FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION DECEMBER 31, 2016 AND 2015
TABLE OF CONTENTS Independent Auditors Report 1-2 Statements of Financial Position - December 31, 2016 and 2015 3 Statements of Activities - Years Ended December 31, 2016 and 2015 4 Statements of Cash Flows - Years Ended December 31, 2016 and 2015 5-6 Notes to Financial Statements 7-10 Supplementary Information: Statement of Financial Position Data - December 31, 2016 11-12 Statement of Activities Data for the Year Ended December 31, 2016 13-15 Statement of Cash Flows Data for the Year Ended December 31, 2016 16-17 Computation of Surplus Cash - Annual - December 31, 2016 18 Schedule of Changes in Property and Equipment for the Year Ended December 31, 2016 19 Schedule of Restricted Deposits for Reserve for Replacements for the Year Ended December 31, 2016 20 Schedule of Restricted Deposits for Residual Receipts for the Year Ended December 31, 2016 21 Officers Certification 22 Management Agent s Certification 23
2 Enterprise Drive P.O. Box 2488 Shelton, CT 06484-1488 Tel 203.944.2100 Fax 203.944.2111 blumshapiro.com Independent Auditors Report To the Board of Directors Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport Bridgeport, Connecticut Report on the Financial Statements We have audited the accompanying financial statements of Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport, HUD Project No. 017-EE-033 (the Project), which comprise the statements of financial position as of December 31, 2016 and 2015, 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our 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 we 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 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 auditors consider 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. Blum, Shapiro & Company, P.C. -1- An independent member of Baker Tilly International
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport as of December 31, 2016 and 2015, 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. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information presented on pages 11 through 21 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 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 a report dated March 29, 2017 on our consideration of Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport s internal control over financial reporting and compliance. Shelton, Connecticut March 29, 2017-2-
STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2016 AND 2015 2016 2015 ASSETS Assets Cash and cash equivalents $ 21,020 $ 28,514 Accounts receivable - tenants and other 268 1,783 Tenant security deposits held in trust 16,918 17,373 Restricted deposits for replacement of property and equipment 132,524 55,033 Restricted deposits for residual receipts 83,612 83,339 Property and equipment, net 4,042,435 4,172,262 Total Assets $ 4,296,777 $ 4,358,304 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 40,633 $ 41,829 Tenant security deposits 15,298 16,087 Advances from a related party, Carmel Ridge Estates 111,700 82,200 Total liabilities 167,631 140,116 Unrestricted Net Assets 4,129,146 4,218,188 Total Liabilities and Net Assets $ 4,296,777 $ 4,358,304 The accompanying notes are an integral part of the financial statements -3-
STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 2016 2015 Changes in Unrestricted Net Assets Revenues Rent from tenants $ 203,176 $ 194,897 Rental assistance from HUD 279,159 244,816 Other 20,738 5,317 Total revenues 503,073 445,030 Expenses Project operations 449,209 430,856 Administration 142,906 128,743 Total expenses 592,115 559,599 Decrease in Unrestricted Net Assets (89,042) (114,569) Unrestricted Net Assets - Beginning of Year 4,218,188 4,332,757 Unrestricted Net Assets - End of Year $ 4,129,146 $ 4,218,188 The accompanying notes are an integral part of the financial statements -4-
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 2016 2015 Cash Flows from Operating Activities Rental and housing assistance receipts $ 483,176 $ 438,491 Interest received 672 68 Other cash received 20,071 5,098 Payment of administrative expenses (45,668) (35,603) Payment of management fees (40,441) (37,226) Payment of utilities (110,921) (122,341) Payment of salaries and wages (67,553) (71,915) Payment of operating and maintenance expenses (65,343) (69,878) Payment of real estate taxes (76,377) (32,049) Payment of property insurance (20,434) (18,552) Payment of miscellaneous taxes and insurance (16,973) (18,926) Payment of tenant security deposits (334) 170 Net cash provided by operating activities 59,875 37,337 Cash Flows from Investing Activities Restricted deposits for replacement of property and equipment (85,315) (43,608) Interest income reinvested in restricted deposits for replacement of property and equipment (306) (27) Withdrawals from restricted deposits for replacement of property and equipment 8,130 62,012 Restricted deposits for residual receipts - (459) Interest income reinvested in restricted deposits for residual receipts (273) (34) Purchase of fixed assets (19,105) (46,629) Net cash used in investing activities (96,869) (28,745) Cash Flows from Financing Activities Advances from (repayments to) Carmel Ridge Estates 29,500 (15,000) Net cash provided by (used in) financing activities 29,500 (15,000) Net Decrease in Cash and Cash Equivalents (7,494) (6,408) Cash and Cash Equivalents - Beginning of Year 28,514 34,922 Cash and Cash Equivalents - End of Year $ 21,020 $ 28,514 (Continued on next page) -5-
STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 2016 2015 Cash Flows from Operating Activities Decrease in net assets $ (89,042) $ (114,569) Adjustments to reconcile decrease in net assets to net cash provided by operating activities: Depreciation 148,932 146,027 Decrease in accounts receivable - tenants and other 1,515 162 Decrease (increase) in tenant security deposits held in trust 455 (1,243) (Decrease) increase in accounts payable and accrued expenses (1,196) 5,547 (Decrease) increase in tenant security deposits (789) 1,413 Net Cash Provided by Operating Activities $ 59,875 $ 37,337 The accompanying notes are an integral part of the financial statements -6-
NOTES TO FINANCIAL NOTE 1 - ORGANIZATION Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport, HUD Project No. 017-EE-033 (the Project), is a 48-unit independent living facility for the elderly located in Bridgeport, Connecticut. Augustana Homes East Bridgeport, Inc. is a not-for-profit, Connecticut non-stock corporation organized by The Bridgeport Roman Catholic Diocesan Corporation (the Diocese), a related party through common members, directors and officers. The Project is operated under Section 202 of the National Housing Act. The Project received capital advances from the U.S. Department of Housing and Urban Development (HUD) under Section 202 totaling $4,208,900 to renovate the facility pursuant to a note secured by a mortgage on the facility. The advances are non-interest bearing and need not be repaid as long as the housing remains available for eligible very low-income elderly individuals and families through 2044. Failure to keep the housing available for such individuals and families would result in HUD s calling all advances plus interest at 6.25% annually from July 1, 2004, the date of approval for occupancy by HUD. The capital advance is included in unrestricted net assets. The Project also has entered into a Project Rental Assistance Contract (PRAC) with HUD and a significant portion of the Project s revenue is received as rental assistance based on operating cost standards established by HUD. The Project is regulated by HUD with respect to rental rates and operating methods. Rent from tenants and HUD housing assistance are the main sources of revenue for the Project. The Project s regulatory agreements require the following: 1. The Project may not increase rental rates without HUD s approval. 2. The Project must make annual deposits into an account for replacement of property and equipment. Expenditures from the account may not be made without HUD s approval. The amounts in the account are generally not available for operating purposes. 3. The Project must annually deposit surplus cash, if any, defined as cash balances, including accounts receivable from HUD and tenant security deposits held in trust, in excess of obligations due within 30 days, revenue received in advance and tenant security deposit liabilities, into a residual receipts account and withdrawals may not be made without HUD s approval. 4. The Project may not make distributions of assets or income to its officers or directors. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The financial statements are presented in conformity with accounting principles generally accepted in the United States of America (GAAP). Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. -7-
NOTES TO FINANCIAL As a not-for-profit corporation, the Project s net assets are classified as unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets based upon the existence or absence of donorimposed restrictions limiting the use of the contributed assets. The Project has not received contributions from donors and, therefore, none of the Project s net assets are subject to donor-imposed restrictions. Accordingly, all net assets are reported as unrestricted net assets. Cash and Cash Equivalents The Project considers bank accounts and all highly liquid investments purchased with an initial maturity of 90 days or less to be cash and cash equivalents. Property and Equipment Property and equipment are reported at cost. Depreciation is determined using the straight-line method over the estimated useful lives of the related assets as follows: Buildings Furniture and fixtures Maintenance and other equipment 20-40 years 5-10 years 3-15 years Additions over $1,000 with a useful life greater than one year and betterments that extend useful life by greater than one year are capitalized. Other additions and betterments together with maintenance and repairs are expensed as incurred. Income Taxes Augustana Homes East Bridgeport, Inc. is exempt from income taxes under Section 501(a) of the Internal Revenue Code as an organization described under Section 501(c)(3), except to the extent it has taxable income from activities unrelated to its exempt purpose. No provision for income taxes was required for 2016 or 2015. The Project recognizes the benefits of income tax positions only if those positions are more likely than not of being sustained. The Project is subject to routine audits by the Internal Revenue Service. Subsequent Events Management has evaluated transactions and events that occurred through March 29, 2017, the date the financial statements were available to be issued, for recognition and/or disclosure in these financial statements. -8-
NOTES TO FINANCIAL NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 2016 and 2015: 2016 2015 Land $ 284,520 $ 284,520 Buildings 5,394,952 5,394,952 Furniture and fixtures 96,999 79,600 Maintenance and other equipment 52,945 51,239 5,829,416 5,810,311 Less accumulated depreciation (1,786,981) (1,638,049) $ 4,042,435 $ 4,172,262 NOTE 4 - MANAGEMENT FEE The Project pays a management fee equal to 8.4% of gross revenues to Winn Residential Connecticut, LLC (Winn). Winn employees operate and administer the Project. The Project reimburses Winn for compensation and related expenses of those employees with the expenses reported in the same manner as if they were Project employees. During the years ended December 31, 2016 and 2015, the management fee was $40,428 and $37,239, respectively. NOTE 5 - RELATED PARTY TRANSACTIONS The Project participates in the property, casualty and liability insurance program sponsored by the Diocese for all Diocesan entities and incurred expenses of $20,576 and $18,571 for the years ended December 31, 2016 and 2015, respectively. Advances from Carmel Ridge Estates (Carmel), an unincorporated unit of the Diocese, represents amounts received for working capital needs. The advances are non-interest bearing and no formal repayment schedule has been established. NOTE 6 - CONTINGENCIES 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 mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including any additional administrative burden, to comply with a change. -9-
NOTES TO FINANCIAL NOTE 7 - SUBSEQUENT EVENT On March 16, 2017, a Purchase and Sale Agreement was entered into with a third party buyer for the purchase of this facility. The sale is contingent on certain conditions including but not limited to the approval by the U.S. Department of Housing and Urban Development Department (HUD) of the assignment and transfer of various agreements that support the subsidy for this facility. The parties to the transaction anticipate that this sale will close within six months from the date of the execution of the Sale Agreement, approximately by September 30, 2017. -10-
STATEMENT OF FINANCIAL POSITION DATA DECEMBER 31, 2016 Current assets 1120 Cash - operations $ 21,020 1130 Tenant/member accounts receivable 123 1140 Account and notes receivable - operations 145 1100T Total current assets $ 21,288 1191 Tenant deposits held in trust 16,918 Restricted deposits and funded reserves 1320 Replacement reserve 132,524 1340 Residual receipts reserve 83,612 1300T Total restricted deposits and funded reserves 216,136 Property and equipment 1410 Land 278,745 1420 Buildings 5,394,952 1440 Building equipment - portable 38,131 1450 Furniture for project/tenant use 19,337 1460 Furnishings 68,568 1465 Office furniture and equipment 9,094 1470 Maintenance equipment 14,814 1490 Land improvements 5,775 1400T Total property and equipment 5,829,416 1495 Less: accumulated depreciation (1,786,981) 1400N Net property and equipment 4,042,435 1000T Total assets $ 4,296,777 (Continued on next page) -11-
STATEMENT OF FINANCIAL POSITION DATA (CONTINUED) DECEMBER 31, 2016 Current liabilities 2110 Accounts payable - operations $ 37,072 2120 Accrued wages payable 3,058 2123 Accrued management fees 500 2210 Prepaid revenue 3 2122T Total current liabilities $ 40,633 2191 Tenant deposits held in trust 15,298 Long-term liabilities 2390 Advances from a related party, Carmel Ridge Estates 111,700 2300T Total long-term liabilities 111,700 Net assets 3131 Unrestricted net assets 4,129,146 3130 Total net assets 4,129,146 2033T Total liabilities and net assets $ 4,296,777-12-
STATEMENT OF ACTIVITIES DATA FOR THE YEAR ENDED DECEMBER 31, 2016 Revenue 5120 Rent revenue - gross potential $ 205,133 5121 Tenant assistance payments 279,159 5100T Total rental revenue 484,292 5220 Vacancies - apartments (1,957) 5152N Net rental revenue $ 482,335 5410 Financial revenue - operations 342 5440 Revenue from investments - replacement reserve 330 5400T Total financial revenue 672 5910 Laundry and vending 1,869 5920 Tenant charges 10 5990 Miscellaneous revenue 18,187 5900T Total other revenue 20,066 5000T Total revenue 503,073 Expenses 6204 Management consultants 3,023 6310 Office salaries 15,613 6311 Office expenses 12,157 6320 Management fees 40,428 6330 Manager or superintendent salaries 29,520 6350 Audit expense 18,350 6351 Bookkeeping fees/accounting services 1,920 6370 Bad debts 7,371 6390 Miscellaneous administrative expenses 4,307 6263T Total administrative expenses 132,689 (Continued on next page) -13-
STATEMENT OF ACTIVITIES DATA (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2016 Expenses (continued) 6450 Electricity $ 72,616 6451 Water 21,840 6452 Gas 19,716 6400T Total utilities $ 114,172 6510 Payroll 23,348 6515 Supplies 5,448 6520 Contracts 44,815 6525 Garbage and trash removal 3,140 6530 Security payroll/contract 823 6546 Heating/cooling repairs and maintenance 1,147 6548 Snow removal 7,230 6590 Miscellaneous operating and maintenance expenses 8,288 6500T Total operating and maintenance expenses 94,239 6710 Real estate taxes 60,352 6711 Payroll taxes 6,085 6720 Property and liability insurance 20,576 6722 Workmen's compensation 5,177 6723 Health insurance and other employee benefits 9,008 6790 Miscellaneous taxes, licenses, permits, and insurance 885 6700T Total taxes and insurance 102,083 6000T Total cost of operations before depreciation 443,183 5060T Change in net assets before depreciation 59,890 (Continued on next page) -14-
STATEMENT OF ACTIVITIES DATA (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2016 6600 Depreciation expense $ 148,932 5060N Operating loss (89,042) 3247 Change in unrestricted net assets from operations (89,042) 3250 Change in total net assets from operations $ (89,042) S1000-010 Total mortgage principal payments required during $ - the year S1000-020 Total of 12 monthly deposits during the year into $ 67,740 replacement reserve account, as required by the regulatory agreement S1000-030 Replacement reserve or residual receipts releases $ 125 which are included as expense items on this statement of activities S1000-040 Project improvement reserve releases under the $ - flexible subsidy program that are included as expense items on this statement of activities -15-
STATEMENT OF CASH FLOWS DATA FOR THE YEAR ENDED DECEMBER 31, 2016 Cash flows from operating activities S1200-010 Rental receipts $ 483,176 S1200-020 Interest received 672 S1200-030 Other cash received 20,071 S1200-040 Total receipts $ 503,919 S1200-050 Administrative (45,668) S1200-070 Management fees (40,441) S1200-090 Utilities (110,921) S1200-100 Salaries and wages (67,553) S1200-110 Operating and maintenance (65,343) S1200-120 Real estate taxes (76,377) S1200-140 Property insurance (20,434) S1200-150 Miscellaneous taxes and insurance (16,973) S1200-160 Tenant security deposits (334) S1200-230 Total disbursements (444,044) S1200-240 Net cash provided by operating activities 59,875 Cash flows from investing activities S1200-250 Net replacement reserve withdrawals (77,491) S1200-260 Net residual receipts withdrawals (273) S1200-330 Purchase of fixed assets (19,105) S1200-350 Net cash used in investing activities (96,869) Cash flows from financing activities S1200-450 Advance from Carmel Ridge Estates 29,500 S1200-460 Net cash provided by financing activities 29,500 S1200-470 Net decrease in cash and cash equivalents (7,494) S1200-480 Beginning of period cash 28,514 S1200T End of period cash $ 21,020 (Continued on next page) -16-
STATEMENT OF CASH FLOWS DATA (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2016 Reconciliation of change in net assets to net cash provided by operating activities: 3250 Decrease in net assets $ (89,042) Adjustments to reconcile decrease in net assets to net cash provided by operating activities: 6600 Depreciation $ 148,932 S1200-490 Decrease in tenant accounts receivable 326 S1200-500 Decrease in accounts receivable - HUD 1,189 S1200-530 Decrease in tenant security deposits 455 S1200-540 Increase in accounts payable 14,583 S1200-560 Decrease in accrued liabilities (15,110) S1200-580 Decrease in tenant security deposits held in trust (789) S1200-5890 Decrease in prepaid revenue (669) Total adjustments 148,917 S1200-610 Net cash provided by operating activities $ 59,875-17-
COMPUTATION OF SURPLUS CASH - ANNUAL DECEMBER 31, 2016 Cash $ 21,020 Tenant deposits held in trust 16,918 Total cash $ 37,938 Current obligations Accounts payable due within 30 days 37,072 Accrued expenses 3,558 Tenant deposits held in trust 15,298 Prepaid revenue 3 Total current obligations 55,931 Surplus cash $ (17,993) -18-
SCHEDULE OF CHANGES IN PROPERTY AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 2016 Balance Balance Account 12/31/15 Additions Deductions 12/31/16 Land $ 278,745 $ - $ - $ 278,745 Land Improvements 5,775 - - 5,775 Buildings 5,394,952-5,394,952 Building equipment - portable 36,425 1,706-38,131 Furniture for project/tenant use 15,720 3,617-19,337 Furnishings 54,786 13,782-68,568 Office furniture and equipment 9,094 - - 9,094 Maintenance equipment 14,814 - - 14,814 Total 5,810,311 19,105-5,829,416 Accumulated depreciation (1,638,049) (148,932) - (1,786,981) Net book value $ 4,172,262 $ (129,827) $ - $ 4,042,435-19-
SCHEDULE OF RESTRICTED DEPOSITS FOR RESERVE FOR REPLACEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Balance at December 31, 2015 $ 55,033 Total monthly deposits $ 67,740 Interest income reinvested 306 HUD approved withdrawal for operating cash flow purposes Redeposit of HUD approved withdrawal for operating cash 17,575 flow purposes Withdrawals for purchases of property and equipment (8,130) 77,491 Balance at December 31, 2016 $ 132,524-20-
SCHEDULE OF RESTRICTED DEPOSITS FOR RESIDUAL RECEIPTS FOR THE YEAR ENDED DECEMBER 31, 2016 Balance at December 31, 2015 $ 83,339 Interest income reinvested $ 273 273 Balance at December 31, 2016 $ 83,612-21-
FEDERAL SINGLE AUDIT REPORT DECEMBER 31, 2016
FEDERAL SINGLE AUDIT REPORT DECEMBER 31, 2016 TABLE OF CONTENTS Independent Auditors Report on Compliance for The Major Federal Program; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 1-3 Schedule of Expenditures of Federal Awards 4 Notes to Schedule of Expenditures of Federal Awards 5 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 6-7 Schedule of Findings and Questioned Costs 8
2 Enterprise Drive P.O. Box 2488 Shelton, CT 06484-1488 Tel 203.944.2100 Fax 203.944.2111 blumshapiro.com Independent Auditors Report on Compliance for The Major Federal Program; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance To the Board of Directors Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport Bridgeport, Connecticut Report on Compliance for the Major Federal Program We have audited Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport s (HUD Project No. 017-EE-033) (the Project) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Project s major federal program for the year ended December 31, 2016. The Project s major federal program is 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 the Project s major federal program 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 the Project 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 the major federal program. However, our audit does not provide a legal determination of the Project s compliance. Blum, Shapiro & Company, P.C. -1- An independent member of Baker Tilly International
Opinion on the Major Federal Program In our opinion, the Project, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended December 31, 2016. Report on Internal Control over Compliance Management of the Project is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Project 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 the major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Project 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 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 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. -2-
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the Project, as of and for the year ended December 31, 2016 and have issued our report thereon dated March 29, 2017, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the 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 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 schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a whole. Shelton, Connecticut March 29, 2017-3-
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2016 Federal Grantor/Program Title CFDA Number Expenditures U.S. Department of Housing and Urban Development Supportive Housing for the Elderly (Section 202) - Capital Advance 14.157 $ 4,208,900 Supportive Housing for the Elderly (Section 202) - Project Rental Assistance Contract (PRAC) 14.157 279,159 Total Federal Awards Expended $ 4,488,059 The accompanying notes are an integral part of this schedule -4-
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2016 NOTE 1 - BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport (HUD Project No. 017-EE-033) (the Project) under programs of the federal government for the year ended December 31, 2016. The information in the Schedule is presented in accordance with the 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). Because the Schedule presents only a selected portion of the operations of the Project, it is not intended to and does not present the financial position, changes in net assets or cash flows of the Project. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. For costreimbursement awards, 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. For performance-based awards, expenditures reported represent amounts earned. NOTE 3 - INDIRECT COST RECOVERY The Project did not recover its indirect costs using the 10% de minimis indirect cost rate provided under Section 200.414 of the Uniform Guidance. NOTE 4 - LOAN PROGRAMS The following is a summary of loans outstanding under federal loan programs: Loan Program Outstanding Loans Supportive Housing for the Elderly (Section 202) - Capital Advance $ 4,208,900-5-
2 Enterprise Drive P.O. Box 2488 Shelton, CT 06484-1488 Tel 203.944.2100 Fax 203.944.2111 blumshapiro.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 To the Board of Directors Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport Bridgeport, Connecticut 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 Augustana Homes East Bridgeport, Inc. d/b/a Bishop Curtis Homes - East Bridgeport (HUD Project No. 017-EE-033) (the Project), which comprise the statement of financial position as of December 31, 2016 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 our report thereon dated March 29, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Project 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 the Project s internal control. Accordingly, we do not express an opinion on the effectiveness of the Project s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or 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. Blum, Shapiro & Company, P.C. -6- An independent member of Baker Tilly International
Compliance and Other Matters As part of obtaining reasonable assurance about whether the project 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 the Project 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 project s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Shelton, Connecticut March 29, 2017-7-
SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2016 I. SUMMARY OF AUDITORS RESULTS Financial Statements Type of auditors report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major program: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Type of auditors report issued on compliance for major program: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR Section 200.516(a)? yes X no Major program: CFDA # Name of Federal Program or Cluster 14.157 U.S. Department of Housing and Urban Development Supportive Housing for the Elderly (Section 202) Dollar threshold used to distinguish between type A and type B programs: $ 750,000 Auditee qualified as a low-risk auditee? X yes no II. FINANCIAL STATEMENT FINDINGS No matters are reported. III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters are reported. -8-