GARDEN OF HOPE, INC. AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2017

Transcription

1 AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2017

2 TABLE OF CONTENTS Page Independent Auditor's Report... 1 FINANCIAL Statement of Financial Position... 3 Statement of Activities... 5 Statement of Cash Flows... 7 Notes to the Financial Statements... 9 OTHER Supplement Information...12 Schedule of Expenditures of Federal Awards Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs Schedule of Prior Year Audit Findings... 21

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5 STATEMENT OF FINANCIAL POSITION SEPTEMBER 30, 2017 ASSETS Current Assets 1120 Cash - Operating $ 8, Accounts and Notes Receivable - Operations Miscellaneous Prepaid Expenses 2, T Total Current Assets 11,353 Non-Current Assets 1191 Tenant Deposits Held in Trust 17,266 Restricted Deposits 1310 Escrow Deposits 3, Replacement Reserve 141, Other Reserves 10, Residual Receipts Reserve T Total Deposits 155,482 Property, Plant & Equipment 1410 Land 110, Buildings 4,333, T Total Fixed Assets 4,443, Accumulated Depreciation (1,215,216) 1400N Net Fixed Assets 3,227, Miscellaneous Other Assets 3, T Total Other Assets 3, T Total Assets $ 3,415,731 The accompanying notes are an integral part of the financial statements. 3

6 STATEMENT OF FINANCIAL POSITION SEPTEMBER 30, 2017 LIABILITIES AND NET ASSETS Current Liabilities 2110 Accounts Payable - Operations $ 12, Accrued Wages Payable 3, Accrued Payroll Taxes Prepaid Revenue 1, HAP Repayment T Total Current Liabilities 19, Tenant Deposits Held in Trust (Contra) 17,266 Long-Term Liabilities 2320 Mortgage (or Bonds) Payable - First Mortgage (or Bonds) 4,178, Other Mortgages Payable (Long-Term) 250, T Total Long-Term Liabilities 4,428, T Total Liabilities 4,464,711 Net Assets 3131 Unrestricted Net Assets (1,048,980) 3130 Total Net Assets (1,048,980) 2033T Total Liabilities and Net Assets $ 3,415,731 The accompanying notes are an integral part of the financial statements. 4

7 GARDEN OF HOPE, INC STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017 REVENUE 5120 Rent Revenue - Gross Potential $ 163, Tenant Assistance Payments 218, Miscellaneous Rent Revenue Special Claims Revenue 2, T Total Rent Revenue 384,844 Vacancies 5220 Apartments T Total Vacancies N Net Rental Revenue (Rent Revenue Less Vacancies) 384,844 Financial Revenue 5410 Revenue from Investments - Investment Revenue from Investments - Residual Receipts Revenue from Investments - Replacement Reserve T Total Financial Revenue 459 Other Revenue 5910 Laundry and Vending Revenue 3, Tenant Charges Gifts/Memorials Electricity Reimbursements Cable TV Reimbursements 6, Pest Conrol Receovery (775) 5900T Total Other Revenue 8, T Total Revenue $ 394,141 EXPENSES Administrative Expenses 6203 Conventions and Meeting $ Other Renting Expenses Office Salaries 27, Office Expenses 17, Management Fee 54, Manager or Superintendent Salaries 38, Legal Expense - Project Audit Expense 8, Bookkeeping Fees/Accounting Services 2, T Total Administrative Expenses 150,371 The accompanying notes are an integral part of the financial statements. 5

8 GARDEN OF HOPE, INC STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017 Utilities Expenses 6450 Electricity 28, Water 11, Gas 3, Sewer 19, T Total Utilities Expense 64,023 Operating & Maintenance Expenses 6510 Payroll 20, Supplies 5, Contracts 50, Insurance Claim or Loss Garbage and Trash Removal 3, Security Payroll/Contract Heating/Cooling Repairs and Maintenance 8, Vehicle and Maintenance Equipment Operation and Repairs T Total Operating and Maintenance Expenses 88,547 Taxes and Insurance 6711 Payroll Taxes (Project's Share) 7, Property & Liabilities Insurance (Hazard) 17, Fidelity Bond Insurance Workmen's Compensation 2, Employee Health 1, Miscellaneous Taxes, Licenses, Permits and Insurance 5, T Total Taxes and Insurance 35,331 Elderly Care Expenses 6990 Other Service Expenses 50, T Total Elderly Care Expenses 50,218 Operating Results 6000T Total Cost of Operations before Depreciation 388, T Profit (Loss) before Depreciation 5, Depreciation 111, N Operating Profit or (Loss) (106,305) 3247 Changes in Unrestricted Net Assets (106,305) S Total Net Assets, Beginning (942,675) 3130 Total Net Assets, Ending $ (1,048,980) The accompanying notes are an integral part of the financial statements. 6

9 STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017 Cash Flows From Operating Activities: S Rental Receipts $ 383,551 S Interest Receipts 459 S Other Operating Receipts 8,838 S Total Receipts 392,850 S Administrative (52,147) S Management Fee (54,812) S Utilities (64,023) S Salaries and Wages (65,766) S Operating and Maintenance (67,784) S Property Insurance (17,370) S Miscellaneous Taxes and Insurance (17,961) S Tenant Security Deposits - S Other Operating Expenses (41,629) S Total Disbursements (381,492) S Net Cash Provided by (Used in) Operating Activities 11,357 Cash Flows From Investing Activities S Net Deposits to the Mortgage Escrow Account (227) S Net Deposits to the Reserve for Replacement Account 18,365 S Net Deposits to the Residual Receipts Account - S Net Purchase of Fixed Assets (22,891) S Net Cash Provided by (Used in) Investing Activities (4,753) S Net Increase (Decrease) in Cash 6,605 S Beginning of Period Cash 1,819 S1200T Ending of Period Cash $ 8,424 The accompanying notes are an integral part of the financial statements. 7

10 STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017 Reconciliation of Net Profit (Loss) to Net Cash Provided By Operating Activities 3250 Change in Total Net Assets $ (106,305) Adjustment to Reconcile Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 6600 Depreciation 111,956 S Decrease (Increase) in Prepaid Expenses (82) S Decrease (Increase) in Tenant Security Deposits (1,082) S Decrease (Increase) in Accounts and Notes Receivable - S Increase (Decrease) in Accounts Payable and Accruals 4,023 S Increase (Decrease) in Tenant Security Deposits Held in Trust 1,082 S Increase (Decrease) in Prepaid Revenue 1,293 S Increase (Decrease) in HAP Repayment 472 S Net Cash Provided by Operating Activities $ 11,357 The accompanying notes are an integral part of the financial statements. 8

11 NOTES TO FINANCIAL STATEMENTS NOTE 1 - Summary of Significant Accounting Policies: Garden of Hope, Inc., ( the Project ) is a 62 unit apartment project that provides housing for elderly in Birmingham, Alabama. Legal title to the Project is held by Garden of Hope, Inc., a nonprofit corporation. The Project operates under Section 202 of the National Housing Act and is regulated by the Department of Housing and Development (HUD) with respect to rental charges and operating methods. The Section 202 loan is a major program. The Project also receives rental assistance payments from HUD on behalf of eligible families pursuant to Section 202 of the National Housing Act. The Project Rental Assistance Contract is considered a major program. A. Cash Equivalents For the statement of cash flows, all unrestricted investment instruments with original maturities of three months or less are considered cash equivalents. B. Rental Property Rental property is carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated useful lives by the use of straight-line method for financial reporting purposes. C. Rental Income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Project and the tenants of the property are operating leases. Under the regulatory agreement, the Project may not increase rents charged to tenants without HUD approval. D. Functional Expenses Expenditures incurred in connection with project operations and expenditures made for corporate (mortgage entity) purposes, if applicable, have been summarized on a functional basis in the statement of activities. E. Income Taxes No provision for income taxes has been included in these financial statements since the entity is exempt from Federal income taxes, except for tax on unrelated business income, under Section 501(a) of the internal Revenue Code as an organization described in Section 501(c)(3). The entity had no unrelated business income for the year ended September 30,

12 NOTES TO FINANCIAL STATEMENTS NOTE 1 - Summary of Significant Accounting Policies (Continued): F. Advertising The Project expenses advertising costs as they are incurred. G. Use of Estimate The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Accordingly, actual amounts could differ from those estimates. NOTE 2 - Capital Advance The $4,178,400 capital advance is payable to the Federal Housing Administration (FHA) and is collateralized by a deed of trust on the rental property. The advance bears interest at the rate of 5.25% per annum. Principal and interest are payable in full by the Project only upon sale or conversion of the property prior to expiration of the 40 year commitment in September Accrued interest through September 30, 2017 is not recorded as a liability in the accompanying financial statements since it is only payable as a penalty in the event of default. The liability of the Project under the mortgage note is limited to the underlying value of the real estate collateral plus other amounts deposited with the lender. The Project is required to make monthly deposits of $1,386 to a reserve for replacements account for use in funding future maintenance and replacement costs. During the next five (5) years, $83,185 will be deposited to the reserve for replacements accounts. NOTE 3 - Management Fee The Project is managed by SPM, LLC pursuant to an agreement which provides for management fee of 14.00% of monthly collections, as defined. The current management agreement originated August 2, 2010 and expires August 2,

13 NOTES TO FINANCIAL STATEMENTS NOTE 4 - HUD Restricted Deposits Under the terms of the Regulatory Agreement, the Project is required to set aside specified amounts for the replacement of property and other project expenditures as approved by HUD. Restricted funds in the amount of $155,481 at September 30, 2017 are held in separate accounts and generally are not available for operating purposes. NOTE 5 - Distributions to Officers and Directors The Regulatory Agreement with HUD provides, among other things, that the Project will not make distributions of assets or income because Garden of Hope, Inc. is a nonprofit organization. All surplus cash, as defined by HUD, must be deposited into a residual receipts account. Use of the residual receipts amount is contingent upon HUD s prior written approval. As of September 30, 2017, there was no surplus cash. NOTE 6 - Home Investment Partnership Program Loan In May 2005, Garden of Hope, Inc. received a non-interest bearing loan in the amount of $250,000 from the City of Birmingham through grant funds from the HOME Investment Partnership Program funded by the U.S. Department of Housing and Urban Development. The note is secured by a second mortgage on the real estate. The term of the loan is 20 years with a maturity date of April 1, 2026, following which the City will forgive the principal amount of the loan in its entirety, provided that the Project has complied with all terms and regulations in conjunction with the use of HOME funds. NOTE 7 - Current Vulnerability Due to Certain Concentrations The entity s sole asset is a 62 unit apartment complex and its operations are concentrated in the multifamily real estate market. In addition, the entity operates in a heavily regulated environment. The operations of the Project are subject to the administrative directives, rules and regulations of federal, state, and local regulatory agencies, including but not limited to HUD. Such administrative directives, rules and regulations are subject to change by an act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change. 11

14 SUPPLEMENTAL INFORMATION SEPTEMBER 30, 2017 Schedule of Reserve for Replacements Balance at beginning of year $ 159,940 Total monthly deposits $ 3,771 Other deposits Other deposits - interest income 454 Other deposits - excess income - Other deposits - Balance of Construction Account - 4,225 Approved withdrawals $ 22,590 - Other withdrawals Other withdrawals - service charge - Other withdrawals - 22,590 Balance at end of year $ 141,575 Schedule of Residual Receipts Balance at beginning of year $ - Total monthly deposits $ - Other deposits: Other deposits - interest income - Other deposits - Additional deposit required by HUD - - Approved withdrawals $ - Other withdrawals Other withdrawals - service charge - Other withdrawals - - Balance at end of year $ - 12

15 SUPPLEMENTAL INFORMATION SEPTEMBER 30, 2017 Computation of Surplus Cash - Annual Cash $ 25,690 Tenant subsidy vouchers due to period covered by financial statement - Other - Total Cash $ 25,690 Accrued mortgage interest payable $ - Delinquent mortgage principal payments Delinquent deposits to reserve for replacements - Accounts payable (due within 30 days) 19,045 Loans and notes payable (due within 30 days) - Deficient tax, insurance or MIP escrow deposits - Prepaid rents 1,903 Tenant security deposits liability 17,266 Other - - Total Current Obligations $ 38,213 Shortage Cash $ (12,523) Deposit due Residual Receipts $ - 13

16 SUPPLEMENTAL INFORMATION - CONTINURED SEPTEMBER 30, 2017 Schedule of Changes in Fixed Assets Beginning Ending Balance Additions Deductions Balance Land $ 110, $ 110,000 Buildings 4,310,155 22,891-4,333,046 Building Equipment (Portable) Furniture for Project/Tenant Use Furnishings Office Furniture and Equipment Maintenance Equipment Motor Vehicles Miscellaneous Fixed Assets Total Fixed Assets 4,420,155 22,891-4,443,046 Less:Accumulated Depreciation 1,103, ,956-1,215,216 Net Fixed Assets $ 3,316, ,956 - $ 3,227,831 Additional Information Total mortgage principal payments required during the year $ - Total of 12 monthly deposits during the year into the replacement reserve account, as required by the regulatory agreement $16,637 Replacement reserve or residual receipts releases, which are included as expenses items on profit and loss statement $ - Project improvement reserve releases under the flexible subsidy program that are included as expense items on the profit and loss statement $ - 14

17 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017 Federal Federal Grantor/Pass-through Grantor/ CFDA Federal Program Title Number Expenditures U.S. Department of Housing and Urban Development: Section 202 Capital Advance ,428,400 Section 202 PRAC ,173 HOME Investment Partnerships Program ,000 Total $ 4,899,573 GARDEN OF HOPE, INC. NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2017 Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of Garden of Hope, Inc. and is presented on the accrual basis of accounting. The information contained in this schedule is presented in accordance with the requirements by Title 2 U.S. Code of Federal Regulations, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. Therefore, some amounts presented in this schedule may differ from the amounts presented in, or used in the preparation of, the basic financial statements. The agency elected not to use the 10% de minims cost rate. 15

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22 062-EE057 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017 SECTION I SUMMARY OF AUDITOR'S RESULTS 1. The auditor s report expresses an unmodified opinion on the financial statements of Garden of Hope, Inc. 2. No material weaknesses were identified during the audit of the financial statements. 3. No instances of noncompliance material to the financial statements of Garden of Hope, Inc. were disclosed during the audit. 4. No material weaknesses were identified during the audit of the major federal award programs. 5. The auditor s report on compliance for the major federal award programs for Garden of Hope, Inc. expresses an unqualified opinion. 6. Audit findings relative to the major federal award programs for Garden of Hope, Inc. are reported in Section III of this Schedule. 7. The programs tested as major programs included: Section 202 Capital Advance Section 202 PRAC 8. The threshold for distinguishing Types A and B programs was $750, Garden of Hope, Inc. qualified as a low risk auditee. SECTION II FINDINGS-FINANCIAL STATEMENTS AUDIT None SECTION III FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS AUDIT None 20

23 062-EE057 SCHEDULE OF PRIOR YEAR AUDIT FINDINGS There were no audit findings in the prior year. 21