Development Ventures Incorporated. Annual Financial Report

Transcription

1 Annual Financial Report For the fiscal year ended December 31, 2012

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3 Table of Contents Independent Auditor s Report... 5 Basic Financial Statements... 6 Exhibit A Statement of Financial Position... 7 Exhibit B Statement of Activities... 8 Exhibit C Statement of Cash Flows... 9 Notes to Basic Financial Statements

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5 CliftonLarsonAllen LLP Independent Auditor's Report Members of the Board of Directors Development Ventures Incorporated We have audited the accompanying financial statements of Development Ventures Incorporated (a nonprofit organization), which comprise the statements of financial position as of December 31, 2012 and 2011, 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. 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 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 Development Ventures Incorporated as of December 31, 2012 and 2011, 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. a CliftonLarsonAllen LLP Baltimore, Maryland December 13, 2013 An independent member of Nexia International 5

6 Basic Financial Statements 6

7 Exhibit A Statement of Financial Position Development Ventures Incorporated December 31, ASSETS Current assets Cash & cash equivalents $ 424,655 $ 554,386 Cash & cash equivalents - restricted 6,006 38,520 Total current assets 430, ,906 Noncurrent assets Capital assets Land 92,700 - Buildings 284,802 - Less: Accumulated depreciation (3,790) - Total capital assets (net) 373,712 - Total noncurrent assets 373,712 - Total Assets $ 804,373 $ 592,906 LIABILITIES & NET ASSETS Liabilities Current liabilities Tenant security deposits $ 654 $ 654 Other current liabilities 5,352 37,866 Interprogram due to 2,440 77,134 Total current liabilities 8, ,654 Net assets Unrestricted 795, ,252 Total net assets 795, ,252 Total liabilities and net assets $ 804,373 $ 592,906 The accompanying notes are an integral part of the financial statements. 7

8 Exhibit B Statement of Activities Development Ventures Incorporated December 31, OPERATING REVENUE Operating grants $ 54,642 $ - Other revenue (Authority contribution) 274,722 5,901 Total operating revenue 329,364 5,901 OPERATING EXPENSES Administration 4,880 78,349 Utilities 2,244 - Maintenance 85 - General expense 60 - Depreciation and amortization 3,790 - Total operating expenses 11,059 78,349 Operating Income/ (Loss) 318,305 (72,448) NONOPERATING REVENUES Investment income Total nonoperating revenues Change in net assets 318,675 (71,728) Net assets beginning of year 477, ,980 Net assets end of year $ 795,927 $ 477,252 The accompanying notes are an integral part of the financial statements. 8

9 Exhibit C Statement of Cash Flows Development Ventures Incorporated December 31, CASH FLOWFROM OPERATING ACTIVITIES Receipts from tenants and others $ 1,862 $ 5,901 Receipts from grants and subsidies 327,502 - Payments to suppliers (39,783) (551) Net cash provided by (used in) operating activities 289,581 5,350 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds - - Change in Interprogram Due To (74,694) - Net cash used in noncapital financing activities (74,694) - CASH FLOWS FROM INVESTING ACTIVITIES Interest received Net cash provided by investing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of capital assets (377,502) - Net cash provided by (used in) capital and related financing activities (377,502) - Increase/(Decrease) in cash and cash equivalents (162,245) 6,070 Cash and cash equivalents beginning of year 592, ,836 Cash and cash equivalents end of year $ 430,661 $ 592,906 Reconciliation of operating income to net cash provided by operating activities Operating income/(loss) 318,305 (72,448) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 3,790 - Changes in assets and liabilities: Increase/(Decrease) in Other Liability (32,514) 77,798 Net cash provided by operating activities $ 289,581 $ 5,350 The accompanying notes are an integral part of the financial statements. 9

10 Notes to the Basic Financial Statements December 31, 2012 Notes to Basic Financial Statements Note A Summary of Organization, Significant Accounting Policies and Reporting Entity 1. Organization DVI is a not-for-profit corporation formed to provide funds to eligible home buyers and investors to increase the quantity and quality of housing within the City of Durham. DVI has the authority to issue notes and other obligations and controls its own projects and expenditures. DVI's financial statements have been included in the Durham Housing Authority's (DHA's) financial statements as a blended component unit due to the ability of DHA to control the direction and policies of DVI. DHA's management and staff control DVI's operations and financial activity. This report includes the general operations of DVI. 2. Basis of Accounting The accompanying financial statements are presented in accordance with the accrual basis of accounting, whereby revenue is recognized when earned and expenses are recognized when incurred. The financial statement presentation is in accordance with the requirements of Statement of Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) , and Financial Statements of Not-for-Profit Organizations. Under ASC , DVI is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. DVI had no temporarily or permanently restricted net assets at December 31, Income Taxes DVI is exempt from income tax under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no federal income taxes have been provided in the accompanying financial statements. DVI adopted the guidance related to Accounting for Uncertainty in Income Taxes. Management has determined that DVI has no material uncertain tax positions that would require recognition under FASB ASC 740. The returns for calendar years 2009 through 2011 remain subject to examination by federal and various state tax jurisdictions. 4. Basis of Presentation The statements of DVI are presented on the accrual basis of accounting. Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor imposed stipulations. Accordingly, the net assets of DVI and changes therein are classified and reported as follows: Unrestricted net assets Net assets not subject to donor imposed stipulations; Temporarily restricted net assets Net assets subject to donor imposed stipulations that may or will be met either by actions of DVI and/or the passage of time; Permanently restricted net assets Net assets subject to donor imposed stipulations that require the corpus be maintained permanently by DVI. DVI had no permanently restricted net assets as of December 31, 2012 and Contributions with donor-imposed restrictions that are met in the same year as received are reported as unrestricted income. 10

11 Notes to the Basic Financial Statements December 31, Use of Estimates in Preparing Financial Statements 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 assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. However, management does not believe that actual results will be materially different from those estimates. 6. Revenues and Expenses Revenues and expenses are recognized in essentially the same manner as used in commercial accounting. Revenues relating to DVI's operating activities include rental related income, interest income and other sources of revenues are recognized in the accounting period in which they are earned. 7. Budgets DVI adopts an annual budget at the function level. Although not required, the adoption of a budget is a tool used to manage the financial activity of DVI. 8. Cash & Investments DVI's cash and cash equivalents include cash on hand, demand deposits, and short-term investments with an original maturity of three months or less when purchased to be cash equivalents. 9. Compensation for Futures Absences It is DHA s policy to permit employees to accumulate earned but unused vacation benefits which will be paid to the employees upon separation from DHA service. These benefits have been accrued, allocated and recorded for DVI. DHA employees are eligible to accrue leave balances as an employee benefit. DHA makes estimates regarding projected use of these balances and allocates the accrued balance between a current portion anticipated to be used within the next year and the non-current portion that will be used beyond the next year. 10. Deferred Charges Payments made to vendors for services that will benefit periods beyond the fiscal year end are recorded as deferred charges. 11. Inventories Inventories are valued at the lower of cost (first-in, first-out) or market. Inventories consist primarily of maintenance materials and supplies held for consumption. The cost of these supplies is regarded as an expense at the time the items are consumed. Inventories are classified as deferred charges on the Statement of Net Assets. 12. Capital Assets All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are valued at their estimated market value on the date donated. Capital assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of the respective assets ranging as follows: buildings, years; equipment, 7 years; automobiles, 5 years; and site improvements, 10 years. The costs of assets retired or otherwise disposed of and the related accumulated depreciation have been eliminated from 11

12 Notes to the Basic Financial Statements December 31, 2012 the respective accounts. Gains or losses resulting from such dispositions are recognized in current income. The Capitalization Policy for DVI calls for items purchased or betterments, not repairs, in excess of $5, and a useful life of one (1) year, to be capitalized. The cost of maintenance and repairs are charged to operations as incurred. Costs of major additions, improvements, and betterments are capitalized. Interest cost is capitalized on proprietary fund capital assets. Interest is not capitalized on assets acquired or constructed with gifts and grants (contributed capital) that are restricted by the donor or grantor to acquisition of those assets to the extent that funds are available from such grants and gifts. No interest was capitalized during the audit period. 13. Revenue Recognition Contributions are recognized as support when received or pledged by the donor. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statements of Activities as net assets released from restrictions. Grant revenue is recognized when all eligibility requirements are met. Deferred revenue represents cash received under grant agreements for which eligibility requirements have not been met. In-kind contributions of property are recorded as support at their estimated fair value at the date of donation. Based on independent services, such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. Contributed services are recognized as contributions in accordance with FASB ASC , if the services (a) create or enhance nonfinancial assets, or (b) require specialized skills, are performed by people with those skills, and would otherwise have been purchased by DVI. DVI benefits from the efforts of many volunteers. These in-kind contributions by volunteers are recorded in the financial statements as they meet the requirements. Note B Cash and Investments 1. Cash All the deposits of DVI are either insured or collateralized using the Dedicated Method whereby all deposits that exceed the federal depository insurance coverage level are collateralized with securities held by DVI s agents in these units' names. DVI has no policy regarding custodial credit risk for deposits. At December 31, 2012, DVI's deposits had a carrying amount of $430,661 and bank balances of $430,661. Of the bank balances held in various financial institutions, $250,000 was covered by federal depository insurance and the remainder was covered by collateral held under the Dedicated Method. Bank balances at December 31, 2012, and 2011 were as follows: 12

13 Notes to the Basic Financial Statements December 31, Checking accounts $ 430,661 $ 592,906 Total bank balances $ 430,661 $ 592, Investments Interest rate risk- As a means of limiting its exposure to fair value losses arising from rising interest rates, DVI typically limits its investment portfolio to maturities of 12 months or less. DVI has no specific policy regarding interest rate risk. Credit risk DVI has no policy regarding credit risk. DVI investments were limited to savings that were 100% collateralized. Custodial credit risk - For an investment, the custodial risk is the risk that in the event of the failure of the counter-party, DVI will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. All investments in repurchase agreements are collateralized by the securities are held by the counterparty, or by its trust department. DVI has no policy on custodial credit risk. Concentration of credit risk DVI places no limit on the amount that DVI may invest with any one issuer. 100% of DVI s investments are in SunTrust Bank as of December 31, DVI has no policy regarding concentration of credit risk. Note C Accounts Receivable DVI had no accounts receivable as of December 31, Note D Inventory & Prepaid Items DVI had no inventory or prepaid items at December 31, Note E Capital Assets A summary of changes in capital assets during 2012 is as follows: Beginning balances Increases Decreases Ending balances Capital assets not being depreciated: Land $ - $ 92,700 $ - $ 92,700 Total capital assets not being depreciated - 92,700-92,700 Capital assets being depreciated: Buildings & improvements - 284, ,802 Total capital assets being depreciated - 284, ,802 Less accumulated depreciation: Buildings & improvements - (3,790) - (3,790) Total accumulated depreciation - (3,790) - (3,790) Net capital assets being depreciated - 281, ,012 Total capital assets, net $ - $ 373,712 $ - $ 373,712 13

14 Notes to the Basic Financial Statements December 31, 2012 During the year, DVI purchased Lincoln Apartments, a multi-family residential property located adjacent to McDougald Terrace, a public housing community operating by the Durham Housing Authority. As of the end of the year, DVI was in the process of removing all tenants from the property due to the deteriorated condition of the property. DVI will hold the property pending the results of a planning grant activity that is underway in the area. Note F Tenant Security Deposits DVI collected security deposits from tenants of the Woodridge Apartments housing community, a property that was sold by DVI during DVI held these security deposits in trust until a tenant moved out of unit. At that point, the security deposit was used to pay for amounts due by the tenant for repairs to the unit or the security deposit is returned to the tenant. These security deposits are treated as a liability. DVI still holds a small amount of these security deposits due to an inability to locate the tenant. The amounts have not yet been escheated and are still included in DVI's accounts. Tenant security deposits consisted of the following at December 31, 2012 and 2011: Woodridge Apartments security deposits $ 654 $ 654 Total tenant security deposits $ 654 $ 654 Note G Other Current Liabilities Per the terms of agreements related to the Holman Homes development, a HOPE VI Grant project that DVI is a party to, DVI holds funds on behalf of The Community Builders, Inc. These funds are recorded as Other Current Liabilities. As of December 31, 2012 and 2011, the amounts being held were: Funds held on behalf of The Community Builders, Inc. $ 5,352 $ 37,866 Total other current liabilities $ 5,352 $ 37,866 Note H Pension Plan Obligations DVI uses the employees of DHA and therefore does not have its own employee pension plan. DHA operates the Durham Housing Authority Retirement Plan, which is a defined contribution plan. A description of the pension plan and disclosures regarding the plan is made in the consolidated financial report for DHA and is not restated in this report. Note I Contingencies The entity is subject to possible examinations made by federal regulators who determine compliance with terms, conditions, laws and regulations governing grants given to the entity in the current and prior years. These examinations may result in required refunds by the entity to federal grantors and/or program beneficiaries. Note J Related Party Transactions DVI is considered to be a component unit of the Housing Authority of the City of Durham. Consequently, all transactions and activity are managed and recorded by DHA. Note K Risk Management DVI is exposed to all common perils associated with the ownership and rental of real estate properties. A risk management program has been established to minimize loss occurrence and to transfer risk through 14

15 Notes to the Basic Financial Statements December 31, 2012 various levels of insurance. Property, casualty, employee dishonesty and public official s liability forms are used to cover the respective perils. No contingent liabilities requiring disclosure are believed to exist as of December 31, Note L Subsequent Events Management evaluated subsequent events through December 13, 2013, the date the financial statements were available to be issued. Events or transactions occurring after December 31, 2012, but prior to December 13, 2013, that provided additional evidence about conditions that existed at December 31, 2012, have been recognized in the financial statements for the year ended December 31, Events or transactions that provided evidence about conditions that did not exist at December 31, 2012 but arose before the financial statements were available to be issued have not been recognized in the financial statements for the year ended December 31, This information is an integral part of the accompanying financial statements. 15