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HomeMy WebLinkAbout2002 HA AuditWHEAT RIDGE HOUSING AUTHORITY FINANCIAL STATEMENTS December 31, 2002 TABLE OF CONTENTS Independent Auditors' Report General Purpose Financial Statements Balance Sheet Statement of Revenues, Expenses and Changes in Retained Earnings Statement of Cash Flows PAGE Notes to Financial Statements 5-8 Swanhorst & Cutler LLC Certified Public Accountants Board of Commissioners Wheat Ridge Housing Authority Wheat Ridge, Colorado INDEPENDENT AUDITORS' REPORT We have audited the accompanying general purpose financial statements of the Wheat Ridge Housing Authority as of December 31, 2002, and for the year then ended. These general purpose financial statements are the responsibility of the Wheat Ridge Housing Authority's management. Our responsibility is to express an opinion on these general purpose 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 general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Wheat Ridge Housing Authority as of December 31, 2002, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. 94/~ G6(~ April 18, 2003 8400 E. Crescent Parkway • Suite 600 • Greenwood Village, CO 80111 • (720) 528-4306 Fax: (720) 528-4307 GENERAL PURPOSE FINANCIAL STATEMENTS WHEAT RIDGE HOUSING AUTHORITY BALANCESHEET December 31, 2002 2002 2001 ASSETS Cash $ 727,858 $ 66,008 Property Held for Resale 369,839 1,292,129 Loans Receivable 13,210 - TOTAL ASSETS $ 1,110,907 $ 1,358,137 LIABILITIES AND FUND EQUITY CURRENT LIABILITIES Accounts Payable $ 2,630 $ 4,279 Homeowners Dues Escrow 2,550 - Loan Payable - 238,294 TOTAL LIABILITIES 5,180 242,573 FUND EQUITY Retained Earnings 1,105,727 1,115,564 TOTAL LIABILITIES AND FUND EQUITY $ 1,110,907 $ 1,358,137 The accompanying notes are an integral part of the financial statements. 2 WHEAT RIDGE HOUSING AUTHORITY STATEMENT OF REVENUES EXPENSES AND CHANGES IN RETAINED EARNINGS Year Ended December 31, 2002 OPERATING REVENUES Rental Other TOTAL OPERATING REVENUES OPERATING EXPENSES General and Administrative Utilities Homeowners Dues City Reimbursement TOTAL OPERATING EXPENSES NET OPERATING INCOME -NON-OPERATING REVENUES (EXPENSES) Interest Income Interest Expense Loss on Sale of Investment Property NET NON-OPERATING REVENUES (EXPENSES) NET INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS CAPITAL CONTRIBUTIONS City of Wheat Ridge Grants NET INCOME (LOSS) RETAINED EARNINGS, Beginning RETAINED EARNINGS, Ending 2002 2001 $ 28,627 $ 15,650 - 102,385 28,627 - 118,035 331 4,570 6,173 - 2,578 4,996 14,078 4,570 14,549 113,465 520 3,672 (11,753) (1,573) (57,051) (68,284) 2,099 (53,735) 115,564 - 500,000 43,898 500,000 (9,837) 1,115,564 1,115,564 - $ 1,105,727 $ 1,115,564 The accompanying notes are an integral part of the financial statements. 3 WHEAT RIDGE HOUSING AUTHORITY STATEMENT OF CASH FLOWS Year Ended December 31, 2002 Increase (Decrease) in Cash CASH FLOWS FROM OPERATING ACTIVITIES 2002 2001 Cash Received from Tenants and Others $ 31,177 $ 118 035 Cash Payments to Suppliers and Others (15,727) , (291) Net Cash Provided by Operating Activities 15,450 117,744 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Loans to Homeowners (13,210) _ Net Cash Provided (Used) by Non-Capital Financing Activities (13,210) _ CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase, Rehabilitation and Closing Costs of Investment Property (536,461) (1,292,129) Proceeds from Sale of Investment Property 1,401,700 _ Contribution from City of Wheat Ridge - 500,000 Grant Proceeds 43,898 500,000 Loan Proceeds 238,294 Loan Principal Payments (238,294) _ Loan Interest Payments (11,753) (1,573) Net Cash Provided (Used) by Capital and Related Financing Activities 659,090 (55,408) CASH FLOWS FROM INVESTING ACTIVITIES Interest Income 520 3,672 Net Cash Provided by Investing Activities 520 3,672 NET INCREASE IN CASH 661,850 66,008 CASH, Beginning 66,008 _ CASH, Ending $ 727,858 $ 66,008 RECONCILIATION OF NET OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Operating Income $ 14,549 $ 113,465 Adjustments to Reconcile Net Operating. Income to Net Cash Provided by Operating Activities Changes in Assets and Liabilities Accounts Payable (1,649) 4,279 Homeowners Dues Escrow 2,550 - Net Cash Provided by Operating Activities $ 15,450 $ 117,744 The accompanying notes are an integral part of the financial statements. 4 WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2002 NOTE l: SUMMARY OF SIGNIFICANTA CCOUNTING 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 units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Authority's accounting policies are described below. 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. FUND ACCOUNTING The Authority uses funds to report on its financial position and its cash flows. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. The Authority is classified as a proprietary fund. This fund type accounts for operations that are organized to be self-supporting through user charges. The fund included in this category is an enterprise fund. 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. BASIS OFACCOUNTING Basis of accounting refers to when revenues and expenditures/expenses are recognized in the accounts and reported in the financial statements. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. The proprietary fund is accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Proprietary fund-type operating statements present increases (e.g., revenues) and decreases (e.g. expenses) in net total assets. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31. 2002 NOTE 1: SUMMARY OFSIGNIFICANTACCOUNTING POLICIES (Continued) BASIS OFACCOUNTING (Continued) The accrual basis of accounting is utilized by the proprietary fund type. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The Authority has elected not to apply Financial Accounting Standards Board (FASB) statements and interpretations issued after November 30, 1989. BUDGETSAND BUDGETARYACCOUNTING The Authority prepares annual budgets for management purposes. However, because the Authority is not legally required to budget its activities, no budgetary statements are presented in the financial statements. ENCUMBRANCES Encumbrance accounting is not utilized. 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 carried commercial insurance for property-related risks of loss during the rehabilitation phase of the project. CASHAND INVESTMENTS Cash equivalents are defined as investments with an original maturity of three months or less. Investments are recorded at fair value. PROPERTYHELD FOR RESALE Property held for resale includes the purchase and rehabilitation costs of investment property, and is recorded at cost. NOTE 2: DEVELOPMENT PROJECT The Authority purchased a fourteen (14) unit condominium complex during 2001 for the purpose of establishing and providing a homeownership program to low-income residents of the City Wheat Ridge. The Authority rehabilitated the units for resale to qualified buyers. During the year ended December 31, 2002, eleven units were sold at sales prices ranging from $125,000 to $129,500. The average per unit cost to the Authority, including purchase, rehabilitation and broker commissions, was $132,566, resulting in a total loss on sale of $57,051. Subsequent to December 31, 2002, the remainder of the condominium units were sold. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2002 NOTE 3: CASH Cash Deposits The Colorado Public Deposit Protection Act (PDPA), requires that all units of local government deposit cash in eligible public depositories. Eligibility is determined by state regulations. Amounts on deposit in excess of federal insurance levels must be collateralized by eligible collateral determined by the PDPA. The institution is allowed 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. Deposits are categorized to give an indication of risk assumed by the Authority at the end ofthe year. Category 1 includes deposits that are insured, Category 2 includes collateralized deposits with securities held by the pledging institution's trust department or agent in the Authority's name, and Category 3 includes uncollateralized, uninsured deposits. At December 31, 2002, the Authority's deposits had a carrying balance of $727,858 and a corresponding bank balance as follows: Bank Balance Insured (Category 1) $ 100,000 Collateralized in Single Institution Pool(s) (Category 2) 635,142 Total Cash Deposits $ 735,142 NOTE 4: PROPERTY HELD FOR RESALE Following is a summary of transactions related to the property held for resale for the year ended December 31, 2002. Balance Balance 12/31/01 Additions Payments 12/31/02 Purchase and Rehabilitation Costs of Investment Property $ 1292,129 $ 479,410 $ 1401.700 $ 369.839 NOTE 5: LOANS RECEIVABLE During 2002, the Authority approved loans, totaling $13,210, to assist two homeowners with closing costs related to their condominium purchases. One loan requires monthly payments of $50, including interest at 3.5% per annum, through September, 2012. The second loan requires one payment of $3,525, including interest at 3.5% per annum, due in October, 2007. These loans are secured by the condominium units. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2002 NOTE 6: LOANPAYABLE Following is a summary of debt obligation transactions for the year ended December 31, 2002. Balance Balance 12/31/01 Additions Payments 12/31/02 Loan Payable - Vectra Bank $ 238,294 $ $ 238,294 $ Loan Payable - YectraBank This note was obtained to provide short-term financing to rehabilitate the condominium complex. The note bears interest at 4.36% per annum and matured on October 22, 2002. The note was secured by land and buildings. The note was paid in full on the maturity date. NOTE 7: COMMITMENTS AND CONTINGENCIES Management Agreement The Authority has a management agreement with the Jefferson County Housing Authority (JCHA) for contracted services. Under the terms ofthis agreement, the Authority contracts for labor and expertise in housing authority management, operation and administration, etc. The contracted services have been classified as functional expenses for better reporting purposes. 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, accounting, treasury management, 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 units. 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. As of December 31, 2002, significant amounts of grant expenses have not been audited but the Authority believes that subsequent audits will not have a material effect on the overall financial position of the Authority.