FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT EASTERN IOWA REGIONAL HOUSING AUTHORITY DUBUQUE, IOWA

Transcription

1 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT EASTERN IOWA REGIONAL HOUSING AUTHORITY DUBUQUE, IOWA June 30, 2017

2 TABLE 0 F C 0 N T E N T S Page INDEPENDENT AUDITOR'S REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) 3 6 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION STATEMENT OF CASH FLOWS NOTES TO FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION COMBINING STATEMENT OF NET POSITION COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION COMBINING STATEMENT OF CASH FLOWS COMBINING STATEMENT OF NET POSITION - EIRHC 33 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - EIRHC COMBINING STATEMENT OF CASH FLOWS - EIRHC SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS SCHEDULE AND CERTIFICATION OF ACTUAL MODERNIZATION COSTS FINANCIAL DATA SCHEDULE OTHER REPORTS 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 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE SCHEDULE OF FINDINGS AND QUESTIONED COSTS

3 609 S. 4th Street, Suite B La Crosse, WI Phon~ Fax: Your Business Safety Net INDEPENDENT AUDITOR'S REPORT Board of Directors Eastern Iowa Regional Housing Authority We have audited the accompanying basic financial statements of the Eastern Iowa Regional Housing Authority ("Authorityu), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions 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 ln order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. -3-

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Eastern Iowa Regional Housing Authority, as of June 30, 2017, and the respective changes in financial position and cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 6-13 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, wh~ch 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 we performed do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the Authority's basic financial statements. The combining financial statements and statement and certification of actual modernization costs are presented for additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards 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 (Uniform Guidance), and the Department of Housing and Urban Development, and is also not a required part of the basic financial statements. Further, the financial data schedule is presented for purposes of additional analysis as required by Uniform Financial Reporting Standards issued by the Department of Housing and Urban Development, and is also not a required part of the financial statements. The above described other information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the above described other information is fairly stated in all material respects in relation to the basic financial statements as a whole. -4-

5 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 30, 2017, on our consideration of the Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority's internal control over financial reporting and compliance. October 30,

6 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) -6-

7 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30,2017 This section of the Eastern Iowa Regional Housing Authority, 's annual financial report presents our management's discussion and analysis of the Authority's financial performance during the fiscal year ended on June 30, This discussion and analysis is designed to assist the reader in focusing on the significant financial issues and activities and to identify any significant changes in financial position. Please read and consider the information presented in conjunction with the financial statements as a whole. For accounting purposes, the Housing Authority is classified as an enterprise fund. Enterprise funds account for activities similar to those found in the private business sector, where the determination of net income is necessary or useful to sound financial administration. Enterprise funds are reported using the full accrual method of accounting in which all assets, all deferred outflows of resources, all liabilities, and all deferred inflows of resources, associated with the operation of these funds are included on the balance sheet. The focus of enterprise funds is on income measurement, which, together with the maintenance of equity, is an important financial indication. FINANCIAL IDGHLIGHTS >- The term "net position" refers to the difference between assets plus deferred outflows of resources less liabilities and deferred inflows of resources. The Authority's total net position as of June 30, 2017 was $4,598,030. The net position decreased by $177,698 from the prior year. >- The Authority had a net decrease of $258,932 in the Low Rent Public Housing and Capital Fund Programs, $24,734 net decrease in the Section 8 Housing Choice Voucher Program, $2,826 net decrease in the Rural Rental Housing Loans Program, $72 net increase in Home Investment Partnership Program (Tenant Based Rental Assistance), $154,542 net increase in State/Local, and a $45,820 net decrease in Component Units (Eastern Iowa Regional Housing Corporation - EIRHC). >- Revenues for the Authority were $7,357,229 for the year ended June 30,2017. This was an increase of $524,275 or 7.7% over the prior year. >- Expenses for the Authority were $7,534,927 for the year ended June 30,2017. This was an increase of$247,946 or 3.4% over the prior year. >- Rental revenue for the Authority was $384,227 for the year ended June 30, 2017, a decrease of $1,620 or.4% from the prior year. Intergovernmental revenue for the Authority was $6,674,808 for the year ended June 30,2017, an increase of$544,120 or 8.9% over the prior year. Revenue reported from HUD capital grants for the year ended June 30, 2017 was $31,802, a decrease of $1,086 or 3.3% from the prior year. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report includes this Management Discussion and Analysis report, the Basic Financial Statements and the Notes to the Financial Statements. This report also contains the Financial Data Schedule (FDS) as referenced in the section of Supplemental Information Required by HUD. The Authority's financial statements are presented as fund level financial statements because the Authority only has proprietary funds. -7-

8 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30,2017 OVERVIEW OF THE FINANCIAL STATEMENTS- CONTINUED Required Financial Statements The financial statements of the Housing Authority report information of the Authority using accounting methods similar to those used by private sector companies. These statements offer short- and long-term financial information about its activities. The Statement of Net Position includes all the Authority's assets, deferred outflows of resources, liabilities, and deferred inflows of resources and provides information about the nature and amounts of investments in resources (assets and deferred outflows of resources) and obligations of the Authority creditors (liabilities and deferred inflows of resources). It also provides the basis for evaluating the capital structure of the Authority and assessing the liquidity and financial flexibility of the Authority. All of the current year's revenues and expenses are accounted for in the Statement of Revenues, Expenses, and Changes in Fund Net Position. This statement measures the success of the Authority's operations over the past year and can be used to determine whether the Authority has successfully recovered all its costs through its user fees and other charges, profitability and credit worthiness. The final required financial statement is the Statement of Cash Flows. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing and financing activities and provides answers to such questions as where did cash come from, what was cash used for, and what was the change in the cash balance during the reporting period. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements and provide more detailed data. Supplemental Information This report also contains the Financial Data Schedule (FDS) as referenced in the section of Supplemental Information Required by HUD. HUD has established Uniform Financial Reporting Standards that require Housing Authority's to submit financial information electronically to HUD using the FDS format. This financial information was electronically transmitted to the Real Estate Assessment Center (REAC) for the year ended June 30, 2017 and is required to be included in the audit reporting package. FINANCIAL ANALYSIS Net position may serve, over time, as a useful indicator of a government's financial position. As stated in the table on the following page, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $4,598,030 at the close of the year ended June 30, 2017 down from $4,775,728 in fiscal year The decrease in net position of$177,698 was due to the reasons noted below. ~ Current and other assets include cash, investments, receivables, prepaid expenses, and assets held for sale. Of the $11,887 decrease in this category, cash and investments increased $37,631, receivables decreased $49,100, and prepaid expenses decreased $

9 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30,2017 FINANCIAL ANALYSIS- CONTINUED ~ Non-current assets decreased $123,302 due to a decrease of $263,453 in capital assets which was partially offset by an increase of $140,151 in notes receivable. Capital assets decreased because current year depreciation expense exceeded current year capital asset additions. Change in capital assets is explained in section titled "Capital Asset and Debt Administration" of this analysis. ~ Current liabilities include accounts payable, tenant security deposits, unearned revenue, and current portion of long-term debt. The decrease in this category of $20,918 was mainly due to a decrease in accrued wages of $15,148 and a decrease in accounts payable of $6,684. ~ Non-current liabilities increased $63,427 due to an increase in FSS Escrow Payable of $67,685, which was partially offset by a $4,258 decrease in long-term portion of mortgage payable. The unrestricted net position was $1,218,008 as of June 30,2017. This amount may be used to meet the Authority's ongoing obligations. The Authority has sufficient funds to meet requirements for cash outlays, excluding housing assistance payments, for five months. Restricted net position was $36,774 as of June 30, This amount may only be used in the Rural Rental Housing program for replacement reserve expenses. At the end of the current fiscal year, the Authority is able to report positive balances in all categories of net position. The same situation held true for the prior fiscal year. CONDENSED STATEMENTS OF NET POSITION Dollar Percent FY 2017 FY 2016 Change Change Current and other assets $ 1,577,479 $ 1,589,366 $ (11,887) -0.7% Non-current assets 3,817,857 3,941,159 (123,302) -3.1% Total Assets 5,395,336 5,530,525 (135,189) -2.4% Current liabilities 296, ,371 (20,918) -6.6% Non-current liabilities 500, ,426 63, % Total Liabilities 797, ,797 42, % Net Position Net investment in capital assets 3,343,248 3,602,731 (259,483) -7.2% Restricted 36,774 46,825 (10,051) -21.5% Unrestricted 1,218,008 1,126,172 91, % Total Net Position $ 4,598,030 $ 4,775,728 $ (177,698) -3.7% The largest portion of the Authority's net position reflects its investment in capital assets (e.g. land, buildings and equipment) less accumulated depreciation. The Authority uses these capital assets to provide service and consequently these assets are not available to liquidate liabilities or other spending. -9-

10 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30,2017 FINANCIAL ANALYSIS- CONTINUED The 2016 approved capital grant (501-16) totals $175,099 and was 100.0% expended as of June 30, The following is a summary of individual grant line items, budget amount, percent expended as of 6/30/17, and development account: Line No. Amount Percent DeveloQment Account 1406 $137, % Operations 1410 $ 10, % Administration 1460 $ 13, % Dwelling Structures 1465 $ 14, % Dwelling Equipment While the Statement of Net Position shows the change in financial position of net position, the Statements of Revenues, Expenses, and Changes in Net Position provides answers as to the nature and source of these changes. As can be seen in the table on the following page, total revenues increased $524,275 due to the reasons noted below. ~ Rental income increased $1,620 or.4% from FY ~ Intergovernmental revenue increased $544,120 primarily due to a $345,255 increase in funding for the Housing Choice Voucher program and a $379,513 increase in funding for State/Local (Housing Trust Fund) activities, which was partially offset by a $173,961 decrease in funding for the Home Investment Partnership Program (Tenant Based Rental Assistance). ~ Other operating revenue increased $2,795 or 1.1% from FY ~ Interest income increased $3,265 from FY 2016 primarily due to a $2,243 increase in interest on notes receivable in the State/Local (Housing Trust Fund) and a $1,025 increase in interest on investments in Component Units (Tax Credit program). ~ HUD capital grants decreased $1,086 from FY The Agency is allocated capital fund grants each year as determined by HUD and the amount remains relatively consistent from year to year. Revenue from HUD capital grants during the year will depend upon timing of projects as outlined in the HUD approved capital grant budget. ~ EIRHA had a gain on disposal of capital assets of $26,439 in FY Total expenses increased by $247,946 due to the reasons noted below. ~ Administrative expenses increased $17,057 or 1.6% from FY 2016 primarily due to an increase in administrative salaries of$25,741 or 3.4%. This was partially offset by decreases in travel expenses of$3,443 or 13.2%, legal expenses of$2,708 or 87.0%, and other administrative expenses of$1,916 or0.8%. ~ EIRHA had tenant service expenses of $302,601 in FY 2017 for the Authority's FSS, ROSS and Housing Counseling Assistance programs. This represented a decrease of $6,029 or 2.0% from FY

11 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30,2017 FINANCIAL ANALYSIS- CONTINUED CONDENSED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION Dollar Percent FY2017 FY 2016 Change Change Revenues Program revenues Rental income $ 384,227 $ 382,607 $ 1, % Intergovernmental revenue 6,674,808 6,130, , % Other operating revenue 261, ,770 2, % General revenues Interest income 4,827 1,562 3, % HUD capital grants 31,802 32,888 (1,086) -3.3% Gain (loss) on disposal of capital assets 26,439 (26,439) % Total Revenues 7,357,229 6,832, , % Expenses Administrative 1,069,076 1,052,019 17, % Tenant services 302, ,630 (6,029) -2.0% Utilities 95,171 95, % Ordinary maintenance & operations 364, ,791 (29,811) -7.6% General expense 430, , , % Interest expense 19,229 19, % Housing assistance payments 4,919,797 4,896,636 23, % Depreciation 333, ,841 5, % Total Expenses 7,534,927 7,286, , % Excess (deficiency) before prior period adjustments (177,698) (454,027) 276,329 Prior period adjustments Change in net position (177,698) (454,027) 276,329 Beginning net position 4,775,728 5,229,755 (454,027) Ending net position $ 4,598,030 $ 4,775,728 $ (177,698) -11-

12 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30, 20 I7 FINANCIAL ANALYSIS- CONTINUED ~ Utilities increased $I3 from FY 20I6. ~ Ordinary maintenance & operations decreased $29,8II or 7.6% due to a decrease in maintenance labor of$3i,ii2 or Il.6% and a decrease in maintenance materials of$ii,059 or I9.3%. This was partially offset by an increase in contracted maintenance services of $I2,360 or I8.0%. ~ General expenses increased $237,628 or I23.3% from FY 20I6 mostly due to a $262,600 increase in other general expenses for EIRHA's State/Local Program. ~ Interest expense increased $56 or 0.3% from FY 20I6. ~ Housing assistance payments increased $23,I6I or 0.5% from FY 20I6. For the Housing Choice Voucher program EIRHA had an increase in average housing assistance payment per voucher leased of $30.70 or 8.1 %. For the Tenant Based Rental Assistance program EIRHA had a decrease in average housing assistance payment per voucher leased of $I7.22 or 3.0%. ~ The Authority had a $5,87I or I.8% increase in Depreciation which is the write-off of capital assets over their estimated useful life. EIRHA currently owns and manages I64 public housing units. These units are located in Dyersville, Bellevue, Manchester, Colesburg, Miles, Sabula, De Witt, Holy Cross, Hopkinton, Worthington, Delmar, Preston, Peosta, and Wheatland. Overall, the projects maintain a 98.78% occupancy level. There are 85 units of elderly and 79 units of family. The family housing is scattered site single family homes and duplexes. Currently EIRHA has 4 four-bedroom units, 30 three-bedroom units, 46 two-bedroom units, and 84 one-bedroom units. EIRHA is authorized to assist 983 households with the Housing Choice Voucher Rental Assistance Program. Of the 983 vouchers, the City of Maquoketa is given priority to their original I 56 vouchers under their Annual Contributions Contract that EIRHA assumed. From July I, 20I6 through June 30, 20I7, EIRHA served 132 families in the City ofmaquoketa. In July 20I4 EIRHA received an additional IOO vouchers from the City of Bettendorf. From July I, 20I6 through June 30, 20I7, EIRHA served 202 families in the City of Bettendorf. The Section 8 lease up rate for FY 20 I7 was 88.85%, down from 9I.53% in the prior year. EIRHA expended $4,232,5I7 or I 00.0% of housing assistance received from HUD during FY 20 I

13 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30,2017 FINANCIAL ANALYSIS- CONTINUED EIRHC owns 10 one-bedroom USDA units that are designed for the elderly/handicapped/disabled, located in Grand Mound (6 units) and Worthington (4 units). EIRHC is also the general partner/developer for the 24 tax credit units known as Evergreen Meadows. This project is located in Peosta, Iowa and has 3 four-bedroom units, 11 three-bedroom units and 10 two-bedroom units. In addition, EIRHC is general partner/developer for the 32 tax credit units known as Asbury Meadows. This project is located in Asbury, Iowa and has 6 four-bedroom units, 14 three-bedroom units and 12 two-bedroom units. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets- The Eastern Iowa Regional Housing Authority, 's net investment in capital assets as of June 30, 2017 amounts to $3,343,248. This investment in capital assets includes land, buildings, improvements, equipment and construction in progress, net of accumulated depreciation and related debt. The total decrease in the Authority's investment in capital assets for the current fiscal year was 6.8% in terms of net book value. Actual expenditures to purchase or construct capital assets were $70,259 for the year. The Authority has various contract commitments with contractors for the implementation of the HUD capital grants as outlined by the HUD approved Capital Grant Budget. Depreciation charges for the year totaled $333,712. Additional information on the Authority's capital assets can be found in the notes to the financial statements of this report. Beginning Additions Depreciation Ending \ Capital assets $3,871,109 $70,259 $(333,712) $3,607,656 Debt Administration- The USDA project has several mortgages that were used to purchase land and buildings for the Rural Rental Housing Assistance Program. Total mortgage debt as of June 30, 2017 is $264,408, down from $268,378 in FY Additional information on the Authority's long-term debt can be found in the notes to the financial statements of this report. -13-

14 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Year Ended June 30,2017 ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES The Board of Commissioners and Management of the Housing Authority considered many factors when approving the fiscal year 2018 Public Housing budget. The user charges are based on a tenant's income as established by HUD guidelines and are not adjustable. Operating subsidy is based on occupied units and approved vacancies, utility consumption and rates, approved add-ons, formula income, and transition funding. The amount of funding is also established and approved by HUD. Formula income is based on rental income from the Authority's rent roll records for the period specified by HUD. Operating expenses are expected to increase by the economy's inflation rate. The Authority receives annual budget authority from HUD based on prior year leasing and HAP utilization. In addition to annual budget authority, the Authority has $4,143 in HUD-Held Program Reserves available for housing assistance payments. Administrative fees for the Housing Choice Voucher program will be based on actual utilization in FY 2017 and adjusted for pro-ration which is currently at %. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the Authority's finances for all those with an interest in its finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to: Michelle Schnier Director of Housing and Support Services Eastern Iowa Regional Housing Authority 7600 Commerce Park

15 BASIC FINANCIAL STATEMENTS -15-

16 STATEMENT OF NET POSITION June 30, 2017 ASSETS CURRENT ASSETS Cash and cash equivalents Cash and cash equivalents - restricted Accounts receivable Tenants, net of allowance Other, net of allowance Due from other governments Prepaid expense Notes receivable - current portion Accrued interest receivable Assets held for sale Total current assets NONCURRENT ASSETS Notes receivable Capital assets, net of accumulated depreciation Investment in joint ventures Total noncurrent assets TOTAL ASSETS $ $ 846, ,919 9,682 72,800 95,821 29,365 10,948 2, ,189 1,577, ,151 3,607,656 70,050 3,817,857 5,395,336 CURRENT LIABILITIES Accounts payable Accrued payroll and payroll taxes Accrued liabilities - other Accrued interest payable Unearned revenues Due to other governments Tenant's security deposits Notes payable - current portion Total current liabilities NONCURRENT LIABILITIES Tenant's FSS escrow Notes payable Total noncurrent liabilities Total liabilities NET POSITION Net investment in capital assets Restricted Unrestricted Total net position LIABILITIES AND NET POSITION TOTAL LIABILITIES AND NET POSITION $ $ 77,627 92,581 27,097 1,022 23,357 24,656 45,831 4, , , , , ,306 3,343,248 36,774 1,218,008 4,598,030 5,395,336 The accompanying notes are an integral part of this statement. -16-

17 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION Year ended June 30, 2017 OPERATING REVENUE Rental income Operating grants Other operating revenue Total operating revenue OPERATING EXPENSE Administration Tenant services Utilities Maintenance and operations General expense Housing assistance payments Depreciation Total operating expense Operating loss NONOPERATING REVENUE (EXPENSE) Interest income Interest subsidy Interest expense Net nonoperating revenue (expense) Change in net position before capital grants CAPITAL GRANTS Change in net position NET POSITION AT BEGINNING OF YEAR NET POSITION AT END OF YEAR $ 376,195 6,284, ,110 7,309,982 1,069, ,601 95, , ,361 4,919, ,712 7,515,698 (205, 716) 4,827 10,618 (19,229) (3,784) (209,500) 31,802 (177,698) 4,775,728 $ 4,598,030 The accompanying notes are an integral part of this statement. -17-

18 STATEMENT OF CASH FLOWS Year ended June 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from tenants Cash received from operating grants Other income received Cash payments to vendors Cash payments to employees Cash payments for housing assistance Net cash (used in) operating activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital assets Aquisition of capital assets Notes receivable Principal payments Interest paid Net cash (used in) capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Net decrease in cash and cash equivalents CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR $ 438,564 6,766, ,826 (867,314) (1, 444, 674) (4,910,318) 236,506 31,802 (70,259) (151,099) (3,970) (7,933) (201, 459) 2,584 37,631 1,137,800 $ ==1='=1=7=5='=4=3=1= NON-CASH FINANCING ITEMS Interest subsidy and related interest expense $ 10,618 ======== The accompanying notes are an integral part of this statement. -18-

19 STATEMENT OF CASH FLOWS - CONTINUED Year ended June 30, 2017 RECONCILIATION OF CASH AND CASH EQIVALENTS PER STATEMENT OF CASH FLOWS TO THE STATEMENT OF NET POSITION Cash and cash equivalents Cash and cash equivalents - restricted Cash and cash equivalents per the Statement of Net Position $ 846, ,919 $ ==1='=1=7=5='=4=3=1= RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss) Adjustments t o reconcile operating income (loss) to net cash from operating activities: Depreciation Changes in assets and liabilities (Increase) decrease in assets Accounts receivable Due from other governments Prepaid expense Increase (decrease) in liabilties Accounts payable Accrued payroll and payroll taxes Accrued liabilities Unearned revenue Due to other governments Tenant's security deposits Tenant's FSS escrow Net cash (used in) operating activities $ (205, 716) 333,712 (23,438) 85, (2, 730) (4,235) (14,868) (104) (237) ,685 $ 236,506 The accompanying notes are an integral part of this statement. -19-

20 NOTES TO FINANCIAL STATEMENTS June 30, 2017 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The Eastern Iowa Regional Housing Authority (EIRHA) is organized pursuant to the provisions of Chapter 403A and Chapter 28E of the Code of Iowa for the purposes of owning and providing affordable rental units and rent subsidies to low and moderate-income individuals in Dubuque, Delaware, Jackson, Cedar, Clinton and Jones counties excluding the cities of Dubuque and Clinton. The Eastern Iowa Regional Housing Authority Board consists of elected directors and housing commissioners from those counties. As required by generally accepted accounting principles, these financial statements present the Eastern Iowa Regional Housing Authority and its component unit, the Eastern Iowa Regional Housing Corporation (EIHRC). Although it is legally separate from EIRHA, EIRHC is reported as if it were part of the primary government because of the significance of its operational or financial relationship with Eastern Iowa Regional Housing Authority, including having the same Board of Directors. EIRHC is a non-profit corporation which owns and operates ten one-bedroom USDA units. EIRHC is also the management agent and general partner/ developer for two low-income housing tax credit projects: Evergreen Meadows and Asbury Meadows. EIRHC has entered into agreements with the Eastern Iowa Regional Housing Authority (EIRHA) and the East Central Intergovernmental Association (ECIA) for staffing services. Programs Administered by the Housing Authority The programs of the Authority are recorded in one enterprise fund. Each program is maintained using a separate set of self-balancing accounts. The programs include a Public Housing Program, Capital Funds Program, Section 8 Housing Choice Voucher Program, ROSS FSS/ESS Program, Housing Counseling Assistance Program, Business Activities and EIRHC. Basis of Accounting and Measurement Focus The Authority's basic financial statements are presented on the full accrual basis in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Authority applies all pronouncements of the Governmental Accounting Standards Board (GASB) as well as U.S. GAAP, as codified by the Financial Accounting Standards Board. All activities of the Authority are accounted for within one proprietary (enterprise) fund. A proprietary fund is used to account for operations that are (a) financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the government body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management contrel, accountability or other purposes. -20-

21 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2017 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Basis of Accounting and Measurement Focus - continued A proprietary fund distinguishes operating revenue and expenses from nonoperating i terns. Operating revenue and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the Authority is rents collected from tenants and operating grants. Operating expenses for a proprietary fund include the cost of operating properties owned, administrative expenses and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. The accounting and financial reporting treatment applied to the Authority is determined by its measurement focus. The transactions of the Authority are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations are included in the statement of net position. Net position (i.e., total assets net of total liabilities) is segregated into net investment in capital assets, restricted and unrestricted components. When both restricted and unrestricted resources are available for use, it is the Authority's policy to use restricted resources first, and then unrestricted resources as they are needed. Cash and Cash Equivalents For purposes of the statements of cash flows, the Authority considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Cash and Cash Equivalents - Restricted Restricted cash and cash equivalents are segregated resources spent for unspent housing assistance payments, tenant security deposits, tenant selfsufficiency (FSS) deposits and replacement reserve deposits. Accounts Receivable Accounts receivable are recorded at gross amount, less an allowance for doubtful accounts. The allowance for doubtful accounts was $232 for public housing and $3,233 for housing choice vouchers at June 30, Prepaid Expense Prepaid expenses represent payments made to vendors for services that will benefit beyond June 30,

22 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2017 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Capital Assets Capital assets are stated at cost. The capitalization policy of the Authority is to capitalize fixed assets costing more than $500 and expected to last more than one year. The cost of maintenance and repairs that do not add value to assets or materially extend asset lives is not capitalized. Buildings, improvements, and equipment are depreciated using a straight-line method over their estimated useful lives as follows: Buildings Building and land improvements Equipment years 5-20 years 3-10 years Notes Receivable - EIRHC Notes receivable of EIRHC at June 30, 2017, consists of a $151,099, 2% per annum promissory note from Community Housing Initiative, Inc., secured by a mortgage on certain property it owns. At June 30, 2017, the current maturity was $10,948 and accrued interest was $2,243. Net Position Classifications Net position represents the difference between the total assets and the total liabilities. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Federal and State Aids Federal and state aids for reimbursable programs are recognized as revenue in the year the related program expenditures are incurred. Aids received prior to meeting revenue recognition criteria are recorded as unearned revenue. Due To/From Other Programs During the course of operations, numerous transactions occur between individual programs for goods provided or services rendered. These receivables and payables are classified as "due from other programs" or "due to other programs" on the combining statement of net assets and have been eliminated in the basic financial statements. Rental Income Rental Income is recognized as rents become due. -22-

23 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2017 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Economic Dependency The Authority received approximately 86% its total operating revenues from the federal government. This revenue is subject to federal government budget appropriations and potential funding reductions. Budgetary Process The Authority prepares an annual operating budget with formal Board approval prior to the start of its fiscal year. The United States Department of Housing and Urban Development (HUD) requests the Authority keep the budget on file and to submit to HUD the calculation for operating subsidy. The Authority must prepare a revised operating budget only when total expenditures exceed the amount originally budgeted. The revised budget, if needed, is also kept on file at the Authority's office. Subsequent Events The Authority has evaluated subsequent events through October 30, 2017, the date on which the financial statements were available to be issued. NOTE B - CASH AND CASH EQUIVALENTS HUD regulations and statutes authorize the Authority to have deposits in checking accounts, certificates of deposit, money market funds, United States government securities, and repurchase agreements fully collateralized by United States government securities. At June 30, 2017, the Authority reported cash and cash equivalents as follows: Cash and cash equivalents Cash and cash equivalents - Total restricted $ $ 846, ,919 1,175,

24 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2017 NOTE B - CASH AND INVESTMENTS - CONTINUED Fair Value of Deposits Deposits are reported at fair value. At June 30, 2017, the fair value of the Authority's deposits approximated original cost; therefore, no fair value adjustments were necessary. Determining Fair Value Fair value of the Authority's deposits are determined as follows: deposits with stated interest rates (operating accounts, savings accounts, certificates of deposit, repurchase agreements, and money market accounts) are stated at cost. Income Allocation Interest income is generally allocated to the operating account, savings account, certificates agreement, or money market account. program that of deposit, owns the repurchase Custodial Credit Risk - Deposits Custodial credit risk for deposits is the risk that, in the event of the failure of a bank failure, the Authority's deposits may not be returned to it. The Authority does not have a deposit policy for custodial credit risk. As of June 30, 2017, the Authority's bank deposits of $1, 169,216 were entirely covered by FDIC insurance or by a multiple financial institution collateral pool in accordance with Chapter 12C of the Iowa Code. This chapter provides for additional assessments against the depositories to insure there will be no loss of public funds. Amounts in excess of FDIC insurance varied during the fiscal year. NOTE C - INVESTMENT IN JOINT VENTURE Eastern Iowa Regional Housing Corporation (EIRHC) includes Eastern Iowa Development Corporation (EIDC), a wholly-owned subsidiary of EIRHC. In September, 2003, EIDC purchased.01% interest in a tax credit housing project, Eastern Iowa Regional Partnership, LLLP (Evergreen Meadows) for $69,950. In October 2004, EIDC purchased.01% interest in Asbury EIRP, LLLP (Asbury Meadows) for $100. EIDC is a general partner in the two limited partnerships with a total investment of $70,050. EIDC manages the two limited partnerships for which it receives a management fee. Management fees for the year ended June 30, 2017, totaled $24,

25 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2017 NOTE D - CAPITAL ASSETS A summary of changes in capital assets for the Housing Authority is as follows: Public Housing/CFP Land (non-depreciable) Depreciable capital assets: Land improvements Buildings and improvements Furniture & Equipment Dwellings Administration Accumulated depreciation: Land improvements Buildings and improvements Furniture & equipment Dwellings Administration Net capital assets $ Balance 06/30/16 823, ,065 9,613,876 54, ,568 10,055,461 10,879,247 47,776 6,925,501 40, ,939 7,256,346 3,622,901 Additions & Transfers $ 23,264 10,171 24,468 57,903 57,903 7, ,526 3,248 16, ,664 (256, 761) Retirements & Transfers $ $ 38,617 38,617 38,617 38,617 38,617 Balance 06/30/17 823, ,065 9,637,140 65, ,419 10,074,747 10,898,533 55,666 7,213,027 43, ,322 7,532,393 3,366,140 Section 8 Housing Choice Vouchers Depreciable capital assets: Furniture & Equipment Accumulated depreciation: Furniture & equipment Net capital assets 49,241 28,236 21,005 2,629 5,843 (3,214) 51,870 34,079 17,791 EIRHC - USDA Housing Land (non-depreciable) Depreciable capital assets: Land improvements Buildings and improvements Furniture & Equipment Dwellings Administration Accumulated depreciation: Land improvements Buildings and improvements Furniture & Equipment Dwellings Administration Net capital assets 19,664 10, ,361 16, , ,369 2, ,302 16, , ,630 17,528 9, f ,256 2,850 6, ,845 17,411 17,528 17,528 17,528 17,528 19,664 28, ,561 16, , ,097 5, ,126 16, , ,513 EIRHC - Tax Credit Programs Depreciable capital assets: Furniture & Equipment Accumulated depreciation: Furniture & Equipment Net capital assets 26,954 12,381 14,573 3,361 (3, 361) 26,954 15, f 212 Total net capital assets $ ====3:f::, 8=7=1:f'=1=0=9= $ (245, 925) $==1=7='=5=2=8= $ ===3=, 6=0=7='=6=5=6= -25-

26 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2017 NOTE E - NOTES PAYABLE - EIRHC Details of notes payable are set forth below: Notes payable Balance at July 1, 2016 $ 268,378 Additions Reductions $ $ 3, 970 ==== Balance at June 30, 2017 $ 264,408 Notes payable for EIRHC are payable to United States Department of Agriculture, Rural Housing Services (USDA). The following mortgage notes payable to USDA at June 30, 2017 are as follows: 6.50% first mortgage note payable $ 161, % first mortgage note payable 102, ,408 Less current maturities 4,282 LONG-TERM OBLIGATIONS $ The United States Department of Agriculture, Rural Housing Services (USDA) is subsidizing the interest payable on the first mortgage notes, thereby effectively reducing the interest rate to 1%. The USDA notes are secured by real property and rents and profits of the Authority's USDA Housing Program. Principal and interest maturities on notes payable are as follows: EIRHC - Rural Development Year ended June 30, Principal Interest 2018 $ ,282 4,591 4,922 5,278 5,659 35,054 49,697 70,480 71,523 12,922 $ 18,238 17,929 17,598 17,242 16,861 77,548 62,905 42,122 14, Totals $ 264,408 $ 285,261 NOTE F - RELATED PARTY The Eastern Iowa Regional Housing Authority, related to the East Central Intergovernmental Association (ECIA) through common management, pays ECIA for management services and office space. During the year ended June 30, 2017, the Eastern Iowa Regional Housing Authority paid East Central Intergovernmental Association $1,315,603 for such services. -26-

27 NOTE G - Eastern Iowa Regional Housing Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2017 CONTINGENT LIABILITY Eastern Iowa Regional Housing Corporation (EIRHC) includes Eastern Iowa Development Corporation (EIDC), a wholly-owned subsidiary of EIRHC. EIDC is a general partner in two limited partnerships which it manages and for which it receives a management fee. The partnerships that EIDC is a general partner in are as follows: Name Eastern Iowa Regional Partnership, L.L.L.P., Peosta, Iowa Asbury E.I.R.P,., L.L.L.P., Asbury, Iowa Ownership Percent.01%.01% Outstanding Liabilities at $ 1,292,872 $ 1,812,156 NOTE H - DUE TO/FROM OTHER PROGRAMS For the Statement of Net Assets, the following individual program interfund receivable and payable balances at June 30, 2017, which are within business-type activities, are netted and eliminated. Program Due From Due To Low Rent Public Housing $ 8,743 $ ROSS FSS Program 8,743 NOTE I - Totals $ 8l743 $ 8l743 RISK MANAGEMENT The Authority is exposed to various risks of loss related to torts; theft; damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These risks are covered by the purchase of commercial insurance. Settled claims from these risks have not exceeded commercial insurance coverage in any of the past four years. NOTE J - OTHER POST-EMPLOYMENT BENEFITS The Authority offers no material post-employment benefits to employees upon separation from service. Employees receive no payments at or after separation from service other than accrued vacation pay which is already accrued in this report. The only post-employment benefits an employee may receive is COBRA continuation of their health insurance, for which the separated employee must pay 100% of their premium. NOTE K - RESTRICTED CASH AND RESTRICTED NET POSITION The Authority has total restricted cash of $328,919 and restricted net position of $36,774 at June 30, Restricted cash includes tenants' FSS escrow accounts totaling $240,727, tenant security deposits of $45,831, unearned ROSS FSS grant revenue of $5,587, and USDA Housing Program Replacement Reserve of $36,774. Restricted net position represents USDA replacement reserve for USDA approved expenditures. -27-

28 SUPPLEMENTARY INFORMATION -28-

29 COMBINING STATEMENT OF NET POSITION June 30, 2017 Housing Housing ROSS Counseling Public Choice FSS/ESS Assistance Business Elimination ASSETS Housing Vouchers Program Program Activities EIRHC Entry Total CURRENT ASSETS Cash and cash equivalents $ 152,824 $ 47,854 $ $ $ $ 645,834 $ $ 846,512 Cash and cash equivalents - restricted 108, , , ,919 Accounts receivable Tenants, net of allowance 9, ,682 Other, net of allowance 15,782 57,018 72,800 Due from other governments 49,028 8,743 38,050 95,821 Due from other programs 8,743 (8, 743) Prepaid expense 16,252 11,771 1,342 29,365 Notes receivable - current portion 10,948 10,948 Accrued interest receivable 2,243 2,243 Assets held for sale 181, ,189 Total current assets 295, ,008 8, , ,240 (8, 743) 1,577,479 NONCURRENT ASSETS Notes receivable 140, ,151 Capital assets, net 3,366,140 17, ,725 3,607,656 Investment in joint ventures 70,050 70,050 Total noncurrent assets 3,366,140 17, ,926 3,817,857 TOTAL ASSETS $ 3,661,731 $ 322,799 $ 8,743 $ $ 181,640 $ 1,229,166 $ (8, 743) $ 5,395,336 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable $ 14,269 $ 16,187 $ $ $ $ 47,171 $ $ 77,627 Accrued payroll and payroll taxes 42,614 42,299 7,668 92,581 Accrued liabilities - other 27, ,097 Accrued interest payable 1,022 1,022 Unearned revenue 16,717 3,565 3,075 23,357 Due to other governments 24,656 24,656 Due to other programs 8,743 (8,743) Tenants' security deposits 42, ,740 45,831 Notes payable - current portion 4,282 4,282 Total current liabilities 167,993 62,051 8, ,958 (8, 743) 296,453 NONCURRENT LIABILITIES Tenants' FSS escrow 60, , ,727 Notes payable 260, ,126 Total noncurrent liabilities 60, , , ,853 Total liabilities 228, ,624 8, ,084 (8, 743) 797,306 NET POSITION Net investment in capital assets 3,366,140 17,791 (40,683) 3,343,248 Restricted 36,774 36,774 Unrestricted 67,444 62, , ,991 1,218,008 Total net position 3,433,584 80, , ,082 4,598,030 TOTAL LIABILITIES AND NET POSITION $ 3,661,731 $ 322,799 $ 8,743 $ $ 181,640 $ 1,229,166 $ (8,743) $ 5,395,