FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION Years Ended June 30, 2017 and 2016
TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT 1-2 FINANCIAL STATEMENTS Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 Notes to Financial Statements 6-10 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 11 Notes to Schedule of Expenditures of Federal Awards 12 Schedule of Findings and Questioned Costs 13 Schedule of Revenues and Expenses by Funding Source 14 REPORTS ON COMPLIANCE AND INTERNAL CONTROL Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 15-16 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance 17-18
INDEPENDENT AUDITOR S REPORT January 3, 2018 To the Board of Directors of Homeownership Center of Tacoma Tacoma, Washington Report on the Financial Statements I have audited the accompanying financial statements of Homeownership Center of Tacoma (a nonprofit organization) which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities and cash flows for the years 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. Auditor s Responsibility My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits 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 I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, I 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. 1
Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Homeownership Center of Tacoma as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter Other information My audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. The schedule of revenues and expenses by funding source on page 14 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the 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 my 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, I have also issued my report dated January 3, 2018, on my consideration of Homeownership Center of Tacoma s internal control over financial reporting and on my 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 my testing of internal control over financial reporting and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Homeownership Center of Tacoma s internal control over financial reporting and compliance. Mary Jane Dubbs Certified Public Accountant University Place, Washington 2
ASSETS HOMEOWNERSHIP CENTER OF TACOMA STATEMENTS OF FINANCIAL POSITION June 30, 2017 and 2016 2017 2016 Current assets Cash and cash equivalents 325,693 91,116 Prepaid expenses 2,614 2,712 Grants receivable 96,348 4,553 Construction in process 948,845 1,049,284 Real estate held for sale 553,209 522,720 Total current assets 1,926,709 1,670,385 Property and equipment Furniture and equipment 28,924 27,703 Building 99,359 99,359 Land 42,173 42,173 Less: accumulated depreciation (76,362) (71,541) Total property and equipment 94,094 97,694 Other assets Notes receivable 1,023,729 1,129,669 Land held for development 269,750 260,596 Total other assets 1,293,479 1,390,265 TOTAL ASSETS 3,314,282 3,158,344 LIABILITIES AND NET ASSETS Current liabilities Accounts payable 17,936 2,396 Accrued expenses 22,991 21,176 Deferred revenue 13,581 13,581 Notes payable 515,594 738,376 Current portion of long-term debt 8,108 8,440 Total current liabilities 578,210 783,969 Long term debt, net of current portion 1,262,384 1,270,455 TOTAL LIABILITIES 1,840,594 2,054,424 Net assets Unrestricted 852,124 482,356 Permanently restricted 621,564 621,564 TOTAL NET ASSETS 1,473,688 1,103,920 TOTAL LIABILITIES AND NET ASSETS 3,314,282 3,158,344 3 See accompanying notes.
STATEMENTS OF ACTIVITIES Years Ended June 30, 2017 and 2016 2017 2016 Permanently Permanently Unrestricted Restricted Total Unrestricted Restricted Total SUPPORT AND OTHER REVENUES Support: Grants 874,044-874,044 838,479-838,479 Contributions 5,169-5,169 143-143 Revenue: Property sales 890,000-890,000 648,625-648,625 Developer fees 125,000-125,000 100,000-100,000 Other income 2,725-2,725 6,833-6,833 TOTAL SUPPORT AND OTHER REVENUES 1,896,938-1,896,938 1,594,080-1,594,080 EXPENSES Program Services: Housing development 1,095,229-1,095,229 965,141-965,141 Mortgage lending 4,153-4,153 18,881-18,881 Client service 127,283-127,283 124,553-124,553 Total program services 1,226,665-1,226,665 1,108,575-1,108,575 Support Services: General and administrative 300,505-300,505 294,043-294,043 TOTAL EXPENSES 1,527,170-1,527,170 1,402,618-1,402,618 CHANGES IN NET ASSETS 369,768-369,768 191,462-191,462 NET ASSETS, BEGINNING OF YEAR 482,356 621,564 1,103,920 290,894 621,564 912,458 NET ASSETS, END OF YEAR 852,124 621,564 1,473,688 482,356 621,564 1,103,920 4 See accompanying notes.
STATEMENTS OF CASH FLOWS Years Ended June 30, 2017 and 2016 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from clients and grants 859,991 804,639 Cash paid to suppliers and employees (501,534) (437,765) Cash paid to home developing (193,621) (567,739) Interest paid (2,212) (2,593) Net cash used by operating activities 162,624 (203,458) CASH FLOWS FROM INVESTING ACTIVITIES Repayment of notes by homeowners 105,940 54,200 Sale of land held for development - 31,375 Payment for land held for development (9,154) (4,421) Purchase of equipment (1,221) - Net cash provided by investing activities 95,565 81,154 CASH FLOWS FROM FINANCING ACTIVITIES Payment on short-term borrowings (15,209) (36,125) Payment on long-term borrowings (8,403) (8,022) Net cash used by financing activities (23,612) (44,147) NET DECREASE IN CASH AND CASH EQUIVALENTS 234,577 (166,451) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 91,116 257,567 CASH AND CASH EQUIVALENTS AT END OF YEAR 325,693 91,116 RECONCILIATION OF NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Increase (decrease) in net assets 369,768 191,462 Adjustments to reconcile net assets to net cash provided (used) by operating activities: Loss on sale of land for development - 1,626 Depreciation 4,821 4,576 Bad debts - 13,900 Non-cash change in real estate held for sale and construction in process (70,362) (139,702) Noncash settlement of debt (137,211) - (Increase) decrease in: Prepaid expenses 98 481 Grants receivable (91,795) 23,095 Construction in process and real estate held for sale 69,950 (74,090) Accounts payable 15,540 (49,459) Accrued expenses 1,815 3,150 Deferred Revenue - (166,953) Retainage payable - (11,544) NET CASH USED BY OPERATING ACTIVITIES 162,624 (203,458) Supplemental Disclosures Notes issued on homes purchased 148,800 400,680 Notes satisfied by homes sold (219,162) (540,382) Non-cash change in real estate held for sale and construction in process (70,362) (139,702) Debts settled by grants 5 137,211 - See accompanying notes.
NOTES TO FINANCIAL STATEMENTS NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History of Organization Homeownership Center of Tacoma (the Organization) is a Washington not-for-profit organization established in Washington in 1993 to foster neighborhood revitalization through homeownership. Nature of Activities Its primary objectives are to construct and rehabilitate single family unit homes and to sell them to first-time homebuyers in selected target neighborhoods of Tacoma, Washington. The Organization also provides a full range of homeownership counseling and buyer assistance to help low and moderate-income homebuyers become successful in obtaining homes. Basis of Accounting The financial statements of the Organization have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. Basis of Presentation The Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Fair Value Disclosures The fair value of financial instruments including cash and cash equivalents, receivables and payable approximates the carrying values, principally because of the short maturity of those items. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, the Organization considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. Property and Equipment The Organization capitalizes all expenditures for property and equipment in excess of $5,000. Purchased property and equipment are carried at cost. Donated property and equipment are carried at fair value at the date of donation. Depreciation is computed using the straight-line method based on an estimated useful life. Accounting for Grants Cost reimbursement grant revenues are recorded as revenue at the time allowable expenses are incurred. Amounts due for reimbursement of allowable costs but not received are recorded as a receivable. 6
NOTES TO FINANCIAL STATEMENTS NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Restricted and Unrestricted Revenue Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. All other donorrestricted contributions are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activities as net assets released from restrictions. Income Taxes The Organization is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code except on net income derived from unrelated business activities. The Organization had no unrelated business activities. The Organization believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. The Organization s federal information returns are subject to possible examination by the taxing authorities until the expiration of related statutes of limitations on those tax returns, which is generally three years. NOTE B DESCRIPTION OF PROGRAM AND SUPPORTING SERVICES The following programs and supporting services are included in the accompanying financial statements: Program Services: The Organization offers newly constructed or rehabilitated homes to modest-income home buyers where the monthly payment is tailored to the household s income. The Organization also provides a full range of homeownership counseling and buyer assistance to help low and moderate-income homebuyers become successful in obtaining homes. Management and General: Includes the functions necessary to maintain an equitable employment program; ensure an adequate working environment; provide coordination and articulation of the Organization s program strategy; secure proper administrative functioning of the Board of Directors; and manage the financial and budgetary responsibilities of the Organization. NOTE C CONSTRUCTION IN PROCESS, REAL ESTATE HELD FOR SALE AND LAND HELD FOR DEVELOPMENT These accounts consist of acquisition, construction, rehabilitation and other costs pertaining to the development of homes for sale. The homes are reclassified as it progress through its stages of development. Sold units are charged to housing development using specific identification method. 7
NOTES TO FINANCIAL STATEMENTS NOTE C CONSTRUCTION IN PROCESS, REAL ESTATE HELD FOR SALE AND LAND HELD FOR DEVELOPMENT (Continued) The home units as of June 30, 2017, reported at net realizable value, consists of: Construction In process Real Estate Held for Sale Land held for development No of units 8 3 4 Historical Cost 1,083,813 553,209 269,750 Estimated loss when sold (134,968) - - Net realizable value 948,845 553,209 269,750 The home units as of June 30, 2016, reported at net realizable value, consists of: Construction In process Real Estate Held for Sale Land held for development No of units 8 3 4 Historical Cost 1,184,252 522,720 260,596 Estimated loss when sold (134,968) - - Net realizable value 1,049,284 522,720 260,596 NOTE D NOTES RECEIVABLE Notes receivable are comprised of second and third mortgages held in connection with the sale of houses to assist in the affordability of homes to homebuyers. These notes are long-term and repayment does not begin until the first mortgage is paid. The notes earn no interest, and are secured by second and third liens on the property. No allowance for loan loss has been reserved at June 30, 2017 and 2016. Included in mortgage lending expenses for the year ended June 30, 2016 were $13,900 of notes written off due to foreclosure of underlying property. NOTE E NOTES PAYABLE The Organization utilizes short-term construction loans from banks, which are due within one year after sale of houses. The notes are collateralized by the construction in process and bear interests at 4.5% to 5.25%, with interest due monthly. The construction loans had a balance of $515,594 and $601,165 as of June 30, 2017 and 2016, respectively. The organization has zero interest short-term financing from the Neighborhood Stabilization Fund. The loan is for the acquisition and rehabilitation of foreclosed properties to be sold to a target population. The organization purchased four properties and sold one property during the year. The loan balances at June 30, 2016 were $137,411, collateralized by purchased properties. 8
NOTES TO FINANCIAL STATEMENTS NOTE F LONG TERM DEBT Long term debts at June 30, consist of: 9 2017 2016 No- interest revolving loan fund, State of Washington, Department of Community Development - Affordable Housing Program, due within 45 days of program discontinuance or on January 1, 2045, renewable in five year increments 600,000 600,000 No-interest revolving fund, City of Tacoma/U.S. Department of Housing and Urban Development - HOME Investment Partnership Agreement, due on January 1, 2045 626,678 626,678 Variable interest bank note secured by office building, monthly payment of interest and principal of $885, balance due on January 28, 2022. 43,814 52,217 Total 1,270,492 1,278,895 Less: Current portion (8,108) (8,440) Net long-term debt 1,262,384 1,270,455 Future maturities of the notes for years ending June 30 are as follows: 2018 8,108 2019 9,234 2020 9,647 2021 10,096 2022 5,922 Thereafter 1,227,485 Total 1,270,492 The HOME Investment Partnership Agreement requires the Organization to establish a Revolving Loan Fund for the purpose of receiving and accounting for the repayment of principal and interest on loans funded from the program. The proceeds from the sale of property and any income derived from the deposits, investment or use of such funds shall be deposited in the Revolving Loan Fund. The Organization did not maintain such funds. NOTE G COMMITMENTS In 1998, the Organization received $920,000 State revolving loan funds for developing homes and selling it to twenty (20) target populations. The Organization has a 30-year commitment to use the funds under the terms of the agreement which will expire on June 30, 2030. The Organization recognized the forgivable loan as grants income in previous years because the Organization has no plan to default on any of the loan terms.
NOTES TO FINANCIAL STATEMENTS NOTE G COMMITMENTS (Continued) In a related agreement, the Organization received $460,000 State revolving loan funds for homebuyer down-payment assistance to twenty (20) target population. The Organization has a 30-year commitment to use the funds under the terms of the agreement which will expire on June 30, 2032. The Organization recognized the forgivable loan as grants income in previous years because the Organization has no plan to default on any of the loan terms. NOTE H RESTRICTED NET ASSETS Permanently restricted net assets represents grant funds which are required to be held in a revolving loan fund. The funds are to be used for second mortgages on homes sold. The Organization had no temporarily restricted net assets at June 30, 2017 and 2016. NOTE I OPERATING LEASE The Organization has an operating lease for office equipment which expires in April 2020 and requires monthly minimum payments of $518. Rental expense totaled $6,018 and $6,850 for the years ended June 30, 2017 and 2016, respectively. Future minimum lease payments required under the operating lease for years ending June 30 are: NOTE J SUBSEQUENT EVENTS 2018 6,217 2019 6,217 2020 5,180 17,614 Subsequent events were evaluated through January 3, 2018, which is the date the financial statements were available to be issued. There were no subsequent events that are material to the financial statements. 10
SUPPLEMENTARY INFORMATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2017 CFDA Federal Agency Name Number ID Number Expenditures U.S. Department of Housing and Urban Development Pass-through from State of Washington Community Trade and Economic Development: Home Investment Partnership Program loan balance 14.239 unknown 626,678 Pass-through from City of Tacoma, Washington Home Investment Partnership Program 14.239 unknown 202,692 Total Home Investment Partnership Program 829,370 Pass-through from City of Tacoma, Washington Neighborhood Stabilization Program 14.228 unknown 140,264 TOTAL EXPENDITURES OF FEDERAL AWARDS 969,634 11 See notes to schedule of expenditures of federal awards.
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2017 NOTE A BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Homeownership Center of Tacoma under programs of the federal government. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulation (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 Homeownership Center of Tacoma, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Homeownership Center of Tacoma. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (1) 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 to reimbursement. (2) Pass-through entity identifying numbers are presented where available. 12
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2017 A. SUMMARY OF AUDIT RESULTS 1. The auditor s report expresses an unqualified opinion on the financial statements of Homeownership Center of Tacoma (the Organization). 2. There were no significant deficiencies relating to the audit of the financial statements reported in the Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standard. 3. No instances of noncompliance material to the financial statements of the Organization were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal awards programs are reported in the Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance. 5. The auditor s report on compliance for the major federal award programs for the Organization expresses an unqualified opinion. 6. Audit findings that are required to be reported in accordance with 2 CFR sections 200.516(a) of the Uniform Guidance are reported in this schedule. 7. The programs tested as major programs include: Housing and Urban Development HOME Funds CFDA 14.239. 8. The threshold for distinguishing Types A and B programs was $750,000. 9. The Organization qualifies as a low-risk auditee. B. FINDINGS- FINANCIAL STATEMENTS AUDIT None C. FINDINGS AND QUESTIONED COSTS- MAJOR FEDERAL AWARD PROGRAMS AUDIT None 13
SCHEDULE OF REVENUES AND EXPENSES BY FUNDING SOURCE Year Ended June 30, 2017 State of Washington Neighborhood Stabilization Fund Funding Source Home Fund Other Total Revenues - - 990,314 230,103 1,220,417 Contributions 534,141 137,210-5,169 676,520 534,141 137,210 990,314 235,272 1,896,937 Expenses Housing development - - 867,851 244,000 1,111,851 Mortgage Lending - - - 4,153 4,153 General and administrative Salaries and wages - - - 316,906 316,906 Employee benefits - - - 33,492 33,492 Payroll taxes - - - 26,373 26,373 Professional services - - - 11,079 11,079 Office expense - - - 13,064 13,064 Telephone - - - 5,335 5,335 Occupancy - - - 14,504 14,504 Interest expense - - - 2,213 2,213 Depreciation - - - 4,821 4,821 Total expenses - - 867,851 675,940 1,543,791 Increase in net assets 534,141 137,210 122,463 (440,668) 353,146 14
REPORTS ON COMPLIANCE AND INTERNAL CONTROL
INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS January 3, 2018 To the Board of Directors of Homeownership Center of Tacoma Tacoma, Washington I have audited, 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, the financial statements of Homeownership Center of Tacoma (a nonprofit organization) which comprise the statement of financial position as of June 30, 2017, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements, and have issued my report thereon dated January 3, 2018. Internal Control Over Financial Reporting In planning and performing my audit, I considered Homeownership Center of Tacoma s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Homeownership Center of Tacoma s internal control. Accordingly, I do not express an opinion on the effectiveness of the Organization 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 significant 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, 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. My 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 my audit I did not identify any deficiencies in internal control that I consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 15
Compliance and Other Matters As part of obtaining reasonable assurance about whether Homeownership Center of Tacoma s financial statements are free of material misstatement, I 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 my audit, and accordingly, I do not express such an opinion. The results of my 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 my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Mary Jane Dubbs Certified Public Accountant University Place, Washington 16
INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE January 3, 2018 To the Board of Directors of Homeownership Center of Tacoma Tacoma, Washington Report on Compliance for Each Major Federal Program I have audited the Homeownership Center of Tacoma s (a nonprofit organization) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Homeownership Center of Tacoma s major federal programs for the year ended June 30, 2017. Homeownership Center of Tacoma s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility My responsibility is to express an opinion on compliance for each of Homeownership Center of Tacoma s major federal programs based on my audit of the types of compliance requirements referred to above. I conducted my 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 I 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 Homeownership Center of Tacoma s compliance with those requirements and performing such other procedures as I considered necessary in the circumstances. I believe that my audit provides a reasonable basis for my opinion on compliance for each major federal program. However, my audit does not provide a legal determination of Homeownership Center of Tacoma s compliance. 17
Opinion on Each Major Federal Program In my opinion, Homeownership Center of Tacoma complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2017. Report on Internal Control Over Compliance Management of Homeownership Center of Tacoma is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing my audit of compliance, I considered Homeownership Center of Tacoma 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, I do not express an opinion on the effectiveness of Homeownership Center of Tacoma internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. My 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. I did not identify any deficiencies in internal control over compliance that I consider to be material weaknesses. However, material weaknesses may exist that were not identified. The purpose of this report on internal control over compliance is solely to describe the scope of my 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. Mary Jane Dubbs Certified Public Accountant University Place, Washington 18