La Porte, Texas FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2017
TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2017 AUDITOR DISCLOSURE INFORMATION 1 INDEPENDENT AUDITORS' REPORT 2 FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION 4 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS 5 STATEMENT OF CASH FLOWS 6 NOTES TO FINANCIAL STATEMENTS 7 SUPPORTING DATA REQUIRED BY HUD 13 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 22 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 23 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 24 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE 26 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 28 MORTGAGOR S CERTIFICATION 30 MANAGEMENT AGENT S CERTIFICATION 31
() AUDITOR DISCLOSURE INFORMATION DECEMBER 31, 2017 INDEPENDENT AUDITOR CliftonLarsonAllen LLP AUDIT PRINCIPAL Michael J. Siegel, CPA OFFICE ADDRESS 5001 Spring Valley Road, Suite 600W Dallas, TX 75244 TELEPHONE NUMBER (972) 383-5700 FEDERAL I.D. # 41-0746749 (1)
CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of Directors Bayview Senior Housing LaPorte, Texas Report on the Financial Statements We have audited the accompanying financial statements of Bayview Senior Housing, HUD Project No. 114-EE133-CA, which comprise the statement of financial position as of December 31, 2017, and the related statements of activities and changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. (2)
Board of Directors Bayview Senior Housing Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bayview Senior Housing as of December 31, 2017, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 13 to 23 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. The schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is also presented for purposes of additional analysis and is not a required part of the basic financial statements. The supporting information required by HUD and the 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. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 21, 2018, on our consideration of Bayview Senior Housing'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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on the effectiveness of Bayview Senior Housing s 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 Bayview Senior Housing s internal control over financial reporting and compliance. CliftonLarsonAllen LLP Dallas, Texas March 21, 2018 (3)
STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2017 ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 49,956 Accounts Receivable - Tenant 2,074 Prepaid Expenses 3,959 Total Current Assets 55,989 ASSETS LIMITED AS TO USE Reserve for Replacements 284,230 Residual Receipts 65,889 Total Assets Limited as to Use 350,119 PROPERTY AND EQUIPMENT Land and Improvements 508,706 Building and Improvements 6,376,304 Furniture and Equipment 533,467 Total Property and Equipment 7,418,477 Less: Accumulated Depreciation (1,918,386) Total Fixed Assets 5,500,091 OTHER ASSETS Tenant Security Deposits 19,031 Total Assets $ 5,925,230 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts Payable - Trade $ 43,094 Accrued Wages 10,698 Related Party Payables 3,236 Total Current Liabilities 57,028 OTHER LIABILITIES Tenant Security Deposits 18,517 Total Liabilities 75,545 NET ASSETS Unrestricted Net Deficit (1,035,576) Temporarily Restricted 6,885,261 Total Net Assets 5,849,685 Total Liabilities and Net Assets $ 5,925,230 See accompanying Notes to Financial Statements. (4)
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2017 REVENUE Rental Revenue $ 496,942 Other Revenue 12,310 Total Revenue 509,252 EXPENSE General and Administrative 164,797 Utilities 27,617 Operating and Maintenance 156,591 Taxes and Insurance 61,646 Depreciation 207,362 Total Expense 618,013 CHANGE IN UNRESTRICTED NET ASSETS (108,761) Total Net Assets - Beginning of Year 5,958,446 TOTAL NET ASSETS - END OF YEAR $ 5,849,685 See accompanying Notes to Financial Statements. (5)
STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Tenants and Other Services $ 512,160 Cash Paid to Suppliers and Employees (427,562) Net Cash Provided by Operating Activities 84,598 CASH FLOWS FROM INVESTING ACTIVITIES Net Deposits into Residual Receipts (107) Net Deposits to Reserve for Replacements (28,690) Purchase of Property and Equipment (65,053) Net Cash Used by Investing Activities (93,850) NET DECREASE IN CASH AND CASH EQUIVALENTS (9,252) Cash and Cash Equivalents - Beginning of Year 59,208 CASH AND CASH EQUIVALENTS - END OF YEAR $ 49,956 RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Change in Net Assets $ (108,761) Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities: Depreciation 207,362 Change in Assets and Liabilities: Other Receivables and HUD Receivables 2,659 Other Assets 325 Accounts Payable (17,007) Other Liabilities 20 Net Cash Provided by Operating Activities $ 84,598 SUPPLEMENTARY DISCLOSURE OF NONCASH ITEMS Property and Equipment Included in Accounts Payable $ 6,373 See accompanying Notes to Financial Statements. (6)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 NATURE OF PROJECT AND SIGNIFICANT ACCOUNTING POLICIES Nature of Project Bayview Senior Housing (the Project) is a nonprofit, tax exempt Project operating a 61-unit apartment complex for the elderly in LaPorte, Texas. The Project is operated under Section 202 of the National Housing Act and regulated by the U.S. Department of Housing and Urban Development (HUD) with respect to rental charges and operating methods. The Project received a HUD Section 202 Capital Advance which places certain conditions on the Project for a period of 40 years. The Project s Section 202 Capital Advance is considered a major program. The Project is also subject to a Project Rental Assistance Contract (PRAC) with HUD, and a significant portion of the Project s rental income is received from HUD. The Project s PRAC rent subsidy is considered a nonmajor program. The Project is sponsored and managed by Methodist Retirement Communities (MRC), who also appoints the board of directors of the Project. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Basis of Presentation Contributions received are recorded as an increase in unrestricted, temporarily restricted or permanently restricted support, depending on the existence or nature of any donor restrictions. Accordingly, net assets of the Project and changes therein are classified and reported as follows: Unrestricted Those resources over which the board of directors has discretionary control. Designated amounts represent those revenues that the board has set aside for a particular purpose. Temporarily Restricted Those resources subject to donor imposed restrictions that will be satisfied by actions of the Project or the passage of time. If a donation is received with a specific purpose, temporarily restricted in nature, and the specific purpose is met in the same year as the gift received, the Project classifies the gift as unrestricted. Permanently Restricted Those resources subject to a donor imposed restriction that they be maintained permanently by the Project. At December 31, 2017, the Project did not have any permanently restricted net assets. (7)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 NATURE OF PROJECT AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash and Cash Equivalents For purposes of the statement of cash flows, the Project considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. The Project s cash balances are held at various financial institutions, which may at times exceed the federally insured amount. The Project monitors the stability of its banking institutions to minimize the risk of loss. Accounts Receivable The Project provides an allowance for uncollectible accounts using management's judgment. Residents are not required to provide collateral for services rendered. Payment for services is required upon receipt of invoice. Accounts are individually analyzed on a monthly basis for collectibility. Once accounts are deemed uncollectible, they are written off. No allowance for uncollectible accounts was deemed necessary at December 31, 2017. Assets Limited as to Use Assets limited as to use consist of escrows required by the HUD Section 202 Capital Advance which are limited to use in accordance with the requirements of the Regulatory Agreement. Property and Equipment Property and equipment is carried at cost. Acquisitions of property and equipment in excess of $2,500 and all expenditures for maintenance, repairs, renewals, and betterments that materially extend the useful life of the asset are capitalized. Contributed property and equipment is recorded at fair market value at the date of donation. Depreciation is computed on the straight-line method over the useful lives of the assets, which are based upon the following estimated useful lives: Buildings and Improvements Building Equipment Furniture and Equipment 5-40 Years 3-10 Years 3-15 Years Tenant Security Deposits The Project holds in trust, security deposits advanced by the tenants of the Project. The Project accrues simple interest on the deposits from the date of receipt in accordance with statutory requirements for security deposits. Distributions The Project s Regulatory Agreement with HUD stipulates, among other things, that the Project will not make distributions of assets or income to any of its officers or directors. (8)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1 NATURE OF PROJECT AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Tax Exempt Status The Project has been granted exempt status relative to federal and state income taxes under Internal Revenue Code Section 501(a) as an Project described in Section 501(c)(3) and applicable state statutes. The Project s tax filings are subject to review and examination by federal and state authorities. The Project is not aware of any activities that would jeopardize its tax-exempt status. The Project files all proper returns related to unrelated business income and properly discloses such activities. Functional Expenses The costs of providing housing programs and other activities to residents are as follows for the year ended December 31, 2017: Program Expenses $ 453,216 General and Administrative 164,797 Total Expenses $ 618,013 Resident Services Revenue Resident services revenue includes room charges and ancillary services to residents, is recorded at established rates, and is recognized when services are provided. Advertising Advertising costs are expensed as incurred and amounted to $226 for the year ended December 31, 2017. Subsequent Events In preparing these financial statements, the Project has evaluated events and transactions for potential recognition or disclosure through March 21, 2018, the date the financial statements were available to be issued. NOTE 2 ASSETS LIMITED AS TO USE The following is a summary of the funds held for limited purpose. All funds are invested in cash and cash equivalents as of December 31, 2017. Replacement Reserves The Projects current agreement with HUD (the Regulatory Agreement) requires that the Project deposit $2,346 per month into a reserve fund for property replacements. The deposits must be paid into a separate federally insured bank account in the name of the Project and no distribution from the reserve fund shall be made without the prior written approval of HUD. (9)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 2 ASSETS LIMITED AS TO USE (CONTINUED) Residual Receipts Surplus cash is required to be deposited into a residual receipt reserve account. The deposits must be paid to a separate federally insured bank account in the name of the Project. No distribution from such fund shall be made without the prior written approval of HUD. NOTE 3 TEMPORARILY RESTRICTED NET ASSETS As of December 31, 2017, temporarily restricted net assets were held for following purposes: Capital Advance $ 6,540,735 Affordable Housing Program Grant 344,526 Total Temporarily Restricted Net Assets $ 6,885,261 Capital Advance The Project received a HUD Section 202 Capital Advance which is evidenced by a mortgage and a mortgage note for $6,549,500, which was fully funded in the amount of $6,540,735. The note shall bear no interest and repayment is not required so long as the housing remains available for very low income elderly or disabled persons in accordance with Section 202 of the Housing Act of 1959, the regulatory agreement and regulations for no less than 40 years. The debt evidenced by this note may not be prepaid prior to the maturity date hereof without the prior written approval of HUD. Provided that (1) the housing has remained available for occupancy by eligible persons until the maturity date of the note and (2) the note has not otherwise become due and payable by reason of defaults under the note, mortgage or regulatory agreement, on that date the note shall be deemed to be paid and discharged. If default be made by the owner under the terms of this note, mortgage, the regulatory agreement, or the regulations, at the option of the holder of this note, the entire principal sum shall at once become due and payable without notice and interest at the stated interest rate of 5.25% from the date of the first advance. (10)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 3 TEMPORARILY RESTRICTED NET ASSETS (CONTINUED) Affordable Housing Program Grant The Federal Home Loan Bank of Dallas granted the Project $344,526 under an Affordable Housing Program Grant for a rental project (the AHP program) for the purpose of constructing a 61-unit multi-family housing development. The AHP assistance was received in June 2008 and provided in the form of a direct subsidy which shall be repayable, with interest, if the Project is not used in compliance with the terms of the AHP Agreement, or is sold or refinanced, unless the Project continues to be subject to a deed restriction or other legally enforceable retention agreement or mechanism incorporating the income-eligibility and affordability restrictions committed to in the grant application for a period of 15 years following the project completion date. If any noncompliance occurs, the grant shall be repaid in full. Due to the time restriction noted in the agreement, the AHP grant is recorded as temporarily restricted net assets on these financial statements. NOTE 4 RELATED PARTY TRANSACTIONS MRC and MRC Crestview provide the Project certain operating costs associated with the operations of the Project. MRC Crestview Terrace, MRC Crestview, and Happy Harbor Senior Housing are all affiliates of MRC and share related payroll, insurance, and other operating costs. As of December 31, 2017, related party balances included the following: Due to MRC $ 3,100 Due to MRC Crestview 136 Total Due to Related Party $ 3,236 NOTE 5 MANAGEMENT AGREEMENT Under the terms of the HUD approved management agreement, the Project incurs a management fee equal to 8% of residential and miscellaneous revenue. Management fee expense for the year ended December 31, 2017 amounted to $26,352. NOTE 6 SELF-INSURED PLANS MRC formed a captive insurance company to provide general liability and professional insurance coverage within HUD s regulatory requirements for claims up to the limit of $500,000. Additionally, MRC is a nonsubscriber to worker s compensation and as such provides coverage for claims up to the limit of $50,000. The Project s insurance premiums paid to fund the self-insurance plans as stated amounted to $5,726 for the year ended December 31, 2017. (11)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 7 401(K) PLAN The Project participates in the defined contribution 401(k) benefit plan (the Plan), sponsored by MRC, which covers substantially all of its full-time employees with at least one year of service that allows for discretionary Employer matching contributions. The Project s contribution to the Plan for the year ended December 31, 2017 amounted to $2,046. NOTE 8 PROJECT RENTAL ASSISTANCE CONTRACT Under the Regulatory Agreement, the Project may not increase rents charged to tenants without HUD approval. The Project receives rental subsidies under a Project Rental Assistance Contract (PRAC) with HUD. These amounted to $365,492 for the year ended December 31, 2017. The Project s current contract expires in November 2018. NOTE 9 CONCENTRATIONS The Project s sole asset is the 61-unit apartment complex. The Project s operations are concentrated in the multi-family real estate market. Additionally, the Project operates in a heavily regulated environment. The operations of the Project are subject to the administrative directives, rules and regulations of federal, state, and local regulatory agencies, including, but not limited to HUD. Such administrative directives, rules and regulations are subject to change by an act of Congress or an administrative change by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with the change. NOTE 10 CONTINGENCIES In December 2015, with the passage of the Consolidated Appropriations Act, 2016 (ACT) HUD received the authority to request project funds, in excess of $250 per unit, held in residual receipts accounts, be refunded to HUD upon termination of the Project Rental Assistance Contract (PRAC). The Project s current PRAC expires in November 2018. It is not known at this time whether HUD will request the Project to refund the excess funds at the end of the current PRAC contract or the amount of such refund, therefore no adjustments have been made to the accompanying financial statements. (12)
SUPPORTING DATA REQUIRED BY HUD DECEMBER 31, 2017 STATEMENT OF FINANCIAL POSITION Account Number ASSETS CURRENT ASSETS 1120 Cash - Operations $ 49,956 1130 Accounts Receivable - Tenant 2,074 1200 Prepaid Expenses 3,959 1100T Total Current Assets 55,989 1191 DEPOSITS HELD IN TRUST - FUNDED TENANT SECURITY DEPOSITS 19,031 ASSETS LIMITED AS TO USE 1320 Replacement Reserve 284,230 1340 Residual Receipts Reserve 65,889 1300T Total Assets Limited as to Use 350,119 PROPERTY AND EQUIPMENT 1410 Land 508,706 1420 Buildings 6,376,304 1440 Equipment 156,455 1450 Furniture 374,597 1460 Furnishings 2,415 1400T Total Fixed Assets 7,418,477 1495 Less: Accumulated Depreciation (1,918,386) 1400N Total Fixed Assets 5,500,091 1000T Total Assets $ 5,925,230 LIABILITIES AND NET ASSETS CURRENT LIABILITIES 2110 Accounts Payable - Trade $ 43,094 2120 Accrued Wages Payable 10,698 2190 Miscellaneous Current Liabilities (See Schedule) 3,236 2122T Total Current Liabilities 57,028 2191 DEPOSITS HELD IN TRUST - FUNDED TENANT SECURITY DEPOSITS LIABILITY 18,517 2000T Total Liabilities 75,545 NET ASSETS 3131 Unrestricted Net Deficit (1,035,576) 3132 Temporarily Restricted Net Assets 6,885,261 3130 Total Net Assets 5,849,685 2033T Total Liabilities and Net Assets $ 5,925,230 (13)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS Account Number REVENUE 5120 Rent Revenue - Gross Potential $ 131,450 5121 Tenant Assistance Payments 367,591 5100T Total Rental Income 499,041 5220 Apartments 2,099 5200T Total Vacancies 2,099 5152N Net Rental Revenue 496,942 5430 Revenue from Investments - Residual Receipts 107 5440 Revenue from Investments - Replacement Reserve 538 5400T Total Financial Revenue 645 5910 Laundry/Vending Income (Net) 3,820 5920 Tenant Charges 1,826 5970 Gifts 6,019 5900T Total Other Revenue 11,665 5000T Total Revenue 509,252 EXPENSES 6203 Conventions and Meetings 4,736 6210 Advertising and Marketing 226 6310 Office Salaries 97,275 6311 Office Expenses 19,923 6320 Management Fee 26,352 6350 Audit Expenses 120 6370 Bad Debt Expense 77 6390 Miscellaneous Administrative Expenses (See Schedule) 16,088 6263T Total Administrative Expenses 164,797 6450 Electricity 14,176 6451 Water 10,848 6452 Gas 2,593 6400T Total Utilities Expense 27,617 6510 Payroll 37,013 6515 Supplies 2,285 6520 Contracts 1,960 6525 Garbage and Trash Removal 1,683 6546 Heating/Cooling Repairs and Maintenance 17,873 6590 Miscellaneous Operating and Maintenance Expenses (See Schedule) 95,777 6500T Total Operating and Maintenance Expenses 156,591 (14)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS (CONTINUED) Account Number EXPENSES (CONTINUED) 6711 Payroll Taxes $ 11,080 6720 Property and Liability Insurance (Hazard) 34,868 6723 Health Insurance and Other Employee Benefits 15,338 6790 Miscellaneous Insurance (See Schedule) 360 6700T Total Taxes and Insurance 61,646 6000T Total Cost of Operations Before Depreciation 410,651 5060T PROFIT BEFORE DEPRECIATION 98,601 6600 Depreciation Expense 207,362 5060N/ 3247 CHANGE IN UNRESTRICTED NET ASSETS (108,761) S1100-060 Unrestricted Net Asset - Beginning of Year (926,815) 3131 UNRESTRICTED NET ASSETS - END OF YEAR $ (1,035,576) S1100-070 Temporarily Restricted Net Assets - Beginning of Year $ 6,885,261 3132 TEMPORARILY RESTRICTED NET ASSETS $ 6,885,261 S1100-050 Total Net Assets - Beginning of Year $ 5,958,446 3250 Change in Total Net Assets from Operations (108,761) 3130 TOTAL NET ASSETS $ 5,849,685 (15)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 STATEMENT OF CASH FLOWS Account Number CASH FLOWS FROM OPERATING ACTIVITIES Receipts: S1200-010 Rental Receipts $ 499,850 S1200-020 Interest Receipts 645 S1200-030 Other Receipts 11,665 S1200-040 Total Receipts 512,160 Disbursements: S1200-050 Administrative 58,426 S1200-070 Management Fees 26,352 S1200-090 Utilities 27,617 S1200-100 Salaries and Wages 97,255 S1200-110 Operating and Maintenance 156,591 S1200-140 Property Insurance 34,868 S1200-150 Miscellaneous Taxes and Insurance 26,334 S1200-160 Tenant Security Deposits 119 S1200-230 Total Disbursements 427,562 S1200-240 Net Cash Provided by Operating Activities 84,598 CASH FLOWS FROM INVESTING ACTIVITIES S1200-250 Net Deposits to Reserve for Replacements (28,690) S1200-260 Net Deposits to Residual Receipts (107) S1200-330 Purchases of Property and Equipment (65,053) S1200-350 Net Cash Used by Investing Activities (93,850) S1200-470 NET DECREASE IN CASH AND CASH EQUIVALENTS (9,252) S1200-480 Cash and Cash Equivalents - Beginning of Year 59,208 S1200T CASH AND CASH EQUIVALENTS - END OF YEAR $ 49,956 RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES 3250 Change in Net Assets $ (108,761) Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities: 6600 Depreciation 207,362 (Increase) Decrease in Assets: S1200-500 Other Receivables and HUD Receivables 2,659 S1200-520 Prepaid Expenses 444 S1200-530 Tenant Security Deposits (119) Increase (Decrease) in Liabilities: S1200-540 Accounts Payable (17,007) S1200-560 Accrued Expense 20 S1200-610 Net Cash Provided by Operating Activities $ 84,598 (16)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 SUPPLEMENTAL SCHEDULE OF STATEMENT OF FINANCIAL POSITION Line 2190 "Miscellaneous Current Liabilities" Due to MRC $ 3,100 Due to MRC Crestview 136 Total Miscellaneous Current Liabilities $ 3,236 SUPPLEMENTAL SCHEDULE OF STATEMENT OF ACTIVITIES Line 6390 "Miscellaneous Administrative Expenses" Travel $ 5,757 Social Activities Expense 4,669 Dues and Licenses 1,342 Employee Appreciation 404 Uniforms 863 Cable Television 119 Contract Labor 2,020 Other Miscellaneous Administrative Expenses 914 Total Miscellaneous Administrative Expenses $ 16,088 Line 6590 "Operating and Maintenance Expenses" Repairs - Building $ 55,654 Alarm System - Fire, Sprinkler 3,483 Elevator 6,164 Exterminating 5,786 Grounds and Landscaping 20,451 Equipment Rental 4,239 Total Operating and Maintenance Expenses $ 95,777 Line 6790 "Miscellaneous Taxes, Licenses, and Insurance" Brokerage Fee Insurance $ 230 Miscellaneous Insurance 130 Total Miscellaneous Taxes, Licenses, and Insurance $ 360 (17)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 RESERVE FOR REPLACEMENTS AND RESIDUAL RECEIPTS In accordance with provisions of the Regulatory Agreement, cash is deposited into separate bank accounts to be used for the replacement of property and equipment and various other uses. Surplus cash is required to be deposited into the residual receipts reserve account. Disbursements from these accounts require prior written approval from HUD. Current year activity was as follows: Account Number Schedule of Reserve for Replacement 1320P Balance, January 1, 2017 $ 255,540 1320DT Required Monthly Deposits 28,152 1320INT Interest 538 1320R Balance, December 31, 2017 $ 284,230 Schedule of Residual Receipts 1340P Balance, January 1, 2017 $ 65,782 1340INT Interest 107 1340R Balance, December 31, 2017 $ 65,889 COMPUTATION OF SURPLUS CASH Account Number Current Assets: S1300-010 Cash $ 68,987 S1300-040 Total Cash $ 68,987 Current Liabilities: S1300-075 Accounts Payable - Trade 43,094 S1300-100 Accrued Salaries and Payroll Taxes 7,173 2191 Tenant Security Deposits 18,517 S1300-110 Related Party Payables 3,236 S1300-140 Total Current Obligations 72,020 S1300-150 Cash Deficit at December 31, 2017 $ (3,033) (18)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 SCHEDULE OF CHANGES IN PROPERTY AND EQUIPMENT 1410P Beginning Balance for 1410 $ 508,706 1410AT Additions for 1410-1410 Land 508,706 1420P Beginning Balance for 1420 6,351,917 1420AT Additions for 1420 24,387 1420DT Disposals for 1420-1420 Buildings 6,376,304 1440P Beginning Balance for 1440 141,354 1440OAT Additions for 1440 15,101 1440 Building Equipment (Portable) 156,455 1450P Beginning Balance for 1450 342,659 1450AT Additions for 1450 31,938 1450 Furniture for Project/Tenant Use 374,597 1460P Beginning Balance for 1460 2,415 1460AT Additions for 1460-1460 Furnishings 2,415 1400PT Total Beginning Balance for Fixed Assets 7,347,051 1400AT Total Asset Additions 71,426 1400DT Total Asset Disposals - 1400T Total Fixed Assets 7,418,477 1495P Beginning Balance for 1495 1,711,024 6600 Total Provisions 207,362 1495 Ending Balance for Accumulated Depreciation 1,918,386 1400N Total Net Book Value $ 5,500,091 (19)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 Fixed Asset Additions: Furniture: Building and Improvements: Computer $ 3,624 REAC Upgrades $ 6,727 Exterior Cameras 6,374 Hand Rails, Crown Molding, and Common Area Furniture 15,943 Paint 17,660 Gliders/Benches 5,997 Total $ 24,387 Total $ 31,938 Equipment: A/C Units $ 15,101 (20)
SUPPORTING DATA REQUIRED BY HUD YEAR ENDED DECEMBER 31, 2017 Account Number S1000-010 Total Mortgage Principal Payments Required During the Audit Year $ - S1000-020 Total of 12 Monthly Deposits in the Audit Year into the Replacement Reserve Account, as Required by the Regulatory Agreement even if Payments may be Temporarily Suspended or Reduced $ 28,152 S1000-030 Replacement Reserve, or Residual Receipts and Releases which are Included as Expense Items on the Statement of Profit and Loss $ - S1000-040 Project Improvement Reserve Releases under the Flexible Subsidiary Program that are Included as Expense Items on the Statement of Profit and Loss $ - 1320R Waiver Obtained for Deposits into Replacement Reserve No (21)
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2017 Federal Federal Federal Grantor/Pass-Through Grantor/Program Title CFDA No. Expenditures U.S. Department of Housing and Urban Development: Section 202 Capital Advance 14.157 $ 6,540,735 Section 8 Housing Assistance Payments 14.195 367,591 Total $ 6,908,326 See accompanying Notes to Schedule of Expenditures of Federal Awards. (22)
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS DECEMBER 31, 2017 NOTE 1 BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of Bayview Senior Housing under programs of the federal government for the year ended December 31, 2017. The information in this Schedule is presented in accordance with the requirements of 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Bayview Senior Housing it is not intended to and does not present the financial position, changes in net assets, or cash flows of Bayview Senior Housing. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Bayview Senior Housing has elected to use the 10% de minimis indirect cost rate as allowed under the Uniform Guidance. (23)
CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Bayview Senior Housing LaPorte, Texas 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 Bayview Senior Housing, which comprise the statement of financial position as of December 31, 2017, and the related statements of activities and changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 21, 2018. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Bayview Senior Housing's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Bayview Senior Housing s internal control. Accordingly, we do not express an opinion on the effectiveness of Bayview Senior Housing s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. (24)
Board of Directors Bayview Senior Housing Compliance and Other Matters As part of obtaining reasonable assurance about whether Bayview Senior Housing 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. 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 result of that testing, and not to provide an opinion on the effectiveness of Bayview Senior Housing's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Bayview Senior Housing s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CliftonLarsonAllen LLP Dallas, Texas March 21, 2018 (25)
CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Directors Bayview Senior Housing LaPorte, Texas Report on Compliance for Each Major Federal Program We have audited Bayview Senior Housing 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 Bayview Senior Housing s major federal programs for the year ended December 31, 2017. Bayview Senior Housing s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of Bayview Senior Housing 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 a major federal program occurred. An audit includes examining, on a test basis, evidence about Bayview Senior Housing s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Bayview Senior Housing s compliance. Opinion on Each Major Federal Program In our opinion, Bayview Senior Housing complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2017. (26)
Board of Directors Bayview Senior Housing Report on Internal Control Over Compliance Management of Bayview Senior Housing 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 Bayview Senior Housing 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 Bayview Senior Housing s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. CliftonLarsonAllen LLP Dallas, Texas March 21, 2018 (27)
SCHEDULE OF FINDINGS AND QUESTIONED COSTS DECEMBER 31, 2017 Section I Summary of Auditors Results Financial Statements 1. Type of auditors report issued: Unmodified 2. Internal control over financial reporting: Material weakness(es) identified? yes x no Significant deficiency(ies) identified? yes x none reported 3. Noncompliance material to financial Statements noted? yes x no Federal Awards 1. Internal control over major federal programs: Material weakness(es) identified? yes x no Significant deficiency(ies) identified? yes x none reported 2. Type of auditors report issued on compliance for major federal programs: Unmodified 3. Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes x no Identification of Major Federal Programs CFDA Number(s) Name of Federal Program or Cluster 14.157 Section 202 Capital Advance Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee x yes no (28)
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) DECEMBER 31, 2017 Section II Financial Statement Findings Our audit did not disclose any matters required to be reported in accordance with Government Auditing Standards. Section III Findings and Questioned Costs Major Federal Programs Our audit did not disclose any matters required to be reported in accordance with 2 CFR 200.516(a). Section IV Prior Year Findings There were no findings in the prior year that were required to be reported. (29)
MORTGAGOR S CERTIFICATION DECEMBER 31, 2017 We hereby certify that we have examined the foregoing financial statements and supplemental information of Bayview Senior Housing, HUD Project No. 114-EE133-CA and, to the best of our knowledge and belief, the same are complete and accurate. BAYVIEW SENIOR HOUSING METHODIST RETIREMENT COMMUNITIES Ron Jennette, CEO Date Don Stephens, CFO Date Employer Identification Number: 20-8289146 (30)
MANAGEMENT AGENT S CERTIFICATION DECEMBER 31, 2017 I hereby certify that I have examined the foregoing financial statements and supplemental information of Bayview Senior Housing, HUD Project No. 114-EE133-CA and, to the best of my knowledge and belief, the same are complete and accurate. Don Stephens, CFO Methodist Retirement Communities Date Managing Agent s Employer Identification Number: 74-2989751 (31)