Rental Assistance Division of the Georgia Department of Community Affairs

Transcription

1 Financial Statements (With Supplementary Information) and Independent Auditor's Report June 30, 2016

2 Index Page Financial Section Independent Auditor's Report 3 Managements' Discussion and Analysis 6 Basic Financial Statements: Statement of Net Position 10 Statement of Revenues, Expenses and Changes in Net Position 11 Statement of Cash Flows 12 Notes to Basic Financial Statements 14 Supplementary Information Financial Data Schedule of Statement of Net Position Accounts 21 Financial Data Schedule of Program Revenues, Expenses and Changes in Net Position Accounts 23 Single Audit Section 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 26 Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 28 Schedule of Findings and Questioned Costs 30 Schedule of Prior Year Findings and Questioned Costs 32 Schedule of Expenditures of Federal Awards 33 Notes to Schedule of Expenditure of Federal Awards 34 1

3 Financial Section

4 Independent Auditor's Report Board of Commissioners Rental Assistance Division of the Atlanta, Georgia Report on the Financial Statements We have audited the accompanying modified accrual basis financial statements of the Rental Assistance Division of the (RAD) as of and for the year ended June 30, 2016, which collectively comprise RAD'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 modified accrual basis of accounting described in Note 2; this includes determining that the modified accrual basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these basic 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 basic financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the basic financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the basic financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the basic financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis of Accounting As described in Note 2, these basic financial statements were prepared on the modified accrual basis of accounting which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. 3

5 Opinion In our opinion, the basic financial statements referred to above present fairly, in all material respects, the modified accrual basis financial position of RAD as of June 30, 2016, and the changes in financial position, and cash flows thereof for the year then ended in conformity with the basis of accounting described in Note 2. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 6 through 8 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 an opinion on the financial statements that collectively comprise RAD's basic financial statements. The accompanying supplemental information on pages 21 through 24, including the financial data schedules required by the U.S. Department of Housing and Urban Development, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis 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 is also not a required part of the basic financial statements. The supplementary information, including the financial data schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information, including the financial data schedule and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic 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 December 14, 2016, on our consideration of RAD'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 4

6 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 RAD s internal control over financial reporting and compliance. Atlanta, Georgia December 14,

7 Managements Discussion and Analysis June 30, 2016 As management of the Rental Assistance Division, (RAD), we offer readers of RAD's financial statements this narrative overview and analysis of the financial activities of RAD for the fiscal year ended June 30, We encourage readers to read the information presented here in conjunction with additional information we have furnished in the RAD's financial statements, which follow this narrative. This statement is management's belief and as the State of Georgia's, Rental Assistance Division of the works to ensure that Georgians have the affordable rental housing they need. During the year ended June 30, 2016, RAD's awards and expenditures that benefited residents of Georgia including: a. HUD Housing Choice Voucher program awards were $108,022,955. b. Housing assistance payments under the HUD Housing Choice Voucher program were $105,723,717 providing for 40,401 affordable rental units in the state. c. HUD Supportive Housing for Persons with Disabilities (5 year mainstream program) awards were $398,406. d. Housing assistance payments under the HUD Supportive Housing for Persons with Disabilities (5 year mainstream program) were $348,860. Financial Analysis Net Position Net position is summarized in the table below: Current assets $ 5,146,863 $ 4,608,662 Total assets $ 5,146,863 $ 4,608,662 Current liabilities $ 613,762 $ 969,967 Total liabilities $ 613,762 $ 969,967 Net position $ 4,533,101 $ 3,638,695 Total net position $ 4,533,101 $ 3,638,695 Total assets of RAD at June 30, 2016 and 2015 amounted to $5,146,863 and $4,608,662, respectively. Current assets are comprised of unrestricted and restricted cash and cash equivalents, accounts receivable, and prepaid items. Current assets are approximately 12% higher at June 30, 2016 than 6

8 Managements Discussion and Analysis June 30, 2016 June 30, 2015 due primarily to an increase in restricted cash and cash equivalents and accounts receivable. Total liabilities of RAD amounted to $613,762 and $969,967 at June 30, 2016 and June 30, 2015 respectively. Current liabilities primarily include accounts payable. Current liabilities decreased 36.8% from 2015 to 2016 primarily due to a decrease in reimbursements RAD paid for to cover operating expenses. Net position represents the equity of RAD after liabilities are subtracted from assets. Total net position of RAD is $4,533,101 and $3,638,695 during the years ended June 30, 2016 and 2015, respectively. RAD's current ratio reflects the relationship between current assets and current liabilities and is a measure of RAD's ability to pay short-term obligations. At June 30, 2016 and 2015, RAD's current ratio is 8:1 and 5:1 respectively. Revenues, Expenses, and Changes in Net Position Changes in net position are summarized in the table below: Operating revenue HUD operating grants $ 119,204,536 $ 107,022,826 Investment income - unrestricted 8,211 8,118 Other revenue 12,462,536 11,148,087 Total operating revenue 131,675, ,179,031 Operating expenses Program administrative 12,127,234 12,037,488 Tenant services 452, ,196 Utilities Other general expenses 6,916 5,309 Maintenance and operations 151, ,501 Housing assistance payments 118,042, ,457,523 Total operating expense 130,780, ,164,686 Change in net position 894,406 (8,985,655) Net position - beginning 3,638,695 12,624,350 Net position - ending $ 4,533,101 $ 3,638,695 7

9 Managements Discussion and Analysis June 30, 2016 RAD's change in net position is $894,406 and ($8,985,655) for 2016 and 2015, respectively. Operating revenues were 11% higher in 2016 than 2015 due to the portability income received. Program administrative expenses were.7% higher in 2016 than Housing assistance payments were 3% higher in 2016 than 2015 due to portability payments made. Requests for Information This financial report is designed to provide the reader with a general overview of RAD's finances and to demonstrate that RAD's financial accountability over its resources. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Shawn Williams Executive Director Rental Assistance Division of the 60 Executive Park South, NE Atlanta, GA

10 Basic Financial Statements

11 Statement of Net Position June 30, 2016 Assets Current assets Cash and cash equivalents - unrestricted $ 2,584,968 Cash and cash equivalents - restricted 1,353,711 Accounts receivable - PHA projects 759,170 Accounts receivable - HUD 24,655 Accounts receivable - miscellaneous 746 Prepaid expenses and other assets 423,613 Total current assets 5,146,863 Total assets $ 5,146,863 Liabilities and Net Position Current liabilities Accounts payable $ 165,016 Other current liabilities 448,746 Total current liabilities 613,762 Net position Restricted net position 2,299,238 Unrestricted net position 2,233,863 Total net position 4,533,101 Total net position and liabilities $ 5,146,863 See Notes to Basic Financial Statements. 10

12 Statement of Revenues, Expenses and Changes in Net Position Year Ended June 30, 2016 Operating Revenue HUD operating grants $ 119,204,536 Investment income - unrestricted 8,211 Other revenue 12,462,536 Total Operating Revenue 131,675,283 Operating Expenses Program administrative 12,127,234 Tenant services 452,151 Utilities 341 General expenses 6,916 Maintenance and operations 151,858 Housing assistance payments 118,042,377 Total Operating Expense 130,780,877 Net Operating Income (Loss) 894,406 Change in Net Position 894,406 Net Assets - Beginning 3,638,695 Net Position - Ending $ 4,533,101 See Notes to Basic Financial Statements. 11

13 Statement of Cash Flows Year Ended June 30, 2016 Cash flows from operating activities HUD operating grant receipts $ 119,232,126 Other income receipts 12,161,840 Total receipts 131,393,966 Payments to vendors (8,630,417) Payments to employees (4,599,140) Housing assistance payments (118,042,377) Total disbursements (131,271,934) Net cash provided in operating activities 122,032 Net increase in cash and cash equivalents 122,032 Cash and cash equivalents, beginning 3,816,647 Cash and cash equivalents, ending $ 3,938,679 Reconciliation to Statement of Net Position: Cash and cash equivalents - unrestricted $ 2,584,968 Cash and cash equivalents - restricted $ 1,353,711 3,938,679 12

14 Statement of Cash Flows Year Ended June 30, 2016 Reconciliation of change in net position to net cash provided by operating activities Change in net position $ 894,406 Changes in asset and liability accounts (Increase) decrease in assets Accounts receivable - PHA projects (300,479) Accounts receivable - HUD 27,590 Accounts receivable - miscellaneous (8,428) Prepaid expenses (142,534) Increase (decrease) in liabilities Accounts payable 133,011 Accounts payable - other government (28,502) Other current liabilities (453,032) Total adjustments (772,374) Net cash provided by operating activities $ 122,032 See Notes to Basic Financial Statements. 13

15 Notes to Basic Financial Statements June 30, 2016 Note 1 - Organization Organization The Rental Assistance Division (RAD) of the (DCA) administers certain federally funded housing programs to provide safe, decent and affordable housing assistance for the citizens of the State of Georgia. The Georgia Department of Community Affairs is a public purpose financial enterprise, a corporate body and instrumentality of the State of Georgia. DCA has broad corporate powers including the power to acquire, administer and renovate housing. RAD's programs are funded and regulated by the U.S. Department of Housing and Urban Development (HUD) under the provisions of the U.S. Housing Act of 1937, as amended. All of RAD's revenue is derived from HUD appropriations. Reporting entity The powers of RAD are vested in the Board of DCA. Board members are appointed by the Governor and are composed of one member from each United States Congressional District in the State (currently 13) plus five additional members from the State at large and include elected officials of counties or municipalities, individuals with an interest or expertise in community or economic development, environmental issues, housing development or finance or citizens who in the judgment and discretion of the Governor enhance the DCA's Board. RAD is required by HUD to report separately its Financial Data Schedule filing in HUD's Real Estate Assessment Center system. Its primary operations comprised grant programs as follows: Housing Choice Voucher Program (HCV) - RAD receives Section 8 funding under its Annual Contributions Contract with HUD. The purpose of the Housing Choice Voucher Program is to provide decent and affordable housing to low-income families, elderly, and handicapped persons by providing rental subsidy. The subsidized units are owned and managed by private landlords. Fees earned by RAD for administering this program are intended to cover the cost of program operations. Section 8 Homeownership Program (Section 8) Section 8 enables individuals and families receiving rental assistance through the HCV to use their vouchers to purchase a home. To qualify, an individual must be a current HCV participant enrolled in the Family Self-Sufficiency (FSS) Program and meet other compliance requirements. RAD assists the individuals by establishing an escrow savings account in which the funds build up on the participant's behalf for five years. At the end of the five-year period, the participant is entitled to receive the escrowed money and receives homeownership counseling and assistance with obtaining mortgages. FSS financial is reported within the HCV. Supportive Housing for Persons with Disabilities (Mainstream) This is a housing program wherein low income disabled elderly or disabled non-elderly families lease housing units directly from private landlords. RAD processes all Section 8 payments, approves applicants for housing and contracts with the private landlords to make assistance payments for the difference between the approved contract rent and the actual rent paid by the low income tenants. Under the terms of the annual contributions contract, HUD funds RAD for the rental supplements and the administrative costs of managing the program based on funding levels available from HUD, not on actual costs. 14

16 Notes to Basic Financial Statements June 30, 2016 Note 2 - Summary of accounting policies A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements as described in the accompanying table of contents follows. Basis of presentation and accounting The financial statements, including Financial Data Schedules and Schedule of Expenditures of Federal Awards, of RAD are reported using the economic resources measurement focus on the modified accrual basis of accounting, which is a comprehensive basis of accounting other than Generally Accepted Accounting Principles (GAAP). Significant differences of RAD's accounting using modified accrual and GAAP are as follows: depreciation of assets is not required as all vehicle purchases are expensed under State of Georgia policy; compensated absences and retirement plan obligations are not accrued and are expensed when paid. All other assets and liabilities associated with the operations of RAD are included in the statement of net position. The principal operating revenues of RAD are programs funded directly from HUD. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Operating expenses for RAD include the costs of operating six regional program administrative offices and administrative expenses. All other revenues and expenses not meeting the definition of operating revenues and expenses are reported as nonoperating revenues and expenses or as contributions of capital. In June 2015, GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB 68, and Amendments to Certain Provisions of GASB 67 and 68, and Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, both effective for fiscal year In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, effective for fiscal year In the opinion of management, these standards do not and will not have an impact on the RAD s financial position given current operations and obligations. Cash and cash equivalents Cash and cash equivalents, as reported in the statement of net position, include short-term investment securities with original maturities of three months or less. Amounts reported as cash and cash equivalents include amounts that are restricted for use under federal program regulations. Accounts receivable PHA projects Accounts receivable PHA projects represent housing assistance payments due from other housing authorities for residents who have ported or transferred into RAD's jurisdiction. Accounts receivable Tenant promissory notes Tenant promissory notes accounts receivable represent receivables on those notes which are due to over payment of program funds on behalf of tenants that did not qualify or submitted fraudulent information on their program application which caused errors in the calculation of the assistance received. Such tenants must repay the notes or be excluded from further participation in housing programs. Management determined that collectability is remote, therefore receivables are fully reserved. Revenue received in advance Revenue received in advance arises when potential revenue has not been earned in the current period. Revenue received in advance also arises when resources are received by RAD before it 15

17 Notes to Basic Financial Statements June 30, 2016 has a legal claim to them, such as when grant moneys are received prior to meeting all eligibility requirements and/or prior to incurring qualifying expenditures. In subsequent periods, when either the revenue recognition criteria are met or when RAD has a legal claim to the resources, the liability for revenue received in advance is removed from the statement of net position and revenue is recognized. Net position Net position is classified and displayed in three categories in the financial statements: Invested in capital assets, net of related debt consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net position consists of net position with constraints placed on the use either by (1) external groups such as creditors, grantors, contributions, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. Unrestricted net position consists of all other net position that does not meet the definition of restricted or invested in capital assets, net of related debt. Compensated absences Compensated absences are those absences for which employees will be paid, such as vacation, computed in accordance with GASB No. 16. A liability for compensated absences that is attributable to services already rendered and that are not contingent on a specific event that is outside the control of the RAD and its employees are accounted for in the period in which such services are rendered or in which such events take place. RAD reports on the modified accrual basis of accounting, as such, compensated absences are not recorded. As of June 30, 2016 unrecorded compensated absences are $505,763. Income taxes Income received or generated by RAD is not subject to federal income tax, pursuant to Internal Revenue Code Section 115. Operating revenues and expenses Operating revenues and expenses consist of revenues earned and expenses incurred as a result of the principal operations of RAD. Operating revenue results from exchange transactions associated with providing housing assistance and related services, and federal operating subsidies and housing assistance payments that are directly related to RAD's mission. Revenues are recognized when RAD has a legal claim to them, as when all eligibility requirements have been met and/or qualifying expenditures have been incurred. Non-operating revenue includes capital and noncapital federal grants, earnings on investments, interest revenue, and other revenues not meeting the definition of operating. Operating expenses consist of all expenses incurred to provide housing services. Risk management RAD is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. RAD carries commercial insurance, including workers compensation and employee health and accident insurance, general 16

18 Notes to Basic Financial Statements June 30, 2016 liability, fire and extended coverage, fidelity bond, automobile, and director and officers' liability. Settled claims resulting from these risks have not exceeded commercial insurance coverage. Use of estimates The preparation of financial statements in conformity with the modified accrual basis of accounting requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Note 3 - Cash and cash equivalents Investment of funds RAD is permitted to invest funds in deposit accounts at federally insured financial institutions; in obligations of the U.S. Treasury or U.S. Government agencies; Local or State Government Investment Pools. Georgia Fund I is an investment pool held with the State of Georgia that invests primarily in cash and cash equivalents products. Cash and cash equivalents presented in the basic financial statements as of June 30, 2016 are as follows: Cash and cash equivalents: Cash $ 929,330 Georgia Fund I 3,009,349 Total cash and cash equivalents $ 3,938,679 Interest rate risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Due to the short term liquidity needs of RAD to meet its funding obligations of Housing Assistance Payments, RAD maintains its cash and investments in short term highly liquid investments. As of June 30, 2016, management believes RAD does not have significant interest rate risk. Total Investment maturities as of June 30, 2016 Less than Fair Value 3 Months 4-12 Months 1-5 Years 6-10 Years More than 10 Years Cash and cash equivalents: Cash $ 929,330 $ 929,330 $ - $ - $ - $ - Georgia Fund I 3,009,349 3,009, Total cash and cash equivalents $ 3,938,679 $ 3,938,679 $ - $ - $ - $ - Custodial credit risk For an investment, custodial credit risk is the risk that, in the event of failure of the counterparty, RAD will not be able to recover all or a portion of the value of its investments or collateral securities that are in the possession of an outside party. As of June 30, 2016, all of RAD's investments were insured or registered, or for which the securities were held by RAD or its agent in RAD's name. 17

19 Notes to Basic Financial Statements June 30, 2016 Credit risk and concentration of credit risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Some investments, such as U.S. Treasuries and GNMA securities, are guaranteed by the United States government and are considered to have no, or minimal, credit risk. Other investments are in corporate debt securities, which have been categorized based on the sponsoring entity's credit rating by Standard & Poor's. Generally, the debt securities are not collateralized. However, RAD has selected high quality corporate debt investments in order to minimize its exposure to loss due to credit risk. RAD maintains its cash in bank deposit accounts which, at times may exceed federally insured limits. RAD has not experienced any losses in connection with its investments as a result of credit risk. The exposure of RAD's debt securities to credit quality risk as of June 30, 2016 is as follows: Total Government Standard & Poor's Credit Rating as of June 30, 2016 Fair Value securities AAA AA A BBB BB Cash and cash equivalents: Cash $ 929,330 $ - $ - $ - $ 929,330 $ - $ - Georgia Fund I 3,009,349-3,009, Total cash and cash equivalents $ 3,938,679 $ - $ 3,009,349 $ - $ 929,330 $ - $ - Note 4 - Revenue received in advance Revenue received in advance consists of program funds received by RAD for which the intended program eligibility requirements have not yet been met and tenant rents received in advance. As of June 30, 2016, RAD has no revenue received in advance. Note 5 - Overhead allocation RAD is allocated certain administrative and information technology costs incurred by Georgia Department of Community Affairs based on number of employees. Costs allocated to RAD by DCA during the year ended June 30, 2016 totaled to $1,711,629 and are included in program administrative expenses on the accompanying statement of revenues, expenses and changes in net position. Note 6 - Lease payments RAD entered into leases for each of its seven field offices. Leases are year-to-year contracts with options for RAD to extend it year-to-year for three to eight years. Lease expense for the year ending June 30, 2016 is $500,133. Future minimum lease payments through 2019, including extensions, and in aggregate thereafter are as follows: 2017 $ 281, , ,142 Total $ 550,036 18

20 Notes to Basic Financial Statements June 30, 2016 Note 7 - Contingencies and uncertainties In connection with various federal grant programs, RAD is obligated to administer such programs and spend the grant moneys in accordance with applicable regulatory restrictions, and is subject to audit by the grantor agencies. In cases of noncompliance, the agencies involved may require RAD to refund program moneys. RAD is also contingently liable in connection with claims and contracts arising in the normal course of its activities. RAD management is of the opinion that the outcome of such matters will not have a material effect on the accompanying financial statements. HUD is the primary federal agency regarding Federal Awards and provides approximately 100 percent of the RAD's total revenues. Awards are subject to annual appropriations by HUD. The possibility exists that HUD contributions may decrease in the future. In the event such contributions were significantly reduced, RAD would need to seek other funding sources to maintain operations at current levels and may reduce benefits to applicants. Note 8 - Subsequent events Events that occur after the statement of net position date but before the modified accrual basis financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the statement of net position date are recognized in the accompanying basic financial statements. Subsequent events which provide evidence about conditions that existed after the statement of net position date require disclosure in the accompanying notes. Management evaluated the activity of RAD through December 14, 2016 (the date the basic financial statements were available to be issued) and concluded that no subsequent events have occurred that would require recognition in the basic financial statements or disclosure in the notes to the financial statements. 19

21 Supplementary Information

22 Financial Data Schedule of Net Position Accounts June 30, 2016 Account Description Housing Choice Mainstream Vouchers Program Eliminating TOTAL DIVISION ASSETS: CURRENT ASSETS: Cash: 111 Cash and Cash Equivalents - Unrestricted $ 2,584,968 $ - $ - $ 2,584, Cash and Cash Equivalents - Other Restricted 1,353, ,353, Total Cash 3,938, ,938,679 Accounts and Notes Receivables: 121 Accounts Receivable - PHA Projects 759, , Accounts Receivable - HUD Other Projects - 24,655-24, Accounts Receivable - Miscellaneous Accounts Receivable - Tenants 164, , Allowance for Doubtful Accounts - Dwelling Rents (164,850) - - (164,850) 120 Total Receivables, Net of Allowances for Doubtful Accounts 759,916 24, ,571 Current Investments: 142 Prepaid Expenses and Other Assets 423, , TOTAL CURRENT ASSETS 5,122,208 24,655-5,146, TOTAL ASSETS $ 5,122,208 $ 24,655 $ - $ 5,146,863 21

23 Financial Data Schedule of Net Position Accounts June 30, 2016 Housing Account Description Choice Vouchers Mainstream Program Eliminating LIABILITIES AND NET POSITION: LIABILITIES: CURRENT LIABILITIES: 312 Accounts Payable < = 90 Days $ 165,016 - TOTAL DIVISION $ - $ 165, Other Current Liabilities 448, , TOTAL CURRENT LIABILITIES 613, , TOTAL LIABILITIES $ 613,762 $ - $ - $ 613,762 NET POSITION: Restricted Net Assets $ 2,299,238 $ - $ - $ 2,299, Unrestricted Net Assets 2,209,208 24,655-2,233, TOTAL EQUITY/NET POSITION 4,508,446 24,655-4,533, TOTAL LIABILITIES AND EQUITY/NET POSITION $ 5,122,208 $ 24,655 $ - $ 5,146,863 22

24 Financial Data Schedule of Program Revenues, Expenses and Changes in Net Position Accounts Year Ended June 30, 2016 Account Description Housing Choice Vouchers Mainstream Program Eliminating TOTAL DIVISION REVENUE: HUD PHA Operating Grants $ 118,806,130 $ 398,406 $ - $ 119,204, Investment Income - Unrestricted 8, , Other Revenue 12,462, ,462, TOTAL REVENUE 131,276, , ,675,283 EXPENSES: Administrative: Administrative Salaries 4,567,926 31,214-4,599, Advertising and Marketing 6, , Employee Benefit Contributions - Administrative 3,258,111 18,332-3,276, Other Operating - Administrative 1,196, ,196, Legal Expense 2, , Travel Expense 197, , Allocated Overhead 1,711, ,711, Other 1,136, ,136,868 12,077,688 49,546-12,127,234 Tenant Services: Tenant Services - Salaries 449, , Relocation Costs 2, , , ,151 Utilities: Electricity Ordinary Maintenance and Operations: Ordinary Maintenance and Operations - Materials & Other 132, , Ordinary Maintenance and Operations - Contract Costs 19, , , ,858 23

25 Financial Data Schedule of Program Revenues, Expenses and Changes in Net Position Accounts Year Ended June 30, 2016 General Expenses: Account Description Housing Choice Vouchers Mainstream Program Eliminating TOTAL DIVISION All Other Insurance 6,916 6,916 6, , TOTAL OPERATING EXPENSES 12,688,954 49,546-12,738, EXCESS OPERATING REVENUE OVER OPERATING EXPENSES 118,587, , ,936,783 Other Expenses: Housing Assistance Payments 105,723, , ,072, HAP Portability-In 11,969, ,969, ,693, , ,042, TOTAL EXPENSES 130,382, , ,780, Excess (Deficiency) of Total Revenue Over (Under) Total Expenses 894, ,406 Memo Account Information Beginning Equity 3,614,040 24,655-3,638,695 Total Net Position, Ending $ 4,508,446 $ 24,655 $ - $ 4,533, Unit Months Available 207, , Number of Unit Months Leased 177, , Administrative Fee Equity 2,209, ,209, Housing Assistance Payments Equity 2,299, ,299,238 24

26 Single Audit Section

27 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 Board of Commissioners Rental Assistance Division of the Atlanta, Georgia 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 modified accrual basis financial statements of Rental Assistance Division of the (RAD), a component unit of the State of Georgia, as of and for the year ended June 30, 2016, and the related notes to the basic financial statements, which collectively comprise RAD's basic financial statements, and have issued our report thereon dated December 14, Internal Control over Financial Reporting In planning and performing our audit of the basic financial statements, we considered RAD'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 basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of RAD's internal control. Accordingly, we do not express an opinion on the effectiveness of RAD's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether RAD's basic 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. 26

28 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. Atlanta, Georgia December 14,

29 Independent Auditor's Report on Compliance for Each Major Federal Program and on Internal Control over Compliance Required by the Uniform Guidance The Board of Commissioners Rental Assistance Division of the Atlanta, Georgia Report on Compliance for Each Major Federal Program We have audited the Rental Assistance Division of the (RAD) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of RAD's major federal programs for the year ended June 30, RAD's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of RAD's major federal programs 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 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 RAD's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of RAD's compliance. Opinion on Each Major Federal Program In our opinion, RAD complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs for the year ended June 30, Report on Internal Control over Compliance Management of RAD 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 RAD's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine 28

30 the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each 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 RAD'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 type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Atlanta, Georgia December 14,

31 Schedule of Findings and Questioned Costs Year Ended June 30, 2016 I. Summary of Independent Auditor s Results Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None Reported Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR Section (a) Yes X No Identification of major programs: CFDA Number Name of Federal Program Housing Choice Voucher (HCV) Program Mainstream Vouchers Dollar threshold used to distinguish between type A and type B programs. $3,000,000 Auditee qualified as low-risk auditee? Yes X No 30

32 Schedule of Findings and Questioned Costs Year Ended June 30, 2016 Section II Financial Statement Findings No findings relating to the basic financial statements to be reported in accordance with Government Auditing Standards identified. Section III Federal Award Findings No findings relating to the federal awards to be reported in accordance with the Uniform Guidance identified. 31

33 Schedule of Prior Year Findings and Questioned Costs Year Ended June 30, 2016 Finding Condition: DCA-RAD did not correctly determine income for two tenants selected for eligibility testing. Recommendation: It was recommended that management should establish procedures and monitor compliance with those procedures to ensure that the determination of tenant eligibility is in accordance with guidelines specified by HUD. Current status: DCA-RAD will continue to conduct a monthly file review to ensure that tenant eligibility is processed according to HUD Rules and Regulations. No similar findings were noted in the audit for the year ended June 30,

34 Schedule of Expenditures of Federal Awards Year Ended June 30, 2016 Federal Total CFDA Federal Federal Grantor/Program or Cluster Title Number Expenditures U.S. Department of Housing and Urban Development (HUD): Housing Voucher Cluster Section 8 Housing Choice Vouchers $ 130,382,471 Mainstream Vouchers ,406 Total U.S. Department of HUD $ 130,780,877 33

35 Notes to Schedule of Expenditures of Federal Awards Year Ended June 30, 2016 Note 1 - General The accompanying Schedule of Expenditures of Federal Awards (the Schedule) presents the activity of all federal financial assistance programs of the Rental Assistance Division of the Georgia Department of Community Affairs (RAD). RAD receives direct financial assistance from the U.S. Department of Housing and Urban Development. Note 2 Reporting entity The powers of RAD are vested in the Board of the Department of Community Affairs. Board members are appointed by the Governor and are composed of one member from each United States Congressional District in the State (currently 14) plus four additional members from the State at large and will include elected officials of counties or municipalities, individuals with an interest or expertise in community or economic development, environmental issues, housing development or finance or citizens who in the judgment and discretion of the Governor enhance the Department s Board. The Commissioner of the Department of Community Affairs is the Executive Director of the Authority. The State exercises oversight responsibility by approving RAD s Administrative Fund operating budget. RAD does not adopt an annual budget for its state grants and local programs. Due to the extent of the State s oversight responsibility and given the composition of RAD s Board, RAD is considered an instrumentality and component unit of the State of Georgia. Note 3 - Basis of presentation The accompanying Schedule includes the federal award activity of RAD, under programs of the federal government for the year ended June 30, This information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of RAD, it is not intended to and does not present the financial position, changes in net assets, or cash flows of RAD. Note 4 Summary of significant accounting policies Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-87 for State, Local and Indian Tribal Governments, or the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or limited as to reimbursement. RAD has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. 34