Presbyterian Village of Holly Phase II d/b/a The Village of Holly Woodlands (a not-for-profit corporation) HUD Project No.

Transcription

1 (a not-for-profit corporation) Financial Report with Supplemental Information June 30, 2013

2 Certificate of Officers We certify that we have examined the attached financial statements and supplemental information of, d/b/a The Village of Holly Woodlands, and to the best of our knowledge and belief, the same is a true statement of the financial condition as of June 30, William W. Walters Chair September 12, 2013 Date Pauline Kenner Vice-Chair September 12, 2013 Date ID# Employer Identification Number

3 Management Agent's Certification We certify that we have examined the attached financial statements and supplemental information of, d/b/a The Village of Holly Woodlands, and to the best of our knowledge and belief, the same is a true statement of the financial condition as of June 30, Cheryl Carney Management Agent Representative September 12, 2013 Date (248) Telephone Number ID# Management Company Employer Identification Number Deanna Coggins Property Manager

4 Contents Report Letter 1-2 Financial Statements Balance Sheet 3-4 Statement of Activities 5-6 Statement of Changes in Deficiency in Net Assets 7 Statement of Cash Flows 8-9 Notes to Financial Statements Supplemental Information 15 Report Letter 16 Balance Sheet Data Statement of Activities Data Statement of Changes in Deficiency in Net Assets Data 22 Statement of Cash Flows Data Supplemental Information Schedule of Changes in Fixed Asset Accounts 27 Schedule of Expenditures of Federal Awards 28 Computation of Surplus Cash 29 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 Report on Compliance for the Major Federal Program; Report on Internal Control Over Compliance Schedule of Findings and Questioned Costs 37-39

5 Independent Auditor's Report To the Board of Trustees Report on the Financial Statements We have audited the accompanying financial statements of, (the "Organization"), which comprise the balance sheet as of June 30, 2013 and 2012 and the related statements of activities, changes in deficiency in net assets, and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the 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. 1

6 To the Board of Trustees Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of, d/b/a The Village of Holly Woodlands as of June 30, 2013 and 2012 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 12, 2013 on our consideration of, Presbyterian Village of Holly Phase II ' internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering, ' internal control over financial reporting and compliance. September 12, 2013 By: Robert F. Long Engagement Partner Northwestern Highway P.O. Box 307 Southfield, MI Federal ID Number: Phone Number: (248)

7 Balance Sheet June 30, 2013 June 30, 2012 Assets Current Assets Cash - Operations $ 32,997 $ 13,254 Tenant accounts receivable Accounts receivable - HUD 1,348 - Prepaid expenses 6,953 5,538 Total current assets 41,540 18,792 Deposits - Held in Trust Tenant deposits held in trust 21,784 18,167 Deposits - Funded Escrow deposits 60,180 63,826 Replacement reserve 146, ,553 Residual receipts reserve 44,938 44,902 Total deposits - Funded 251, ,281 Fixed Assets Land and land improvements 84,328 78,828 Buildings and building improvements 4,126,067 4,106,420 Building equipment (portable) 220, ,145 Furniture for project/tenant use 28,954 17,314 Office furniture and equipment 8,104 8,104 Maintenance equipment 24,496 24,496 Miscellaneous fixed assets 21,293 21,293 Total fixed assets 4,513,387 4,476,600 Accumulated depreciation (1,712,734) (1,540,862) Net fixed assets 2,800,653 2,935,738 Total assets $ 3,115,725 $ 3,212,978 See Notes to Financial Statements. 3

8 Balance Sheet (Continued) Liabilities and Deficiency in Net Assets June 30, 2013 June 30, 2012 Current Liabilities Accounts payable - Operations (Note 4) $ 29,567 $ 14,406 Accrued wages payable 3,370 3,719 Accrued payroll taxes payable Residual receipts liability 51,185 - Prepaid revenue - 1,668 Total current liabilities 84,380 20,068 Tenant deposits held in trust (contra) 16,687 17,096 Long-term Liabilities Capital advance (Note 2) 3,660,900 3,660,900 Total liabilities 3,761,967 3,698,064 Deficiency in Net Assets Deficiency in unrestricted net assets (646,242) (485,086) Total deficiency in net assets (646,242) (485,086) Total liabilities and deficiency in net assets $ 3,115,725 $ 3,212,978 See Notes to Financial Statements. 4

9 Statement of Activities Year Ended June 30, 2013 June 30, 2012 Rent Revenue Rent revenue - Gross potential $ 186,963 $ 201,409 Tenant assistance payments 233, ,723 Total rent revenue (potential at 100% occupancy) 420, ,132 Vacancies Apartments - (6,815) Residual receipts adjustment (51,185) - Total vacancies (51,185) (6,815) Net rent revenue (rent revenue less vacancies) 368, ,317 Financial Revenue Project operations Investments - Residual receipts 40 2 Investments - Replacement reserve Total financial revenue Other Revenue Laundry and vending revenue 3,087 3,698 Tenant charges - 63 Gifts (Note 4) 11,643 - Miscellaneous revenue (Note 3) - 89,035 Total other revenue 14,730 92,796 Total revenue 383, ,367 Administrative Expenses Conventions and meetings Management consultants 15,074 14,468 Advertising and marketing Other renting expenses Office salaries 18,900 21,867 Office expenses 3,229 2,465 Management fee (Note 4) 24,480 23,868 Manager or superintendent salaries 27,101 23,105 Legal expenses 74 - Auditing expenses 6,900 6,400 Bookkeeping fees/accounting services (Note 4) 6,120 6,120 Miscellaneous administrative expenses 4,857 4,072 Total administrative expenses 107, ,775 See Notes to Financial Statements. 5

10 Statement of Activities (Continued) Year Ended June 30, 2013 June 30, 2012 Utilities Expense Electricity $ 36,128 $ 31,779 Water 53,842 63,939 Gas 19,216 20,141 Total utilities expense 109, ,859 Operating and Maintenance Expenses Payroll 34,753 44,619 Supplies 11,226 9,233 Contracts 39,390 35,485 Garbage and trash removal 3,372 3,789 Snow removal 4,864 4,639 Vehicle and maintenance equipment operation and repairs 821 2,183 Miscellaneous operating and maintenance expenses 29,922 24,494 Total operating and maintenance expenses 124, ,442 Taxes and Insurance Payroll taxes (FICA) 7,187 7,737 Property and liability insurance (hazard) 15,856 15,759 Workers' compensation 2,518 2,251 Health insurance and other employee benefits (Note 6) 6,229 8,776 Total taxes and insurance 31,790 34,523 Financial Expenses Miscellaneous financial expenses Total financial expenses Total Costs of Operations Before Depreciation 373, ,700 Change in Net Assets Before Depreciation 10, ,667 Depreciation Expense 171, ,616 Change in Total Net Assets $ (161,156) $ (41,949) See Notes to Financial Statements. 6

11 Statement of Changes in Deficiency in Net Assets Deficiency in Net Assets - July 1, 2011 $ (443,137) Increase in deficiency in net assets (41,949) Deficiency in Net Assets - June 30, 2012 (485,086) Increase in deficiency in net assets (161,156) Deficiency in Net Assets - June 30, 2013 $ (646,242) See Notes to Financial Statements. 7

12 Statement of Cash Flows Year Ended June 30, 2013 June 30, 2012 Cash Flows from Operating Activities Receipts: Rental $ 416,874 $ 414,985 Interest Grants - 120,068 Other cash receipts 3,087 10,810 Gifts 11,643 - Total receipts 431, ,117 Disbursements: Administrative (185) (13,668) Management fee (26,520) (25,857) Utilities (109,186) (115,859) Salaries and wages (101,033) (110,459) Operating and maintenance (89,595) (77,776) Property insurance (15,856) (15,759) Miscellaneous taxes and insurance (17,349) (18,116) Tenant security deposits (4,026) 622 Miscellaneous financial (109) - Total disbursements (363,859) (376,872) Net cash provided by operating activities 67, ,245 Cash Flows from Investing Activities Net withdrawal from (deposit to) the escrow account 3,646 (908) Net deposit to the reserve for replacement account (15,077) (47,907) Net deposit to the residual receipts account (36) (19,271) Net purchase of fixed assets (36,787) (87,285) Payment of construction payables - (37,453) Net cash used in investing activities (48,254) (192,824) Net Increase (Decrease) in Cash 19,743 (23,579) Cash - Beginning of year 13,254 36,833 Cash - End of year $ 32,997 $ 13,254 See Notes to Financial Statements. 8

13 Statement of Cash Flows (Continued) A reconciliation of change in net assets to net cash from operating activities is as follows: Year Ended June 30, 2013 June 30, 2012 Change in net assets $ (161,156) $ (41,949) Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation 171, ,616 (Increase) decrease in assets: Tenant accounts receivable (1,590) 38,082 Prepaid expenses (1,415) 645 Cash restricted for tenant security deposits (3,617) 83 Other miscellaneous asset - 2,047 Increase (decrease) in liabilities: Accounts payable - Operations 15,161 (1,655) Accrued liabilities 50, Tenant security deposits held in trust (409) 539 Prepaid revenue (1,668) 1,668 Net cash provided by operating activities $ 67,997 $ 169,245 See Notes to Financial Statements. 9

14 Notes to Financial Statements June 30, 2013 and 2012 Note 1 - Nature of Business and Significant Accounting Policies (the "Organization") is a not-for-profit corporation that owns and operates a 51-unit affordable housing rental project for elderly persons (the "Project"). The Project, located in Holly, Michigan, is operating under HUD Section 202 under the National Housing Act and is regulated by the U.S. Department of Housing and Urban Development (HUD) with respect to rental charges and operating methods. The Organization is sponsored by Presbyterian Villages of Michigan (PVM). PVM is a comprehensive, diverse, and faith-based organization serving seniors in multiple settings since Its mission, guided by its Christian heritage, is to serve seniors of all faiths and to create new possibilities for quality living. PVM's tradition of social accountability and servant leadership are further reflected in its statements of beliefs and values and its various operational philosophies and practices. Significant account policies are as follows: Basis of Accounting - The Organization maintains its accounting records and prepares its financial statements on an accrual basis, which is in accordance with accounting principles generally accepted in the United States of America. The accompanying schedule of expenditures of federal awards includes the federal grant activity of and is presented on the same basis of accounting as the financial statements. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Tenant Accounts Receivable and Allowance for Bad Debts - Accounts receivable represent amounts due from tenants. Tenant accounts generally are collectible as long as a tenant is occupying a unit. When a tenant vacates a unit, any unpaid amount remaining after application of security deposits is charged to bad debt expense. There was no allowance for bad debts at June 30, 2013 and

15 Notes to Financial Statements June 30, 2013 and 2012 Note 1 - Nature of Business and Significant Accounting Policies (Continued) Deposits - Funded - The funds controlled by the mortgagee represent a replacement reserve that consists of deposits by the Organization to offset specific expenses and to replace structural elements and mechanical equipment upon consent of HUD. The residual receipts reserve consists of surplus cash deposits by the Organization, which are calculated by a HUD-prescribed formula and can only be disbursed at HUD's discretion. Excess residual receipts are required to be remitted to HUD upon termination of the PRAC contract. Excess residual receipts that are deemed probable to be paid to or recaptured by HUD are recorded as a liability. The excess residual receipts reserve was $51,185 at June 30, 2013 and is included in current liabilities on the balance sheet. Each year, the liability is adjusted to reflect current year activity to the residual receipts, including required deposits, earned interest, approved withdrawals, and any adjustments to the amounts deemed probable to be paid to or recaptured by HUD. Escrow deposits represent funds set aside by the Organization to offset painting and insurance expenditures. Future monthly commitments for the funding of the replacement reserve total $1,243. Deposits Held in Trust - In accordance with the Regulatory Agreement with HUD, the Organization is required to maintain a tenant security deposit trust account. The amount must at all times be equal to or exceed the aggregate of all outstanding obligations to tenants for refundable security deposits. The tenant security deposits fund consists of cash. Fixed Assets - Land, buildings, furniture, and equipment are recorded at cost when purchased or appraised value if donated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which range from 5 years to 40 years. Maintenance, repairs, and renewals that do not involve any substantial betterments are charged to expense when incurred. Expenditures that increase the useful life of the property are capitalized. Impairment of Assets - The Organization recognizes impairment of long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. No impairment of the Organization's rental property has occurred. Classification of Net Assets - The deficiency in net assets of the Organization is classified as permanently restricted, temporarily restricted, or unrestricted depending on the presence and characteristics of donor-imposed restrictions limiting the Organization's ability to use or dispose of contributed assets or the economic benefits embodied in those assets. The deficiency in net assets of the Organization at June 30, 2013 and 2012 is considered unrestricted. 11

16 Notes to Financial Statements June 30, 2013 and 2012 Note 1 - Nature of Business and Significant Accounting Policies (Continued) Federal Income Taxes - No provision for income taxes has been included in the financial statements since the Organization is exempt from such taxes under Section 501(c)(3) of the Internal Revenue Code. Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Organization and recognize a tax liability if the Organization has taken an uncertain tax position that more likely than not would not be sustained upon examination by the IRS or other applicable taxing authorities. Management has analyzed the tax positions taken by the Organization and has concluded that as of June 30, 2013 and 2012, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Organization is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Management believes it is no longer subject to income tax examinations for fiscal years prior to Rental Income - Units are designated for occupancy by eligible low-income tenants under a HUD Section 202 project rental assistance contract (PRAC) expiring on February 25, These tenants contribute a portion of the contract rent based on formulas prescribed by the U.S. Department of Housing and Urban Development. Housing assistance payments are received for the balance of contract rent from HUD. Grant Revenue - During the year ended June 30, 2012, HUD approved a total grant award amount of $606,898 to the Organization under the Green Retrofit Program (GRP). The grant is a reimbursable grant for certain approved expenditures. Total expenditures and revenue recognized for the years ended June 30, 2013 and 2012 were $0 and $81,986, respectively. Regulatory Agreement - A Regulatory Agreement with HUD was signed in connection with the mortgage note. No violations of this agreement were noted for the years ended June 30, 2013 and 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events - The financial statements and related disclosures include evaluation of events up through and including September 12, 2013, which is the date the financial statements were available to be issued. 12

17 Notes to Financial Statements June 30, 2013 and 2012 Note 2 - Capital Advance Funding The Organization obtained a capital advance from HUD which was used to assist in financing the construction of the Project in accordance with the provisions of Section 202 of the Housing Act of The capital advance at June 30, 2013 and 2012 is $3,660,900, bears no interest, and is not required to be repaid as long as the housing remains available to eligible very low-income households and the aged and/or handicapped for a period of 40 years, ending in August In addition, the Organization is subject to the additional requirements of the HUD Section 202 program. If default occurs, then HUD, at its option, may accelerate the entire principal balance and charge interest. It is the Organization's intent to comply with the program requirements. Based on the time and provision requirements, the advance is recorded as a long-term liability. The capital advance is collateralized by the land and building of the Organization. Note 3 - Green Retrofit Program The Organization received a Green Retrofit Program grant from HUD which is available to properties under Title XII of the American Recovery and Reinvestment Act of 2009, P.L (the "Recovery Act"). The grant provides funds for the cost of improvements and inspections, then any incentives earned, then additional repairs if approved by the secretary. The grant was used to replace windows, doors, floor coverings, interior and exterior lighting, install new ceiling tiles, water savers, refrigerators, HVAC systems, and detectors/alarms, as well as painting and making improvements to elevators. The maximum amount of the grant award is $606,898. The Organization earned grant funds totaling $0 and $81,986 for the years ended June 30, 2013 and 2012, respectively. The grant is not required to be repaid and is considered earned once the funds are received. Note 4 - Related Party Transactions Trustee appointments are approved by Presbyterian Villages of Michigan (PVM), a related not-for-profit organization that is also the HUD-approved management agent. As of June 30, 2013 and 2012, $29,567 and $14,406, respectively, was due to PVM for payment of expenditures and is included in accounts payable. Due to the Green Retrofit Program, PVM Foundation granted the property with a $0 and $15,692 efficiency incentive during the period ended June 30, 2013 and 2012, respectively, which is included with the grant income disclosed in Note 3. In addition, during the years ended June 30, 2013 and 2012, PVM Foundation provided the Organization with $11,643 and $0, respectively, in contribution support through the allocation of funds raised by the Organization and matching grants from the PVM Foundation. 13

18 Notes to Financial Statements June 30, 2013 and 2012 Note 4 - Related Party Transactions (Continued) The property management agreement provides that a management fee in the amount of 6.13 percent of gross rents collected be paid to PVM. In addition, the Organization pays accounting service fees to PVM, which are included in the annual budget. The Organization incurred management fees of $24,480 and $23,868 to PVM for the years ended June 30, 2013 and 2012, respectively. In addition, accounting service fees of $6,120 were also paid to PVM for both years ended June 30, 2013 and Note 5 - Current Vulnerability Due to Certain Concentrations The Organization's sole asset is d/b/a The Village of Holly Woodlands. The Organization's operations are concentrated in the senior housing market. In addition, the Organization operates in a heavily regulated environment. The operations of the Organization are subject to the administrative directives, rules, and regulations of federal, state, and local regulatory agencies, including, but not limited to, HUD. Such administrative directives, rules, and regulations are subject to change by an Act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including additional administrative burden, to comply with a change. Note 6 - Retirement Plans PVM and its affiliates maintain a tax-sheltered retirement plan qualified under Internal Revenue Code Section 403(b). Under this plan, qualified nonunion participants who contribute may receive an employer discretionary match subject to sponsor board approval. The Organization's contributions to the plan for the years ended June 30, 2013 and 2012 totaled $683 and $650, respectively. 14

19 Supplemental Information 15

20 Independent Auditor's Report on Supplemental Information To the Board of Trustees We have audited the financial statements of, Presbyterian Village of Holly Phase II, as of and for the year ended June 30, Our audit was performed for the purpose of forming an opinion on the financial statements of taken as a whole. The accompanying supplemental information, including the schedule of expenditures of federal awards, is presented for the purpose of additional analysis as required by HUD and the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statements. For the purpose of electronic submission to the U.S. Department of Housing and Urban Development, Real Estate Assessment Center (REAC), the supplemental information is also deemed to include the financial data template information as presented in the balance sheet and the statements of activities, changes in deficiency in net assets, and cash flows. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. September 12,

21 Balance Sheet Data June 30, 2013 Assets Current Assets 1120 Cash - Operations $ 32, Tenant accounts receivable Accounts receivable - HUD 1, Prepaid expenses 6, T Total current assets 41,540 Deposits - Held in Trust 1191 Tenant deposits held in trust 21,784 Deposits - Funded 1310 Escrow deposits 60, Replacement reserve 146, Residual receipts reserve 44, T Total deposits - Funded 251,748 Fixed Assets 1410 Land and land improvements 84, Buildings and building improvements 4,126, Building equipment (portable) 220, Furniture for project/tenant use 28, Office furniture and equipment 8, Maintenance equipment 24, Miscellaneous fixed assets 21, T Total fixed assets 4,513, Accumulated depreciation (1,712,734) 1400N Net fixed assets 2,800, T Total assets $ 3,115,725 17

22 Balance Sheet Data (Continued) June 30, 2013 Liabilities and Deficiency in Net Assets Current Liabilities 2110 Accounts payable - Operations $ 29, Accrued wages payable 3, Accrued payroll taxes payable Residual receipts liability 51, T Total current liabilities 84, Tenant deposits held in trust (contra) 16,687 Long-term Liabilities 2310 Capital advance 3,660, T Total liabilities 3,761,967 Deficiency in Net Assets 3131 Deficiency in net assets (646,242) 3130 Total deficiency in net assets (646,242) 2033T Total liabilities and deficiency in net assets $ 3,115,725 18

23 Statement of Activities Data Year Ended June 30, 2013 Rent Revenue 5120 Rent revenue - Gross potential $ 186, Tenant assistance payments 233, T Total rent revenue (potential at 100% occupancy) 420,132 Vacancies 5290 Miscellaneous (51,185) 5200T Total vacancies (51,185) 5152N Net rent revenue (rent revenue less vacancies) 368,947 Financial Revenue 5410 Project operations Investments - Residual receipts Investments - Replacement reserve T Total financial revenue 252 Other Revenue 5910 Laundry and vending revenue 3, Gifts 11, T Total other revenue 14, T Total revenue 383,929 Administrative Expenses 6203 Conventions and meetings Management consultants 15, Advertising and marketing Other renting expenses Office salaries 18, Office expenses 3, Management fee 24, Manager or superintendent salaries 27, Legal expenses Auditing expenses 6, Bookkeeping fees/accounting services 6, Miscellaneous administrative expenses 4, T Total administrative expenses 107,780 19

24 Statement of Activities Data (Continued) Year Ended June 30, 2013 Utilities Expense 6450 Electricity $ 36, Water 53, Gas 19, T Total utilities expense 109,186 Operating and Maintenance Expenses 6510 Payroll 34, Supplies 11, Contracts 39, Garbage and trash removal 3, Snow removal 4, Vehicle and maintenance equipment operation and repairs Miscellaneous operating and maintenance expenses 29, T Total operating and maintenance expenses 124,348 Taxes and Insurance 6711 Payroll taxes (FICA) 7, Property and liability insurance (hazard) 15, Workers' compensation 2, Health insurance and other employee benefits 6, T Total taxes and insurance 31,790 Financial Expenses 6890 Miscellaneous financial expenses T Total financial expenses T Total Costs of Operations Before Depreciation 373, T Change in Net Assets Before Depreciation 10, Depreciation Expense 171, Change in Total Net Assets $ (161,156) 20

25 Statement of Activities Data (Continued) Supplemental Information Year Ended June 30, 2013 S Total principal required under the mortgage, even if payments under a workout agreement are less or more than those required under the mortgage $ 0 S Replacement reserve deposits required by the Regulatory Agreement or amendments thereto, even if payments may be temporarily suspended or waived 14,916 S Replacement reserve or residual receipt releases that are included as expense items on this profit and loss statement 0 S Project improvement reserve releases under the flexible subsidy program that are included as expense items on this profit and loss statement 0 21

26 Statement of Changes in Deficiency in Net Assets Data Year Ended June 30, 2013 S Deficiency in Net Assets - July 1, 2012 $ (485,086) 3250 Increase in deficiency in net assets (161,156) 3130 Deficiency in Net Assets - June 30, 2013 $ (646,242) 22

27 Statement of Cash Flows Data Year Ended June 30, 2013 Cash Flows from Operating Activities Receipts: S Rental $ 416,874 S Interest 252 S Gifts 11,643 S Other cash receipts 3,087 S Total receipts 431,856 Disbursements: S Administrative (185) S Management fee (26,520) S Utilities (109,186) S Salaries and wages (101,033) S Operating and maintenance (89,595) S Property insurance (15,856) S Miscellaneous taxes and insurance (17,349) S Tenant security deposits (4,026) S Miscellaneous financial (109) S Total disbursements (363,859) S Net cash provided by operating activities 67,997 Cash Flows from Investing Activities S Net withdrawal from the mortgage escrow account 3,646 S Net deposit to the reserve for replacement account (15,077) S Net deposit to the residual receipts account (36) S Net purchase of fixed assets (36,787) S Net cash used in investing activities (48,254) S Net Increase in Cash 19,743 S Cash - Beginning of year 13,254 S1200T Cash - End of year $ 32,997 23

28 Statement of Cash Flows Data (Continued) Year Ended June 30, 2013 A reconciliation of change in net assets to net cash from operating activities is as follows: 3250 Change in net assets $ (161,156) Adjustments to reconcile change in net assets to net cash from operating activities: 6600 Depreciation 171,872 Increase in assets: S Tenant accounts receivable (1,590) S Prepaid expenses (1,415) S Cash restricted for tenant security deposits (3,617) Increase (decrease) in liabilities: S Accounts payable - Operations 15,161 S Accrued liabilities 50,819 S Tenant security deposits held in trust (409) S Prepaid revenue (1,668) S Net cash provided by operating activities $ 67,997 24

29 Supplemental Information Year Ended June 30, Schedule of Reserve for Replacements - In accordance with the provisions of the Regulatory Agreement, restricted cash is held by Huntington Bank to be used for replacement of property with the approval of HUD as follows: 1320P Balance - July 1, 2012 $ 131, DT Monthly deposits ($1,243 x 12) 14, INT Interest OWT Bank service charges (3) 1320 Balance - June 30, 2013 $ 146, Schedule of Residual Receipts - In accordance with the provisions of the Regulatory Agreement, surplus cash is calculated per the HUD formula and deposited into the residual receipts account. Restricted cash is held by Huntington Bank to be used for any project purpose with the approval of HUD as follows: 1340P Balance - July 1, 2012 $ 44, INT Interest OWT Bank service charges (4) 1340 Balance - June 30, 2013 $ 44, Computation of Surplus Cash - Form HUD See attached 4. Schedule of Changes in Fixed Asset Accounts - See attached 5. Schedule of 5300 Accounts - N/A 6. Schedule of 6900 Accounts - N/A 7. Nursing Home Data - N/A 25

30 Supplemental Information (Continued) Year Ended June 30, Detail of Accounts 2190 Residual receipts liability $ 51, Dues and subscriptions $ 926 Professional fees 1,000 Mileage reimbursements 880 Bank fees 738 Miscellaneous 1,277 Computer user training Total $ 4, Connectivity $ 13,662 System maintenance, repair, and support 5,378 Minor systems purchases 8,621 Software purchase 2,259 Miscellaneous maintenance Total $ 29, Additional residual receipts deposits $ 51,185 26

31 Schedule of Changes in Fixed Asset Accounts Year Ended June 30, 2013 Assets Balance July 1, 2012 Additions Deductions Balance June 30, 2013 Balance July 1, 2012 Accumulated Depreciation Current Provision Deductions Balance June 30, 2013 Net Book Value June 30, Land and land improvements $ 78,828 $ 5,500 $ - $ 84,328 $ 5,356 $ 2,058 $ - $ 7,414 $ 76, Buildings and building improvements 4,106,420 19,647-4,126,067 1,429, ,847-1,571,623 2,554, Building equipment (portable) 220, ,145 46,265 21,949-68, , Furniture for project/tenant use 17,314 11,640-28,954 17, ,022 10, Office furniture and equipment 8, ,104 8, , Maintenance equipment 24, ,496 19,768 1,329-21,097 3, Miscellaneous fixed assets 21, ,293 14,279 3,981-18,260 3,033 Total $ 4,476,600 $ 36,787 $ - $ 4,513,387 $ 1,540,862 $ 171,872 $ - $ 1,712,734 $ 2,800,653 Fixed Asset Addition Detail: Land and land improvements - Asphalt $ 5,500 Buildings and building improvements: Flooring 10,055 Three metal doors 9,592 Furniture for project/tenant use: Dining room chairs 9,113 TVs and mounts 2,527 Total $ 36,787 27

32 Schedule of Expenditures of Federal Awards Year Ended June 30, 2013 Federal Agency/Pass-through Agency/Program Title CFDA Number Federal Expenditures U.S. Department of Housing and Urban Development: Supportive Housing for the Elderly - Capital Advance $ 3,660,900 Supportive Housing for the Elderly - Project Rental Assistance ,169 Total federal awards $ 3,894,069 28

33 Computation of Surplus Cash Year Ended June 30, 2013 S Cash $ 54, Accounts Receivable - HUD 1,348 S Total Cash 56,129 Current Obligations S Accounts Payable - 30 Days 29,567 S Accrued Expenses (Not Escrowed) 3, Tenant/Patient Deposits Held In Trust (Contra) 16,687 S Total Current Obligations 49,882 S Surplus Cash (Deficiency) $ 6,247 S Deposit Due Residual Receipts $ 6,247 29

34 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 30

35 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 To Management and the Board of Trustees 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, which comprise the balance sheet as of June 30, 2013 and the related statements of activities, changes in deficiency in net assets, and cash flows for the year then ended, and related notes to the financial statements and have issued our report thereon dated September 12, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Presbyterian Village of Holly Phase II ' internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 31

36 To Management and the Board of Trustees Compliance and Other Matters As part of obtaining reasonable assurance about whether ' 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. Southfield, Michigan September 12,

37 Report on CompWooliance for the Major Federal Program; Report on Internal Control Over Compliance 33

38 Report on Compliance for the Major Federal Program; Report on Internal Control Over Compliance Independent Auditor's Report To the Board of Trustees Report on Compliance for the Major Federal Program We have audited ' compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on its major federal program for the year ended June 30, ' major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal program. Auditor's Responsibility Our responsibility is to express an opinion on compliance for Presbyterian Village of Holly Phase II ' major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Presbyterian Village of Holly Phase II ' compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. 34

39 To the Board of Trustees We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of ' compliance. Opinion on the Major Federal Program In our opinion, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, Report on Internal Control Over Compliance Management of is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered d/b/a The Village of Holly Woodlands' internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected and corrected on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 35

40 To the Board of Trustees The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Southfield, Michigan September 12,

41 Schedule of Findings and Questioned Costs 37

42 Schedule of Findings and Questioned Costs Year Ended June 30, 2013 Section I - Summary of Auditor's Results Financial Statements Type of auditor's report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weaknesses? Yes X No Noncompliance material to financial statements noted? Yes X None reported Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weaknesses? Yes X None reported Type of auditor's report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Yes X No Identification of major program: CFDA Numbers Name of Federal Program or Cluster Opinion Supportive Housing for the Elderly Unqualified Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? X Yes No 38

43 Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2013 Section II - Financial Statement Audit Findings Reference Number Current Year: Reference Number Prior Year: None None Finding Finding Questioned Costs Questioned Costs Section III - Federal Program Audit Findings Reference Number Current Year: Reference Number Prior Year: None None Finding Finding Questioned Costs Questioned Costs 39