THE HOUSING AUTHORITY OF THE CITY OF JASPER JASPER, ALABAMA REPORT ON EXAMINATION OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Transcription

1 THE HOUSING AUTHORITY OF THE CITY OF JASPER JASPER, ALABAMA REPORT ON EXAMINATION OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA YEAR ENDED JUNE 30, 2017

2 THE HOUSING AUTHORITY OF THE CITY OF JASPER JASPER, ALABAMA TABLE OF CONTENTS Page Independent Auditors Report 1-6 Management s Discussion & Analysis (MD&A) 7-12 FINANCIAL STATEMENTS: Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position 15 Statement of Cash Flows 16 Notes to Financial Statements SUPPLEMENTARY DATA: Statement and Certification of Program Costs Capital Fund Program 26 Schedule of Expenditures of Federal Awards 27 Financial Data Schedule SCHEDULE OF FINDINGS AND QUESTIONED COSTS 33-34

3 INDEPENDENT AUDITORS' REPORT Board of Commissioners The Housing Authority of the City of Jasper Jasper, Alabama Report on the Financial Statements We have audited the accompanying financial statements of The Housing Authority of the City of Jasper, Alabama as of and for the year ended June 30, 2017, and the related notes to the financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Authority 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 Authority 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Authority as of June 30, 2017, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Aprio, LLP 5501 Highway 280, Suite 200, Birmingham, Alabama Aprio.com Independently Owned and Operated Member of Morison KSi

4 Other Matters Accounting principles generally accepted in the United States of America require that Management s Discussion and Analysis on pages 7 through 12 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was performed for the purpose of forming an opinion on the financial statements that collectively comprise the Authority s basic financial statements. Supplementary data is presented for purposes of additional analysis and is not a required part of the basic financial statements. The accompanying Financial Data Schedule is presented for the Department of Housing and Urban Development s information, and is not a required part of the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is not a required part of the basic financial statements. The Financial Data Schedule, the Schedule of Expenditures of Federal Awards and other supplementary data are the responsibility of management and were derived from and relate directly to the underlying accounting data 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 data 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 5, 2018 on our consideration of the Authority s internal control over financial reporting and 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 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 and should be considered in assessing the results of our audit. Birmingham, Alabama January 5, 2018

5 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Commissioners The Housing Authority of the City of Jasper Jasper, Alabama 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 the Authority, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements, and have issued our report thereon dated January 5, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Authority'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 Authority s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority 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 Authority 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 weakness may exist that have not been identified Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority's financial statements are free of 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. Aprio, LLP 5501 Highway 280, Suite 200, Birmingham, Alabama Aprio.com Independently Owned and Operated Member of Morison KSi

6 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 Authority 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 Authority s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Birmingham, Alabama January 5, 2018

7 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Commissioners The Housing Authority of the City of Jasper Jasper, Alabama Report on Compliance for Each Major Federal Program We have audited the Authority s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Authority s major federal program for the year ended June 30, The Authority s major federal program is identified in the Summary of Auditors 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 programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for the Authority s 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 the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 the Authority 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 the major federal programs. However, our audit does not provide a legal determination of Authority s compliance. Opinion on the Major Program In our opinion, the Authority complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, Aprio, LLP 5501 Highway 280, Suite 200, Birmingham, Alabama Aprio.com Independently Owned and Operated Member of Morison KSi

8 Report on Internal Control Over Compliance Management of the Authority 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 the Authority s internal control over compliance with the types of requirements that could have a direct and material effect on the major 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 the Uniform Guidance, 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 Authority 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 combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a 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. 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 our testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Birmingham, Alabama January 5, 2018

9 THE HOUSING AUTHORITY OF THE CITY OF JASPER JASPER, ALABAMA MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 This section of the Authority s annual financial report presents Management s analysis of the Authority s financial performance during the Fiscal Year Ended June 30, The operation of the Housing Authority of the City of Jasper is comprised of a Low Income Public Housing Program including a Capital Fund Program, a Housing Choice Voucher Program and a Section 8 New Construction Program funded through the Housing Assistance Corporation of Jasper, Alabama (a blended component unit of the Authority). The Public Housing Program and Section 8 New Construction Program are funded with rental revenue, miscellaneous tenant charges and Department of Housing and Urban Development (HUD) grants. The Housing Choice Voucher is funded entirely by grants from HUD. FINANCIAL HIGHLIGHTS 1. Total assets exceed total liabilities by $10,462, Unrestricted net position equals 1,024, Total net position decreased by 289,670 REQUIRED FINANCIAL STATEMENTS The Financial Statements of the Authority report information using the Enterprise Fund accounting method:. Statement of Net Position includes all of the Authority s assets and liabilities. It also provides a basis for assessing the liquidity and financial flexibility of the Authority. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial health of the Authority is improving or deteriorating. This statement was formerly known as a Balance Sheet.. Statement of Revenues, Expenses and Changes in Net Position - provides current year revenues over expenses. This statement was formerly known as an Income Statement.. Statement of Cash Flows provides information about net cash provided by, or used for operating activities, capital and related financing activities and investing activities

10 FINANCIAL ANALYSIS CONDENSED STATEMENT OF NET POSITION Variance Assets: Current & Restricted Assets $ 1,527,638 $ 1,390,559 $ 137,079 Capital Assets 9,841,260 10,355,454 (514,194) Other Assets - Total Assets $ 11,368,898 $ 11,746,013 $ (377,115) Liabilities: Current Liabilities $ 337,507 $ 335,320 $ 2,187 Non-Current Liabilities 568, ,254 (89,632) Total Liabilities $ 906,129 $ 993,574 $ (87,445) Net Position: Net Investment in Capital Assets $ 9,206,260 $ 9,645,454 $ (439,194) Restricted Net Position 232,016 81, ,076 Unrestricted Net Position 1,024,493 1,025,045 (552) Total Net Position $ 10,462,769 $ 10,752,439 $ (289,670) As illustrated, in the Condensed Statement of Net Position, the overall net position of the Authority decreased by $289,670. Current and restricted assets increased primarily due to an increase in cash restricted for debt service and future housing assistance payments. Capital assets decreased due to depreciation exceeding capital additions. Non-current liabilities decreased due to debt principal payments made during the fiscal year. Restricted net position increased due to an increase in cash restricted for debt service and future housing assistance payments

11 FINANCIAL ANALYSIS (continued) CHANGE IN UNRESTRICTED NET POSITION Unrestricted Net Position, June 30, 2016 $ 1,025,045 Results of Operations (403,213) Investment Income 2,190 Interest Expense (33,289) Depreciation 583,836 Change in Restricted Net Position (150,076) Unrestricted Net Position, June 30, 2017 $ 1,024,493 While the results of operations are a significant measure of the Authority s activities, the analysis of the changes in Unrestricted Net Position provides a clearer change in financial well-being

12 FINANCIAL ANALYSIS (continued) SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION Variance Revenues: Tenant Revenue $ 743,501 $ 713,994 $ 29,507 Operating Grants 2,235,565 1,949, ,213 Capital Grants 144, ,156 26,486 Investment Income 2,190 2, Other Revenue 11,568 21,809 (10,241) Total Revenues $ 3,137,466 $ 2,805,362 $ 332,104 Expenses: Administrative Expenses $ 457,751 $ 492,401 $ (34,650) Tenant Services 70,238 60,251 9,987 Utilities 341, ,636 13,451 Maintenance & Operations 868, ,599 (32,024) General Expense 215, ,698 6,951 Housing Assistance Payments 856, , ,362 Interest Expense 33,289 36,595 (3,306) Depreciation 583, ,036 1,800 Total Expenses $ 3,427,136 $ 3,351,565 $ 75,571 Excess (Deficiency) Revenues Over Expenses $ (289,670) $ (546,203) $ 256,533 REVENUES In reviewing the Schedule of Revenues, Expenses and Changes in Net Position, you will find that 76% of the Authority s revenue is derived from grants from the HUD, almost 24% of the Authority s revenue is from dwelling rent and less than 1% from Investment and other income. EXPENSES Over 13% of the Authority s expenses are administrative, 25% are for maintenance, 10% for utilities, 25% for housing assistance payments, 17% for depreciation, 1% for interest expense, and less than 9% for tenant services and general expenses. SIGNIFICANT VARIANCES Operating grants increased due mainly to an increase in subsidies recognized in the Section 8 Housing Choice Voucher program to fund housing assistance payments. Housing assistance payments expense increased due to increased leasing and payment standards

13 FINANCIAL ANALYSIS (continued) CAPITAL ASSETS As of year-end, the Authority had $9,841,260 invested in a variety of capital assets as reflected in the following schedule, which represents a decrease of 5% from the end of last year Variance % Change Land $ 230,268 $ 230,268 $ - 0% Buildings 23,212,620 23,077, ,157 1% Furniture & Equipment 1,740,922 1,740,922-0% Construction in Process 285, ,808 (65,515) -19% Accumulated Depreciation (15,627,843) (15,044,007) (583,836) 4% Net Capital Assets $ 9,841,260 $ 10,355,454 $ (514,194) -5% The following reconciliation summarizes the change in Capital Assets: Beginning Balance, July 1, 2016 $ 10,355,454 Additions: Capital Fund Program - Improvements 69,642 Depreciation Expense (583,836) Ending Balance, June 30, 2017 $ 9,841,260 DEBT OUTSTANDING As of year-end, the Authority had $635,000 in debt outstanding compared to $710,000 last year, a decrease of $75,000. The Housing Authority debt consists of bond issue obligations which were issued through the Public Finance Corporation. These proceeds were used for renovation and construction projects. Outstanding Debt, at Year-End Variance Long Term Debt Capital Projects Revenue Bonds $ 635,000 $ 710,000 $ 75,000 Total Long Term Debt $ 635,000 $ 710,000 $ 75,

14 FINANCIAL ANALYSIS (continued) ECONOMIC FACTORS AND EVENTS AFFECTING OPERATIONS Several factors that may affect the financial position of the Authority in the subsequent fiscal year are as follows: Federal funding provided by Congress to the Department of Housing and Urban Development Local labor supply and demand, which can affect salary and wage rates Local inflationary, recessionary and employment trends, which can affect resident incomes and therefore the amount of rental income Inflationary pressure on utility rates, supplies and other costs CONCLUSION The Authority s management is committed to staying abreast of regulations and appropriations as well as maintaining an ongoing analysis of all budgets and expenses to ensure that the Authority continues to operate at the highest standards established by the Real Estate Assessment Center and the Department of Housing and Urban Development. CONTACT This financial report is designed to provide our residents, the citizens of the City of Jasper, Alabama, all federal and state regulatory bodies, and any creditors with a general overview of the Authority s finances. If you have any questions regarding these financial statements or supplemental information, you may contact Marla W. Tucker, Executive Director, at 1005 Highway 69 South, Jasper, Alabama

15 THE HOUSING AUTHORITY OF THE CITY OF JASPER STATEMENT OF NET POSITION JUNE 30, 2017 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Enterprise Fund Current Assets Cash and Cash Equivalents $ 1,144,248 Accounts Receivable - Grants 1,950 Tenants Accounts Receivable (Net) 5,666 Investments 72,422 Prepaid Costs 29,333 Inventory, Net of Allowance 42,003 Total Current Assets 1,295,622 Restricted Assets Cash and Cash Equivalents 232,016 Total Restricted Assets 232,016 Capital Assets Land 230,268 Buildings and Improvements 23,212,620 Furniture & Equipment 1,740,922 Construction in Progress 285,293 25,469,103 (Less): Accumulated Depreciation (15,627,843) Net Capital Assets 9,841,260 Total Assets 11,368,898 Deferred Outflows of Resources - Total Assets and Deferred Outflows of Resources $ 11,368,898 See the accompanying notes to financial statements

16 THE HOUSING AUTHORITY OF THE CITY OF JASPER STATEMENT OF NET POSITION JUNE 30, 2017 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Enterprise Fund Current Liabilities Accrued Wages and Payroll Taxes 2,648 Accrued Compensated Absences 17,184 Accrued Interest Payable 17,398 Accounts Payable - Other Government 106,987 Tenant Security Deposits 78,941 Unearned Revenue 34,349 Current Portion of Capital Debt 80,000 Total Current Liabilities 337,507 Long Term Liabilities Long Term Capital Debt 555,000 Accrued Compensated Absences 13,622 Total Long Term Liabilities 568,622 Total Liabilities 906,129 Deferred Inflows of Resources - Total Liabilities and Deferred Inflows of Resources 906,129 Net Position Net Investment in Capital Assets 9,206,260 Restricted Net Position 232,016 Unrestricted Net Position 1,024,493 Total Net Position 10,462,769 Total Liabilities, Deferred Inflows of Resources and Net Position $ 11,368,898 See the accompanying notes to financial statements

17 THE HOUSING AUTHORITY OF THE CITY OF JASPER STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 Enterprise Fund Operating Revenues Tenant Revenue $ 743,501 Operating Grants 2,235,565 Other Revenue 11,568 Total Operating Revenues 2,990,634 Operating Expenses Administrative 457,751 Tenant Services 70,238 Utilities 341,087 Maintenance and Operations 868,575 General Expense 215,649 Housing Assistance Payments 856,711 Depreciation 583,836 Total Operating Expenses 3,393,847 Operating Income (Loss) (403,213) Non-Operating Revenues (Expenses) Investment Income 2,190 Interest Expense (33,289) Total Non-Operating Rev/(Exp) (31,099) Increase (decrease) before Capital Contributions (434,312) Capital Contributions 144,642 Increase (Decrease) in Net Position (289,670) Net Position, Beginning 10,752,439 Net Position, Ending $ 10,462,769 See the accompanying notes to financial statements

18 THE HOUSING AUTHORITY OF THE CITY OF JASPER STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 Enterprise Fund Cash flows from operating activities: Cash Received from Dwelling Rent $ 705,347 Cash Received from Operating Grants 2,233,615 Cash Received from Other Sources 14,418 Cash Payments for Salaries and Benefits (872,334) Cash Payments to Vendors and Landlords (1,865,554) Net cash provided (used) by operating activities 215,492 Cash flows from capital and related financing activities: Capital Grants Received 144,642 Capital Outlay (69,642) Principal and Interest paid on Capital Debt (109,985) Net cash provided (used) by capital & related financing activities (34,985) Cash flows from investing activities: Interest earned from cash and cash equivalents 2,190 Transfer to Investments (62) Net cash provided (used) by investing activities 2,128 Net increase in cash and cash equivalents 182,635 Total cash and cash equivalents, beginning of year 1,193,629 Total cash and cash equivalents, end of year $ 1,376,264 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating Income (Loss) $ (403,213) Adjustment to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 583,836 Bad Debt Expense (Tenants) 38,863 Obsolete Inventory Expense 24,622 Change in Tenant Accounts Receivable (38,154) Change in Accounts Receivable/Payable - Grants (1,950) Change in Other Accounts Receivable 28,406 Change in Prepaid Costs (1,239) Change in Inventory (4,930) Change in Accounts Payable - Operating (3,504) Change in Accrued Expenses (10,095) Change in Security Deposits Held 2,850 Net cash provided (used) by operating activities $ 215,492 See the accompanying notes to financial statements

19 THE HOUSING AUTHORITY OF THE CITY OF JASPER JASPER, ALABAMA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE A - SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Housing Authority have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The Authority is a Special Purpose Government engaged only in business-type activities and therefore, presents only the financial statements required for the enterprise fund, in accordance with GASB Statement 34 paragraph 138 and GASB Statement 63. The Authority has multiple programs which are accounted for in one enterprise fund, which is presented as the Enterprise Fund in the basic financial statements as follows: Cash Enterprise Fund In accordance with the Enterprise Fund Method, activity is recorded using the accrual basis of accounting and the measurement focus is on the flow of economic resources. Under the accrual basis of accounting revenues are recorded when earned and expenses are recorded when are incurred. This required the Housing Authority to account for operations in a manner similar to private business or where the Board has decided that the determination of revenues earned, costs incurred and/or net income is necessary for management accountability. Governmental Accounting Standards The Housing Authority has applied all applicable Governmental Accounting Standards Board pronouncements as well as applicable pronouncements issued by the Financial Accounting Standards Board. The Housing Authority considers cash on hand and cash in checking and money markets to be cash equivalents. Cash on hand is not included in calculation of collateral required. Accounts Receivable Tenant accounts receivables are carried at the amount considered by management to be collectible. Other receivables consist of amounts due from HUD for grants. Prepaid Items Prepaid Items consists of payments made to vendors for services that will benefit future periods. Inventory Inventory consists of supplies that have not been used or consumed. Inventory is valued at lower of cost or market. The inventory is recorded as an expense when it is used or consumed. Inventory of $69,872 is reported net of an allowance for obsolescence of $27,869, in the amount of $42,

20 NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE A - SIGNIFICANT ACCOUNTING POLICIES- CONTINUED Unearned Revenue The Authority recognizes revenues as earned. The amount received in advance of the period in which it is earned is recorded as a liability under unearned revenue. Unearned revenue of $34,349 consists of unexpended grant proceeds. Revenue Accounting Policies Dwelling rent income, HUD grants recognized for operations, and other miscellaneous income are reported as operating income. HUD grants received to fund capital asset expenditures and all other revenue is reported as non-operating revenue. These financial statements do not contain material inter-program revenues and expenses for internal activity. The policy is to eliminate any material inter-program revenues and expenses for these financial statements. Capital Assets Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The costs of maintenance and repairs are expensed, while significant renewals and betterments are capitalized. Small dollar value minor equipment items are expensed. Depreciation on assets has been expensed in the Statement of Revenues, Expenses and Changes in Net Position. Estimated useful lives are as follows: Buildings Improvements Furniture and equipment 40 years 25 years 5-10 years Authority management has assessed the carrying values of capital asset balances as of June 30, 2017, and as of January 5, No significant capital asset value impairments exist as of the noted dates. Accounts Payable Other Government The Authority has entered into a Payment-in-Lieu of Taxes (PILOT) Agreement with the City of Jasper whereby the Authority agrees to pay a negotiated sum in lieu of real property taxes. Fiscal year 2017 PILOT expense was $31,264. Deferred Outflows and Inflows of Resources A Deferred Outflow of Resources is a consumption of assets by the Authority that is applicable to a future reporting period. Conversely, a Deferred Inflow of Resources is an acquisition of assets by the Authority that is applicable to a future reporting period. Cost Allocation Plan The Authority utilizes a Cost Allocation Plan. The Authority allocates indirect costs to programs on the basis of one of the following methods: direct salaries and wages, percentage of office square footage, number of vouchers and/or units, estimated/actual time spent, number of checks processed or the allotment stipulated in contractual agreements

21 NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE B - REPORTING ENTITY DEFINITION The Housing Authority is a separate non-profit corporation with a Board of Commissioners. The applicable jurisdictions appoint the Board of Commissioners. However, the Housing Authority has complete legislative and administrative authority and it recruits and employs personnel. The Authority adopts a budget that is approved by the Board of Commissioners. Subsidies for operations are received primarily from HUD. The Authority has substantial legal authority to control its affairs without local government approval; therefore, all operations of the Authority are a separate reporting entity as reflected in this report. The Authority is responsible for its debts and is entitled to surpluses. In determining how to define the reporting entity, management has considered all potential component units. The decision to include a component unit in the reporting entity was made by applying the criteria set forth in Section 2100 and 2600 of the Codification of Governmental Accounting and Financial Reporting Standards, Statement No. 14 (amended), of the Governmental Accounting Standards Board: The Financial Reporting Entity, Statement No. 39: Determining Whether Certain Organizations are Component Units, and Statement No. 61: The Financial Reporting Entity: Omnibus. These criteria include manifestation of oversight responsibility including financial accountability, appointment of a voting majority, imposition of will, financial benefit to or burden on a primary organization, financial accountability as a result of fiscal dependency, potential for dual inclusion, and organizations included in the reporting entity although the primary organization is not financially accountable. Based upon the application of these criteria, the reporting entity includes the following blended component unit: Housing Assistance Corporation of Jasper, Alabama (the Corporation) is an Alabama not for profit Corporation under Section 115 of the Internal Revenue Code of 1986, and is exempt from federal income tax. The Corporation is organized and is operated exclusively as a subsidiary of The Housing Authority of the City of Jasper, Alabama. The Corporation was developed for the purpose of building low-income housing and owns a low-moderate income apartment complex known as East Elderly Village Apartments. The organization s fiscal year end is June 30. The Corporation does not issue stand-alone financial statements. The Corporation has the same governing body as the Authority and is therefore reported in the Authority s financial statements as a blended component unit

22 NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE C - CASH AND INVESTMENT DEPOSITS Custodial Credit Risk The Authority s policy is to limit credit risk by adherence to the list of HUDpermitted investments, which are backed by the full faith and credit of, or a guarantee of principal and interest by the U.S. Government. Interest Rate Risk The Authority s formal investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from interest rate volatility. HUD requires housing authorities to invest excess funds in obligations of the U.S., certificates of deposit or any other federally-insured investments. The Housing Authority s cash and cash equivalents consist of cash held in interest bearing checking and market accounts totaling $1,221,491 and $154,643 held in U.S. Treasury Money Market Funds. The U.S. Treasury Money Market Funds are invested in a dollar for dollar fund invested only in short term U.S. Treasury Obligations. The fund seeks to maximize current income, preserve capital and maintain liquidity. Investments consist of certificates of deposit totaling $72,422. The certificates of deposit bear interest ranging from.10% to 1.00% and have various maturity periods, with penalties for early withdrawal. Any penalties for early withdrawal would not have a material effect on the financial statements. The remaining $130 is held in the form of petty cash or a change fund. Deposits with financial institutions are secured as follows: Book Balance Bank Balance Insured by FDIC $ 511,062 $ 511,062 Investments held in U.S. Treasury Obligations 154, ,643 Collateralized with specific securities in the Authority name which are held by the financial institution 782, ,671 Uncollateralized $ 1,448,556 $ 1,457,376 All investments are carried at cost plus accrued interest, which approximates market. The Authority had no realized gains or losses on the sale of investments. The calculation of realized gains or losses is independent of a calculation of the net change in the fair value of investments. NOTE D - CONTRACTUAL COMMITMENTS The Authority did not have any significant outstanding contractual commitments as of the Statement of Net Position Date. NOTE E SIGNIFICANT ESTIMATES These financial statements are prepared in accordance with generally accepted accounting principles. The financial statements include some amounts that are based on management s best estimates and judgments. The most significant estimates relate to depreciation and useful lives, and inventory valuation. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant

23 NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE F - PENSION PLAN The Authority provides pension benefits for all of its full-time employees through a defined contribution plan entitled The Housing Authority of the City of Jasper Retirement Plan, which is administered by the Matrix Trust Company. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. Employees are eligible to participate six months after the date of employment. The Authority contributes approximately 14.7% of eligible employees compensation, while the employees have no required contribution. The Authority s contributions for each employee (and interest allocated to the employee s account) are fully vested after five years of continuous service. Authority contributions for, and interest forfeited by, employees who leave employment before vesting are used to reduce the Authority s current-period contribution requirement. The Authority made the required contributions in the amount of $82,975 for the 2017 fiscal year. NOTE G - COMPENSATED ABSENCES It is the Housing Authority s policy to permit employees to accumulate a limited amount of earned annual leave. The Authority accrues a liability for absences which the employee has earned the rights to. Accrued amounts are based on the current salary rates. Full-time, permanent employees are granted leave benefits in varying amounts to specified maximums depending on tenure with the Authority. Earned leave benefits are recorded as an expense and related liability in the year earned by employees. Leave accrued but not yet paid as of the end of the fiscal year, is reported as a liability in the Statement of Net Position. The amount estimated to be paid out in the subsequent year is reported as a current liability, the balance is reported as a long-term liability. NOTE H - CAPITAL DEBT AND OTHER NON-CURRENT LIABILITIES BONDS PAYABLE The Housing Authority pledged a portion of its annual Capital Fund Grant from HUD to secure the Authority s allocable portion of Bonds issued jointly by the Authority and other participating Alabama housing authorities. The Authority s allocable share of the net proceeds, $1,415,000 was used to acquire, construct, equip, renovate and improve public housing developments owned and operated by the Authority for rental to and occupancy by qualified tenants under the applicable HUD rules and regulations. The Bonds are designated Capital Fund Program Revenue Bonds, Series The entire proceeds of $1,415,000 were deposited with the Trustee, Bank of New York Trust Company, which was authorized and directed to apply and disburse such monies for the purposes and in the order specified in the Master - Trust Indenture. The Bonds bear interest at a rate not to exceed six percent and are paid semi-annually. Interest charged to expense during the year was $33,289. The outstanding principal balance as of June 30, 2017 was $635,000. Future projected debt service obligations are as follows: Fiscal Year Principal Interest Balance Due ,000 29,814 $ 555, ,000 26, , ,000 22, , ,000 18, , ,000 14, , ,000 12,943 - Total Payments $ 635,000 $ 125,

24 NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE H - CAPITAL DEBT AND OTHER NON-CURRENT LIABILITIES - CONTINUED A summary of long-term liability activity for fiscal year 2017 is as follows: Balance Balance Due Within July 1, 2016 Increases Decreases June 30, 2017 One Year Bonds Payable $ 710,000 $ - $ 75,000 $ 635,000 $ 80,000 Accrued Compensated Absences 38,905 17,184 25,283 30,806 17,184 Less: Current Portion (90,651) (97,184) Total Long-Term Liabilities $ 658,254 $ 568,622 $ 97,184 NOTE I - RESTRICTED CASH AND NET POSITION Restricted cash and net position consists of the following: Debt Service Reserves $ 154,643 Held for Future Housing Assistance Payments 77,373 Total Restricted Assets $ 232,016 The restricted Debt Service Reserves are restricted by the bond covenants for future debt service. Excess housing assistance payment (HAP) funds available to the Authority under the Section 8 Housing Choice Voucher program are required by HUD to be restricted. These funds are to be used only for HAP expenditures of the program. NOTE J - RISK MANAGEMENT The Housing Authority is exposed to various risks of losses related to torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Housing Authority carries commercial insurance for all risks of loss, including workman s compensation and employee health and accident insurance. The Housing Authority has not had any significant reductions in insurance coverage or any claims not reimbursed

25 NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE K - CAPITAL ASSETS A summary of capital assets at June 30, 2017 is as follows: PUBLIC HOUSING HOUSING CHOICE COMPONENT and CFP VOUCHER UNIT TOTAL Land $ 164,798 $ - $ 65,470 $ 230,268 Building and Improvements 21,541,748-1,670,872 23,212,620 Furniture and Equipment 1,644,824 36,500 59,598 1,740,922 Construction in Process 285, ,293 Less Accumulated Depreciation (13,795,403) (36,500) (1,795,940) (15,627,843) Total Property and Equipment $ 9,841,260 $ - $ - $ 9,841,260 A summary of capital asset activity for fiscal year 2017 is as follows: Balance Transfers & Balance July 1, 2016 Additions Deletions June 30, 2017 Land $ 230,268 $ - $ - $ 230,268 Construction in Process 350,808 69,642 (135,157) 285,293 Total Assets not being depreciated 581,076 69,642 (135,157) 515,561 Buildings and Improvements 23,077, ,157 23,212,620 Furniture and Equipment 1,740,922 1,740,922 Total Property and Equipment 25,399,461 69,642-25,469,103 Less Accumulated Depreciation: Buildings & Improvements (13,585,003) (569,352) - (14,154,355) Furniture & Equipment (1,459,004) (14,484) - (1,473,488) Net Book Value $ 10,355,454 $ (514,194) $ - $ 9,841,

26 NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE L - CONCENTRATION OF RISK The Housing Authority receives most of its funding from HUD. These funds and grants are subject to modification by HUD depending on the availability of funding. NOTE M - COMMITMENTS AND CONTINGENCIES Amounts received or receivable from HUD are subject to audit and adjustment by grantor agencies. If expenses are disallowed as a result of these audits, the claims for reimbursement to the grantor agency would become a liability of the Authority. In the opinion of management, any such adjustments would not be significant. NOTE N - SUBSEQUENT EVENTS In preparing financial statements, management evaluated subsequent events through January 5, 2018, the date the financial statements were issued

27 NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE O - HOUSING ASSISTANCE CORPORATION OF JASPER, ALABAMA Condensed Statement of Net Position Assets Current assets $ 597,028 Total assets 597,028 Liabilities Current liabilities 13,324 Total liabilities 13,324 Net position Unrestricted net position 583,704 Total net position $ 583,704 Condensed Statement of Revenues, Expenses and Changes in Net Position Revenues Tenant and other revenue $ 111,924 Operating subsidy (HUD) 148,963 Investment income 567 Total revenues 261,454 Expenses Administrative and general expenses 129,611 Maintenance and utilities 126,111 Total expenses 255,722 Increase in net position 5,732 Beginning net position 577,972 Ending net position $ 583,704 Condensed Statement of Cash Flows Cash flows from operating activities $ 1,706 Cash flows from investing activities 567 Net increase in cash and equivalents 2,273 Beginning current and restricted cash 573,113 Ending cash $ 575,

28 THE HOUSING AUTHORITY OF THE CITY OF JASPER STATEMENT AND CERTIFICATION OF PROGRAM COSTS - CAPITAL FUND PROGRAM FOR THE YEAR ENDED JUNE 30, 2017 Capital Fund Program AL09P Funds Approved $ 310,446 Funds Expended 310,446 Excess of Funds Approved $ - Funds Advanced $ 310,446 Funds Expended 310,446 Excess of Funds Advanced $ - 1. The distribution of costs as shown on the Actual Modernization Cost Certificate submitted to HUD for approval is in agreement with the Housing Authority's records. 2. All Modernization costs have been paid and all related liabilities have been discharged through payment

29 THE HOUSING AUTHORITY OF THE CITY OF JASPER JASPER, ALABAMA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 EXPENDITURES Section 8 - New Construction Program (Passed through Jefferson County, Alabama) Total CFDA Number $ 148,963 Public Housing Program Total CFDA Number a 898,721 Section 8 Housing Choice Voucher Program Total CFDA Number ,063,020 Public Housing Capital Fund Program Total CFDA Number ,503 TOTAL HUD EXPENDITURES 2,380,207 TOTAL FEDERAL EXPENDITURES $ 2,380,207 NOTE 1 BASIS OF PRESENATION The above Schedule of Expenditures of Federal Awards includes the federal award activity of the Authority under programs of the federal government for the year ended June 30, The information on this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Because the Schedule presents only a selected portion of operations of the Authority, it is not intended to and does not present the financial net position, changes in net position, or cash flows of the Authority. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowed or are limited as to reimbursement. NOTE 3 INDIRECT COST RATE The Authority has elected not to use the 10% De Minimus Indirect Cost Rate allowed under the Uniform Guidance

30 Housing Authority of the City of Jasper (AL012) JASPER, AL Entity Wide Balance Sheet Summary Fiscal Year End: 06/30/2017 Project Total Housing Choice Vouchers N/C S/R Section 8 Programs ELIM Total Enterprise Fund 111 Cash - Unrestricted $ 314,816 $ 188,429 $ 562,062 $ - $ 1,065, Cash - Restricted - Modernization and Development Cash - Other Restricted 154,643 77, , Cash - Tenant Security Deposits 65,617-13,324-78, Cash - Restricted for Payment of Current Liabilities Total Cash $ 535,076 $ 265,802 $ 575,386 $ - $ 1,376, Accounts Receivable - PHA Projects Accounts Receivable - HUD Other Projects 1,950-1, Accounts Receivable - Other Government Accounts Receivable - Miscellaneous Accounts Receivable - Tenants 4,903-1,743-6, Allowance for Doubtful Accounts -Tenants (980) - (980) Allowance for Doubtful Accounts - Other Notes, Loans, & Mortgages Receivable - Current Fraud Recovery Allowance for Doubtful Accounts - Fraud Accrued Interest Receivable Total Receivables, Net of Allowances for Doubtful Accounts $ 5,873 $ - $ 1,743 $ - $ 7, Investments - Unrestricted 61,360 11, , Investments - Restricted Investments - Restricted for Payment of Current Liability Prepaid Expenses and Other Assets 9,434-19,899-29, Inventories 69,872-69, Allowance for Obsolete Inventories (27,869) - (27,869) 144 Inter Program Due From Assets Held for Sale Total Current Assets $ 653,746 $ 276,864 $ 597,028 $ - $ 1,527, Land 164,798-65, , Buildings 18,191,052-1,670,872-19,861, Furniture, Equipment & Machinery - Dwellings 544,245-59, , Furniture, Equipment & Machinery - Administration 1,100,579 36, ,137, Leasehold Improvements 3,350,696-3,350, Accumulated Depreciation (13,795,403) (36,500) (1,795,940) - (15,627,843) 167 Construction in Progress 285, , Infrastructure Total Capital Assets, Net of Accumulated Depreciation $ 9,841,260 $ - $ - $ - $ 9,841, Notes, Loans and Mortgages Receivable - Non-Current Notes, Loans, & Mortgages Receivable - Non Current - Past Due Grants Receivable - Non Current Other Assets Investments in Joint Ventures Total Non-Current Assets $ 9,841,260 $ - $ - $ - $ 9,841, Deferred Outflow of Resources $ - $ - $ - $ - $ Total Assets and Deferred Outflow of Resources $ 10,495,006 $ 276,864 $ 597,028 $ - $ 11,368,