BOCA RATON HOUSING AUTHORITY

Transcription

1 BOCA RATON HOUSING AUTHORITY Basic Financial Statements and Supplemental Information December 31, 2016

2 TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS 4 BASIC FINANCIAL STATEMENTS Statement of Net Position 8 Statement of Revenues, Expenses and Changes in Net Position 9 Statement of Cash Flows 10 Notes to Basic Financial Statements 12 REQUIRED SUPPLEMENTAL INFORMATION Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on Participation in the Employee Pension Plan of Florida Municipal Pension Trust Fund 30 Schedule of Contributions Based on Participation in the Public Employee Pension Plan of Florida Municipal Pension Trust Fund 31 SUPPLEMENTAL INFORMATION Financial Data Schedule 33 Schedule of Actual Capital Fund Program Costs and Advances 37 SINGLE AUDIT AND COMPLIANCE INFORMATION Schedule of Expenditures of Federal Awards and Local Assistance 39 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 40 Independent Auditor s Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 42 Schedule of Findings and Questioned Costs 44 Page

3 8035 Spyglass Hill Road Melbourne, FL Phone: Fax: S. Orange Ave. Suite 1545 Orlando, FL Phone: Fax: INDEPENDENT AUDITOR S REPORT Board of Commissioners Boca Raton Housing Authority Boca Raton, Florida Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities of the Boca Raton Housing Authority (the Authority ), as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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. 1

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority s business-type activities as of December 31, 2016, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and the employee pension trust fund information as listed in the table of contents 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 supplemental 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 the Authority s financial statements as a whole. The accompanying financial data schedule and schedule of actual capital fund program costs and advances are presented for purposes of additional analysis as required by U.S. Department of Housing and Urban Development, and are not a required part of the financial statements of the Authority. The accompanying schedule of expenditures of federal awards and local assistance 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 not a required part of the financial statements of the Authority. The supplemental information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the 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 information is fairly stated in all material respects in relation to the financial statements taken as a whole. 2

5 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 28, 2017 on our consideration of the Authority s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority s internal control over financial reporting and compliance. June 28, 2017 Melbourne, Florida Berman Hopkins Wright & LaHam CPAs and Associates, LLP 3

6 Management s Discussion and Analysis As management of the Boca Raton Housing Authority (the Authority ), we offer the readers of the Authority s financial statements this narrative overview and analysis of the financial activities of the Authority for the year ended December 31, We encourage readers to consider the information presented here in conjunction with the Authority s financial statements. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Executive Director, John Scannell, Boca Raton Housing Authority, 2333A West Glades Road, Boca Raton, FL Financial Points The assets of the Authority exceeded the liabilities as of December 31, 2016 by $5,232,108 (net position). The Authority s cash balances as of December 31, 2016 were $1,420,995, representing an increase of $155,549. The Authority earned direct revenue from the U.S. Department of Housing and Urban Development ( HUD ) of $7,023,454. Dixie Manor, a Public Housing community, had a 97.4% occupancy rate. Boca Island East, an affordable housing community, had a 99.5% occupancy rate. Overview of Financial Statements The financial statements included in this annual report are those of a special-purpose government engaged in a single business-type activity prepared on an accrual basis. Over time, significant changes in the Authority s net position serve as a useful indicator of whether its financial health is improving or deteriorating. To fully assess the financial health of any authority, the reader must also consider other non-financial factors such as changes in client household composition, fluctuations in the local economy, HUD mandated program administrative changes and the physical condition of capital assets. The following statements are included: Statement of Net Position - this statement reports the Authority s assets and deferred outflows of resources less its liabilities and deferred inflows of resources at the end of the fiscal year. You can think of the Authority s net position as the difference between the Authority s rights (assets and deferred outflows of resources) and the Authority s obligations (liabilities and deferred inflows of resources). Statement of Revenue, Expenses, and Changes in Net Position - this statement presents information showing how the Authority s net position increased or decreased during the current fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of when cash is received or paid. Thus, revenues and expenses are reported in this statement for some items that will result in cash inflows and cash outflows in the future periods. Statement of Cash Flows - this statement presents information showing the total cash receipts and cash disbursements of the Authority during the current fiscal year. The statement reflects the net changes in cash resulting from operations plus any other cash requirements during the current year (i.e. capital additions, debt service, prior period obligations, etc.). The statement reflects the receipt or disbursement of cash that was obligated to or paid by the Authority in prior periods and subsequently received or paid during the current fiscal year (i.e. receivables and payables). 4

7 Overview of Financial Statements (continued) Notes to the Basic Financial Statements - the notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided. These notes give greater understanding on the overall activity of the Authority and how values are assigned to certain assets and liabilities and the longevity of these values. In addition, notes reflect the impact (if any) of any uncertainties the Authority may face. In addition to the basic financial statements listed above, our report includes supplemental information. This information is to provide more detail on the Authority s various programs and the required information mandated by regulatory bodies that fund the Authority s various programs. Financial Analysis Statement of Net Position Net Change Current assets, net $ 1,553,786 $ 1,379,694 $ 174,092 Capital assets, net 3,125,723 3,330,073 (204,350) Other noncurrent assets 883, , ,016 Total assets 5,562,980 5,379, ,758 Deferred outflows of resources 245, ,850 (48,317) Current liabilities 282, ,411 (87,979) Other noncurrent liabilities 31, ,014 (92,510) Total liabilities 313, ,425 (180,489) Deferred inflows of resources 262,469 38, ,266 Net investment in capital assets 3,125,723 3,330,073 (204,350) Restricted net position 43,911 34,598 9,313 Unrestricted net position 2,062,474 1,775, ,701 $ 5,232,108 $ 5,140,444 $ 91,664 Net Current Assets increased by $174,092 primarily due to an increase in cash of $155,549. Net Capital Assets decreased by $204,350 due to depreciation expense of $542,913 and net disposals of $2,080 offset by the increase in capital assets of $340,643. Other Noncurrent Assets increased by $214,016 primarily due to the increase in the net pension asset (see Note B-5). Deferred Outflows of Resources decreased by $48,317 due to the recording of changes in the net pension asset (see Note B-5). Deferred Inflows of Resources increased by $224,266 due to the changes in the net pension asset (see Note B-5). 5

8 Net Position - The difference between an organization s assets and deferred outflows of resources and its liabilities and deferred inflows of resources is its net position. Net position is categorized into three components. 1. Net investment in capital assets - the Authority s capital assets, net of accumulated depreciation and related debt. 2. Restricted - the component of the Authority s net position which is subject to constraints imposed by law or agreement. 3. Unrestricted - the component of the Authority s net position that is neither invested in capital assets nor restricted which increase principally due to operations. These resources are available to meet the Authority s ongoing obligations to its residents and creditors. Changes in Net Position Net Change Operating revenue: HUD revenue $ 6,774,033 $ 6,632,690 $ 141,343 Other revenue, net 2,053,969 2,382,431 (328,462) Total operating revenue 8,828,002 9,015,121 (187,119) Operating expenses: Housing assistance payments 6,889,891 7,079,131 (189,240) Depreciation 542, ,887 (6,974) Administrative 762, ,092 (70,676) Tenant services 266, ,249 (69,701) Utilities 129, ,736 2,477 Maintenance 307, ,752 1,595 General 107, ,767 (13,087) Total operating expenses 9,006,008 9,351,614 (345,606) Operating income (loss) (178,006) (336,493) 158,487 Nonoperating revenues (expenses:) Gain (loss) on disposal of capital assets (2,081) (2,118) 37 Interest income - unrestricted 3,166 7,141 (3,975) Total nonoperating revenues (expenses) 1,085 5,023 (3,938) Change in net position before capital contributions (176,921) (331,470) 154,549 HUD capital grants 268, , ,733 Change in net position 91,664 (203,618) 295,282 Total net position - beginning 5,140,444 4,428, ,919 Prior period adjustment - 915,537 (915,537) Total net position - ending $ 5,232,108 $ 5,140,444 $ 91,664 6

9 Total Operating Revenue decreased $187,119 mainly due to a decrease in the number of incoming portable vouchers administered. Total Operating Expenses are categorized by the Authority as administrative, tenant services, utilities, maintenance, general, depreciation and housing assistance payments. Housing assistance payments decreased by $189,240 mainly due to a decrease in the number of incoming portable vouchers administered. Capital Asset and Debt Activity Net capital assets decreased by $204,350 mostly due to depreciation expense of $542,913 and net disposals of $2,080 offset by the increase in capital assets of $340,643. At the end of the fiscal year 2016, the Authority had no long-term debt. Factors Affecting Next Year s Budget The Authority is dependent upon HUD for the funding of its Low Rent Public Housing, Housing Choice Voucher and Capital Fund programs; therefore, the Authority is affected by the federal budget. Other portions of the Authority s portfolio, for instance, affordable housing sites and/or third party contract work, are affected more by national and local economic conditions. Economic Factors Significant economic factors affecting the Authority are as follows: Federal funding provided by Congress to the Department of Housing and Urban Development; Local labor supply and demand, which can affect salary and wage rates; Local inflationary, recessionary and employment trends, which can affect resident incomes and therefore the amount of rental income; Inflationary pressure on utility rates, housing costs, supplies and other costs; and Trends in the current housing market. Focus Forward The Authority s Board approved the 2017 operating budgets for its Low Income Public Housing Program, Housing Choice Voucher Program, Boca Island East affordable housing complex and the Pearl City C.A.T.S after-school program. During 2017, the Authority will continue to devote its time and efforts to assisting low income residents with housing and other needs. Conclusion The Authority, along with its Board of Commissioners, will continue to use the resources available to provide the best possible assistance to the residents and clients it serves. As funding and other factors (including economic and budgetary) change, the Authority will do what is necessary to carry out its mission. 7

10 STATEMENT OF NET POSITION December 31, 2016 ASSETS CURRENT ASSETS Cash and cash equivalents - unrestricted $ 1,213,269 Cash and cash equivalents - restricted 177,927 Receivables, net 128,910 Prepaid expenses 33,680 Total current assets 1,553,786 NONCURRENT ASSETS Cash and cash equivalents - restricted 29,799 Capital assets, net 3,125,723 Net pension asset 853,672 Total assets 5,562,980 DEFERRED OUTFLOWS OF RESOURCES Defined benefit pension plan 245,533 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities 50,587 Accrued compensated absences 15,367 Tenant security deposits 65,840 Unearned revenue 51,838 Family self-sufficiency escrow 68,176 Other current liabilities 30,624 Total current liabilities 282,432 NONCURRENT LIABILITIES Accrued compensated absences 1,705 Family self-sufficiency escrow 29,799 Total liabilities 313,936 DEFERRED INFLOWS OF RESOURCES Defined benefit pension plan 262,469 NET POSITION Net investment in capital assets 3,125,723 Restricted 43,911 Unrestricted 2,062,474 Total net position $ 5,232,108 The accompanying notes are an integral part of this financial statement. 8

11 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION Year Ended December 31, 2016 OPERATING REVENUES HUD operating revenues $ 6,774,033 Tenant revenue, net 759,403 Other grant revenue 185,216 Other operating revenue 1,109,350 Total operating revenues 8,828,002 OPERATING EXPENSES Administrative 762,416 Tenant services 266,548 Utilities 129,213 Maintenance 307,347 General 107,680 Depreciation 542,913 Housing assistance payments 6,889,891 Total operating expenses 9,006,008 OPERATING LOSS (178,006) NONOPERATING REVENUES (EXPENSES) Loss on disposal of capital assets (2,081) Interest income - unrestricted 3,166 Total nonoperating revenues (expenses) 1,085 Change in net position before capital contributions (176,921) CAPITAL CONTRIBUTIONS HUD capital grants 268,585 Change in net position 91,664 Total net position - beginning 5,140,444 Total net position - ending $ 5,232,108 The accompanying notes are an integral part of this financial statement. 9

12 STATEMENT OF CASH FLOWS Year Ended December 31, 2016 CASH FLOWS FROM OPERATING ACTIVITIES HUD operating grants received $ 6,789,019 Collections from tenants 739,057 Collections from other grants 223,449 Collections from other sources 1,109,350 Payments to employees (1,003,363) Payments to suppliers (702,212) Housing assistance payments (6,930,859) Net cash provided by operating activities 224,441 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of property and equipment (339,004) Proceeds from HUD capital grant 266,946 Net cash used in capital and related financing activities (72,058) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 3,166 NET INCREASE IN CASH 155,549 Cash at beginning of year 1,265,446 Cash at end of year $ 1,420,995 AS PRESENTED ON THE ACCOMPANYING STATEMENT OF NET POSITION: Cash and cash equivalents - unrestricted $ 1,213,269 Cash and cash equivalents - restricted - current 177,927 Cash and cash equivalents - restricted - noncurrent 29,799 $ 1,420,995 The accompanying notes are an integral part of this financial statement. 10

13 STATEMENT OF CASH FLOWS (continued) Year ended December 31, 2016 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating loss $ (178,006) Adjustments to reconcile operating loss to net cash provided by operating activities Depreciation 542,913 Provision for bad debt 7,902 (Increase) decrease in assets and deferred outflows: Receivables, net (27,688) Due from HUD 15,587 Due from other governments 38,233 Prepaid expenses 1,418 Net pension asset (266,372) Defined benefit pension plan 48,317 Increase (decrease) in liabilities and deferred inflows: Accounts payable and accrued liabilities (22,721) Accrued compensated absences (89,207) Accrued salaries and benefits (1,882) Tenant security deposits (560) Unearned revenue (43,211) Family self-sufficiency escrow 2,331 Accounts payable - PHA projects (43,299) Due from HUD (601) Other current liabilities 17,021 Defined benefit pension plan 224,266 Net cash provided by operating activities $ 224,441 The accompanying notes are an integral part of this financial statement. 11

14 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Reporting entity Boca Raton Housing Authority (the Authority ), a governmental agency, was created pursuant to Florida Statutes Chapter 421. The primary purpose of the Authority is to develop, acquire and operate safe, decent, sanitary and affordable housing for low-income families and to operate the housing programs in accordance with federal legislation. The Authority's governing board consists of a five member Board of Commissioners (the Board ), which is appointed by the City Council of the City of Boca Raton, Florida (the City ). The Authority is not a component unit of the County, as defined in Governmental Accounting Standards Board ( GASB ) Statement No. 61, The Financial Reporting Entity: Omnibus, as amended, as the Board independently oversees the Authority s operations. The definition of the reporting entity as defined by GASB Statement No. 61 is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization s governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government. Blended component unit Some component units, despite being legally separate from the primary government, are so integrated with the primary government that they are in substance part of the primary government. These component units are blended with the primary government. In 2005, the Authority formed a 501(c)(3) organization, Dixie Manor Children s Fund, Inc., which was organized to engage in a wide range of charitable, educational and recreational programs for the children of housing developments owned or managed by the Authority. This organization was determined to be a component unit of the Authority. Component units are legally separate organizations for which the primary government is financially accountable or organizations which should be included in the primary government s financial statements because of the nature and significance of their relationship with the primary government. In determining how to define the reporting entity, management has considered all potential component units. Although legally separate entities, blended component units are, in substance, part of the Authority s operation. Accordingly, data from Dixie Manor Children s Fund, Inc. is combined with data of the primary government. However, during the current fiscal year there was no component unit activity to report in the accompanying financial statements. 12

15 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. Government-wide and fund financial statements The government-wide financial statements report information about the reporting government as a whole excluding fiduciary activities. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues and other nonexchange revenues. Businesstype activities rely, to a significant extent, on fees and charges for support. Governments use fund accounting, whereby funds are organized into three major categories: governmental, proprietary and fiduciary. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, deferred outflows of resources, liabilities, deferred inflow of resources, fund net position, revenues and expenditures/expenses. For financial reporting purposes, the Authority reports all of its operations as a single business activity in a single enterprise fund. Therefore, the government-wide and the fund financial statements are the same. Enterprise funds are proprietary funds. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating activities generally arise from providing services in connection with a proprietary fund s principal activity. The operating revenues of the Authority consist primarily of rental charges to tenants and operating grants from the U.S. Department of Housing and Urban Development ( HUD ), and include, to a lesser extent, certain operating amounts of capital grants that offset operating expenses. Operating expenses for the Authority include the cost of administrative, tenant services, general, maintenance, utilities, protective services, depreciation and housing assistance payments. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses, except for capital contributions, which are presented separately. When restricted resources meet the criteria to be available for use and unrestricted resources are also available for use, it is the Authority s policy to use restricted resources first, and then unrestricted resources, as needed. 3. Measurement focus and basis of accounting Measurement focus is a term used to describe which transactions are recorded within the various financial statements. The proprietary fund utilizes an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net position (or cost recovery), financial position and cash flows. All assets, deferred outflows of resources, liabilities and deferred inflows of resources (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. 13

16 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. Measurement focus and basis of accounting (continued) Basis of accounting refers to when transactions are recorded regardless of the measurement focus applied. The basis of accounting used is similar to businesses in the private sector, thus, these funds are maintained on the accrual basis of accounting. Revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. For financial reporting purposes, the Authority considers its grants associated with operations as operating revenue because these funds more closely represent revenues generated from operating activities rather than non-operating activities. Grants associated with capital acquisition and improvements are considered capital contributions and are presented after non-operating activity on the accompanying statement of revenues, expenses and changes in net position. The Authority maintains its accounts in accordance with the chart of accounts prescribed by HUD. As provided by GASB Statement No. 34 and related guidance, tenant revenue and fraud recovery revenue is reported net of accounts written off in the amounts of $13,242 and $5,583, respectively. 4. Summary of HUD programs The accompanying basic financial statements include the activities of several housing programs subsidized by HUD at the Authority. A summary of each significant program is provided below. Public and Indian Housing Programs The Authority owns, operates and maintains a 95-unit Public Housing property in the City of Boca Raton, called Dixie Manor. The purpose of the public housing program is to provide decent and affordable housing to low-income families at reduced rents. The developments/units are acquired, developed and modernized under HUD s Development and Capital Fund programs. Funding of the program operations and development is provided by federal annual contributions, operating subsidies and tenant rentals (determined as a percentage of family income, adjusted for family composition and other allowances). Housing Assistance Payments ( HAP ) Programs HAP Programs utilize existing privately owned family rental housing units to provide decent and affordable housing to low-income families. The Section 8 Housing Choice Voucher program ( HCV ) is funded through federal housing assistance contributions from HUD for the difference between the approved landlord contract rent and the rent paid by the tenants. 14

17 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4. Summary of HUD programs (continued) State and Local The State and Local Program is made up of Pearl City Children Achieving Their Success ( C.A.T.S. ) and the Community Center. The C.A.T.S. Program is a certified after school and day camp program for children with low-income families. The program operates from Dixie Manor s Community Center. These programs receive funding from Family Central, Inc., and the City of Boca Raton, Florida and various other local organizations. Business Activities The Authority s business activities consist of Boca Island East Apartments. The apartment is not a separate legal entity but rather a housing development owned and managed by the Authority. 5. Budgets Budgets are prepared on an annual basis for each program and are used as a management tool throughout the accounting cycle. Budgets are not, however, legally adopted nor required in the basic financial statement presentation. 6. Cash and cash equivalents Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. 7. Receivables Receivables consist of revenues earned during the fiscal year and not yet received. Management s estimate of the allowance is based on historical collection experience and a review of the current status of accounts receivable. 15

18 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 8. Eliminations - interprogram due to/from In the normal course of operations, certain programs may pay for common costs or advance funds for operations that create interprogram receivables or payables. These interprogram receivables and payables normally offset and are eliminated for the presentation of the Authority as a whole. As of December 31, 2016, $19,164 of Interprogram amounts was eliminated. 9. Capital assets The Authority s policy is to capitalize assets with a value in excess of $500 and a useful life in excess of two years. The Authority capitalizes the costs of site acquisition and improvement, structures, equipment and direct development costs meeting the capitalization policy. Capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at fair market value on the date contributed. Depreciation has been calculated using the straight-line method over the estimated useful lives, which range as follows: Buildings and improvements Equipment - dwelling and administration years 5-7 years 10. Deferred outflows of resources In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to future periods and thus, will not be recognized as an outflow of resources until then. The Authority s balance of deferred outflows of resources relates to funding of the net pension asset (see Note B-5). 11. Compensated absences Compensated absences are those absences for which employees will be paid, such as vacation and sick leave. Full-time regular employees are granted leave benefits to specified maximums depending on tenure with the Authority. Generally, after meeting tenure requirements, employees are entitled to all accrued annual leave and a maximum of 30% of sick leave upon termination. In accordance with the provisions of GASB Statement No. 16, Accounting for Compensated Absences, the estimated liability for vested leave benefits is recorded when it is earned as an expense and the cumulative unpaid amount is reported as a liability. 16

19 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 12. Deferred inflows of resources In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future periods and thus, will not be recognized as an inflow of resources until then. The Authority s balance of deferred inflows of resources relates to funding of the net pension asset (see Note B-5). 13. Net position In accordance with GASB Statement No. 34, as amended, total equity as of December 31, 2016 is classified into three components of net position: Net Investment in capital assets This category consists of capital assets, net of accumulated depreciation, reduced by any outstanding balances of debt and deferred inflows of resources related to the acquisition, construction, and improvements of those assets. Restricted component of net position This category consists of restricted assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources. The statement of net position of the Authority reports $43,911 in the restricted component of net position which consists entirely of Housing Choice Voucher reserves. Unrestricted component of net position This category includes the remaining amounts not required to be reported in the other components of net position. 14. Payments in lieu of taxes As part of an agreement for the exchange of a tract of land, the Authority entered into an agreement with the City of Boca Raton, Florida, (the City ) to waive payments in lieu of taxes through Therefore no liability or expense is recognized in the accompanying financial statements. 15. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the basic financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 17

20 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 16. Income taxes The Authority is a governmental entity and is exempt from federal and state income taxes. Accordingly, no provision for income taxes has been made in the financial statements. The Authority s blended component unit is subject to the income tax provisions of Florida Statutes and the Internal Revenue Code, however, they had no activity during 2016 and no income tax is due. 17. Impairment of long-lived assets The Authority evaluates events or changes in circumstances affecting long-lived assets to determine whether an impairment of its assets has occurred. If the Authority determines that a capital asset is impaired, and that impairment is other-than-temporary, then an impairment loss will be recorded in the Authority s financial statements. Management has determined that there were no impairments as of December 31, Impact of recently issued accounting policies In June 2015, the GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68 and Amendments to Certain Provisions of GASB Statements 67 and 68, which clarifies certain provisions of GASB No. 68, Accounting and Financial Reporting for Pensions, and it establishes requirements for defined contribution pensions that was not within the scope of GASB No. 68. This statement is effective for the Authority s December 31, 2017 fiscal year end. Management is currently evaluating the impact of the adoption of this statement on the Authority s financial statements. In January 2016, the GASB issued Statement No. 80, Blending Requirements for Certain Component Units - An Amendment of GASB Statement No. 14, which amends GASB Statement No. 14, The Financial Reporting Entity, as amended, by addressing the blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. This statement is effective for the Authority s December 31, 2017 fiscal year end. Management is currently evaluating the impact of the adoption of this statement on the Authority s financial statements. 18

21 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE B - DETAILED NOTES 1. Deposits and investments As of December 31, 2016, the Authority s cash and cash equivalents consist of cash with carrying amounts of $1,206,761 and money market funds in the amount of $214,234. In accordance with GASB Statement No. 40, the Authority s exposure to risk is disclosed as follows: Custodial Credit Risk. Custodial credit risk is the risk that in the event of a bank failure, the Authority s deposits may not be returned. The Authority does have a deposit policy for custodial credit risk, which requires collateral to be held in the Authority s name by its agent or by the bank s trust department. As of December 31, 2016, none of the Authority s bank balance was exposed to custodial credit risk. Restricted deposits The classification of restricted cash as noncurrent is based on the estimated time frame of payment of the associated liability. As of December 31, 2016, restricted cash, cash equivalents, and investments consist of the following: Current Portion Noncurrent Portion Total Cash and cash equivalents: Security deposits $ 65,840 $ - $ 65,840 Family self-sufficiency escrow 68,176 29,799 97,975 HAP reserves 43,911-43,911 Total cash and cash equivalents $ 177,927 $ 29,799 $ 207,726 19

22 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE B - DETAILED NOTES (continued) 2. Receivables, net As of December 31, 2016, receivables, net consist of: Portability receivables $ 28,737 Due from HUD 24,845 Due from other governments 31,767 Fraud recovery 43,748 Tenant receivables 18,638 Total receivables 147,735 Allowance for doubtful accounts - tenants (13,492) Allowance for doubtful accounts - fraud (5,333) $ 128, Capital assets, net A summary of changes in capital assets, net is as follows: Balance at January 1, 2016 Transfers in/ Additions Transfers out/ Deletions Balance at December 31, 2016 Non-depreciable: Land $ 451,320 $ - $ - $ 451,320 Construction in progress - 19,164-19,164 Total non-depreciable 451,320 19, ,484 Depreciated: Buildings and improvements 11,503, ,583-11,776,092 Equipment - dwelling 1,553,954 46,352 (18,036) 1,582,270 Equipment - administration 194,673 2,544 (1,415) 195,802 Total depreciated 13,252, ,479 (19,451) 13,554,164 Total capital assets 13,703, ,643 (19,451) 14,024,648 Less accumulated depreciation Buildings and improvements (8,903,245) (434,098) - (9,337,343) Equipment - dwelling (1,371,131) (98,433) 15,956 (1,453,608) Equipment - administration (99,007) (10,382) 1,415 (107,974) Total accumulated depreciation (10,373,383) (542,913) 17,371 (10,898,925) Capital assets, net $ 3,330,073 $ (202,270) $ (2,080) $ 3,125,723 20

23 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE B - DETAILED NOTES (continued) 4. Noncurrent liabilities A summary of changes in noncurrent liabilities is as follows: Payable at January 1, 2016 Additions Reductions Payable at December 31, 2016 Current Portion Compensated absences $ 106,279 $ 38,976 $ (128,183) $ 17,072 $ 15,367 Net pension liability (asset) (587,300) 72,646 (339,018) (853,672) - Family self sufficiency escrow 95,644 49,098 (46,767) 97,975 68,176 Total $ (385,377) $ 160,720 $ (513,968) $ (738,625) $ 83, Retirement plans a) Defined benefit pension plan Plan description. The Authority provides pension benefits for all of its full time regular employees through the Florida Municipal Pension Trust Fund ( FMPTF ). The plan is a multiple-employer defined benefit pension plan. The plan provides retirement, disability, and death benefits to plan members and beneficiaries. The Board of Trustees which is comprised of the Authority s Board of Commissioners holds the authority to establish and amend benefit provisions. The plan is administered by the Board of Trustees of the Retirement Plan for the Employees for the Boca Raton Housing Authority. An independent audit of the Florida Municipal Pension Trust fund is performed annually and a copy of the report can be obtained by contacting the Plan Administrator. Benefits provided. Members are eligible to retire with an unreduced benefit at age 65 or age 62 with 10 years of service credit or age 55 with 20 years of service, these are considered Division 1. Further eligibility includes age 65 or age 55 with 15 years of service (hired prior to October 2, 2004) and age 65 or age 55 with 20 years of service (hired after October 1, 2004). Benefits are determined by a formula using the member s highest five consecutive year average compensation and the member s years of service credit. Reduced benefits for early retirement are available at age 50 and with 20 years of service. Members vest with ten years of service credit. Service related disability benefits are provided regardless of length of service. The service related disability benefits are determined in the same manner as a service retirement benefit. A variety of death benefits are available under various eligibility criteria. 21

24 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE B - DETAILED NOTES (continued) 5. Retirement plans (continued) a) Defined benefit pension plan (continued) Employees covered by benefit terms. At the measurements date of September 30, 2016, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 4 Inactive employees entitled to but not yet receiving benefits 26 Active employees Contributions. For the year ended December 31, 2016, employer contributions for the Authority were $66,435 based on a rate of percent of covered payroll. By law, employer contributions are required to be paid. The employer s actuarially determined contribution ( ADC ) and member contributions are expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability. Net Pension Asset The Authority s net pension asset was measured as of September 30, 2016, and the total pension asset used to calculate the net pension asset was determined by an actuarial valuation as of that date. Actuarial assumptions. The total pension liability as of October 1, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary increases Retirement age Mortality Cost of Living Adjustments 2.89 percent 4.5 percent per annum Normal retirement age but no earlier than one year after the valuation date. Sex-distinct rates set forth in the RP-2000 Mortality Table for annuitants, projected to percent for payments at least two years after retirement (Division 1 only) or 1.50 percent for payments at least five years after retirement (Division 2 only). 22

25 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE B - DETAILED NOTES (continued) 5. Retirement plans (continued) a) Defined benefit pension plan (continued) Determination of the long-term expected rate of return on plan assets: Asset Class Long-Term Expected Real Rate of Return Target Allocation Core bonds 0.50% 12.00% Multi-sector 1.00% 18.00% U.S. large cap equity 6.00% 47.00% U.S. small cap equity 6.75% 13.00% Non-U.S. equity 6.75% 10.00% % The long-term expected rate of return on pension plan investments was established by the FMPTF Board of Trustees as 7.5 percent based on a blending of the three factors described above. Discount rate. The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current rate and that contributions from the Authority will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive 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 asset. 23

26 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE B - DETAILED NOTES (continued) 5. Retirement plans (continued) a) Defined benefit pension plan (continued) Changes in the Net Pension Liability (Asset) Total Pension Liability (a) Increase (Decrease) Plan Fiduciary Net Position (b) Net Pension Liability (Asset) (a)+(b) $ $ (587,300) Balance at December 31, 2015 $ 1,924,247 (2,511,547) Changes for the year: Service cost 111, ,773 Expected interest growth 150,186 (188,138) (37,952) Unexpected investment income - (17,193) (17,193) Demographic experience (228,009) - (228,009) Employer contributions - (66,435) (66,435) Employee contributions - (45,069) (45,069) Benefit payments and refunds (101,195) 101,195 - Administrative expenses - 16,513 16,513 Net changes (67,245) (199,127) (266,372) Balance at December 31, 2016 $ 1,857,002 $ (2,710,674) $ (853,672) Sensitivity of the net pension liability (asset) to changes in the discount rate. The following presents the net pension liability (asset) of the Authority calculated using the discount rate of 7.5 percent, as well as what the net pension liability (asset) would be if it were calculated using a discount rate that is 1-percentagepoint lower (6.5 percent) or 1-percentage- point higher (8.5 percent) than the current rate: 1% Decrease (6.5%) Current Discount Rate (7.5%) 1% Increase (8.5%) The Authority's net pension liability (asset) $ (657,915) $ (853,672) $ (1,021,557) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. Pension expense. For the year ended December 31, 2016, the Authority recognized pension expense of $72,

27 NOTES TO BASIC FINANCIAL STATEMENTS December 31, 2016 NOTE B - DETAILED NOTES (continued) 5. Retirement plans (continued) a) Defined benefit pension plan (continued) Deferred outflows of resources and deferred inflows of resources. For the year ended December 31, 2016, the Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ - $ 247,369 Change in assumption 132,616 - Net difference between projected and actual earnings on pension plan investments 112,917 15,100 Contributions subsequent to the measurement date of September 30, (not applicable) Total $ 245,533 $ 262,469 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended December 31: 2017 $ 27, , , (9,582) 2021 (6,145) Thereafter (84,028) In the table shown above, positive amounts will increase pension expense while negative amounts will decrease pension expense. 25