FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION JUNE 30, 2012 AND 2011
TABLE OF CONTENTS JUNE 30, 2012 AND 2011 Page(s) Independent Auditors Report 1 2 Basic Financial Statements Balance Sheets 3 4 Statements of Revenues, Expenses, and Changes in Net Assets 5 Statements of Cash Flows 6 Notes to Financial Statements 7 14 Supplementary Information Required by HUD 15 18 Schedule of Expenditures of Federal Awards 19 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 20 21 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-133 22 23 Schedule of Findings and Questioned Costs in Accordance with OMB Circular A-133 24 25 Summary Schedule of Prior Audit Findings and Questioned Costs in Accordance with OMB Circular A-133 26 Corrective Action Plan in Accordance with OMB Circular A-133 27 Compensation of Officers 28 Corporate Officers' Certificate 29 Management Agents' Certification 30 Independent Accountants Report on Applying Agreed-Upon Procedure and Attachment 31 32
INDEPENDENT AUDITORS REPORT To the Board of Directors, University Village Apartments, Inc.: We have audited the accompanying balance sheet of University Village Apartments, Inc. (the Corporation), HUD Project No. 063-55008 NP, a component unit of the University of Florida, as of June 30, 2012, and the related statements of revenues, expenses, and changes in net assets, and cash flows for the year then ended. These financial statements are the responsibility of the Corporation s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Corporation as of and for the year ended June 30, 2011 were audited by other auditors whose report dated September 27, 2011, expressed an unqualified opinion on those statements. As discussed in Note 15, the Corporation has restated its 2011 financial statements during the current year to correctly state accumulated depreciation in conformity with accounting principles generally accepted in the United States of America. The other auditors reported on the 2011 financial statements before the restatement. 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 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 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 opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of University Village Apartments, Inc. as of June 30, 2012, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Corporation has not presented management's discussion and analysis that Governmental Accounting Standards Board (GASB) has determined it is necessary to supplement, although not required to be part of, the basic financial statements. - 1 -
In accordance with Government Auditing Standards, we have also issued a report dated September 21, 2012, on our consideration of the Corporation s internal control over financial reporting. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting. In accordance with Government Auditing Standards, we have also issued an opinion dated September 21, 2012, on the Corporation s compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters that could have a direct and material effect on a major HUD assisted program. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information on pages 15-18 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 basic 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 Government and Non-Profit Organizations, 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 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. Gainesville, Florida September 21, 2012-2 -
BALANCE SHEETS JUNE 30, 2012 AND 2011 ASSETS 2011 2012 (As restated - See Note 15) Account No. Current assets 1120 Cash in bank $ 37,459 $ 37,369 1120 Due from University of Florida 112,265 44,416 1130 Accounts receivable - tenants 42,637 40,494 1131 (Reserve for collection losses) (23,921) (23,282) Net accounts receivable - tenants 18,716 17,212 1200 Prepaid insurance 41,137 40,047 Total current assets 209,577 139,044 Restricted deposits and funded reserves 1310 Mortgage insurance escrow deposit 5,695 10,724 1320 Reserve for replacements 275,108 186,450 1340 Residual receipts reserve 77,872 77,814 Total restricted deposits and funded reserves 358,675 274,988 Fixed assets, at cost 1410-1470 Land, building, and equipment 4,632,822 4,556,385 1495 (Accumulated depreciation) (4,072,668) (3,952,547) 560,154 603,838 1490 Leasehold cost 182,483 182,483 1490 (Accumulated amortization) (76,349) (74,448) 106,134 108,035 Total fixed assets 666,288 711,873 Other assets 1520 Mortgage financing costs 182,325 182,325 1520 (Accumulated amortization) (181,555) (176,939) Total other assets 770 5,386 Total Assets $ 1,235,310 $ 1,131,291 The accompanying notes to the financial statements are an integral part of these statements. - 3 -
BALANCE SHEETS JUNE 30, 2012 AND 2011 (Continued) LIABILITIES 2012 2011 (As restated - See Note 15) Account No. Current liabilities 2110 Accounts payable - operations $ 927,233 $ 409,052 2120 Salaries and fringe benefits payable 258,003 58,416 2131 Accrued interest payable 81 400 2170 Mortgage payable - current portion 32,518 127,564 Total current liabilities 1,217,835 595,432 Deposit and prepayment liabilities 2191 Unearned rent 57,755 65,957 Total deposit and prepayment liabilities 57,755 65,957 Long-term liabilities 2320 Mortgage payable 32,518 160,186 2322 (Current portion) (32,518) (127,564) Total long-term liabilities - 32,622 Total Liabilities 1,275,590 694,011 NET ASSETS (DEFICIT) Net assets (deficit) 3130 Invested in capital assets, net of related debt 527,636 443,652 3131 Unrestricted (567,916) (6,372) Total net assets (deficit) (40,280) 437,280 Total Liabilities and Net Assets (Deficit) $ 1,235,310 $ 1,131,291 The accompanying notes to the financial statements are an integral part of these statements. - 4 -
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2012 AND 2011 Account No. 2012 2011 (As restated - See Note 15) Revenue 5120 Rent revenue - gross potential $ 1,305,480 $ 1,305,480 5220 Vacancies - Apartments (38,651) (42,810) Total rent revenue 1,266,829 1,262,670 Other operating revenue 5910 Laundry and vending revenue 18,000 18,000 5920 Tenant charges 4,170 2,638 5990 Miscellaneous revenue - tenant utilities 106,101 116,362 Other operating revenue 128,271 137,000 Total operating revenue 1,395,100 1,399,670 Operating expenses 6311 Office and telephone expenses 37,175 37,507 6320 Management fee 123,895 125,312 6330 Manager 26,652 28,493 6350 Audit expenses 14,500 13,800 6370 Bad debt expense (recovery) 639 (1,089) 6390 Miscellaneous administrative expenses 119 175 6450 Electricity 152,998 159,872 6451 Water 18,178 16,521 6452 Gas 1,691 1,776 6453 Sewer 24,883 26,413 6510 Payroll 317,353 336,435 6515 Repair and maintenance/supplies 428,297 485,135 6520 Contracts 502,501 94,410 6525 Garbage and trash removal 13,390 14,225 6590 Miscellaneous operating expenses 30,949 30,940 6600 Depreciation 120,121 114,854 6610 Amortization 6,517 6,517 6720 Property and liability insurance 50,574 47,301 Total operating expenses 1,870,432 1,538,597 Operating loss (475,332) (138,927) Nonoperating revenues (expenses) 5410 Interest income 240 179 5430-5440 Revenue from investments 272 319 6820 Interest on mortgage payable (2,740) (6,518) Total nonoperating revenues (expenses) (2,228) (6,020) Net change in net assets (477,560) (144,947) Net assets, beginning of year, as restated 437,280 582,227 Net Assets, end of year $ (40,280) $ 437,280 The accompanying notes to the financial statements are an integral part of these statements. - 5 -
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2012 AND 2011 2012 Cash flows from operating activities Cash received from: Rental and utility income 1,294,737 2011 (As restated - See Note 15) $ $ 1,464,431 Vending income 18,000 18,000 Miscellaneous income 4,170 2,638 Cash disbursed for: Management fees (84,731) (125,312) Payroll and related expenses (255,362) (432,190) Utilities (457,104) (287,254) Repairs and maintenance (390,283) (355,056) Other administrative and operating 212,666 (8,804) Insurance deposits (46,635) (47,301) Net cash provided by operating activities 295,458 229,152 Cash flows from capital and related financing activities Interest paid on debt (3,059) (6,829) Payment of mortgage principal (127,668) (123,899) Net cash used in capital and related financing activities (130,727) (130,728) Cash flows from investing activities Net deposits to reserve for replacements (88,658) (88,655) Net deposits to residual receipts (58) (52) Property and equipment acquisitions (76,437) (136,732) Funds released from reserves and residual receipts - 139,189 Investment income 512 499 Net cash used in investing activities (164,641) (85,751) Net increase in cash 90 12,673 Cash, beginning of year 37,369 24,696 Cash, end of year $ 37,459 $ 37,369 Reconciliation of operating loss to net cash provided by operating activities Operating loss $ (475,332) $ (138,927) Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation 120,121 114,854 Amortization 6,517 6,517 Bad debt expense (recovery) 639 (1,089) Changes in certain assets and liabilities: Due from University (67,849) 78,739 Net accounts receivable - tenants (2,143) 5,387 Prepaid insurance 3,939 5,171 Accounts payable 518,181 224,489 Accrued payroll and related expenses 199,587 (67,262) Unearned rent (8,202) 1,273 Net cash provided by operating activities $ 295,458 $ 229,152 The accompanying notes to the financial statements are an integral part of these statements. - 6 -
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 (1) Organization and Summary of Significant Accounting Policies: (a) Reporting entity University Village Apartments, Inc. (the Corporation) is considered a component unit of the University of Florida. The Corporation is a nonprofit organization established in 1969 for the purpose of providing housing for low and moderate income families, especially those affiliated with the University of Florida. Capital was contributed at inception by the University of Florida Foundation, Inc., but no capital stock was issued because the Corporation does not operate for the benefit of any special interests. The Corporation provides housing under Section 221(d)(3) of the National Housing Act. The facility consists of 28 two-story buildings regulated by the U.S. Department of Housing and Urban Development (HUD) as to rent charges and operating methods. The Corporation's major program is its Section 221 insured loan which is in the repayment phase. Legal title to the property is held by the Corporation. All corporate powers are executed by or under the authority of the Board of Directors. The Board of Directors consists of seven individuals elected at the annual meeting. The Corporation has no employees. All employees are considered employees of the University of Florida Department of Housing and Residence Education and a percentage of salaries and wages are allocated to the Corporation. The Corporation reimburses the University of Florida Department of Housing and Residence Education on a monthly basis. (b) Governmental Accounting Standards Board (GASB) Statement No. 34 The financial statements of the Corporation have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The GASB is the standard-setting body for governmental accounting and financial reporting. (c) Basis of accounting For financial reporting purposes, the Corporation is considered a special purpose government engaged only in business-type activities. Accordingly, the Corporation's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Pronouncements of the Financial Accounting Standards Board (FASB) issued after November 30, 1989, are not applied in the preparation of these proprietary fund financial statements in accordance with GASB Statement No. 20. (d) Classification of Revenues The Corporation classifies its revenues as operating or nonoperating according to the following criteria: Operating Revenues Include activities that have the characteristics of exchange transactions, such as apartment rent and utilities, vending, and miscellaneous tenant charges. Nonoperating Revenues Include activities that have characteristics of nonexchange transactions, such as investment income. - 7 -
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 (1) Organization and Summary of Significant Accounting Policies: (Continued) (e) Net assets The Corporation's net assets are classified as follows: Invested in Capital Assets, Net of Related Debt Represents the Corporation's total investment in capital assets, net of outstanding debt obligations related to those capital assets. Unrestricted Represents net assets that are not restricted for any purpose and available for current operations. (f) Depreciation and amortization Property and equipment is stated at cost. Depreciation is computed using the straight-line method. The asset lives used, provisions for the year, and accumulated depreciation amounts are detailed by specific asset accounts in the schedule or property and equipment in the supplementary information section. Amortization is computed using the straight-line method. Amortization charged to current operations is as follows: 2012 2011 Leasehold Costs (99 years) $ 1,901 $ 1,901 Mortgage financing costs (39 1/2 years) 4,616 4,616 Total annual amortization expense $ 6,517 $ 6,517 (g) Income taxes The financial statements do not include a provision for federal or state income taxes. The Corporation is exempt under Section 501(c)(4) of the Internal Revenue Code. In regards to income tax uncertainties, it is the policy of management to evaluate its tax position on an ongoing basis and to disclose any such tax positions it believes would have a material impact on the financial statements and related notes. Management believes that no such required disclosure currently exists. Additionally, the Corporation is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2008. (h) Cash and cash equivalents For purposes of reporting cash flows, cash consists of operating cash in bank. (i) Investments Funds set aside in accordance with the Corporation's reserve requirements are currently invested in money market accounts. These investments are carried at cost, which is considered to be equal to fair value. (j) Accounts Receivable Tenants Consists of monthly apartment rental, utilities, and miscellaneous charges. The total represents charges for prior months that are still outstanding and owed by University of Florida students. - 8 -
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 (1) Organization and Summary of Significant Accounting Policies: (Continued) (k) Accounting 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, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (l) Budget Each year, management prepares a proposed budget to be approved by the Corporation's Board of Directors. Once approved, the budget is then submitted to HUD for final approval. (m) Fixed asset capitalization The Corporation capitalizes any equipment, fixtures, and other tangible personal property of a nonconsumable and nonexpendable nature with a cost of more than $5,000 and an expected life of one year or more. (2) Cash: The carrying amount of operating cash is as follows: Carrying Amount Bank Balance June 20, 2012 June 30, 2011 June 30, 2012 June 30, 2011 Cash $ 37,459 $ 37,369 $ 37,459 $ 37,369 The Corporation's operating cash is held in a money market account in the entity's name at a qualified financial institution and is fully insured by the FDIC up to $250,000. (3) Restricted Deposits and Funded Reserves: Restricted Deposits and Funded Reserves consist of a money market account held by the Corporation primarily for the purpose of funding the cost of timely replacements of structural components and mechanical equipment. Reserve for Replacements and Residual Receipts Reserve funds are to be used for repairs and replacement of property contingent upon the prior written approval of HUD. The deposits consist of money market accounts held by Wells Fargo Multi-family Capital and are fully insured up to $250,000 following the HUD investment guidelines. At times during the years ended June 30, 2012 and 2011, the Corporation held funds in excess of FDIC insurance limits. - 9 -
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 (4) Due from University of Florida: The University of Florida acts as a depository agency for tenants' rent and utility remittances, and transfers these funds to the Corporation upon request. The receivables of $112,265 and $44,416 at June 30, 2012 and 2011, respectively, represent June collections not yet transferred. (5) Accounts Receivable Tenants: Accounts Receivable - Tenants consist of receivables for rent, utilities, and miscellaneous rental charges of $42,637 and $40,494 at June 30, 2012 and 2011, respectively. The receivables are reduced by the allowance for doubtful accounts of $23,921 and $23,282 at June 30, 2012 and 2011, respectively. (6) Accounts Payable Operations: Accounts payable - operations consist of the following: 2012 2011 Garbage $ 8,910 $ 5,967 Water and sewer 28,024 17,016 Telephone 21,088 12,050 Grounds - 2,667 Cable television 18,053 10,316 Other expenses 9,557 11,588 Repairs and maintenance 303,755 191,537 Electricity 76,380 46,164 Management fee 70,619 31,455 Contracts 390,847 80,292 Total $ 927,233 $ 409,052 Operating expenses are paid directly by University Housing, a division of the University of Florida, upon presentation of an approved invoice. The Corporation reimburses University Housing periodically. At June 30, 2012 and 2011, the Accounts Payable- Operations account included three or more months' expenses for each year reimbursable to University of Florida Department of Housing and Residence Education. (7) Unearned Rent: Unearned rent represents rent collected in June for the current year for July of the following fiscal year. - 10 -
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 (8) Mortgage Payable: Construction of the Corporation's apartment buildings was financed by the issuance of a $3,023,300 mortgage under Section 221(d)(3) of the National Housing Act. The mortgage is for 39-1/2 years at 3% interest, and requires monthly payments of principal and interest of $10,894. Also required are monthly payments to escrow accounts as follows: 2012 2011 Mortgage and hazard insurance $ 3,774 $ 3,737 Reserve for replacements $ 7,375 $ 7,375 Both the insurance escrow deposit and the reserve for replacements are controlled by the Federal Housing Commissioner, and no disbursements can be made without first obtaining the Commissioner's consent. The mortgage agreement contains numerous restrictive covenants. The major restrictions are summarized as follows: (a) The apartments can only be rented to families having low or moderate income (limits established by the Commissioner) with preference being given to displaced families. (b) Units must be leased for a period of not less than 30 days or more than one year. (c) Rent charged for each unit must be in accordance with a rent schedule approved by the Commissioner. (d) The Corporation may not convey, transfer, or further encumber any of the mortgaged property or any personal property of the project, including rents, without prior approval of the Commissioner. (e) The Corporation may not pay out any funds, except for reasonable operating expenses and necessary repairs, nor remodel, add to, reconstruct, or demolish any part of the mortgaged property without the prior approval of the Commissioner. (f) The Corporation may not engage in any other business or activity, or incur any liability or obligation not in connection with the project, without the prior approval of the Commissioner. (g) The Corporation may not pay any compensation or incur any obligations to any of its officers or directors without the prior approval of the Commissioner. (h) Any cash remaining after the payment of sums currently due under the terms of the mortgage, all amounts required to be deposited in the reserve for replacements, and other obligations of the Corporation must be deposited with the Commissioner within 60 days after the fiscal year-end. - 11 -
(8) Mortgage Payable: (Continued) UNIVERSITY VILLAGE APARTMENTS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 The mortgage is secured by the leasehold, buildings, appliances, and equipment. Long-term mortgage obligation for the year ended June 30, 2012 is as follows: 6/30/2011 Balance Additions Deletions 6/30/2012 Balance Due Within One Year HUD Loan $ 160,186 $ - $ 127,668 $ 32,518 $ 32,518 Long-term mortgage obligation for the year ended June 30, 2011 is as follows: 6/30/2010 Balance Additions Deletions 6/30/2011 Balance Due Within One Year HUD Loan $ 284,085 $ - $ 123,899 $ 160,186 $ 127,564 The minimum future debt payments as of June 30, 2012, for the next year and in the aggregate are: Year Ending June 30, Total Minimum Debt Payments (Amount Representing Interest) Present Value of Net Minimum Debt Payments 2013 $ 32,355 $ (163) $ 32,518 Total $ 32,355 $ (163) $ 32,518 (9) Management Fees: The Corporation has entered into an agreement with the University of Florida Department of Housing and Residence Education for management services. The management fees for these services are 9% of gross earned income for the years ending June 30, 2012 and 2011. These fees are charged to cover services provided by the University of Florida Department of Housing and Residence Education, such as bookkeeping, accounting, occupancy, and marketing. These fees totaled $123,895 and $125,312 for the years ended June 30, 2012 and 2011, respectively. - 12 -
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 (10) Payroll Expenses: The following is a detail of payroll expenses for the years ended June 30: 2012 2011 Repairs salaries $ 262,233 $ 287,708 Janitorial salaries 14,789 13,370 Pool cleaning salaries 1,809 1,062 Exterminating salaries 18,724 19,942 Community assistant salaries 19,798 14,353 Total $ 317,353 $ 336,435 (11) Contracts Expense: The following is a detail of contract expenses for the years ended June 30: 2012 2011 Architect $ 2,199 $ 15,828 Windows - 47,137 Grounds 29,920 31,445 Network 470,382 - Total $ 502,501 $ 94,410 (12) Capital Assets: The following is a detail of capital asset activity for the year ended June 30, 2012: Beginning Balance Additions Deletions Ending Balance Capital assets being depreciated: Buildings and improvements $ 4,528,091 $ 76,437 $ - $ 4,604,528 Furniture and equipment 28,294 - - 28,294 Total capital assets being depreciated 4,556,385 76,437-4,632,822 Less accumulated depreciation for: Buildings and improvements 3,924,253 120,121-4,044,374 Furniture and equipment 28,294 - - 28,294 Total accumulated depreciation 3,952,547 120,121-4,072,668 Total capital assets, net $ 603,838 $ (43,684) $ - $ 560,154-13 -
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 (12) Capital Assets: (Continued) The following is a detail of capital asset activity for the year ended June 30, 2011: Beginning Balance Additions Deletions Ending Balance Capital assets being depreciated: Buildings and improvements $ 4,391,359 $ 136,732 $ - $ 4,528,091 Furniture and equipment 28,294 - - 28,294 Total capital assets being depreciated 4,419,653 136,732-4,556,385 Less accumulated depreciation for: Buildings and improvements 3,809,399 114,854-3,924,253 Furniture and equipment 28,294 - - 28,294 Total accumulated depreciation 3,837,693 114,854-3,952,547 Total capital assets, net $ 581,960 $ 21,878 $ - $ 603,838 (13) Operating Lease: The Corporation leases the land on which the apartments are located from an agency of the State of Florida. The term of the lease is 99 years, commencing on May 2, 1969. There are no monthly lease payments required, but the lease does require that occupancy preferences be given to University of Florida students and faculty who meet the income guidelines established by the Federal Housing Commissioner (see Note 8). There is no conveyance of title to the Corporation during the lease term or at its expiration, and all permanent fixtures at the expiration of the lease shall become the property of the lessor. (14) Risk Management: The Corporation is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the Corporation carries commercial insurance. Insurance against losses are provided through HRH Insurance for the following types of risk: General and Automotive Liability, Real and Personal Property Damage, and Director's Liability. (15) Prior Period Adjustment: Subsequent to the issuance of the Corporation s June 30, 2011 financial statements, management became aware of certain errors in the prior year calculation of accumulated depreciation and depreciation expense. The correction of these items in the June 30, 2011 statements had the following effects: assets increased by $223,358, expenses decreased by $77,470, and net assets increased by $223,358. - 14 -
SUPPLEMENTARY INFORMATION REQUIRED BY HUD
SCHEDULE OF RESERVE FOR REPLACEMENTS AND RESIDUAL RECEIPTS FOR THE YEAR ENDED JUNE 30, 2012 Reserve for Replacement In accordance with provisions of the regulatory agreement, restricted cash is held in an insured account by Wells Fargo to be used for repairs and replacement of property with the approval of HUD. Wells Fargo invests the funds as directed by the Corporation, which follows HUD-approved forms of investment. Beginning in fiscal year 1997, reserve for replacement funds were invested in insured money market deposit accounts and insured cash accounts. Any interest earned was reinvested in the reserve. Investment fees related to the account, which were $41 in 2012 and $86 in 2011, were paid by the reserve account funds. The account activity is as follows: 2012 2011 Balance at beginning of year $ 186,450 $ 236,984 Monthly Deposits ($7,375 x 12) 88,500 88,500 Interest reinvested 199 240 Investment Fees (41) (86) Transfer to Operating Cash Roof, Building - (139,188) Balance at end of year, confirmed by mortgagee $ 275,108 $ 186,450 Residual Receipts Reserve In accordance with provisions of the regulatory agreement, restricted deposits is held in an insured account by Wells Fargo to be used for repairs and replacement of property contingent upon the prior written approval of HUD. Account activity is as follows: 2012 2011 Balance at beginning of year $ 77,814 $ 77,763 Interest Revinvested 73 79 Investment Fees (15) (28) Balance at end of year, confirmed by mortgagee $ 77,872 $ 77,814-15 -
SCHEDULE OF CHANGES IN FIXED ASSET ACCOUNTS FOR THE YEAR ENDED JUNE 30, 2012 Fixed Assets Accumulated Depreciation Net Balance Balance Rate Balance Balance Book Value June 30, June 30, or June 30, June 30, June 30, Account No. 2011 Additions Deletions 2012 Life 2011 Additions Deletions 2012 2012 1420 Buildings Apartments $ 2,612,127 $ - $ - $ 2,612,127 40 Years $ 2,465,195 $ 65,303 $ - $ 2,530,498 $ 81,629 Apartment improvements 1,430,031 76,437-1,506,468 15 Years 973,125 54,818-1,027,943 478,525 Carpets 39,606 - - 39,606 5 Years 39,606 - - 39,606 - Air conditioning 285,085 - - 285,085 10 Years 285,085 - - 285,085 - Fencing 6,713 - - 6,713 10 Years 6,713 - - 6,713 - Playground 5,467 - - 5,467 7 Years 5,467 - - 5,467 - Swimming pool 40,859 - - 40,859 10 Years 40,859 - - 40,859 - Swimming pool building 2,284 - - 2,284 10 Years 2,284 - - 2,284 - Swimming pool fence 925 - - 925 10 Years 925 - - 925 - Swimming pool restroom 15,069 - - 15,069 10 Years 15,069 - - 15,069 - Total Buildings 4,438,166 76,437-4,514,603 3,834,328 120,121-3,954,449 560,154 1440 Building Equipment 35,646 - - 35,646 10 Years 35,646 - - 35,646-1460 Furnishings 54,279 - - 54,279 10 Years 54,279 - - 54,279-1465 Office Furniture and Equipment 7,756 - - 7,756 7 Years 7,756 - - 7,756-1470 Maintenance Equipment 20,538 - - 20,538 7 Years 20,538 - - 20,538-1490 Miscellaneous Fixed Assets Leasehold - Cost $ 182,483 $ - $ - $ 182,483 96 Years $ 74,448 $ 1,901 $ - $ 76,349 $ 106,134 Total Fixed Assets $ 4,738,868 $ 76,437 $ - $ 4,815,305 $ 4,026,995 $ 122,022 $ - $ 4,149,017 $ 666,288-16 -
COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS, AND RESIDUAL RECEIPTS FOR THE YEAR ENDED JUNE 30, 2012 Computation of Surplus Cash, Distributions, and Residual Receipts - Annual Part A: Cash (including due from University) $ 149,724 Current Obligations Accrued interest payable 81 Accounts payable 927,233 Salaries and fringe benefits payable 258,003 Unearned rent 57,755 Total current obligations 1,243,072 Surplus cash (deficiency) $ (1,093,348) Deposit due residual receipt $ - Other Revenue and Miscellaneous Administrative Expenses Other revenue (Account No. 5900) Utility charges to tenants $ 106,101 Miscellaneous administrative expenses (Account No. 6390) Bank and investment fees 57 Corporate filing fees 62 Total miscellaneous administrative expenses $ 119-17 -
LEAD AUDITOR INFORMATION JUNE 30, 2012 James Moore and Company, P.L. Certified Public Accountants Mr. Kenneth W. Kurdziel, CPA Audit Partner 5931 NW 1 st Place Gainesville, Florida 32607 (352) 378-1331 F.E.I. No. 59-3204548 - 18 -
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012 *Loan Federal Outstanding/ CFDA Federal Federal Grantor/Pass-Through Grantor/Program Title Number Expenditures U.S. Department of Housing and Urban Development Section 221(d)(3) Multi-family Rental Housing Loan 14.135 $ 32,518 Amount represents the outstanding loan balance for project constructed in prior years and is currently in repayment phase. Notes to Schedule of Expenditures of Federal Awards Note A Basis of Presentation The accompanying schedule of expenditures of federal awards, includes the federal grant activity of University Village Apartments, Inc. (HUD Project No. 063-55008 NP), and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of states, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. - 19 -
INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors, University Village Apartments, Inc.: We have audited the financial statements of the business-type activities of University Village Apartments, Inc., (the Corporation) HUD Project No. 063-55008 NP a component unit of the University of Florida, as of and for the year ended June 30, 2012, and have issued our report thereon dated September 21, 2012. 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. Internal Control Over Financial Reporting Management of the Corporation is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the Corporation s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Corporation s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Corporation s internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses. 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. We consider deficiency 2012-1 described in the accompanying schedule of findings and questioned costs to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Corporation's financial statements are free of 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 - 20 -
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 one instance of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as item 2012-2. Pursuant to Chapter 119, Florida Statutes, this report is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this report is intended solely for the information and use of management, the Board of Directors, others within the entity, and federal awarding agencies, and is not intended to be and should not be used by anyone other than these specified parties. Gainesville, Florida September 21, 2012-21 -
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-133 To the Board of Directors, University Village Apartments, Inc.: Compliance We have audited University Village Apartments, Inc. s (the Corporation), HUD Project No. 063-55008 NP a component unit of the University of Florida, compliance with the types of compliance requirements described in the OMB Circular A-133, Compliance Supplement, that could have a direct and material effect on its major federal program for the year ended June 30, 2012. The Corporation's major federal program is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to its major federal program is the responsibility of the Corporation's management. Our responsibility is to express an opinion on the Corporation's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Corporation'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. Our audit does not provide a legal determination on the Corporation's compliance with those requirements. As described in item 2012-2 in the accompanying schedule of findings and questioned costs, the Corporation did not comply with the eligibility determination requirements that are applicable to Multi- Family Rental Housing. Compliance with such requirements is necessary, in our opinion, for the Corporation to comply with the requirements applicable to that program. In our opinion, except for those instances of material noncompliance with the specific program requirements governing Multi-Family Rental Housing referred to in the third paragraph of this report and identified in the accompanying Schedule of Findings and Questioned Costs, the Corporation complied, in all material respects, with the compliance requirements described above that could have a direct and material effect on each of its major HUD-assisted programs for the year ended June 30, 2012. Internal Control Over Compliance Management of the Corporation is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to - 22 -
federal programs. In planning and performing our audit, we considered the Corporation's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Corporation's internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified a deficiency in internal control over compliance that we consider to be a material weakness. 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. We consider the deficiency in internal control over compliance described in the accompanying schedule of findings and questioned costs as item 2012-2 to be a material weakness. The Corporation s responses to the findings identified in our audit are described in the accompanying corrective action plan. We did not audit the Corporation s responses and, accordingly, we express no opinion on the responses. Pursuant to Chapter 119, Florida Statutes, this report is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this report is intended solely for the information and use of management, the Board of Directors, others within the entity, the U.S. Department of Housing and Urban Development, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Gainesville, Florida September 21, 2012-23 -
SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 Section I. Summary of Auditors' Results: Financial Statements Type of auditors' report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified X Yes No Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weakness(es) identified? X Yes No Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None reported Type of auditors' report issued on compliance for major programs: Qualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? X Yes No Identification of major programs: Dollar threshold used to distinguish between the type A and type B programs: CFDA No. 14.135, Multi-family Rental Housing $300,000 Auditee qualified as a low-risk auditee? X Yes No - 24 -
SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 (Continued) Section II. Findings relating to the Financial Statements Which are Required to be Reported in Accordance with Government Auditing Standards 2012-1: Prior Period Adjustment Management is responsible for assigning reasonable useful lives to all capitalized fixed assets. During the course of our audit, we noted multiple capitalized building improvements which were, by error, given inconsistent and unreasonable useful lives. Correcting this error and depreciating the building improvements using reasonable useful lives resulted in a material difference in accumulated depreciation. As such, the 2011 financial statements have been restated to account for the correction of this error. The correction of these items in the June 30, 2011 financial statements had the following effects: assets increased by $223,358, expenses decreased by $77,470, and net assets increased by $223,358. See note 15 to the financial statements. Section III. Findings and Questioned Costs for Federal Awards: 2012-2: Eligibility Determination Management is responsible for determining that tenants are eligible to receive housing by completing the HUD Family Income Certification Form during the application process. During the course of our audit we noted multiple instances where this form was not kept on file for current tenants. We recommend for the Corporation to complete and keep on file the HUD Family Income Certification Form for every tenant who receives housing as well as develop an system of internal control that would prevent a tenant from receiving housing if the form was not received. - 25 -
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS IN ACCORDANCE WITH OMB CIRCULAR A-133 FOR THE YEAR ENDED JUNE 30, 2012 1. Status of Prior Audit Findings There were no audit findings reported in the prior year s audit schedule of findings and questioned costs. - 26 -
CORRECTIVE ACTION PLAN FOR THE YEAR ENDED JUNE 30, 2012-27 -
COMPENSATION OF OFFICERS FOR THE YEAR ENDED JUNE 30, 2012 Name of Officer Official Title Time Devoted to Business % of Stock Owned Amount of Compensation Expenses and Allowance David Kratzer President Part None None None Michael V, McKee Vice President Part None None None Norbert Dunkel Secretary Part None None None Robert Miller Treasurer Part None None None John E. Poppell Director Part None None None - 28 -
CORPORATE OFFICERS CERTIFICATION FOR THE YEAR ENDED JUNE 30, 2012 I hereby certify that I have examined the accompanying financial statements and supplementary information of University Village Apartments, Inc., HUD Project No. 063-55008 NP for the year ended June 30, 2012, and, to the best of my knowledge and belief, the same are accurate and complete. David Kratzer, President Michael V. McKee, Vice President Robert Miller, Treasurer Employer Identification Number: 23-7060602 - 29 -
MANAGEMENT AGENT S CERTIFICATION FOR THE YEAR ENDED JUNE 30, 2012 I hereby certify that I have examined the accompanying financial statements and supplementary information of University Village Apartments, Inc., HUD Project No. 063-55008 NP for the year ended June 30, 2012, and, to the best of my knowledge and belief, the same are accurate and complete. Norbert Dunkel, Secretary Associate Vice President of Student Affairs University of Florida Department of Housing and Residence Education Azfar Mian, Director Housing Financial and Information Technology Services University of Florida Department of Housing and Residence Education Employer Identification Number: 23-7060602 - 30 -
INDEPENDENT ACCOUNTANTS REPORT ON APPLYING AGREED-UPON PROCEDURE To the Board of Directors, University Village Apartments, Inc.: We have performed the procedure described in the second paragraph of this report, which was agreed to by University Village Apartments, Inc., HUD Project No. 063-55008 NP (the Project) and the U.S. Department of Housing and Urban Development, Real Estate Assessment Center (REAC), solely to assist them in determining whether the electronic submission of certain information agrees with the related hard copy documents. The Project is responsible for accuracy and completeness of the electronic submission. This agreed-upon procedure engagement was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants and the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States. The sufficiency of the procedure is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedure described below either for the purpose for which this report has been requested or for any other purpose. We compared the electronic submission of the items listed in the UFRS Rule Information column with the corresponding printed documents listed in the Hard Copy Documents column. The results of the performance of our agreed-upon procedure indicate agreement or non-agreement of the electronically submitted information and hard copy documents as shown in the attached chart. We were engaged to perform an audit of the financial statements of the Project as of and for the year ended June 30, 2012, and have issued our reports thereon dated September 21, 2012. The information in the Hard Copy Documents column was included within the scope, or was a by-product of that audit. Further, our opinion on the fair presentation of the supplemental financial data templates dated September 21, 2012, was expressed in relation to the basic financial statements of the Project taken as a whole. A copy of the financial statement package, which includes the auditors reports, is available in its entirety from the Project. We have not performed any additional auditing procedures since the date of the aforementioned audit reports. Further, we take no responsibility for the security of the information transmitted electronically to the U.S. Department of Housing and Urban Development, REAC. This report is intended solely for the information and use of the Project and the U.S. Department of Housing and Urban Development, REAC, and is not intended to be and should not be used by anyone other than these specified parties. Gainesville, Florida September 21, 2012-31 -