PROJECT NO. P0124 FINANCIAL STATEMENTS, INDEPENDENT AUDITORS REPORT AND SUPPLEMENTARY DATA FOR THE YEAR ENDED MARCH 31, 2017

Transcription

1 WESTBROOK TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 FINANCIAL STATEMENTS, INDEPENDENT AUDITORS REPORT AND SUPPLEMENTARY DATA FOR THE YEAR ENDED MARCH 31, 2017

2 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 FINANCIAL STATEMENTS, INDEPENDENT AUDITORS REPORT AND SUPPLEMENTAL DATA MARCH 31, 2017 TABLE OF CONTENTS Independent Auditors' Report 1 FINANCIAL STATEMENTS Statement of Net Positon 3 Statement of Revenues, Expenses, and Change in Net Position 4 Statement of Cash Flows 5 Notes to the Financial Statements 6 SUPPLEMENTARY INFORMATION Supplementary Data Required by HUD 10 Computation of Surplus Cash, Distributions and Residual Receipts 11 Financial Data Schedules (FDS) 12 Schedule of Expenditures of Federal Awards 15 Annual Auditors Certificate Current Year Debt Service Ratio 16 INTERNAL CONTROL AND COMPLIANCE MATTERS 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 17 Report on Compliance for Each Major Federal Program and Report on Internal Controls Over Compliance as Required by Uniform Guidance 19 Audit Firm Information 21 Schedule of Findings and Questioned Costs 22 Status of Prior Year Findings 23 Certification of Project Owner 24 Management Agent s Certification 25 Page

3 Board of Directors Westbrooks Towers Affordable Housing Corporation Murfreesboro, TN INDEPENDENT AUDITORS' REPORT Report on the Financial Statements We have audited the accompanying financial statements of Westbrooks Towers Affordable Housing Corporation, Project No. P0124, which is comprise the statement of net position as of March 31, 2017, and the related statements of revenues, expenses, and change in net positon, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with principles generally accepted in the United States of America; this included 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westbrooks Towers Affordable Housing Corporation as of March 31, 2017, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

4 INDEPENDENT AUDITORS REPORT (CONTINUED) Other Matter Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Westbrooks Towers Affordable Housing Corporation s financial statements as a whole. The supplementary information list in the table of contents and the schedule of expenditures of federal awards as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 16, 2017 on our consideration of Westbrooks Towers Affordable Housing Corporation 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 Westbrooks Towers Affordable Housing Corporation s internal control over financial reporting and compliance. May 16,

5 FINANCIAL STATEMENT

6 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 STATEMENT OF NET POSITION MARCH 31, 2017 ASSETS Current Assets Cash $ 353,830 Accounts receivable (net) 7,920 Prepaid expenses 30,884 Inventory 16,110 Total Current Assets 408,744 Non Current Assets Cash tenant security deposits 74,196 Investments 398,178 Capital Assets (net) 8,477,774 Total Non Current Assets 8,950,148 TOTAL ASSETS $ 9,358,892 LIABILITIES AND NET POSITON Current Liabilities Accounts payable $ 32,561 Accrued expense 66,397 Mortgage payable current portion 800,000 Total Current Liabilities 898,958 Long term Liabilities Tenant deposits held in trust 74,196 Compensated absences 49,290 Mortgage payable 2,353,000 Total Long term Liabilities 2,476,486 TOTAL LIABILITIES 3,375,444 NET POSITON Net investment in capital assets 5,324,774 Unrestricted net position 658,674 TOTAL NET POSITION 5,983,448 TOTAL LIABILITIES AND NET POSITION $ 9,358,892 See notes to financial statements 3

7 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET POSITION FOR THE YEAR ENDED MARCH 31, 2017 OPERATING REVENUES Rental Income $ 2,057,674 Vacancies (28,957) Interest income 6,738 Other tenant charges 51,485 TOTAL OPERATING REVENUES 2,086,940 OPERATING EXPENSES Administrative Expenses 290,165 Utilities Expense 243,234 Operating and Maintenance Expenses 388,169 Taxes and Insurances 287,717 Depreciation 956,298 TOTAL OPERATING EXPENSES 2,165,583 NET OPERATING PROFIT (LOSS) (78,643) CHANGE IN NET POSITION (78,643) BEGINNING NET POSITION 6,062,091 ENDING NET POSITION $ 5,983,448 See notes to financial statements 4

8 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Rent $ 2,030,132 Other revenue 56,321 Subtotal 2,086,453 Salaries and wages (197,625) Administrative (276,018) Operating and maintenance (220,619) Insurance (283,534) Utilities (243,234) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 865,423 CASH FLOWS FROM INVESTING ACTIVITIES Fixed assets (11,581) NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (11,581) CASH FLOWS FROM FINANCING ACTIVITIES Princple payments (800,000) NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (800,000) Net increase (decrease) in cash 53,842 Beginning Cash 299,988 Ending Cash $ 353,830 RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income (loss) $ (78,643) Depreciation 956,298 Increase (decrease) in Tenant accounts receivable 944 Prepaid expenses 3,191 (Increase) decrease in Accrued expense (13,846) Prepaid rent (1,431) Security deposits Prepaid rent (1,090) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 865,423 Cash paid for interest expense during the year $ - See notes to financial statements 5

9 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2017 NOTE 1: DESCRIPTION OF PROJECT Nature of Organization Westbrooks Towers Affordable Housing Corporation (the Corporation) a nonprofit public benefit corporation, is an instrumentality Murfreesboro Housing Authority (the Authority). The Corporation was incorporated under the laws of the State of Tennessee on December 31, 1992 for the purpose of operating and rental housing project under Section 221 (d) 4 of the National Housing Act. Under this program the Corporation provides housing to the low and moderate income elderly, subject to regulation by HUD as to rental charges and operating methods. Lower rental charges to tenants are recovered by the Corporation through rent subsidies provided by HUD, passed through Tennessee Housing Development Agency. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation The financial statements of the project have been prepared in conformity with generally accepted accounting principles (GAPP) and the U.S. Department of Housing and Urban Development Consolidated Audit Guide for Audits of HUD Programs as applied to the agencies. The Corporation being an instrumentality of the Authority applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The Corporation is also considered a blended component unit of the Authority. The more significant of the Corporation s accounting policies are described below. Basis of Accounting These financial statements are presented on the accrual basis of accounting. Under the accrual basis of accounting, revenue is recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The financial statements of the Corporation are presented as an enterprise fund. The accounting and financial reporting method applied by a fund is determined by the fund s measurement focus. The accounting objectives are determination of net income, financial position and cash flows. All assets and liabilities associated with the enterprise funds activities are included on the statement of net position. Cash and Cash Equivalents For purposes of the statements of cash flows, the Corporation considers all highly liquid investments available for current use with an initial maturity of three months or less, when acquired, to be cash equivalents. Advertising Advertising costs are expensed when incurred. Advertising expense totaled $1,578 for the year ended March 31, Rent Increases Under the HUD agreements, the Corporation may not increase rents charged to tenants without HUD approval. Materials Inventory Supplies inventory is valued using the average cost method. 6

10 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Income Taxes The Corporation is a non profit corporation exempted from federal income taxation under Section 501 (c) (3) of the Internal Revenue Code. Furthermore as an instrumentality of the Authority it is consider a disregarded entity by the Internal Revenue Services (IRS) and not required to report annually to the IRS as such. Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Balances that are still outstanding after management has used reasonable collection efforts are generally written off through a charge to the collection losses expense account and a credit to Allowance for uncollectible. Capital Assets Capital assets are stated at historical costs. Donated capital assets are stated at their fair value on the date donated. This includes site acquisition and improvement, structures and equipment. Depreciation of exhaustible capital assets used by proprietary funds is charged as an expense against operations and accumulated depreciation is normally reported on the proprietary funds statement of net positon. Depreciation is computed on the straight line basis. Items having a useful life in excess of 1 year and original cost in excess of $5,000 are capitalized and depreciated over their useful lives. The estimated useful lives for each major class of depreciable capital assets are as follows: Buildings Furniture, fixtures and equipment Vehicles 5 30 years 3 10 years 3 7 years Revenues and Expenses Revenues and expenses are recognized in essentially the same manner as used in commercial accounting. Revenues relating to the Corporation s operating activities including renal related income, interest income and other sources of revenue are recognized in the accounting period in which they are earned. Other major sources of revenues include the low income housing assistance payments provide by the U.S. Department of Housing and Urban Development (HUD). The Corporation entered into an agreement with the HUD as of March 1, 1993 to operate this project under the program Section 8 New Construction. Salaries and Benefits The salaries and benefits expenses in the financial statement are an allocation of employees of Murfreesboro Housing Authority for services rendered to the Corporation. The Corporation has no employees, all salaries and benefits are allocated costs. Also the amounts of compensated absences represent an allocated amount of the liability related to those employees. Subsequent Events Events that occur after the balance sheet date but before the financial statements were available to be issued must be evaluated for recognition of disclosure. The effects of subsequent events that provide evidence about conditions that existed at the balance sheet date are recognized in the accompanying financial statements. Management evaluated the activity of the Corporation through May 16, 2017 (the date the financial statements were available to be issued) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements. 7

11 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE 3: CASH AND CASH EQUIVALENTS The Corporation is allowed to invest in certain approved investment securities in accordance with HUD guidelines and state laws. Approved investments generally include any of the following: a. Direct obligation of the United States of America or obligations fully guaranteed by the United States of America. b. Bonds, indentures, notes or other obligation issued by the agencies or instrumentalities of the United States of America, the obligations of which are full faith and credit obligations of the United States of America. c. Interest bearing time or demand deposits or other similar banking arrangements, which are federally insured. A deposit in excess of the insurance coverage may be made at a depository institution provided that it is fully collateralized by designated sororities held in the Corporation s name. d. Repurchase agreements collateralized by direct obligations of, or obligation in, the payment of principal and interest on which are unconditional guaranteed as a to full and timely payment by the United State of America. The Corporation s deposits include deposits with financial institutions. The carrying amount of the Corporation s deposits for cash and investments was $826,204. The total amount of bank balances and certificates of deposits were $826,204. All deposits and certificates of deposit were adequately secured by the Corporation s financial institutions with FDIC coverage and securities pledges of institution in the Tennessee Bank Collateral Pool. The Corporation s cash and investment consist of checking, money market, and certificates of deposits. The Corporation s checking and money market accounts are short term highly liquid investments that are considered cash and cash equivalents. The Corporation considers all highly liquid investments with a maturity of three months or less when purchased to be cash and cash equivalents. Investments consist of certificates of deposit with original maturity dates in excess of ninety days. NOTE 4: LONG TERM DEBT On September 30, 2011, the Corporation refinanced its revenue bond with Pinnacle National Bank. The promissory note is the first mortgage on the property. The land and building are collateral for the loan. The original amount issued was $7,953,000. The interest rate of the loan is the Prime Rate minus 4% but never below 0%, with a maturity date of October 1, The five year maturity schedule is presented below. Fiscal Year Principal Interest Total 2017 $ 800,000 $ $ 800, , , ,553,000 1,553, Thereafter $ 3,153,000 $ $ 3,153,000 8

12 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE 5: CAPITAL ASSETS Capital assets consist of the following: Balance Balance 03/31/16 Additions Deletions 03/31/17 Assets Land $ 619,513 $ $ $ 619,513 Building and improvements 19,350,032 19,350,032 Equipment 626,593 11, ,174 Total 20,596,138 11,581 20,607,719 Accumulated Depreciation Net property and equipment (11,173,647) (956,298) (12,129,945) $ 9,422,491 $ (944,717) $ $ 8,477,774 The depreciation expense for the year ended March 31, 2017 was $956,298. NOTE 6: LONG TERM LIABILITIES Long term liabilities had the following activity: Balance Balance 03/31/16 Additions Deletions 03/31/17 Liabilities Tenant deposits $ 74,799 $ 8,750 $ (9,353) $ 74,196 Compensated absences 35,262 14,028 49,290 Mortgage payable 3,153,000 (800,000) 2,353,000 Total Long Term Liabilities 3,263,061 22,778 (809,353) 2,476,486 Section Intentionally Left Blank 9

13 SUPPLEMENTARY INFORMATION

14 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT No. P0124 SUPPLEMENTARY DATA REQUIRED BY HUD MARCH 31, 2017 A. PROPERTY AND EQUIPMENT Balance Balance 03/31/16 Additions Deletions 03/31/17 Assets Land $ 619,513 $ $ $ 619,513 Building and improvements 19,350,032 19,350,032 Equipment 626,593 11, ,174 Total 20,596,138 11,581 20,607,719 Accumulated Depreciation Net property and equipment (11,173,647) (956,298) (12,129,945) $ 9,422,491 $ (944,717) $ $ 8,477,774 B. TENANTS SECURITY DEPOSITS Tenants security deposits are held in a separate bank account in the name of the project. The amount of $74,196 was the balance at March 31, C. COMPENSATION OF OFFICERS Officers of Westbrooks Towers Affordable Housing Corporation do not receive any type of compensation, expense or other allowance from the project. D. RELATED PARTY PURCHASES There were no purchases from related parties. 10

15 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS FOR THE YEAR ENDED MARCH 31, 2017 Part A Compute Surplus Cash Cash (Accounts 1110, 1120, 1191, 1192) $ 428,026 Less Current Obligations Accounts payable (due within 30 days) 32,561 Tenant Security Deposits (Account 2191) 74,196 Other 66,397 Total Obligations 173,154 Net Surplus Cash $ 254,872 See auditors' report on supplementary information 11

16 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 FINANCIAL DATA SCHEDULE MARCH 31, 2017 ASSETS Current Assets Cash 1120 Cash in bank $ 353,830 Total Cash 353,830 Accounts Receivable 1130 Tenant accounts receivable 1, Allowance for doubtful accounts 1160 Accounts receivable interest 2, Accounts receivable other 3,161 Total Accounts Receivable 7,920 Inventory 1180 Inventory 16,110 Total Inventory 16,110 Prepaids 1200 Prepaid expenses 30,884 Total Prepaids 30,884 Total Current Assets 408, Tenant security deposits 74,196 Fixed Assets 1410 Land 619, Building 19,350, Building equipment (portable) 221, Furniture 384, Maintenance equipment 32,032 20,607, Accumulated depreciation (12,129,945) Net Fixed Assets 8,477,774 Investments 1510 Investements operations 398,178 Total Investments 398,178 TOTAL ASSETS $ 9,358,892 LIABILITIES AND NET ASSETS Current Liabilities Accounts Payable 2110 Trade payables 32,561 Total Accounts Payable 32,561 Accrued Expenses 2120 Accrued wages 4, Accrued property taxes 61,956 Total Accrued Expenses 66,397 Prepaid Rent 2210 Prepaid rent Total Prepaid Rent Mortgage Payable Current 2170 Current portion mortgage payable 800,000 Total Current Mortgage Payable 800,000 Total Current Liabilities 898,958 Long term Liabilities 2191 Tenant deposits held in trust 74, Compensation absences 49, Mortgage payable long term 2,353,000 Total Long term Liabilities 2,476,486 Total Liabilities 3,375,444 Net Assets 3131 Unrestricted net assets 5,983,448 Total Net Assets 5,983,448 TOTAL LIABILITIES AND NET ASSETS $ 9,358,892 See auditors' report on supplementary information 12

17 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 FINANCIAL DATA SCHEDULE FOR THE YEAR ENDED MARCH 31, 2017 Rental Income 5120 Apartment carrying charges $ 891, Tenant assistance payments 1,166,235 Total Rent $ 2,057,674 Vacancy Loss 5220 Vacancy loss apartments (28,957) Total Vacancy Loss (28,957) Financial Revenue 5410 Interest income operations 6, Interest income replacement reserve Total Financial Revenue 6,738 Other Revenue 5910 Laundry and vending revenue 22, Other tenant charges Other revenue 28,833 Total Other Revenue 51,485 Total Revenue 2,086,940 Administrative Expenses 6210 Advertising 1, Office expenses 62, Manager or Superitendent 204, Legal fee 1, Audit fees 3, Bookkeeping fees 1, Bad debt (309) 6390 Miscellaneous administrative expenses 14,147 Total Administrative Expenses 290,165 Utilities Expense 6450 Electricity 190, Water 46, Gas 6,443 Total Utilities Expense 243,234 Operating and Maintenance Expenses 6510 Payroll 190, Supplies 70, Contracts 102, Garbage and trash removal 7, Security payroll/contract 6, Vehicle and maintenance equipment operation and repairs 11,420 Total Operating and Maintenance Expenses 388,169 Taxes and Insurances 6710 Property taxes 61, Property & liability insurance (hazard) 55, Workers compensation insurance 6723 Health Insurance and other benefits 169,770 Total Taxes and Insurances 287,717 Financial Expenses 6820 Interest on mortgage Total Financial Expenses Total Expenses 1,209,285 Profit (Loss) before depreciation 877,655 Depreciation 956,298 Net Profit or (Loss) $ (78,643) See auditors' report on supplementary information 13

18 WESTBROOKS TOWERA AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 FINANCIAL DATA SCHEDULE FOR THE YEAR ENDED MARCH 31, 2017 Cash Flows from Operating Activities S Rental receipts $ 2,030,132 S Interest receipts 4,836 S Other operating receipts 51,485 S Total receipts 2,086,453 S Administrative (276,018) S Utilities (243,234) S Salaries and wages (197,625) S Operating and maintenance (220,619) S Property Insurance (113,764) S Miscellaneous taxes and insurances (169,770) S Security deposits S Total Disbursements (1,221,030) S Net Cash provided by (used in) Operating Activities 865,423 Cash Flow from Investing Activities S Fixed assets (11,581) S Net Cash Provided (used) in Investing Activities (11,581) Cash Flow from Financing Activities S Principal Payments (800,000) S Net Cash Provided (Used in Financing Activities (800,000) S Net Increase (Decrease) in Cash and Cash Equivalents 53,842 Beginning Cash Balance 299,988 Ending Cash Balance $ 353,830 Reconciliation of Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 3250 Profit or Loss (Net Income or Loss) $ (78,643) Adjustments to Reconcile Net Profit (Loss) to Net Cash Provided by (Used in) Operating 6600 Depreciation Expenses 956,298 S Decrease (increase) in tenant/member accounts receivable 2,846 S Decrease (increase) in accounts receivable other (1,902) S Decrease (increase) in prepaid expenses 3,191 S Decrease (increase) in cash restricted for tenant security deposits 583 S Increase (decrease) in accounts payable (6,533) S Increase (decrease) in accrued liabilities (7,313) S Increase (decrease) in tenant security deposits held in trust (583) S Increase (decrease) in prepaid rent (1,431) S Increase (decrease) in other (1,090) S Net Cash provided by (used in) Operating Activities $ 865,423 See auditors' report on supplementary information 14

19 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED MARCH 31, 2017 Pass through CFDA Entity Identifying Federal PROGRAM NO. Number Expenditures U. S. Department of Housing and Urban Development Direct Assistance Section 8 New Construction * $ 1,166,235 Total U. S. Department of Housing and Urban Development 1,166,235 Total Federal $ 1,166,235 * Major program Scope of Presentation The accompanying schedule presents the expenditures incurred (and related awards received) by the Corporation that are reimbursable under federal programs of federal agencies providing financial assistance and state awards. For the purposes of this schedule, only the portion of program expenditures reimbursable with such federal or state funds are reported in the accompanying schedule. Program expenditures in excess of the maximum federal or state reimbursement authorized or the portion of the program expenditures that were funded with local or other nonfederal funds are excluded from the accompanying schedule. Basis of Accounting The expenditures included in the accompanying schedule were reported on a accrual basis of accounting. Expenditures are recognized in the accounting period in which the related liability is incurred. Expenditures reported included any property or equipment acquisitions incurred under the federal program. The Schedule was prepared from only the accounts of the grant programs and, therefore, does not present the financial position or results of operations of the Organization See auditors' report on supplementary information 15

20 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 ANNUAL AUDITORS' CERTIFICATE OF CURRENT YEARS DEBT SERVICE RATIO FOR THE YEAR ENDED MARCH 31, 2017 PROJECT REVENUES Rental Income $ 862,482 HAP cntract payments 1,166,235 Miscellaneous income 58,223 2,086,940 PROJECT EXPENSES Administrative Expenses 290,165 Utilities Expense 243,234 Operating and Maintenance Expenses 388,169 Taxes and Insurances 287,717 1,209,285 Net Operating Income $ 877,655 Debt Service on Loan $ 800,000 Debt Service Coverage Ratio 1.10 See auditors' report on supplementary information 16

21 INTERNAL CONTROL AND COMPLIANCE MATTERS

22 Board of Directors Westbrooks Towers Affordable Housing Corporation Murfreesboro TN 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 AUDITORS REPORT We have audited, in accordance with auditing standards generally accepted in the United Sates of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Westbrooks Towers Affordable Housing Corporation (the Corporation) which comprise the balance sheet as of March 31, 2017, and the related statements of activities, and cash flows for the year then ended and the related notes to the financial statements, and have issued our report thereon dated May 16, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Corporation s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Corporation s internal control. Accordingly, we do not express an opinion on the effectiveness of the Corporation s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies given these limitation, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matter As part of obtaining reasonable assurance about whether the Corporation s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statements amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our test disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

23 REPORT ON COMPLIANCE (CONTINUED) Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an internal part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. May 16,

24 Board of Directors Westbrooks Towers Affordable Housing Corporation Murfreesboro TN REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE AS REQUIRED BY UNIFORM GUIDANCE INDEPENDENT AUDITORS REPORT Report on Compliance for Each Major Federal Program We have audited Westbrooks Towers Affordable Housing Corporation s (the Corporation) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Corporation s major federal programs for the year ended March 31, The Corporation s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Corporation s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Corporation s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination on Westbrooks Towers Affordable Housing Corporation s compliance. Opinion on Each Major Federal Program In our opinion, the Corporation s complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended March 31, 2017.

25 REPORT ON COMPLIANCE WITH UNIFORM GUIDANCE (Continued) Report on Internal Control Over Compliance Management of the Corporation is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Corporation s internal control over compliance with the types of requirements that could have a direct and material effect on a major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Corporation s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less sever than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weakness or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weakness may exits that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope for our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. May 16,

26 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 AUDIT FIRM INFORMATION MARCH 31, 2017 Partner: Firm: Chad Porter, CPA Smith Marion & Co Certified Public Accountants 5141 Virginia Way, Ste. 400 Brentwood TN Telephone: (615) Facsimile: (909) FIN:

27 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 SCHEDULE OF FINDINGS AND QUESTIONED COSTS MARCH 31, 2017 SECTION I Summary of Auditors Results Financial Statements 1. Type of Auditor Report on the financial statements: Unmodified. 2. Internal control over financial reporting: a. Material weakness identified yes X no b. Significant deficiencies identified that are not considered to be material weaknesses yes X none reported 3. Noncompliance material to financial statements yes X no Federal Awards 4. Internal control over major programs: a. Material weakness identified yes X no b. Significant deficiencies identified that are not considered to be material weaknesses yes X none reported 5. Type of auditors report on compliance for major programs: Unmodified. 6. Audit findings noted which are required to be reported under Section (a) of the Uniform Guidance yes X no 7. Identification of Major Programs: CFDA Number Name of Federal Program U.S. Department of Housing and Urban Development Section 8 New Construction 8. The Dollar Threshold Used To Distinguish Between Type A and Type B Programs: $750, Auditee qualified as a low risk auditee X yes no SECTION II Financial Statement Findings There were no findings relating to this area for the period ended March 31, SECTION III Federal Award Findings and Questioned Costs There were no auditor findings to be reported in accordance with paragraph (a) of the Uniform Guidance for the period ended March 31,

28 WESTBROOKS TOWERS AFFORDABLE HOUSING CORPORATION PROJECT NO. P0124 STATUS OF PRIOR YEAR FINDINGS MARCH 31, 2017 Prior Findings Status No prior year findings reported. 23

29

30