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HomeMy WebLinkAbout2003 HA AuditWHEAT RIDGE HOUSING AUTHORITY FINANCIAL STATEMENTS December 31, 2003 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 5-9 Swanhorst & Cutler LLC c~ Certified Publie Aw ..1.1, 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, 2003, 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 whether the 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, 2003, 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. ~c May 21, 2004 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. 2003 2003 2002 ASSETS Cash $ 533,786 $ 727,858 Property Held for Resale 773,665 369,839 Grants Receivable 20,000 - Prepaid Expenses 1,996 - Loans Receivable 12,963 13,210 TOTAL ASSETS $ 1,342,410 $ 1,110,907 LIABILITIES AND FUND EQUITY CURRENT LIABILITIES Accounts Payable $ 19,710 $ 2,630 Retainage Payable 27,311 - Accrued Liabilities 569 - Homeowners Dues Escrow - 2,550 Loan Payable 173,298 - TOTAL LIABILITIES 220,888 5,180 FUND EQUITY Retained Earnings 1,121,522 1,105,727 TOTAL LIABILITIES AND FUND EQUITY $ 1,342,410 $ 1,110,907 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, 2003 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 Grants NET INCOME (LOSS) RETAINED EARNINGS, Beginning RETAINED EARNINGS, Ending 2003 2002 $ 10,570 $ 28,627 55 10,625 28,627 7,404 331 1,541 6,173 1,288 2,578 2,506 4,996 12,739 14,078 (2,114) 14,549 1,063 520 (2,449) (11,753) (12,286) (57,051) (13,672) (68,284) (15,786) (53,735) 31,581 43,898 15,795 (9,837) 1,105,727 1,115,564 $ 1,121,522 $ 1,105,727 The accompanying notes are an integral part of the financial statements. 3 WHEAT RIDGE HOUSING AUTHORITY STATEMENT OF CASH FLOWS Year Ended December 31, 2003 Increase (Decrease) in Cash 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Tenants and Others $ 10,625 $ 31,177 Cash Payments to Suppliers and Others (13,730) (15,727) Net Cash Provided (Used) by Operating Activities (3,105) 15,450 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Loans to Homeowners - (13,210) Loan Repayments from Homeowners 247 - Net Cash Provided (Used) by Non-Capital Financing Activities 247 (13,210) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase, Rehabilitation and Closing Costs of Investment Property (1,013,707) (536,461) Proceeds from Sale of Investment Property 639,000 1,401,700 Grant Proceeds 11,581 43,898 Loan Proceeds 173,298 - Loan Principal Payments - (238,294) Loan Interest Payments (2,449) (11,753) Net Cash Provided (Used) by Capital and Related Financing Activities (192,277) 659,090 CASH FLOWS FROM INVESTING ACTIVITIES Interest Income 1,063 520 Net Cash Provided by Investing Activities 1,063 520 NET INCREASE (DECREASE) IN CASH (194,072) 661,850 CASH, Beginning 727,858 66,008 CASH, Ending $ 533,786 $ 727,858 RECONCILIATION OF NET OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Net Operating Income $ (2,114) $ 14,549 Adjustments to Reconcile Net Operating Income to Net Cash Provided (Used) by Operating Activities Changes in Assets and Liabilities Related to Operations Prepaid Insurance (1,996) - Accounts Payable 2,986 (1,649) Accrued Liabilities 569 - Homeowners Dues Escrow (2,550) 2,550 Net Cash Provided by Operating Activities $ (3,105) $ 15,450 The accompanying notes are an integral part of the financial statements. 4 WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31. 2003 NOTE 1: SUMMAR Y 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 of Accounting 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, 2003 NOTE 1: SUMMARY 017SIGNIFICANTACCOUNTING POLICIES (Continued) Basis of Accounting (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. Budgets and Budgetary Accounting 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 carries commercial insurance for property-related risks of loss during the rehabilitation phase of the projects. Cash and Investments Cash equivalents are defined as investments with an original maturity of three months or less. Investments are recorded at fair value. Property Held For Resale Property held for resale includes the purchase and rehabilitation costs of investment property, and is recorded at cost. NOTE 2: DEVELOPMENT PROJECTS During 2001, the Authority purchased a fourteen (14) unit condominium complex 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, 2003, the remaining units were sold at sales prices ranging from $125,000 to $129,000. The average per unit cost to the Authority, including purchase, rehabilitation and broker commissions, was $132,566. The resulting loss on the project was $65,861, including a loss for the year ended December 31, 2003 of $8,810. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE 2: NOTE 3: DEVELOPMENT PROJECTS (Continued) During 2003, the Authority purchased a ten (10) unit condominium complex known as Carnation Square to provide a homeownership program to low-income residents of the City of Wheat Ridge. The Authority rehabilitated the units for resale to qualified buyers. During the year ended December 31, 2003, two units were sold at sales prices of $123,000 and $134,000. The average unit cost to the Authority, including purchase, rehabilitation and broker commissions was approximately 115,000, resulting in a loss of $3,476 for the year ended December 31, 2003. 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, 2003, the Authority's deposits had a carrying balance of $533,786 and a corresponding bank balance as follows: Bank Balance Insured (Category 1) $ 100,000 Collateralized in Single Institution Pool(s) (Category 2) 204,488 Total Cash Deposits $ 304,488 NOTE 4: PROPERTYHELD FOR RESALE Following is a summary of transactions related to the property held for resale for the year ended December 31, 2003. Balance Balance 12/31/02 Additions Deletions 12/31/03 Purchase and Rehabilitation Costs of Investment Property $ 369,839 $ 1,000,680 $ 596,854 $ 773,665 WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE 5: LOANSRECEIVABLE 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. During 2003, the homeowners made principal payments totaling $247, resulting in a balance of $12,963 at December 31, 2003. NOTE 6: LOANPAYABLE Following is a summary of loan transactions for the year ended December 31, 2003. Balance Balance 12/31/02 Additions Payments 12/31/03 Loan Payable - Vectra Bank $ - $ 173,298 $ $ 173,298 Loan Payable - Vectra Bank During 2003, the Authority obtained a $325,000 loan to provide short-term financing for rehabilitation of the Carnation Square condominium complex. At December 31, 2003, the Authority had drawn $173,298 on the loan. The loan accrues interest at 3.35% per annum and is secured by land and buildings. The loan was paid in full on the maturity date, May 19, 2004. 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 of this 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, 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. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE 7: COMMITMENTS AND CONTINGENCIES (Continued) 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, 2003, 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. 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.