THE HOUSING AUTHORITY OF THE CITY OF MONROEVILLE, ALABAMA

Transcription

1 THE HOUSING AUTHORITY OF THE CITY OF MONROEVILLE, ALABAMA LeCroy, Hunter & Company, P.C. Certified Public Accountants Northport, Alabama

2 TABLE OF CONTENTS DESCRIPTION PAGE NO. Independent Auditor's Report. 1-3 Report on Compliance and Internal Control Financial Statements: Management s Discussion and Analysis Statement of Net Position as of June 30, Statement of Revenues, Expenses and Changes in Net Position for the year ended June 30, Statement of Cash Flows for the Year Ended June 30, Notes to Financial Statements Federal Financial Assistance: Report on Compliance and Internal Control in Accordance with Uniform Guidance Schedule of Expenditures of Federal Awards. 37 Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Question Costs Schedule of Prior Audit Findings Corrective Action Plan 42 Supplementary Information: Budgetary Comparison Schedule Conventional Program for the year ended June 30, Note to Required Supplementary Information Schedule of Changes in the Net Pension Liability as of June 30, Schedule of Pension Contributions. 46 Modernization Cost Certificate Complete as of June 30, Modernization Cost Certificate Incomplete as of June 30, Financial Data Schedule for the year ended June 30,

3 LeCroy, Hunter & Company, P.C. CERTIFIED PUBLIC ACCOUNTANTS 5710 WATERMELON ROAD, SUITE 400 NORTHPORT, ALABAMA P.O. BOX 462 NORTHPORT, AL (205) FAX: (205) RICHARD D. LECROY, C.P.A. MEMBERS KELLIE HUNTER-SUTE, C.P.A. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS MATTHEW W. RICHARDSON, C.P.A R. COURTNEY LECROY, C.P.A. ALABAMA SOCIETY OF CERTIFIED W. RYAN ALEXANDER, C.P.A. PUBLIC ACCOUNTANTS Independent Auditor's Report Board of Commissioners HUD/Office of Inspector General The Housing Authority of the National Review Center for City of Monroeville, Alabama Non-Federal Audits P.O. Box Beacon Ridge Parkway West Monroeville, AL Birmingham, AL We have audited the accompanying financial statements of the business-type activities of The Housing Authority of the City of Monroeville, Alabama, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. -1-

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, of The Housing Authority of the City of Monroeville, Alabama, as of June 30, 2016, 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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information and schedule of changes in the net pension liability and contribution on pages 6 10, 43 and 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 conducted for the purpose of forming opinions on the financial statements that collectively comprise The Housing Authority of the City of Monroeville, Alabama s, basic financial statements. The accompanying Schedule of Completed Capital Fund Programs, Financial Data Schedule and Schedule of Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the Guide for Audits of HUD Programs are presented for purposes of additional analysis, and are not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards, Schedule of Completed Capital Fund Programs and Financial Data Schedule are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards, Schedule of Completed Capital Fund Programs and Financial Data Schedule are fairly stated in all material respects, in relation to the financial statements as a whole. -2-

5 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 28, 2016 on our consideration of the Authority s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority s internal control over financial reporting and compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority s internal control over financial reporting and compliance. LeCroy, Hunter & Company, P.C. LeCroy, Hunter & Co., P.C. Certified Public Accountants Northport, Alabama November 28,

6 LeCroy, Hunter & Company, P.C. CERTIFIED PUBLIC ACCOUNTANTS 5710 WATERMELON ROAD, SUITE 400 NORTHPORT, ALABAMA P.O. BOX 462 NORTHPORT, AL (205) FAX: (205) RICHARD D. LECROY, C.P.A. MEMBERS KELLIE HUNTER-SUTE, C.P.A. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS MATTHEW W. RICHARDSON, C.P.A R. COURTNEY LECROY, C.P.A. ALABAMA SOCIETY OF CERTIFIED W. RYAN ALEXANDER, C.P.A. PUBLIC ACCOUNTANTS 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 HUD/Office of Inspector General The Housing Authority of the National Review Center for City of Monroeville, Alabama Non-Federal Audits P.O. Box Beacon Ridge Parkway West Monroeville, AL Birmingham, AL 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 business-type activities of The Housing Authority of the City of Monroeville, Alabama, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise The Housing Authority of the City of Monroeville, Alabama s basic financial statements, and have issued our report thereon dated November 28, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered The Housing Authority of the City of Monroeville, Alabama 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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of The Housing Authority of the City of Monroeville, Alabama s internal control. Accordingly, we do not express an opinion on the effectiveness of The Housing Authority of the City of Monroeville, Alabama 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs that we consider to be a material weaknesses. See finding

7 Compliance and Other Matters As part of obtaining reasonable assurance about whether The Housing Authority of the City of Monroeville, Alabama s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Response to Findings The Housing Authority of the City of Monroeville, Alabama s response to the finding identified in our audit is described in the accompanying Corrective Action Plan. The Authority s response was not subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we express no opinion on it. 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. LeCroy, Hunter & Company, P.C. LeCroy, Hunter & Co., P.C. Certified Public Accountants November 28,

8 MANAGEMENT DISCUSSION & ANALYSIS

9 MANAGEMENT DISCUSSION AND ANALYSIS 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 Monroeville Housing Authority is comprised into two divisions, Public Housing and Housing Choice Vouchers. Public housing is funded with rental revenue, miscellaneous tenant charges and contributions from HUD. Housing Choice Vouchers is funded entirely with contributions from HUD. FINANCIAL HIGHLIGHTS 1. Total assets exceed total liabilities by $1,924, Unrestricted Net Position deficit ($165,474) 3. Investments increased $766 REQUIRED FINANCIAL STATEMENTS The Financial Statements of the Authority report information using the Enterprise Fund accounting methods: Statement of Net Position includes all of the Authority s assets and liabilities and provides information about the amounts and investments in assets and the obligations to Authority creditors. It also provides a basis of 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 the Balance Sheet. Statement of Revenues, Expenses and Net Position provides information as to the increase or decrease of current year revenue over expenses. This statement was formerly known as the Income Statement. Statement of Cash Flows provides information about the Authority s cash receipts and disbursements during the reporting period. The statement reports net changes in cash resulting from operations, financing and investing

10 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL ANALYSIS Statement of Net Position Variance % Change Assets: Current Assets $ 177,815 $ 222,596 $ (44,781) -20% Non Current Assets 2,446,484 2,490,012 (43,528) -2% Deferred Outflow of Resources 34,030 17,777 16, % Total Assets $ 2,658,329 $ 2,730,385 $ (72,056) -3% Liabilities: Current Liabilities $ 81,408 $ 62,433 $ 18,975 30% Non Current Liabilities 652, ,023 (39,966) -6% Deferred Inflow of Resources ,867 (12,052) 100% Total Liabilities $ 734,280 $ 767,323 $ (33,043) -4% Net Position: Invested in Capital Assets $ 2,089,523 $ 2,095,306 $ (5,783) 0% Restricted - 2,033 (2,033) -100% Unrestricted (Note 1) (165,474) (134,277) (31,197) 23% Total Net Position $ 1,924,049 $ 1,963,062 $ (39,013) -2% As illustrated, in the Statement of Net Position, the overall Net Position of the Authority decreased by $39,013. Current liabilities increased by $18,975. The majority of the increase is a result of the current loan liability. Noncurrent liabilities decreased due to bond principal payments of $35,000. The bonds have a maturity date of December 1, 2023 and an interest rate of 2%. Repayments of the bonds can be made from funds drawn on the Capital Fund Program. Noncurrent assets decreased by $43,528 this is attributed to the additions to fixed assets net of the current year depreciation. Current Assets decreased in the amount of $44,781 the majority of this decrease is due to a net cash decrease and collection of a HUD receivable

11 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL ANALYSIS (continued) Statement of Revenues and Expenses Variance % Change Revenue: Tenant Rental Revenue $ 50,815 $ 51,758 $ (943) -2% Tenant Revenue - Other 7,405 11,115 (3,710) -33% HUD PHA Grants 470, ,458 (11,046) -2% Investment Income (25) -23% Gain on Sale of Capital Assets 5,865 1,120 4,745 0% Other Revenue 23,131 26,110 (2,979) -11% Total Revenue $ 557,710 $ 571,668 $ (13,958) -2% Expenses: Administrative Expenses $ 197,683 $ 194,345 $ 3,338 2% Housing Assistance Payments 184, ,461 (3,101) -2% Maintenance & Operations 160, ,881 (17,038) -10% Depreciation/Amortization Expense 96, ,393 (9,620) -9% General 28,455 35,720 (7,265) -20% Interest Expense 15,429 18,643 (3,214) -17% Utilities 10,800 7,628 3,172 42% Total Expenses $ 694,343 $ 728,071 $ (33,728) -5% Excess (Deficiency) Revenue Over Expense Before Contributions $ (136,633) $ (156,403) $ 19,770-13% Contributions - Capital Grants $ 97,620 $ 65,855 $ 31,765 48% Change in Net Position $ (39,013) $ (90,548) $ 51,535-57% Beginning Net Position (Note 1) 1,963,062 2,340,134 (377,072) -16% Prior Period Adjustment - Note 17 - (286,524) 286, % Ending Net Position $ 1,924,049 $ 1,963,062 $ (39,013) -2% REVENUES In reviewing the Statement of Revenue and Expenses and Net Position, you will find that 84% of the Authority s revenues are derived from grants from the Department of Housing and Urban Development (HUD). The remaining 16% of revenues are derived from rental income, investment income and other sources. Tenant Rental Revenue decreased $943 and is due to the turnover of tenants and the changing rental amounts based upon their ability to pay rent

12 FINANCIAL ANALYSIS (continued) EXPENSES THE HOUSING AUTHORITY OF MANAGEMENT DISCUSSION AND ANALYSIS In reviewing the Statement of Revenues, Expenses and Net Position, you will find that 28% of the Authority s expenses are for administrative, 26% for housing assistance payments, 23% percent for maintenance, 14% for depreciation and 8% for general expenses, interest expenses, protective and tenant services and utility expenses. Capital Assets Variance % Change Land $ 698,761 $ 698,761 $ - 0% Buildings 4,422,855 4,360,235 62,620 1% Furniture & Equipment 294, ,709 (23,500) -7% Accumulated Depreciation (2,991,307) (2,911,399) (79,908) 3% Net Capital Assets $ 2,424,518 $ 2,465,306 $ (40,788) -2% The change in capital assets is due to the net of assets purchased of $62,620 and an increase in accumulated depreciation of $96,773. ECONOMIC FACTORS AND EVENTS AFFECTING OPERATIONS Several factors may affect the financial position of the authority in the subsequent fiscal year. These factors are: (1) Unemployment in Monroe County for October 2016 was 9.1%. The Unemployment Rate for Monroe County decreased by.60% from the previous year. 1 REAC The Real Estate Assessment Center performs a financial evaluation on the Public Housing Authority as it compares to its peers. This evaluation is known as the Financial Assessment Sub System (FASS). As of June 30, 2016 the Housing Authority had timely filed their report with HUD

13 CONCLUSIONS THE HOUSING AUTHORITY OF MANAGEMENT DISCUSSION AND ANALYSIS Overall, The Monroeville Housing Authority had a financial deficit during the year, but 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 The financial report is designed to provide our residents, the citizens of Monroeville, 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 need supplemental information, you may contact Ms. Tammy Labella, Executive Director, P.O. Box 732, Monroeville, Alabama

14 F I N A N C I A L S T A T E M E N T S

15 THE CITY OF MONROEVILLE, ALABAMA STATEMENT OF NET POSITION ASSETS: ENTERPRISE Current Assets FUNDS Cash - Unrestricted (Note 4) $ 32,170 Cash - Security Deposits (Note 4) 9,007 Net Accounts Receivable - Tenants (Note 1) 1,192 Accounts Receivable - HUD 8,710 Accrued Interest Receivable 11 Investments - Unrestricted (Note 4) 35,315 Investments - Restricted (Note 4) 84,883 Inventory (Note 1) 2,966 Prepaid Expenses 3,561 TOTAL CURRENT ASSETS $ 177,815 Noncurrent Assets Capital Assets, Net (Note 1 & 11) $ 2,424,523 Other Assets 21,961 TOTAL NONCURRENT ASSETS $ 2,446,484 Deferred Outflow of Resources (Note 7) $ 34,030 TOTAL ASSETS $ 2,658,329 LIABILITIES: Current Liabilities Accounts Payable $ 16,448 Current Portion of Long-term Debt 35,000 Payroll Taxes Payable 4,817 Accrued Compensated Absences (Note 8 & 14) 981 Tenant Security Deposits 9,007 Deferred Revenue 2,896 Other Current Liabilities 4,762 Interest Payable - Bonds 7,497 TOTAL CURRENT LIABILITIES $ 81,408 Long-Term Liabilities Accrued Compensated Absences (Note 8 & 14) $ 8,831 Non Current Liabilities - Other 8,178 Accrued Pension Liability (Note 7) 335,048 Long-Term Portion of Debt (Note 14) 300,000 TOTAL LONG-TERM LIABILITIES $ 652,057 TOTAL LIABILITIES $ 733,465 Deferred Inflow of Resources (Note 7) $ 815 NET POSITION: Invested in Capital Assets, net of related debt $ 2,089,523 Unrestricted (Note 1) (165,474) TOTAL NET POSITION $ 1,924,049 The accompanying notes are an integral part of the financial statements

16 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED ENTERPRISE OPERATING REVENUE FUNDS Tenant Rental Revenue $ 50,815 Tenant Revenue - Other 7,405 HUD PHA Grants 470,412 Other Revenue 23,131 TOTAL OPERATING REVENUE $ 551,763 OPERATING EXPENSES Administrative $ 197,683 Housing Assistance Payments 184,360 Maintenance and Operations 160,843 Depreciation 96,773 General 28,455 Utilities 10,800 TOTAL OPERATING EXPENSES $ 678,914 OPERATING INCOME (LOSS) $ (127,151) NONOPERATING REVENUES (EXPENSES) Investment Income - Unrestricted $ 78 Investments Income - Restricted 4 Gain on Sale of Capital Assets 5,865 Interest and Amortization Expense on Bonds (15,429) TOTAL NONOPERATING REVENUES (EXPENSES) $ (9,482) TRANSFER OF OPERATING INCOME AND CAPITAL ASSETS Contributed Capital - Capital Grant $ 97,620 CHANGE IN NET POSITION $ (39,013) NET POSITION - BEGINNING (Note 1) 1,963,062 NET POSITION - ENDING $ 1,924,049 The accompanying notes are an integral part of the financial statements

17 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED ENTERPRISE CASH FLOWS FROM OPERATING ACTIVITIES FUNDS Receipts from HUD PHA Grants $ 473,034 Receipts from Renters 60,546 Receipts from Other Revenue 23,131 Payments to Employees (191,477) Payment of Supplies & Materials (13,193) Payment of Benefits (85,974) Payment of Insurance (22,497) Payment of Other Administrative (16,974) Payment of Other General (4,762) Payment of Contract Costs (17,683) Payment of Utilities (10,800) Payment of Housing Assistance Payments (184,360) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,991 CASH FLOWS FROM INVESTING ACTIVITIES Receipt of Interest Income $ 82 Deferred Outflow of Resources (16,253) Increase in Investments (776) NET CASH USED BY INVESTING ACTIVITIES $ (16,947) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal Paid on Revenue Bond $ (35,000) Payment of Interest on Revenue Bond (13,396) Fixed Asset Additions (62,620) Proceeds from Sale of Capital Assets 12,500 Proceeds from Capital Grants 97,620 Deferred Inflow of Resources (12,052) NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES $ (12,948) NET INCREASE (DECREASE) IN CASH $ (20,904) CASH BALANCE - BEGINNING 146,964 CASH BALANCE - ENDING $ 126,060 The accompanying notes are an integral part of the financial statements

18 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED ENTERPRISE FUNDS RECONCILIATION OF OPERATING INCOME (LOSS) TO CASH USED BY OPERATING ACTIVITIES Operating Income (Loss) $ (127,151) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation and Amortization 96,773 Accounts Receivable 2,326 Accounts Receivable - HUD 17,390 Accounts Receivable - Other 4,160 Prepaid Insurance 1,146 Inventory (369) Accounts Payable (19,945) Payroll Taxes Payable 2,542 Interest Payable (805) Tenant Security Deposits 975 Accrued Compensated Absences (6,385) Current Liabilities - Other (776) Non Current Liabilities - Other 2,520 Accrued Liabilities - Other 33,968 Prepaid Tenant Rent 2,622 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,991 The accompanying notes are an integral part of the financial statements

19 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Housing Authority of the City of Monroeville, Alabama provides low-income housing to the citizens of Monroeville, Alabama and the surrounding area. The Authority has 100 Conventional units available for the rental program. These units were built using federal government monies under the Department of Housing and Urban Development. The Authority also administered 46 Housing Voucher Units. BASIS OF ACCOUNTING The accompanying financial statements of The Housing Authority of The City of Monroeville, Alabama have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). The accompanying financial statements present the financial position of the Authority and the various funds and fund types, the results of operations of the Authority and the various funds and fund types, and the cash flows of the enterprise funds. The financial statements are presented as of June 30, 2016, and for the year then ended. The financial statements include the various authorities and any other organizational units governed by The Housing Authority of the City of Monroeville, Alabama. 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. As a general rule the effect of inter-fund activity has been eliminated from the Government-Wide financial statements. REPORTING ENTITY The Authority has considered all potential component units for which it is financially accountable and other organizations for which the nature and significance of their relationship with the Authority are such that exclusion would cause the Authority s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization s governing body and (1) the ability of the Authority to impose its will on that organization or (2) the See Independent Auditors Report. -15-

20 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) REPORTING ENTITY (continued) potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the Authority. The Authority does not have any component units that meet the above mentioned criteria. As required by generally accepted accounting principles, these financial statements present The Housing Authority of the City of Monroeville, Alabama. MEASUREMENT FOCUS, BASIS OF ACCOUNTING & FINANCIAL STATEMENT PRESENTATION Enterprise Funds Financial Statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of related cash flows. Each enterprise fund has the option to elect to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The primary government s enterprise funds have elected to apply FASBs issued after the applicable date. Enterprise funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an enterprise fund s principal on-going operations. Revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. FUND ACCOUNTING The financial activities of the Authority are recorded in the individual funds, each of which is deemed to be a separate accounting entity. The Authority uses fund accounting to report its financial position and results of operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. The financial activities of the Authority that are reported in the accompanying financial statements See Independent Auditors Report. -16-

21 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) FUND ACCOUNTING (continued) have been classified into the following major enterprise funds. Enterprise Funds account for those activities for which the intent of management is to recover, primarily through user charges, the cost of providing goods or services to the general public, or where sound financial management dictates that periodic determinations of results of operations are appropriate. Conventional Program This fund accounts for the rents received from tenants living in the low income housing units provided by the Authority and the related expenses from maintaining the units and operating the office. Housing Choice Vouchers Program This fund accounts for the Fair Market Rents received from the Housing And Urban Development and the related payments to homeowners Participating in the Housing Choice Vouchers program along with administrative Expenses associated with operating the program. Capital Funds Program This fund accounts for grant monies received from the Housing and Urban Development to make capital improvements to existing housing and fund operations of the Conventional Program. ACCOUNTS RECEIVABLE The Authority uses the allowance method to account for uncollectible accounts receivable. Accounts Receivable is presented net of an allowance for doubtful accounts. The allowance for doubtful accounts for the Conventional Program was $132 at June 30, CASH AND INVESTMENTS Cash and investments include amounts in demand and time deposits. Federal statutes authorize the Housing Authority to invest in U.S. Government Obligations, U.S. Corporate Debt, and U.S. Corporate Equities, as well as bank certificates of deposit and bank public fund investment accounts. All investments are required to earn at least the current T-Bill rate. Investments are generally stated at fair value. See Independent Auditors Report. -17-

22 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and equivalents, accounts receivable, accounts payable, accrued liabilities and amounts due to and from affiliates are reflected in the financial statements at fair value because of the short term maturity of these instruments. Quoted market prices are used when available to calculate these fair values. PENSIONS The Employees Retirement System of Alabama (the Plan) financial statements are prepared using the economic resources measurement focus and accrual basis of accounting. Contributions are recognized as revenues when earned, pursuant to plan requirements. Benefits and refunds are recognized as revenues when due and payable in accordance with the terms of the plan. Expenses are recognized when the corresponding liability is incurred, regardless of when the payment is made. Investments are reported at fair value. Financial statements are prepared in accordance with requirements of the Governmental Accounting Standards Board (GASB). Under these requirements, the Plan is considered a component unit of the State of Alabama and is included in the State s Comprehensive Annual Financial Report. FIXED ASSETS The Housing Authority has adopted a capitalization policy which states that items purchased in excess of $1,000 with a useful life that exceeds one year will be capitalized. Items capitalized as fixed assets are recorded at cost. The book value of obsolete assets is charged to depreciation expense when they are scrapped. Upon sale or retirement, the cost and related accumulated depreciation are removed from the respective accounts, and any gain or loss is included in income. Maintenance and repair costs are expensed as incurred. Depreciation is computed principally using the straight-line method based on estimated useful lives of the assets. The useful lives are as follows: Buildings Dwelling Furniture & Equipment Administrative Furniture & Equipment 50 Years 8 Years 5-8 Years See Independent Auditors Report. -18-

23 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) CASH BALANCES Separate bank accounts are maintained by each program to avoid intermingling of funds. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense) until then. Currently, the Authority has one item that qualifies for reporting in this category, employer pension contributions subsequent to the measurement date of September 30, In addition, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The Authority has only one type of item that qualifies for reporting in this category, the net difference between projected and actual earnings on pension plan investments. INVENTORY VALUATION Inventories of materials and supplies are determined both by physical counts and through perpetual inventory systems. Inventories are valued at the lower of cost or market. Cost is principally determined by the first-in, first-out (FIFO) method of inventory valuation. Inventory is comprised of supplies for use by the Authority and appliances to be installed in housing units. BUDGETS In accordance with the Housing Authority's Annual Contribution Contract, the Authority is required to send its proposed operating budget to HUD's field office no later than 90 days before the beginning of the Housing Authority's fiscal year. The purpose of the budget is to provide realistic estimates of operating receipts and expenditures for a given period of time to be used as a plan of operation and a monitoring tool to measure an agency's performance. Budgets are adopted on a cash basis. See Independent Auditors Report. -19-

24 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Corporation considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. NOTE 2: INCOME TAXES The Authority is a nonprofit organization exempt from Federal income tax under Internal Revenue Code Section 501(c)(3). The Authority is a Federal and State governmental unit that is exempt from filing a return or paying taxes on income. NOTE 3: SINGLE AUDIT ACT The Single Audit Act focuses attention on a single coordinated audit of the aggregate federal financial assistance provided to a recipient agency during its fiscal year, with special emphasis on defined major federal financial assistance. NOTE 4: DEPOSITS AND INVESTMENTS Cash, cash equivalents and investments as of June 30, 2016 are classified in the accompanying financial statements as follows: Statement of Net Assets: Cash and Cash Equivalents $ 126,060 Investments 35,315 Total Cash and Investments $ 161,375 See Independent Auditors Report. -20-

25 NOTES TO FINANCIAL STATEMENTS NOTE 4: DEPOSITS AND INVESTMENTS (continued) Cash and Investments as of June 30, 2016 consist of the following: Cash: Cash on Hand $ 75 Deposit with Financial Institutions 125,985 Investments: Long-term Certificate of Deposit 35,315 Total Cash and Investments $ 161,375 Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of the investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. When the length of the investment is longer than days, the Authority looks at the safety and liquidity of the investment in addition to the rate of return. Concentration of Credit Risk The Authority places no limit on the amount it may invest with one issuer. The Authority s total investments are: Debt % Certificate of Deposit 30.00% Custodial Credit Risk- Custodial credit risk for deposits is the risk that, in the event of failure of a depository financial institution, the Authority will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of failure of the counterparty to a transaction, the Authority will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Authority s investments over $250,000 are collateralized by underlying securities pledges in the Authority s name. Cash, cash equivalents and investments are presented in the government-wide financial statements as follows: See Independent Auditors Report. -21-

26 NOTES TO FINANCIAL STATEMENTS NOTE 4: DEPOSITS AND INVESTMENTS (continued) Cash and Cash Equivalents Investments Total Businesss-Type Activities: Conventional Program $ 110,072 $ 35,315 $ 145,387 Housing Choice Vouchers 15,988-15,988 Total Government-Wide $ 126,060 $ 35,315 $ 161,375 NOTE 5: ECONOMIC DEPENDENCY The Authority is economically dependent upon the U.S. Department of Housing and Urban Development for operating subsidies and grants to defer operating costs and perform capital improvements. These monies are subject to modification by the U.S. Department of Housing and Urban Development depending on the availability of funding. NOTE 6: RISK MANAGEMENT The Authority is exposed to various risks to losses related to torts; thefts of, damage to and destruction of assets; errors and omissions; injuries to employees and natural disasters. The Authority carries commercial insurance for all risks of loss, including workmen s compensation and employee health and accident insurance. The Authority has not had any significant reductions in insurance coverage or any claims not reimbursed. NOTE 7: DEFINED BENEFIT PENSION PLAN GENERAL INFORMATION ABOUT THE PENSION PLAN PLAN DESCRIPTION The Employees Retirement System of Alabama, an agency multiple-employer plan, was established October 1, 1945 under the provisions of Act 515 of the Legislature of 1945 for the purpose of providing retirement allowances and other specified benefits for state employees, State Police, and on an elective basis, to all cities, counties, towns and quasi-public organizations. The responsibility for the general administration and operation of ERS is vested in its Board of Control. The ERS Board of Control consists of 13 trustees. The Plan is administered by the Retirement Systems of Alabama (RSA). Title 36-Chapter 27 of the Code of Alabama grants the authority to establish and amend the benefit terms to the ERS Board of Control. The Plan issues a publicly available financial report that See Independent Auditors Report. -22-

27 NOTES TO FINANCIAL STATEMENTS NOTE 7: DEFINED BENEFIT PENSION PLAN (continued) GENERAL INFORMATION ABOUT THE PENSION PLAN PLAN DESCRIPTION (continued) can be obtained at The ERS Board of Control consists of 13 trustees as follows: 1) The Governor, ex officio. 2) The State Treasurer, ex officio. 3) The State Personnel Director, ex officio. 4) The State Director of Finance, ex officio. 5) Three vested members of ERS appointed by the Governor for a term of four years, no two of whom are from the same department of state government nor from any department of which an ex officio trustee is the head. 6) Six members of ERS who are elected by members from the same category of ERS for a term of four years as follows: a. Two retired members with one from the ranks of retired state employees and one from the ranks of retired employees of a city, county, or a public agency each of whom is an active beneficiary of ERS. b. Two vested active state employees. c. Two vested active employees of an employer participating in ERS pursuant to BENEFITS PROVIDED State law establishes retirement benefits as well as death and disability benefits and any ad hoc increase in postretirement benefits for the ERS. Benefits for ERS members vest after 10 years of creditable service. State employees who retire after age 60 (52 for State Police) with 10 years or more of creditable service or with 25 years of service (regardless of age) are entitled to an annual retirement benefit, payable monthly for life. Local employees who retire after age 60 with 10 years or more of creditable service or with 25 or 30 years of service (regardless of age), depending on the particular entity s election, are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, members of the ERS (except State Police) are allowed % of their average final compensation (highest 3 of the last 10 years) for each year of service. State Police are allowed 2.875% for each year of State Police service in computing the formula method. Act 377 of the Legislature of 2012 established a new tier of benefits (Tier 2) for members hired on or See Independent Auditors Report. -23-

28 NOTES TO FINANCIAL STATEMENTS NOTE 7: DEFINED BENEFIT PENSION PLAN (continued) BENEFITS PROVIDED (continued) after January 1, Tier 2 ERS members are eligible for retirement after age 62 (56 for State Police) with 10 years or more of creditable service and are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, Tier 2 members of the ERS (except State Police) are allowed 1.65% of their average final compensation (highest 5 of the last 10 years) for each year of service. State Police are allowed 2.375% for each year of state police service in computing the formula method. Members are eligible for disability retirement if they have 10 years of credible service, are currently in-service, and determined by the RSA Medical Board to be permanently incapacitated from further performance of duty. Preretirement death benefits are calculated and paid to the beneficiary on the member s age, service credit, employment status and eligibility for retirement. The ERS serves approximately 846 local participating employers. These participating employers include 287 cities, 65 counties, and 494 other public entities. The ERS membership includes approximately 83,874 participants. As of September 30, 2015, membership of the Authority consisted of: Retired Members Or Their Beneficiaries Currently Receiving Benefits 2 Active Members 6 Total Membership 8 CONTRIBUTIONS Covered members of the ERS contributed 5% of earnable compensation to the ERS as required by statute until September 30, From October 1, 2011, to September 30, 2012, covered members of the ERS were required by statute to contribute 7.25% of earnable compensation. Effective October 1, 2012, covered members of the ERS are required by statute to contribute 7.50% of earnable compensation. Certified law enforcement, correctional officers, and firefighters of the ERS contributed 6% of earnable compensation as required by statute until September 30, From See Independent Auditors Report. -24-

29 NOTES TO FINANCIAL STATEMENTS NOTE 7: DEFINED BENEFIT PENSION PLAN (continued) CONTRIBUTIONS (continued) October 1, 2011, to September 30, 2012, certified law enforcement, correctional officers, and firefighters of the ERS were required by statute to contribute 8.25% of earnable compensation. Effective October 1, 2012, certified law enforcement, correctional officers, and firefighters of the ERS are required by statute to contribute 8.50% of earnable compensation. State Police of the ERS contribute 10% of earnable compensation. ERS local participating employers are not required by statute to increase contribution rates for their members. Tier 2 covered members of the ERS contribute 6% of earnable compensation to the ERS as required by statute. Tier 2 certified law enforcement, correctional officers, and firefighters of the ERS are required by statute to contribute 7% of earnable compensation. Tier 2 State Police members of the ERS contribute 10% of earnable compensation. These contributions rates are the same for Tier 2 covered members of ERS local participating employers. The ERS establishes rates based upon an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with additional amounts to finance any unfunded accrued liability, the pre-retirement death benefit and administrative expenses of the Plan. For the plan year ended June 30, 2016, the Authority s active employee contribution rate was 5.00 percent of covered employee payroll, and the Authority s average contribution rate to fund the normal and accrued liability costs was 6.50 percent of covered employee payroll. Authority s contractually required contribution rate for the year ended June 30, 2016 was 7.93% of pensionable pay for Tier 1 employees, and 5.43% of pensionable pay for Tier 2 employees. These required contribution rates are based upon the actuarial valuation dated September 30, 2015, a percent of annual pensionable payroll, and actuarially determined as an amount that, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, with an additional amount to finance any unfunded accrued liability. Total employer contributions to the pension plan from the Authority were $38,765 for the year ended June 30, See Independent Auditors Report. -25-

30 NOTES TO FINANCIAL STATEMENTS NOTE 7: DEFINED BENEFIT PENSION PLAN (continued) NET PENSION LIABILITY The Authority s net pension liability was measured as of September 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as September 30, 2014 rolled forward to September 30, 2015 using standard roll-forward techniques as shown in the following table: TPL Roll-forward Expected Actual ( a ) Total Pension Liability as of September 30, 2014 $ 742,580 $ 741,688 ( b ) Entry Age Normal Cost for October 1, September 30, ,836 15,836 ( c ) Actual Benefit Payments and Refunds for October 1, September 30, 2015 (44,455) (44,455) ( d ) Total Pension Liability as of September 30, 2015 [(a) x (1.08)] + [(c) x (1.04)] $ 771,589 $ 770,626 (e) Difference between Expected and Actual Experience (Gain)/Loss $ (963) ACTUARIAL ASSUMPTIONS The total pension liability in the September 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% % Investment rate of return* 8.00% *Net of pension plan investment expense Mortality rates for ERS were based on the RP-2000 Combined Mortality Table Projected with Scale AA to 2016 set forward three years for males and two years for females. The rates of mortality for the period after disability retirement are according to the sex distinct RP-2000 Disability Mortality Table. The actuarial assumptions used in the September 30, 2014 valuation were based on the results of an See Independent Auditors Report. -26-