ROBINSON, FARMER, COX ASSOCIATES

Transcription

1 ROBINSON, FARMER, COX ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS A PROFESSIONAL LIMITED LIABILITY COMPANY Communication with Those Charged with Governance To the Board of Commissioners Charlottesville Redevelopment and Housing Authority Charlottesville, Virginia We have audited the financial statements of the business-type activities, and the discretely presented component unit of Charlottesville Redevelopment and Housing Authority for the year ended March 31, Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards and OMB Circular A-133, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 25, Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Charlottesville Redevelopment and Housing Authority are described in Note 2 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during fiscal year We noted no transactions entered into by the Authority during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the entity s financial statements were: Management s estimate of the allowance for uncollectible tenant accounts receivable, estimated lives of capital assets and related depreciation expense and accumulated depreciation are based on the following: Management s review and assessment of individual tenant accounts receivable and prior year collection data, and estimated useful lived of capital assets based on various accounting and HUD guidelines relating to capital asset lives and depreciation methods. We evaluated the key factors and assumptions used to develop the above estimates in determining that they are reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent and clear. Difficulties Encountered in Performing the Audit We encountered no difficulties in dealing with management in performing and completing our audit.

2 Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit s financial statements taken as a whole. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated October 6, Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the entity s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the entity s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. We also issued a separate letter to the Board of Commissioners dated October 6, 2012 that should be read in conjunction with this letter. Other Matters With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. This information is intended solely for the use of the Board of Commissioners and management of Charlottesville Redevelopment and Housing Authority and is not intended to be and should not be used by anyone other than these specified parties. Charlottesville, Virginia October 6, 2012

3 ROBINSON, FARMER, COX ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS A PROFESSIONAL LIMITED LIABILITY COMPANY October 6, 2012 Board of Commissioners Charlottesville Redevelopment and Housing Authority City Hall Charlottesville, Virginia Ladies and Gentlemen: In planning and performing our audit of the financial statements of the Charlottesville Redevelopment and Housing Authority for the year ended March 31, 2012, we considered the Authority s internal control structure to plan our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. During our audit we noted certain matters involving the internal control structure and other operational matters that are presented herewith for your consideration. This letter does not affect our report dated October 6, 2012 on the financial statements of the Charlottesville Redevelopment and Housing Authority. Our comments and recommendations, all of which have been discussed with appropriate members of management, are intended to improve the internal control structure or result in other operational efficiencies, and to note certain matters for which corrective actions may be taken prior to year end. We will be pleased to discuss these comments in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. The following items are not deemed to be significant deficiencies or material weaknesses: Virginia Retirement System: Finding: Most Authority employees were given increases in pay effective on April 1, However, those pay increases were not properly reported to the Virginia Retirement System (VRS) as required. Other adjustments to pay that occurred after April 1 were reported as required. Management has provided VRS updated compensation amounts for the respective periods worked, and has paid all delinquent amounts due. The cost of this oversight is not significant (less than $1,000). Recommendation: VRS creditable compensation reports should be periodically reviewed to ensure that correct compensation amounts are reported. Public Housing Unit Inspection Documentation: Finding: Tests of public housing tenant eligibility and review of tenant files disclosed that the tenant move-in, move-out and annual unit inspection reports are not uniformly filed in the tenant files. Recommendation: A copy of the public housing tenant move-in, move-out and annual unit inspection reports should be filed in the individual tenant files maintained by the property managers. We believe filing copies of these reports in the tenant files results in a more complete tenant file in addition to providing a centralized location of all tenant information that can be readily accessed to determine compliance with HUD regulations. - Management Letter -

4 Public Housing Compliance Matters: In our tests of compliance of the Public and Indian Housing Program we determined that the Authority was not in compliance with two matters with respect to the Special Tests and Provisions compliance section. The items noted were not in the Compliance Supplement (which is issued by the federal Office of Management and Budget for audit guidance for specific compliance matters) for this program for FY The matters are noted in the Schedule of Findings and Questioned Costs and are also summarized below: The Authority had not recorded declarations of trust against public housing property as required by HUD. The declarations of trust against the properties protect HUD s interest in the properties by limiting the Authority s ability to convey the property to others without HUD approval. We believe it would be highly unlikely that the Authority would attempt to transfer such property without the approval of HUD and/or the City of Charlottesville. Notwithstanding, the declarations had not been recorded and, accordingly, the non-recording of such declarations of trust constitute a compliance violation. This requirement apparently was communicated to housing authorities in The Authority has had several changes in management during that period to now which apparently resulted in not recording such declarations. Management has requested the Charlottesville City Attorney s office to record such declarations against the public housing properties. When the Authority changed financial institutions near the end of fiscal year 2011, it did not enter into a depository agreement with the financial institution using form HUD or other form required by HUD. On August 16, 2012 management entered into a depository agreement with its financial institution using the required HUD form. Sincerely, ROBINSON, FARMER, COX ASSOCIATES Randolph W. Jones, Jr. Certified Public Accountant Director - Management Letter -

5 CHARLOTTESVILLE REDEVELOPMENT AND HOUSING AUTHORITY Charlottesville, Virginia FINANCIAL REPORT FOR THE YEAR ENDED MARCH 31, 2012

6 List of Principal Officers March 31, 2012 Name Title Board of Commissioners: Hosea Mitchell... Keith Woodard... Sherri Clarke... Claudette Green... Joy Johnson... David Norris... Robert Stevens... Chairman Vice-Chair Board Member Board Member Board Member Board Member Board Member Senior Management: Aubrey Watts... Acting Executive Director Allyson Manson-Davies... Deputy City Attorney

7 TABLE OF CONTENTS Page Independent Auditors Report Management s Discussion and Analysis Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Revenues, Expenses and Changes in Net Assets Statement of Cash Flows Notes to Financial Statements Required Supplementary Information: Schedule of Pension and OPEB Funding Progress Other Supplemental Information: Combining Statement of Net Assets By Program Combining Statement of Revenues, Expenses and Changes in Net Assets By Program Combining Statement of Cash Flows By Program Compliance: 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 with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Schedule of Prior Year Findings and Questioned Costs... 41

8 ROBINSON, FARMER, COX ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS A PROFESSIONAL LIMITED LIABILITY COMPANY Independent Auditors Report To the Board of Commissioners Charlottesville Redevelopment and Housing Authority Charlottesville, Virginia We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of the Charlottesville Redevelopment and Housing Authority as of and for the year ended March 31, 2012, as listed in the Table of Contents. These financial statements are the responsibility of the Authority s management. Our responsibility is to express opinions on these financial statements based on our audit. The prior year comparative information has been derived from the Authority s 2011 financial statements, and in our report dated August 4, 2011, we expressed unqualified opinions on those financial statements. We conducted our audit 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 Specifications for Audits of Authorities, Boards, and Commissions, issued by the Commonwealth of Virginia, Office of the Auditor of Public Accounts. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities and the discretely presented component unit of the Charlottesville Redevelopment and Housing Authority as of March 31, 2012, and the changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 6, 2012, on our consideration of the Charlottesville Redevelopment and Housing Authority 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 and should be considered in assessing the results of our audit. 1

9 Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and the Required Supplementary Information as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the management s discussion and analysis and 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 management s discussion and analysis and schedules of funding progress because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Charlottesville Redevelopment and Housing Authority s financial statements as a whole. The other supplemental information is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. The other supplemental information and schedule of expenditures of federal awards are the responsibility of management and were derived from and relate 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. Charlottesville, Virginia October 6,

10 Management s Discussion and Analysis Year Ended March 31, 2012 This section of the Charlottesville Redevelopment and Housing Authority s (the Authority s) annual financial report presents an overall review of financial activities for the fiscal year ended March 31, Please read this in conjunction with the financial statements, which follow. The intent of this discussion and analysis is to look at the Authority s financial performance as a whole. Financial Highlights for the Year The assets of the Authority exceeded its liabilities at the close of March 31, 2012 by $7.17 million (net assets). Of this amount, $1.93 million (unrestricted net assets) may be used to meet the Authority s ongoing obligations to residents and creditors. The Authority s net assets decreased by $932,169 (or 11.50%) over the prior year. Since the Authority engages only in business-type activities, the decrease is all in the category of businesstype net assets. Net Assets were $7.28 million, $8.11 million, and $7.17 million for 2010, 2011, and 2012 respectively. The business-type activities revenue decreased significantly during Total revenues were $6.6 million, $7.0 million, and $5.1 million for 2010, 2011, and 2012 respectively. For the year ended March 31, 2012, the total expenses of all Authority programs decreased by $107 thousand (or 1.74%). Total expenses were $6.3 million, $6.1 million, and $6.0 million for 2010, 2011, and 2012 respectively. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Authority s basic financial statements. The Authority s basic financial statements comprise two components: Government-wide financial statements Notes to financial statements This report contains other supplementary information in addition to the basic financial statements themselves. The basic financial statements include the Authority and its discretely presented component unit, Charlottesville Development Corporation. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. Figure A shows how the required parts of the Management s Discussion and Analysis and the Authority s basic financial statements are arranged and related to one another. Figure A: Required Components of the Authority's Financial Statements Management's Discussion and Analysis (MD&A) Government-wide Financial Statements Notes to Financial Statements Other Supplemental Information 3

11 Government-wide Financial Statements The Government-wide financial statements are designed to be corporate-like in that all business-type activities are consolidated into columns that add to a total for the entire Authority. These Statements include a Statement of Net Assets, which is similar to a Balance Sheet. The Statement of Net Assets reports all financial and capital resources for the Authority. The statement is presented in the format where assets, minus liabilities, equal Net Assets, formerly known as equity. Assets and liabilities are presented in order of liquidity, and are classified as Current (convertible into cash within one year), and Non-current. The focus of the Statement of Net Assets (the Unrestricted Net Assets ) is designed to represent the net available liquid (non-capital) assets, net of liabilities, for the entire Authority. Net Assets (formerly equity) are reported in three broad categories: Net Assets, Invested in Capital Assets, Net of Related Debt: This component of Net Assets consists of all Capital Assets, reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted Net Assets: This component of Net Assets consists of restricted assets, when constraints are placed on the asset by creditors (such as debt covenants), grantors, contributors, laws, regulations, etc. Unrestricted Net Assets: Consists of Net Assets that do not meet the definition of Net Assets Invested in Capital Assets, Net of Related Debt, or Restricted Net Assets. The Government-wide financial statements also include a Statement of Revenues, Expenses and Changes in Net Assets (similar to an Income Statement). The Statement includes Operating Revenues such as rental income, Operating Expenses such as administrative, utilities, maintenance, and depreciation, and Non-Operating Revenue and Expenses such as grant revenue, investment income and interest expense. The focus of the Statement of Revenues, Expenses and Changes in Net Assets is the Change in Net Assets, which is similar to Net Income or Loss. Finally, a Statement of Cash Flows is included, which discloses net cash provided by or used for operating activities, non-capital financing activities, and from capital and related financing activities. 4

12 Other Supplemental Information The other supplemental information presents the individual fund financial statements. The program financial statements provide more detailed information about the Authority s most significant programs not the Authority as a whole. Separate program reporting units are accounting mechanisms that the Authority uses to keep track of specific sources of funding and spending for particular purposes. Many of the programs are required by U.S. Department of Housing and Urban Development (HUD). Others are segregated to enhance accountability and control. The Authority consists exclusively of the Enterprise Funds. Enterprise funds utilize the full accrual basis of accounting. The Authority maintains its accounting in one enterprise fund. This method of accounting is similar to accounting utilized by the private sector. Conventional Public Housing Under the Conventional Public Housing Program, the Authority rents units that it owns to low-income households. Public Housing is operated under an Annual Contributions Contract (ACC) with HUD. HUD provides Operating Subsidy and Capital Grant funding to enable public housing agencies (PHA) to provide housing at a rent based upon 30% of adjusted household income. The Capital Program is the primary funding source for physical and management improvements to the Authority s properties. Housing Choice Voucher Program Under the Housing Choice Voucher Program (formerly known as Section 8), the Authority administers contracts with independent property owners/managers. The Authority subsidizes the family s rent through a Housing Assistance Payment made to the landlord. The program, administered under an ACC with HUD, provides funding to enable the Authority to structure a lease that sets participants rent at 30% of household income. Business Activities Represents non-hud resources developed from a variety of activities, including: 1. Urban Renewal 2. Working/Central City Rehab 3. State/Local Represents grants funded from Commonwealth of Virginia and City of Charlottesville 4. Community Development Block Grant (CDBG) 5. Component Unit The Authority has one separate legal entity in its report-charlottesville Development Corporation. Financial Analysis of the Authority as a Whole This is the seventh year that the Charlottesville Redevelopment and Housing Authority has presented its financial statements under the new reporting model required by GASB Statement No. 34. This reporting model changes significantly both the recording and presentation of financial data. 5

13 Statement of Net Assets The following table reflects the condensed statement of net assets compared to prior years. The Authority is engaged only in business-type activities. Charlottesville Redevelopment and Housing Authority Table 1 Summary of Net Assets March 31, 2012, 2011 and Assets: Current assets $ 2,285,080 $ 2,912,196 $ 2,829,912 Capital assets 4,996,473 5,460,860 4,745,165 Other assets 424, , ,880 Total assets $ 7,706,213 $ 8,797,716 $ 7,996,957 Liabilities: Current liabilities $ 532,085 $ 691,419 $ 716,903 Long-term liabilities Total liabilities $ 532,085 $ 691,419 $ 716,903 Net Assets: Invested in capital assets, net of related debt $ 4,996,473 $ 5,460,860 $ 4,745,165 Restricted 251, , ,952 Unrestricted 1,926,634 2,055,951 2,124,937 Total net assets $ 7,174,128 $ 8,106,297 $ 7,280,054 For more detailed information see the Statement of Net Assets. Net assets may serve over time as a useful indicator of a housing authority s financial position. In the case of the Charlottesville Redevelopment and Housing Authority, assets exceeded liabilities by $7.17 million at the close of fiscal year The largest portion of the Authority s net assets (70%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less accumulated depreciation and less any related outstanding debt used to acquire those assets. The Authority uses these assets to provide housing and services to the public housing residents. Current assets increased primarily due to an increase in cash which primarily resulted from an increase in accounts payable. Accounts payable increased to due timing differences in paying year end bills. 6

14 Statement of Activities The following schedule of Activities compares the revenues and expenses for the current and previous fiscal years. The Authority is engaged only in business-type activities. Charlottesville Redevelopment and Housing Authority Table 2 Statement of Revenues, Expenses, and Changes in Net Assets March 31, 2012, 2011 and Revenues: Tenant revenue - rents and other $ 1,176,025 $ 1,128,140 $ 1,095,870 Expenses: Administrative $ 1,113,587 $ 1,112,289 $ 1,136,422 Tenant services 80,978 92, ,496 Utilities 719, , ,963 Maintenance 831,494 1,061,840 1,043,038 Protective services 60,800 59,832 63,194 General 460, , ,870 Housing assistance payments 1,998,406 1,861,405 1,996,724 Depreciation 754, , ,328 Total expenses $ 6,019,103 $ 6,125,690 $ 6,271,035 Operating income (loss) $ (4,843,078) $ (4,997,550) $ (5,175,165) Nonoperating revenues: Operating subsidies and grants $ 3,267,471 $ 4,185,326 $ 3,757,578 Capital grants 590,268 1,525,109 1,634,060 Investment income 13,130 20,104 73,231 Other revenues 40,040 93,254 81,481 Total nonoperating revenue $ 3,910,909 $ 5,823,793 $ 5,546,350 Net increase (decrease) $ (932,169) $ 826,243 $ 371,185 Tenant revenue and operating subsidies and grants did not change significantly between 2011 and The public housing operating subsidy decreased significantly from between 2011 and In FY 2011 the City provided $480,751 of Community Development Block Grant funds to the Authority for the purchase of property for redevelopment. Similar funding was not received in FY The capital fund grants decreased by 61% in 2012 due to the decrease in American Recovery and Reinvestment Act grant funds. Other revenues decreased by 57% in 2012 due reductions in local grant funds. Administrative expenses did not change significantly between 2011 and 2012 (0.1% increase). Utility expenses increased by $27,243 between 2011 and 2012 primarily due to an increase in consumption due to a higher occupancy rate as well as an increase in rates (3.9%). 7

15 Statement of Activities (continued) Maintenance expenses decreased significantly between 2011 and 2012 due to a much reduced use of outside contractors for construction project management (21.7%). Tenant services expenses decreased by 12.4% in 2012 due to reduction in the number of resident apprentices. Protective services expenses did not change significantly between 2011 and 2012 (1.6% increase). General expenses did not change significantly between 2011 and 2012 (4.1% decrease). Investment income decreased 34.7% due to a decrease in interest rates and invested funds. Depreciation decreased by 1.5%. Capital Assets The Authority s investment in capital assets for its business-type activities as of March 31, 2012 amounts to $5.0 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and system, improvements, machinery and equipment. The total decrease in the Authority s investment in capital assets for the current fiscal year was 8.5%. Major capital asset events during the current fiscal year included the following: Kitchen cabinets at various locations - $37,773 Fire sprinkler at Crescent Halls - $17,050 Tile flooring at Crescent Halls - $19,872 Pressure washing fences at various locations - $27,820 Hot water heaters at various locations - $12,155 Speed humps at Westhaven - $14,800 Site improvements at various locations consisting of concrete grinding and erosion control - $10,402 Charlottesville Redevelopment and Housing Authority Table 3 Capital Assets at Year-End (Net of Depreciation) March 31, 2012, 2011 and Land $ 2,308,907 $ 2,303,907 $ 1,816,238 Buildings 27,986,073 27,855,214 27,004,737 Equipment - Administration 562, , ,675 Equipment - Dwelling 1,752,848 1,599,005 1,455,604 Accumulated depreciation (27,614,030) (26,859,941) (26,094,089) Total $ 4,996,473 $ 5,460,860 $ 4,745,165 8

16 Contacting the Authority s Financial Management This report is designed to provide a general overview of the Authority s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, Charlottesville Redevelopment and Housing Authority, 605 East Main Street, P. O. Box 1405, Charlottesville, VA

17 - Basic Financial Statements Government-wide Financial Statements

18 Statement of Net Assets At March 31, 2012 (With Comparative Totals for the Prior Year) Assets Total Authority Component Unit Charlottesville Development Corporation Total Reporting Entity Prior Year Reporting Entity Totals Current assets: Cash and cash equivalents $ 61,617 $ - $ 61,617 $ 98,237 Investments 1,892,908-1,892,908 2,364,073 Receivables: Tenants, net 9,797-9,797 18,641 Federal Government 48,169-48, ,593 Other receivables 1,729-1,729 17,419 Inventories 73,821-73,821 51,243 Due from component unit 136, , ,251 Prepaid expense and other assets 60,874-60,874 63,739 Total current assets $ 2,285,080 $ - $ 2,285,080 $ 2,912,196 Noncurrent assets: Capital assets, net $ 4,996,473 $ - $ 4,996,473 $ 5,460,860 Prepaid expenses - master plan 363, , ,160 Notes and mortgages receivable 61,500-61,500 61,500 Total noncurrent assets $ 5,421,133 $ - $ 5,421,133 $ 5,885,520 Total assets $ 7,706,213 $ - $ 7,706,213 $ 8,797,716 Liabilities Current liabilities: Accounts payable $ 89,471 $ - $ 89,471 $ 295,269 Other liabilities 306, , ,899 Due to primary government - 136, , ,251 Total liabilities $ 395,530 $ 136,555 $ 532,085 $ 691,419 Net Assets Invested in capital assets $ 4,996,473 $ - $ 4,996,473 $ 5,460,860 Restricted for Housing Choice Vouchers 251, , ,486 Unrestricted 2,063,189 (136,555) 1,926,634 2,055,951 Total net assets $ 7,310,683 $ (136,555) $ 7,174,128 $ 8,106,297 The accompanying notes to financial statements are an integral part of this statement. 10

19 Statement of Revenues, Expenses and Changes in Net Assets For the Year Ended March 31, 2012 (With Comparative Totals for the Prior Year) Total Authority Component Unit Charlottesville Development Corporation Total Reporting Entity Prior Year Reporting Entity Totals Operating revenues: Rental income $ 1,176,025 $ - $ 1,176,025 $ 1,128,140 Expenses: Maintenance and operations $ 3,252,736 $ 13,871 $ 3,266,607 $ 3,498,433 Housing assistance 1,998,406-1,998,406 1,861,405 Depreciation 754, , ,852 Total expenses $ 6,005,232 $ 13,871 $ 6,019,103 $ 6,125,690 Operating income (loss) $ (4,829,207) $ (13,871) $ (4,843,078) $ (4,997,550) Nonoperating revenues: Grants: Federal Government - HUD $ 3,152,558 $ - $ 3,152,558 $ 3,695,736 Federal Government - capital funds 590, ,268 1,525,109 Other government 114, , ,590 Investment income 13,130-13,130 20,104 Other 39, ,040 93,254 Total nonoperating revenues $ 3,910,202 $ 707 $ 3,910,909 $ 5,823,793 Change in net assets $ (919,005) $ (13,164) $ (932,169) $ 826,243 Net assets, beginning of year 8,229,688 (123,391) 8,106,297 7,280,054 Net assets, end of year $ 7,310,683 $ (136,555) $ 7,174,128 $ 8,106,297 The accompanying notes to financial statements are an integral part of this statement. 11

20 For the Year Ended March 31, 2012 Statement of Cash Flows (With Comparative Totals for the Prior Year) Total Authority Component Unit Charlottesville Development Corporation Total Reporting Entity Prior Year Reporting Entity Totals Cash flows--operating activities: Receipts from tenants $ 1,181,990 $ - $ 1,181,990 $ 1,122,160 Other receipts ,382 Payments to suppliers (2,451,345) (8,141) (2,459,486) (2,454,570) Payments to employees (996,092) (5,730) (1,001,822) (1,039,489) Other payments (1,998,406) 13,164 (1,985,242) (1,861,405) Net cash provided (used) by operating activities $ (4,263,853) $ (707) $ (4,264,560) $ (4,226,922) Cash flows--noncapital financing activities: Noncapital government grants $ 3,260,697 $ - $ 3,260,697 $ 3,695,736 Other 41, ,681 47,058 Net cash provided (used) by noncapital financing activities $ 3,302,671 $ 707 $ 3,303,378 $ 3,742,794 Cash flows--capital and related financing activities: Capital grants $ 739,084 $ - $ 739,084 $ 2,045,393 Purchase of land, buildings and equipment (289,703) - (289,703) (1,481,639) Net cash provided (used) by capital and related financing activities $ 449,381 $ - $ 449,381 $ 563,754 Cash flows--investing activities: Investment income $ 13,130 $ - $ 13,130 $ 20,104 Sales (purchases) of investments 462, ,051 (20,356) Net cash provided (used) by investing activities $ 475,181 $ - $ 475,181 $ (252) Net increase (decrease) in cash and cash equivalents $ (36,620) $ - $ (36,620) $ 79,374 Cash and cash equivalents, beginning of year 98,237-98,237 18,863 Cash and cash equivalents, end of year $ 61,617 $ - $ 61,617 $ 98,237 12

21 Statement of Cash Flows For the Year Ended March 31, 2012 (Continued) (With Comparative Totals for the Prior Year) Total Authority Component Unit Charlottesville Development Corporation Total Reporting Entity Prior Year Reporting Entity Totals Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ (4,829,207) $ (13,871) $ (4,843,078) $ (4,997,550) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 754, , ,852 Bad debts 20,657-20,657 56,044 (Increases) decreases in: Tenant receivables 8,844-8,844 (1,192) Other receivables (19,267) - (19,267) 30,637 Inventories (22,578) - (22,578) (21,094) Due from component unit (13,914) - (13,914) (12,295) Other assets 2,865-2,865 (21,035) Increases (decreases) in: Accounts payable (205,724) (74) (205,798) (44,977) Other liabilities 40,381 (676) 39,705 6,393 Due to component unit - 13,914 13,914 12,295 Net cash provided (used) by operating activities $ (4,263,853) $ (707) $ (4,264,560) $ (4,226,922) The accompanying notes to financial statements are an integral part of this statement. 13

22 Notes to Financial Statements At March 31, 2012 NOTE 1 REPORTING ENTITY: The Charlottesville Redevelopment and Housing Authority (CRHA) was established by referendum in CRHA has operated under state enabling legislation and federal housing regulations of the United States Department of Housing and Urban Development (HUD). The governing body of CRHA is a seven-member Board of Commissioners appointed by the City of Charlottesville Council. CRHA is a public housing agency, which provides affordable housing for low-income residents of the City including seniors and disabled individuals. The mission of CRHA is to uplift our community by providing families with safe, affordable, quality housing, and by fostering opportunities for residents empowerment and self-sufficiency. The Component Unit discussed below is included in CRHA s reporting entity because of the significance of its operational and financial relationship with CRHA, as defined in Governmental Accounting Standards Board (GASB) No. 39, Determining Whether Certain Organizations Are Component Units. Component Unit: The Component Unit consists of Charlottesville Development Corporation (CDC). CDC is a not-forprofit corporation whose purpose is to provide housing and social and economic opportunities for the benefit of low to moderate income people. CDC is a Component Unit of CRHA because of the significance of its operational and financial relationship with CRHA. The disclosure requirements of GASB No. 39 are met by the combined financial statement presentation of the sole Component Unit. Footnotes regarding policies of CRHA apply to the Component Unit unless otherwise indicated. The CDC is reported separately to emphasize that it is legally separate from the Authority (primary government). The CDC has a March 31 fiscal year end. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A. Program accounting: The accounts of CRHA are organized on the basis of programs, each of which is considered a separate accounting entity for financial reporting purposes. The operations of each program are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, net assets, revenues and expenses. Resources are allocated to and accounted for in individual programs based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various programs are presented as proprietary fund type enterprise funds in the financial statements. Enterprise fund accounting is used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of CRHA is that the costs (expenses, including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges. The measurement focus is upon determination of net income, financial position, and cash flows. The Authority utilizes the following programs: Public Housing: The Public Housing Program is the primary operating program of CRHA. It provides subsidized housing to low income residents. CRHA is the owner of approximately 376 public housing units located throughout the City. CRHA receives revenue from dwelling rental income and an operating subsidy provided by HUD through the Annual Contributions Contract (ACC) P Capital grants, funded by HUD, are used to improve the physical condition, management, and operation of existing housing. 14

23 Notes to Financial Statements At March 31, 2012 (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) A. Program accounting: (Continued) Housing Choice Vouchers (Section 8): The Section 8 (11b) Housing Assistance Programs establish partnerships between public and private housing providers throughout the City. The operations of the Section 8 Voucher and Moderate Rehabilitation are funded by ACC P-5548 by HUD. The contract provides appropriations for housing assistance. CRHA earns administrative fees from HUD for facilitating and managing the public/private housing partnership. State/Local: The State/Local Program reflects CDBG funds received from HUD by the City. Business Activities: The Business Activities Fund includes various projects such as monies for land improvements and single-family mortgage loans, rehabilitation loans and grants in designated sections of the City. In addition, other housing related activities are included in this program. Other Activities and Programs: Redevelopment activities include planning for the development and redevelopment of Authority properties. Central office activities report the administrative operations of the Authority. B. Basis of accounting: Proprietary fund accounting uses the accrual basis of accounting; therefore, revenues are recognized when they are earned and expenses are recognized when they are incurred. In accordance with GASB Statement No Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, proprietary fund types follow all applicable GASB pronouncements as well as all Financial Accounting Standards Board (FASB) pronouncements and predecessor Accounting Principles Board Opinions and Accounting Research Bulletins issued on or before November 30, Under paragraph 7 of Statement No. 20, CRHA has elected not to apply FASB pronouncements issued after November 30, C. Use of estimates: The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingencies at the date of the financial statements, and revenues and expenses recognized during the reporting period. Actual results could differ from those estimates. D. Cash and cash equivalents: Cash in bank and on hand are considered cash equivalents. 15

24 Notes to Financial Statements At March 31, 2012 (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) E. Investments: Investments are reported at fair value, with changes in fair value recognized as a component of investment income. Fair value is determined by reference to quoted market prices. F. Notes receivable: Deed of trust and rental rehabilitation loans are carried at their unpaid principal balance. No allowance for loan losses is considered necessary. G. Master Plan: The Authority has recorded as prepaid expenses costs incurred in the development of a master plan for redevelopment of certain public housing and other properties. At March 31, 2012 these costs totaled $363,160. These costs will be allocated to the redevelopment costs of the projects. H. Due from/due to other programs and component unit: During the course of its operations, CRHA has numerous transactions between programs and the Component Unit to finance operations and provide services. To the extent that certain transactions between programs and the Component Unit had not been paid or received as of March 31, 2012, balances of intercompany amounts receivable and payable have been recorded. I. Capital assets: CRHA s land, structures and equipment which cost or have a donated value of $5,000 or more when acquired are capitalized with depreciation calculated on the straight-line basis over the following estimated useful lives. Real property improvements Rental property Data processing equipment and automobiles Office furniture and equipment 10 years 27.5 years 5 years 5 years J. Annual contributions and operating subsidies: In accordance with the annual contributions contracts, CRHA receives operating subsidies. Such amounts are included as grant revenues from the federal government in the financial statements. K. Compensated absences: Employees earn annual vacation leave at a rate ranging from 12 days per year, up to a maximum of 24 days per year after 31 years of service. Employees with leave balances in excess of 30 days at December 31 forfeit leave in excess of 30 days or 240 hours. Regular part-time employees accrue vacation at one-half the above rates. At termination, employees are paid for any accumulated annual vacation leave. 16

25 Notes to Financial Statements At March 31, 2012 (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) L. Net assets: All net assets balances are designated by the grant program for future expenses or must be returned to the grantor and generally may not be used in any manner by CRHA except as specified under the respective grant contracts. The net assets of the Business Activities Program, State/Local Program and the Component Unit are designated to provide for financial resources utilization in future periods. M. Pension plans and other post-employment benefits: CRHA participates in a defined benefit pension plan administered by the Virginia Retirement System. It is CRHA s policy to fund the normal cost and amortization of any unfunded prior service cost, if applicable. CRHA also provides post-employment benefits other than pension in the form of health-related insurance. Expenses are recognized as incurred. N. Income taxes: As a political subdivision of the Commonwealth of Virginia, CRHA is exempt from federal and state income taxes. Charlottesville Development Corporation is exempt from federal and state income taxes under Internal Revenue Code Section 501 (c)(3) and comparable state law. O. Inventories: Inventories consist of materials and supplies used for maintenance and repairs to properties. The inventories are valued at lower of cost or market on a first-in first-out basis. P. Operating revenues and expenses: Operating revenues and expenses are defined as those items that result from providing services and include all transactions and events which are not capital and related financing, noncapital financing or investing activities. Q. Rental income: The Authority leases certain property included in the Public Housing Fund. The rentals are based on tenant income and rental income is reported when earned. R. Comparative totals: Prior year totals on the financial statements are presented for informational and comparative purposes only. 17

26 Notes to Financial Statements At March 31, 2012 (Continued) NOTE 3 - DEPOSITS AND INVESTMENTS: Deposits: Deposits with banks are covered by the Federal Deposit Insurance Corporation (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the Act ) Section et. seq. of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial Institutions may choose between two collateralization methodologies and depending upon that choice, will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Deposits are placed in one financial institution and with one broker, and are stated at fair value. There were no deposits in excess of insured amounts during the year. Investments: The Authority s investment policy provides for the diversification of its investments in accordance with state law and HUD requirements. State law authorizes the Authority to invest in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank) and Asian Development Bank, commercial paper rate A-1 by Standard and Poor s Corporation or P-1 by Moody s Commercial Paper Record, banker s acceptances, repurchase agreements and the state Treasurer s Local Government Investment Pool (LGIP). The Authority s custodial credit risk policy provides for the safekeeping of securities by approved banks and other dealers. The Authority had no custodial credit risk related to its investments at March 31, The Authority's investments as of March 31, 2012 consist of money market funds in banks. All of the deposits were collateralized as public deposits. NOTE 4 - NOTES AND MORTGAGES RECEIVABLE: The Authority has made loans to qualified individuals for the rehabilitation of residences. The loans are non-interest bearing and are secured by an interest in the property. The loans have no fixed maturity date and are to be repaid upon the sale of the residences. The Authority held $61,500 in such loans as of March 31,