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HomeMy WebLinkAbout2008 HA AuditWHEAT RIDGE HOUSING AUTHORITY FINANCIAL STATEMENTS December 31, 2008 TABLE OF CONTENTS PAGE Independent Auditors' Report Basic Financial Statements Statement of Net Assets Statement of Revenues, Expenses and Changes in Net Assets Statement of Cash Flows 4 Notes to Financial Statements 5-9 Swanhorst & Company LLC Certified Publie Accountants Board of Commissioners Wheat Ridge Housing Authority Wheat Ridge, Colorado INDEPENDENT AUDITORS' REPORT We have audited the accompanying basic financial statements of the Wheat Ridge Housing Authority as of and for the year ended December 31, 2008. These financial statements are the responsibility of the Wheat Ridge Housing Authority's management., Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whetherthe 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. The Wheat Ridge Housing Authority has not presented management's discussion and analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Wheat Ridge Housing Authority as of December 31, 2008, and the changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. March 24, 2009 8400 E. Crescent Parkway • Suite 600 • Greenwood Village, CO 80111 • (720) 528-4306 Fax: (720) 528-4307 BASIC FINANCIAL STATEMENTS WHEAT RIDGE HOUSING AUTHORITY STATEMENT OF NET ASSETS December 31, 2008 ASSETS Current Assets Cash Prepaid Expenses Loans Receivable Property Held for Resale TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Accrued Liabilities Retainage Payable Loan Payable TOTAL LIABILITIES NET ASSETS Unrestricted TOTAL LIABILITIES AND NET ASSETS $ 479,095 $ 454,662 10 350 8,567 8,885 745,500 1,125,600 $ 1,233,172 $ 1,589,497 $ 18,113 $ 7,279 - 3,036 - 990 - 123,000 18,113 134,305 1,215,059 1,455,192 $ 1,233,172 $ 1,589,497 The accompanying notes are an integral part of the financial statements. 2 WHEAT RIDGE HOUSING AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Year Ended December 31, 2008 2008 2007 OPERATING REVENUES Sales of Investment Property $ 299,000 $ 246,900 Cost of Sales (309,401) (216,280) Rental 900 8,395 TOTAL OPERATING REVENUES (9,501) 39,015 OPERATING EXPENSES Closing Costs 19,926 13,916 General and Administrative 11,994 10,031 Repairs and Maintenance 23,858 11,248 Utilities 6,337 2,886 Homeowners Dues 932 3,956 City Reimbursement 4,258 3,667 Property Acquisition Costs 22,030 - Unrealized Loss on Property Held for Resale 147,728 - TOTAL OPERATING EXPENSES 237,063 45,704 OPERATING LOSS (246,564) (6,689) NONOPERATING REVENUES (EXPENSES) Interest Income 10,973 30,160 Interest Expense (4,542) (1,185) TOTAL NONOPERATING REVENUES (EXPENSES) 6,431 28,975 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS (240,133) 22,286 CAPITAL CONTRIBUTIONS Grants - 187,500 CHANGE IN NET ASSETS (240,133) 209,786 NET ASSETS, Beginning 1,455,192 1,245,406 NET ASSETS, Ending $ 1,215,059 $ 1,455,192 The accompanying notes are an integral part of the financial statements. 3 WHEAT RIDGE HOUSING AUTHORITY STATEMENT OF CASH FLOWS Increase (Decrease) in Cash Year Ended December 31, 2008 CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from Sales of Investment Property Purchase and Rehabilitiation of Investment Property Cash Received from Tenants Cash Payments to Vendors and Suppliers 2008 $ 299,000 (100,049) 900 (59,167) 2007 Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Loan Repayments from Homeowners Net Cash Provided by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Grant Proceeds Loan Proceeds Loan Principal Payments Loan Interest Payments Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest Income Net Cash Provided by Investing Activities NET INCREASE (DECREASE) IN CASH CASH, Beginning CASH, Ending RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Loss Adjustments to Reconcile Operating Loss to Net Cash Provided (Used) by Operating Activities Changes in Assets and Liabilities Related to Operations Prepaid Expenses Property Held for Resale Accounts Payable Accrued Liabilities Retainage Payable Net Cash Provided (Used) by Operating Activities $ 246,900 (818,986) 8,395 (77,773) 140,684 (641,464) 318 3,284 318 3,284 - 187,500 - 123,000 (123,000) (4,542) (1,185) (127,542) 309,315 10,973 30,160 10,973 30,160 24,433 (298,705) 454,662 753,367 $ 479,095 $ 454,662 $ (246,564) $ (6,689) 340 (350) 380,100 (600,519) 10,834 (33,776) (3,036) 2,057 (990) (2,187) $ 140,684 $ (641,464) The accompanying notes are an integral part of the financial statements. 4 WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2008 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Wheat Ridge Housing Authority (the "Authority") have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental entities. The Governmental Accounting Standards Board (GASH) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Following is a summary of the more significant policies. Reporting Entity In accordance with governmental accounting standards, the Authority has considered the possibility of inclusion of additional entities in its financial statements. The definition of the reporting entity is based primarily on financial accountability. The Authority is financially accountable for organizations that make up its legal entity. It is also financially accountable for legally separate organizations if Authority officials appoint a voting majority of the organization's governing body and either it is able to impose its will on that organization or there is a potential for benefits to, or to impose specific financial burdens on, the Authority. The Authority may also be financially accountable for organizations that are fiscally dependent upon it Based on the application of this criteria, the Authority does not include additional organizations within its reporting entity. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The Authority uses an enterprise fund to account for its operations. Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the financial statements to the extent that those standards do not conflict with or contradict guidance of the GASH. Governments also have the option of following subsequent private-sector guidance for their enterprise funds, subject to this same limitation. The Authority has elected not to follow subsequent private-sector guidance. Enterprise funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund's principal ongoing operations. Operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2008 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) When both restricted and unrestricted resources are available for use, it is the Authority's practice to use restricted resources first, then unrestricted resources as they are needed. Property Held For Resale Propertyheld for resale includes the acquisition and rehabilitation costs of investment property, and is reported at the lower of cost or market value. Risk Management The Authority is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The Authority carries commercial insurance for these risks of loss. Comparative Data Comparative data for the prior year has been presented in the accompanying financial statements in order to provide an understanding of changes in the Authority's financial position and operations. However, complete comparative data in accordance with generally accepted accounting principles has not been presented since its inclusion would make the financial statements unduly complex and difficult to read. NOTE 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary Information A budget is adopted for the Authority as a management control devise, but is not legally required. Therefore, budgetary information is not presented in the financial statements. NOTE 3: DEVELOPMENT PROJECTS The Authority previously purchased and rehabilitated a condominium complex on Quail Street, a ten-unit condominium complex known as Carnation Square, and an eight-unit townhome complex known as Parkside. During 2006, the Authority purchased a duplex on Parfet Street. At December 31, 2008, one unit of the duplex, including rehabilitation costs, was held for resale. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2008 NOTE 3: DEVELOPMENT PROJECTS (Continued) During 2007, the Authority purchased a duplex on Allison Court, and a duplex on 41s` Avenue. The Authority obtained grant funding and loan financing to purchase and rehabilitate the properties. At December 31, 2008, the properties, including rehabilitation costs, were held for resale. NOTE 4: CASH Deposits The Colorado Public Deposit Protection Act (PDPA) requires that all units of local government deposit cash ineligible public depositories. Eligibility is determined by State regulations. Amounts on deposit in excess of federal insurance levels must be collateralized by eligible collateral as determined by the PDPA. PDPA allows the financial institution to create a single collateral pool for all public funds held. The pool is to be maintained by another institution, or held in trust for all the uninsured public deposits as a group. The market value of the collateral must be at least equal to 102% of the uninsured deposits. At December 31, 2008, the Authority had bank deposits of $229,705 collateralized with securities held by the financial institution's agent but not in the Authority's name. Investments The Authority is required to comply with State statutes which specify investment instruments meeting defined rating, maturity, custodial and concentration risk criteria in which local governments may invest, which include the following: Obligations of the United States and certain U. S. Agency securities Certain international agency securities General obligation and revenue bonds of U.S. local government entities Bankers' acceptances of certain banks Commercial paper Written repurchase agreements collateralized by certain authorized securities Certain money market funds Guaranteed investment contracts Local government investment pools Interest Rate Risk - State statutes generally limit investments to an original maturity of five years unless the governing board authorizes the investment for a period in excess of five years. Credit Risk - State statutes limit investments to those with specified ratings, as provided by nationally recognized statistical rating organizations, depending on the investment type. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2008 NOTE 5: LOANS RECEIVABLE During 2002, the Authority approved a loan, totaling $10,250, to assist a homeowner with closing costs related to a condominium purchase. The loan requires monthly payments of $50, including interest at 3.5% per annum, through September, 2012. This loan is secured by the condominium unit. During 2008, the homeowner paid principal on the loan totaling $318, leaving an outstanding balance of $8,567 at December 31, 2008. NOTE 6: PROPERTY HELD FOR RESALE Following is a summary of transactions for the property held forresale for the year ended December 31, 2008. Balance Balance 12/31/07 Additions Deletions 12/31/08 Acquisition and Rehabilitation Costs of Investment Property $ 1,125,600 $ 99,059 $ 479,159 $ 745,500 At December 31, 2008, management determined that the carrying value of property held for resale exceeded the estimated market value. Accordingly, the carrying value has been reduced $147,728. NOTE 7: LOAN PAYABLE A summary of changes in the Authority's long-term debt for the year ended December 31, 2008, is presented below. Balance Balance 12/31/07 Additions Deletions 12/31/08 FirstBank Loan L--L23 ,000 $ L--L23 ,000 $ During 2007, the Authority obtained financing from FirstBank to purchase a duplex on 41s` Avenue. Interest accrued on the outstanding balance of the loan at 7.5% per annum. Principal and interest was paid in full in November, 2008. NOTE 8: COMMITMENTS AND CONTINGENCIES Management Agreement The Authority had a management agreement with the Jefferson County Housing Authority (JCHA) for contracted services. Under the terms of this agreement, the Authority contracted for personnel expertise in housing management, operations and administration. The management agreement was terminated during 2008. The contracted services have been classified as functional expenses in the financial statements for better reporting purposes. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2008 NOTE 8: COMMITMENTS AND CONTINGENCIES (Continued) Cooperation Agreement The Authority has entered into an agreement with the City of Wheat Ridge for contracted services. Under the terms of this agreement, the City will provide legal, planning, engineering services, etc., as deemed necessary by the Authority. Under the terms of this agreement, the City Manager or his designee will act as the Executive Director of the Authority. Claims and Judgements The Authority participates in federal programs that are fully or partially funded by grants received from other governmental entities. Expenses financed by grants are subject to audit by the appropriate grantor government. If expenses are disallowed due to noncompliance with grant program regulations, the Authority may be required to reimburse the grantor government. At December 31, 2008, significant amounts of grant expenses have not been audited but the Authority believes that subsequent audits will not have amaterial effect on the overall financial position of the Authority. Tabor Amendment Colorado voters passed an amendment to the State Constitution, Article X, Section 20, which has several limitations, including revenue raising, spending abilities, and other specific requirements of state and local government. The Amendment is complex and subject to judicial interpretation. Management believes the Authority is exempt from the provisions of the Amendment. 9