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HomeMy WebLinkAbout2004 HA AuditWHEAT RIDGE HOUSING AUTHORITY FINANCIAL STATEMENTS December 31, 2004 TABLE OF CONTENTS Independent Auditors' Report Basic Financial Statements Statement of Net Assets Statement of Revenues, Expenses and Changes in Fund Net Assets Statement of Cash Flows PAGE Notes to Financial Statements 5-9 Swanhorst & Company LLC Ccn,ficd Public ACCOllmanls 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, 2004. 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 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 the Wheat Ridge Housing Authority as of December 31, 2004, and the changes in its financial position and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 9 to the financial statements, the Wheat Ridge Housing Authority adopted the standards of Governmental Accounting Standards Board Statements No. 34 and 38 for the year ended December 31, 2004. 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. s o avj~, February 1, 2005 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, 2004 2004 2003 ASSETS Cash $ 356,647 $ 533,786 Grants Receivable - 20,000 Prepaid Expenses - 1,996 Loans Receivable 12,708 12,963 erty Held for Resale Pro 770,310 773,665 p TOTAL ASSETS 1,139,665 1,342,410 LIABILITIES Accounts Payable 8,117 19,710 Retainage Payable - 27,311 Accrued Liabilities 4,770 569 able Loan Pa - 173,298 y TOTAL LIABILITIES 12,887 220,888 NET ASSETS Unrestricted $ 1,126,778 $ 1,121,522 The accompanying notes are an integral part of the financial statements. 2 WHEAT RIDGE HOUSING AUTHORITY STATEMENT OF REVENUES. EXPENSES AND CHANGES IN FUND NET ASSETS Year Ended December 31, 2004 2004 2003 OPERATING REVENUES Rental $ 13,606 $ 10,570 Other - 55 TOTAL OPERATING REVENUES 13,606 10,625 OPERATING EXPENSES General and Administrative 8,043 7,404 Repairs and Maintenance 3,266 - Utilities 5,726 1,541 Homeowners Dues 1,200 1,288 City Reimbursement 3,125 2,506 TOTAL OPERATING EXPENSES 21,360 12,739 OPERATING INCOME (LOSS) (7,754) (2,114) NONOPERATING REVENUES (EXPENSES) Interest Income 599 1,063 Interest Expense (60) (2,449) Gain (Loss) on Sale of Investment Property 12,471 (12,286) TOTAL NONOPERATING REVENUES (EXPENSES) 13,010 (13,672) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS 5,256 (15,786) CAPITAL CONTRIBUTIONS Grants - 31,581 CHANGE IN NET ASSETS 5,256 15,795 Beginning NET ASSETS 1,121,522 1,105,727 , NET ASSETS, Ending $ 1,126,778 $ 1,121,522 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, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Tenants and Others Cash Payments to Suppliers and Others 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 Purchase, Rehabilitation and Closing Costs of Investment Property Proceeds from Sale of Investment Property 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 INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Changes in Assets and Liabilities Related to Operations Prepaid Expenses Accounts Payable Accrued Liabilities Homeowners Dues Escrow Net Cash Provided (Used) by Operating Activities 2004 2003 $ 13,606 $ 10,625 (26,756) (13,730) (13,150) (3,105) 255 247 255 247 (776,966) (1,013,707) 765,481 639,000 20,000 11,581 (173,298) 173,298 (60) (2,449) (164,843) (192,277) 599 1,063 599 (177,139) 533,786 1,063 (194,072) 727,858 $ 356,647 $ 533,786 $ (7,754) $ (2,114) 1,996 (1,996) (11,593) 2,986 4,201 569 - (2,550) $ (13,150) $ (3,105) The accompanying notes are an integral part of the financial statements. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2004 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 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. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The Authority uses an enterprise fund to account for its operations. 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 Governmental Accounting Standards Board. 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 non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the Authority'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 non-operating revenues and expenses. 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. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Prepaid Expenses Payments to vendors for services which will benefit periods after December 31 are recorded as prepaid items. Property Held For Resale Property held for resale includes the purchase and rehabilitation costs of investment property, and is recorded at cost. 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. NOTE 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary Information 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. NOTE 3: DEVELOPMENT PROJECTS During 2004, the Authority purchased an eight-unit townhome complex for the purpose of establishing and providing a homeownership program to low-income residents of the City Wheat Ridge. The Authority will rehabilitate the units for resale to qualified buyers. During 2003, the Authority purchased a ten- 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 and sold two units during 2003. During the year ended December 31, 2004, six units were sold at sales prices of $124,000 and $133,500. The average unit cost to the Authority, including purchase, rehabilitation and broker commissions was approximately 115,000, resulting in a gain of $12,471. Two units were held for resale at December 31, 2004. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE 4: NOTE 5: 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 of the 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, 2004, the Authority's deposits had a carrying balance of $356,647 and a corresponding bank balance as follows: Bank Insured (Category 1) Collateralized (Category 2) Total LOANS RECEIVABLE Balance $ 100,000 257,073 $ 357,073 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 2004, the homeowners made principal payments totaling $255, resulting in a balance of $12,708 at December 31, 2004. NOTE 6: PROPERTY HELD FOR RESALE Following is a summary of transactions related to the property held for resale for the year ended December 31, 2004. Balance Balance 12/31/03 Additions Deletions 12/31/04 Purchase and Rehabilitation Costs of Investment Property $ 773,665 $ 549,527 $ 552,882 $ 770,310 WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE 7: LOAN PAYABLE Following is a summary of loan transactions for the year ended December 31, 2004. Balance Balance 12/31/03 Additions Payments 12/31/04 Loan Payable - Vectra Bank $ 173,298 $ 84,462 $ 257,760 $ - 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. During 2004, the Authority had drawn an additional $84,462 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 8: 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 in the financial statements 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. 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, 2004, 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. WHEAT RIDGE HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE 9: CHANGE IN ACCOUNTING PRINCIPLE For the year ended December 31, 2004, the Authority adopted the standards of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis for State and Local Governments. In addition, the Authority has revised or added certain note disclosures in accordance with GASB Statement No. 38, Certain Financial Statement Note Disclosures.