HOUSING AUTHORITY OF THE COUNTY OF BEAVER

Transcription

1 HOUSING AUTHORITY OF THE COUNTY OF BEAVER ~ ~ ~ ~ ~ FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016

2 HOUSING AUTHORITY OF THE COUNTY OF BEAVER BEAVER COUNTY, PENNSYLVANIA FINANCIAL STATEMENTS AND INFORMATION REQUIRED BY GOVERNMENT AUDITING STANDARDS AND THE UNIFORM GUIDANCE WITH REPORTS BY CERTIFIED PUBLIC ACCOUNTANT FOR THE YEAR ENDED JUNE 30, 2016

3 BEAVER, PENNSYLVANIA TABLE OF CONTENTS PAGE Independent Auditor's Report... i-iii Management s Discussion and Analysis... iv-xiii Exhibit A Statement of Net Position Exhibit B Statement of Revenues, Expenses and Changes in Net Position... 3 Exhibit C Statement of Cash Flows... 4 Notes to Financial Statements OTHER REQUIRED SUPPLEMENTARY INFORMATION Supplemental Schedule Actual Modernization Cost Certificates Capital Grant Program Information Required by Government Auditing Standards and the Uniform Guidance: Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance required by the Uniform Guidance Supplementary Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Status of Prior Audit Findings... 34

4 Mark C. Turnley Certified Public Accountant rd Avenue New Brighton, Pennsylvania (724) FAX (724) To the Board of Housing Commissioners Housing Authority of the County of Beaver Independent Auditor's Report Report on Financial Statements I have audited the accompanying financial statements of the Housing Authority of the County of Beaver as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Housing Authority of the County of Beaver 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 My responsibility is to express an opinion on these financial statements based on my audit. I conducted my 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 I 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 Housing Authority of the County of Beaver 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 Housing Authority of the County of Beaver s internal control. Accordingly, I 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. i American Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants

5 Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Housing Authority of the County of Beaver as of June 30, 2016 and the results of its operations and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages iv-xiii and other required supplementary information on page 24 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. I 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 my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I 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 My audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Housing Authority of the County of Beaver s basic financial statements. The accompanying supplemental schedule of actual modernization cost certificates, and the supplemental financial data schedule required by the U.S. Department of Housing and Urban Development Real Estate Assessment Center (REAC), are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The supplemental schedule of actual modernization cost certificates, the supplemental financial data schedule, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the supplemental schedule of actual modernization cost certificates, the supplemental financial data schedule, and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. ii

6 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated March 11, 2017 on my consideration of the Housing Authority of the County of Beaver s internal control over financial reporting and on my 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 my 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 the Housing Authority of the County of Beaver s internal control over financial reporting and compliance. Mark C. Turnley, CPA March 11, 2017 New Brighton, Pennsylvania iii

7 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Management s Discussion and Analysis The Housing Authority of the County of Beaver (HACB) management s discussion and analysis is designed to assist the reader on significant financial issues, provide an overview of the Authority s financial activity, identify changes in the Authority s financial position, and identify individual fund issues or concerns. As management of the Housing Authority of the County of Beaver, 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 June 30, We encourage readers to consider the information presented here in conjunction with the Authority s financial statements. The mission of the Housing Authority of the County of Beaver is to assist low-income families with safe, decent, and affordable housing opportunities as they strive to achieve self-sufficiency and improve the quality of their lives. The Housing Authority is committed to operating in an efficient, ethical, and professional manner. The Housing Authority will create and maintain partnerships with its clients and appropriate community agencies in order to accomplish this mission. HACB was able to assist 5 homeowners to correct code violations and or make necessary home improvements through the Home Improvement Program. The funding for this program comes from the Beaver County Community Development Block Grant. The Weatherization Program assisted 196 households in completing various weatherization upgrades that will result in lower energy consumption. Funding for the Weatherization Program is through the Commonwealth of Pennsylvania Department of Community and Economic Development. The Housing Choice Voucher Program assisted approximately 648 families with their rental payments in the private rental market. iv

8 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 The Department of Housing and Urban Development awarded a three year grant in the amount of $427,444 to the HACB. The 2013 Resident Opportunities and Self- Sufficiency Service Coordinators grant in the amount of $427,444 is for the years. The funding for this grant is designated to coordinate supportive services and other activities designed to help Public housing residents attain economic and housing self-sufficiency. HACB along with eight other Pennsylvania housing authorities were part of a $22 million Capital Fund Securitization Revenue bond pool through the Pennsylvania Housing Finance Agency. HACB s portion of the pool was $7.8 million. The Housing Authority has committed a percentage of its future capital grant funds for the next 20 years for repayment. The bond will be paid in full in the year The HACB acts as the management agent for eight independently owned housing complexes consisting of a total of 162 units. The housing complexes are Westbridge Apartments, Seventh Avenue Place, Koppel Terrace, Beaver Village, Friendship Commons, Riverview Apartments, Dawes Manor and Reliable Housing. HACB also manages a homeless shelter and twenty five apartments in Ambridge, Baden and West Mayfield for the Beaver County Community Development Organization, Inc. HACB with Beaver County Behavioral Health (BCBH) entered into an agreement in 2008 for HACB to assist in the administration of the Bridge Subsidy Program portion of their Housing Plan designed to expand permanent supportive housing opportunities for consumers of Beaver County Behavioral Health throughout Beaver County. The Authority s Programs Conventional Public Housing Under the Conventional Public Housing Program, the Authority rents units that it owns to low-income households. The Conventional Public Housing Program is operated under an Annual Contributions (ACC) with HUD, and HUD provides operating subsidy to enable the PHA to provide the housing at a rent that is based upon 30 percent of household income. The Conventional Public Housing Program also includes the Capital Fund Program, which is the primary funding source for physical and management improvements to the Authority s properties. Housing Choice Voucher Program Under the Housing Choice Voucher Program, the Authority administers contracts with independent landlords that own the property. The Authority subsidizes the family s rent through a housing assistance payment made to the landlord. The program is administered under a Housing Assistance Payment Contract (HAP) with HUD. HUD provides the HAP Funding to enable the Authority to structure a lease that sets the participants rent at 30 percent of household income. v

9 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Resident Opportunities and Self-Sufficiency Program This grant program, funded by the Department of Housing and Urban Development, is intended to assist residents to become economically self-sufficient by providing supportive Services and resident empowerment activities. Section 8 New Construction - The Housing Authority entered into a Housing Assistance Payment Contract with the HUD for the construction of the Francis Farmer Apartments which consists of 105 units. This contract provides rental assistance in connection with the development on behalf of families that are eligible. Home Improvement Program This program provides low and moderate-income individuals and families with the means to upgrade their single family owner occupied property. Funding is provided by the Community Development Block Grant (CDBG) and HOME Funds. Tenant Based Rental Assistance In connection with the Federal HOME Investment Partnership Act, the Housing Authority entered into an agreement with the County of Beaver to administer the HOME Tenant Based Rental Assistance Program. The specific purpose of the program is to provide rental assistance to households and individuals that are mentally ill. State/Local Programs The Housing Authority currently owns and operates seven (7) housing projects under its State/Local program. The projects are known as Allaire Heights, Linmar Heights, and College Hill Apartments, Pulaski Homes, New Brighton Townhouses, High Street and Whipple Court. These properties consist of 161 units. The purpose of theses program is to provide decent, safe, and sanitary housing facilities. Funding under these programs is provided by dwelling rentals charged to tenants. Continuum of Care Program (CARL) - The CARL Program is a Permanent Supportive Housing Program within Beaver County s Continuum of Care. The program is funded by the Department of Housing and Urban Development (HUD). The goal of the CARL program is to provide stable housing for homeless/chronically homeless households to allow them to achieve stability and self-sufficiency in all areas of their lives. Weatherization Assistance Programs The Housing Authority entered into contracts with 1) the Commonwealth of Pennsylvania Department of Community and Economic Development (DCED) for weatherization assistance of low-income persons, funded through the Department of Energy, 2) low-income-income home energy assistance (LIHEAP), funded through the Department of Health and Human Services, and 3) funds from Duquesne Light, Columbia Gas, and Peoples Gas. The purpose of this program is to provide eligible low-income individuals with specific energy saving improvements to their homes. vi

10 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Family Savings Account Program The Housing Authority has been awarded two grants funded by the Commonwealth of Pennsylvania s Department of Community and Economic Development (DCED) is used to promote economic self-sufficiency for lower income residents of Beaver County through education, counseling, and structured savings plans for 76 individuals. Shelter Plus Care - This grant is designed to provide a housing voucher to assist chronically homeless individuals who have a mental health diagnosis and are receiving treatment. Financial Highlights In addition to the following highlights a more descriptive explanation of the following items is provided on subsequent pages of this report Total current assets and investments increased by 2.6% from $23.6 million in 2015 to $24.3 million in Total non-current assets decreased by 6.6% from $51 million in 2015 to $47.7 million in Total current liabilities decreased by 12% from $2.3 million in 2015 to $2.0 million in Total Non-current liabilities decreased 9.1% from $10.4 million in 2015 to 9.5 million in In 2016, the Authority had total revenues of $20,459,268 (excluding intercompany eliminations) and operating expenses of $17,950,770 (excluding depreciation and intercompany eliminations). In 2015 the Authority had total revenues of $22,263,481 (excluding intercompany elimination) and operating expenses of $17,550,098 (excluding depreciation and intercompany eliminations). Total revenues decreased 8.1% from 2015 and total operating expenses increased 2.3% from Net Loss for 2016 was $1,907,446 in comparison to a 2015 Net Loss of $2,008,147. Overview of the Financial Statements The financial statements included in this annual report are those of a special-purpose government engaged in a business-type activity. The following statements are included: Statement of Net Position reports the Authority s current financial resources (shortterm spendable resources) with capital assets and long-term obligations. Statement of Revenues, Expenses, and Changes in Fund Net Position reports the Authority s operating and non-operating revenues, by major source along with operating and non-operating expenses and capital contribution Statement of Cash Flows Provides relevant information about the cash receipts and cash payments of HACB during the year, specifically, how much cash was generated for operating needs, and the amount of cash required for capital needs and debt service obligations. vii

11 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Statement of Entity Wide Net Position (Statement of Net Position) The following is a comparison of the net position of the Authority for the fiscal years ended June 30, 2016 and 2015: VARIANCE % CHANGE Cash $ 16,342,080 $ 15,558,009 $ 784, % Other Assets 1,596,254 1,716,730 (120,476) -7.02% Investments 6,320,532 6,365,724 (45,192) -0.71% Capital Assets Net of Accumulated Depreciation 45,726,481 49,143,315 (3,416,834) -6.95% Non-Current Assets 1,962,038 1,913,293 48, % Total Assets $ 71,947,385 $ 74,697,071 $ (2,749,686) -3.68% Current Liabilities $ 2,031,415 $ 2,307,560 $ (276,145) % Long Term Liabilities 9,463,814 10,414,170 (950,356) -9.13% Total Liabilities $ 11,495,229 $ 12,721,730 $ (1,226,501) -9.64% Net Investments in Capital Assets $ 36,268,548 $ 38,586,540 $ (2,317,992) -6.01% Restricted Net Position 51,776 30,355 21, % Unrestricted Net Position 24,131,832 23,358, , % Total Net Position $ 60,452,156 $ 61,975,341 $ (1,523,185) -2.46% Total Liabilities and Net Position $ 71,947,385 $ 74,697,071 $ (2,749,686) -3.68% viii

12 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Analysis of Entity Wide Revenues (Statement of Revenues, Expenses and Changes in Net Assets) The authority administers the following programs and the revenues generated from these programs during FYE 2016 were as follows: Low Income Public Housing $ 12,133,391 Section 8: NC/SR 1,014,538 Voucher 3,450,019 Community Development Block Grant 464,169 Home Investment Partnership Program 91,716 Resident Opportunity and Support Services 126,604 Capital Grant Fund 598,638 State/Local 1,499,069 Weatherization Assistance for Low Income Persons 169,602 Low-Income Home Energy Assistance 256,861 Central Office Cost Center 51,314 Continuum of Care 567,703 New Assets for Independence Demonstration Program 291 Supportive Housing for Persons with Disabilities 35,353 Total Revenues $ 20,459,268 Central Office Cost Center revenues exclude $2,465,353 of intercompany management and bookkeeping fees eliminated against expenses in the statement of revenues, expenses and changes in net position. ix

13 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Analysis of Entity Wide Expenses (Statement of Revenues, Expenses and Changes in Net Position) The following is a comparison of the revenues, expenses and changes in net position of the Authority for the fiscal years ended June 30, 2016 and 2015: Account Description FYE 2016 FYE 2015 VARIANCE Total Tenant Revenue $ 6,793,473 $ 6,566,425 $ 227,048 Grants 12,586,299 14,755,313 (2,169,014) Investment Income 133, ,938 (683) Other Revenue 946, , ,436 Total Revenues $ 20,459,268 $ 22,263,481 $ (1,804,213) Administrative Expense $ 4,885,022 $ 4,324,224 $ 560,798 Tenant Services 146,282 75,490 70,792 Utilities 1,759,928 2,432,711 (672,783) Maintenance Costs 6,064,092 6,066,323 (2,231) Other General Expenses 1,774,434 1,453, ,702 Interest Expense 408, ,834 (35,024) Total Operating Expenses $ 15,038,568 $ 14,796,314 $ 242,254 Excess Revenue over Operating Expenses $ 5,420,700 $ 7,467,167 $ (2,046,467) Extraordinary Maintenance 126, ,863 (50,792) Housing Assistance Payments 3,194,941 3,020, ,186 Depreciation Expense 3,658,603 3,890,135 (231,532) Total Expenses 22,018,183 21,884, ,116 Net Gain/Losses $ (1,558,915) $ 379,414 $ (1,938,329) x

14 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Major factors affecting the Statement of Revenue, Expenses, and Changes in Net Position. FYE 2015 and FYE 2016 total revenues were $22,263,481 and $20,459,268 respectively. Comparatively, FYE 2015 revenues decreased by $1,802,413 or 8.1%. The main decrease was from HUD capital funding which decreased from $2,692,807 in FYE 2015 to $598,638 in FYE FYE 2015 and FYE 2016 total expenses before depreciation/amortization were $17,993,932 and $18,359,580 respectively. Comparatively FYE 2015 expenses increased by $365,648 or 2.0%. Capital Assets and Debt Administration Capital Assets At June 30, 2016, the Authority had $45,726,481 invested in a broad range of capital assets, including land, buildings and furniture and equipment (net of depreciation). During the fiscal year, the net additions to the Authority s capital assets totaled $2,885,865. Construction in progress expenditures for the fiscal year consisted mainly of the following projects: Accessibility Accommodations all units Development and Renovation at Pulaski Homes The Authority s total depreciation for the current fiscal year was $3,658,603. A summary of the changes in the capital assets of the Authority for the fiscal year is as follows: BALANCE NET BALANCE 06/30/15 ADDITIONS 06/30/16 Land $ 2,478,310 $ - $ 2,478,310 Buildings 148,892,892 1,977, ,869,973 Furniture & Equipment 3,549,772 $ (34,284) 3,515,488 $ 154,920,974 $ 1,942,797 $ 156,863,771 Less: Accumulated Depreciation (110,697,285) (3,510,201) (114,207,486) $ 44,223,689 $ (1,567,404) $ 42,656,285 Construction in Progress 4,919,626 (1,849,430) 3,070,196 $ 49,143,315 $ (3,416,834) $ 45,726,481 xi

15 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Debt Administration In October of 2005, the Pennsylvania Housing Finance Agency (PHFA) issued Capital Fund Securitization Revenue Bonds - Series 2005A under the terms of a Master Trust Indenture and First Supplemental Trust Indenture dated November 1, 2005, by and between the PHFA and Manufacturers and Traders (M&T) Trust Company, as trustee, in the amount of $22,010,000. The purpose of the bond issue was to enable PHFA to enter into loan agreement with participating housing authorities to finance accelerated renovations and repairs under the Capital Fund Program for rental housing projects. The bonds are limited obligations of the PHFA and are secured by the aforementioned loan agreements. As part of this bond issue, PHFA and M&T Trust Company entered into a loan agreement with the Housing Authority of the County of Beaver for a portion of these proceeds totaling $8,403,499. The terms of the loan call for the annual payment of principal along with the semi-annual payment of interest on the loan at an approximate rate of interest of %. The loan is scheduled to mature December 1, The balance on this loan at June 30, 2016 is $ 5,118,078. The Authority is scheduled to make principal and interest payments on the above debt of $645,105 during the fiscal year. Information regarding the Authority s long term debt obligations is detailed in Note 10 to the financial statements. On September 30, 2009 the Housing Authority of the County of Beaver entered into a lease purchase agreement with Siemens Public, Inc. This lease purchase agreement was the financing for an energy performance contract. The interest rate was % with 42 lease payments. On March 27, 2014, the Housing Authority of the County of Beaver refinanced the Siemens Public, Inc. lease purchase agreement with PNC Equipment Finance. The interest rate decreased to 2.985%. The purpose of the lease purchase agreement is financing for the development, design, and provision of all required labor, material, and equipment for the installation of the Facility Improvement Measures (FIMS) and associated work and cost items for the Housing Authority s Low Income Housing Program. The principal balance as of June 30, 2016 is $4,035,400. This lease is scheduled to mature 12/27/2024. The Authority is scheduled to make principal and interest payments on the above debt of $542,078 during the fiscal year. On November 15, 2012 the Housing Authority of the County of Beaver entered into a lease purchase agreement with Municipal Capital Corporation. This lease purchase agreement was the financing for security equipment. The interest rate is 2.2% with 28 lease payments. The principal balance as of June 30, 2016 is $286,541. The lease is scheduled to mature February 15, The Authority is scheduled to make principal and interest payments on the above debt of $82,424 during the fiscal year. xii

16 HOUSING AUTHORITY OF THE COUNTY OF BEAVER MANAGEMENT DISCUSSION AND ANALYSIS FYE JUNE 30, 2016 Economic Factors Significant economic factors affecting the Authority are as follows: Federal funding provided by Congress to the Department of Housing and Urban Development. Inflationary pressure on utility rates, supplies, and other costs. Staffing Change In July 2016 long time Executive Director Carl DeChellis retired. The Board of Commissioners appointed Brian L. Yaworsky to the position of Executive Director upon Mr. DeChellis retirement. Contacting the Authority s Financial Management The financial report is designed to provide a general overview of the Authority s finances for all those with an interest. Questions concerning any of the information provided in this report of requests for additional financial information should be addressed to the Executive Director, Housing Authority of the County of Beaver, 300 State Avenue (Vanport), Beaver, PA or call xiii

17 EXHIBIT A HOUSING AUTHORITY OF THE COUNTY OF BEAVER STATEMENT OF NET POSITION JUNE 30, 2016 ASSETS: CURRENT ASSETS: Cash and Cash Equivalents $ 16,342,080 Accounts Receivable - Tenants (Net of Allowance for Doubtful Accounts of $96,498) 161,462 Accounts Receivable - Other 285,129 Accrued Interest Receivable 17,116 Notes Receivable - Current Portion 65,494 Prepaid Expenses 354,037 Inventory (Net of Allowance for Obsolete Inventories of $37,528) 713,016 TOTAL CURRENT ASSETS $ 17,938,334 INVESTMENTS: Certificates of Deposit $ 6,173,743 Money Market Funds 12,434 Annuity 108,585 Money Market Trust Funds - Restricted 25,770 TOTAL INVESTMENTS $ 6,320,532 FIXED ASSETS: Land $ 2,478,310 Buildings 150,869,973 Furniture and Equipment 3,515,488 $ 156,863,771 Accumulated Depreciation (114,207,486) $ 42,656,285 Construction in Progress 3,070,196 NET FIXED ASSETS $ 45,726,481 OTHER ASSETS: Notes Receivable - Long-Term Portion $ 1,962,038 TOTAL OTHER ASSETS $ 1,962,038 TOTAL ASSETS $ 71,947,385 The accompanying notes are an integral part of these financial statements 1

18 EXHIBIT A HOUSING AUTHORITY OF THE COUNTY OF BEAVER STATEMENT OF NET POSITION JUNE 30, 2016 LIABILITIES: CURRENT LIABILITIES: Accounts Payable - Trade $ 155,089 Accrued Wages and Taxes Payable 115,313 Accrued Compensated Absences 106,416 Accounts Payable - Other 358,579 Tenant Security Deposits 344,485 Unearned Revenue 42,279 Current Portion - Long Term Debt 908,203 Other Current Liabilities 1,051 TOTAL CURRENT LIABILITIES $ 2,031,415 LONG-TERM LIABILITIES: Loan Payable (PHFA) - Long Term Portion (Net of Premium) $ 4,723,643 Capital Lease - Long Term Portion 3,826,087 Net OPEB Obligation 618,632 Other Long-Term Liabilities 295,452 TOTAL LONG-TERM LIABILITIES $ 9,463,814 TOTAL LIABILITIES $ 11,495,229 NET POSITION: Net Investment in Capital Assets $ 36,268,548 Restricted For Capital Projects/Debt Service 25,770 Restricted - HAP Equity 26,006 Unrestricted 24,131,832 TOTAL NET POSITION $ 60,452,156 TOTAL LIABILITIES AND NET POSITION $ 71,947,385 The accompanying notes are an integral part of these financial statements 2

19 EXHIBIT B HOUSING AUTHORITY OF THE COUNTY OF BEAVER STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2016 OPERATING REVENUE: Tenant Rentals $ 6,793,473 HUD Operating Grants 10,936,722 Other Grants 1,050,939 Other Revenue 920,793 TOTAL OPERATING REVENUE $ 19,701,927 OPERATING EXPENSES: Administrative Salaries $ 2,060,148 Employee Benefits - Administrative 1,406,120 Other Administrative 1,418,754 Tenant Services 146,282 Utilities 1,759,928 Ordinary Maintenance 6,064,092 Insurance Premiums 700,751 Other General Expenses 416,055 Payments in Lieu of Taxes 424,872 Bad Debts 232,756 Housing Assistance Payments 3,194,941 Depreciation 3,658,603 Extraordinary Maintenance/Casualty Losses 126,071 TOTAL OPERATING EXPENSES $ 21,609,373 OPERATING INCOME <LOSS> $ (1,907,446) NON-OPERATING REVENUES AND <EXPENSES>: Investment Income $ 133,255 HUD Capital Grants 598,638 Gain on Sale of Assets 25,448 Interest Expense (408,810) TOTAL NON-OPERATING REVENUES <EXPENSES> $ 348,531 CHANGE IN NET POSITION $ (1,558,915) NET POSITION - JULY 1, ,975,341 Prior Period Adjustment 35,730 NET POSITION - JUNE 30, 2016 $ 60,452,156 The accompanying notes are an integral part of these financial statements 3

20 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2016 EXHIBIT C CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received From Tenant Rents $ 6,740,579 Cash Received From HUD Operating Grants 10,947,518 Cash Received From Other Government Grants 1,101,791 Cash Received From Other Sources 1,113,838 Cash Payments (Wages and Benefits) to Employees for Services (5,357,261) Cash Payments to Vendors/Suppliers for Goods and Services (9,448,104) Cash Paid for Housing Assistance Payments (HAP) (3,194,941) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,903,420 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and Construction of Capital Assets $ (317,155) HUD Capital Grants 598,638 Principal Paid on PHFA Loan (397,076) Increase in Restricted Investments (2,864) Notes Issued (120,000) Payments on Notes Receivable 58,353 Principal Paid on Notes Payable (218,156) Payments on Capital Lease (481,708) Cash Paid for Interest on Indebtedness (408,810) NET CASH (USED FOR) CAPITAL AND RELATED FINANCING ACTIVITIES $ (1,288,778) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds/(Purchase) of Investments (Net) $ 45,192 Interest Income 124,237 NET CASH PROVIDED BY INVESTING ACTIVITIES $ 169,429 NET INCREASE IN CASH AND CASH EQUIVALENTS $ 784,071 CASH AND CASH EQUIVALENTS - JULY 1, ,558,009 CASH AND CASH EQUIVALENTS - JUNE 30, 2016 $ 16,342,080 RECONCILIATION OF OPERATING INCOME <LOSS> TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating Income <Loss> $ (1,907,446) Adjustments to Reconcile Operating Income <Loss> to Net Cash Provided By Operating Activities Depreciation 3,658,603 Bad Debt Expense 232,756 Provision for Obsolete Inventory 30,701 Change in Assets and Liabilities: <Increase> Decrease in Tenant Accounts Receivable (95,260) <Increase> Decrease in Other Receivables 116,970 <Increase> Decrease in Prepaid Expenses 41,833 <Increase> Decrease in Inventory (47,078) Increase <Decrease> in Trade and Other Payables (38,508) Increase <Decrease> in Accrued Wages 23,840 Increase <Decrease> in Other Liabilities (184,515) Increase <Decrease> in Unearned Revenue (51,772) Increase <Decrease> in Net OPEB Obligation 119,802 Increase <Decrease> in Accrued Compensated Absences (89) Increase <Decrease> in Tenant Security Deposits 3,583 NET CASH PROVIDED BY OPERATING ACTIVITIES The accompanying notes are an integral part of these financial statements 4 $ 1,903,420

21 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Housing Authority of the County of Beaver (the Authority) was created and organized under the provisions of the Housing Authority Law of 1937 by the Commonwealth of Pennsylvania. Members of the Board of Housing Commissioners are appointed by the County of Beaver and have complete authority over the operations and administration of the Housing Authority's activities subject to certain guidelines of the Department of Housing and Urban Development. The financial statements of the Authority have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). Accordingly, the Authority applies all GASB pronouncements as well as Financial Accounting Standards Board (FASB) statements and interpretations, issued after November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. During the year, the Authority adopted the provisions of Government Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application ; Statement No. 76, The Hierarchy of Generally Accepted Principals for State and Local Governments ; and Statement No. 79, Certain External Investment Pools and Pool Participates. The more significant accounting policies established in GAAP and used by the Authority are discussed below. REPORTING ENTITY A reporting entity is comprised of the primary government, component units and other organizations that are included to ensure the financial statements are not misleading. The primary government of the Housing Authority of the County of Beaver consists of all funds, departments, boards and agencies that are not legally separate from the Authority. As defined by GASB Statement No. 14, component units are legally separate entities that are included in the Authority s reporting entity because of the significance of their operating or financial relationships with the Authority. Based on the application of these criteria, the Housing Authority of the County of Beaver has no component units. The following entities that perform activities within the Authority s boundaries are excluded from the accompanying financial statements because the Authority is not financially accountable for these entities nor are they fiscally dependent on the Authority: County of Beaver Westbridge Apartments Beaver Village Apartments Limited Partnership Friendship Commons Beaver County Home Buyer Program Limited Partnership Beaver County Community Housing Development Organization, Inc. Seventh Avenue Place, Beaver Falls Dawes Manor Koppell Terrace Riverview Apartments Beaver County Behavior Health Reliable Housing 5

22 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) PROGRAMS The following programs are administered by the Housing Authority of the County of Beaver: Public Housing The objective of the Public Housing Program is to provide decent, safe and sanitary housing and related facilities for eligible low-income families and elderly. The program operates under an Annual Contributions Contract (ACC) W-58 between the Authority and the Department of Housing and Urban Development (HUD). Funding under the contract is based on housing needs. Tenant rents are based on certain factors as prescribed by HUD. Capital Grant Program In connection with the Public Housing Program, the objective of the Capital Grant Program is to improve the physical condition and upgrade the management and operation of existing public housing projects. The program is provided to the Housing Authority through the Department of Housing and Urban Development (HUD) according to physical needs and Housing Authority Management capability in accordance with modernization plans approved by the regional HUD field office. Section 8 The objectives of the Section 8 Programs are to assist low income families to obtain housing through a system of rental subsidies and to promote economically mixed, existing, newly constructed, moderately rehabilitated, substantially rehabilitated and newly constructed housing in addition to upgrading substandard rental properties. An annual contribution contract (ACC) is entered into with HUD for housing assistance payment contracts with private housing owners. The owners provide housing to eligible families at reduced rent and recoup a portion of this rent from the Housing Authority of the County of Beaver. The Authority currently operates two (2) Section 8 programs supported by the annual contributions contract: Housing Choice Voucher ACC P1518V 746 units New Construction PA units Resident Opportunity and Self-Sufficiency (ROSS)/Neighborhood Network Programs The Department of Housing and Urban Development (HUD) awarded the Housing Authority of the County of Beaver a Resident Opportunity and Self-Sufficiency (ROSS) grant in the amount of $427,444 for the fiscal years to provide service coordination for education, life skills training, job readiness counseling, resume development, and career planning. Home Improvement Program The objective of this program is to provide low and moderate-income individuals and families with the means to upgrade their existing housing facilities under funding provided by the Community Development Block Grant (CDBG) Program and HOME Funds. 6

23 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) PROGRAMS (Continued) Tenant Based Rental Assistance Program In connection with the Federal HOME Investment Partnership Act, the Housing Authority of the County of Beaver entered into an agreement with the County of Beaver to administer the HOME Tenant Based Rental Assistance Program. The specific purpose of the program is to provide rental assistance and down-payment assistance to households and individuals that are mentally ill. Supportive Housing Program The objective of the Supportive Housing Program is to promote the development of supportive housing and supportive services, including innovative approaches to assist homeless persons in the transition from homelessness, and to promote the provision of supportive housing to homeless persons so they can live as independently as possible. The project name for the Supportive Housing Project is Crescent Commons. The amount of grant funds received totaled $200,066 and is scheduled to expire July 31, The grant was renewed for $200,066 for the 2017 fiscal year. State/Local Programs The Housing Authority of the County of Beaver currently owns and operates seven (7) housing projects under its State/Local program. The projects are known as Allaire Heights, Linmar Heights, and College Hill Apartments, Pulaski Homes, New Brighton Townhouses, High Street and Whipple Court. These properties consist of 161 units. The purpose of theses program is to provide decent, safe, and sanitary housing facilities. Funding under these programs is provided by dwelling rentals charged to tenants. Continuum of Care Program (CARL) The CARL Program is a Permanent Supportive Housing Program within Beaver County s Continuum of Care. The program is funded by the Department of Housing and Urban Development (HUD). The goal of the CARL program is to provide stable housing for homeless/chronically homeless households to allow them to achieve stability and self-sufficiency in all areas of their lives. Weatherization Assistance Programs The Housing Authority of the County of Beaver entered into contracts with the Commonwealth of Pennsylvania Department of Community and Economic Development for weatherization assistance for low-income persons, funded through the Department of Energy, and low-income home energy assistance (LIHEAP), funded through the Department of Health and Human Services. The purpose of the programs is to provide eligible low-income individuals with specific energy saving improvements to their homes. The Family Savings Account Program The Commonwealth of Pennsylvania s Department of Community and Economic Development (DCED) awarded the Housing Authority of the County of Beaver The Family Savings Account Program. The funds will be used to promote economic self-sufficiency for lower income residents in Beaver County through education, counseling, and structured savings plans for 38 individuals. 7

24 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) PROGRAMS (Continued) Shelter Plus Care Program The Shelter Plus Program is funded by a 2015 grant through the Department of Housing and Urban Development (HUD) totaling $40,458. This grant is scheduled to expire in The objective of the Shelter Plus Care grant is to provide housing assistance to a targeted population of chronically homeless individuals. This grant was not renewed. Non-Federal Program Non-Federal Programs of the Authority are used primarily for the purpose of refurbishing and maintaining the housing units operated by the Authority. Funding is obtained mainly from Authority owned washer and dryer units located in various Authority housing units, commercial rental property and earnings on short-term investments. BUDGETARY PROCESS The Housing Authority of the County of Beaver prepares its budget on a basis consistent with generally accepted accounting principles. A budget resolution, approved by the Board of Housing Commissioners, is required to be submitted to The Department of Housing and Urban Development for the upcoming fiscal year, as part of the Authority s Operating Fund submission. The Authority is not required to adopt a legally authorized budget on an annual basis and is therefore not required to present budget versus actual financial information as part of its basic financial statements. The budget information submitted to HUD provides the basis for the amount of federal financial assistance provided by HUD to the Authority during the year. BASIS OF ACCOUNTING The Authority utilizes the accrual method of accounting. Under this method, revenues are recognized when earned rather than when cash is received, and expenses are recognized when the obligation is incurred rather than when cash is disbursed. Grant revenue is recognized to the extent of related expenses. In connection with the Authority s participation in the Pennsylvania Housing Finance Agency s Capital Fund Securitization Revenue Bond issue (Note 10), the Authority will recognize Capital Grant program revenue to the extent of the required debt service payments. CASH AND CASH EQUIVALENTS Cash and cash equivalents include amounts in demand deposit accounts held with Authority depositories and all highly liquid short-term investments with original maturity terms of less than three months. Cash and cash equivalents are comprised of the following: Tenant Security Deposits $ 344,485 HIP Loan Reimbursement 35,880 Hospitalization Reserve 314,207 Unrestricted 15,647,508 $ 16,342,080 8

25 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) INVESTMENTS Unrestricted investments include certificates of deposit with original maturity terms in excess of three months, prime fund capital money market funds, and a single premium immediate annuity purchased with the Symetra Life Insurance Company. Restricted investments include federal treasury obligation money market funds held by Wilmington Trust in connection with the Authority s participation in the Capital Fund Securitization Revenue Bond issue as described in Note 10. These funds are restricted in accordance with the loan agreement, dated November 1, 2005, between the Authority, the Pennsylvania Housing Finance Agency and Wilmington Trust. A liquidity account is maintained on behalf of the Authority, in accordance with the terms of Section 3.6 of the aforementioned loan agreement. Funds in this account represent a Municipal Bond Debt Service Reserve Insurance Policy from Financial Security Assurance, Inc. The balance in this account at June 30, 2016 is $661,475. The Authority has no legal title to these funds and accordingly this amount is not shown as part of restricted assets in the statement of net position (Exhibit A). Investments are stated at cost that approximates fair value. Federal and State statutes authorize the Housing Authority of the County of Beaver to invest in obligations of the U.S. Treasury, commercial paper, corporate bonds and repurchase agreements. As of June 30, 2016, the Authority is in compliance with these statutes. ACCOUNTS RECEIVABLE - TENANTS Accounts receivable - tenant dwelling rents are shown at net realizable value. The Authority provides for an allowance for uncollectable accounts based upon an estimate of past delinquent collection experience. Accounts deemed uncollectible are written off during the year as approved by the Board of Housing Commissioners. SHORT-TERM INTERPROGRAM RECEIVABLES AND PAYABLES/ELIMINATIONS During the course of operations, numerous transactions occur between individual programs for goods provided or services rendered. These receivables and off-setting payables totaling $712,138 are not shown in the statement of net position. Management and bookkeeping fees totaling $2,465,353 earned by the Authority s Central Office Cost Center, from services provided to other Authority owned and operated programs, have been offset (eliminated) against the amount of expense charged to these other programs. INVENTORY The Authority utilizes the consumption method of accounting for its inventory. Obsolete inventory is charged to operations annually. Inventory is stated at the lower of cost or market value using the FIFO (first-in, first-out) method. The Authority provides for an allowance for obsolete inventories based on management s review of inventory condition at fiscal year-end. 9

26 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) FIXED ASSETS All assets, which exceed the Authority s capitalization policy threshold of $1,000, are recorded at cost and include betterments that extend the physical or economic life of the asset. Hard modernization costs, for the purchase of capital assets and the major construction or improvements to public housing property, are capitalized. Soft modernization costs, which do not extend the useful life of an asset, along with routine repair and maintenance costs, are charged to operations as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of the individual assets concerned as follows: Buildings Development Structures Equipment Vehicles 40 Years 15 Years 7 Years 5 Years Depreciation expense totaled $3,658,603 for the fiscal year ended June 30, Construction in progress represents mainly capital grant program projects totaling $3,070,196 in process at June 30, NET POSITION Net position is classified into three categories according to external donor or legal restrictions or availability of assets to satisfy Authority obligations. Net position is classified as follows: Net Investment in Capital Assets This component of net position consists of capital assets net of accumulated depreciation, and reduced by the outstanding balances of debt that is attributable to the acquisition, construction and improvement of the capital assets, plus deferred outflows of resources less deferred inflows of resources related to those assets. Restricted Net Position This component of net position consists of restricted assets reduced by liabilities and deferred inflows related to those assets. Unrestricted Consists of net position that does not meet the definition of restricted or net investment in capital assets. When an expense is incurred that can be paid using either restricted or unrestricted resources (net position), the Authority s policy is to first apply the expense toward restricted resources and then toward unrestricted resources. 10