SARASOTA AREA HOUSING, INC. HUD PROJECT NO. 067-EH273 REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014

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1 HUD PROJECT NO. 067-EH273 REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014

2 HUD PROJECT NO. 067-EH273 TABLE OF CONTENTS INDEPENDENT AUDITORS REPORT 2-3 PAGE FINANCIAL STATEMENTS Statement of Financial Position 4-5 Statement of Activities 6 Statement of Cash Flows 7 NOTES TO THE FINANCIAL STATEMENTS 8-11 SUPPLEMENTARY DATA REQUIRED BY HUD SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 22 SINGLE AUDIT REPORTS 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 Independent Auditors Report on Compliance for Each Major Program and on Internal Control Over Compliance Required By OMB Circular A Schedule of Findings and Questioned Costs Corrective Action Plan 29 CERTIFICATE OF DIRECTOR 30 CERTIFICATE OF MANAGEMENT AGENT 31 1

3 INDEPENDENT AUDITORS REPORT To the Board of Directors SARASOTA AREA HOUSING, INC. Report on the Financial Statements We have audited the accompanying financial statements of SARASOTA AREA HOUSING, INC., which comprise the statement of financial position as of June 30, 2014, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with 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 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 auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SARASOTA AREA HOUSING, INC. as of June 30, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 2

4 INDEPENDENT AUDITORS REPORT (CONTINUED) Other Matters Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 12 to 21 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs 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 by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, 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 July 31, 2014, on our consideration of SARASOTA AREA HOUSING, INC. 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 SARASOTA AREA HOUSING, INC. s internal control over financial reporting and compliance. HARAN & ASSOCIATES LTD Certified Public Accountants July 31,

5 STATEMENT OF FINANCIAL POSITION JUNE 30, 2014 ASSETS FIXED ASSETS Land and improvements $ 352,210 Buildings 2,104,453 Building equipment 206,485 Furniture for project/tenant use 182,804 Furnishings 17,021 Office furniture and equipment 11,061 Maintenance equipment 868 Miscellaneous fixed assets 2,721 Total fixed assets $ 2,877,623 Accumulated depreciation 1,437,596 Net fixed assets $ 1,440,027 OTHER ASSETS Cash and cash equivalents $ 6,913 Accounts receivable 29 Prepaid expenses 8,819 Tenant deposits held in trust 11,337 Escrow deposits 38,739 Replacement reserve 300,431 Total other assets $ 366,268 Total assets $ 1,806,295 The accompanying notes are an integral part of this statement. 4

6 STATEMENT OF FINANCIAL POSITION (CONTINUED) JUNE 30, 2014 LIABILITIES AND NET ASSETS LIABILITIES APPLICABLE TO INVESTMENT IN REAL ESTATE Accounts payable $ 13,347 Accrued payroll 6,455 Tenant deposits held in trust (contra) 11,062 Total liabilities applicable to investment in real estate $ 30,864 NET ASSETS Temporarily restricted - capital advance from HUD $ 1,997,800 Temporarily restricted - green retrofit grant 544,829 Accumulated net assets - unrestricted (767,198) Total net assets $ 1,775,431 Total liabilities and net assets $ 1,806,295 The accompanying notes are an integral part of this statement. 5

7 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014 REVENUE Rental revenue Gross rental revenue $ 438,520 Less: Vacancy loss 1,732 Net rental revenue $ 436,788 Interest income 433 Other revenue 4,742 Total revenues $ 441,963 OPERATING EXPENSES Administrative $ 136,838 Utilities 27,084 Operating and maintenance 105,625 Taxes and insurance 104,487 Supportive services 26,439 Total operating expenses $ 400,473 Change in net assets before financial expenses $ 41,490 FINANCIAL EXPENSES Miscellaneous financial $ 19 Total financial expenses $ 19 Change in net assets before depreciation $ 41,471 Depreciation 107,841 Change in net assets $ (66,370) Net assets at beginning of year 1,841,801 Net assets at end of year $ 1,775,431 The accompanying notes are an integral part of this statement. 6

8 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2014 RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Change in net assets $ (66,370) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation expense 107,841 Decrease (increase) in: Accounts receivable 1,048 Prepaid expenses 246 Tenant security deposits 169 Increase (decrease) in: Accounts payable 424 Accrued expenses (603) Tenant security deposits held in trust (88) Net cash provided by (used in) operating activities $ 42,667 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of depreciable assets, net $ (14,558) Escrow deposits, net (3,678) Replacement reserve deposits, net (29,765) Net cash provided by (used in) investing activities $ (48,001) Net increase (decrease) in cash $ (5,334) Cash at beginning of the year 12,247 Cash at end of the year $ 6,913 The accompanying notes are an integral part of this statement. 7

9 NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SARASOTA AREA HOUSING, INC.(the Corporation ) was formed as a Not-For-Profit Corporation, under the laws of the State of Illinois in 1989, for the purpose of acquiring land, building and operating a 40-unit building for low-income elderly and handicapped persons as defined by the National Housing Act of 1959, as amended, which is located in Sarasota, Florida. The Corporation is currently operating as ORCHARD PLACE OF SARASOTA (the Project). The construction cost of the building was financed through a capital advance agreement with the United States Department of Housing and Urban Development (HUD) under terms of Section 811 of the Affordable Housing Act. Lifelink Charities (Lifelink) is the sponsor of the Project and the parent of the Corporation. Lifelink and the Corporation are organized exclusively for charitable purposes as not-for-profit corporations, as described in Section 501 (c)(3) of the Internal Revenue Code (Code) and are exempt from federal and state income taxes on related income pursuant to Section 501(a) of the Code. The Corporation, being a not-for-profit organization, is not allowed any distributions from surplus cash, pursuant to the Regulatory Agreement. All surplus cash is to be deposited into a residual receipts account in the name of the Corporation. Agreements with HUD provide for the regulation and control of the operations of the Corporation. Under terms thereof, the Corporation is regulated as to rent charges and operating methods. There are restrictions as to transactions with related parties, transfer of title, prepayment of debt and other operating matters. These agreements also establish certain restricted deposit accounts and require the Corporation to make certain periodic transfers to these accounts. The following significant accounting policies have been followed in the preparation of the financial statements: The Corporation prepares its financial statements on the accrual basis of accounting, which is consistent with accounting principles generally accepted in the United States of America. Fixed assets are recorded at cost. Provisions for depreciation are computed on the straight-line method over the estimated useful lives of the assets, which range from five to twenty-seven and a half years. No provision for income taxes has been made since the Corporation is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provisions were made for income taxes in the accompanying financial statements. The Corporation s informational returns for the years ended June 30, 2011 through June 30, 2013 remain open to examination by the Internal Revenue Service and state taxing agencies. 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 the 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 estimated. The Corporation s management reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such property may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the future net undiscounted cash flow expected to be generated and any estimated proceeds from the eventual disposition. If the longlived asset is considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount exceeds the fair value as determined from an appraisal, discounted cash flow analysis or other valuation technique. There was no impairment loss recognized for the year ended June 30,

10 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2014 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Rental revenue attributable to residential leases is recorded when due from residents, generally upon the first day of each month. Leases are for periods of up to one year, with rental payments due monthly. Other revenue results from fees for late payments, cleaning, damages, and laundry facilities and is recorded when earned. Advance receipts of rental income are recorded as liabilities until earned. Tenant receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review of the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. The Corporation, as allowed under current State of Florida statutes, has applied for and received exemption from local real estate taxes since its inception. Accordingly, it has never paid nor accrued real estate taxes. The Corporation maintains cash deposit accounts at a bank where accounts are insured by the F.D.I.C. for up to $250,000. Amounts on deposit in excess of insured limits totaled $123,399 at June 30, The Corporation has not experienced any losses in such accounts. The Corporation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The Corporation considers all cash balances and highly liquid debt instruments purchased with a maturity of three months or less at the date of purchase to be cash equivalents for purposes of the statement of cash flows. Restricted cash and escrow deposits are not considered cash and cash equivalents. Subsequent events have been evaluated through July 31, 2014, which is the date the financial statements were available to be issued. Management has determined that there were no subsequent events requiring disclosure. NOTE 2 - TENANT SECURITY DEPOSITS Tenant security deposits are held in a separate bank account in the name of the Corporation. NOTE 3 - CAPITAL ADVANCE FROM HUD The Corporation has entered into a capital advance agreement with HUD, under Section 811 of the National Affordable Housing act of 1990, which provided funds in the amount of $1,997,800. The capital advance does not bear interest and is not required to be repaid as long as the Corporation complies with all the terms of the capital advance agreement. The terms require the housing units to remain available to lowincome households for a period of 40 years. In the event that the Corporation does not comply with the terms of the capital advance agreement, the outstanding principal balance of the capital advance, along with interest at 8.375% per annum through the date of the default, becomes currently due and payable. It is management s intention to operate the Corporation in accordance with the agreement and Section 811 of the National Affordable Housing Act of The capital advance was recorded as a direct addition to temporarily restricted net assets in the accompanying financial statements. 9

11 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2014 NOTE 4 - GREEN RETROFIT GRANT REVENUE On January 1, 2011 the Corporation received a Green Retrofit Program Grant (GRP) from HUD under the American Recovery and Reinvestment Act of 2009 in the amount of $544,829. The GRP is secured by a use agreement and is not required to be repaid so long as the Corporation complies with all the terms of the GRP use agreement. The terms require the housing units to remain available to low-income households, compliance with Green Retrofit Program Operations & Maintenance Plan and submission of annual reports until October 31, In the event that the Corporation does not comply with the terms of the GRP use agreement the Secretary may seek any other legal or equitable remedy in addition to liquidated damages. It is management s intention to operate the Corporation in accordance with the agreement and American Recovery and Reinvestment Act of The GRP from HUD in the amount of $544,829 was recorded as a direct addition to temporarily restricted net assets in the accompanying financial statements. NOTE 5 - ESCROW DEPOSITS AND RESTRICTED RESERVES According to the Regulatory Agreement, the Corporation is required to maintain certain escrow deposits and reserves. They have established a replacement reserve account which is funded on a monthly basis with deposits set aside for the replacement of property and other Project expenditures approved by HUD. The replacement reserve has been properly funded as of June 30, Also, within 90 days after the close of its fiscal year, any surplus cash, as defined by the regulatory agreement, is to be transferred into the residual receipts account. HUD regulations require that amounts deposited into these accounts are to be maintained in interest-bearing accounts of a federally insured depository with all interest earned added to the respective balances. NOTE 6 - RENTAL ASSISTANCE PAYMENTS The Corporation has executed a Housing Assistance Payment Contract with HUD providing for rental subsidy payments to the Corporation for all units leased to eligible lower-income residents. Under the terms of the contract, the Corporation is to receive subsidy payments designed to provide for the difference between the approved rents and the cash generated by the tenants rental payments, which are usually 30% of their disposable income, and are adjusted annually. Due to the occupancy levels and tenant mixes, the amount of HUD subsidies will vary year to year. NOTE 7 - RENTAL INCREASES Under the regulatory agreement, the Corporation may not increase rents charged to tenants without HUD s approval. NOTE 8 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The Corporation s primary asset is its rental building. The Corporation s operations are concentrated in the multifamily real estate market. In addition, the Corporation operates in a heavily regulated environment. The operations of the Corporation 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 such a change. 10

12 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2014 NOTE 9 - MANAGEMENT FEE The Corporation has entered into a Management Agreement with Consecra Housing Network, a related party. The agreement calls for a management fee equal to the lower of $47 per unit per month or 5.52% of residential and miscellaneous income collected. NOTE 10 - RELATED PARTY TRANSACTIONS Consecra Housing Network, as the management agent, provides management services for which it is compensated with a fee. During fiscal year 2014, $22,332 was earned and paid for property management fees. Consecra Housing Network, as the current management agent, receives bookkeeping and computer fees. During fiscal year 2014, $2,160 was earned and paid for such fees. NOTE 11 - GENERAL LIABILITY INSURANCE CONTINGENCY Through December 31, 2001, Lifelink and its affiliates maintained professional liability insurance through commercial insurance policies. Effective January 1, 2002, Lifelink and its affiliates entered into a contractual agreement to form Caring Communities Insurance Program (Caring Communities), a self-insurance administrator, which, through its risk-sharing provisions, provided Lifelink and its affiliates with insurance coverage for professional and comprehensive general liability exposure. Caring Communities was a multi-organizational insurance company for long-term care organizations incorporated under the laws of the Cayman Islands, which had elected to be taxed as a U.S. corporation. Effective January 1, 2008, Caring Communities became a wholly owned subsidiary of Caring Communities (CCrRRG), a Reciprocal Risk Retention Group, a District of Columbia insurer. At that date, Lifelink and its affiliates aggregate capital contributions to Caring Communities of $481,260 were exchanged for a charter capital account of the same value with CCrRRG. Caring Communities continued to provide Lifelink and its affiliates with claims-made insurance coverage for claims reported before January 1, Effectively January 1, 2008, CCrRRG now provides Lifelink and its affiliates with claims-made insurance coverage using a combination of selfinsured retentions and excess commercial insurance coverage. CCrRRG engages a professional actuarial consultant for the determination of premiums to be assessed to participants under the plan of coverage. As a self-insurance administrator, CCrRRG enables risk sharing among participating longterm care organizations. Lifelink and its affiliates are required to pay assessed premiums and are subject to a per-claim self-insured retention of $50,000. Based upon Lifelink and its affiliates historical claims experience and exposure to date with Caring Communities and CCrRRG, no reserves have been established. 11

13 SUPPLEMENTARY DATA REQUIRED BY HUD JUNE 30, 2014 STATEMENT OF FINANCIAL POSITION DATA ASSETS CURRENT ASSETS 1120 Cash - operations $ 6, Tenant/member accounts receivable (coops) Miscellaneous prepaid expenses 8, T Total current assets $ 15,761 DEPOSITS HELD IN TRUST - FUNDED 1191 Tenant deposits held in trust $ 11,337 RESTRICTED DEPOSITS AND FUNDED RESERVES 1310 Escrow deposits $ 38, Replacement reserve 300, T Total deposits $ 339,170 FIXED ASSETS 1410 Land $ 352, Buildings 2,104, Building equipment (portable) 206, Furniture for project/tenant use 182, Furnishings 17, Office furniture and equipment 11, Maintenance equipment Miscellaneous fixed assets 2, T Total fixed assets $ 2,877, Accumulated depreciation 1,437, N Net fixed assets $ 1,440, T Total assets $ 1,806,295 12

14 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) JUNE 30, 2014 STATEMENT OF FINANCIAL POSITION DATA (CONTINUED) LIABILITIES AND NET ASSETS CURRENT LIABILITIES 2110 Accounts payable - operations $ 11, Accounts payable - Section 8 and other 1, Accrued payroll 6, T Total current liabilities $ 19,802 DEPOSITS 2191 Tenant deposits held in trust (contra) $ 11, T Total liabilities $ 30,864 NET ASSETS 3131 Accumulated net deficit - unrestricted $ (767,198) 3132 Temporarily restricted - capital advance from HUD 1,997, Temporarily restricted - green retrofit grant 544, T Total net assets $ 1,775, T Total liabilities and net assets $ 1,806,295 13

15 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 STATEMENT OF ACTIVITIES DATA RENT REVENUE 5120 Rent revenue - gross potential $ 99, Tenant assistance payments 339, T Total rent revenue $ 438,520 VACANCIES 5220 Apartments $ 1, T Total vacancies $ 1, N Net rental revenue $ 436,788 FINANCIAL REVENUE 5410 Financial revenue - project operations $ Revenue from investments - replacement reserves Revenue from investments - miscellaneous T Total financial revenue $ 433 OTHER REVENUE 5910 Laundry and vending revenue $ 1, Tenant charges Gifts 1, Miscellaneous revenue 1, T Total other revenue $ 4, T Total revenue $ 441,963 14

16 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 STATEMENT OF ACTIVITIES DATA (CONTINUED) ADMINISTRATIVE EXPENSES 6203 Conventions and meetings $ 5, Advertising and marketing 1, Other renting expenses 1, Office salaries 18, Office expenses 14, Management fee 22, Manager or superintendent salaries 57, Legal expense - project Audit expense 6, Bookkeeping fees/accounting services 5, Bad debts Miscellaneous administrative expenses 2, T Total administrative expenses $ 136,838 UTILITIES EXPENSES 6450 Electricity $ 12, Water 11, Gas 3, T Total utilities expenses $ 27,084 OPERATING AND MAINTENANCE EXPENSES 6510 Payroll $ 41, Supplies 7, Contracts 41, Garbage and trash removal 7, Security payroll/contract 7, Vehicle and maintenance equipment repair expenses T Total operating and maintenance expenses $ 105,625 TAXES AND INSURANCE EXPENSES 6710 Real estate taxes $ 4, Payroll taxes (Project's share) 13, Property and liability insurance (hazard) 44, Workmen's compensation 2, Health insurance and other benefits 39, Misc. taxes, licenses, permits, and insurance expenses T Total taxes and insurance expenses $ 104,487 15

17 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 STATEMENT OF ACTIVITIES DATA (CONTINUED) FINANCIAL EXPENSES 6890 Miscellaneous financial expenses $ T Total financial expenses $ EXPENSES 6900 Nursing homes/assisted living/board and care/other elderly care expenses $ 26, T Total expenses $ 26,439 OPERATING RESULTS 6000T Total cost of operations before depreciation $ 400, T Changes in net assets before depreciation $ 41, Depreciation expense 107, N Change in net assets $ (66,370) CHANGE IN NET ASSETS FROM OPERATIONS 3247 Change in unrestricted net assets from operations $ (66,370) PROFIT OR LOSS 3250 Change in total net assets from operations $ (66,370) 16

18 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 STATEMENT OF ACTIVITIES DATA (CONTINUED) S Total of 12 monthly deposits in the audit year into the replacement reserve account, as required by the Regulatory Agreement, even if payments may be temporarily suspended or reduced. $ 29,375 STATEMENT OF CHANGE IN PROJECT NET ASSETS S Net assets at beginning of the year $ 1,841, Change in net assets (66,370) 3130 Net assets at end of the year $ 1,775,431 17

19 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 SCHEDULE OF CASH FLOW DATA CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from: S Rental receipts $ 439,311 S Interest receipts 433 S Other operating receipts 4,742 S Total cash receipts $ 444,486 Cash payments for: S Administrative $ 39,046 S Management fee 22,332 S Utilities 27,084 S Salaries and wages 118,167 S Operating and maintenance 64,572 S Real estate taxes 4,323 S Property insurance 44,650 S Miscellaneous taxes and insurance 55,268 S Tenant security deposits (81) S Supportive services 26,439 S Miscellaneous financial 19 S Total cash payments $ 401,819 S Net cash provided by (used in) operating activities $ 42,667 CASH FLOWS FROM INVESTING ACTIVITIES S Net deposits to the mortgage escrow account $ (3,678) S Net deposits to the reserve for replacement (29,765) S Net purchase of fixed assets (14,558) S Net cash provided by (used in) investing activities $ (48,001) S Net increase (decrease) in cash $ (5,334) S Beginning of the year cash 12,247 S1200T End of the year cash $ 6,913 18

20 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 SCHEDULE OF CASH FLOW DATA (CONTINUED) Reconciliation of change in net assets to net cash provided by (used in) operating activities: 3250 Change in net assets $ (66,370) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: 6600 Depreciation expense 107,841 Decrease (increase) in: S Tenant/member accounts receivable 791 S Accounts receivable - HUD 257 S Prepaid expenses 246 S Tenant security deposits 169 Increase (decrease) in: S Accounts payable (1,051) S Accounts payable - HUD 1,475 S Accrued liabilities (603) S Tenant security deposits held in trust (88) S Net cash provided by (used in) operating activities $ 42,667 19

21 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 Computation of Surplus Cash S Cash $ 18,250 S Total cash $ 18,250 Current obligations: S Accounts payable - 30 days $ 13,347 S Accrued expenses (not escrowed) 6, Tenant security deposits liability 11,062 S Total current obligations $ 30,864 S Surplus cash (deficiency) $ (12,614) S Deposits due residual receipts $ - Schedule of Reserve for Replacement 1320P Balance at July 1, 2013 $ 270, DT Total monthly deposits 29, INT Interest on replacement reserve account OWT Other withdrawals (2) 1320 Balance at June 30, 2014 $ 300, R Deposits suspended or waived indicator No 20

22 SUPPLEMENTARY DATA REQUIRED BY HUD (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 CHANGES IN FIXED ASSETS Assets Accumulated Depreciation Balance, Balance, Balance, Balance, Net Book Value July 1, June 30, July 1, Current June 30, June 30, 2013 Additions Provision Land $ 352,210 $ - $ 352,210 $ 70,864 $ 4,967 $ 75,831 $ 276,379 Buildings 2,104,453-2,104, ,074 79,502 1,074,576 1,029,877 Building equipment (portable) 203,750 a 2, ,485 71,169 18,342 89, ,974 Furniture for project/tenant use 182, , ,073 2, ,475 1,329 Furnishings 5,198 b 11,823 17,021 3, ,710 12,311 Office furniture and equipment 11,061-11,061 7,674 1,177 8,851 2,210 Maintenance equipment Miscellaneous fixed assets 2,721-2,721 1, , Total $ 2,863,065 $ 14,558 $ 2,877,623 $ 1,329,755 $ 107,841 1,437,596 $ 1,440,027 a b Air conditioning units Kitchen cabinets, tables, chairs, dishwasher 21

23 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2014 Federal Grantor/Pass-through Grantor/ Program Title Federal CFDA Federal Balance at Number Expenditures June 30, 2014 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Section 8 Housing Assistance Payments $ 339,090 $ - Supportive Housing for the Elderly - capital advance ,997,800 Green Retrofit Program for Multifamily Housing , ,090 2,542,629 NOTE 1 SCOPE OF AUDIT PURSUANT TO CIRCULAR A-133 All federal grant activities of SARASOTA AREA HOUSING, INC. (the Corporation) are included in the scope of the U.S. Office of Management and Budget (OMB) Circular A-133 audit. Under Government Auditing Standards and U.S. Department of Housing and Urban Development (HUD) s Regulations, the Corporation s Section 811 capital advance, Green Retrofit Program Grant and its Housing Assistance Payment Contract (Section 8) are all considered major programs. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For purposes of the schedule of expenditures of federal awards, federal awards include all grants, contracts, loans, and loan guarantee agreements entered into directly between the Corporation and agencies and departments of the federal government. For the year ended June 30, 2014, the Corporation had no expenditures in the form of noncash assistance, had no federally funded insurance in effect for the year, and had no sub recipients. The accompanying schedule of expenditures of federal awards is prepared on the accrual basis of accounting. NOTE 3 CAPITAL ADVANCES The total amounts funded under capital advances from HUD are reflected at their respective balances of June 30, 2014, in the accompanying schedule of expenditures of federal awards. NOTE 4 GREEN RETROFIT GRANT The total amounts funded under the green retrofit grant from HUD are reflected at their respective balances as of June 30, 2014, in the accompanying schedule of expenditures of federal awards. NOTE 5 Other OMB Circular A-133 Audits Lifelink Charities has other affiliates that have expended more than $500,000 in federal awards, which have separate OMB Circular A-133 audits, which are not included in the accompanying schedule of expenditures of federal awards. See accompanying independent auditors report 22

24 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 SARASOTA AREA HOUSING, INC. We have audited, in accordance with the 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, the financial statements of SARASOTA AREA HOUSING, INC., which comprise the statement of financial position as of June 30, 2014, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated July 31, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered SARASOTA AREA HOUSING, INC. s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of SARASOTA AREA HOUSING, INC. s internal control. Accordingly, we do not express an opinion on the effectiveness of SARASOTA AREA HOUSING, INC. s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether SARASOTA AREA HOUSING, INC. 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. 23

25 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 (CONTINUED) Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. HARAN & ASSOCIATES LTD Certified Public Accountants July 31,

26 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To the Board of Directors SARASOTA AREA HOUSING, INC. Report on Compliance for Each Major Federal Program We have audited SARASOTA AREA HOUSING, INC. s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of SARASOTA AREA HOUSING, INC. s major federal programs for the year ended June 30, SARASOTA AREA HOUSING, INC. s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of SARASOTA AREA HOUSING, INC. 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 SARASOTA AREA HOUSING, INC. 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 of SARASOTA AREA HOUSING, INC. s compliance. Opinion on Each Major Federal Program In our opinion, SARASOTA AREA HOUSING, INC. 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,

27 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 (CONTINUED) Report on Internal Control over Compliance Management of SARASOTA AREA HOUSING, INC. 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 SARASOTA AREA HOUSING, INC. 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 OMB Circular A- 133, 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 SARASOTA AREA HOUSING, INC. 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. 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 OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. HARAN & ASSOCIATES LTD Certified Public Accountants July 31,

28 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2014 SECTION I: SUMMARY OF AUDITORS RESULTS 1. Financial Statements Type of auditors report issued unqualified Internal control over financial reporting Material weakness identified? yes X_ no Significant deficiencies identified that are not considered to be material weaknesses? yes X_ none Noncompliance material to financial statements noted? yes X_ no 2. Federal Awards Internal control over financial reporting Material weakness identified? yes X_ no Significant deficiencies identified that are not considered to be material weaknesses? yes X_ none Type of auditors report issued on compliance for major programs unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133? yes X_ no 3. Identification of major programs CFDA Number Name of Federal Program or Cluster Supportive Housing for the Elderly capital advance Section 8 Housing Assistance Payments Green Retrofit Program for Multifamily Housing Dollar threshold used to distinguish Between Type A and Type B programs $300,000 Auditee qualified as a low-risk auditee? X_ yes no 27

29 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2014 SCHEDULE OF FINDINGS AND QUESTIONED COSTS CURRENT YEAR No findings. SCHEDULE OF FINDINGS AND QUESTIONED COSTS PRIOR YEARS No findings. 28

30 CORRECTIVE ACTION PLAN Audit Period: For the year ended June 30, 2014 Section I: Internal Control Structural Review A. Comments on Findings and Recommendations No Findings. B. Actions Taken or Planned No Findings. C. Status of Corrective Actions on Prior Findings No Findings. Section II: Compliance Review A. Comments on Findings and Recommendations No Findings. B. Actions Taken or Planned No Findings. C. Status of Corrective Actions on Prior Findings No Findings. 29

31 CERTIFICATE OF DIRECTOR I hereby certify that I have examined the accompanying financial statements and supporting data as of June 30, 2014 for SARASOTA AREA HOUSING, INC. and, to the best of my knowledge and belief, the same is complete and accurate. SARASOTA AREA HOUSING, INC. By: Title: Date: 30

32 CERTIFICATE OF MANAGEMENT AGENT I hereby certify that I have examined the accompanying financial statements and supporting data as of June 30, 2014 for SARASOTA AREA HOUSING, INC. and, to the best of my knowledge and belief, the same is complete and accurate. CONSECRA HOUSING NETWORK MANAGEMENT AGENT FEDERAL EMPLOYER IDENTIFICATION NO By: Title: Date: 31