current Liabilities $19, Accrued Liabilities - Other 347 Inter Program- Due To 348 Loan Liability - Current 310 Total Current Liabilities $56,435 $41,571 $28,447 $15,040 $5,732 $17,983 $23, Long-term Debt, Net of Current- Capital Projects/Mortgage 352 Long-term Debt, Net of Current- Operating Borrowings 353 Non-current Liabilities - Other 354 Accrued Compensated Absences - Non Current $5,767 $21,485 $3, Loan Liability - Non Current 356 FASB 5 Liabilities ~~ ---