Board of Directors Carver Finance, Inc. Friday, October 12, :00 AM

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1 735 8th Street South, Naples, Fl Council Chamber The Carver Finance Board of Directors provides oversight to the George Washington Carver Apartments and meets at least annually (date and time to be announced) to review financial statements and audits, or other related matters. Average meeting time: 1 hour annually. Welcome to today's meeting. If you wish to address the Board regarding an item listed on this agenda, please complete a registration form at the rear of the room and place it in the Speaker Request Box located on the dais prior to consideration of that item. We ask that speakers limit their comments to 3 minutes and that large groups name a spokesperson whenever possible. Thank you for your interest and participation in City government. Board of Directors Carver Finance, Inc. Friday, October 12, :00 AM All proposed documents and information on items listed below, which have been provided in advance of this meeting, may be inspected in the office of the City Clerk, or on the City of Naples home page or call the City Clerk's Office, All written, audio-visual and other materials presented to the Board in conjunction with deliberations during this meeting will become the property of the City of Naples and will be retained by the City Clerk. 1. Roll Call 2. Set Agenda 3. Approval of Meeting Minutes 3.A. October 2, 2017 Meeting Minutes Recommended Action: Approve the minutes. NOTICE FORMAL ACTION MAY BE TAKEN ON ANY ITEM DISCUSSED OR ADDED TO THIS AGENDA. ANY PERSON WHO DECIDES TO APPEAL ANY DECISION MADE BY THE BOARD OR COMMITTEE WITH RESPECT TO ANY MATTER CONSIDERED AT THIS MEETING (OR HEARING) WILL NEED A RECORD OF THE PROCEEDINGS AND MAY NEED TO ENSURE THAT A VERBATIM RECORD OF THE PROCEEDING IS MADE, WHICH RECORD INCLUDES THE TESTIMONY AND EVIDENCE UPON WHICH THE APPEAL IS TO BE HEARD. ANY PERSON WITH A DISABILITY REQUIRING AUXILIARY AIDS AND SERVICES FOR THIS MEETING MAY CALL THE CITY CLERK'S OFFICE AT (239) WITH REQUESTS AT LEAST TWO BUSINESS DAYS BEFORE THE MEETING DATE. 1

2 October 2, 2017 Draft Minutes 4. Election of Officers 5. Annual Financial Report Finance Department's Review and Comments on the GWC Annual Financial Report as of December 31, A. Finance Departments's Review and Comments on the GWC Annual Financial Report as of December 31, 2017 Recommended Action: Review the report. Agenda Memorandum Report 6. Presentation of the 2017 GWC Financial Statements 6.A. Presentation of the 2017 GWC Financial Statements Recommended Action: Review Financial Statment & Supporting Data 7. Old Business 8. New Business Approve 2019 Meeting Date 8.A Meeting Date Recommended Action: Approve. Agenda Memorandum 9. Public Comment 10. Correspondence / Communication 11. Adjourn 2

3 Board of Directors of Carver Finance, Inc. Agenda Item Report Submitted by: Vicki Smith Submitting Department: Finance Meeting Date: October 12, 2018 SUBJECT October 2, 2017 Meeting Minutes Legislative Type: Legislative Item Funding Source: N/A Recommendation: Approve the minutes. ATTACHMENTS October 2, 2017 Draft Minutes 3

4 City Council Chamber 735 Eighth Street South Naples, Florida Board of Directors of Carver Finance, Inc. October 2, :07 a.m. It is noted for the record that all documents electronically appended hereto are also contained in the file for this meeting in the City Clerk s Office. Call to Order President Merrick called the meeting to order and presided. Prior to Roll Call, City Clerk Patricia Rambosk administered the oath of office to reappointed Member Lodge McKee. 1. Roll Call Members Present: Stephen Merrick, President Lodge McKee, Secretary-Treasurer Lonnie Mills, Vice President (arrived 9:26 a.m.) Staff Present: Patricia Rambosk, City Clerk Jodi Bain, Senior Accountant Jessica Hernandez, Administrative Coordinator Also Present: Antonio Dumornay Michael Dersa, Independent Management Svcs. 2. Set Agenda MOTION by Merrick to APPROVE the agenda; seconded by McKee and carried 2-0 (McKee-yes, Mills-absent, and Merrick-yes). 3. Approval of Meeting Minutes MOTION by McKee to APPROVE the meeting minutes of October 3, 2016; seconded by Merrick and carried 2-0 (McKee-yes, Mills-absent, and Merrickyes). Minutes 4. Election of Officers Continued to a date uncertain. Memorandum It is noted for the record that Items 5 and 6 were considered concurrently. 5. Finance Department s Review and Comments on the GWC Annual Financial Report as of December 31, Presentation of the 2016 GWC Financial Statements MOTION by McKee to APPROVE: 1) Item 5 (see attached GWC Annual Financial Report as of December 31, 2016 ); and 2) Item 6 (see attached 2016 GWC Financial Statements ) with the condition that the most recent quarterly financial reports be provided at each meeting. Motion seconded by Merrick and carried 2-0 (McKee-yes, Mills-absent, and Merrick-yes). Public Comment: Antonio Dumornay, expressed interest in being a leader for the River Park community, and stated that revenue could be more appropriately used for computer and educational programs for the children who reside at the George Washington Carver apartments. Memorandum GWC Annual Financial Report as of December 31, GWC Financial Statements 4 DRAFT

5 Board of Directors of Carver Finance, Inc. October 2, :07 a.m. 7. Old Business MOTION to CONSIDER the following improvements for the next budget: 1) resurfacing needs of the driveway areas and parking lot; 2) landscaping improvements, more specifically the islands in the driveway areas, and the plantings surrounding the curb areas and buildings. Motion seconded by Merrick and carried 2-0 (McKee-yes, Mills-absent, and Merrick-yes). It is noted for the record that Member Mills arrived at 9:26 a.m. and stayed for the remainder of the meeting. 8. Public Comment None. 9. New Business Approve 2018 Meeting Date MOTION by McKee to RECOGNIZE the support of City staff, in particular: Fire Chief Peter DiMaria, as well as Fire Lieutenants Corey Adamski and Erick Baltodano in providing assistance to George Washington Carver apartment residents prior to Hurricane Irma; and Community Services Director Dana Souza as well as Utilities Director Robert Middleton for organizing rapid debris cleanup. Each aforementioned individual is to receive a copy of this motion. Motion seconded by Mills and carried 3-0 (McKee-yes, Mills-yes, and Merrick-yes). City Clerk Patricia Rambosk subsequently administered the oath of office to reappointed Member Lonnie Mills. Michael Dersa, Vice President of Independent Management Services (IMS): gave a brief overview of the damage caused by Hurricane Irma; extended his appreciation to City staff and Adele Hernandez, GWC (George Washington Carver) Site Manager, for their efforts prior to, during, and after the storm; noted that bids had been received for roof repair; and advised that there are several trees that should be inspected by the city. MOTION by Merrick to APPROVE scheduling the next Board meeting for October 1, 2018; seconded by McKee and carried 3-0 (McKee-yes, Mills-yes, and Merrick-yes). Memorandum 10. Correspondence/Communication None. 11. Adjourn 9:34 a.m. Stephen Merrick, President DRAFT Patricia L. Rambosk, City Clerk Minutes Prepared by: Jessica Hernandez, Administrative Coordinator Minutes Approved: Lonnie Mills, Vice President Lodge McKee, Secretary-Treasurer 5 2

6 Board of Directors of Carver Finance, Inc. Agenda Item Report Submitted by: Vicki Smith Submitting Department: Finance Meeting Date: October 12, 2018 SUBJECT Finance Departments's Review and Comments on the GWC Annual Financial Report as of December 31, 2017 Legislative Type: Legislative Item Funding Source: N/A Recommendation: Review the report. ATTACHMENTS Agenda Memorandum Report 6

7 Memo Finance Department Accounting Customer Service TO: FROM: VIA: Board of Directors, Carver Finance, Inc. Jodi Bain, Senior Accountant Ann Marie S. Ricardi, Finance Director DATE: September 10, 2018 SUBJECT: Review of Annual Financial Report as of 12/31/2017 On March 19, 2018 Brittany Wilson provided a copy of the George Washington Carver December 2017 Audited Financial Statements to the City of Naples Finance Department. The financial statements were audited by BDO-LLC out of Troy, Michigan. BDO indicated there were no significant findings in the audit work. Attached is a spreadsheet showing the past four years of reports, which you may find useful in comparing results. The management service and the auditor can best address any questions of the board. The following are additional comments or suggestions. Revenue Revenue as a whole increased from 2016 by $26,674. This is due to an increase in Rent Revenue by $43,524. However, Tenant Assistance Payments decreased by $18,719 from 2016 and the vacancies increased from $899 in 2016 to $2,380 in Also, in 2017, Laundry and Vending Revenue increased by $2,005. Expenses Expenses as a whole increased from 2016 by $47,874. Supplies increased by $16,031 from 2016 and Contracts increased by $28,344 in the same time period. Another increase to point out is the Interest on Mortgage Payable, it increased $13,064. Water and sewer both decreased from 2016 and there are no bad debts on the books as of Even after Hurricane Irma, Property and Liability Insurance decreased by $4, Ethics above all else... Service to others before self... Quality in all that we do.

8 Carver Finance Balance Sheet ASSETS Change Cash Operations $ 179,924 $ 134,281 $ 246,027 $ 209,398 $ (36,629) Cash Entity $ 65,309 $ 2,930 $ 131,985 $ 2,907 $ (129,078) Tenant Member A/R $ 24 $ 15 $ 3,862 $ 32 $ (3,830) Subsidy receivable $ - $ - $ - $ 978 $ 978 A/R Operations $ 9,603 $ 10,603 $ 11,603 $ 12,603 $ 1,000 Short Term Investments/Operations $ 43,241 $ 37,579 $ 24,997 $ 18,198 $ (6,799) Misc. Prepaid Assets $ 18,691 $ 18,192 $ 17,303 $ 15,621 $ (1,682) Subtotal $ 316,792 $ 203,600 $ 435,777 $ 259,737 $ (176,040) Tenant Security Deposits $ 18,325 $ 18,386 $ 18,565 $ 21,255 $ 2,690 Replace Reserve $ 86,958 $ 63,243 $ 71,660 $ 71,758 $ 98 Bond Reserve $ 28,511 $ 28,511 $ 25,146 $ 19,148 $ (5,998) Subtotal Deposits $ 133,794 $ 110,140 $ 115,371 $ 112,161 $ (3,210) Land/Land Improvements $ 114,920 $ 128,895 $ 128,895 $ 128,895 $ - Building $ 5,059,535 $ 5,076,043 $ 5,076,043 $ 5,086,789 $ 10,746 Furniture $ 168,682 $ 168,682 $ 168,682 $ 143,837 $ (24,845) Subtotal $ 5,343,137 $ 5,373,620 $ 5,373,620 $ 5,359,521 $ (14,099) Less Accumulated Depreciation $ (1,890,001) $ (2,081,671) $ (2,274,746) $ (2,442,847) $ (168,101) Net Fixed Assets $ 3,453,136 $ 3,291,949 $ 3,098,874 $ 2,916,674 $ (182,200) Intangible Assets, net Amortization/ $ 226,099 $ 213,059 $ 15,276 $ 12,170 $ (3,106) Total Assets $ 4,129,821 $ 3,818,748 $ 3,665,298 $ 3,300,742 $ (364,556) LIABILITIES A/P Operations $ 16,341 $ 11,545 $ 19,214 $ 15,427 $ (3,787) A/P Entity $ 49,676 $ 3,531 $ 50,897 $ 3,730 $ (47,167) Accrued Wages $ - $ - $ - $ 5,251 $ 5,251 Accrued Management Fees $ 960 $ 2,347 $ 564 $ 1,055 $ 491 Accrued Interest - First Mortgage $ - $ - $ - $ 3,588 $ 3,588 Mortgage Payable $ 20,000 $ 25,000 $ 30,000 $ 25,000 $ (5,000) Miscellaneous Current Liabilities $ - $ - $ 3,000 $ 4,000 $ 1,000 Tenants Deposits $ 16,920 $ 17,287 $ 17,559 $ 18,064 $ 505 Prepaid Revenues $ 3,470 $ 4,556 $ 10,171 $ 128 $ (10,043) Subtotal Current Liabilites $ 107,367 $ 64,266 $ 131,405 $ 76,243 $ (55,162) Mortgage Payable $ 3,365,000 $ 3,340,000 $ 3,310,000 $ 3,285,000 $ (25,000) Debt Issuance Costs $ - $ - $ (185,251) $ (179,201) $ 6,050 Total Liabilities $ 3,472,367 $ 3,404,266 $ 3,256,154 $ 3,182,042 $ (74,112) Member's Equity $ 657,454 $ 414,482 $ 409,144 $ 118,700 $ (290,444) Total Liabilities and Members' Equity $ 4,129,821 $ 3,818,748 $ 3,665,298 $ 3,300,742 $ (364,556) 8

9 Carver Finance Profit and Loss Statement Comparison Change Rent Revenue- Gross Potential $ 170,081 $ 170,910 $ 178,888 $ 222,412 $ 43,524 Rent Revenue- Tenant Assistance Pmts $ 569,475 $ 612,690 $ 772,466 $ 753,747 $ (18,719) Special Claims Revenue $ 150 $ 330 $ 480 $ 288 $ (192) Vacancies $ (821) $ (789) $ (899) $ (2,380) $ (1,481) Financial Recenue - Project Operations $ 35 $ 119 $ 193 $ 204 $ 11 Revenue from Investments - Replacement Reserve $ 212 $ 168 $ 212 $ 387 $ 175 Laundry and Vending Revenue $ 3,574 $ 3,149 $ 2,056 $ 4,061 $ 2,005 Tenant Charges $ 1,309 $ 2,203 $ 1,386 $ 2,469 $ 1,083 Miscellaneous Revenue $ 9,690 $ 55 $ 40 $ 308 $ 268 Total Revenues $ 753,705 $ 788,835 $ 954,822 $ 981,496 $ 26,674 Advertising and Marketing $ - $ 163 $ - $ 154 $ 154 Other Renting Expenses $ 765 $ 1,225 $ 1,195 $ 1,318 $ 123 Office Salaries $ 45,112 $ 48,851 $ 52,966 $ 58,622 $ 5,656 Office Expenses $ 12,505 $ 18,648 $ 13,202 $ 11,687 $ (1,515) Management Fee $ 40,320 $ 38,966 $ 40,404 $ 40,643 $ 239 Legal Expense - Project $ - $ - $ - $ 350 $ 350 Audit Expense $ 10,192 $ 10,405 $ 10,640 $ 10,745 $ 105 Bookkeeping Fees/Accounting Services $ 5,880 $ 5,880 $ 5,880 $ 5,880 $ - Bad Debts $ 1,388 $ 524 $ 1,778 $ - $ (1,778) Miscellaneous Administrative Expenses $ 3,167 $ 169 $ 319 $ 185 $ (134) Electricity $ 4,446 $ 3,623 $ 3,542 $ 4,078 $ 536 Water $ 35,879 $ 13,493 $ 16,524 $ 13,321 $ (3,203) Gas $ 2,199 $ 1,943 $ 1,390 $ 1,906 $ 516 Sewer $ 43,248 $ 44,042 $ 50,954 $ 44,713 $ (6,241) Payroll $ 60,308 $ 71,531 $ 74,607 $ 79,535 $ 4,928 Supplies $ 37,085 $ 29,180 $ 38,942 $ 54,973 $ 16,031 Contracts $ 24,635 $ 22,809 $ 31,505 $ 59,849 $ 28,344 Garbage and Trash removal $ 17,464 $ 18,187 $ 18,727 $ 19,003 $ 276 Security Payroll/Contract $ 763 $ 642 $ 642 $ 642 $ - Heating/Cooling Repairs and Maintenance $ 1,942 $ 1,620 $ 1,504 $ 882 $ (622) Vehicle Maintenance & Equipment Operation & Repairs $ 572 $ 399 $ 428 $ 520 $ 92 Real Estate Taxes $ 26,210 $ 28,886 $ 30,250 $ 31,688 $ 1,438 Payroll taxes (Projecy's Share) $ 9,946 $ 10,440 $ 11,027 $ 11,611 $ 584 Property & Liability Insurance (Hazard) $ 51,688 $ 57,971 $ 52,849 $ 48,765 $ (4,084) Fidelity Bond Insurnace $ 471 $ 137 $ 138 $ 138 $ - Workmen's Compensation $ 3,892 $ 3,752 $ 3,347 $ 3,295 $ (52) Health Insurance & Other Employee Benefits $ 20,879 $ 19,038 $ 21,629 $ 21,391 $ (238) Miscellaneous Taxes, Licenses, Permits & Insurance $ 435 $ 913 $ 643 $ 688 $ 45 Interest on Mortgage Payable $ 4,406 $ 4,395 $ 23,534 $ 36,598 $ 13,064 Miscellaneous Financial Expenses $ 49,298 $ 49,166 $ 51,236 $ 48,002 $ (3,234) Depreciation Expenses $ 190,572 $ 191,670 $ 193,075 $ 192,946 $ (129) Amortization Expense $ 13,039 $ 13,039 $ 6,483 $ 3,106 $ (3,377) Total Expenses $ 718,706 $ 711,707 $ 759,360 $ 807,234 $ 47,874 Entity Revenue $ 39 $ 3 $ 29 $ 157 $ 128 Corporate Expenses (Incentive Management, Company Management and Investor Services Fee) $ (43,843) $ (44,968) $ (46,318) $ (48,000) $ (1,682) $ - Net Entity Expenses $ (43,804) $ (44,965) $ (46,289) $ (47,843) $ (1,554) Net Income(Loss) $ (8,805) $ 32,163 $ 149,173 $ 126,419 $ (22,754) 9

10 Board of Directors of Carver Finance, Inc. Agenda Item Report Submitted by: Vicki Smith Submitting Department: Finance Meeting Date: October 12, 2018 SUBJECT Presentation of the 2017 GWC Financial Statements Legislative Type: Legislative Item Funding Source: N/A Recommendation: Review. ATTACHMENTS 2017 Financial Statment & Supporting Data 10

11 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Financial Statements and Supporting Data Required by the United States Department of Housing and Urban Development Year Ended December 31, The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership, and the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

12 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Financial Statements and Supporting Data Required by the United States Department of Housing and Urban Development Year Ended December 31,

13 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Contents Independent Auditor s Report 3-4 Financial Statements Balance Sheet as of December 31, Statement of Income for the Year Ended December 31, Statement of Changes in Members Equity for the Year Ended December 31, Statement of Cash Flows for the Year Ended December 31, Notes to Financial Statements Supporting Data Required by the United States Department of Housing and Urban Development Supporting Data Required by HUD for the Year Ended December 31, Computation of Surplus Cash, Distributions and Residual Receipts (Year-End) 21 Computation of Surplus Cash, Distributions and Residual Receipts (Mid-Year) 22 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 HUD Program and on Internal Control Over Compliance Required by the Consolidated Audit Guide for Audits of HUD Programs Independent Accountant s Report on Applying Agreed-Upon Procedures Certification of Members 30 Management Agent s Certification 31 Electronic Submission

14 Tel: Fax: West Big Beaver, Suite 600 Troy, MI Independent Auditor s Report To the Members of GWC-2004 Limited Liability Company Report on the Financial Statements We have audited the accompanying financial statements of GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H (the Company ), which comprise the balance sheet as of December 31, 2017, and the related statements of income, changes in members equity, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our 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. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3 14

15 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H (the Company ) as of December 31, 2017, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages and is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying supplementary information shown on pages and is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. 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 financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information shown on pages and is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2018, on our consideration of GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H 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 Company s internal control over financial reporting and compliance. Troy, Michigan March 16,

16 Financial Statements 16

17 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Balance Sheet December 31, 2017 Assets Current Assets 1120 Cash - operations $ 209, Cash - entity 2, Tenant/member accounts receivable Subsidy receivable Accounts receivable - operations 12, Short-term investments - operations 18, Miscellaneous prepaid assets 15,621 Total Current Assets 259,737 Deposits 1191 Tenant security deposits held in trust 21, Replacement reserve 71, Bond reserves 19,148 Total Deposits 112,161 Fixed Assets 1410 Land/land improvements 128, Building 5,086, Furniture for project/tenant use 143,837 Total Fixed Assets 5,359, Less accumulated depreciation (2,442,847) Net Fixed Assets 2,916, Intangible assets, net accumulated amortization of $73,261 12,170 Total Assets $ 3,300,742 See accompanying notes to financial statements. 17 6

18 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Balance Sheet December 31, 2017 Liabilities and Members Equity Current Liabilities 2110 Accounts payable - operations $ 15, Accounts payable - entity 3, Accrued wages 5, Accrued management fees 1, Accrued interest - first mortgage 3, Mortgage payable - first mortgage 25, Miscellaneous current liabilities 4, Tenant deposits held in trust 18, Prepaid revenues 128 Total Current Liabilities 76,243 Long-Term Liabilities 2320 Mortgage payable - first mortgage 3,285, Debt issuance costs (net) (179,201) Net Long-Term Liabilities 3,105,799 Total Liabilities 3,182,042 Contingency 3130 Members Equity 118,700 Total Liabilities and Members Equity $ 3,300,742 See accompanying notes to financial statements. 18 7

19 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Statement of Income For Month/Period Beginning: January 1, 2017 Ending: December 31, 2017 Part 1 Description of Account Acct. No. Amount Rent Revenue - Gross Potential 5120 $ 222,412 Tenant Assistance Payments 5121 $ 753,747 Rent Rent Revenue - Stores and Commercial 5140 $ - Revenue Garage and Parking Spaces 5170 $ Flexible Subsidy Revenue 5180 $ - Miscellaneous Rent Revenue 5190 $ - Excess Rent 5191 $ - Rent Revenue/Insurance 5192 $ - Special Claims Revenue 5193 $ 288 Retained Excess Income 5194 $ - Lease Revenue (Nursing Homes) 5195 $ - Total Rent Revenue 5100T $ 976,447 Apartments 5220 $( 2,380) Stores and Commercial 5240 $ - Vacancies Rental Concessions 5250 $ Garage and Parking Spaces 5270 $ - Miscellaneous 5290 $ - Total Vacancies 5200T $( 2,380) Net Rental Revenue (Rent Revenue Less Vacancies) 5152N $ 974,067 Nursing Homes/Assisted Living/Board and Care/Other Elderly Care/Coop/and Other Revenues 5300 $ - Financial Revenue-Project Operations 5410 $ 204 Financial Revenue from Investments-Residual Receipts 5430 $ - Revenue Revenue from Investments-Replacement Reserve 5440 $ Revenue from Investments-Miscellaneous 5490 $ - Total Financial Revenue 5400T $ 591 Laundry and Vending Revenue 5910 $ 4,061 Other Tenant Charges 5920 $ 2,469 Revenue Interest Reduction Payments Revenue 5945 $ Miscellaneous Revenue 5990 $ 308 Total Other Revenue 5900T $ 6,838 Total Revenue 5000T $ 981,496 Conventions and Meetings 6203 $ - Management Consultants 6204 $ - Advertising and Marketing 6210 $ 154 Other Renting Expenses 6250 $ 1,318 Office Salaries 6310 $ 58,622 Office Expenses 6311 $ 11,687 Admini- Office or Model Apartment Rent 6312 $ - strative Management Fee 6320 $ 40,643 Expenses Manager or Superintendent Salaries 6330 $ /6300 Administrative Rent Free Unit 6331 $ - Legal Expense - Project 6340 $ 350 Audit Expense 6350 $ 10,745 Bookkeeping Fees/Accounting Services 6351 $ 5,880 Bad Debts 6370 $ - Miscellaneous Administrative Expenses 6390 $ 185 Total Administrative Expenses 6263T $ 129,584 See accompanying notes to financial statements. 19 8

20 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Statement of Income Fuel Oil/Coal 6420 $ - Utilities Electricity 6450 $ 4,078 Expense Water 6451 $ 13, Gas 6452 $ 1,906 Sewer 6453 $ 44,713 Total Utilities Expense 6400T $ 64,018 Payroll 6510 $ 79,535 Supplies 6515 $ 54,973 Operating Contracts 6520 $ 59,849 and Main- Operating and Maintenance Rent Free Unit 6521 $ - tenance Garbage and Trash Removal 6525 $ 19,003 Expenses Security Payroll/Contract 6530 $ Security Rent Free Unit 6531 $ - Heating/Cooling Repairs and Maintenance 6546 $ 882 Snow Removal 6548 $ - Vehicle Maintenance and Equipment Operation and Repairs 6570 $ 520 Miscellaneous Operating and Maintenance Expenses 6590 $ - Total Operating and Maintenance Expenses 6500T $ 215,404 Real Estate Taxes 6710 $ 31,688 Payroll Taxes (Project s share) 6711 $ 11,611 Taxes and Property and Liability Insurance (Hazard) 6720 $ 48,765 Insurance Fidelity Bond Insurance 6721 $ Workmen's Compensation 6722 $ 3,295 Health Insurance and Other Employee Benefits 6723 $ 21,391 Miscellaneous Taxes, Licenses, Permits and Insurance 6790 $ 688 Total Taxes and Insurance 6700T $ 117,576 Interest on Mortgage Payable 6820 $ 36,598 Financial Interest on Other Mortgages 6825 $ - Expenses Interest on Notes Payable (Short-Term) 6840 $ Mortgage Insurance Premium/Service Charge 6850 $ - Interest on capital recovery payment 6845 $ - Miscellaneous Financial Expenses 6890 $ 48,002 Total Financial Expenses 6800T $ 84,600 Nursing Homes/Assisted Living/Board and Care/Other Elderly Care Expenses 6900 $ - Total Cost of Operations before Depreciation 6000T $ 611,182 Income (Loss) before Depreciation 5060T $ 370,314 Depreciation Expenses 6600 $( 192,946) Amortization Expense 6610 $( 3,106) Operating Income (Loss) 5060N $ 174,262 Entity Revenue 7105 $ 157 Officer Salaries 7110 $ - Incentive performance fee 7115 $ - Corporate Legal Expenses (Entity) 7120 $ - or Mortgagor Federal, State, and Other Income Taxes 7130 $ - Entity Interest on Notes Payable 7141 $ - Expenses Interest on Mortgage Payable 7142 $ Other Expense (Incentive Management, Company Management and Investor Services Fees) 7190 $( 48,000) Net Entity Expenses 7100T $( 47,843) Net Income (Loss) 3250 $ 126,419 See accompanying notes to financial statements. 20 9

21 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Statement of Changes in Members Equity Year ended December 31, 2017 Balance, January 1, 2017 $ 409,144 Distributions (416,863) Net income 126,419 Balance, December 31, 2017 $ 118,700 See accompanying notes to financial statements

22 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Statement of Cash Flows Year ended December 31, 2017 Operating Activities Rental $ 966,876 Interest receipts 591 Entity receipts 157 Other receipts 6, ,462 Administrative (30,319) Management fees (40,152) Utilities (62,232) Salaries and wages (133,548) Operating and maintenance (141,799) Real estate taxes (31,688) Payroll taxes (11,611) Property insurance (47,085) Miscellaneous financial expenses (49,759) Miscellaneous taxes and insurance (25,512) Interest on mortgage payable (26,960) Tenant security deposits (2,185) Other operating expenses 1,000 Entity expenses (93,411) Net cash provided by operating activities 279,201 Investing Activities Net increase in reserve for replacement (98) Net purchase of fixed assets (10,746) Net cash used in investing activities (10,844) Financing Activities Distribution to members (416,863) Principal payments on mortgage (30,000) Net decrease in bond sinking fund 6,000 Net cash used in financing activities (440,863) Net Decrease In Cash and Cash Equivalents (172,506) Cash and Cash Equivalents, beginning of year 403,009 Cash and Cash Equivalents, end of year $ 230,503 See accompanying notes to financial statements

23 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Statement of Cash Flows Year ended December 31, 2017 Reconciliation Of Net Income To Net Cash Provided By Operating Activities Net income $ 126,419 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 196,052 Amortization of debt issuance costs 6,050 Changes in operating assets and liabilities activities Decrease in accounts receivable 1,852 Decrease in miscellaneous prepaid expenses 1,680 Increase in tenant security deposits held in trust (2,690) Decrease in trade accounts payable (3,786) Decrease in entity accounts payable (47,167) Increase in accrued expenses 9,838 Increase in accrued management fee 491 Increase in tenant security deposits 505 Decrease in prepaid revenues (10,043) Net cash provided by operating activities $ 279,201 See accompanying notes to financial statements

24 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Notes to Financial Statements 1. Organization GWC-2004 Limited Liability Company (the Company ) was formed as a limited liability company under the laws of the State of Michigan on August 9, 2004, for the purpose of acquiring, rehabilitating and operating a low-income residential housing project (the Project ). The Project is subject to the requirements of the Multifamily Assisted Housing Reform and Affordability Act ( MAHRA ) of Such projects are regulated by the U.S. Department of Housing and Urban Development ( HUD ) as to rent charges and operating methods. The Project consists of a 70-unit apartment complex located in Naples, Florida and is currently operating under the name of George Washington Carver Apartments. Cash distributions are limited by agreements between the Company and HUD to the extent of surplus cash as defined by HUD. 2. Summary of Significant Accounting Policies Revenue Recognition Rental revenue attributable to residential leases is recognized monthly when the cash rental payment is due. Rental payments received in advance are deferred until earned. All leases between the Company and tenants of the property are operating leases. Concentration of Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at financial institutions and, at times, balances may exceed the federally issued limit by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts during the year ended December 31, Fixed Assets and Depreciation Fixed assets are recorded at cost. Depreciation is computed over the estimated useful lives of the assets using straight-line and accelerated methods. Estimated useful lives by asset category are as follows: Land Improvements Building Furniture for Project/Tenant Use 15 years 27.5 years 5 to 15 years Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company would record an impairment loss and reduce the carrying amount of the Project when indicators of impairment are present and the expected undiscounted cash flows of the Project are less than the carrying value of the Project. If the Company does not expect to recover its carrying cost, the carrying value of the Project would be reduced to its fair value. As of December 31, 2017, management believes that there is no impairment in the value of the Project

25 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Notes to Financial Statements Intangible Assets Intangible assets consist of monitoring fees relating to Low-Income Housing Tax Credits. These costs are amortized over the tax credit period. The amortization expense for each of the next four years is as follows: 2018 $ 3, , , ,851 Debt Issuance Costs Debt issuance costs consist of bond and mortgage costs incurred in financing the Project and are being amortized by the straight-line method, which approximates the effective interest method, over the life of the permanent financing obligation. Amortization of debt issuance costs in the amount of $6,050 is included in Interest on Mortgage Payable on the Statement of Income. As of December 31, 2017, accumulated amortization was $73,063. Estimated amortization expense for each of the five years subsequent to December 31, 2017, is $6,050. Member Allocation Income or loss of the Company is allocated.01% to the Managing Member, 4.99% to the Special Member Class I, and 95% to the Investment Member. Distributable Net Cash Flow, as defined by the Operating Agreement is allocated.01% to the Managing Member, 89.99% to the Special Member Class I and 10% to the Investment Member. Capital allocation among the members is as follows: Managing Member.01% Investment Member 95% Special Member Class I 4.99% Income Taxes No federal income tax provision has been included in the financial statements since income or loss of the Company is required to be reported by the members on their respective income tax returns. The Company measures uncertain state tax positions and believes that all positions would more likely than not sustain an audit. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates

26 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Notes to Financial Statements Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. These investments are classified as a Current asset under the category Short-term investments on the Balance Sheet. For cash flow purposes, restricted deposits are not considered to be cash equivalents. Fair Value Measurements In accordance with Accounting Standards Codification ( ASC ) Topic 820, Fair Value Measurements and Disclosures fair value is measured as the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price ) in an orderly transaction between market participants at the measurement date. ASC 820 valuation techniques are based on observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company s market assumptions. Accounting guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly. Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company s cash and cash equivalents, escrow deposits and restricted cash, accounts receivables, accounts payable and long-term debt are carried at amounts which reasonably approximates their fair values. Subsequent Events The financial statements and related disclosures include an evaluation of events up to and including March 16, 2018, which is the date the financial statements were available to be issued, and in management s opinion there were no subsequent events requiring adjustments to, or disclosure in, the financial statements

27 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Notes to Financial Statements 3. Long-Term Debt On December 15, 2005, the Housing Finance Authority of Collier County, Florida issued $3,500,000 in 40 year revenue bonds. In conjunction with the bond issuance, the Company entered into a loan agreement with the Housing Finance Authority of Collier County, Florida. The bond proceeds were obtained to rehabilitate the Project and pay off existing debt. The bond collected is a 40 year mortgage note with interest being adjusted weekly and charged at the applicable interest rate on the bonds. At December 31, 2017, the interest rate being charged was 1.86%. As of December 31, 2017, the total amount outstanding under this mortgage note was $3,310,000. Monthly principal payments on the mortgage note are made in accordance to the Reimbursement Agreement and are deposited to the Bond Sinking Fund with the Trustee. There is a bond reserve balance at December 31, 2017, in the amount of $19,148. The bonds are secured by a $3,334,666 letter of credit, a first mortgage on the Project, substantially all assets of the Company and the assignment of the Company s rights in its rental agreements. Additionally, a member of the Company and its owner have provided guarantees. The annual fee for the letter of credit is 1.25% plus $50 for each monthly draw made. The letter of credit expires December 15, Maturities on the note payable for the next five years are as follows: $25,000; $30,000; $35,000; $35,000; and $40,000. As part of the Company s Letter of Credit Agreement, the bank required the Company to fund a replacement reserve escrow, which began February 1, 2006, with monthly payments of $1,604. During 2017, the replacement reserve escrow account balance had the following activity: Balance, January 1, 2017 $ 71,660 Monthly deposits 19,253 Interest 387 Draws (19,542) Balance, December 31, 2017 $ 71, Related Party Transactions Company Management Fee Beginning in 2005, the Company pays the Managing Member a Company Management Fee in the amount of $10,500 per year, which became cumulative and started increasing annually by 3% in The fee is for monitoring operations, performing periodic physical inspections, reviewing financial and tax accounting systems, reviewing operating budgets, reviewing management procedures, supervising the preparation of financial statement and tax returns and monitoring all other matters relating to the legal and tax status of the Company. During 2017, $28,646 was paid for the 2016 and 2017 Company Management Fees and no fees were accrued

28 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Notes to Financial Statements Investor Services Fee Beginning in 2007, the Company pays the Investment Member an amount equal to $3,500 increasing 3% per year and payable on a cumulative basis. The fee is for services rendered in connection with tax credit matters, tax returns and annual reports of the Company. During 2017, $9,270 was paid for the 2016 and 2017 Investor Services Fees and no fees were accrued. Incentive Management Fee Beginning in 2007, the Company pays to the Managing Member a non-cumulative annual Incentive Management Fee, only to the extent funds are available. The fee is equal to the least of (i) 10% of Effective Gross Income for such year or (ii) an amount which, when combined with all other amounts paid to the Managing Member and its affiliates from Net Cash Flow, is equal to 90% of the aggregate Net Cash Flow as defined by the Operating Agreement. The fee is for management oversight services, planning, supervising and developing a marketing plan and assisting the Project in tenant selection. During 2017, $54,788 was paid for the 2016 and 2017 Incentive Management Fees and no fees were accrued. 5. Tenant Security Deposits HUD regulations require that any funds collected as security deposits shall be kept separate and apart from all other Company funds in a trust account. At December 31, 2017, the Company had funded the following: Required Funding at December 31, 2017 $ 18,064 Funded at December 31, 2017 Deposits held in trust $ 21, Management Fees The Project is managed pursuant to a Management Agreement. Management fees are payable at the lower of 4.94% of rental income collected or $48 per unit per month ( PUPM ) and 4.94% of other income collected effective January 1, 2017 through October 31, 2017 and the lower of 4.28% of rental income collected or $48 per unit per month ( PUPM ) and 4.28% of other income collected effective November 1, 2017 through December 31, Management fees charged to operations in 2017 totaled $40,643, of which $1,055 remains accrued for at December 31, During 2017, the Project paid the Project manager $5,880 for bookkeeping and accounting services. 7. Housing Assistance Payment Contract Agreements The Federal Housing Administration ( FHA ) has contracted with the Company under Section 8 of the United States Housing Act of 1937, and Section 515(a) of the Multifamily Assisted Housing Reform and Affordability Act of 1997 to make housing assistance payments to the Company on behalf of qualified tenants under one contract. The current contract expires on October 22,

29 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Notes to Financial Statements 8. Contingency The Project s low-income housing credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest. In addition, such potential noncompliance may require an adjustment to the contributed capital by the Investment Member. 9. Ground Sublease On May 26, 2005, the Company entered into an Amended and Restated Ground Sublease Agreement with Carver Finance, Incorporated ( Landlord ). Under the agreement, the Company is required to make annual ground lease payments of $1,000. The Landlord holds the annual payments in a separate account, which is to be used for improvements and maintenance of the Property. 10. Current Vulnerability Due to Certain Concentrations The Project operates in a heavily regulated environment. The operations of the Project are subject to the administrative directives, rules and regulations of Federal and State regulatory agencies. Such change may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden to comply with a change. 11. Identity of Interest St. Clair Construction, a subsidiary of American Community Developers ( ACD ), may perform construction services on the Project from time to time on a competitive basis. Independent Management Services ( IMS ) is the management company for the Project and performs services for other projects affiliated with ACD, including computer and accounting services. In addition, the President of IMS is a limited partner/member in various ACD projects

30 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Supporting Data Required by the United States Department of Housing and Urban Development Year Ended December 31,

31 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Supporting Data Required by HUD A. Reserve Funds Supplemental item not applicable to this Project. B. Changes in Fixed Assets Land/ Land Improvements Building Furniture for Project/ Tenant Use Totals Balance, January 1, 2017 $ 128,895 $ 5,076,043 $ 168,682 $ 5,373,620 Additions - 10,746-10,746 Disposals - - (24,845) (24,845) Balance, December 31, 2017 $ 128,895 $ 5,086,789 $ 143,837 $ 5,359,521 Accumulated Depreciation Balance, January 1, 2017 $ 79,859 $ 2,026,205 $ 168,682 $ 2,274,746 Current provisions 8, , ,946 Disposals - - (24,845) (24,845) Balance, December 31, 2017 $ 88,107 $ 2,210,903 $ 143,837 $ 2,442,847 Net Book Value, December 31, 2017 $ 40,788 $ 2,875,886 $ - $ 2,916,674 C. Residual Receipts Supplemental item not applicable to this project

32 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Computation of Surplus Cash, Distributions and Residual Receipts Computation of Surplus Cash, Distributions and Residual Receipts Project Name: GWC-2004 Limited Liability Company Part A - Compute Surplus Cash Cash Fiscal Period Ended: 12/31/17 Project Number: FL29H Cash $ 248, Tenant subsidy vouchers due for period covered by financial statement $ Other $ - (a) Total Cash (Add Lines 1, 2 and 3) $ 249,829 Current Obligations 4. Accrued mortgage interest payable $ 3, Delinquent mortgage principal payments $ - 6. Delinquent deposits to reserve for replacements $ - 7. Accounts payable (due within 30 days) $ 15, Loans and notes payable (due within 30 days) $ - 9. Deficient Tax Insurance or MIP Escrow Deposits $ Accrued expenses (not escrowed) $ 6, Prepaid Revenue $ Tenant deposits held in trust $ 18, Other Current Obligations (Describe) Property Ground Lease $ 4,000 (b) Less Total Current Obligations (Add Lines 4 through 13) $ 47,513 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 202,316 Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts 1. Surplus Cash $ 202,316 Limited Dividend Projects 2a. Annual Distribution Earned During Fiscal Period Covered by the Statement $ - 2b. Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period $ - 2c. Distributions and Entity Expenses Paid During Fiscal Period Covered by Statement $ - 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (Line 2a plus 2b minus 2c) $ - 4. Amount Available for Distribution During Next Fiscal Period $ 202, Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $

33 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Computation of Surplus Cash, Distributions and Residual Receipts Computation of Surplus Cash, Distributions and Residual Receipts Project Name: GWC-2004 Limited Liability Company Part A - Compute Surplus Cash Cash Fiscal Period Ended: 6/30/17 Project Number: FL29H Cash $ 255, Tenant subsidy vouchers due for period covered by financial statement $ Other (describe) $ - (a) Total Cash (Add Lines 1, 2 and 3) $ 255,793 Current Obligations 4. Accrued mortgage interest payable $ - 5. Delinquent mortgage principal payments $ - 6. Delinquent deposits to reserve for replacements $ - 7. Accounts payable (due within 30 days) $ 12, Loans and notes payable (due within 30 days) $ - 9. Deficient Tax Insurance or MIP Escrow Deposits $ Accrued expenses (not escrowed) $ Prepaid Revenue $ 3, Tenant deposits held in trust $ 17, Other Current Obligations (Describe) $ - (b) Less Total Current Obligations (Add Lines 4 through 13) $ 33,653 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 222,140 Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts 1. Surplus Cash $ 222,140 Limited Dividend Projects 2a. Annual Distribution Earned During Fiscal Period Covered by the Statement $ - 2b. Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period $ - 2c. Distributions Paid During Fiscal Period Covered by Statement $ - 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (Line 2a plus 2b minus 2c) $ - 4. Amount Available for Distribution During Next Fiscal Period $ 222, Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $

34 Tel: Fax: West Big Beaver, Suite 600 Troy, MI GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H 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 To the Members of GWC-2004 Limited Liability Company We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of GWC-2004 Limited Liability Company (a Michigan Limited Liability Company), FHA Project No. FL29H (the Company ), which comprise the balance sheet as of December 31, 2017, and the related statements of income, changes in members equity, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 16, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Company s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. Accordingly, we do not express an opinion on the effectiveness of the Company s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms

35 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Company s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Troy, Michigan March 16,

36 Tel: Fax: West Big Beaver, Suite 600 Troy, MI GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Independent Auditor s Report on Compliance for Each Major HUD Program and on Internal Control Over Compliance Required by the Consolidated Audit Guide for Audits of HUD Programs To the Members of GWC-2004 Limited Liability Company Report on Compliance for Each Major HUD Program We have audited GWC-2004 Limited Liability Company (a Michigan Limited Liability Company), FHA Project No. FL29H (the Company ), compliance with the compliance requirements described in the Consolidated Audit Guide for Audits of HUD Programs (the Guide ) that could have a direct and material effect on each of the Company s major U.S. Department of Housing and Urban Development ( HUD ) programs for the year ended December 31, The Company s major HUD programs are as follows: Section 8. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its HUD programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Company s major HUD programs based on our audit of the compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on a major HUD program occurred. An audit includes examining, on a test basis, evidence about the Company s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major HUD program. However, our audit does not provide a legal determination of the Company s compliance. Opinion on Each Major HUD Program In our opinion, the Company complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major HUD programs for the year ended December 31, BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms

37 Report on Internal Control Over Compliance Management of the Company is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Company s internal control over compliance with the requirements that could have a direct and material effect on each major HUD program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major HUD program and to test and report on internal control over compliance in accordance with the Guide, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Company s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a compliance requirement of a HUD program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement of a HUD program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a compliance requirement of a HUD program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Guide. Accordingly, this report is not suitable for any other purpose. Troy, Michigan March 16,

38 Tel: Fax: West Big Beaver, Suite 600 Troy, MI GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Independent Accountant s Report on Applying Agreed-Upon Procedures To the Members of GWC-2004 Limited Liability Company We have performed the procedure described in the second paragraph of this report, which was agreed to by GWC-2004 Limited Liability Company (a Michigan Limited Liability Company), FHA Project No. FL29H (the Company ) and the U.S. Department of Housing and Urban Development, Public Indian Housing-Real Estate Assessment Center ( PIH-REAC ), on whether the electronic submission of certain information agrees with the related hard copy documents within the audit reporting package. The Company is responsible for accuracy and completeness of the electronic submission. The sufficiency of the procedure is solely the responsibility of the Company and PIH-REAC. Consequently, we make no representation regarding the sufficiency of the procedure described below either for the purpose for which this report has been requested or for any other purpose. We compared the electronic submission of the items listed in the UFRS Rule Information column with the corresponding printed documents listed in the Hard Copy Documents column. The associated findings from the performance of our agreed-upon procedure indicate agreement or non-agreement of the electronically submitted information and hard copy documents as shown in the attached chart. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on whether the electronic submission of the items listed in the UFRS Rule Information column agrees with the related hard copy documents within the audit reporting package. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. We were engaged to perform an audit in accordance with the Consolidated Audit Guide for Audits of HUD Programs by the Company as of and for the year ended December 31, 2017, and have issued our reports thereon dated March 16, The information in the Hard Copy Documents column was included within the scope, or was a by-product of that audit. Further, our opinion on the fair presentation of the supplementary information dated March 16, 2018, was expressed in relation to the basic financial statements of the Company taken as a whole. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms

39 A copy of the reporting package required by the Consolidated Audit Guide for Audits of HUD Programs which includes the auditor s reports, is available in its entirety from the Company. We have not performed any additional auditing procedures since the date of the aforementioned audit reports. Further, we take no responsibility for the security of the information transmitted electronically to the U.S. Department of Housing and Urban Development, PIH-REAC. The purpose of this report on applying the agreed-upon procedure is solely to describe the procedure performed on the electronic submission of the items listed in the UFRS Rule Information column and the associated findings, and not to provide an opinion or conclusion. Accordingly, this report is not suitable for any other purpose. Troy, Michigan March 16,

40 GWC-2004 Limited Liability Company (a Michigan Limited Liability Company) FHA Project No. FL29H Attachment to Independent Accountant s Report on Applying Agreed-Upon Procedures Attachment UFRS Rule Information Hard Copy Document(s) Findings Balance Sheet, Revenue and Expense and Cash Flow Data (account numbers 1120 to 7100T and the S1200 series) Surplus Cash (S1300 series of accounts) Footnotes (S3100 series of accounts) Type of Opinion on the Financial Statements and Compliance (account numbers S , S ) Type of Opinion on Financial Data Templates (i.e., Supplemental Data) (account number S ) Audit Findings Narrative (S2700 series of accounts) Financial Data Templates (i.e., Supplemental Schedules) Financial Data Templates (i.e., Computation of Surplus Cash, Distributions and Residential Receipts (Annual)) Footnotes to the Audited Basic Financial Statements Auditor s Reports on the Financial Statements and Compliance Auditor s Supplemental Report on Financial Data Templates Schedule of Findings and Questioned Costs Agrees Agrees Agrees Agrees Agrees Agrees 40 29

41 GWC-2004 LimiteI Liability Company (a Michigan Limited Liability Comany) FHA Project No. FL29HI Certif1catkn of Members We hereby certify that we have examined the acompanyfng financial statements and supplemental data of GWC-2004 Limited Liability Company ( Michigan Limited Liability Company) Fl-IA Project No. FL , and, to the best of our knowtdge and belief, the same is complete and accurate. Managing Member: Gerald A. Krueger, F4sident American Commun1tDevelopers, Inc. Date E.LN

42 42

43 3/16/2018 AFS Submission Owner: GWC-2004 L.L.C. TIN: Reporting From: 01/01/2017 Reporting To: 12/31/2017 FHA/Contract Number(s): FL29H Submission Type: AUD Assets 1120 Cash - Operations $ 209, Cash - Entity $ 2, Tenant/Member Accounts Receivable (Coops) $ N Net Tenant Accounts Receivable $ Accounts Receivable - HUD $ Accounts and Notes Receivable - Operations $ 12,603 Detail - Accounts and Notes Receivable - Operations Type of Receivable Other Description - Miscellaneous Detail for Ground lease improvement receivable Amount - Miscellaneous Detail for 1140 $ 12,603 Assets 1170 Short Term Investments - $ 18,198 Operations 1200 Prepaid Expenses $ 15, T Total Current Assets $ 259, Tenant/Patient Deposits Held $ 21,255 in Trust 1320 Replacement Reserve $ 71, Bond Reserves $ 19, T Total Deposits $ 90, Land $ 128, Buildings $ 5,086, Furniture for Project/Tenant $ 143,837 Use 1400T Total Fixed Assets $ 5,359, Accumulated Depreciation $ 2,442, N Net Fixed Assets $ 2,916, Deferred Financing Costs $ 12, T Total Other Assets $ 12, T Total Assets $ 3,300,742 Liabilities 1/15

44 3/16/2018 AFS Submission 2110 Accounts Payable - Operations $ 15, Accounts Payable - Entity $ 3, Accrued Wages Payable $ 5, Accrued Management Fee Payable $ 1, Accrued Interest Payable - First Mortgage (or Bonds) $ 3, Mortgage (or Bonds) Payable - First Mortgage $ 25,000 (Bonds) (Short Term) 2190 Miscellaneous Current Liabilities $ 4,000 Detail - Miscellaneous Current Liabilities Description - Miscellaneous Detail for Ground lease payment accrual Amount - Miscellaneous Detail for $ 4, Prepaid Revenue $ T Total Current Liabilities $ 58, Tenant/Patient Deposits Held In Trust (Contra) $ 18, Mortgage (or Bonds) Payable - First Mortgage (or $ 3,285,000 Bonds) 2340 Debt Issuance Costs $ 179,201 Liabilities 2300T Total Long Term Liabilities $ 3,105, T Total Liabilities $ 3,182,042 Equity Data - Entities other than Corporations 3130 Total Equity $ 118, T Total Liabilities and Equity $ 3,300,742 Rent Revenue 5120 Rent Revenue - Gross Potential $ 222, Tenant Assistance Payments $ 753, Special Claims Revenue $ T Total Rent Revenue $ 976,447 Vacancies 5220 Apartments $ 2, T Total Vacancies $ 2, N Net Rental Revenue (Rent $ 974,067 Revenue Less Vacancies) Financial Revenue Financial Revenue - Project $ /15

45 3/16/2018 AFS Submission Operations 5440 Revenue from Investments - Replacement Reserve $ T Total Financial Revenue $ 591 Other Revenue 5910 Laundry and Vending Revenue $ 4, Tenant Charges $ 2, Miscellaneous Revenue $ 308 Details - Miscellaneous Revenue Description Eviction charges Amount $ T Total Other Revenue $ 6, T Total Revenue $ 981,496 Administrative Expenses 6210 Advertising and Marketing $ Other Renting Expenses $ 1, Office Salaries $ 58, Office Expenses $ 11, Management Fee $ 40, Legal Expense - Project $ Audit Expense $ 10, Bookkeeping Fees/Accounting Services $ 5, Miscellaneous Administrative $ T Expenses Total Administrative Expenses $ 129,584 Utilities Expenses 6450 Electricity $ 4, Water $ 13, Gas $ 1, Sewer $ 44, T Total Utilities Expense $ 64,018 Operating & Maintenance Expenses 6510 Payroll $ 79, Supplies $ 54, Contracts $ 59, Garbage and Trash Removal $ 19, Security Payroll/Contract $ Heating/Cooling Repairs and Maintenance 6570 Vehicle and Maintenance Equipment Operation and Repairs 6500T Total Operating and Maintenance Expenses $ 882 $ 520 $ 215,404 Taxes & Insurance 6710 Real Estate Taxes $ 31, /15 45

46 3/16/2018 AFS Submission 6711 Payroll Taxes (Project's Share) $ 11, Property & Liability Insurance (Hazard) $ 48, Fidelity Bond Insurance $ Workmen's Compensation $ 3, Health Insurance and Other Employee Benefits $ 21, Miscellaneous Taxes, Licenses, Permits and $ 688 Insurance 6700T Total Taxes and Insurance $ 117,576 Financial Expenses 6820 Interest on First Mortgage (or Bonds) Payable $ 36, Miscellaneous Financial Expenses $ 48,002 Details - Miscellaneous Financial Expenses Description Letter of Credit Fees Amount $ 41, Description Remarketing Fees Amount $ 3, Description Trustee Administration Fees Amount $ 3, T Total Financial Expenses $ 84,600 Operating Results 6000T Total Cost of Operations before Depreciation $ 611, T Profit (Loss) before Depreciation $ 370, Depreciation Expenses $ 192, Amortization Expense $ 3, N Operating Profit or (Loss) $ 174,262 Corporate or Mortgagor Revenue/Expenses 7105 Entity Revenue $ Other Expenses $ 48,000 Details - Other Expenses Description Postage & Bank Fees Amount $ Description Travel Amount $ Description 2017 Investor Services Fee Amount $ 4, Description 2017 Company Management Fee Amount $ 14, Description 2017 Incentive Management Fee Amount $ 27, T Net Entity Expenses $ 47,843 Profit or Loss Profit or Loss (Net Income or $ 126, /15

47 3/16/2018 AFS Submission Loss) Part II S Total first mortgage (or bond) principal payments required during the audit period (usually 12 months). This $ 30,000 applies to all direct loans, HUD-held and HUD-insured first mortgages. S The total of all monthly reserve for replacement deposits (usually 12 months) required during the audit $ 19,253 period even if deposits have been temporarily waived or suspended. Equity Data - Entities other than Corporations S Beginning of Year Balance $ 409, Net Income or Loss $ 126,419 S Distributions $- 416, End of Year $ 118,700 Cash Flow from Operating Activities S Rental Receipts $ 966,876 S Interest Receipts $ 591 S Other Operating Receipts $ 6,838 S Entity/Construction Receipts $ 157 Details - Entity/Construction Receipts S Description Interest S Amount $ 157 S Total Receipts $ 974,462 S Administrative $- 30,319 S Management Fee $- 40,152 S Utilities $- 62,232 S Salaries and Wages $- 133,548 S Operating and Maintenance $- 141,799 S Real Estate Taxes $- 31,688 S Property Insurance $- 47,085 S Miscellaneous Taxes and Insurance $- 37,123 S Tenant Security Deposits $- 2,185 S Other Operating Expenses $ 1,000 S Interest on First Mortgage $- 26,960 S Miscellaneous Financial $- 49,759 S Entity/Construction Disbursements $- 93,411 Details - Entity/Construction Disbursements S Description Postage & Bank Fees S Amount $- 707 S Description Investor Services Fees 47 S Amount $- 9,270 S Description Company Management Fees 5/15

48 3/16/2018 AFS Submission S Amount $- 28,646 S Description Incentive Management Fees S Amount $- 54,788 S Total Disbursements $- 695,261 S Net Cash provided by (used in) Operating Activities $ 279,201 Cash Flow from Investing Activities S Net Deposits to the Reserve for Replacement account $- 98 S Net Purchase of Fixed Assets $- 10,746 S Net Cash used in Investing Activities $- 10,844 Cash Flow from Financing Activities S Principal Payments - First Mortgage (or Bonds) $- 30,000 S Distributions $- 416,863 S Other Financing Activities $ 6,000 Details - Other Financing Activities S Description - Other Financing Activities Net decrease in bond sinking fund S Amount - Other Financing Activities $ 6,000 S Net Cash used in Financing Activities $- 440,863 S Net increase (decrease) in Cash and Cash Equivalents $- 172,506 Cash and Cash Equivalents S Beginning of Period Cash $ 403,009 S1200T End of Period Cash $ 230,503 Reconciliation of Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 3250 Profit or Loss (Net Income or Loss) $ 126,419 Adjustments to Reconcile Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 6600 Depreciation Expenses $ 192, Amortization Expense $ 3,106 S Amortization of Debt Issuance Costs $ 6,050 S Decrease (increase) in Tenant/Member Accounts $ 3,830 Receivable S Decrease (increase) in Accounts Receivable - Other $- 1,978 S Decrease (increase) in $ 1,680 Prepaid Expenses S Decrease (increase) in Cash 48 Restricted for Tenant $- 2,690 Security Deposits 6/15

49 3/16/2018 AFS Submission S Increase (decrease) in $- 3,786 Accounts Payable S Increase (decrease) in Accrued Liabilities $ 10,329 S Increase (decrease) in Tenant Security Deposits $ 505 held in trust S Increase (decrease) in Prepaid Revenue $- 10,043 S Increase (decrease) in Entity/Construction Liability $- 47,167 accounts Details - Increase (decrease) in Entity/Construction Liability accounts S Description Decrease in Accounts payable - entity S Amount $- 47,167 Net Cash provided by (used in) Operating Activities S Net Cash provided by (used in) Operating Activities $ 279,201 Notes S Organization and Presentation Note S Summary of Significant Accounting Policies Note GWC-2004 Limited Liability Company (the?company?) was formed as a limited liability company under the laws of the State of Michigan on August 9, 2004, for the purpose of acquiring, rehabilitating and operating a lowincome residential housing project (the? Project?). The Project is subject to the requirements of the Multifamily Assisted Housing Reform and Affordability Act (? MAHRA?) of Such projects are regulated by the U.S. Department of Housing and Urban Development (? HUD?) as to rent charges and operating methods. The Project consists of a 70-unit apartment complex located in Naples, Florida and is currently operating under the name of George Washington Carver Apartments. Cash distributions are limited by agreements between the Company and HUD to the extent of surplus cash as defined by HUD. Revenue Recognition - Rental revenue attributable to residential leases is recognized monthly when the cash rental payment is due. Rental payments received in advance are deferred until earned. All leases between the Company and tenants of the property are operating leases. Concentration of Risk - Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at financial institutions and, at times, balances may exceed the federally issued limit by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts during the year ended December 31, Fixed Assets and Depreciation - Fixed assets are recorded at cost. Depreciation is computed over the estimated useful lives 49 of the assets using straight-line and accelerated methods. Estimated useful lives by asset category are as follows: 7/15

50 3/16/2018 AFS Submission Land Improvements 15 years Building 27.5 years Furniture for Project/Tenant Use 5 to 15 years Long- lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company would record an impairment loss and reduce the carrying amount of the Project when indicators of impairment are present and the expected undiscounted cash flows of the Project are less than the carrying value of the Project. If the Company does not expect to recover its carrying cost, the carrying value of the Project would be reduced to its fair value. As of December 31, 2017, management believes that there is no impairment in the value of the Project. Intangible Assets - Intangible assets consist of monitoring fees relating to Low- Income Housing Tax Credits. These costs are amortized over the tax credit period. The amortization expense for each of the next four years is as follows: 2018 $ 3, , , ,851 Debt Issuance Costs - Debt issuance costs consist of bond and mortgage costs incurred in financing the Project and are being amortized by the straight-line method, which approximates the effective interest method, over the life of the permanent financing obligation. Amortization of debt issuance costs in the amount of $6,050 is included in Interest on Mortgage Payable on the Statement of Income. As of December 31, 2017, accumulated amortization was $73,063. Estimated amortization expense for each of the five years subsequent to December 31, 2017, is $6,050. Member Allocation - Income or loss of the Company is allocated.01% to the Managing Member, 4.99% to the Special Member Class I, and 95% to the Investment Member. Distributable Net Cash Flow, as defined by the Operating Agreement is allocated.01% to the Managing Member, 89.99% to the Special Member Class I and 10% to the Investment Member. Capital allocation among the members is as follows: Managing Member.01% Investment Member 95% Special Member Class I 4.99% Income Taxes - No federal income tax provision has been included in the financial statements since income or loss of the Company is required to be reported by the members on their respective income tax returns. The Company measures uncertain state tax positions and believes that all positions would more likely than not sustain an audit. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those 50 estimates. Cash Equivalents - For purposes of the Statement of Cash Flows, the Company considers all 8/15

51 3/16/2018 AFS Submission S Mortgages (or Bond) Payable Note highly liquid investments purchased with a maturity of three months or less to be cash equivalents. These investments are classified as a Current asset under the category Short-term investments on the Balance Sheet. For cash flow purposes, restricted deposits are not considered to be cash equivalents. Fair Value Measurements - In accordance with Accounting Standards Codification (?ASC?) Topic 820, Fair Value Measurements and Disclosures fair value is measured as the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the?exit price?) in an orderly transaction between market participants at the measurement date. ASC 820 valuation techniques are based on observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company?s market assumptions. Accounting guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1? Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2? Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly. Level 3? Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument?s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company?s cash and cash equivalents, escrow deposits and restricted cash, accounts receivables, accounts payable and long-term debt are carried at amounts which reasonably approximates their fair values. Subsequent Events - The financial statements and related disclosures include an evaluation of events up to and including March 16, 2018, which is the date the financial statements were available to be issued, and in management?s opinion there were no subsequent events requiring adjustments to, or disclosure in, the financial statements. On December 15, 2005, the Housing Finance Authority of Collier County, Florida issued $3,500,000 in 40 year revenue bonds. In conjunction with the bond issuance, the Company entered into a loan agreement with the Housing Finance Authority of Collier County, Florida. The bond proceeds were obtained to rehabilitate the Project and pay off existing debt. The bond collected is a 40 year mortgage note with interest being adjusted weekly and charged at 51 the applicable interest rate on the bonds. At December 31, 2017, the interest rate being charged was 1.86%. As of 9/15

52 3/16/2018 AFS Submission Details - Mortgages Payable S Principal Payments in the next 12 months - Year 1 S Principal Payments in the next 12 months - Year 2 S Principal Payments in the next 12 months - Year 3 S Principal Payments in the next 12 months - Year 4 S Principal Payments in the next 12 months - Year 5 S Principal Payments remaining after Year 5 S Related Party Transactions Note December 31, 2017, the total amount outstanding under this mortgage note was $3,310,000. Monthly principal payments on the mortgage note are made in accordance to the Reimbursement Agreement and are deposited to the Bond Sinking Fund with the Trustee. There is a bond reserve balance at December 31, 2017, in the amount of $19,148. The bonds are secured by a $3,334,666 letter of credit, a first mortgage on the Project, substantially all assets of the Company and the assignment of the Company?s rights in its rental agreements. Additionally, a member of the Company and its owner have provided guarantees. The annual fee for the letter of credit is 1.25% plus $50 for each monthly draw made. The letter of credit expires December 15, As part of the Company?s Letter of Credit Agreement, the bank required the Company to fund a replacement reserve escrow, which began February 1, 2006, with monthly payments of $1,604. $ 25,000 $ 30,000 $ 35,000 $ 35,000 $ 40,000 $ 3,145,000 Company Management Fee - Beginning in 2005, the Company pays the Managing Member a Company Management Fee in the amount of $10,500 per year, which became cumulative and started increasing annually by 3% in The fee is for monitoring operations, performing periodic physical inspections, reviewing financial and tax accounting systems, reviewing operating budgets, reviewing management procedures, supervising the preparation of financial statement and tax returns and monitoring all other matters relating to the legal and tax status of the Company. During 2017, $28,646 was paid for the 2016 and 2017 Company Management Fees and no fees were accrued. Investor Services Fee - Beginning in 2007, the Company pays the Investment Member an amount equal to $3,500 increasing 3% per year and payable on a cumulative basis. The fee is for services rendered in connection with tax credit matters, tax returns 10/15 52

53 3/16/2018 AFS Submission and annual reports of the Company. During 2017, $9,270 was paid for the 2016 and 2017 Investor Services Fees and no fees were accrued. Incentive Management Fee - Beginning in 2007, the Company pays to the Managing Member a non-cumulative annual Incentive Management Fee, only to the extent funds are available. The fee is equal to the least of (i) 10% of Effective Gross Income for such year or (ii) an amount which, when combined with all other amounts paid to the Managing Member and its affiliates from Net Cash Flow, is equal to 90% of the aggregate Net Cash Flow as defined by the Operating Agreement. The fee is for management oversight services, planning, supervising and developing a marketing plan and assisting the Project in tenant selection. During 2017, $54,788 was paid for the 2016 and 2017 Incentive Management Fees and no fees were accrued. Details - Related Party Transactions S Company American Community Developers, Inc. Name S Amount $ 28,646 Received S Company PNC Bank, N.A. Name S Amount $ 9,270 Received S Company American Community Developers, Inc. Name S Amount $ 54,788 Received S Management Fee Note The Project is managed pursuant to a Management Agreement. Management fees are payable at the lower of 4.94% of rental income collected or $48 per unit per month (?PUPM?) and 4.94% of other income collected effective January 1, 2017 through October 31, 2017 and the lower of 4.28% of rental income collected or $48 per unit per month ('PUPM') and 4.28% of other income collected effective November 1, 2017 through December 31, Management fees charged to operations in 2017 totaled $40,643, of which $1,055 remains accrued for at December 31, During 2017, the Project paid the Project manager $5,880 for bookkeeping and accounting services. S Additional Note Tenant Security Deposits - HUD regulations require that any funds collected as security deposits shall be kept separate and apart from all other Company funds in a trust account. At December 31, 2017, the Company had funded the following: Required Funding at December 31, 2017 $ 18,064 Funded at December 31, 2017 Deposits held in trust $ 21,255 S Additional Note Housing Assistance Payment Contract Agreements - The Federal Housing Administration (?FHA?) has contracted with the Company under Section 8 of the United States 53 Housing Act of 1937, and Section 515(a) of the Multifamily Assisted Housing Reform and Affordability Act of 1997 to 11/15

54 3/16/2018 AFS Submission make housing assistance payments to the Company on behalf of qualified tenants under one contract. The current contract expires on October 22, S Additional Note Contingency - The Project?s low-income housing credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest. In addition, such potential noncompliance may require an adjustment to the contributed capital by the Investment Member. S Additional Note Ground Sublease - On May 26, 2005, the Company entered into an Amended and Restated Ground Sublease Agreement with Carver Finance, Incorporated (? Landlord?). Under the agreement, the Company is required to make annual ground lease payments of $1,000. The Landlord holds the annual payments in a separate account, which is to be used for improvements and maintenance of the Property. S Additional Note Current Vulnerability Due to Certain Concentrations - The Project operates in a heavily regulated environment. The operations of the Project are subject to the administrative directives, rules and regulations of Federal and State regulatory agencies. Such change may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden to comply with a change. S Additional Note Identity of Interest - St. Clair Construction, a subsidiary of American Community Developers (?ACD?), may perform construction services on the Project from time to time on a competitive basis. Independent Management Services (? IMS?) is the management company for the Project and performs services for other projects affiliated with ACD, including computer and accounting services. In addition, the President of IMS is a limited partner/member in various ACD projects. Report on the Financial Statement S Opinion UNMODIFIED S Going Concern Issue N Report on Supplemental Data S Opinion UNMODIFIED Report on Internal Controls S Instances of Fraud, Noncompliance, or Abuse of Laws, Regulations, N Contracts or Grants That Have a Material Effect on the Audit 54 S Significant Deficiencies or N 12/15

55 3/16/2018 AFS Submission Material Weaknesses in Internal Controls Over Financial Reporting Indicator Report on Compliance Major Programs S Opinion on Compliance with Laws, Regulations, and Contracts Applicable to Each UNMODIFIED Major Program S Significant Deficiencies or Material Weaknesses in Internal Controls Over Compliance Indicator Schedule of Reserve for Replacement 1320P Balance at Beginning of Year $ 71, DT Total Monthly Deposits $ 19, INT Interest on Replacement Reserve Accounts $ WT Approved Withdrawals $ 19, Balance at End of Year, Confirmed by Mortgagee $ 71, R Deposits Suspended or Waived Indicator N Computation of Surplus Cash, Distributions, and Residual Receipts (Annual) S Cash $ 248, Accounts Receivable - HUD $ 978 S Total Cash $ 249,829 S Accrued Mortgage (or Bond) Interest Payable $ 3,588 S Accounts Payable - 30 days $ 15,427 S Accrued Expenses [not escrowed] $ 6, Prepaid Revenue $ Tenant/Patient Deposits Held In Trust (Contra) $ 18,064 S Other Current Obligations $ 4,000 Details - Other Current Obligations S Description - Other Current Obligations Detail Property Ground Lease S Amount - Other Current Obligations Detail $ 4,000 S Total Current Obligations $ 47,513 S Surplus Cash (Deficiency) $ 202,316 S Amount Available for distribution during next fiscal period 13/15 N $ 202,316 Computation of Surplus Cash, Distributions, and Residual Receipts (Mid-year) 55 S Semi-Annual Period Ended 06/30/2017 S Cash $ 255,152

56 3/16/2018 AFS Submission S Tenant Subsidy due for semiannual $ 641 period S Total Cash $ 255,793 S Accounts Payable [due within 30 days] $ 12,676 S Prepaid Revenue $ 3,418 S Tenant Security Deposits Liability $ 17,559 S Total Current Obligations $ 33,653 S Surplus Cash (Deficiency) $ 222,140 S Amount Available for Distribution during next fiscal $ 222,140 period Schedule of Changes in Fixed Asset Accounts 1410P Beginning Balance for 1410 $ 128, Land $ 128, P Beginning Balance for 1420 $ 5,076, AT Additions for 1420 $ 10,746 Details - Additions for A Item Purchased Shower Heads, Valves, Aerators 1420A Total Amount $ 10, Buildings $ 5,086, P Beginning Balance for 1450 $ 168, DT Deductions for 1450 $ 24,845 Details - Deductions for D Description Furniture/Fixtures 1450D Total Deduction $ 6, D Description Appliances 1450D Total Deduction $ 4, D Description Carpet 1450D Total Deduction $ 13, Furniture for Project/Tenant Use $ 143, PT Total Beginning Balance for Fixed Assets $ 5,373, AT Total Asset Additions $ 10, DT Total Asset Deductions $ 24, T Total Fixed Assets $ 5,359, P Beginning Balance for 1495 $ 2,274, Total Provisions $ 192, ADT Total Accumulated Depreciation from Disposed Assets $ 24, Ending Balance for Accumulated Depreciation $ 2,442, N Total Net Book Value $ 2,916,674 Mortgagor's Certification S Narrative I/we hereby certify that I/we have examined the accompanying financial statements AND supplemental data and, to the best of my/our knowledge and belief, the 56 same is complete AND accurate. S Name of Signatory #1 Gerald A. Krueger 14/15

57 3/16/2018 AFS Submission S Title of Certifying Official #1 President of the Managing Member S Auditee Telephone Number S Date of Certification 03/16/2018 Managing Agent's Certification S Narrative I/we hereby certify that I/we have examined the accompanying financial statements AND supplemental data and, to the best of my/our knowledge and belief, the same is complete AND accurate. S Name of Managing Agent Independent Management Services S Name of Signatory Frank Carswell S Managing Agent TIN S Name of Property Manager Mike Dersa Auditor's Transmittal Letter S Audit Firm ID (UII) S Audit Firm BDO USA, LLP - Troy S Lead Auditor First Name Fred S Lead Auditor Middle Name D S Lead Auditor Last Name Rozelle S Auditor Street Address Line W Big Beaver Rd S Auditor Street Address Line Suite S Auditor City Troy S Auditor State MI S Auditor Zip Code S Telephone Number S Audit Firm TIN S Date of Independent Auditor's Report 03/16/ end of statement /15

58 Board of Directors of Carver Finance, Inc. Agenda Item Report Submitted by: Vicki Smith Submitting Department: Finance Meeting Date: October 12, 2018 SUBJECT 2019 Meeting Date Legislative Type: Legislative Item Funding Source: N/A Recommendation: Approve. ATTACHMENTS Agenda Memorandum 58

59 Memo Finance Department TO: FROM: Board of Directors, Carver Finance, Inc. Jodi Bain, Senior Accountant DATE: October 12, 2018 SUBJECT: 2019 Carver Finance Board Meeting BACKGROUND: The regular annual meeting of the directors shall be held on the first Monday in October of each year at such place in the City of Naples, Florida. If the day fixed for the annual meeting shall fall on a legal holiday, such meeting shall be held on the next succeeding business day or within a reasonable time thereafter. ACTION: For the board to select a meeting date for Staff proposes the board meet on October 7, 2019 at 9 am, Naples City Hall, City Council Chambers, th Street South, Naples. 59 Ethics above all else... Service to others before self... Quality in all that we do.