COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Glennallen, Alaska

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1 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Financial Statements and Compliance Reports September 30, 2016 and 2015 NEWHOUSE & VOGLER Certified Public Accountants

2 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Table of Contents Exhibit Page INDEPENDENT AUDITOR S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) BASIC FINANCIAL STATEMENTS Statements of Net Position... A-1 7 Statements of Revenues, Expenses, and Changes in Net Position... B-1 8 Statements of Cash Flows... C-1 9 Notes to the Basic Financial Statements REQUIRED SUPPLEMENTRARY INFORMATION (UNAUDITED) Schedule of Proportionate Share of the Net Pension Liability and Related Ratios... D-1 19 Schedule of Required Contributions... D-2 20 Notes to the Required Supplementary Information SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule... E-1 22 Schedule of Program Expenses... E FEDERAL SINGLE AUDIT REPORTS Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance for each Major Federal Program and Report on Internal Control over Compliance Required by Uniform Guidance Summary of Auditor's Results and Schedule of Findings and Questioned Costs STATE SINGLE AUDIT REPORTS Schedule of State Financial Assistance Report on Compliance for each Major State Program and Report on Internal Control Over Compliance Required by the State of Alaska Audit Guide and Compliance Supplement for State Single Audits State Schedule of Findings and Questioned Costs Status of Prior Year Audit Findings... 36

3 Newhouse & Vogler Certified Public Accountants 237 E. Fireweed Lane, Suite 200 Anchorage, Alaska (907) (907) Fax Independent Auditor's Report Board of Commissioners Copper River Basin Regional Housing Authority Ladies and Gentlemen: Report on the Financial Statements We have audited the accompanying financial statements of Copper River Basin Regional Housing Authority, as of and for the years ended September 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise Copper River Basin Housing 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1

4 Board of Commissioners Copper River Basin Regional Housing Authority Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Copper River Basin Housing Authority, as of September 30, 2016 and 2015, and the respective changes in financial position and, cash flows thereof for the years 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 on pages 4 through 6 and the Schedules of Proportionate Share of the Net Pension Liability and Related Ratios and Schedule of Required Contributions on pages 19 and 20 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 Copper River Basin Regional Housing Authority s financial statements. The Budgetary Comparison Schedule, Schedule of Expenditures of Federal Awards, and the Statement of State Financial Assistance, required by the U.S. Office of Management and Budget Uniform Guidance, Audits of States, Local Governments and Non-Profit Organizations and the State of Alaska Single Audit Act are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Budgetary Comparison Schedule, Schedule of Expenditures of Federal Awards, and Schedule of State Financial Assistance 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. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain other 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 Budgetary Comparison Schedule, Schedule of Expenditures of Federal Awards, and Schedule of State Financial Assistance are fairly stated in all material respects in relation to the financial statements as a whole. 2

5 Board of Commissioners Copper River Basin Regional Housing Authority Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 23, 2017 on our consideration of Copper River Basin Regional Housing 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Copper River Basin Regional Housing Authority s internal control over financial reporting and compliance. Anchorage, Alaska May 23,

6 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Management s Discussion and Analysis September 30, 2016 and 2015 Our discussion and analysis of Copper River Basin Regional Housing Authority s (the Authority) financial performance provides for an overview of the Authority s financial activities for the fiscal year ending September 30, Please read it in conjunction with the Authority s financial statements. BASIC FINANCIAL STATEMENTS All transactions are recorded using the full accrual basis of accounting, and the Authority has chosen to be presented as a business-type activity. Net position is classified as net investment in capital assets, restricted, reserved for future construction, and unrestricted. The Statements of Net Position report a classified statement in which assets and liabilities are reported as current and non-current. The Statements of Revenues, Expenses, and Changes in Net Position report operating and nonoperating revenues and expenses. The Statements of Cash Flows have been presented using the direct and indirect methods. FINANCIAL HIGHLIGHTS The main source of revenue is federal grants received from the Department of Housing and Urban Development authorized by the Native American Housing Assistance and Self-Determination Act (NAHASDA). In 2016, the Authority expended $3,306,614 in federal grant funds, $627,234 in state grant funds, and earned $483,424 in rental revenues and administrative fees on units under management. In comparison, in 2015 the Authority expended $2,318,112 in federal grant funds, $466,149 in state grant funds, and earned $465,261 in rental revenues and administrative fees on units under management. 4

7 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Management s Discussion and Analysis, continued FINANCIAL ANALYSIS OF THE AUTHORITY Current and other assets $ 3,684,906 3,648,956 Capital assets, net 8,355,565 8,686,830 Deferred outflows, pension related 339,503 63,540 Total assets and deferred outflows 12,379,974 12,399,326 Liabilities 2,010,241 1,442,295 Deferred inflows, pension related 28,286 97,685 Total liabilities and deferred inflows 2,038,527 1,539,980 Net position: Invested in capital assets, net of related debt 6,940,581 7,271,846 Restricted for Mutual Help housing inventory 1,414,984 1,414,984 Unrestricted 1,985,882 2,172,516 Total net position $ 10,341,447 10,859,346 Revenues: Federal revenue - NAHASDA $ 2,110,327 2,197,432 Dwelling rental and administration fees 483, ,261 State of Alaska - Weatherization 96, ,399 State of Alaska - Supplemental 530, ,750 ICDBG pass-thru 1,196, ,680 Laundry income 15,867 14,983 Water income 10,770 11,589 State of Alaska - PERS on-behalf 42, ,607 Other income 44,712 38,436 Loss on disposal of capital assets - (81,750) Interest Income Total revenues 4,531,305 3,438,707 Expenses: Affordable housing activities 4,554,612 2,691,096 Depreciation 494, ,842 Total expenses 5,049,204 3,167,938 Change in net position (517,899) 270,769 Net position, beginning of year 10,859,346 11,205,237 Period period adjustment, GASB 68 - (616,660) Net position, beginning of year, restated 10,859,346 10,588,577 Net position, end of year $ 10,341,447 10,859,346 5

8 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Management s Discussion and Analysis, continued USING THIS ANNUAL REPORT This annual report consists of the statements of net position; statements of revenues, expenses, and change in net position; and statements of cash flows. The Authority uses the enterprise fund accounting system in accordance with guidance issued by the Department of Housing and Urban Development. BUDGETARY HIGHLIGHTS In accordance with the formula developed to allocate NAHASDA funds among the various tribes, the Authority was granted $2,110,327 for fiscal grant year 2016, compared to $2,197,432 for This amount is subject to change in future years based on changes in the formula and federal funding of NAHASDA. CAPITAL ASSETS AND DEBT ADMINISTRATION The Authority s capitalization policy specifies capitalization of expenditures in excess of $5,000. Expenditures of $5,000 or less are included in current-year expenses at the time of purchase. Lowincome rental units are depreciated over 30 years. Equipment is depreciated over 5 years. Capital assets net of accumulated depreciation totaled $6,940,581 at September 30, 2016, compared to $7,271,846 in the prior year. The Authority held 13 Mutual Help homes in inventory with a value of $1,414,984, at year end, which is unchanged from the prior year. NEXT YEAR S ACTIVITIES The Authority will use a substantial portion of its resources to maintain and operate housing units constructed under the 1937 Housing Act and NAHASDA. The Authority plans to manage the construction of 8 new homes in its region using a combination of Tribal ICDBG, State, and NAHASDA funding. Title to these homes will vest with the Tribal entity through which the ICDBG was received. The Authority is planning construction of a new office and maintenance shop. This project will be built utilizing conventional financing through Wells Fargo. CONTACTING THE AUTHORITY S FINANCIAL MANAGEMENT This financial report is designed to provide the tribes, participants, and the federal government with a general overview of the Authority s finances and to show the Authority s accountability for monies it receives. If you have any questions about this report or need additional information, contact Copper River Basin Regional Housing Authority at PO Box 89, Glennallen, AK

9 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Exhibit A-1 Statements of Net Position September 30, 2016 and Assets and Deferred Outflows of Resources Assets: Current assets: Cash $ 3,408,015 3,187,055 Accounts receivable, net 60,002 75,163 Grants receivable 161, ,610 Prepaid expenses 26,676 24,888 Total current assets 3,656,370 3,603,716 Noncurrent assets: Insurance deposit 28,536 45,240 Capital assets, net of accumulated depreciation 6,940,581 7,271,846 Mutual Help housing unit inventory, restricted 1,414,984 1,414,984 Total non-current assets 8,384,101 8,732,070 Total assets 12,040,471 12,335,786 Deferred outflows of resources: Pension related 339,503 63,540 Total assets and deferred outflows of resources $ 12,379,974 12,399,326 Liabilities, Deferred Inflows of Resources, and Net Position Liabilities: Current liabilities: Accounts payable $ 254,942 83,539 Accrued payroll and taxes 24,483 30,348 Refundable advances 476, ,779 Total current liabilities 756, ,666 Non-current liabilities: Accrued leave 33,426 36,143 Security deposits 78,350 78,341 Net pension liability 1,142, ,145 Total non-current liabilities 1,254, ,629 Total liabilities: 2,010,241 1,442,295 Deferred inflows of resources: Pension related 28,286 97,685 Net Position: Net investment in capital assets 6,940,581 7,271,846 Restricted for Mutual Help housing inventory 1,414,984 1,414,984 Unrestricted 1,985,882 2,172,516 Total net Position 10,341,447 10,859,346 Total liabilities, deferred inflows of resources, and net position $ 12,379,974 12,399,326 See accompanying notes to the financial statements. 7

10 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Exhibit B-1 Statements of Revenues, Expenses, and Changes in Net Position Years Ended September 30, 2016 and Operating revenues: Federal revenue - NAHASDA $ 2,110,327 2,197,432 Dwelling rental and administration fees 483, ,261 State of Alaska - Weatherization 96, ,399 State of Alaska - Supplemental 530, ,750 ICDBG pass-thru 1,196, ,680 Laundry income 15,867 14,983 Water income 10,770 11,589 State of Alaska - PERS on-behalf 42, ,607 Other income 44,712 38,436 Total operating revenues 4,531,189 3,520,137 Operating expenses: Payroll and benefits 1,308,742 1,148,262 Utilities 389, ,535 Depreciation 494, ,842 Supplies and materials 326, ,769 Professional fees 373, ,738 Contractual 1,837, ,408 Insurance 111, ,222 Travel and training 81,780 96,332 Office expenses 67,413 67,906 Vehicle and equipment 47,081 66,948 Other 9,628 41,976 Total operating expenses 5,049,204 3,167,938 Net operating income (518,015) 352,199 Nonoperating revenues (expenses): Loss on disposal of capital assets - (81,750) Interest Income Total non-operating revenues (expenses) 116 (81,430) Increase (decrease) in net position (517,899) 270,769 Net position at beginning of year 10,859,346 11,205,237 Prior period adjustment, GASB 68 - (616,660) Net position at beginning of year, restated 10,859,346 10,588,577 Net position at end of year $ 10,341,447 10,859,346 See accompanying notes to the financial statements. 8

11 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Exhibit C-1 Statements of Cash Flows Years Ended September 30, 2016 and Cash flows from operating activities: Cash received from tenants $ 525, ,636 Cash received from grants 3,894,657 3,311,344 Cash received from other 44, ,057 Cash paid to employees (1,020,878) (999,595) Cash paid to suppliers and vendors (3,059,551) (1,490,107) Net cash provided by operating activities 384,171 1,568,335 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (163,327) (335,472) Interest revenue Proceeds from sale of capital assets - 8,000 Total cash flows used by capital and related financing activities (163,211) (327,152) Net increase in cash 220,960 1,241,183 Cash at beginning of year 3,187,055 1,945,872 Cash at end of year $ 3,408,015 3,187,055 Reconciliation of change in net position to net cash provided (used) by operating activities: Change in net position $ (518,015) 352,199 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation expense 494, ,842 Pension related 310,822 12,094 (Increase) decrease in assets and deferred outflows: Accounts receivable 15,161 9,959 Grants receivable 154,933 (143,696) Other receivables - 203,621 Prepaid expenses (1,788) 8,071 Insurance deposit 16,704 3,520 Deferred outflows of resources (56,944) (51,464) Increase (decrease) in liabilities and deferred inflows: Accounts payable 171,403 29,042 Accrued payroll and taxes (5,865) (5,168) Accrued leave (2,717) (308) Refundable advances (194,124) 670,779 Security deposits 9 2,919 Homebuyer equity accounts - (75) Net cash provided by operating activities $ 384,171 1,568,335 Supplemental information: Non-cash PERS on-behalf payments $ 42, ,607 ` See accompanying notes to the financial statements. 9

12 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Basic Financial Statements September 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Reporting Entity Copper River Basin Regional Housing Authority (the Authority) was established to administer lowincome home ownership and low-rent housing programs funded by Department of Housing and Urban Development (HUD). The programs are governed by terms of the Native American Housing Assistance and Self-determination Act. The Authority is not included in any other governmental reporting entity, and the Authority s Board of Commissioners has decision-making authority, the responsibility to significantly influence operations, and primary accountability for fiscal matters. The Authority does not exercise oversight responsibility over any another entity. The Native American Housing Assistance and Self-determination Act of 1996 (NAHASDA) became effective on October 1, The purpose of this law is to: (1) streamline the process of providing housing assistance to Native Americans; (2) facilitate, where possible, the development of private housing finance mechanisms; and (3) promote economic self-sufficiency and self-determination among Native Americans. Accordingly, it eliminates many compliance requirements under the U.S. Housing Act of 1937, as amended, as well as associated regulations, handbooks, and guidebooks that provided guidance in the past. While permitting the tribal entity greater latitude in establishing policies and procedures, it also created additional reporting and administrative requirements. Under NAHASDA, block grants are awarded directly to tribal entities, and the amount of the block grant is determined by the number of current assisted stock and unmet housing needs within the village. Tribes may designate the Authority to be the tribally designated housing entity (TDHE). Block grants are awarded only after an Indian Housing Plan (IHP) has been submitted. The purpose of an IHP is to demonstrate that the TDHE has made or will make adequate provision to comply with objectives and stewardship requirements of NAHASDA funds. The IHP is composed of a 5-year plan and a 1-year plan. Based upon agreements with a majority of villages in the region and expected funding levels for NAHASDA, the Authority does not expect that revenues received directly or indirectly from HUD will decline substantially within the next few years. (b) Measurement Focus, Basis of Accounting, and Basis of Presentation The financial statements of the Authority are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Authority s reporting entity applies all relevant GASB pronouncements and applicable Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless they conflict with GASB pronouncements. The Authority does not apply FASB pronouncements or APB opinions issued after November 30, The Authority uses the enterprise model for financial reporting purposes where the focus is on measuring economic resources utilizing the full accrual basis of accounting, wherein revenues are recognized when earned and expenses when incurred 10

13 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Measurement Focus, Basis of Accounting, and Basis of Presentation, continued The Statements of Net Position and the Statements of Revenues, Expenses, and Changes in Net Position report information on all activities of the primary government. The Authority has elected to present all activity as one business-type activity. For the most part, the effect of internal activity has been removed, or eliminated, from the financial statements to minimize the grossing up effect on assets and liabilities of the Authority. Operating revenues and expenses are distinguished from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with affordable housing activities of the Authority. Principal operating revenues of the Authority are NAHASDA grant revenues, State and other federal grants, rental income, and other income from operations. Operating expenses of the Authority include standard categories of operating expenses, including salaries and benefits, professional services, etc. Nonoperating items include interest revenue and gain/loss on disposal of fixed assets. When both restricted and unrestricted resources are available for use, it is the Authority s policy to use restricted resources first, then unrestricted resources as needed. (c) Assets, Liabilities, and Net Position Cash The Authority s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of 3 months or less from the date of acquisition. Receivables Tenant account receivables are presented net of the allowance for doubtful accounts. Net receivables are considered fully collectible. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. Capital Assets The Authority s property, plant, equipment, and infrastructure with useful lives of more than 1 year are stated at historical cost and comprehensively reported in the financial statements. The Authority does not have any infrastructure asset recorded. Donated assets are stated at fair value on the date donated. The Authority generally capitalizes assets with a cost of $5,000 or more as purchase and construction outlays occur. Costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives in years for depreciable assets are as follows: Buildings 30 Vehicles/equipment 5 11

14 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Assets, Liabilities, and Net Assets, continued Mutual Help Housing Units From the beginning of the Authority s inception, the Authority began building homeownership units under HUD s new Mutual Help Housing Program. At September 30, 2016, the Authority still held title to Mutual Help units. The units are leased to homebuyers for a period not to exceed 25 years. At the end of the lease, title is transferred to the homebuyer. Terms of the lease are governed by the Mutual Help Occupancy Agreement (MHOA) between the homebuyer and the Authority. HUD s Office of Native American Programs issued accounting guidance on May 23, 2003, stating, The lease-to-own arrangement between the homebuyer and TDHE (the Authority) can best be described as a layaway program. In response to the question of how units should be valued on TDHE s financial books, the guidance stated, Housing units are maintained on financial books until the unit is conveyed to the homebuyer. The value of housing units would be the lower of cost or market. The MHOA would establish the unit s purchase price or market price. Mutual Help housing units are considered a noncurrent restricted asset due to the fact that units are not available to help finance the Authority s operations in the short term and cannot be mortgaged, sold, or disposed of in any manner that would violate terms of the MHOA. Fund Equity Net position of the Authority is reported in one of three classifications. These classifications are invested in capital assets, restricted for Mutual Help housing unit inventory and unrestricted net position. (d) Deferred outflows/inflows of resources In addition to assets, the Statements of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The Authority reports one pension-related item in this category, part of which is contributions made subsequent to the measurement date. Contributions made subsequent to the measurement date are deferred in the year they are contributed and recognized as a reduction in the net pension liability in the subsequent year. The remaining pension-related deferred outflows of resources are amortized over subsequent years. In addition to liabilities, the Statements of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Authority has one pension-related deferred inflow of resources which is amortized over subsequent years. 12

15 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued (e) Revenue and expenses The Authority administers federal and state grants and contracts which are generally of a costreimbursement type. The grants and contracts include provisions for advances and billings for costs on a reimbursable basis. Revenues and receivables are generally recorded when reimbursable expenses are incurred to the extent of the grant or contract amount. Amounts receivable from funding agencies at year end include amounts relating to expenses incurred prior to year end but not reimbursed until after year end. Advances from funding agencies are considered liquidated when the expense is recorded. NOTE 2 CASH At September 30, 2016 and 2015, carrying and bank amounts of the Authority s cash and cash equivalents were as follows: Carrying Bank Amount Amount 2016 Checking, savings, and money market accounts $ 3,408,015 3,433, Checking, savings, and money market accounts $ 3,187,055 3,217,286 The bank balances were covered by the Federal Deposit Insurance Corporation or collateralized by governmental securities held by the Authority s agent under a tri-party agreement. The Authority had covered bank balances at September 30, 2016 and 2015 of $3,414,461 and $3,217,286, respectively. The authority had an uncollateralized bank balance at September 30, 2016 of $18,824. There were no uncollateralized amounts at September 30, NOTE 4 ACCOUNTS RECEIVABLES Receivables were as follows as of September 30, 2016 and 2015: Tenants $ 199, ,912 Less allowance for doubtful accounts (139,238) (157,749) Net accounts receivable $ 60,002 75,163 13

16 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 3 PROPERTY AND EQUIPMENT Property and equipment are carried at cost and consist of the following at September 30, 2016 and 2015: Buildings $ 15,973,547 16,050,690 Vehicles and equipment 263, ,730 Land 380, ,000 16,617,747 16,454,420 Less accumulated depreciation (9,677,166) (9,182,574) Total $ 6,940,581 7,271,846 NOTE 5 PENSION AND POST EMPLOYMENT HEALTH CARE PLANS Description of Plans As of September 30, 2016, all regular employees of the Authority who work more than fifteen hours per week participate in the Alaska Public Employees Retirement System (PERS). PERS administers the State of Alaska Public Employees Retirement System Defined Benefit Retirement Plan which includes both pension and post-employment healthcare plans for all employees hired prior to July 1, The defined benefit plan was an agent multiple-employer, statewide plan until July 1, 2008, when Senate Bill 125 converted the plan to a multiple-employer cost-sharing plan. PERS also administers the State of Alaska Public Employees Retirement System Defined Contribution Retirement Plan which includes both pension and post-employment healthcare plans for all employees hired on or after July 1, PERS is administered by the State. Benefits and contributions provisions are established by Chapter 35 of Alaska Statute Title 39, and may be amended only by state legislature. Amendments do not affect existing employees. PERS audited financial statements and related information is available at Defined Benefit Pension and Post Employment Health Care Plans (Employees hired prior to July 1, 2006) Employee Benefits: The Plan provides for retirement, death and disability, and post-employment health care benefits. There are three tiers of employees, based on entry date. For all tiers within the DB pension plans, full retirement benefits are generally calculated using a formula comprised of a multiplier times the average monthly salary (AMS) times the number of years of service. The multiplier is increased at longevity milestone markers for most employees. 14

17 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 5 PENSION AND POST EMPLOYMENT HEALTH CARE PLANS, continued The tiers within the Plan establish differing criteria regarding normal retirement age, early retirement age, and the criteria for calculation of AMS, COLA adjustments, and other OPEB benefits. A complete benefit comparison chart is available at the website noted above. This plan was closed to new entrants as of September 30, Employees hired after that date participate in the PERS Defined Contribution Plan described later in these notes. Funding Policy: Under State law, covered employees are required to contribute 6.75% of their annual covered salary to the pension plan and are not required to contribute to the Post Employment Healthcare Plan. Under State law the Authority is required to contribute 22% of annual covered salary. For fiscal year 2016, 13.25% of covered salary is for the pension plan and 8.75% of covered salary is for the Post Employment Healthcare Plan. Under AS , the difference between the actuarial required contribution of 27.19% for fiscal year 2016 and the employer rate of 22% is funded by the State. The Authority s contributions to the defined benefit post-employment healthcare plan for the year ended September 30, 2016, totaled $35,157, and for the years ended September 30, 2015 and 2014 totaled $38,562 and $39,464, respectively. Pension Liabilities: At September 30, 2016, the Authority reported a liability for its proportionate share to the net pension liability in the amount of $1,142,385. This amount reflected State pension support provided to the Authority in the amount of $308,248. The total net pension liability associated with the Authority was $1,450,633. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the new pension liability was determined by an actuarial valuation as of June 30, 2014 and rolled forward to June 30, Pension Expense: For the year ended September 30, 2016, the Authority recognized pension expense of $355,502 and revenue of $42,568 for support provided by the State. Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: As of September 30, 2016, the Authority s deferred outflows of resources related to pensions of $339,503 were due to a change in its proportionate share of contributions to the pension plan of $200,250, a difference between expected and actual experience of $1,332, changes in assumptions of $66,796 and contributions to the pension plan subsequent to the measurement date of $71,125. The Authority s deferred inflows of resources related to pension of $28,286 were due to a difference between projected and actual investment earnings of $20,225 and change in proportion and difference between employer contributions of $8,

18 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 5 PENSION AND POST EMPLOYMENT HEALTH CARE PLANS, continued The amounts recognized as deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows: Year Ended June 30, Net Deferred Outflows and Inflows 2017 $ 294, , (12,989) ,742 Total $ 311,217 Actuarial Assumptions: The total pension liability for fiscal year ended September 30, 2016, was determined by an actuarial valuation as of June 30, 2014, rolled forward to June 30, The valuation was prepared assuming an inflation rate of 3.12%. Salary increases were determined by grading by age and service to range from 4.34% to 8.55%. Investment rate of return was calculated at 8.00%, net of pension plan investment expenses, based on an average inflation rate of 3.12% and a real rate of return of 4.88%. Mortality rates were based on the RP-2000 table, 2000 Base Year projected to 2018 with Projection scale BB. The actuarial assumptions used in the June 30, 2014 actuarial valuation were based on the results of an actuarial experience study for the period from July 1, 2009 to June 30, 2013, resulting in changes in actuarial assumptions adopted by the Alaska Retirement Management Board to better reflect expected future experience. The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These rates are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. 16

19 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 5 PENSION AND POST EMPLOYMENT HEALTH CARE PLANS, continued Best estimates of arithmetic real rates of return for each major asset class included in the pension plan s target asset allocation as of June 30, 2015 are summarized in the following table (note that the rates shown below exclude the inflation component): Asset Class Long-Term Expected Real Rate of Return Domestic equity 5.35% Global equity (non-us) 5.55% Private equity 6.25% Fixed income composite 0.80% Real estate 3.65% Alternative equity 4.70% Discount rate: The discount rate used to ensure the total pension liability was 8%. The projection of cash flows used to determine the discount rate assumed that the Authority and nonemployer State contributions will continue to follow the current funding policy, which meets State statutes. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Authority s proportionate share of the net pension liability to changes in the discount rate: The following presents the Authority s proportionate share of the net pension liability using the discount rate of 8% and what it would be if the discount was 1% (7%) lower or 1% higher (9%). Current 1% Decrease Discount Rate 1% Increase -7.00% -8.00% -9.00% Authority's proportionate share of the net pension liability 1,518,705 1,142, ,563 Employee Benefits There is no retirement age set, however taxes and penalties may apply if withdrawn prior to age 59 ½. Retirement benefits are equal to the Defined Contribution account balance plus interest. The employee may direct the investment of the account if so desired. The account balance is 100% of the employees contribution plus 25% of the Authority s contribution after two years of service, 50% of the Authority s contribution after three years of service, 75% of the Authority s contribution after four years of service, and 100% of the Authority s contribution after 5 years of service. The plan pays a portion of the retiree medical plan premium if the retiree retires directly from the plan and is eligible for Medicare. The portion of premium paid by the plan is determined by years of service. Disability benefits are also provided. 17

20 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Notes to the Financial Statements, continued NOTE 5 PENSION AND POST EMPLOYMENT HEALTH CARE PLANS, continued Funding Policy Under State law, covered employees are required to contribute 8% of their annual covered salary. For fiscal year 2016, the Authority is required to contribute 5.22% of the annual covered salary to the pension plan. The contributions to the pension plan for the year ended September 30, 2016, by the employees totaled $31,052 and by the Authority totaled $19,408. Under State law, covered employees are not required to contribute to the post employment healthcare plan. For fiscal year 2016, the Authority is required to contribute 1.68% of the annual covered salary plus an annual flat dollar amount of $2,005 for each covered employee. The Authority contributed $6,036 for retiree medical and $18,141 to a health reimbursement arrangement for the year ended September 30, If the total amount that the Authority has contributed for the defined contribution pension and postemployment healthcare plans is less than 22% of covered payroll, the Authority must pay that additional amount. This additional amount is used to reduce the defined benefit plan s unfunded liability. For the year ended September 30, 2016, the Authority paid additional contributions of $41,003. These contributions equal $25,517 for the defined benefit pension and $15,486 for the defined benefit postemployment healthcare plans. NOTE 6 LINE OF CREDIT Copper River Basin Regional Housing Authority secured a line of credit of $1,095,655 for the construction of their new administration building. The balance at September 30, 2016 was $0. NOTE 7 SUBSEQUENT EVENTS In preparing these financial statements, Copper River Basin Regional Housing Authority has evaluated events and transactions for potential recognition or disclosure through May 23, 2017, the date the financial statements were available to be issued. 18

21 REQUIRED SUPPLEMENTARY INFORMATION

22 Exhibit D-1 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Schedule of Proportionate Share of the Net Pension Liability and Related Ratios September 30, Authority's proportion of the net pension liability % % % - Authority's proportionate share of the net pension liability $ 1,142, , ,336 - State of Alaska proportionate share of the net pension liability 308, , ,951 - Total net pension liability $ 1,450,633 1,080,728 1,412,287 - Authority's covered-employee payroll $ 258, , ,023 - Authority's proportionate share of the net pension liability as a percentage of covered-employee payroll 441% 232% 332% - Plan fiduciary net position as a percentage of the total pension liability 63.96% 62.37% 56.00% - See accompanying independent auditor's report and notes to the Required Supplementary Information. 19

23 Exhibit D-2 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Schedule of Required Contributions September 30, Contractually required contribution $ 56,944 51,464 37,333 50,314 Contributions in relation to the contractually required contribution 56,944 51,464 37,333 50,314 Contribution deficiency (excess) $ Authority's covered-employee payroll $ 258, , , ,699 Contributions as a percentage of covered-employee payroll 22% 22% 22% 22% See accompanying independent auditor's report and notes to the Required Supplementary Information. 20

24 COPPER RIVER REGIONAL BASIN HOUSING AUTHORITY Notes to the Required Supplementary Information September 30, 2016 Schedule of Proportionate Share of the Net Pension Liability and Related Ratios - PERS Defined Benefit Pension Plan Information in this table is presented based on the Plan measurement date. For September 30, 2016, the plan measurement date is June 30, Schedule of Required Contributions Public Employees Retirement System - PERS Defined Benefit Pension Plan This table reports the Authority s pension contributions to PERS Defined Benefit Pension Plan during fiscal year These contributions are reported as a deferred outflow of resources on the September 30, 2016 basic financial statements. Both pension tables are intended to present 10 years of information. Additional years information will be added to the schedules as it becomes available. The plan is reporting no changes in benefit terms from the prior measurement period. The plan is reporting no changes in assumptions from the prior measurement period. 21

25 SUPPLEMENTARY INFORMATION

26 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Exhibit E-1 Budgetary Comparison Schedule Governmental Fund Basis Year Ended September 30, 2016 Revised Budget Actual Variance Revenues: Dwelling rental and administrative fees $ 450, ,424 (33,424) NAHASDA IHBG revenue 2,110,327 2,110,327 - HUD ICDBG 1,711,993 1,196, ,706 State of Alaska - AHFC Supplemental 670, , ,544 State of Alaska - AHFC Weatherization 100,000 96,999 3,001 State of Alaska - PERS On-Behalf 40,000 42,568 (2,568) Loan proceeds 1,095,655-1,095,655 Other 50,000 71,349 (21,349) Total revenues 6,228,754 4,531,189 1,697,565 Expenses: Administration: Salaries and fringe 355, ,316 19,684 Travel and training 70,000 61,821 8,179 Professional fees 145, ,422 23,578 Office expenses 52,000 45,680 6,320 Professional liability insurance 3,500 1,117 2,383 Total administration 625, ,356 60,144 Housing services: Salaries and fringe 115,000 86,514 28,486 Staff training and travel 4,000 1,821 2,179 Professional fees 5,500 5, Office expenses 3,000 3,173 (173) Total housing services 127,500 96,567 30,933 Maintenance and operations: Salaries and fringe 530, ,826 1,174 Staff training and travel 15,000 13,780 1,220 Utilities 420, ,690 30,310 Vehicle costs 50,000 34,715 15,285 Insurance 110, ,625 1,375 Supplies and materials 300, ,861 7,139 Other expenses 20,000 18,706 1,294 Total maintenance and operations 1,445,000 1,387,203 57,797 Project Development: Salaries and fringe 70,000 33,924 36,076 Staff training and travel 2, ,452 Professional fees 4,000-4,000 Total project development 76,000 34,472 41,528 AHFC Weatherization Program 120, ,821 3,179 ICDBG pass-thru 2,630,292 2,084, ,641 Capital construction projects 1,204, ,632 1,034,830 Total expenses 6,228,754 4,454,702 1,774,052 Net income - 76,487 (76,487) This schedule was prepared on the modified accrual basis of accounting. 22

27 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Exhibit E-2 Schedule of Program Expenses Year Ended September 30, 2016 Housing Maintenance Project AHFC Administration Services and Operations Development Weatherization Operating expenses: Payroll and benefits $ 598,550 86, ,826 33,924 60,928 Utilities , Depreciation 494, Supplies and materials ,860-33,876 Professional fees 121,422 5, Contractual Insurance 1, ,625-2,197 Travel and training 61,821 1,821 13, ,810 Office expenses 45,681 3,173 18, Vehicles and equipment ,715-12,366 Other ,628 Total operating expenses $ 1,323,183 96,567 1,387,203 34, ,128 See accompanying notes to the financial statements. 23

28 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Exhibit E-2, continued Schedule of Program Expenses, continued ICDBG Chitina Kluti-Kaah Gakona Gulkana Total Operating expenses: Payroll and benefits $ ,308,742 Utilities ,690 Depreciation ,592 Supplies and materials ,736 Professional fees 98,772 64,068-84, ,938 Contractual 630,926 1,183,122 23,469-1,837,665 Insurance ,939 Travel and training ,780 Office expenses ,413 Vehicles and equipment ,081 Other ,628 Total operating expenses $ 729,698 1,247,190 23,469 84,294 5,049,204 See accompanying notes to the financial statements. 24

29 FEDERAL SINGLE AUDIT REPORTS

30 COPPER RIVER BASIN REGIONAL HOUSING AUTHORITY Schedule of Expenditures of Federal Awards Year Ended September 30, 2016 Total Grant CFDA Grant Eligible Federal Grant Title Number Number Award Expenditures U.S. Department of Housing and Urban Development: ICDBG - Kluti-Kaah (passed through the Native Village of Kluti-Kaah) B-11-SR $ 600, ,193 ICDBG - Chitina (passed through the Native Village of Chitina) B-12-SR , ,800 ICDBG - Gulkana (passed through the Native Village of Gulkana) B-14-SR ,000 84,294 NAHASDA FY16* 55IH ,110,327 2,110,327 $ 3,910,327 3,306,614 *Denotes a major program 25

31 COPPER RIVER BASIN REGINOAL HOUSING AUTHORITY Notes to the Schedule of Expenditures of Federal Awards September 30, 2016 NOTE 1 BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Copper River Basin Regional Housing Authority (the Authority) under programs of the federal government for the year ended September 30, The information in the Schedule is presented in accordance with the audit requirements of Title 2 U.S. CFR Part 200, Uniform Guidance. Because the Schedule presents only a selected portion of the operations of the Authority, it is not intended to and does not present the financial position, changes in net position, or cash flows of the Authority. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Title 2 U.S. CFR Part 200, Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. NOTE 3 FEDERAL INDIRECT RATE The Authority did not elect to use the 10% de minimis indirect cost rate. 26

32 Newhouse & Vogler Certified Public Accountants 237 E. Fireweed Lane, Suite 200 Anchorage, Alaska (907) (907) Fax 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 Board of Commissioners Copper River Basin Regional Housing Authority Ladies and Gentlemen: We have audited, 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, the basic financial statements of Copper River Basin Regional Housing Authority as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise Copper River Basin Regional Housing Authority s basic financial statements, and have issued our report thereon dated May 23, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Copper River Basin Regional Housing Authority s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Copper River Basin Regional Housing Authority s internal control. Accordingly, we do not express an opinion on the effectiveness of Copper River Basin Regional Housing Authority s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the 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. 27

33 Board of Commissioners Copper River Basin Regional Housing Authority Our consideration of internal control over financial reporting 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 financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting 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 Copper River Basin Regional Housing Authority s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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. Anchorage, Alaska May 23,

34 Newhouse & Vogler Certified Public Accountants 237 E. Fireweed Lane, Suite 200 Anchorage, Alaska (907) (907) Fax Report on Compliance for each Major Federal Program and Report on Internal Control over Compliance Required by Uniform Guidance Independent Auditor s Report Board of Commissioners Copper River Basin Regional Housing Authority Ladies and Gentlemen: Report on Compliance for Each Major Federal Program We have audited Copper River Basin Regional Housing Authority s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended September 30, Copper River Basin Regional Housing Authority 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 the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Copper River Basin Regional Housing Authority 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 requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Copper River Basin Regional Housing Authority s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Copper River Basin Regional Housing Authority s compliance. 29

35 Board of Commissioners Copper River Basin Regional Housing Authority Opinion on each Major Federal Program In our opinion, Copper River Basin Regional Housing Authority 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 for the year ended September 30, Report on Internal Control over Compliance Management of Copper River Basin Regional Housing Authority is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Copper River Basin Regional Housing Authority 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 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 Copper River Basin Regional Housing Authority s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a 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. Anchorage, Alaska May 23,