HOUSING AUTHORITY OF THE COUNTY OF CASS BEARDSTOWN, ILLINOIS FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 AND REPORTS ON COMPLIANCE AND ON

Transcription

1 BEARDSTOWN, ILLINOIS FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 AND REPORTS ON COMPLIANCE AND ON INTERNAL CONTROL

2 TABLE OF CONTENTS MARCH 31,2016 Section I - Auditor's Report and Management's Discussion and Analysis Independent Auditor's Report Management's Discussion and Analysis (unaudited) Section II - Financial Statements and Notes to Financial Statements Basic Financial Statements: i-ii iii-viii Statement of Net Position 1-2 Statement of Revenue, Expenses and Changes in Net Position 3 Statement of Cash Flows 4-5 Notes to Basic Financial Statements 6-23 SUPPLEMENTAL INFORMATION Schedule of Expenditures of Federal Awards and Notes to the Schedule of Federal Awards 24 PHA s Statement and Certification of Capital Fund Program Costs 25 Financial Data Schedule - HUD Prescribed Format Section III - Reports on Compliance and on Internal Control Exhibit A Independent Auditor s 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 1-2 Independent Auditor s Report on Compliance For Each Major Federal Program; Report on Internal Control over Compliance Required by Uniform Guidance 3-5 Significant Deficiencies Communicated in Prior Years 6 Schedule of Findings and Questioned Costs: Section I - Summary of Auditor Results 7 Section II - Financial Statement Findings 8 Section III - Federal Awards Findings 8

3 SECTION I AUDITOR'S REPORT AND MANAGEMENT S DISCUSSION AND ANALYSIS

4 BRZ Sailor Khan LLC Certified Public Accountants ===ÿÿ Board of Commissioners Housing Authority of the County of Cass Report on the Financial Statements INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Housing Authority of the County of Cass, Illinois, (Authority), as of and for the year ended March 31, 2016, and the related notes to the financial statements, which collectively comprise the Housing Authority of the County of Cass s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 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 Housing Authority of the County of Cass 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 Housing Authority of the County of Cass 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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Housing Authority of the County of Cass, as of March 31, 2016 and the changes in financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America S. Brentwood Blvd, Suite 1305, St. Louis, MO Fax:

5 BRZ Sailor KhanLLC Other Matters Report on Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages iii through viii 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 audit 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 sufficient evidence to express an opinion or provide any assurance. Other Information Report on Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Housing Authority of the County of Cass s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance), and the remaining accompanying supplementary information including the Financial Data Schedule - HUD Prescribed Format are presented for purposes of additional analysis and are not a required part of the basic 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 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 above described supplementary information is fairly stated, in all material respects, in relation to the basic 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 November 17, 2016 on our consideration of the Housing Authority of the County of Cass s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 in considering the Housing Authority of the County of Cass's internal control over financial reporting and compliance. <A~ UJ~ BRZ Sailor Khan, LLC St. Louis, Missouri November 17, u -

6 Housing Authority of the County of Cass Management s Discussion and Analysis (MD&A) March 31, 2016 (Unaudited) This section of the Housing Authority of the County of Cass, Illinois (Authority) annual financial report presents our management s discussion and analysis of the Authority s financial performance during the fiscal year ended on March 31, This discussion and analysis is designed to assist the reader in focusing on the significant financial issues and activities and to identify any significant changes in financial position. Please read and consider the information presented in conjunction with the financial statements as a whole. For accounting purposes, the Housing Authority is classified as an enterprise fund. Enterprise funds account for activities similar to those found in the private business sector, where the determination of net income is necessaiy or useful to sound financial administration. Enterprise funds are reported using the full accrual method of accounting in which all assets, all deferred outflows of resources, all liabilities, and all deferred inflows of resources, associated with the operation of these funds are included on the Statement of Net Position. The focus of enterprise funds is on income measurement, which, together with the maintenance of equity, is an important financial indication. FINANCIAL HIGHLIGHTS >ÿ The term net position refers to the difference between assets plus deferred outflows of resources less liabilities and deferred inflows of resources. The Authority s total net position as of March 31, 2016 was $2,974,834. The net position decreased by $159,375, a decrease of 5.1% over the prior year. Revenues and contributions for the Authority were $790,916 for the year ended March 31, This was a decrease of $14 1,376 or 15.2% from the prior year. >- Expenses for the Authority were $950,291 for the year ended March 31, This was an increase of $75,267 or 8.6% over the prior year. >- Rental revenue for the Authority was $426,803 for the year ended March 31, 2016, an increase of $55,964 or 15.1% over the prior year. HUD operating grants for the Authority was $198,821 forthe year ended March 31, 2016, a decrease of $123 or 0.1% from the prior year. Capital contributions were $0 for the year ended March 31, 2016, a decrease of $190,552 or 100.0% from the prior year. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report includes this Management Discussion and Analysis report, the Basic Financial Statements and the Notes to the Financial Statements. This report also contains the Financial Data Schedule (FDS) as referenced in the section of Supplemental Information. The Authority s financial statements are presented as fund level financial statements because the Authority only has proprietary funds. Required Financial Statements The financial statements of the Housing Authority report information of the Authority using accounting methods similar to those used by private sector companies. These statements offer short- and long-term financial information about its activities. The Statement of Net Position includes all the Authority s assets, deferred outflows of resources, liabilities, and deferred inflows of resources and provides infonnation about the nature and amounts of investments in resources (assets and deferred outflows of resources) and obligations of the Authority creditors (liabilities and deferred inflows of resources). It also provides the basis for evaluating the capital structure of the Authority and assessing the liquidity and financial flexibility of the Authority. - in -

7 Housing Authority of the County of Cass (Unaudited) Management s Discussion and Analysis (MD&A) - Continued OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED! All of the current year s revenues and expenses are accounted for in the Statement of Revenues, Expenses, and Changes in Fund Net Position. This statement measures the success of the Authority s operations over the past year and can be used to determine whether the Authority has successfully recovered all its costs through its user fees and other charges, profitability and credit worthiness. The final required financial statement is the Statement of Cash Flows. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing and financing activities and provides answers to such questions as where did cash come from, what was cash used for, and what was the change in the cash balance during the reporting period. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements and provide more detailed data. Supplemental Information This report also contains the Financial Data Schedule (FDS) as referenced in the section of Supplemental Information. HUD has established Uniform Financial Reporting Standards that require Housing Authority s to submit financial infonnation electronically to HUD using the FDS format. This financial information was electronically transmitted to the Real Estate Assessment Center (REAC) for the year ended March 31, 2016 and is required to be included in the audit reporting package. FINANCIAL ANALYSIS Net position may serve, over time, as a useful indicator of a government s financial position. As stated in the table on the following page, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $2,974,834 at the close of the year ended March 31, 2016 down from $3,134,209 in fiscal year The decrease in net position of $159,375 was due to the reasons noted below. >ÿ Current and other assets include cash, investments, receivables, and prepaid expenses. Of the $30,644 increase in this category, cash and investments increased $24,221, receivables increased $3,264, and prepaid expenses increased $3,159. >- Capital assets decreased $183,113 because current year depreciation exceeded current year capital asset additions. Change in capital assets is explained in section titled Capital Asset & Debt Administration of this analysis. >- Current liabilities increased $11,408 from FY 2015 primarily due to an increase in accrued interest payable of $13,270, which was partially offset by a $2,510 decrease in accounts payable owed to vendors and contractors. >- Noncurrent liabilities decreased $4,502 from FY 2015 due to current year principal payments made on long-term debt. - IV -

8 FINANCIAL ANALYSIS fcontinued'! Housing Authority of the County of Cass (Unaudited) Management s Discussion and Analysis (MD&A) - Continued The unrestricted net position was $306,471 as of March 31, This amount may be used to meet the Authority s ongoing obligations. The Authority has sufficient funds to meet requirements for cash outlays for five months. The Authority did not have any net position classified as restricted that is subject to external restrictions on how they may be used. At the end of the current fiscal year, the Authority is able to report positive balances in all categories of net position. The same situation held true for the prior fiscal year. CONDENSED STATEMENTS OF NET POSITION MARCH 31, Dollar Percent Change Change Current and other assets Capital assets $ 431,637 3,976, ,794 $ 400,994 4,159,604 $ 30,643 (183,112) 212, % -4.4% 100.0% Total Assets 4,620,923 4,560,598 60, % Current liabilities Noncurrent liabilities Total Liabilities Net Position Net investment in capital assets Unrestricted Total Net Position $ 129,669 1,441,892 1,571,561 2,668, ,998 3,049,362 $ 118,261 1,308,128 1,426,389 2,847, , ,209 $ 11, , ,172 (178,801) 93,954 (84,847) 9.6% 10.2% 10.2% -6.3% 32.7% -2.7% The largest portion of the Authority s net position reflects its investment in capital assets (e.g. land, buildings and equipment) less accumulated depreciation. The Authority uses these capital assets to provide service and consequently these assets are not available to liquidate liabilities or other spending. The 2015 approved capital grant (501-15) totals $61,134 and was 100.0% expended as of March 31, The following is a summary of individual grant line items, budget amount, percent expended as of 3/31/16, and development account: Line No. Amount Percent Development Account 1406 $ 61, % Operations While the Statement of Net Position shows the change in financial position of net position, the Statements of Revenues, Expenses, and Changes in Net Position provides answers as to the nature and source of these changes. - v -

9 FINANCIAL ANALYSIS (CONTINUED) Housing Authority of the County of Cass (Unaudited) Management s Discussion and Analysis (MD&A) - Continued CONDENSED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED MARCH 31, Dollar Change Percent Change Revenues and Contributions Operating - non-operating -capital contributions: Rental revenue $ 426,802 $ 370,839 $ 55, % HUD operating grants 198, ,944 (123) -0.1% Operating grants - other 154, ,652 (306) -0.2% Interest income % Capital Contributions 190,552 (190,552) % Gain (loss) on disposition of capital items 600 (600)?? Other income 10,259 16,043 (5,784) -36.1% Total Revenues and Contributions 790, ,292 (141,378) -15.2% Expenses Personal services 216, ,134 13, % Utilities 131, ,820 9, % Operations and maintenance 135, ,307 30, % Non routine maintenance 0?? Insurance 41,909 42,908 (999) -2.3% Other supplies and expenses 44,765 58,674 (13,909) -23.7% Interest expense 75, ,619 (192,449) -71.9% Depreciation % Total Expenses 943, ,024 68, % Change in net position (152,534) 57,268 (209,802) Beginning net position 3,134,209 3,076,941 57,268 Prior period adjustments 67,687 67,687 Beginning net position, adjusted 3,201,896 3,076, ,955 Ending net position $ 3,049,362 $ 3,134,209 $ (84,847) As can be seen in the table above, total revenues and contributions decreased $141,376 due to the reasons noted below. >ÿ Rental revenue increased $55,964 or 15.1% from FY 2015 mainly due to an increase in dwelling rental charge per unit of $33.26 or 11.3% and a 1.5% increase in occupancy. > Of the $123 decrease in HUD operating grants, public housing operating subsidy increased $568 and capital fund grants used for operating expenditures decreased $ vi -

10 FINANCIAL ANALYSIS (CONTINUED! Housing Authority of the County of Cass (Unaudited) Management s Discussion and Analysis (MD&A) - Continued >- Other government grants decreased $306 from FY 2015 due to a decrease in debt and rental assistance for the Rural Rental Housing program. >- Interest income increased $24 from FY Capital contributions decreased $190,552 from FY In FY 2015 the Authority utilized revenues from a Community Development Block Grant for improvements to the elderly housing project. >ÿ Other income decreased $5,783 or 36.0% from FY 2015 primarily due to a decrease in management fee revenue of $4,507 or 34.4%. > The Authority had a $600 gain on disposal of fixed assets in FY Total expenses increased $75,267 due to the reasons noted below. >- Ofthe$20,833 increase in personal services, employee wages increased $4,241 or 2.9% and employee benefits increased $16,592 or 30.2%. >ÿ Of the $9,027 increase in utilities, water & sewer increased $14,080 or 29.8%, electricity decreased $4,424 or 6.2%, and gas decreased $629 or 14.5%. >ÿ Operations and maintenance increased $30,064 or 28.5% due to a $20,832 increase in contracted services for repairs and maintenance and a $9,232 increase in maintenance materials. >- Insurance decreased $999 or 2.3% primarily due to a decrease in workers compensation insurance of $1,118 or 11.2%. Property and liability insurance decreased $508 or 1.6% and automobile insurance increased $627 or 55.7%. >ÿ Other supplies and expense decreased $13,907 or 23.7% from FY Below are several expense line items that had a decrease from the prior year. / Auditing fees decreased $750 or 10.6%. / Advertising costs decreased $1,848 or 65.0%. / Office expenses decreased $6,812 or 22.9%. / Legal fees decreased $2,217 or 58.3%. / Travel expenses decreased $1,295 or 18.4%. > The Authority had a $30,641 or 11.4% increase in Depreciation which is the write-off of capital assets over their estimated useful life. Interest expense decreased $392 or 0.5% from FY The Public Housing occupancy rate for fiscal year March 31, 2016 was 94.5%, down from 97.7% in FY The Authority currently owns and manages 50 Public Housing units. The Rural Rental Housing occupancy rate for fiscal year ended March 31, 2016 was 93.1%, up from 87.9% in FY The Authority currently owns and manages 60 Rural Rental Housing units. - vii -

11 Housing Authority of the County of Cass (Unaudited) Management s Discussion and Analysis (MD&A) - Continued CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets - The Housing Authority of the County of Cass, Illinois net investment in capital assets as of March 31, 2016 amounts to $2,668,363. The investment in capital assets includes land, buildings, improvements, equipment and construction in progress, net of accumulated depreciation and related debt. The total decrease in the Authority s capital assets for the current fiscal year was 4.4% in terms of net book value. Actual expenditures to purchase or construct capital assets from revenues and capital contributions were $115,147 for the year. The Authority has various contract commitments with contractors for the implementation of the HUD capital grants as outlined by the HUD approved Capital Grant Budget. Depreciation charges for the year totaled $298,260. Additional information on the Authority s capital assets can be found in the notes to the financial statements of this report. Deductions Beginning Additions Depreciation Deductions Depreciation Ending Capital assets $4,159,604 $2,127,454 $(298,260) $(2,013,907) $1,601 $3,976,492 Long-Term Debt - The Authority has a mortgage on its apartment complex known as Elderly Housing held by U.S. Department of Agriculture Rural Development as part of their Section 515 Loan Program. Total mortgage debt as of March 31, 2016 was $1,308,128, down from $1,312,439 in FY Additional information on the Authority s long-term debt can be found in the notes to the financial statements of this report. ECONOMIC FACTORS AND NEXT YEAR S BUDGET AND RATES The Board of Commissioners and Management of the Housing Authority considered many factors when approving the fiscal year 2017 Public Housing budget. The user charges are based on a tenant s income as established by HUD guidelines and are not adjustable. Operating subsidy is based on occupied units and approved vacancies, utility consumption and rates, approved add-ons, formula income, and transition funding. The amount of funding is also established and approved by HUD. Formula income is based on rental income from the Authority s rent roll records for the period specified by HUD. Operating expenses are expected to increase by the economy s inflation rate. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the Authority s finances for all those with an interest in its finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to Steven Horton, Executive Director, Housing Authority of the County of Cass, 9 Otto Turner Drive, vm -

12 SECTION II FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS

13 STATEMENT OF NET POSITION March 31, 2016 ASSETS Current Assets: Cash and cash equivalents $ 154,101 Investments 47,868 Receivable - net of allowances: Accounts 5,235 Accrued interest 25 Prepaid expenses 29,313 Restricted cash and cash equivalents 195,095 Total current assets 431,637 Capital assets: Land, improvements, and construction in progress 91,780 Other capital assets, net of depreciation 3,884,712 Total capital assets- net 3,976,492 Total Noncurrent Assets 3,976,492 Deferred outflow of resources 212,794 Total Outflow of Resources 212,794 Total Assets 4,620,923 See notes to financial statements - 1 -

14 STATEMENT OF NET POSITION (CONTINUED) March LIABILITIES Current Liabilities: Accounts Payable 11,556 Accrued salaries, wages and benefits 3,351 Accrued compensated absences 2,192 Tenant security deposit liability 28,225 Interest payable 77,648 Current portion of long term debt 4,502 Unearned revenues 2,195 Total Current Liabilities 129,669 Noncurrent Liabilities: Long term debt 1,303,626 Accrued Pension and OPEB liability 138,266 Total Noncurrent Liabilities 1,441,892 Total Liabilities 1,571,561 NET POSITION Net investment in capital assets, 2,668,364 Unrestricted 380,998 Total Net Position $ 3.049,362 See notes to financial statements -2-

15 STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION For Year Ended March Operating Revenues: Rental revenue $ 426,802 Operating subsidies- HUD grants 198,821 Operating subsidies- other grants 154,346 Other revenues 10,259 Total operating revenues 790,228 Operating Expenses: Personal services 216,126 Utilities 131,848 Operations and maintenance 135,370 Insurance 41,909 Other supplies and expenses 44,765 Depreciation 298,260 Total operating expenses 868,278 Operating income (loss) (78,050) Non-operating revenues (expenses): Interest and investment earnings 686 Interest expense (75,170) Net non-operating revenues (expenses) (74,484) Change in net position (152,534) Net position at beginning of year 3,134,209 Prior period error corrections 67,687 Net position adjusted at beginning of year 3,201,896 Net position at end of year $ 3,049,362 See notes to financial statements -3-

16 STATEMENT OF CASH FLOWS For Year Ended March Cash flows from operating activities: Cash received from tenants $ 426,181 Cash received from HUD grants- operating 198,821 Cash received from other grants 154,346 Cash received from other operating activities 7,984 Cash payments for goods and services (366,403) Cash payments to employees-salaries (141,124) Cash payments to employees-compensated absences (8,969) Cash payments for employee benefit contributions (64,633) Net cash provided (used) by operating activities 206,203 Cash flows from capital and related financing activities: Proceeds from sale of assets 2,012,305 Payments for capital assets (2,127,453) Principal paid on capital debt (4,311) Interest paid on capital debt (61,900) Net cash (used) for capital and related financing activities (181,359) Cash flows from investing activities: Proceeds from sale of (payments) for investments (159) Interest and dividends 686 Receipts (payments) from tenant security deposits (1,310) Net cash provided (used ) from investing activities (783) Net increase (decrease) in cash and cash equivalents 24,061 Cash and cash equivalents at beginning of year 325,135 Cash and cash equivalents at end of year $ 349,196 See notes to financial statements -4-

17 STATEMENT OF CASH FLOWS (CONTINUED) For Year Ended March Cash and cash equivalents $ 154,101 Restricted cash and cash equivalents 195,095 Total cash and cash equivalents at end of year $ 349,196 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ (78,050) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 298,260 Changes in assets and liabilities: Receivables (3,263) Prepaid expenses (3,159) Accounts and other payables (9,352) Unearned revenues 367 Compensated absences (1,334) Accrued expenses 2,734 Net cash provided (used) by operating activities $ 206,203 See notes to financial statements -5-

18 NOTES TO THE BASIC FINANCIAL STATEMENTS March NOTE 1 - Summary of Significant Accounting Policies The Housing Authority of the County of Cass (Authority) is a Special Purpose Government entity established to provide low-rent housing, under the low rent program Annual Contributions Contract for qualified individuals in accordance with the rules and regulations prescribed by the Department of Housing and Urban Development and other Federal agencies. The Housing Authority complies with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASB) pronouncements. The accounting and reporting framework and the more significant accounting policies are discussed in subsequent subsections of this Note. la. Financial Reporting Entity The Housing Authority s financial reporting entity comprises the following: Primary Government: Component Unit: Housing Authority Cass Affordable Housing Initiative, NFP In determining the financial reporting entity, the Housing Authority complies with the provisions of GASB Statement No. 14 as amended by GASB No. 39 and GASB No. 61, The Financial Reporting Entity, and includes all component units, if any, of which the Housing Authority appointed a voting majority of the units board; the Housing Authority is either able to impose its will on the unit or a financial benefit or burden relationship exists. The Component Unit includes the financial data of the Cass Affordable Housing Initiative, NFP. This unit meets the criteria of financial accountability, including appointment of a majority of the component units' governing body, and the Authority's ability to impose its will on the component unit. The Cass Affordable Housing Initiative, NFP is organized exclusively for charitable purpose including constructing, managing and operating housing projects and for the improvement of housing conditions, including the rental or sale of housing units to persons in need thereof, and lessening the burdens of the Housing Authority of the County of Cass, local governmental body. The component unit, Cass Affordable Housing Initiative, NFP, had no financial activity from inception until end of the current fiscal year and consequently, no financial statements are presented. lb. GASB Implementation The Housing Authority has implemented the Governmental Accounting Standards Board (GASB) Statements number 62, 63 and 65 for those audits with financial statements for periods beginning after December 15, Governmental Accounting Standards Board (GASB) Statements 68 was implemented effective for fiscal years beginning June 15, 2014 and there after. -6-

19 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 1 - Summary of Significant Accounting Policies (Continued) lc. Basis of Presentation Financial statements of the reporting entity's programs are organized and reported as an enterprise fund and are accounted for by providing a set of self-balancing accounts that constitute its assets, liabilities, net position, revenues, and expenditure/expenses. Enterprise funds are used to account for business-like activities provided to its tenants. These activities are financed primarily by user charges and/or Federal funding and the measurement of financial activity focuses on net income measurement similar to the private sector. The reporting entity includes all of the Authority s programs as an enterprise fund. Following is a description of the Authority's programs: Program Low Rent Capital Fund Program Rural Rental Housing Component Unit Brief Description Accounts for activities of the Public and Indian Housing program which HUD provides an annual subsidy to help public housing agencies (PHAs) pay some of the cost of operating and maintaining public housing units. Accounts for activities of the Capital Fund which provides funds to housing authorities to modernize public housing developments. Accounts for activities of Rural Rental Housing program which the mortgage for the property is held by U.S. Department of Agriculture Rural Development (Formerly the Farmers Home Administration) as part of their Section 515 Loan Program. Accounts for activities of the Cass Affordable Housing Initiative, NFP which was organized exclusively for charitable purpose including constructing, managing and operating housing projects and for the improvement of housing conditions, including the rental or sale of housing units to persons in need thereof, and lessening the burdens of the Housing Authority of the County of Cass, local governmental body. The component unit had no financial activity during the year and consequently, no financial statements are presented. Id. Measurement Focus and Basis of Accounting Measurement focus is a term used to describe which transactions are recorded within the various financial statements. Basis of accounting refers to when transactions are recorded regardless of the measurement focus applied. -7-

20 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 1 - Summary of Significant Accounting Policies (Continued) ID. Measurement Focus and Basis of Accounting (Continued) Measurement Focus In the financial statements, the economic resources measurement focus is used as follows: The proprietary fund utilizes an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net position (or cost recovery), financial position, and cash flows. All assets and liabilities(whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. Basis of Accounting In the financial statements, the proprietary fund utilizes the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. le. Assets, Liabilities, and Equity Cash and Investments For the purpose of the Statement of Net Position, cash and cash equivalents includes all demand, savings accounts, and certificates of deposits or short-term investments with an original maturity of three months or less. For the purpose of the Statement of Cash Flows, cash and cash equivalents include all demand and savings accounts, and certificates of deposit or short-term investments with an original maturity of three months or less. Investments are carried at fair value except for short-term U.S. Treasury obligations, if any, with a remaining maturity at the time of purchase of one year or less. Those investments, if any, are reported at amortized cost. Fair value is based on quoted market price. Additional cash and investment disclosures are presented in Notes 2b. and 3a. Interprogram Receivables and Payables During the course of operations, numerous transactions occur within individual programs that may result in amounts owed between these programs. Offsetting interprograms, if any, are eliminated for financial statement presentation.

21 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 1 - Summary of Significant Accounting Policies (Continued) le. Assets, Liabilities, and Equity (Continued) Receivables Receivables consist of all revenues earned at year-end and not yet received. Tenant accounts receivable, accrued interest receivable and accounts receivable-miscellaneous compose the majority of receivables. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Budgets and Budgetary Accounting The Authority adopts a formal operating budget each year for its operating programs and on a project length basis for its capital expenditures which are approved by the Board of Commissioners and submitted to the Department of Housing and Urban Development for their approval, if required. Estimates and Assumptions The Authority uses estimates and assumptions in preparing financial statements. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Capital Assets The accounting treatment over property, plant, and equipment (capital assets) is as follows: In the financial statements, capital assets purchased or acquired with an original cost of $500 or more are accounted for as capital assets. All capital assets are valued at historical cost, or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at their estimated fair value at the date of donation. Depreciation of all exhaustible capital assets is recorded as an allocated expense depending on the program where the asset is shown, in the Statement of Revenues, Expenses and Changes in Net Position, with accumulated depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives bytype of asset is as follows: Buildings Furniture, equipment and machinery - dwelling Furniture, equipment and machinery - administration Leasehold improvements 7-40 years 10 years 5-10 years 2-40 years -9-

22 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 1 - Summary of Significant Accounting Policies (Continued) le. Assets, Liabilities, and Equity (Continued) Restricted Assets Restricted assets include cash and investments legally restricted as to their use. The primary restricted assets are related to Rural Rental Housing which is a U.S. Department of Agriculture program. Compensated Absences The Housing Authority s policies regarding vacation time permit employees to accumulate earned but unused vacation leave. The liability for these compensated absences is recorded as short-term and long-term liabilities based on historical trends. In accordance with the provisions of GASB Statement No. 16, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. Equity Classifications Equity is classified as net position and displayed in two components: a. Net investment in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowing that are attributable to the acquisition, construction, or improvement of those assets. The Authority had no related debt. b. Unrestricted net position - All other net position that do not meet the definition of restricted or net investment in capital assets. IF. Revenues, Expenditures, and Expenses Operating Revenues and Expenses Operating revenues and expenses are those that result from providing services and delivering goods and/or services. It also includes all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. Non-operating revenues and expenses are those that are not operating in nature. Interfund Transfers For the purposes of the Statement of Revenues, Expenses and Change in Net Position, all interfund transfers between individual programs, if any, have been eliminated

23 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 2 - Stewardship, Compliance, and Accountability The Authority and its component units, if any, are subject to various federal, state, and local laws and contractual regulations. An analysis of the Authority s compliance with significant laws and regulations and demonstration of its stewardship over Authority resources follows. 2a. Program Accounting Requirements The Authority complies with all state and local laws and regulations requiring the use of separate programs. The programs used by the Authority are as follows: Program Public and Indian Housing Capital Fund Program Rural Rental Housing Component Unit Required By U.S. Department of Housing and Urban Development U.S. Department of Housing and Urban Development U.S. Department of Agriculture Public Housing Authority 2b. Deposits and Investments Laws and Regulations In accordance with state law, all uninsured deposits of the Authority in financial institutions must be secured with acceptable collateral valued at the lower of market or par. All financial institutions pledging collateral to the Authority must have a written collateral agreement. As reflected in Note 3a., all deposits were folly insured or collateralized. Investments of the Authority are limited by state law to the following: a. Direct obligations of the U.S. Government or its agencies or instrumentalities to which acceptable collateral is pledged. b. Certificates of deposit or savings accounts that are either insured or secured with acceptable collateral. 2c. Revenue Restrictions The Authority has various restrictions placed over certain revenue sources. The primary restricted revenue sources include: Revenue Source Capital Fund Program Legal Restrictions of Use Modernization For the year ended March 31, 2016, the Authority complied, in all material respects, with these revenue restrictions

24 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 3 - Detail Notes on Transaction Classes/Accounts The following notes present detail information to support the amounts reported in the basic financial statements for its various assets, liabilities, equity, revenues, and expenditures/expenses. 3a. Cash and Investments Deposits Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the Authority s deposits may not be returned to it or the Authority will not be able to recover collateral securities in the possession of an outside party. As of March 31, 2016, the Authority s bank balances of $355,333, were insured by federal depository insurance or collateralized with securities held by the pledging financial institutions in the Authority s name. Investments Custodial Credit Risk - Investments. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the Authority will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of March 31, 2016, the Authority s investments were $47,868. These investments were insured by federal depository insurance or registered, or securities held by the Authority or its agent in the Authority s name. Credit Risk Investments, Concentrations of Credit Risk and Interest Rate Risk - Investments: Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Authority will minimize credit risk by reviewing the financial institutions with which the Authority will do business so that potential losses on individual securities will be minimized. Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Investments held for longer periods are subject to increased risk of adverse interest rate changes. The Authority will minimize interest rate risk by structuring the investment portfolio so that securities mature to meet cash requirements and investing operating funds primarily in shorter term securities. Concentration of Credit Risk is the risk of loss attributed to the magnitude of the Authority s investment in a single issuer. The Authority does not have a written investment policy covering concentration of credit risk

25 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 3 - Detail Notes on Transaction Classes/Accounts (Continued) 3b. Restricted Cash and Cash Equivalents The restricted cash and cash equivalents as of March 31, 2016, are as follows: Cash Including Time Type of Restricted Cash and Cash Equivalents Deposits Investments Total Rural Rental Housing - Reserve $ 195,095 $_ $ 195,095 $ 195,095 $ $ 195,095 3c. Accounts Receivable Receivables detail at March 31, 2016, is as follows: Tenant accounts receivable $ 1,602 Allowance for doubtful accounts _ Tenants accounts receivable - net 1,602 Accounts receivable - other _ 3,633 $ 5,

26 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 3 - Detail Notes on Transaction Classes/Accounts (Continued) 3d. Capital Assets Capital asset activity for the year ended March 31, 2016, was as follows: Land Building Furniture, equipment and machinery dwelling Furniture, equipment and machineryadministration Leasehold improvements Construction in progress Accumulated depreciation Total Balance April 1, 2015 Additions ; 91,780 $ 5,519,222 2,067,299 64,333 3,300 58,046 29, ,648 26,959 2,013,907 8,137,936 $ ,978,331 $ $ 4.159,605 Balance March 31, (Deductions) 2016 ; - $ 91,780 7,586,521 67,633 (2,013,907) 87, ,607 : ( ) 8,251,482 : (1.601) 4,274,990 $ 3,976,492 For assets that are depreciated refer to Note le - Capital Assets 3e. Accounts Payable Payable detail at March 31, 2016, is as follows: Accounts payable - vendors $ 4,222 Accrued liabilities - other _ 7,334 3f. Compensated Absences $ 11,556 Accumulated unpaid compensated absences are accrued. The liability for compensated absences at March 31, 2016 is $2,

27 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March 31, 2016 NOTE 3 - Detail Notes on Transaction Classes/Accounts (Continued) 3g. Non-current Liabilities As of March 31, 2016, the non-current liabilities are comprised of the following: Accrued pension and OPEB liabilities $ 138,266 Total $ 138,266 The following is a summary of changes in non-current liabilities for the year ended March 31, 2016: Balance Balance March 31, March 31, 2015 Additions Deductions 2016 Accrued pension and OPEB liabilities $ - $ $ ~~ $ 138,266 Total $ ~~ $ 138,266 $ - $ h. Long-term Debt Changes in Long-term Debt The following is a summary of changes in long-term debt for the year ended March 31, 2016: Type of Debt Balance April 1, 2015 Additions Deductions Balance March 31, 2016 Amounts Due within One Year Notes Payable $ 1,308,128 $ $ $ 1.303,626 $ 4,502 Total $ $ $ 4,502 $ 1,303,626 $ 4,502 On August 1, 2010, the Housing Authority consolidated five existing loans (Beardstown #1, Beardstown #2, Ashland-Six Apartments, Ashland-Lind Apartmentsand Arenzville loans) in the amount of $1,385, The terms of the consolidation are a repayment term of 30 years with an amortization period of 50 years with an interest rate of 4.5% per annum. On September 1, 2010 the Authority entered into a Debt Deferral Agreement for the following projects Beardstown #1, Beardstown #2, Ashland-Six Apartments, and Ashland-Lind Apartments, under the Multi-Family Housing Preservation and Revitalization Restructuring Program. Under this program all principal and interest payments on the aforementioned loans are deferred until August 30, 2030, at which time the total deferred principal and interest will become due. If there are any further payments due on the loans the Housing Authority will resume the payments with the final installment of entire debt due and payable on August 1,

28 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 3 - Detail Notes on Transaction Classes/Accounts (Continued) 3h. Long-term Debt (Continued) On September 1, 2010 the Housing Authority entered into a loan with the U.S. Department of Agriculture, through the Rural Housing Services in the principal sum of $349,635.00, plus interest on the principal of 4.25 percent per annum. For a tenn of 30 years with an amortization period of 50 years. The payments on this loan shall not be deferred. The following is a schedule of notes payable for the Rural Rental Housing Programs: Loan Maturity Length Amorizaiton Original Interest Current Project Date Date Of Loan Of Loan Amount Rate Balance Beardstown # yrs 50 yrs $ 429, % $ 429,610 Beardstown # yrs 50 yrs 100, % 100,049 Arenzville yrs 50 yrs 271, % 262,182 Ashland-Six Apts yrs 50 yrs 94, % 94,566 Ashland-Lind Apts yrs 50 yrs 84, % 84,602 All projects yrs 50 yrs 349, % 337,119 Estimated principal maturities over the next 5 and subsequent years are as follows: Beardstown Beardstown #1 #2 Year Ending Principal Interest Year Ending Principal Interest $ $ - $ 2017 $ - $ ~ ~ , , ,887 99, ,629 69, ,997 16, , , ,165 35,628 $ 429,610 $ 651,432 $ 100,049 $ 151,

29 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March 31, 2016 NOTE 3 - Detail Notes on Transaction Classes/Accounts (Continued) Arenzville 3h. Long-term Debt (Continued) Year Ending Principal Interest Ashland Six Apts. Year Ending Principal Interest 2017 $ 1,896 $ 11, $ $ ,983 11, ,074 11, ,170 11, ,269 11, ,009 55, ,285 51, ,576 94, ,386 47, ,503 15, ,110 39, ,487 33,678 $ 262,182 $ 252,460 $ 94,566 $ Ashland Lind Apts. Year Ending Principal Interest All Projects Year Ending Principal Interest 2017 $ $ 2017 $ 2,606 $ 14, ,719 14, ,837 14, ,960 13, ,089 13, ,569 66, ,195 84, ,721 62, ,606 13, ,854 57, ,801 30, ,764 47,227 $ 84,602 $ 128,292 $ 337,119 $ 304,542 Subsequent Event - Long-term Debt: The Housing Authority has sent a request to the U.S. Department of Agriculture to restructure the remaining loan and promissory note that have not already been deferred

30 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 3 - Detail Notes on Transaction Classes/Accounts (Continued) 3i. Interprogram Transactions Transfers are used to move revenues from the program that is authorized to transfer them to the program in accordance with budgetary authorizations. Offsetting operating transfers, if any, are eliminated for financial statement presentation. 3k. Unrestricted net position - Prior-period Error Corrections Following is the composite of error corrections: 1. Deferred outflow of resources - correct prior year Totals $ 67,687 $ 67,687 NOTE 4 - Other Notes 4a. Employee Retirement Plan IMRF PlanDescrwtion TheEMPLOYER s defined benefit pension plan for regular employees provides retirement and disability benefits, post-retirement increases, and death benefits to plan members and beneficiaries. The EMPLOYER S plan is managed by the Illinois Municipal Retirement Fund (IMRF), the administrator of a multi-employer public pension fund. A summary of IMRF s pension benefits is provided in the Benefits Provided section of this document. Details of all benefits are available from IMRF. Benefit provisions are established by statute and may only be changed by the General Assembly of the State of Illinois. IMRF issues a publicly available Comprehensive Annual Financial Report that includes financial statements, detailed information about the pension plan s fiduciary net position and required supplementary information. The report is available for download at BenefitsProvided IMRF has three benefit plans. The vast majority of IMRF members participate in the Regular Plan (RP). The Sheriff s Law Enforcement Personnel (SLEP) plan is for sheriffs, deputy sheriffs, and selected police chiefs. Countiescould adopt the Elected County Official (ECO) plan for official selected prior toaugust 8, 2011(the ECO plan was closed to new participants after that date)

31 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 4- Other Notes (Continued) 4a. Employee Retirement Plan (Continued) All three IMRF benefit plans have two tiers. Employees hired before January 1, 2011, are eligible for Tier 1 benefits. Tier 1 employees are vested for pension benefits when they have at least eight years of qualifying service credit. Tier 1 employees who retire at age 55 (at reduced benefits) or after age 60 (at full benefits) with eight years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earningsfor the first 15 years of service credit, plus 2%for each year of service credit after 15 years to a maximum of 75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any consecutive 48 months within the last 10 years of service, divided by 48. Under Tier 1, the pension is increased by 3% of the original amount on January 1 every year after retirement. Employees hired on or after January 1, 2011, are eligible for Tier 2 benefits. For Tier 2 employees, pension benefits vest after ten years of service. Participating employees who retire at age 62 (at reduced benefits) or after age 67 (at full benefits) with ten years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earnings for the first 15 years of service credit, plus 2% for each year of service credit after 15 years to a maximum of75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any 96 consecutive months within the last 10 years of service, divided by 96. Under Tier 2, the pension is increased on January 1 every year after retirement, upon reaching age 67, by the lesser of: 3% of the original pension amount, or * 1/2 of the increase in the Consumer Price Index of the original pension amount. Employees Covered by Benefit Terms As of December 31, 2015, the following employees were covered by the benefit terms: Retirees and Beneficiaries, currently receiving benefits 0 Inactive Plan Members entitled to but not yet receiving benefits 1 Active Plan Members _ 4 Total 5 Contributions Asset by statute, the EMPLOYER S Regular Plan Members are required to contribute 4.5% of their annual covered salary. The statute requires employers to contribute the amount necessary, in addition to member contributions, to finance the retirement coverage of its own employees. The EMPLOYER S annual contribution rate for calendar year 2015 was 16.82%. For the fiscal year ended March 31, 2016, the EMPLOYER contributed $27, tothe plan. The EMPLOYER also contributes for disability benefits, death benefits, and supplemental retirement benefits, all of which are pooled at the IMRF level. Contribution rates for disability and death benefits are set by IMRF s Board of Trustees, while the supplemental retirement benefits rate is set by statute

32 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 4 - Other Notes (Continued) 4a. Employee Retirement Plan (Continued) Schedule of Changes in the Net Pension Liability and Related Ratios Last Two Calendar Years Calendar Year Ended December 31, Total Pension Liability Service cost $ 15,004 $ Interest on the total pension liability 563 Change in benefit terms Difference between expected and actual experience of the Total Pension Liability 223,708 Changes of assumptions Benefit payments, including refunds of employee contributions Net Change in Total Pension Liability 239,275 Total Pension Liability - Beginning Total Pension Liability - Ending (A) $ 239,275 $ Plan Fiduciary Net Postion Contributions - Employers $ 21,507 $ Contributions - Employees 80,689 Net investment income 255 Benefit payments, including refunds of employee contributions Other (Net Transfers) (1,442) Net Change in Plan Fiduciary Net Position 101,009 Plan Fiduciary Net Position - Beginning Plan Fiduciary New Position - Ending (B) 101,009 Net Pension Liability - Ending (A) - (B) $ $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 42.21% -% Covered Valuation Payroll 127,865 Net Pension Liability as a Percentage of Covered Valuation Payroll % % -20-

33 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 4 - Other Notes (Continued) 4a. Employee Retirement Plan (Continued) Net Pension Liability The EMPLOYER S net pension liability was measured as of December 31, The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Notes to Schedule: This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, information is presented for those years for which information is available. Schedule of Employer Contributions Last Two Calendar Years Calendar Year Actuality Ended Determined Actual December 31, Contributions Contributions 2014 $ $ 2015 $ $ 21,50' Actual Contribution as a Contribution Covered Percentage of Deficiency Valuation Covered (Excess) Payroll Valuation Payroll $ - $ % $ (21,507) $ 127, % -21 -

34 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 4 - Other Notes (Continued) 4b. Risk Management The Authority is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; injuries to employees; employees health and life; and natural disasters. The Authority manages these various risks of loss as follows: Type of Loss a. Torts, errors and omissions b. Injuries to employees (workers' compensation) c. Physical property loss and natural disasters d. Health Method Managed Purchased insurance with AHRMA. Purchased insurance with Accident Fund; Claims are administered by Accident Fund. Purchased commercial insurance with deductibles of $1,000 for first occurrence, $2,500 for second occurrence and $5,000 for each subsequent occurrence. Purchased health insurance with Health Alliance. Management believes such coverage is sufficient to preclude any significant uninsured losses to the Authority. Settled claims have not exceeded this insurance coverage in any of the past three fiscal years. 4c. Economic Dependency The Housing Authority of the County of Cass receives a significant portion of its revenue from funds provided through Federal grants. The grant amounts are appropriated each year at the Federal level. The amount of the funds the Authority receives could be reduced significantly and have an adverse impact on its operations. 4d. Disclosure On December 21, 2010, Ralls Melotte of Melotte Morse Leonatti Parker, Ltd and Jeffrey Bane of HLR conducted a foundation inspection of the Gamier Development in Beardstown, IL. In Building A, the building closest to Clendenin Street, the foundation is presently sufficiently stable to allow the installation of a cost effective structural enhancement to maintain the building s stability. In Building B, the foundation walls have already shifted 2!4 out of plumb over a 28" rise and are in danger of collapsing. It is the Engineer s opinion and recommendation that Building B should be vacated by all occupants no later than April, The PHA submitted a claim to their insurance provider, which was denied. The Authority appealed that decision and a Judge ruled to set a trial date in On May 10, 2011 the Housing Authority purchased the former Heritage Manor East property to convert into elderly/disabled apartments. The development will be renamed Parkside Place Apartments and will consist of approximately 20 low income elderly/disable apartments funded by the USDA. On May 1, 2014, the Housing Authority opened the Parkside Place Apartments. Consisting of 23 low income elderly/disabled apartments funded by the U.S. Department of Agriculture. -22-

35 NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) March NOTE 4 - Other Notes (Continued) 4e. Contingencies Contingencies The Authority is subject to possible examination by Federal and State authorities who determine compliance with terms, conditions, laws and regulations governing other grants given to the Authority in the current and prior years. No significant violations of finance-related legal or contractual provisions occurred. -23-

36 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND NOTES TO THE SCHEDULE OF FEDERAL AWARDS Year Ended March 31, 2016 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Fiscal Federal Year Federal Grantor CFDA No. Expenditures U.S. Department of HUD Public and Indian Housing Nonmaior - Direct Program 2016 Low Rent Program a S Public and Indian Housing Nonmaior - Direct Program 2016 Capital Fund program S U.S. Department of Agriculture Major - Direct Program 2016 Rural Rental Housing S Total S Note: The Rural Rental Housing program is classified as a major program because the outstanding loans on the RRH program is greater than $750,000. $ 1,308,128 NOTES TO THE SCHEDULE OF FEDERAL AWARDS NOTE 1- Significant Accounting Policies The schedule of federal awards has been prepared on the accrual basis of accounting. -24-

37 PHA S STATEMENT AND CERTIFICATION OF CAPITAL FUND PROGRAM COSTS March Actual Capital Fund Program costs are as follows: CFP Funds approved $ 61,134 Funds expended _ 61,134 Excess of Funds Approved $ Funds advanced $ 61,134 Funds expended _61,134 Excess (deficiency) of Funds Advanced $ 2. The costs as shown on the Actual Cost Certificate dated October 6, 2015 submitted to HUD for approval is in agreement with the PHA s records as of March 31, All costs have been paid and all related liabilities have been discharged through payments. -25-

38 EXHIBIT A FINANCIAL DATA SCHEDULE

39 The Housing Authority of the County of Cass IL. (IL102) BEARDSTOWN, IL Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 i l Project Totai Rural Rental Housing Loans Subtotal EUM Totai 111 Cash - Unrestricted $112,077 $13,799 $125,876 $125, Cash - Restricted - Modernization and Development 113 Cash - Other Restricted $195,095 $195,095 $195, Cash - Tenant Security Deposits $12,200 $16,025 $28,225 $28, Cash - Restricted for Payment of Current Liabilities! 100 Total Cash $124,277 $224,919 $349,196 $0 $349, Accounts Receivable - PHA Projects! 122 Accounts Receivable - HUD Other Projects s 124 Accounts Receivable - Other Government 125 Accounts Receivable - Miscellaneous $1,358 $2,275 $3,633 $3, Accounts Receivable -Tenants $1,458 $144 $1,602 $1, Allowance for Doubtful Accounts -Tenants $0 $0 $0 $ Allowance for Doubtful Accounts - Other $0 $0 $0 $0 127 Notes, Loans, & Mortgages Receivable - Current 128 Fraud Recovery Allowance for Doubtful Accounts - Fraud 129 Accrued Interest Receivable $25 $25 $ Total Receivables, Net of Allowances for Doubtful Accounts $2,841 $2,419 $5,260 $0 $5, investments - Unrestricted $47,888 $47,868 $47, Investments- Restricted j 135 Investments - Restricted for Payment of Current Liability 142 Prepaid Expenses and Other Assets $14,886 $14,427 $29,313 $29, Inventories 1

40 The Housing Authority of the County of Cass IL. (1L102) BEARDSTOWN, IL Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 : Project Total Rural Rental Housing Loans Subtotal ELIM Total Allowance for Obsolete Inventories 144 Inter Program Due From 145 Assets Held for Sale 150 Total Current Assets S $241,765 $431,637 $0 $431, Land $33,904 $57,876 $91,780 91, Buildings $3,536,319 $4,050,202 $7,586,521 $7,586, Furniture, Equipment & Machinery - Dwellings $21,623 $46,010 $67,633 $67, Furniture, Equipment & Machinery - Administration $58,195 $29,746 $87,941 $87, Leasehold Improvements $366,036 $51,571 $417,607 $417, Accumulated Depredation -$2,846,466 -$1,428,524 -$4,274,990 -$4,274, Construction in Progress 168 Infrastructure 160 Total Capital Assets, Net of Accumulated Depreciation $1,169,611 $2,806,881 $3,976,492 $0 $3,976, Notes, Loans and Mortgages Receivable - Non-Current j 172 Notes, Loans, & Mortgages Receivable - Non Current - Past j 173 Grants Receivable - Non Current 174 Other Assets 176 Investments in Joint Ventures 180 Total Non-Current Assets $1,169,611 $2,806,881 $3,976,492 $0 $3,976, Deferred Outflow of Resources $142,577 $70,217 $212,794 $212,794 L_ 290 Total Assets and Deferred Outflow of Resources $1,502,060 $3,118,863 $4,620,923 SO $4,820,923 2 f

41 The Housing Authority of the County of Cass IL. (IL102) BEARDSTOWN, IL Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 I l Project Total Rural Rental Housing Loans Subtotal ELIM Total i 311 Bank Overdraft 312 Accounts Payable <= 90 Days $2,092 $2,130 $4,222 $4, Accounts Payable >90 Days Past Due 321 Accrued Wage/Payroll Taxes Payable $2,430 $921 $3,351 $3, Accrued Compensated Absences - Current Portion $2,000 $192 $2,192 $2, Accrued Contingency Liability 325 Accrued Interest Payable $77,648 $77,648 $77, Accounts Payable- HUD PHA Programs 332 Account Payable - PHA Projects 333 Accounts Payable- Other Government 341 Tenant Security Deposits $12,200 $16,025 $28,225 $28, Unearned Revenue $214 $1,981 $2,195 $2, Current Portion of Long-term Debt - Capital j $4,502 $4,502 $4, Current Portion of Long-term Debt - Operating Borrowings 345 Other Current Liabilities 346 Accrued Liabilities - Other $3,620 $3,714 $7,334 $7, Inter Program - Due To I 348 Loan Liability - Current 310 Total Current Liabilities $22,556 $107,113 $129,669 $0 $129, Long-term Debt, Net of Current - Capital Projects/Mortgage $1,303,626 $1,303,626 $1,303, Long-term Debt, Net of Current - Operating Borrowings 353 Non-current Liabilities - Other 354 Accrued Compensated Absences - Non Current 355 Loan Liability - Non Current 356 FASB 5 Liabilities 3

42

43 The Housing Authority of the County of Cass IL. (1L102) BEARDSTOWN, IL Entity Wide Balance Sheet Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 Project Total Rural Rental Housing Loans Subtotal EUM Total 357 Accrued Pension and OPEB Liabilities $92,721 $45,545 $138,266 $138, Total Non-Current Liabilities $92,721 $1,349,171 $1,441,892 $0 $1,441, Total Liabilities $115,277 $1,456,284 $1,571,561 $0 $1,571, Deferred Inflow of Resources j Net Investment in Capital Assets $1,169,611 $1,498,753 $2,668,364 $2,668, Restricted Net Position Unrestricted Net Position $217,172 $163,826 $380,998 $0 $380, Total Equity - Net Assets / Position $1,386,783 $1,662,579 $3,049,362 $0 $3,049, Total Liabilities, Deferred Inflows of Resources and Equity - $1,502,060 $3,118,863 $4,620,923 $0 $4,620,923 4

44 The Housing Authority of the County of Cass IL (1L102) BEARDSTOWN, IL Entity Wide Revenue and Expense Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 Project Total Rural Rental Housing Loans Subtotal ELIM Total Net Tenant Rental Revenue $179,179 $226,461 $405,640 $405, Tenant Revenue -Other $9,253 $13,989 $23,242 $23, Total Tenant Revenue $188,432 $240,450 $428,882 so $428, HUD PHA Operating Grants $198,821 $198,821 $198, Capita! Grants Management Fee j Asset Management Fee j Book Keeping Fee Front Line Service Fee Other Fees Total Fee Revenue j so $0 $ Other Government Grants $154,346 $154,346 $154, Investment Income -Unrestricted $379 $32 $411 $ Mortgage Interest Income Proceeds from Disposition of Assets Held for Sale i Cost of Sale of Assets Fraud Recovery Other Revenue $1,664 $8,595 $10,259 $10, Gain or Loss on Sale of Capital Assets Investment Income - Restricted $275 $275 $ Total Revenue $389,296 $403,698 $792,994 $0 $792,994 i Administrative Salaries $41,593 $29,100 $70,693 $70,693 1

45 The Housing Authority of the County of Cass IL, (IL102) BEARDSTOWN, IL Entity Wide Revenue and Expense Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 Project Total Rural Rental Housing Loans Subtotal ELIM Total Auditing Fees S3,175 $3,175 $6,350 $6, Management Fee Book-keeping Fee Advertising and Marketing $580 $413 $993 $ Employee Benefit contributions - Administrative 532,247 $8, ,473 $40, Office Expenses $19,949 $2,936 $22,885 $22, Legal Expense 274 $1,310 $1,584 $1, Travel $5,415 $316 $5,731 $5, Allocated Overhead Other $5,610 $1,612 $7,222 $7, Total Operating - Administrative $108,843 $47,088 $155,931 $0 $155, Asset Management Fee j Tenant Services - Salaries Relocation Costs Employee Benefit Contributions - Tenant Services Tenant Services - Other Total Tenant Services so $0 SO $0 $ Water $38,931 $22,396 $61,327 $61, Electricity $8,573 $58,253 $66,826 $66, Gas $3,695 $3,695 $3, Fuel Labor Sewer Employee Benefit Contributions - Utilities [ 2

46 The Housing Authority of the County of Cass IL. (IL102) BEARDSTOWN, IL Entity Wide Revenue and Expense Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 Project Total Rural Renta! Housing Loans Subtotal ELIM Total Other Utilities Expense 9300Q Total Utilities $51,199 $80,649 $131,848 $0 $131, Ordinary Maintenance and Operations - Labor $50,784 $22,381 $73,165 $73, Ordinary Maintenance and Operations - Materials and $41,118 $15,404 $56,522 $56, Ordinary Maintenance and Operations Contracts $55,098 $23,750 $78,848 $78, Employee Benefit Contributions - Ordinary Maintenance $15,467 $8,693 $24,160 $24, Total Maintenance $162,467 $70,228 $232,695 $0 $232, Protective Sen/ices - Labor j Protective Services - Other Contract Costs Protective Services - Other Employee Benefit Contributions - Protective Services Total Protective Services $0 $0 so $0 $ Property Insurance $11,586 $11,411 $22,997 $22, Liability Insurance $3,392 $4,942 $8,334 $8, Workmen's Compensation $5,281 $3,544 $8,825 $8, Alt Other Insurance $840 $913 $1,753 $1, Total insurance Premiums $21,099 $20,810 $41,909 $0 $41, Other General Expenses Compensated Absences $6,915 $720 $7,635 $7, Payments in Lieu of Taxes Bad debt - Tenant Rents $2,080 $2,080 $2, Bad debt - Mortgages 3 i

47 The Housing Authority of the County of Cass IL. (IL102) BEARDSTOWN, IL Entity Wide Revenue and Expense Summary Submission Type: Audited/Single Audit Fiscal Year End: 03/31/2016 Project Total Rural Rental Housing Loans Subtotal EUM Total Bad debt - Other j Severance Expense j Total Other General Expenses $6,915 $2,800 $9,715 $0 $9, interest of Mortgage (or Bonds) Payable $75,170 $75,170 $75, Interest on Notes Payable (Short and Long Term) Amortization of Bond issue Costs Total Interest Expense and Amortization Cost SO $75,170 $75,170 so $75,170 j Total Operating Expenses $350,523 $296,745 $647,268 $0 $647, Excess of Operating Revenue over Operating Expenses $38,773 $106,953 $145,726 $0 $145, Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Depreciation Expense $167,321 $130,939 $298,260 $298, Fraud Losses Capital Outlays - Governmental Funds j Debt Principal Payment - Governmental Funds Dwelling Units Rent Expense ] Total Expenses S517,844 $427,684 $945,528 $0 $945, Operating Transfer In $61,134 $61,134 $0 $61, Operating transfer Out -$61,134 -$61,134 $0 -$61,134 4

48 The Housing Authority of the County of Cass IL. (1L102) BEARDSTOWN, IL Entity Wide Revenue and Expense Summary Submission Type: Audited/Singie Audit Fiscal Year End: 03/31/2016 i i j Project Total Rural Rental Housing Loans Subtotal ELIM Total Operating Transfers from/to Primary Government j Operating Transfers from/to Component Unit [ Proceeds from Notes, Loans and Bonds Proceeds from Property Sales Extraordinary Items, Net Gain/Loss Special Items (Net Gain/Loss) Inter Project Excess Cash Transfer In Inter Project Excess Cash Transfer Out Transfers between Program and Project - In Transfers between Project and Program- Out l Total Other financing Sources (Uses) SO $0 $0 $0 $0 i Excess (Deficiency) of Total Revenue Over (Under) Total -$128,548 -$23,986 -$152,534 $0 -$152,534! Required Annual Debt Principal Payments $0 $9,047 $9,047 $9, Beginning Equity $1,469,940 $1,664,269 $3,134,209 $3,134, Prior Period Adjustments, Equity Transfers and Correction $45,391 $22,296 $67,687 $67, Changes in Compensated Absence Balance j Changes in Contingent Liability Balance j Changes in Unrecognized Pension Transition Liability [ Changes in Special Term/Severance Benefits Liability Changes in Allowance for Doubtful Accounts - Dwelling Changes in Allowance for Doubtful Accounts - Other Administrative Fee Equity Housing Assistance Payments Equity 5

49 The Housing Authority of the County of Cass IL. (IL102) BEARDSTOWN, IL Entity Wide Revenue and Expense Summary Submission Type: Audited/Singie Audit Fiscal Year End: 03/31/2016 Project Total i f Rural Rental Housing Loans Subtotal ELIM Total Unit Months Available j Number of Unit Months Leased Excess Cash $123,220 $123,220 $123, Land Purchases $0 $0 $ Building Purchases j $14,701 $14,701 $14, Furniture & Equipment - Dwelling Purchases $3,300 $3,300 $3, Furniture & Equipment - Administrative Purchases $649 $649 $ Leasehold Improvements Purchases $9,309 $9,309 $9, Infrastructure Purchases! SO so $ CFFP Debt Service Payments $0 $0 $ Replacement Housing Factor Funds j $0 so $0 6

50 SECTION III REPORTS ON COMPLIANCE AND ON INTERNAL CONTROL

51 BRZ Sailor Khan LLC Certified Public Accountants ===ÿÿ Independent Auditor s 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 Board of Commissioners Housing Authority of the County of Cass 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 the Housing Authority of the County of Cass, Illinois, (Authority), as of and for the year ended March 31, 2016, and the related notes to the financial statements, which collectively comprise Housing Authority of thecounty of Cass's basic financial statements, and have issued our report thereon datednovember 17, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Housing Authority of the County of Cass 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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Housing Authority of the County of Cass's internal control. Accordingly, we do not express an opinion on the effectiveness of the Housing Authority of the County of Cass'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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Authority 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 the Housing Authority of the County of Cass 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 S. Brentwood Blvd, Suite 1305, St. Louis, MO Fax:

52 BRZ Sailor Khan LLC 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 Authority 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 Authority s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. (ffiz <A~ BRZ Sailor Khan, LLC St. Louis, Missouri November 17, 2016 ( -2-

53 BRZ Sailor Khan LLC Certified Public Accountants Independent Auditor s Report on Compliance For Each Major Federal Program; Report on Internal Control over Compliance Required by Uniform Guidance Board of Commissioners Housing Authority of the County of Cass Report on Compliance for Each Major Federal Program We have audited the Housing Authority of the County of Cass, Illinois s compliance with the types of compliance requirements described in the OMB Compliance Supplement, that could have a direct and material effect on each of the Housing Authority of the County of Cass s major federal programs for the year ended March 31, The Housing Authority of the County of Cass s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations and the terms and conditions of its federal awards applicable to it s federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Housing Authority of the County of Cass s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements,Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the major federal programs occurred. An audit includes examining, on a test basis, evidence about the Housing Authority of the County of Cass s compliance with those requirements and performingsuch other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance with each major program. However, our audit does not provide a legal determination of the Housing Authority of the County of Cass s compliance. Opinion on Each Major Federal Program In our opinion, the Housing Authority of the County of Cass 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 identified above for the year ended March 31, S. Brentwood Blvd, Suite 1305, St. Louis, MO Fax:

54 BRZ Sailor KhanLLC Report on Internal Control Over Compliance Management of the Housing Authority of the County of Cass 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 the Housing Authority of the County of Cass s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Housing Authority of the County of Cass 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 requirements 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 ofcompliance requirement will not be /prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or 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 the 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, as defined above. However, material weaknesses may exist that have not been identified. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Housing Authority of the County of Cass,Illinois, as of and for the year ended March 31, 2016, and the related notes of the financial statements, which collectively comprise the Housing Authority of the County of Cass, Illinois's basic financial statements. We issued our report thereon dated November 17, 2016, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of the management and was derived from and related directly to the underlying accounting and other records used to prepare the basic financial statements. The infonnation 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 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 schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. -4- }