HOUSING AUTHORITY OF NEW SMYRNA BEACH AUDITED FINANCIAL STATEMENTS. New Smyrna Beach, Florida. March 31, Certified Public Accountant

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1 HOUSING AUTHORITY OF NEW SMYRNA BEACH AUDITED FINANCIAL STATEMENTS New Smyrna Beach, Florida March 31, 2017 Goldie Roberts Certified Public Accountant 8518 S Kays Chapel Rd 870 Cinderella Court Fredericksburg, IN Decatur, GA

2 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida MARCH 31, 2017

3 TABLE OF CONTENTS Page Independent Auditor s Report 1 Management s Discussion and Analysis i FINANCIAL STATEMENTS Statement of Net Position 3 Statement of Revenues, Expenses and Changes in Fund Net Position 4 Statement of Cash Flows 5 Notes to Financial Statements 7 SUPPLEMENTAL FINANCIAL INFORMATION Combining Schedule of Program Net Position 16 Combining Schedule of Revenues, Expenses and Changes in Fund Net Position 17 Financial Data Schedule 18 Notes to Supplemental Financial Information 23 Schedule of Expenditures of Federal Awards 24 OTHER REPORTS 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 25 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance Required by Uniform Guidance 27 Schedule of Findings and Questioned Costs 29

4 Board of Commissioners Housing Authority of New Smyrna Beach PO Box 688 New Smyrna Beach, Florida Report on the Financial Statements Goldie Roberts Certified Public Accountant 8518 S Kays Chapel Rd Fredericksburg, IN INDEPENDENT AUDITOR'S REPORT I have audited the accompanying financial statements of the Housing Authority of New Smyrna Beach ( the Authority ) which comprise the Statement of Net Position as of March 31, 2017, and the related Statements of Revenues, Expenses and Changes in Fund Net Position, and Cash Flows for the year then ended, and the related Notes to the Financial Statements, which collectively comprise the Housing Authority of New Smyrna Beach s 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 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 Authority 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 Authority 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. Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Housing Authority of New Smyrna Beach as of March 31, 2017, 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.

5 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 i through v be presented to supplement the financial statements. Such information, although not a part of the financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the 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 financial statements, and other knowledge I obtained during my audit of the financial statements. I do not express an opinion or provide any assurance on the information because the limited procedures do not provide me with sufficient evidence to express an opinion or provide any assurance. Other Supplementary Information My audit was conducted for the purpose of forming an opinion on the Authority s financial statements as a whole. The accompanying Financial Data Schedule, Schedule of Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principals and Audit Requirements for Federal Awards, and the other supplemental information as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. In regard to, the Financial Data Schedule, Schedule of Expenditures of Federal Awards, and the other supplemental information as listed in the table of contents, such 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 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 my opinion, the Financial Data Schedule, Schedule of Expenditures of Federal Awards, and the other supplemental information as listed in the table of contents 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, I have also issued my report dated October 3, 2017 on my consideration of the Housing Authority of New Smyrna Beach 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 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 Housing Authority of New Smyrna Beach s internal control over financial reporting and compliance. Fredericksburg, Indiana October 3, 2017 Certified Public Accountant 2

6 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida MANAGEMENT S DISCUSSION AND ANALYSIS March 31, 2017 The Housing Authority of the City of New Smyrna Beach Florida (the Authority) issues this management discussion and analysis (MD&A) to aid the viewer in understanding this financial report as it pertains to the Authority. This MD&A is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the Authority s financial activity, (c) identify changes in the Authority s financial position (its ability to address the challenges it will face in the future), and (d) identify specific issues and concerns. Since the MD&A is designed to focus on the current year s activities, resulting changes and currently known facts, please read it in conjunction with the Authority s basic financial statements. This report contains these major sections: 1) Comparative Statement of Net Position 2) Comparative Statement of Revenue, Expenses and Changes in Fund Net Position 3) Significant Variance Information 4) Statement of Cash Flows 5) Notes to the Basic Financial Statements 6) Supplemental Information About Comparative Statement of Net Position The Authority s basic financial statements include a Statement of Net Position, which is a balance sheet that uses Net Position as the Equity account instead of Equity or Retained Earnings. The statement is presented in the format where assets minus liabilities equal Net Position. Assets and liabilities are presented in order of liquidity, and are classified as Current (to be transacted within one year), and Noncurrent (to be transacted in more than one year). The focus of the Statement of Net Position is to emphasize available liquid (non-capital) assets, net of liabilities, for the entire Authority. Net Position is reported in three broad categories: Investment in Capital Assets: This component of Net Position consists of all Capital Assets, reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets Restricted: This component of Net Position consists of restricted assets, in which constraints are placed on the assets by creditors, grantors, contributors, laws, regulations, etc. In this case it is the regulations of HUD (U.S. Department of Housing and Urban Development). Unrestricted: Consists of Net Position that do not meet the definition of "Investment in Capital Assets" or "Restricted". In other words it is Net Position not tied up by restrictions and regulations nor attached to any Capital Assets. i

7 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida MANAGEMENT S DISCUSSION AND ANALYSIS March 31, 2017 (Continued) Comparative Statement of Net Position ASSETS March 31, 2017 March 31, 2016 Variance Current Assets Cash & cash equivalents $ 1,456,894 $ 1,368,074 $ 88,820 Restricted Cash & cash equivalents 55,834 75,240 (19,406) Accounts Receivable, Net 34, ,210 (114,459) Prepaid Expenses 42,809 35,354 7,455 Inventory, Net 22,676 21, Total Current Assets 1,612,964 1,649,647 (36,683) Capital Assets Land & other non-depreciable assets 249, ,476 (641,545) Depreciable capital assets, net 2,317,250 1,519, ,358 Total Capital Assets 2,567,181 2,411, ,813 Total Assets $ 4,180,145 $ 4,061,015 $ 119,130 LIABILITIES Current Liabilities Accounts Payable $ 38,388 $ 34,539 $ 3,849 Accrued Liabilities 37,725 51,762 (14,037) Payable from restricted cash and Cash equivalents: Tenants security Deposits 39,559 34,978 4,581 Unearned Revenue 3,381 1,437 1,944 Total Current Liabilities 119, ,716 (3,663) Noncurrent Liabilities Accrued compensated absences 69,592 44,793 24,799 Total Noncurrent Liabilities 69,592 44,793 24,799 Total Liabilities 188, ,509 21,136 NET POSITION Investment in Capital Assets 2,567,181 2,411, ,813 Restricted 16,275 40,262 (23,987) Unrestricted 1,408,044 1,441,876 (33,832) Total Net Position 3,991,500 3,893,506 97,994 Total Liabilities & Net Position $ 4,180,145 $ 4,061,015 $ 119,130 ii

8 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida MANAGEMENT S DISCUSSION AND ANALYSIS March 31, 2017 (Continued) About Comparative Statement of Revenue, Expenses and Changes in Fund Net Position The Authority s basic financial statements also include a Statement of Revenue, Expenses and Changes in Fund Net Position (similar to an Income Statement). This Statement includes Operating Revenue, such as rental income and operating grant revenue, operating expenses, such as administrative, utilities, maintenance, and depreciation, and non-operating revenue and expenses, such as, investment income and interest expense. The focus of the Statement of Changes in net Position is the change in Net Position which is net income or loss. Comparative Statement of Revenues, Expenses, & Changes in Fund Net Position OPERATING REVENUES March 31, 2017 March 31, 2016 Variance Tenant Income $ 463,064 $ 362,593 $ 100,471 (1) Other Revenue 201, ,181 (177,984) (2) Total Operating Revenue 664, ,774 (77,513) OPERATING EXPENSES Administrative 413, ,331 20,956 (3) Tenant Services 1,400 1, Utilities 103, ,787 (1,139) Ordinary maintenance & operation 299, ,539 16,416 General Expense 144,178 94,352 49,826 (4) Housing Assistant Payments 1,343,901 1,295,452 48,449 (5) Depreciation Expense 271, ,841 44,628 Total Operating Expenses 2,577,838 2,398, ,258 OPERATING INCOME (LOSS) (1,913,577) (1,656,806) (256,771) NONOPERATING REVENUES (EXPENSES) Federal Operating Grants 1,919,206 1,945,255 (26,049) (6) Interest Income (loss) 16 (12,825) 12,841 Total Non-operating Revenue 1,919,222 1,932,430 (13,208) Capital Contributions 92, ,265 (295,916) CHANGE IN NET POSITION 97, ,889 (565,895) TOTAL NET POSITION BEGINNING OF YEAR ,893,506 3,229, ,889 TOTAL NET POSITION END OF YEAR $ 3,991,500 $ 3,893,506 $ 97,994 iii

9 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida MANAGEMENT S DISCUSSION AND ANALYSIS March 31, 2017 (Continued) Comparative Statement of Revenues, Expenses, & Changes in Net Position (continued) Significant Variance Information (Between FYE March 31, 2017 & March 31, 2016) (1) RENTAL INCOME INCREASED by $100,471 The PHA experienced a $100,471 increase in rental income due to the increase in tenant income in the public housing program and due to rented units in the open market program. (2) OTHER REVENUE- DECREASED by $177,984- The PHA had a decrease in other revenue due to a CRA grant received during fiscal year 2016 that was not realized in (3) ADMINISTRATIVE COSTS INCREASED BY $ 20,956 The PHA experienced an increase in this line item due to an increase in salaries and legal fees. (4) GENERAL EXPENSES - INCREASED BY - $49,826- The housing authority s general expenses increased due to an ncrease in insurance, compensated absences, and payment in lieu of taxes expense. (5) HOUSING ASSISTANCE PAYMENTS- INCREASED BY $48,449 The Housing Authority s Housing Voucher Program had an increase in HAP payments to landlords for the behalf of families on the Section 8 program Analysis of Financial Position and Results of Operations Net Position will serve over time as a useful indicator of the Authority s financial condition. Net Position, which is called Retained Earnings in the private sector, is what is left over after liabilities are deducted from assets. At March 31, 2017, Net Position increased by $97,994 from the year before largely due to an increase in rental revenues. Cash Unrestricted cash decreased by $33,832 primarily due to a decrease in net receivables. Capital Assets Investment in capital assets increased by $155,813 primarily due to the rehabilitation occurring in the open market program. iv

10 Debt Administration HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida MANAGEMENT S DISCUSSION AND ANALYSIS March 31, 2017 (Continued) The Authority currently has no outstanding debt, other than current liabilities and long term accrued compensated absences. Supplemental Information The Authority s Programs Low Rent Public Housing Under the Low Rent Public Housing program, the Authority rents units that it owns (126 in all) to low income individuals. This program is operated under the Annual Contributions Contract (ACC) with HUD who provides Operating Subsidy funding to enable the Authority to provide this housing at a rent that is based upon 30% of household income. Housing Choice Voucher Program Under this program the prospective tenant receives a voucher to rent an apartment, house or other unit from a landlord. The Authority administers this program under the Annual Contributions Contract (ACC) with HUD. The tenant pays the landlord rent based on 30% of household income and the Authority pays the balance of the total rent. The payment by the Authority to the landlord is called a Housing Assistance Payment (HAP). Public Housing Capital Fund Program Under this program, the Authority receives funds primarily to finance various construction contracts for repairs. This repair work is required to maintain the units as long as possible since funding for new units from HUD is virtually nonexistent. On the secondary purpose, a portion of it can subsidize Public Housing operations. Open Market Program- Under this program, the housing authority owns four units on Julia St Street and six additional units, that are currently occupied primarily by families holding Section 8 vouchers. The subsidized tenants meet the same requirements as all other tenants on the Housing Voucher Program. Non-subsidized families are charged rent at the HOME affordable rate. The overwhelming need for Housing - The PHA sees an increasing need for affordable housing in the New Smyrna Beach area. All housing authorities are doing what they can to help as many as they can with the limited amount of funding from HUD and program restrictions related to it. Contacting the Authority The individual that should be contacted regarding this report is Teresa Pope, Executive Director at The Authority is located at 1101 S. Dixie Freeway, New Smyrna Beach, FL and the mailing address is: New Smyrna Beach Housing Authority, New Smyrna Beach, FL v

11 FINANCIAL STATEMENTS

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16 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 NOTE A - Summary of Significant Accounting Policies: The financial statements of the HOUSING AUTHORITY OF NEW SMYRNA BEACH ("the Authority") have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Government Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The HOUSING AUTHORITY OF NEW SMYRNA BEACH is a political subdivision both corporate and politic which was established under the provision of Florida Statutes, to provide adequate housing at rents which persons of low-income can afford in areas where there exists a shortage. To accomplish this purpose, the Authority has entered into annual contributions contracts with the U.S. Department of Housing and Urban Development (HUD) to be the Administrator of a public housing program (Contract No. A-4121) and section 8 program (Contract No. FL022). Reporting Entity The entity is a public corporation, legally separate, fiscally independent, and governed by the Board of Commissioners. As required by generally accepted accounting principles, these financial statements present the financial position and results of operations of the Housing Authority of New Smyrna Beach, a primary government. There are no component units to be included herewith, but this report does include all programs which are controlled by the entity s governing body. The financial statements of the HOUSING AUTHORITY OF NEW SMYRNA BEACH include the following: The Authority had 354 units in management at March 31, 2017: Project Units Authority owned 126 Housing Assistance Payments Program: Vouchers Authorized 218 Business Activities _ 10 Total 354 The Authority is also administering Capital Fund Grants, and has a business activities program. Basis of Presentation and Accounting: In accordance with uniform financial reporting standards for HUD housing programs, the financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as applicable to special purpose governments engaged only in business type activities. Proprietary funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. Accordingly, all assets, deferred outflow of resources, liabilities, and deferred inflow of resources are included in the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Fund Net Position present increases (revenues) and decreases (expenses) in net position. Under the Accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. 7

17 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) NOTE A - Summary of Significant Accounting Policies: (Continued) This special purpose government engaged in activities similar to business activities uses an enterprise fund to account for those operations that are financed and operated in a manner similar to private business, or where the Board has decided that the determination of revenues earned, costs incurred, and/or net income is necessary for management accountability. The intent of the governing body is that the costs (expenses including depreciation) of providing services to the general public on a continuing basis be financed or recovered primarily through user charges. Generally accepted accounting principles for state and local governments requires that resources be classified for accounting and reporting purposes into the following net position categories: Investment in Capital Assets: Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets. The Authority has no debt. Restricted: Net position whose use by the Authority is subject to externally imposed stipulations that can be fulfilled by actions of the Authority pursuant to those stipulations or that expire by the passage of time. Such assets include assets restricted for capital acquisitions and debt service. Unrestricted: Net position that are not subject to externally imposed stipulations. Unrestricted net position may be designated for specific purposes by action of management or the Authority Board or may otherwise be limited by contractual agreements with outside parties. Accounting Policies - The financial statements of the Authority have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Government Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Use of Enterprise Accounting - The Authority presents its financial statements using enterprise accounting, as allowed by governments. Although the Authority accounts for its programs using accounts for its internal reporting, the Authority is considered to be a unified enterprise fund for reporting purposes. Accordingly, the Authority uses the economic resources measurement focus and the related accrual basis of accounting. Under the economic resources measurement focus, the Authority accounts for all assets and liabilities. Under the accrual basis of accounting expenses are recorded as earned, irrespective of when cash is received. Budgets - Budgets are prepared on an annual basis for each major operating program and are used as a management tool throughout the accounting cycle. The grant budgets are adopted on a "project length" basis. Budget compared to Actual presentation has been omitted because the Authority does not annually adopt a legally authorized budget. The Authority's budget is adopted by the Authority's board. This budget does not represent an appropriated budget that has been signed into law or a non-appropriated budget 8

18 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) NOTE A - Summary of Significant Accounting Policies: (Continued) authorized by constitution. The Authority's budget represents budgetary execution and management by its board; therefore, budgetary data and presentation is not required. Cash and Cash Equivalents - Deposits consist of checking accounts and Certificates of Deposit and are stated at fair value. Deposits are fully collateralized or vested in securities of the United States Government and are identified specifically in the name of the Authority. Certificates of deposit that are redeemable immediately with little or no penalty are considered cash equivalents. Tenant Receivables - Receivables for rentals and service charges are reported at net of an allowance for doubtful accounts. The Housing Authority Board takes quarterly action as required to write off specific uncollectible accounts receivable balances. Prepaid Prepaid items represent payments made to vendors for services that will benefit beyond March 31, Inventories - Inventories are valued at cost, which approximates market value, using the first-in/first/out (FIFO) method. The consumption method is applied and expense is charged when inventory items are used for the units. Inter-program Due From and Due To - During the course of its operations, the Authority has inter-program transactions to finance operations and provide services. Inter-program accounts receivable and payable have been recorded to recognize transactions between programs for which the applicable cash transfer had not been made as of the balance sheet date. Inter-program balances have been eliminated for financial statement reporting purposes. Capital Assets - Capital assets purchased are recorded as expenditures (capital outlay) at the time of purchase. Such assets are recorded at cost. Donated assets are recorded at fair market value at the date of donation. Because developments and major capital repairs or improvements are financed through cash advances from HUD, there are no capitalized interest costs in current programs. It is the policy of the Authority to capitalize assets costing $1,000 or more. Depreciation of property and equipment is computed by the straight-line method based upon the estimated useful lives of the assets as follows: Class Building & Improvements Furniture, Equipment & Machinery Life years 5-7 years Compensated Absences - Compensated absences are those absences for which employees will be paid, such as vacation leave. A liability for compensated absences that is attributable to services already rendered and that are not contingent on a specific event that is outside the control of the Authority and its employees, is accrued as employees earn the rights to the benefits. Compensated absences that relate to future services or that are contingent on a specific event that is outside the control of the Authority and its employees, are accounted for in the period in which such services are rendered or in which such events take place. 9

19 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) NOTE A - Summary of Significant Accounting Policies: (Continued) 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 and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Leasing Activities (as Lessor) - The Authority is the lessor of dwelling units primarily to low-income residents. The rents under the leases are determined generally by the resident's income as adjusted for eligible deductions regulated by HUD, although the resident may opt for a flat rent. Leases may be cancelled by the lessee at any time. The Authority may cancel the lease only for cause. Income associated with these leases is recorded in the financial statements and schedules as "Rental income". Rental income per resident generally remains consistent from year to year, but is affected by general economic conditions which impact personal income, such as local job availability. Operating Revenues and Expenses - Operating revenues and expenses generally result from providing and producing goods and/or services in connection with providing low income housing programs. Operating expenses include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Restricted Assets - When both restricted and unrestricted resources are available for use, it is the Authority's policy to use unrestricted resources first, and then restricted resources as they are allowed. NOTE B - Deposits and Cash and Cash Equivalents: 1. HUD Deposit Restrictions HUD requires Authorities to invest excess HUD program funds in obligations of the United States, certificates of deposit or any other federally insured instruments. HUD also requires that deposits of HUD program funds be fully insured or collateralized at all times. Acceptable security includes FDIC/FSLIC insurance and the market value of securities purchased and pledged to the political subdivision. Pursuant to HUD restrictions, obligations of the United States are allowed as security for deposits. Obligations furnished as security must be held by the Authority or with an unaffiliated bank or trust company for the account of the Authority. 2. Risk Disclosures A. Interest Rate Risk: As a means of limiting its exposure to fair value losses arising from rising interest rates, the Authority s investment policy limits the Authority s investment portfolio to maturities not to exceed two years at time of purchase. At March 31, 2017, the Authority s deposits and investments were not limited and all of which are either available on demand or have maturities of less than two years. 10

20 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) NOTE B - Deposits and Cash and Cash Equivalents: (Continued) B. Credit Risk: This is a risk that a security or a portfolio will lose some or all of its value due to a real or perceived change in the ability of the issuer to repay its debt. The Authority s investment policy regarding its federal funds is that none of its total portfolio may be invested in securities of any single issuer, other than the US Government, its agencies and instrumentalities. C. Custodial Credit Risk: This is the risk that in the event of the failure of the counterparty, the Authority will not be able to recover the value of its investments or collateral securities that are held by the counterparty. All of the Authority s investments in securities are held in the name of the Authority. The Authority s custodial agreement policy prohibits counterparties holding securities not in the Authority s name. The carrying amounts of the Authority s cash deposits were $1,512,728 at March 31, Bank balances before reconciling items were $1,539,555 at that date, the total amount of which was collateralized or insured with securities held by an unaffiliated banking institution in the Authority s name. Restricted deposits include Section 8 HAP of $16,275 and security deposits of $39,559. Deposits consist of the following: Checking/Money Market accounts/petty Cash $ 1,512,728 NOTE C - Accounts Receivable: Accounts receivable at March 31, 2017, consist of the following: Accounts Receivable- HUD $ 2,250 Other Accounts Receivable, net of allowances for doubtful Accounts of $9,510 16,641 Tenant accounts receivable - net allowance for doubtful accounts of $1, Fraud Recovery Receivable net of allowance for doubtful Accounts of $15,430 15,430 Total Accounts Receivable $ 34,751 NOTE D - Prepaid expenses: Prepaid expenses at March 31, 2017, consist of the following: Prepaid insurance and other expenses $ 42,809 NOTE E - Inventory: Inventory at March 31, 2017, consists of the following: Materials and supplies, net of allowance of $2,520 $ 22,676 Materials inventories are recorded at cost. The FIFO inventory flow assumption is used to determine expenditures. Expenditures are recorded when inventory is consumed. 11

21 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) NOTE F - Capital Assets: A summary in changes in capital assets is as follows: Beginning Ending Balance Balance 03/31/16 Increases Decreases Transfers 03/31/17_ Capital assets, not being depreciated: Land $ 109,317 $ 0 $ 0 $ 0 $ 109,317 Construction in Progress 782, (641,545) 140,614 Total Capital Assets, Not being depreciated 891, (641,545) 249,931 Capital Assets, being depreciated: Buildings & Improvements 7,331, , ,545 8,400,498 Furniture, Equipment & Machinery 200, ,423 Total Capital Assets, being depreciated 7,532, , ,545 8,600,921 Less Accumulated Depreciation for: Buildings & Improvements ( 5,780,658) (268,334) 0 0 ( 6,048,992) Furniture, Equipment and Machinery ( 231,544) ( 3,135) 0 0 ( 234,679) Total Accumulated Depreciation: ( 6,012,202) (271,469) 0 0 ( 6,283,671) Total Capital Assets, being depreciated, net 1,519, , ,545 2,317,250 Capital Assets, Net $ 2,441,368 $ 155,813 $ 0 $ 0 $ 2,567,181 Funding through the Capital Fund Grant Programs of $122,697 has not yet been expended under the current programs (CFP 2014, 2015 and 2016 grants). HUD has approved funding for the above amount. Depreciation expense of $271,469 was incurred during the year. NOTE G - Accounts payable: Accounts payable at March 31, 2017, consist of the following: Vendors Accounts payable $ 9,858 Due to other PHAs for portable vouchers 1,236 Total $ 11,094 12

22 NOTE H - Current liabilities: HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) Accrued liabilities at March 31, 2017, consist of the following: Payments in lieu of taxes $ 27,294 Accrued wages/taxes 16,318 Accrued compensated absences 21,407 Total $ 65,019 NOTE I - Unearned Revenue: Unearned Revenue at March 31, 2017, consists of the following: Prepaid Tenant Rent Payments $ 3,381 NOTE J - Noncurrent Liabilities: Noncurrent liabilities at March 31, 2017, consist of the following: Due within 3/31/16_ Additions Deletions 3/31/17_ one year Total_ Accrued Compensated absences $ 44,793 $ 24,799 $ 0 $ 69,592 $ 21,407 $ 90,999 NOTE K - Federal Operating Grants: HUD contributed the following operating subsidies approved in the operating budgets under the Annual Contributions Contracts: Low Rent Public Housing $ 450,336 Capital Fund Program 67,075 Housing Choice Vouchers 1,401,795 Total $ 1,919,206 NOTE L - Capital Contributions: The Authority receives capital grants from HUD for capital fund program improvements. Capital Fund Program contributions for the fiscal year ended March 31, 2017 were: Capital Fund $ 92,349 NOTE M - Risk Management: The Authority is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Authority carries the following insurance coverage: Commercial General Liability, Auto, Real & Personal Property, Commercial Liability, and Workers Compensation. Settled claims resulted in payment of $70,236 to the housing authority in the current year. 13

23 HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) NOTE N - Pension Plan: The Authority participates in a multi-employer defined contribution plan (also known as PERS) for all full-time employees. The plan requires contributions of 12% of salaries split 58% employer and 42% employee. All full-time employees are covered by the plan. Vesting is 20% per year for 5 years. Contributions are based on prior fiscal year salary levels because of the amount of time it takes HUD to approve the budget each year. The plan is administrated by HUD Plan Services, Inc. and is funded by variable annuity contracts through Lincoln Life Insurance Company. Plan assets are in money market accounts. The trustee is Teresa Pope. The Authority entered into an Agreement of Trust wherein the Authority recognizes a residual equity position in favor of the U.S. Department of Housing and Urban Development in the Authority s land, structures and equipment. Should the Authority fail or the assets be disposed of, the property or the proceeds would revert to HUD. Basis of Accounting The financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Valuation of Investments Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Mortgages are valued on the basis of future principal and interest payments, and are discounted at prevailing interest rates for similar instruments. The fair value of real estate investments is based on independent appraisals. Investments that do not have an established market are reported at estimated fair value. A separate financial report has been published for the Housing Renewal and Local Agency Retirement Plan and may be obtained by writing to APB Financial Group, Ltd, American Pension Benefits, 115 VIP Drive Suite 120, Wexford, PA 15090, NOTE O - Conduit Type Debt: Debt related to the original acquisition and early modernization of the public housing developments is funded, guaranteed and serviced by HUD. There is no debt or pledge of faith and credit on the part of the Authority. Accordingly, this debt has not been recorded in the financial statements of the Housing Authority of New Smyrna Beach. HUD no longer provides the Authority with debt service information since the Authority has no obligation for the debt. 14

24 NOTE P - Economic Dependency: HOUSING AUTHORITY OF NEW SMYRNA BEACH New Smyrna Beach, Florida NOTES TO FINANCIAL STATEMENTS MARCH 31, 2017 (Continued) The Authority receives approximately 75% of its revenues from HUD. If the amount of revenues received from HUD falls below critical levels, the Authority s operations could be adversely affected. NOTE Q - Commitments and Contingencies: Litigation: At March 31, 2017, the Authority was not involved in any threatened litigation. Examinations: The Authority is subject to possible examinations made by federal and state authorities who determine compliance with terms, conditions, laws, and regulations governing other grants given to the Authority in the current and prior years. There were no such examinations during the year ended March 31, Grant Disallowances: Amounts received or receivable from HUD are subject to audit and adjustment by HUD. Any disallowed claims, including amounts already collected, may constitute a liability of the Authority. The amounts, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the Authority expects such amounts, if any, to be immaterial. Construction Projects: There are certain major construction projects in progress at March 31, These include modernizing rental units at the project sites. These projects are being funded by HUD. Funds are requested periodically as the cost is incurred. There is also rehabilitation work being done in the business activities sites. These projects are being funded with CDBG, CRA and some non-federal housing authority funds. NOTE R 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 or 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. Subsequent events which provide evidence about conditions that existed after the balance sheet date require disclosure in the accompanying notes. Management has evaluated the activity of the Authority through October 3, 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. 15

25 SUPPLEMENTAL FINANCIAL INFORMATION

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30 Housing Authority of New Smyrna Beach (FL022) NEW SMYRNA BEACH, FL Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2017 Project Total Community Development Block Grants/Entitlement Grants Housing Choice Vouchers 1 Business 2 State/Local Subtotal ELIM Total Activities 111 Cash - Unrestricted $1,217,213 $232,787 $6,894 $1,456,894 $1,456, Cash - Restricted - Modernization and Development 113 Cash - Other Restricted $16,275 $16,275 $16, Cash - Tenant Security Deposits $30,707 $8,852 $39,559 $39, Cash - Restricted for Payment of Current Liabilities 100 Total Cash $1,247,920 $0 $249,062 $0 $15,746 $1,512,728 $1,512, Accounts Receivable - PHA Projects 122 Accounts Receivable - HUD Other Projects $2,250 $2,250 $2, Accounts Receivable - Other Government 125 Accounts Receivable - Miscellaneous $26,151 $26,151 $26, Accounts Receivable - Tenants $1,422 $693 $2,115 $2, Allowance for Doubtful Accounts -Tenants -$9,441 -$69 -$9,510 -$9, Allowance for Doubtful Accounts - Other -$1,685 -$1,685 -$1, Notes, Loans, & Mortgages Receivable - Current 128 Fraud Recovery $30,860 $30,860 $30, Allowance for Doubtful Accounts - Fraud -$15,430 -$15,430 -$15, Accrued Interest Receivable 120 Total Receivables, Net of Allowances for Doubtful Accounts $18,697 $0 $15,430 $0 $624 $34,751 $34, Investments - Unrestricted 132 Investments - Restricted 135 Investments - Restricted for Payment of Current Liability 142 Prepaid Expenses and Other Assets $35,539 $2,746 $4,524 $42,809 $42, Inventories $25,196 $25,196 $25, Allowance for Obsolete Inventories -$2,520 -$2,520 -$2, Inter Program Due From 145 Assets Held for Sale 150 Total Current Assets $1,324,832 $0 $267,238 $0 $20,894 $1,612,964 $1,612, Land $67,872 $41,445 $109,317 $109, Buildings $7,014,227 $135,071 $7,149,298 $7,149, Furniture, Equipment & Machinery - Dwellings $111,955 $111,955 $111, Furniture, Equipment & Machinery - Administration $63,631 $24,837 $88,468 $88, Leasehold Improvements $1,251,200 $1,251,200 $1,251, Accumulated Depreciation -$6,149,051 -$14,776 -$119,844 -$6,283,671 -$6,283, Construction in Progress $140,614 $140,614 $140, Infrastructure 160 Total Capital Assets, Net of Accumulated Depreciation $1,249,248 $0 $10,061 $0 $1,307,872 $2,567,181 $2,567,181

31 171 Notes, Loans and Mortgages Receivable - Non-Current 172 Notes, Loans, & Mortgages Receivable - Non Current - Past Due 173 Grants Receivable - Non Current 174 Other Assets 176 Investments in Joint Ventures 180 Total Non-Current Assets $1,249,248 $0 $10,061 $0 $1,307,872 $2,567,181 $2,567, Deferred Outflow of Resources 290 Total Assets and Deferred Outflow of Resources $2,574,080 $0 $277,299 $0 $1,328,766 $4,180,145 $4,180, Bank Overdraft 312 Accounts Payable <= 90 Days $7,960 $1,316 $582 $9,858 $9, Accounts Payable >90 Days Past Due 321 Accrued Wage/Payroll Taxes Payable $11,916 $3,267 $1,135 $16,318 $16, Accrued Compensated Absences - Current Portion $14,423 $5,182 $1,802 $21,407 $21, Accrued Contingency Liability 325 Accrued Interest Payable 331 Accounts Payable - HUD PHA Programs 332 Account Payable - PHA Projects $1,236 $1,236 $1, Accounts Payable - Other Government $27,294 $27,294 $27, Tenant Security Deposits $30,707 $8,852 $39,559 $39, Unearned Revenue $3,354 $27 $3,381 $3, Current Portion of Long-term Debt - Capital Projects/Mortgage Revenue 344 Current Portion of Long-term Debt - Operating Borrowings 345 Other Current Liabilities 346 Accrued Liabilities - Other 347 Inter Program - Due To 348 Loan Liability - Current 310 Total Current Liabilities $95,654 $0 $11,001 $0 $12,398 $119,053 $119, Long-term Debt, Net of Current - Capital Projects/Mortgage Revenue 352 Long-term Debt, Net of Current - Operating Borrowings 353 Non-current Liabilities - Other 354 Accrued Compensated Absences - Non Current $62,118 $3,562 $3,912 $69,592 $69, Loan Liability - Non Current 356 FASB 5 Liabilities 357 Accrued Pension and OPEB Liabilities 350 Total Non-Current Liabilities $62,118 $0 $3,562 $0 $3,912 $69,592 $69, Total Liabilities $157,772 $0 $14,563 $0 $16,310 $188,645 $188, Deferred Inflow of Resources Net Investment in Capital Assets $1,249,248 $10,061 $1,307,872 $2,567,181 $2,567, Restricted Net Position $16,275 $16,275 $16, Unrestricted Net Position $1,167,060 $0 $236,400 $0 $4,584 $1,408,044 $1,408, Total Equity - Net Assets / Position $2,416,308 $0 $262,736 $0 $1,312,456 $3,991,500 $3,991, Total Liabilities, Deferred Inflows of Resources and Equity - Net $2,574,080 $0 $277,299 $0 $1,328,766 $4,180,145 $4,180,145

32 Housing Authority of New Smyrna Beach (FL022) NEW SMYRNA BEACH, FL Entity Wide Revenue and Expense Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2017 Project Total Community Development Block Grants/Entitlement Grants Housing Choice Vouchers 1 Business 2 State/Local Subtotal ELIM Total Activities Net Tenant Rental Revenue $359,116 $103,948 $463,064 $463, Tenant Revenue - Other $37,601 $2,343 $39,944 $39, Total Tenant Revenue $396,717 $0 $0 $0 $106,291 $503,008 $503, HUD PHA Operating Grants $517,411 $1,401, Capital Grants $92, Management Fee Asset Management Fee Book Keeping Fee Front Line Service Fee Other Fees Total Fee Revenue $1,919,206 $1,919,206 $92,349 $92, Other Government Grants Investment Income - Unrestricted $7 $9 $16 $ Mortgage Interest Income Proceeds from Disposition of Assets Held for Sale Cost of Sale of Assets Fraud Recovery $8,625 $8,625 $8, Other Revenue $70,236 $82,392 $152,628 $152, Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue $1,076,720 $0 $1,492,812 $0 $106,300 $2,675,832 $2,675, Administrative Salaries $129,029 $80,988 $23,377 $233,394 $233, Auditing Fees $4,676 $2,976 $850 $8,502 $8, Management Fee Book-keeping Fee Advertising and Marketing $173 $173 $ Employee Benefit contributions - Administrative $33,599 $24,943 $6,802 $65,344 $65, Office Expenses $26,999 $19,197 $4,391 $50,587 $50, Legal Expense $7,666 $123 $35 $7,824 $7, Travel $1,467 $1,467 $1, Allocated Overhead Other $29,416 $12,539 $4,041 $45,996 $45, Total Operating - Administrative $232,852 $0 $140,939 $0 $39,496 $413,287 $413, Asset Management Fee Tenant Services - Salaries Relocation Costs $540 $540 $ Employee Benefit Contributions - Tenant Services Tenant Services - Other $860 $860 $ Total Tenant Services $1,400 $0 $0 $0 $0 $1,400 $1,400

33 93100 Water $22,132 $219 $22,351 $22, Electricity $44,360 $19 $44,379 $44, Gas $1,969 $1,969 $1, Fuel Labor Sewer $34,876 $73 $34,949 $34, Employee Benefit Contributions - Utilities Other Utilities Expense Total Utilities $103,337 $0 $0 $0 $311 $103,648 $103, Ordinary Maintenance and Operations - Labor $111,218 $4,042 $115,260 $115, Ordinary Maintenance and Operations - Materials and Other $45,383 $2,492 $47,875 $47, Ordinary Maintenance and Operations Contracts $90,947 $9,656 $100,603 $100, Employee Benefit Contributions - Ordinary Maintenance $35,912 $305 $36,217 $36, Total Maintenance $283,460 $0 $0 $0 $16,495 $299,955 $299, Protective Services - Labor Protective Services - Other Contract Costs Protective Services - Other Employee Benefit Contributions - Protective Services Total Protective Services $0 $0 $0 $0 $0 $0 $ Property Insurance $26,333 $666 $3,456 $30,455 $30, Liability Insurance $11,603 $61 $11,664 $11, Workmen's Compensation $11,958 $2,065 $852 $14,875 $14, All Other Insurance $5,002 $24 $236 $5,262 $5, Total insurance Premiums $54,896 $0 $2,755 $0 $4,605 $62,256 $62, Other General Expenses $3,644 $3,644 $3, Compensated Absences $34,243 $3,431 $3,556 $41,230 $41, Payments in Lieu of Taxes $27,294 $27,294 $27, Bad debt - Tenant Rents $9,754 $9,754 $9, Bad debt - Mortgages Bad debt - Other Severance Expense Total Other General Expenses $71,291 $0 $7,075 $0 $3,556 $81,922 $81, Interest of Mortgage (or Bonds) Payable Interest on Notes Payable (Short and Long Term) Amortization of Bond Issue Costs Total Interest Expense and Amortization Cost $0 $0 $0 $0 $0 $0 $ Total Operating Expenses $747,236 $0 $150,769 $0 $64,463 $962,468 $962, Excess of Operating Revenue over Operating Expenses $329,484 $0 $1,342,043 $0 $41,837 $1,713,364 $1,713, Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments $1,271, HAP Portability-In $72, Depreciation Expense $172,851 $3,358 $95,260 $1,271,008 $1,271,008 $72,893 $72,893 $271,469 $271,469