FUNDACION DE HOGARES PARA TRABAJADORES JARDINES CONDADO MODERNO PROJECT HUD PROJECT NO NP

Transcription

1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Years ended June 30, 2017 and 2016

2 -- TABLE OF CONTENTS -- Page Number Independent Auditors' Report 1 Financial Statements: Statements of Financial Position 3 Statements of Activities 5 Statements of Cash Flows 6 Notes to the Financial Statements 8 Supplementary Information: Supplementary Information Required by HUD 12 Schedule of Expenditures of Federal Awards 17 Summary Schedule of Prior Audit Findings 18 Independent Auditors 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 19 Independent Auditors Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 21 Schedule of Findings and Questioned Costs 24 Certification of Project Owner and Management Agent 26 Independent Accountants' Report on Applying Agreed-Upon Procedures 27

3 PO BOX Tel. (787) SAN JUAN PR Fax (787) INDEPENDENT AUDITORS' REPORT To the Board of Directors of FUNDACION DE HOGARES PARA TRABAJADORES Report on the Financial Statements We have audited the accompanying financial statements of, which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities and cash flows for the years 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 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. 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 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 auditors 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 JARDINES CONDADO MODERNO PROJECT 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 S internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 1

4 Page 2 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, as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Report on Supplementary Information and Schedule of Expenditures of Federal Awards Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information included in the table of contents is presented for purposes of additional analysis as required by the Uniform Financial Reporting Standards issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. 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. 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 January 31, 2018, on our consideration of 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 JARDINES CONDADO MODERNO PROJECT S internal control over financial reporting and compliance. San Juan, Puerto Rico January 31, 2018 Stamp No. E of the Puerto Rico Society of Certified Public Accountants was adhered to the original of this report. 2

5 STATEMENTS OF FINANCIAL POSITION June 30, 2017 and ASSETS CURRENT ASSETS 1120 Cash on hand and in bank -- Notes A and B $ 53,858 $ 1, Tenants' accounts receivable, net of reserve for collections losses of $11,568 in 2017 and $18,221 in Note A 8,970 8, Accounts receivable HUD Note C 0 3, Miscellaneous prepaid expenses 70,982 2,904 TOTAL CURRENT ASSETS 133,810 15, Tenants' deposits held in trust -- Notes A and B 50,091 51,505 RESTRICTED DEPOSITS -- Notes A and B 1310 Escrow deposit 73 57, Replacement reserve -- Note D 768, , Residual receipts -- Note E 181, ,284 PROPERTY AND EQUIPMENT -- Note A 950,568 1,006, Land 422, , Building and improvements 8,730,364 8,730, Building equipment and others 499, , Furniture 166, , Furnishing 65,504 65, Maintenance equipment 30,827 30, Community equipment 46,800 25,754 9,962,089 9,927, Less accumulated depreciation and amortization 8,265,262 8,012,108 1,696,827 1,915,715 $2,831,296 $2,989,468 3

6 LIABILITIES AND NET ASSETS - UNRESTRICTED CURRENT LIABILITIES 2174 Current portion of note payable -- Note F $ 0 $ 298, Bank overdraft 0 7, Accounts payable - 30 days 60,438 29, Accounts payable excess income -- Note C 4,091 4, Accounts payable HUD -- Note C 3,877 1, Accrued wages payable 23,752 22, Accrued payroll taxes payable 1,978 2, Accrued management fees payable -- Note G 108, , Utility reimbursement Prepaid revenue 919 1,123 TOTAL CURRENT LIABILITIES 204, ,284 DEPOSITS LIABILITY 2191 Tenants' security deposits 50,091 51,355 NET ASSETS 3131 Net assets - Unrestricted -- Note H 2,576,702 2,322,829 $2,831,296 $2,989,468 See accompanying notes to the financial statements. 4

7 STATEMENTS OF ACTIVITIES For the years ended June 30, 2017 and REVENUES Rent $1,542,548 $1,499,366 Financial 1,213 1,469 Other 7,489 5,386 TOTAL REVENUES 1,551,250 1,506,221 EXPENSES Salaries 276, ,249 Administrative 179, ,861 Management fees 217, ,668 Utilities 15,465 15,528 Operating and maintenance 175, ,787 Taxes and insurance 155, ,702 Financial 8,112 28,517 Depreciation and amortization 269, ,770 1,297,377 1,325,082 CHANGES IN NET ASSETS 253, ,139 NET ASSETS, beginning of year 2,322,829 2,141,690 NET ASSETS, end of year $2,576,702 $2,322,829 See accompanying notes to the financial statements. 5

8 STATEMENTS OF CASH FLOWS For the years ended June 30, 2017 and CASH FLOWS FROM OPERATING ACTIVITIES Cash received from rentals $1,553,653 $1,488,854 Interest received 1,213 1,469 Other cash received 7,489 5, ,562,355 1,495,709 Salaries ( 275,204) ( 284,128) Administrative ( 181,936) ( 146,228) Management fees ( 356,648) ( 104,308) Utilities ( 21,979) ( 16,813) Operating and maintenance ( 177,493) ( 209,411) Taxes and insurance ( 144,872) ( 222,495) Financial ( 8,112) ( 28,517) Tenant s security deposits liabilities 150 ( 150) ( 1,166,094) ( 1,012,050) NET CASH PROVIDED BY OPERATING ACTIVITIES 396, ,659 CASH FLOWS FROM INVESTING ACTIVITIES Deposits to replacement reserve and interest retained in account ( 156,463) ( 182,564) Withdrawals from replacement reserve 155,000 0 Deposits to residual receipts and interest retained in account ( 212) ( 272) Acquisition of property and equipment ( 54,454) ( 28,544) Increase (Decrease) in account payable related to the acquisition of property and equipment 10,360 ( 18,251) NET CASH USED IN INVESTING ACTIVITIES ( 45,769) ( 229,631) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments of note payable ( 298,211) ( 339,084) NET CASH USED IN FINANCING ACTIVITIES ( 298,211) ( 339,084) NET INCREASE (DECREASE) IN CASH 52,281 ( 85,056) CASH, beginning of year 1,577 86,633 CASH, end of year $ 53,858 $ 1,577 See accompanying notes to the financial statements.

9 STATEMENTS OF CASH FLOWS (CONTINUED) For the years ended June 30, 2017 and 2016 CASH FLOWS FROM OPERATING ACTIVITIES CHANGE IN NET ASSETS $253,873 $181,139 ADJUSTMENTS TO RECONCILE CHANGES IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 269, ,770 Increase (Decrease) in allowance for bad debts ( 6,653) ( 1,655) Loss on disposal of property and equipment 3,894 2,520 (Increase) Decrease in: Tenants' accounts receivable 5,922 12,373 Accounts receivable HUD 3,149 ( 3,149) Miscellaneous prepaid expenses ( 68,078) ( 22) Escrow deposits 57,486 ( 57,540) Tenants security deposit 1,414 ( 1,953) Increase (Decrease) in: Accounts payable - 30 days 21,068 ( 42,210) Accounts payable HUD and Section 8 1,762 ( 20,780) Accrued wages payable 1,013 ( 1,879) Accrued payroll taxes ( 294) 30 Accrued management fees payable ( 138,943) 108,360 Utility allowances Prepaid revenue ( 204) 1,012 Tenants security deposits liability ( 1,264) 1,803 Bank overdraft ( 7,808) 7,808 TOTAL ADJUSTMENTS 142, ,520 NET CASH PROVIDED BY OPERATING ACTIVITIES $396,261 $483,659 Supplemental disclosure of non-cash investing activities: During the year ended June 30, 2017, the Project disposed of property and equipments with an original cost of $20,188 and accumulated depreciation of $16,294, resulting in a loss on disposal amounted to $3,894. See accompanying notes to the financial statements. 7

10 NOTES TO THE FINANCIAL STATEMENTS Years ended June 30, 2017 and 2016 NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization: Jardines Condado Moderno (the Project) is a 304-unit apartment facility for lower income families, located in Caguas, Puerto Rico. It is operated under Section 236 (j)(1), subsidized loan of the National Housing Act and regulated by the U.S. Department of Housing and Urban Development (HUD) with respect to rental charges and operating methods. The Project's major program is its Section 8 Housing Assistance Payments for lower income families. The Project is subject to a Section 8 Housing Assistance Payments with the U.S. Department of Housing and Urban Development (HUD), and a significant portion of the Project's rental income is received from HUD. Legal title of the Project is held by FUNDACION DE HOGARES PARA TRABAJADORES, a nonprofit corporation. The accompanying financial statements are those of the Project and do not represent the financial position of FUNDACION DE HOGARES PARA TRABAJADORES. Provision for Allowance and Bad Debts: The Project s Management recorded an allowance for bad debt expense by means of specific identification of tenant s accounts receivable to report them at their net realizable value in the accompanying financial statements. An allowance for bad debts amounted to $11,568 and $18,221 was provided in the Statement of Financial Position as of June 30, 2017 and in 2016, respectively. A net bad debt expense in the amount of $3,349 and $20,591, was recorded in the Statement of Activities for the fiscal years 2017 and 2016, respectively. Depreciation and Amortization: Property and equipment are valued at cost. Maintenance and repairs, including the replacement of minor items, are expensed as incurred and major additions are capitalized. Depreciation and amortization is computed according to the straight-line method. Depreciation and amortization expense for the years ended June 30, 2017 and 2016, amounted to $269,448 and $297,770, respectively. Income, Property and Other Taxes: Neither the Project nor its nonprofit Corporate Owner is subject to income, property or municipal taxes. Distributions: The Project's Regulatory Agreement with HUD stipulates, among other things, that the Project will not make distributions of assets or income to any of its officers or directors. 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 may affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. 8

11 NOTES TO THE FINANCIAL STATEMENTS Years ended June 30, 2017 and 2016 NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value of Instruments: The Project s financial instruments are cash, accounts receivable, accounts and accrued expenses payable and long-term debt. The recorded values of cash, accounts receivable, accounts and accrued expenses payable, approximate their fair values based on their short-term nature. The recorded values of long-term debt approximate their fair values, as interest approximate market rates. Long-Lived Assets: The Project s Owner follows the provisions of Statement of Financial Accounting Standard, ASC Accounting for the Impairment or Disposal of Long-Lived Assets, which requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Project s Owner has determined that no impairment loss needs to be recognized on the existing assets for the years ended June 30, 2017 and 2016, respectively. Cash Equivalents: For the statement of cash flows, all unrestricted investment instruments with original maturities of three months or less are considered cash equivalents. The Project had no cash equivalents at June 30, 2017 and Functional Expenses: The administrative expenses to support the Project's activities are summarized on a functional basis as follows: Supporting services: Salaries, general and administrative $673,647 $636,778 NOTE B -- CONCENTRATION OF CREDIT RISK The Project maintains all of its cash with Banco Popular de Puerto Rico. Deposits in bank are insured by the Federal Deposit Insurance Corporation up to $250,000, per bank. The possibility of loss exists if a bank holding excess deposits were to fail. The total amount of cash in bank exceeded the federally-insured limits by $804,417 and $809,361 as of June 30, 2017 and 2016, respectively. 9

12 NOTES TO THE FINANCIAL STATEMENTS Years ended June 30, 2017 and 2016 NOTE C -- ACCOUNTS RECEIVABLE PAYABLE TO HUD AND EXCESS INCOME PAYABLE The Project has a receivable from HUD amounted to $3,149 as of June 30, 2016 that was related to Rental Assistance HAP Voucher adjustments made in the months of July thru September 2016, that corresponded to the fiscal year ended June 30, Also, the Project owed to HUD $2,844 for adjustments made to the Housing Assistance Payments of July and August 2017, that corresponded to the fiscal year 2017 and of tenant s omissions collected due to HUD amounted to $1,033 and $1,580 as of June 30, 2017 and 2016, respectively. The amounts payable for excess income to HUD as of June 30, 2017 and 2016, was related to excess rental income collected in the amount of $4,091 and $4,626, respectively. NOTE D -- REPLACEMENT RESERVE Under HUD's Regulatory Agreement, the Project is required to set aside specified amounts for the replacement of property and other expenditures, as approved by HUD. The replacement reserve account balance, which amounted to $768,999 and $767,536 as of June 30, 2017 and 2016, respectively, is held by the Project in a separate interest bearing account and is not generally available for operating purposes. NOTE E -- RESIDUAL RECEIPTS ACCOUNT Under HUD Regulatory Agreement, the Project is required to transfer any surplus cash to the residual receipts reserve account. The residual receipts account balance, which amounted to $181,496 and $181,284 as of June 30, 2017 and 2016, respectively, is held by the Project in a separate interest bearing account. Use of the residual receipts reserve deposits is contingent upon HUD's prior written approval. NOTE F -- NOTE PAYABLE Loan granted by a financial institution in April 29, 2014, for the amount of $1,008,610, subject to 5.80% fixed interest rate, payable in thirty six (36) monthly installments of $30,633 for principal and interest and reduced to $298,211 as of June 30, The proceeds from the loan was used for the payment of a Flexible Subsidy loan held by HUD. During current fiscal year the note payable was fully paid. NOTE G -- MANAGEMENT FEE Fundación de Hogares para Trabajadores is the Project's Management Agent. Management fees were computed at 12.5% of total collection for fiscal years 2017 and 2016, respectively. The management agreement has been approved by HUD. As of June 30, 2017 and 2016, the Project owed $108,940 and $247,883 of management fees, respectively. 10

13 NOTES TO THE FINANCIAL STATEMENTS Years ended June 30, 2017 and 2016 NOTE H -- UNRESTRICTED NET ASSETS None of the Project's net assets is subject to donor-imposed restrictions. Accordingly, all net assets are accounted for as unrestricted net assets under ASC and NOTE I -- RENT INCREASE Under the Regulatory Agreement, the Project may not increase rents charged to tenants without HUD approval. NOTE J -- CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The Project's sole asset is a 304-unit apartment project. The Project's operations are concentrated in the multifamily real estate market. In addition, the Project operates in a heavily regulated environment. The operations of the Project are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to, HUD. Such administrative directives, rules and regulations are subject to change by an act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change. NOTE K -- SUBSEQUENT EVENTS The Management of the Project has evaluated subsequent events through January 31, 2018, date in which the financial statements were available to be issued, and has determined that no additional accruals or disclosures are required in the accompanying financial statements. NOTE L -- OTHER MATTERS Last physical inspection was performed by REAC on June 2, 2012 and the Project score was 91c. Management and Occupancy Review (MOR) was performed by Puerto Rico Housing Finance Authority (PRHFA) on July 19 thru July 21, 2017 and the Project received an overall Satisfactory Rating. Certain findings were noted by PRHFA in their MOR Review Report. Management Agent submitted the Corrective Action Plan in letter dated December 5, As of Auditors report date no response were received from PRHFA related to these matter. 11

14 SUPPLEMENTARY INFORMATION REQUIRED BY HUD Year ended June 30, 2017 Replacement Reserve and Residual Receipts Account In accordance with the provisions of the Regulatory Agreement, restricted cash is held to be used for replacement of property and various other uses, with the approval of HUD, as follows: Replacement Reserve Residual Receipts Balance, June 30, 2016 $767,536 $181,284 Monthly deposits ($12,968 x 14) 155,616 0 Interest earned Withdrawals ( 155,000) 0 All transfers to the replacement reserve were made on a monthly basis. $768,999 $181,496 Schedule of Miscellaneous Administrative Expenses (6390) Bank charges $ 4,785 HUD program 10,944 HUD seminars 2,400 Traveling 1,363 Computer maintenance, repairs and technical assistance fees 14,570 ADP payroll service fees 1,114 Electronic filing of financial statements required by REAC 875 Loss on disposal of property and equipment 3,894 Software support fees 2,014 Miscellaneous Petty cash reimbursements 1,162 Rent Survey Study 3,750 $46,871 12

15 SUPPLEMENTARY INFORMATION REQUIRED BY HUD Year ended June 30, 2017 Changes in Property and Equipment ASSETS ACCUMULATED DEPRECIATION Balance Balance Balance Balance Book Value 06/30/16 Additions Deductions 06/30/17 06/30/16 Provisions Deductions 06/30/17 06/30/ Land $ 422,984 $ 0 $ 0 $ 422,984 $ 0 $ 0 $ 0 $ 0 $ 422,984 Net 1420 Building 8,730, ,730,364 7,524, , ,741, , Building equipment - Portable 486,267 30,709 17, , ,741 42,215 14, , , Furniture 166, , , , Furnishings 65,362 2,534 2,392 65,504 51,850 4,298 2,257 53,891 11, Maintenance equipment 30, ,827 24,645 1, ,656 5, Community equipment 25,754 21, ,800 4,414 5, ,459 37,341 $9,927,823 $54,454 $20,188 $9,962,089 $8,012,108 $269,448 $16,294 $8,265,262 $1,696,827 Additions: Additions (Continue): 1440 Building equipment - Portable: 1440 Building equipment - Portable Ranges (10) $ 3,691 Refrigerators (14) $ 6,233 Water heaters (40) 7,614 Ranges (13) 3,535 Refrigerators (16) 8,159 Water heaters (41) 7,386 Kitchen cabinet (1) 3,400 Air conditioner (1) 642 Air conditioners (2) 2,950 $17,796 Doors (40) 4,895 $30, Furnishings: UHF Radios (3) $ Furnitures: CPU Motherboard (1) 447 Water dispenser (1) $ 165 PC Computer (1) 1,285 $ 2, Furnishings: UHF Radios (3) $ 1,109 PC Computer (1) 1,425 $ 2, Community equipment: Playground equipment $21,046 13

16 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended June 30, 2017 Federal CFDA Federal Federal Grantor/Program Title Number Expenditures U.S. Department of Housing and Urban Development direct program: Section 8 Housing Assistance Payments $1,342,037 NOTE A -- BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal award activity of, HUD Project No NP, and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Project, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Project. NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursements. The Project has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. 17

17 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS Year ended June 30, Security deposit cash account is overfunded when compared to Project s tenants security liability by $150. Corrective Action was taken and condition not repeated during current fiscal year. 18

18 PO BOX Tel. (787) SAN JUAN PR Fax (787) INDEPENDENT AUDITORS 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 To the Board of Directors of FUNDACION DE HOGARES PARA TRABAJADORES We have audited, in accordance with the auditing standards generally accepted in the Unites States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the Unites States, the financial statements of JARDINES CONDADO MODERNO PROJECT, which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities, and cash flows for the years then ended, and the related notes to the financial statements, and have issued our report thereon dated January 31, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered JARDINES DONDADO MODERNO PROJECT'S internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of JARDINES CONDADO MODERNO PROJECT S internal control. Accordingly, we do not express an opinion on the effectiveness of the Project 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 on the Project 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 limitations, 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. 19

19 Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether 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 statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of JARDINES CONDADO MODERNO PROJECT internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Project s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Juan, Puerto Rico January 31, 2018 Stamp No. E of the Puerto Rico Society of Certified Public Accountants was adhered to the original of this report. 20

20 PO BOX Tel. (787) SAN JUAN PR Fax (787) INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Directors of FUNDACION DE HOGARES PARA TRABAJADORES Report on Compliance for Each Major Federal Program We have audited S compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of S major federal programs for the year ended June 30, S major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Direct and material compliance requirement are as follows: Name of Major Federal Programs Section 8 Housing Assistance Payments. Direct and Material Compliance Requirements Federal financial reports, replacement reserve; cash receipts, cash disbursements, tenant application, eligibility, and recertification, units leased to extremely low-income families, security deposits, management functions, acquisition of liabilities, and unauthorized loans from project funds. Management s Responsibility Management is responsible for compliance with the federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. 21

21 Page 2 Auditors Responsibility Our responsibility is to express an opinion on compliance for each of JARDINES CONDADO MODERNO PROJECT 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 Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about JARDINES CONDADO MODERNO PROJECT 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 JARDINES CONDADO MODERNO PROJECT S compliance. Opinion on Each Major Federal Program In our opinion, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Report on Internal Control Over Compliance Management of 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 JARDINES CONDADO MODERNO PROJECT S internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of JARDINES CONDADO MODERNO PROJECT S internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 22

22 Page 3 Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. San Juan, Puerto Rico January 31, 2018 Stamp No. E of the Puerto Rico Society of Certified Public Accountants was adhered to the original of this report. 23

23 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended June 30, 2017 Section 8 Program CFDA # Part I - Summary of Audit Results Type of Report Issued on Financial Statements Unmodified opinion. Reportable Conditions in Internal Control Over Financial Statements None. Material Noncompliance No material noncompliance was found with respect to financial statements. Reportable Conditions in Internal Control over Major Programs No. Type of Report Issued on Compliance for Major Programs Unmodified opinion. Audit Findings Reported Under Code Section 510 (a) No. Major Programs Section 8 Housing Assistance Payments, CFDA # Dollar Threshold to Distinguish Between Type A and Type B Programs $750,000 Low Risk Auditee No, since there were findings in prior two years. 24

24 JARDINES DE CONDADO MODERNO SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended June 30, 2017 Section 8 Program CFDA # Section 236 Subsidized Loan, CFDA # Part II - Financial Statements Finding Section No matters are reportable. Section 8 Program CFDA # Part III - Federal Award Findings and Questioned Costs Section None. 25

25 CERTIFICATION OF PROJECT OWNER AND MANAGEMENT AGENT June 30, 2017 We hereby certify that we have examined the accompanying financial statements and supplemental data of, HUD Project No NP, and to the best of our knowledge and belief, the same are accurate and complete. Mrs. Luisa I. Acevedo President Date Mr. Alberto Ortiz Treasurer Date Fundación de Hogares para Trabajadores Owner EIN Mr. Orlando J. Ramirez Molina Executive Director of Fundación de Hogares para Trabajadores and Management Agent Owner EIN Date 26

26 PO BOX Tel. (787) SAN JUAN PR Fax (787) INDEPENDENT ACCOUNTANTS REPORT ON APPLYING AGREED-UPON PROCEDURES To the Board of Directors of FUNDACION DE HOGARES PARA TRABAJADORES We have performed the procedure described in the second paragraph of this report, which was agreed to by and the U.S. Department of Housing and Urban Development, Public Indian Housing-Real Estate Assessment Center (PIH-REAC), on whether the electronic submission of certain information agrees with the related hard copy documents included within the OMB Uniform Administrative Requirements reporting package. is responsible for the accuracy and completeness of the electronic submission. The sufficiency of the procedure in solely the responsibility of and the U.S. Department of Housing and Urban Development, PIH-REAC. Consequently, we make no representation regarding the sufficiency of the procedure described below either for the purpose for which this report has been requested or for any other purpose. We compared the electronic submission of the items listed in the "UFRS Rule Information" column with the corresponding printed documents listed in the "Hard Copy Documents" column. The associated findings from the performance of our agreed-upon procedure indicate agreement of the electronically submitted information and hard copy documents as shown in the attached chart. The agreed-upon procedure engagement was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants and the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the Unites States. We were not engaged to and did not conduct an examination review, the objective of which would be the expression of an opinion or conclusion, respectively, on whether the electronic submission of the items listed in the UFRS Rule Information column agrees with the related hard copy documents within the audit reporting package. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. 27

27 Page 2 We were engaged to perform an audit in accordance with the audit requirements of OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, for JARDINES CONDADO MODERNO PROJECT as of and for the year ended June 30, 2017, and have issued our reports thereon dated January 31, The information in the "Hard Copy Documents" column was included within the scope, or was a by-product of that audit. Further, our opinion on the fair presentation of the supplementary information dated January 31, 2018, was expressed in relation to the basic financial statements of taken as a whole. A copy of the reporting package required by the OMB Uniform Administrative Requirements, which includes the auditors reports, is available in its entirety from. We have not performed any additional auditing procedures since the date of the aforementioned audit reports. Further, we take no responsibility for the security of the information transmitted electronically to the U.S. Department of Housing and Urban Development, PIH-REAC. The purpose of this report on applying the agreed-upon procedure is solely to describe the procedure performed on the electronic submission of the items listed in the UFRS Rule Information column and the associated findings and not to provide as opinion or conclusion. According, this report is not suitable for other purpose. San Juan, Puerto Rico January 31, 2018 Stamp No. E of the Puerto Rico Society of Certified Public Accountants was adhered to the original of this report. 28

28 JARDINES CONDADO MODERNO June 30, 2017 UFRS Rule Information Hard Copy Document(s) Findings Balance Sheet, Revenue and Expense and Cash Flow Data (account numbers 1120 to 7100T and the S1200 series) Financial Data Templates (Supplemental Schedules) Agrees Surplus Cash (S1300 series of accounts) Footnotes (S3100 series of accounts) Type of Opinion on the Financial Statements and Auditor Reports (S3400, S3500, and S3600 series of accounts) Type of Opinion on Financial Data Templates (Supplemental Data) (account S ) Financial Data Templates (Computation of Surplus Cash, Distributions and Residual Receipts) (Annual) Footnotes to Audited Basic Financial Statements Auditors Reports on the Financial Statements, Compliance, and Internal Control Auditors Supplemental Report on Financial Data Templates Agrees Agrees Agrees Agrees Audit Findings Narrative (S3800, series of accounts) Schedule of Findings and Questioned Costs Agrees General Information (S3300, S3700, and S3800 series of accounts) Schedule of Findings and Questioned Costs and Federal Awards Data Agrees 29