HOUSING AUTHORITY OF THE CITY OF MERIDEN Meriden, Connecticut FINANCIAL STATEMENTS

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1 Meriden, Connecticut FINANCIAL STATEMENTS

2 TABLE OF CONTENTS Page Independent Auditors' Report... 4 Management s Discussion and Analysis... 8 Basic Financial Statements Statement of Net Position... 8 Statement of Revenues, Expenses and Changes in Fund Net Position For the Year Ended... 9 Statement of Cash Flows For the Year Ended Notes to Financial Statements Note Organization... 2 Note 2 Summary of Significant Accounting Policies Note 3 Net Position: Restricted Note 4 Cash and Investment Deposits Note 5 Restrictions on Cash, Cash Equivalents and Investments Note 6 Accounts Receivable Note 7 Notes Receivable Note 8 Investments in the Financing of Affordable Housing Note 9 Capital Assets Note 0 Other Assets Note Noncurrent Liabilities Note 2 Long Term Debt Note 3 Real Estate Taxes Note 4 CostSharing Defined Benefit Pension Plan Note 5 Other Retirement Plans Note 6 Risk Management Note 7 Impairment of Capital Assets Note 8 Economic Dependency Note 9 Ground Lease Agreements Note 20 Minority Interest in Limited Partnerships Note 2 Investment in Joint Venture Note 22 Blended Component Units Note 23 Loan Guarantees Note 24 InterAgency Agreements Note 25 Subsequent Events... 39

3 TABLE OF CONTENTS (Continued) Page Required Supplemental Information Schedule of the Proportionate Share of the Net Pension Liability Schedule of Contributions Notes to Required Supplemental Information Supplemental Information State Aided Program Financial Statements Statutory Basis Balance Sheet Operating Statement Analysis of Retained Earnings Schedule of RM&R Reserves Additional Notes to Financial Statements Statutory Basis Supplemental Financial Data Schedule... 5 Statement of Actual Modernization Costs Uncompleted Statement of Actual Grant Costs Uncompleted Schedule of Expenditures of Federal Awards For the Year Ended... 6 Notes to Schedule of Expenditures of Federal Awards 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 Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance in Accordance with the Uniform Guidance Schedule of Findings and Questioned Costs For the Year Ended Schedule of Prior Audit Findings... 70

4 To The Board of Commissioners Housing Authority of the City of Meriden Meriden, Connecticut Report on the Financial Statements INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the Housing Authority of the City of Meriden, Meriden, CT, as of, and for the year then ended, and the related notes to the financial statements, which collectively comprise the Housing Authority of the City of Meriden s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements The Housing Authority of the City of Meriden s 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 opinions on these financial statements based on our audit. We conducted our 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 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 opinions. Basis for Qualified Opinion Management has implemented the provisions of GASB 68: Accounting and Financial Reporting for Pensions by relying upon a measurement report dated June 30, 205. Accounting principles generally accepted in the United States of America require that pension assets and liabilities be measured no earlier than twelve months and one day prior to the reporting date of. The amount by which this departure would affect the deferred inflows and outflows, liabilities, net position, and expenses of the Housing Authority of the City of Meriden has not been determined.

5 The Housing Authority of the City of Meriden was unable to provide sufficient evidentiary support for the existence, completeness and valuation of Bristol Enterprises, LLC, a joint venture in which the Authority has a 50% ownership stake, as of and for the year ended. Consequently, we were unable to determine whether any adjustments to these amounts were necessary. (See Note 2) Qualified Opinion In our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraphs, the financial statements referred to above present fairly, in all material respects, the financial position of the Housing Authority of the City of Meriden as of, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management s Discussion and Analysis and the required supplemental information presented on pages 42 through 44, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We 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 our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with evidence sufficient to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Housing Authority of the City of Meriden s basic financial statements. The supplemental information presented on pages 46 through 60, as listed in the table of contents, and the Schedule of Expenditures of Federal Awards, as required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplemental information presented on pages 46 through 60 and the Schedule of Expenditures of Federal Awards are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental information presented on pages 46 through 60 and the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 5

6 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated June 23, 207 on our consideration of the Housing Authority of the City of Meriden s internal control over financial reporting and 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audits. Braintree, Massachusetts June 23, 207 6

7 MANAGEMENT S DISCUSSION & ANALYSIS

8 MANAGEMENT S DISCUSSION AND ANALYSIS This section of the Authority s annual financial report presents Management s analysis of the Authority s financial performance during the Fiscal Year Ended. FINANCIAL HIGHLIGHTS AND CONCLUSIONS: The Meriden Housing Authority had a difficult year due to irregular funding of HUD programs and economic market conditions that have greatly affected the Meriden area. These issues are illustrated by the outcome of its fiscal year operations. Total net position increased by $298,770 due to small operating income and capital fund hard cost revenues. MHA had $49,677 million in increased governmental subsidies due to increases across the board. The Department of Housing and Urban Development (HUD) rates each Authority under the Public Housing Assessment System (PHAS). The Authority received the high performer designation for fiscal year ending. The Department of Housing and Urban Development (HUD) also rates each Authority under the Section Eight Management Assessment Program (SEMAP). The Authority received the high performer designation for the fiscal year ended. REQUIRED FINANCIAL STATEMENTS The Financial Statements of the Authority report information using accounting methods similar to those used by private sector companies (Enterprise Fund). The Statement of Net Position (Balance Sheet) includes all of the Authority s assets and liabilities and provides information about the amounts and investments in assets and the obligations to Authority creditors. It also provides a basis of assessing the liquidity and financial flexibility of the Authority. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial health of the Authority is improving or deteriorating. The current year s revenues, expenses and changes in net position are accounted for in the Statement of Revenues, Expenses and Net Position. This statement measures the success of the Authority s operations over the past fiscal year. The Statement of Cash Flows is to provide information about the Authority s cash receipts and disbursements during the reporting period. The statement reports net changes in cash resulting from operations. Housing Authority of the City of Meriden ~ MD&A 8

9 MANAGEMENT S DISCUSSION AND ANALYSIS FINANCIAL ANALYSIS OF THE AUTHORITY One question frequently asked about an Authority s finances is: Did the Authority s operations and financial position improve or deteriorate over the previous fiscal year? The Statement of Net position and the Statement of Revenues, Expenses and Net Position report information about the Authority s activities and are summarized in the following sections. To begin our analysis, a summary of the Authority s Statement of Net Position is presented in Table I. Table I STATEMENTS OF NET POSITION and Change % Change Current Assets $ 2,976,53 $ 4,72,042 $ (,744,5) 36.95% Capital Assets 9,56,729 20,094,95 (937,466) 4.67% Other Noncurrent Assets 3,07,596 2,400,302 67, % Total Assets 25,50,856 27,25,539 (2,064,683) 7.59% Deferred Outflows of Resources 346,027 80,20 65, % Current Liabilities 2,039,22 3,402,204 (,362,992) 40.06% Noncurrent Liabilities 0,203,72 0,95,860 (748,48) 6.83% Total Liabilities 2,242,924 4,354,064 (2,,40) 4.7% Deferred Inflows of Resources 3,592 75,456 (43,864) 25.00% Net Invested in Capital Assets 0,767,966 0,522,27 245, % Restricted 350, , % Unrestricted (Deficit) 2,004,40,993,949 0, % Total Net Position $ 3,22,367 $ 2,866,220 $ 256,47.99% As illustrated in the Combined Statement of Net Position, the overall Net position, the Authority increased by $256,47. The Authority s Unrestricted Net position increased by $0,452 due to net operating income prior to depreciation expense and debt proceeds not yet expended. The Investment in Capital Assets increased by $245,695 due to capital activities outpacing depreciation expense and payment of debt. Housing Authority of the City of Meriden ~ MD&A 9

10 MANAGEMENT S DISCUSSION AND ANALYSIS A review of current assets reveals the PHA decreased their current assets by $.74 million due to increased notes receivable activity mainly related to the Bristol Redevelopment Partnership as well as increases in accounts receivable related to Maynard Road Corporation activity and increases in unrestricted cash. Noncurrent assets increased by $67,294 due to increased notes receivable activity mainly related to the Bristol Redevelopment Partnership, which offset the reduction of restricted cash. Current liabilities decreased by $.4 million due to a variety of changes. The decreases were across the board but mainly related to the payment of shortterm debt obligations in the amount of $.4 million. Table II Change in Net Position 0 Net September 30, 205 $ 2,866,220 0 Results of Operations 256,47 0 Net $ 3,22,367 Housing Authority of the City of Meriden ~ MD&A 0

11 MANAGEMENT S DISCUSSION AND ANALYSIS While the Statement of Net position shows the change in financial position, the Statement of Revenues, Expenses, and Net position breaks down our revenues and expenses further. Table III, which follows, provides a combined statement of the changes in Net position noted above. Table III STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION For the years ended and Change % Change Revenue Operating Revenues $ 4,09,746 $ 3,83,428 $ 278,38 2.0% Nonoperating Revenues 290,78 507,67 (27,439) 42.84% Total Revenues 4,399,924 4,339,045 60, % Expenses Housing assistance payments 7,482,902 7,23, , % Administration,838,870,684,085 54, % Repair and maintenance,475,652,703,692 (228,040) 3.39% Depreciation expense,050,80,059,065 (8,255) 0.78% Utilities 860, ,944 (23,558) 2.67% Tenant services 286, ,982 (0,235) 3.45% Insurance expense 336, ,65 (6,372).86% Other general expenses 267,833 2,835 45, % Protective services 3,928 5,073 (,45) 22.57% Interest expense 539, ,237 5,69.05% Total Expenses 4,43,777 3,755, , % Change in Net Position 256,47 583,947 (327,800) 56.4% Net Position Beginning of Year 2,866,220 2,858,46 7, % Prior Period Adjustments (576,43) 576, % Net Position End of Year $ 3,22,367 $ 2,866,220 $ 256,47.99% REVENUES In reviewing the Statement of Revenues, Expenses, and Net position, you will find that 76% of the Authority s revenues are derived from grants from the Department of Housing and Urban Development. The Authority receives revenue from tenants for dwelling rental charges, excess utilities, and miscellaneous charges of 4% of total revenue. Other Revenue, including Interest from Investments, comprises the remaining 0%. Compared to the Fiscal Year Ended September 30, 205, revenues had an overall increase of $.6 million or 8.77% Housing Authority of the City of Meriden ~ MD&A

12 MANAGEMENT S DISCUSSION AND ANALYSIS Tenant Revenue Tenant Revenue received in the Public Housing Program had a decrease from $2,077,55 to $2,06,55 or around 2.94%. The net change is directly related to the Yale Acres and AMP properties conversion process to tax credit or redevelopment. The process will last until the next year through a designed relocation plan. Program Grants/Subsidies We had an increase in the amount of $49,677 million, or.46%, in federal grants during fiscal year 206. See Table IV for detailed analysis. The chart does not include all state funding. Table IV HUD Funding Comparative Year HCV Public Housing CFP FSS 206 8,253,0.00,854, , , ,826,76.00,906, , Net Change 426, (5,87.00) 42, , % Change 5.45% 2.72% 0.58% 00.00% Ye ar ROSS Choice Neighborhood FEMA Totals , , , ,850, , , ,763, Net Change (244,685.00) (273,758.00) 2, ,35.00 % Change 89.79% 76.92% 00.00% 0.8% Funding increased mainly due to increased HCVP activity outpacing deductions in funding for Public Housing, ROSS and Choice Neighborhood grants. The reduction in Public Housing was related to the normal funding process while the program received a portion of FY 203 funding in FY 205. ROSS decreased as FSS funds are now shown separately. The Agency continues to use a myriad of State of Connecticut. program subsidies to assist with the redevelopment program. During the fiscal year the total subsidies from the State of Connecticut were $46,425, down from the prior year amount of $577,009. Housing Authority of the City of Meriden ~ MD&A 2

13 MANAGEMENT S DISCUSSION AND ANALYSIS EXPENSES The Meriden Housing Authority experienced an increase in operating expenses for the current year from $3,755,098 to $4,43,777 or $388,679 or 2.83%. The highlights of the expenses for the current year are as follows: Administrative Administrative costs include all nonmaintenance and nonresident service personnel costs (including benefits and accrued leave), legal costs, auditing costs, travel and training costs, and other administrative costs such as supplies, telephone expense, etc. Administrative expenses increased by $54,785 or 9.9% due decreases in the areas of salaries, benefits, office and travel expenses. This is due to a concerted plan to increase efficiencies and eliminate unnecessary costs in categories where savings were possible. Tenant Services Tenant Services costs include all costs incurred by the Authority to provide social services to the residents. The Resident Advisory Board (RAB) receives funding for board meetings, training costs, and other items to assist the RAB in staying informed on its role in the Authority s operations. The Tenant Advisory Council (TAC) receives assistance on costs of meetings and other social activities provided. Tenant Services costs decreased by $0,235 or 3.45% due to decreases in ROSS Program expenses related to training, education and homeownership program activity. Utilities The total utilities expense for the Authority decreased by $23,558 or 2.67%. This was due to leaseup reductions and continued energy savings related to the EPC loans. Maintenance Maintenance costs are all costs incurred by the Authority to maintain the 435 Public Housing units as well as 24 State Moderate housing units available for occupancy, which are owned by the Authority in a safe and sanitary manner. Costs include personnel costs, materials used to maintain the units, contracts for waste management, telephone/radio service, etc. The Maintenance Expense for the Authority decreased by $228,040 or 3.39%. The decreases relate to the redevelopment projects with AMP and Yale Acres. Protective Services Expenses Protective Services Expenses decreased by $,45 over the prior year expense of $3,928. Insurance Expenses Insurance Expenses include insurance costs (property, auto, liability, workers compensation, public officials liability, lead based paint insurance, etc. Insurance expenses decreased by $6,372 or.86%. General Expenses General Expenses include collection losses, and payment in lieu of taxes to the City of Meriden. General expenses for the Authority increased by $45,998 or 9.83%. due to timing losses related to the Bristol Enterprises joint venture. These timing loss should be removed when the joint venture is closed and moves on to the redevelopment phase. Housing Authority of the City of Meriden ~ MD&A 3

14 MANAGEMENT S DISCUSSION AND ANALYSIS Housing Assistance Payments Program HAP payments consist of rental payments to owners of private property for which the housing authority has a HAP agreement with the tenant and the owner for the difference between the tenants rent and the applicable payment standard. The Housing Authority has significantly increased the funding and expenditures of this program. HAP payments for the Authority increased by $359,882. This a 5.05% increase in HAP activity during the fiscal year due to normal but controlled inflationary pressures. Interest expense Interest expenses are a portion of the payment for capital debt that provides resources for the improvement of existing properties. Interest expenses increased by $5,69 or.05% due to an increase of $5,69. These increases involve investments in current and future development projects which are expected to provide considerable returns for the Authority. Depreciation Because the costs of all capitalized additions are spread over the estimated useful life of an asset, the estimated current year costs of capitalized items are recorded as depreciation. Depreciation Expense for the current year decreased by $8,255 or.78%. The change is related to assets being prior year completed projects under a full year of depreciation. CAPITAL ASSETS At the end of fiscal year 205 the Authority had invested in Capital Assets of $20,094,95, net of depreciation. As of, the Authority had a decrease its net capital assets by $937,466 to $9,56,756 or 4.67%. The following illustrates the Capital Asset values for 205 and 206. Table V CAPITAL ASSET ANALYSIS and Change % Change Land $,999,752 $,905,797 $ 93, % Buildings 35,36,454 32,900,93 2,45, % Furniture and equipment,253,053,253, % Leasehold improvements,703,302,703,302 Construction in progress,662,798 5,762,254 (4,099,456) 7.4% Total capital assets 4,935,359 4,822,06 3, % Accumulated depreciation (22,778,630) (2,727,82) (,050,809) 4.84% Capital assets, net of accumulated depreciati $ 9,56,729 $ 20,094,95 $ (937,466) 4.67% Housing Authority of the City of Meriden ~ MD&A 4

15 MANAGEMENT S DISCUSSION AND ANALYSIS The PHA had $289,558 in Capital Fund capital expenditures during fiscal year 206. The PHA operated three CFP grants during fiscal year 206. The major project completed was the roof repairs completed Community Towers and 22 Church Street. The PHA had $,050,809 in depreciation expense with no writeoffs NONCURRENT LIABILITIES Noncurrent liabilities decreased by $2.47 million due to payment of the redevelopment partnership in the Bristol Enterprises LLC to rehabilitate two school buildings into senior living facilities. This partnership involves Maynard Road Corporation as a 50% owner in the LLC. Table VI LONG TERM DEBT ANALYSIS and Change % Change Long term debt $ 9,856,353 $ 2,322,976 $ (2,466,623) 20.02% ECONOMIC FACTORS AND EVENTS AFFECTING OPERATIONS: As the Meriden housing market is not immune from the ups and downs of the economy; nor are our residents and participants. Here are a few of the operational impacts the Authority anticipates having to manage in the coming year: Tenant rent adjustments, as a result of unemployment/underemployment and the slow economic recovery, will impact the rent residents and Voucher holders can pay. This may require the Authority to divert unrestricted resources from other program areas or potentially reduce services. Many of our residents and Voucher holders rely on financial aid from the State or social services provided by governmental agencies. There have been and will likely continue to be service and revenue reductions that will impact both residents and the Authority s state and local funding sources. The City of Meriden as most other middlesized cities within Connecticut are suffering loss of industry, business and employment opportunities. This leads to further strains on the PHA s limited expendable assets added with HUD and State cuts in funding for the PHA s programs leads to diminished opportunities for the PHA to assist individuals and families in need within their surrounding areas. Housing Authority of the City of Meriden ~ MD&A 5

16 MANAGEMENT S DISCUSSION AND ANALYSIS CONCLUSIONS: Overall, while the Meriden Housing Authority had a successful fiscal year, many improvements and tough decisions were made in accordance with the lack of Congressional work on a budget that would solidify the funding for the upcoming year and provide consistent and reasonable funding for HUD requirements. We continue to work through a myriad of issues that have slowed the expected progress in the redevelopment goals and objectives but has not slowed our hope and continued efforts. Management is committed to completing the current redevelopment projects and expanding into other development opportunities similar to the joint venture in the Bristol Enterprises redevelopment project as well as assisting other Authority s in improving their operations and financial capacity as well as meeting the redevelopment goals. Management is committed to staying abreast of regulations and appropriations as well as maintain an ongoing analysis of all budgets and expenses to ensure that the Authority continues to operate at the highest standards established by the Real Estate Assessment Center and the Department of Housing and Urban Development. This financial report is designed to provide our residents, the citizens of Meriden, Connecticut, all federal and state regulatory bodies, and any creditors with a general overview of the Authority s finances. If you have any questions regarding these financial statements or supplemental information, you may contact Robert V. Cappelletti, Executive Director at (203) Ext. 703 or by writing: Meriden Housing Authority, 22 Church Street, Meriden, CT Housing Authority of the City of Meriden ~ MD&A 6

17 BASIC FINANCIAL STATEMENTS

18 STATEMENT OF NET POSITION ASSETS Current Assets: Cash and cash equivalents Note 4 $,555,80 Restricted cash and cash equivalents Notes 4 & 5 362,234 Accounts receivable, net Note 6 728,253 Current portion of notes receivable Note 7 8,698 Prepaid expenses and other current assets 2,536 Total Current Assets 2,976,53 Noncurrent Assets: Restricted cash and cash equivalents Notes 4 & 5 47,09 Notes receivable, net of current portion Note 7,452,48 Investment in the financing of affordable housing developments Note 8 350,000 Capital assets, net of accumulated depreciation Note 9 9,56,729 Other noncurrent assets Note 0 798,087 Total Noncurrent Assets 22,74,325 Total Assets 25,50,856 DEFERRED OUTFLOWS OF RESOURCES Note 4 346,027 LIABILITIES Current Liabilities: Current portion of long term debt Note 2 976,72 Accounts payable 200,990 Accounts payable, HUD 535 Accounts payable, other government 30,342 Accrued wages and current portion of compensated absences 96,837 Interest payable 266,844 Other current liabilities 7,04 Unearned revenue 44,066 Tenant security deposits 05,863 Total Current Liabilities 2,039,22 Noncurrent Liabilities: Long term debt, net of current portion Note 2 8,879,632 Accrued compensated absences, net of current portion Note 63,586 Other noncurrent liabilities Note 53,66 Accrued pension Notes & 4 729,328 Total Noncurrent Liabilities 0,203,72 Total Liabilities 2,242,924 DEFERRED INFLOWS OF RESOURCES Note 4 3,592 NET POSITION Net investment in capital assets 0,767,966 Restricted Note 3 350,000 Unrestricted (deficit) 2,004,40 Total Net Position $ 3,22,367 See Accompanying Notes 8

19 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION For the year ended 0 OPERATING REVENUES HUD grants and contributions $ 0,558,390 Tenant rental income 2,06,097 Other revenue,488,834 Other government grants and contributions 46,425 Total Operating Revenues 4,09,746 OPERATING EXPENSES Housing assistance payments 7,482,902 Administration,838,870 Repair and maintenance,475,652 Depreciation expense,050,80 Utilities 860,386 Insurance expense 336,793 Tenant services 286,747 Other general expenses 53,758 Protective services 3,928 Total Operating Expenses 3,489,846 Operating Income 69,900 NONOPERATING REVENUES (EXPENSES) Interest and investment revenue 620 Net loss on investment in joint venture (4,075) Interest expense (539,856) Total Nonoperating (Expenses) (653,3) Loss before Capital Contributions and Transfers (33,4) CAPITAL CONTRIBUTIONS & TRANSFERS HUD capital grants and contributions 289,558 Total Capital Contributions and Transfers 289,558 Change in Net Position 256,47 Net Position Beginning of Year 2,866,220 Net Position End of Year $ 3,22,367 See Accompanying Notes 9

20 STATEMENT OF CASH FLOWS For the year ended 0 CASH FLOWS FROM OPERATING ACTIVITIES HUD grants $ 0,773,236 Other government grants 32,74 Receipts from tenants 2,009,727 Other operating receipts,523,34 Payments to employees (2,307,29) Payments to suppliers (0,33,248) Net cash provided by operating activities,898,64 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES HUD capital grants 87,83 Interest expense (478,83) Payments on long term debt (2,466,623) Acquisitions of capital assets (490,298) Net cash used in capital and related financing activities (3,247,92) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received 620 Proceeds from the collection on notes receivable,670,65 Net cash provided by investing activities,67,27 Net increase in cash and cash equivalents 32,964 Cash and cash equivalents at beginning of year 2,03,7 Cash and cash equivalents at end of year $ 2,335,35 Reconciliation of operating income to net cash provided by operating activities: Operating Income $ 69,900 Adjustments: Depreciation,050,80 Change in assets and liabilities: (Increase) decrease in accounts receivable, tenants 2,686 (Increase) decrease in accounts receivable, other 52,37 (Increase) decrease in accounts receivable, HUD 24,845 (Increase) decrease in accounts receivable, other government 9,450 (Increase) decrease in prepaid expenses and other current assets (4,259) (Decrease) increase in accounts payable 65,488 (Decrease) increase in accounts payable, HUD (Decrease) increase in accounts payable, other government 6,574 (Decrease) increase in compensated absences and accrued wages (45,786) (Decrease) increase in accrued pension liability (28,342) (Decrease) increase in accrued expenses and other current liabilities 8,709 (Decrease) increase in tenant security deposits (5,745) (Decrease) increase in unearned operating revenue (40,854) Net cash provided by operating activities $,898,64 See Accompanying Notes 20

21 NOTE ORGANIZATION NOTES TO FINANCIAL STATEMENTS The Housing Authority of the City of Meriden (the Authority) was incorporated under the laws of the State of Connecticut. The Authority operates under a board of commissioner form of government to provide safe and decent housing to low and moderate income families and elderly individuals. The Authority maintains its accounting records by program and operates the following programs: Low Rent Public Housing (Asset Management Projects (AMPS)) This program accounts for all activities relating to the leasing and operation of apartments in buildings that were constructed and are owned by the Authority. These units are rented to low income families and low income elderly, disabled, and special needs individuals. The properties were constructed with grants and or loans provided by the U.S. Department of Housing and Urban Development (HUD). The Authority receives grants from HUD to subsidize operating deficits. Tenants are charged rents based on a percentage of their income. Public Housing Capital Fund HUD provides grant funds to authorities with Low Rent Public Housing units on a formula basis. The funds are predominantly used to make physical improvements to buildings and dwelling units owned by the Authority under the Low Rent Public Housing Program. A portion of these funds may also be used to support operations and to make improvements in the management and operation of the Authority. Section 8 Housing Choice Voucher and the Family Self Sufficiency Program (FSS) HUD provides grants to the Authority to subsidize rents paid by low income families and individuals who rent dwelling units from private landlords. Under this program, qualified applicants are issued vouchers which may be used by the applicant to obtain housing in the private rental market. The Authority will subsidize the landlord for the difference between the rent requested and the tenant s share of the rent not to exceed a predetermined payment standard. FSS helps eligible individuals acquire the skills and experience needed to obtain work that pays a living wage, and also offers them an opportunity to save towards homeownership. The Authority works with welfare agencies, schools, businesses, and other local partners to help FSS participants access services including but not limited to; child care, transportation, education and training, and homeownership counseling. Resident Opportunities and Self Sufficiency (ROSS) ROSS links public housing residents with supportive services, resident empowerment activities, and assistance in becoming economically selfsufficient. Grants are received from HUD pursuant to a detailed application submitted by the Authority. State and Local Programs The Authority receives financial assistance from the Connecticut Department of Economic and Community Development (DOH) for the rehabilitation of state moderate rental public housing developments. 2

22 NOTE ORGANIZATION (Continued) NOTES TO FINANCIAL STATEMENTS Choice Neighborhoods Planning Grant This program supports the development of comprehensive neighborhood revitalization plans which focused on directing resources to address three core goals: Housing, People and Neighborhoods. To achieve these core goals, has developed a transformation plan. The transformation plan will become the guiding document for the revitalization of the public housing units while simultaneously directing the transformation of the surrounding neighborhood. Central Office Cost Center (COCC) This program tracks common overhead expenses incurred by the Authority. To offset these common expenses, the COCC receives monthly a property management, bookkeeping and asset management fee from the AMPs and state projects. Additionally the COCC receives from the Section 8 Housing Choice Voucher Program a monthly property management and bookkeeping fee. Affiliate Entities and Component Units To manage its business and financial affairs more effectively, the Authority has created affiliate entities to support its various ventures. While the Authority, as the parent entity, manages federal programs, the affiliate entities support the various functions necessary to meet the Authority s mission to provide safe and decent housing to low and moderate income families and elderly individuals. Certain of these affiliate entities are considered component units in accordance with generally accepted accounting principles. The criteria for including organizations as component units within the Authority s reporting entity, as set forth in Section 200 of GASB s Codification of Governmental Accounting and Financial Reporting Standards, include whether: the organization is legally separate (can sue and be sued in their own name) the Authority holds the corporate powers of the organization the Authority appoints a voting majority of the organization s board the Authority is able to impose its will on the organization the organization has the potential to impose a financial benefit/burden on the Authority there is fiscal dependency by the organization on the Authority Based on the aforementioned criteria and because of the nature and significance of their operational or financial relationships with the Authority, the component units are included in the Authority s reporting entity. These blended component units, although legally separate entities are, in substance, part of the Authority s operations. Separate financial information for the following blended component unit is presented in Note 22: Maynard Road Corporation (the Corporation) The Corporation was established to own, rehabilitate and rent residential dwelling units to low and moderate income families, as well as to own the maintenance facility used by the Authority. Because of its close association with the Authority, and that they both share common directors and officers, the Corporation has been included in the Authority s financial statements. 22

23 NOTE ORGANIZATION (Continued) NOTES TO FINANCIAL STATEMENTS The Authority also has two additional component units that, while still active legal entities, have not had any financial activity and do not hold any assets or liabilities. Therefore, no financial information related to these entities are included in the Authority s financial statements. These entities are Chamberlain Heights Manager, LLC and Maynard Road Holdings LLC, each of which are the general partners in limited partnerships, holding a.0% ownership interest in each limited partnership (see Note 20 for further detail). Joint Venture In February of 205, the Authority, through Maynard Road Corporation, entered into a joint venture with a third party to form Bristol Enterprises, LLC. Under the terms of the agreement, the Authority holds a 50% ownerships interest and Bristol Enterprises, LLC, which was formed for the purpose of acquiring and developing affordable housing in the City of Bristol, Connecticut (See Note 2 for further detail). NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Presentation and Accounting The Authority is a specialpurpose government entity engaged only in businesstype activities and, as such, the financial statements are presented as a single enterprise fund. The Authority s financial statements are prepared in accordance with GASB Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments ( GASB 34 ) and GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position ( GASB 63 ). GASB 34 and GASB 63 require the basic financial statements to be prepared using the economic resources measurement focus and the accrual basis of accounting and requires the presentation of a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in Net Position, and a Statement of Cash Flows. GASB 34 requires the Authority to include Management s Discussion and Analysis as part of the Required Supplementary Information. GASB 63 requires the Authority to report deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position and related disclosures. The Authority s primary source of nonexchange revenue relates to grants and subsidies. Grants and subsidies revenue is recognized at the time eligible program expenditures occur and/or the Authority has complied with the grant and subsidy requirements, in accordance with GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. Grants received in advance of expenditures are recorded as a liability until earned. New Accounting Standard Adopted During 206, the Authority adopted GASB 72, Fair Value Measurement and Application. GASB 72 provides guidance on determining fair value measurement and the applicable disclosure requirements. This statement requires disclosures to be made about fair value measurement, the level of fair value hierarchy and valuation techniques. GASB 72 also requires donated capital assets to be measured at acquisition value. 23

24 NOTES TO FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates that affect reported amounts of assets, liabilities, revenues and expenses and related disclosures. Actual amounts could differ from those estimates. C. Cash and Cash Equivalents Cash and cash equivalents consist of cash on deposit with financial institutions and other debt securities that are readily convertible into cash and purchased with original maturities of three months or less. Also included in cash equivalents are nonnegotiable certificates of deposits, recorded at cost in accordance with GASB 3. D. Accounts Receivable Accounts receivable from tenants are carried at the original amount billed less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by using historical experience applied to an aging of accounts receivable. Accounts receivable from tenants are written off with board approval when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Allowances for other nontenant receivables are reviewed annually. See Note 6 for details of accounts receivable and allowances at year end. E. Capital Assets Capital assets include property, furniture, equipment and machinery with initial, individual costs that equal or exceed $5,000 and estimated useful lives of more than one year. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. Capital assets are depreciated using the straightline method over the following estimated useful lives: Buildings 2040 years Land and Building Improvements 0 years Furniture, Equipment and Machinery 35 years 24

25 NOTES TO FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Compensated Absences Sick and vacation time is earned by all employees working at least 35 hours per week based on length of service. The Authority allows employees to carry over to the next fiscal year up to 90 sick days and up to 2 weeks of vacation (vacation accrual must be approved by the Executive Director of the Authority) to subsequent periods. Upon normal retirement, the employee will be reimbursed for unused sick time according to the schedule designated and defined by the Authority s personnel policy. Total accrued compensated absences at aggregated $07,7. G. Investment in the Financing of Affordable Housing Developments Investment in the Financing of Affordable Housing Developments represents longterm subsidized loans to PublicPrivate Partnership entities formed to revitalize and preserve affordable housing properties. The loans were funded through HUD and internal resources. As these loans were subsidized by HUD, instruments with below market interest rate have not been discounted. H. Operating Revenues and Expenses GASB 34 paragraph 02 requires governments to establish a policy that defines operating revenues and expenses. The Authority uses the criteria prescribed in GASB 9 paragraphs 7 and 8 for cash flows to determine operating revenues and expenses. Operating revenue includes operating grants and subsidies, rental income, management services provided and all other revenue relating to the provision of safe, decent and affordable housing services that do not result from transactions defined as capital and related financing, noncapital and related financing or investing activities. Operating expenses include wages, housing assistance payments, utilities, maintenance, depreciation of capital assets, administrative expenses and all other expenses relating to the provision of safe, decent and affordable housing services that do not result from transactions defined as capital and related financing, noncapital and related financing or investing activities. I. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the retirement system and additions to/deductions from the system s fiduciary net position have been determined on the same basis as they are reported by the retirement system. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 25

26 NOTES TO FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Loan Guarantees To facilitate the redevelopment of affordable housing, Maynard Road Corporation periodically guarantees loan made by affiliates during the development stage of the projects. Maynard Road Corporation has considered the likelihood that it will be required to make a payment related to the guarantee and has determined that the likelihood is not probable, as a result, the Maynard Road Corporation has not recognized a liability at. NOTE 3 NET POSITION: RESTRICTED The Authority s restricted net position represent funds restricted by HUD related to the Housing Choice Voucher Program to be used for future HAP payments and for funds invested in the financing of affordable housing. At, total restricted net position was as follows: Category of Restriction Amount 0 HAP $ Investment in the Financing of affordable housing 350,000 0 Total $ 350,000 NOTE 4 CASH AND INVESTMENT DEPOSITS GASB standards require that cash and investment deposits with financial institutions be classified into one of the following four categories: Category A Insured Category B Collateralized, with securities held by the entity or by its agent in the entity s name. Category C Collateralized, with securities held by the pledging financial institution s trust department or agent in the entity s name. Category D Noncollateralized (Includes any bank balance collateralized with securities held by the pledging financial institution, or by its trust department or agent, but not in the entity s name.) The Authority has adopted HUD s Investment Regulation PIH as its investment policy. HUD regulations require that all HUD deposits in financial institutions and investments be fully insured or collateralized, (category A, B or C) by U.S. Government obligations that have a market value of not less than the principal amount of the deposits. The policy also requires that investments not have a maturity period longer than three years. Custodial Credit Risk Cash Deposits In the case of cash deposits, this is the risk that in the event of a bank failure, the Authority s deposits may not be returned to it. The Authority does not have a formal policy for custodial credit risk, except ensuring that it follows the HUD regulations for federal deposits as detailed in a prior paragraph. At, the Authority s cash deposits of $2,335,35 were fully insured or collateralized. 26

27 NOTES TO FINANCIAL STATEMENTS NOTE 4 CASH AND INVESTMENT DEPOSITS (Continued) The Authority notes that in accordance with GASB 40, the disclosures for all types of cash deposits with a financial institution, whether categorized as cash and cash equivalents or as investments are the same and have been reported and disclosed accordingly in the previous section of the note. NOTE 5 RESTRICTIONS ON CASH, CASH EQUIVALENTS AND INVESTMENTS The Authority s current restricted cash and cash equivalents included funds held in escrow related to tenant security deposits, funds restricted for the payment of current liabilities. The noncurrent restricted cash balance represents funds held in escrow for participants in the FSS Program. At, restricted cash was categorized as follows: Category of Restriction Amount 0 Restricted for Payment of Current Liabilities $ 256,37 FSS Escrow 47,09 Tenant Security Deposits 05,863 0 Total $ 779,325 NOTE 6 ACCOUNTS RECEIVABLE The following is a detail listing of receivables for the Authority including the applicable allowances for uncollectible accounts at. Category of Receivable Amount 0 HUD $ 468,005 Other Government 0,59 Miscellaneous 223,228 Tenants 45,367 Gross Receivables 747,9 Allowance Tenants (8,938) 0 Net Receivables $ 728,253 NOTE 7 NOTES RECEIVABLE The City of Meriden has agreed to refund the Authority for over payments of sewer usage charges. As part of the agreement, the Authority is to receive interestfree annual payments of $,4 per year over a forty year period ending in the 2026 fiscal year. At the balance due to the Authority was $06,28. 27