GOODWILL PLAZA, INC. HUD Project No Financial Statements and Supplementary Information December 31, 2016

Transcription

1 GOODWILL PLAZA, INC. Financial Statements and Supplementary Information December 31, 2016

2 WlED McGee Maruca & Associates, P.C. Certified Public Accountants 3111 Banksviile Road, Suite 200 Pittsburgh, PA Ph Fax Website: mcgeemaruca.com Leslie A. McGee, C.P.A. Lisa Maruca DiPardo, C.P.A. U.S. Department of Housing and Urban Development In accordance with the Uniform Financial Reporting Standards issued by HUD, the following auditor s information is made available to you: Audit Firm: Lead Auditor: Title: Address: McGee Maruca & Associates, P.C. Lisa Maruca DiPardo, CPA Engagement Partner 3111 Banksviile Road, Suite 200 Pittsburgh, Pennsylvania Telephone Number: Fax Number: Tax Identification Number: office@mcgeemaruca.com Respectfully submitted, Lisa Maruca DiPardo, CPA Members of the American and Pennsylvania Institutes of Certified Public Accountants

3 GOODWILL PLAZA, INC. Financial Statements and Supplementary Information December 31,2016 TABLE OF CONTENTS Page Independent A uditor s Report 1-2 Financial Statements: Statements o f Financial Position 3 Statements o f Activities 4 Statements of Cash Flows 5-6 Notes to the Financial Statements 7-12 Supplementary Information: Supporting Data Required by HUD Schedule o f Expenditures o f Federal Awards 21 Notes to the Schedule of Expenditures of Federal Awards 22 Independent Auditor s Reports on Compliance and on Internal Control in Accordance with the Uniform Guidance: Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit o f Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule o f Findings and Questioned Costs Summary Schedule o f Prior Year Audit Findings 29 Certifications: Certification o f Proj ect Owner 30 Management A gent s Certification 31

4 McGee Maruca & Associates, P.C. Certified Public Accountants 3111 Banksville Road, Suite 200 Pittsburgh, PA Ph Fax Website: mcgeemamca.com Independent Auditor's Report Leslie A. McGee, C.P.A. Lisa Maruca DiPardo, C.P.A. Board of Directors Goodwill Plaza, Inc.: Report on the Financial Statements We have audited the accompanying financial statements of Goodwill Plaza, Inc. (a non-profit corporation), (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. Management s Responsibility fo r 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. Auditor s Responsibility 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 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 audit 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 auditor s 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 auditor considers 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 o f the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Members of the American and Pennsylvania Institutes of Certified Public Accountants

5 Board of Directors Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Goodwill Plaza, Inc. as of December 31, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 13 to 20 is presented for purposes of additional analysis as required by the Uniform Financial Reporting Standards issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code o f Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part o f 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 tire 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 our report dated March 15, 2017, on our consideration of Goodwill Plaza, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 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 Goodwill Plaza, Inc. s internal control over financial reporting and compliance. Report on Summarized Comparative Information We have previously audited Goodwill Plaza, Inc. s 2015 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 15,2016. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2016, is consistent, in all material respects, with the audited financial statements from which it has been derived. Pittsburgh, Pennsylvania March 15,

6 Goodwill Plaza, Inc. Statements of Financial Position December 31 Assets Current assets: Cash - operations $ 17,108 $ 14,820 Tenant accounts receivable, net 6,872 5,236 Prepaid expenses 24,662 45,687 Miscellaneous current assets - 19,664 Total current assets 48,642 85,407 Tenant deposits held in trust 17,828 18,473 Restricted deposits and funded reserves: Real estate and insurance escrow 35,219 11,312 Reserve for replacements, 123,599 74,921 Other reserves - sinking fund Residual receipts reserve 39,285 23,258 Total restricted deposits and funded reserves 198, ,668 Property and equipment: Land 166, ,549 Buildings 3,469,321 3,469,321 Furnishings 206, ,929 3,842,799 3,842,799 Less allowance for depreciation 2,827,200 2,720,459 Net property and equipment 1,015,599 1,122,340 Other assets Loan origination fees, net 91,200 94,758 Total other assets 91,200 94,758 Total assets $ 1,371,549 $ 1,430,646 Liabilities and Net Assets Liabilities: Current liabilities: Accounts payable - operations $ 19,532 $ 7,370 Accounts payable - related party 251, ,987 Accrued wages payable 4,060 4,043 Accrued payroll taxes payable Mortgage payable - first mortgage (current portion) 55,631 53,002 Miscellaneous current liabilities 9,777 9,753 Total current liabilities 340, ,351 Non-current liabilities: Tenant deposits held in trust 17,046 17,692 Mortgage payable - first mortgage (less current portion) 2,723,719 2,779,351 Total non-current liabilities 2,740,765 2,797,043 Total liabilities 3,081,552 3,058,394 Net assets: Unrestricted (1,710,003) (1,627,748) Total liabilities and net assets $ 1,371,549 S 1,430,646 See accompanying notes to financial statements. 3

7 Goodwill Plaza, Inc. Statements of Activities For the Year Ended December Revenues: Rental income $ 749,900 $ 746,613 Financial income Other income 23,814 25,530 Total revenues 773, ,411 Expenses: Project services: Administrative 194, ,597 Utilities 132, ,486 Operating and maintenance 198, ,864 Taxes and insurance 84,614 76,050 Interest 136, ,705 Depreciation 106, ,872 Amortization 3,558 3,502 Total expenses 856, ,076 Change in net assets (82,255) (26,665) Net assets at beginning of year (1,627,748) (1,601,083) Net assets at end o f year $ (1,710,003) $ (1,627,748) See accompanying notes to financial statements. 4

8 Goodwill Plaza, Inc. Statements of Cash Flows For the Year Ended December 31 Cash flows from operating activities: Revenues: Rental income $ 748,264 $ 750,265 Financial income Other income 23,814 25,530 Total revenues 772, ,063 Expenses: Administrative 121, ,583 Utilities 128, ,766 Operating and maintenance 178, ,654 Real estate taxes 5,000 5,000 Property insurance 17,068 32,211 Miscellaneous taxes and insurance 41,301 37,941 Interest 136, ,705 Tenant security and other deposits 1 - Total expenses 628, ,860 Net cash provided by operating activities 143,903 77,203 Cash flows from investing activities: Net deposits to the reserve for replacement account (48,678) 12,412 Net deposits to the other reserves (23,907) 14,420 Net deposits to the residual receipts account (16,027) 28,001 Net purchases of property and equipment - (65,250) Net cash used by investing activities (88,612) (10,417) Cash flows from financing activities: Mortgage principle payments (53,003) (50,498) Loan origination fees - (5,580) Net cash used by financing activities (53,003) (56,078) Net increase in cash 2,288 10,708 Cash at beginning of year 14,820 4,112 Cash at end o f year $ 17,108 $ 14,820 See accompanying notes to financial statements. 5

9 Goodwill Plaza, Inc. Statements of Cash Flows, continued For the Year Ended December Cash flows from operating activities: Change in net assets $ (82,255) $ (26,665) Adjustment to reconcile change in net assets to net cash provided by operating activities: Depreciation 106, ,872 Amortization 3,558 3,502 (Increase) decrease in tenant accounts receivable (1,636) 3,652 Decrease (increase) in miscellaneous current assets 19,664 (19,664) Decrease (increase) in prepaid expenses 21,025 (4,671) Decrease in tenant deposits held in trust Increase (decrease) in accounts payable - operations 12,162 (7,242) Increase in accounts payable - related party 64,070 16,673 Increase in miscellaneous current liabilities 24 2,397 Increase in accrued wages payable 17 1,906 Increase (decrease) in accrued payroll taxes payable 534 (557) Decrease in tenants deposits held in trust (646) (42) Total adjustments 226, ,868 Net cash provided by operating activities $ 143,903 $ 77,203 See accompanying notes to financial statements. 6

10 GOODWILL PLAZA, INC. Notes to the Financial Statements December 31, 2016 (1) Organization Goodwill Plaza, Inc. (the Project) is a non-profit corporation organized to operate an apartment complex located in the Sheraden section of the City of Pittsburgh. The complex is comprised of 73 units, which consist o f 18 efficiency apartments, 54 one-bedroom apartments, and one two-bedroom apartment. The Project s financing, management, and operations are covered under Section 202 o f the National Housing Act. The Project is also subject to Section 8 Housing Assistance Payment agreements with the U.S. Department of Housing and Urban Development (HUD) and a significant portion of the Project s rental income is received from HUD. The responsibility for management of the affairs of the Project is vested with its Board o f Directors. (2) Summary o f Significant Accounting Policies (a) Basis of Accounting These statements have been prepared on the accrual basis in accordance with generally accepted accounting principles. Accordingly, revenues are recognized when earned and expenses are recognized when incurred, regardless of dates of cash receipts or cash disbursements. (b) Basis of Presentation Financial statement presentation follows the recommendations of the Financial Accounting Standards Board, Accounting Standards Codification, FASB ASC No Under FASB ASC No. 958, the Project is required to report information regarding its financial position and activities according to three classes o f net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The majority of revenue received by the agency during the year ended December 31, 2016 was tenants rent and U.S. Department of Housing and Urban Development tenant assistance payments. Since neither of these revenue sources were from donors; nor were any donor restrictions imposed, there were no temporarily restricted or permanently restricted support for the year ending December 31, (c) (d) Distributions The Project s regulatory agreement with HUD stipulates, among other things, that the Project will not make distributions o f assets or income to any of its officers or directors. Cash Equivalents For puiposes of cash flows, the Project considers all short-term debt securities purchased with a maturity o f three months or less to be cash equivalents. 7

11 GOODWILL PLAZA, INC. Notes to the Financial Statements, continued December 31, 2016 (2) Summary o f Significant Accounting Policies, continued (e) Property, Plant and Equipment Property, plant and equipment are recorded at cost. The Project assesses for impairment losses when conditions warrant. Depreciation is computed by the straight-line method over the estimated useful lives o f the assets (forty years for buildings and five or ten years for furniture and equipment). Expenditures for plant and equipment in excess o f $5,000 or that materially increase the estimated useful life of the assets are capitalized. Maintenance and repairs are charged to expense as incurred. (f) (g) Amortization Amortization is computed on a straight-line basis. Loan origination fees and refinancing fees o f $121,431 are being amortized over the 35 year term of the mortgage loan. Income Taxes The Project is exempt from income tax under section 501(c)(3) o f the Internal Revenue Code and as such, no provision for federal income tax has been made in these financial statements. The Financial Accounting Standards Board (FASB) has issued FASB ASC No. 740, which clarifies accounting principles generally accepted in the United States of America for recognition, measurement, presentation and disclosure relating to uncertain tax positions. FASB ASC No. 740 applies to business enterprises, not-forprofit entities, and pass-through entities, such as S corporations and limited liability companies. The Project evaluates uncertain tax positions in accordance with FASB ASC No. 740 and has determined there is no material impact on the Project s financial position or results o f operations for the year ended December 31, The Project annually files a federal Exempt Organization Tax Return (Form 990) as applicable. The filed form is subject to examination by the Internal Revenue Service generally for three years after it is filed. (h) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make,estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. 8

12 GOODWILL PLAZA, INC. Notes to the Financial Statements, continued December 31,2016 (2) Summary of Significant Accounting Policies, continued (i) Fair Value The Financial Accounting Standards Board (FASB) has issued FASB ASC No. 820, Fair Value Measurements, which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. This pronouncement does not require any new fair value measurements, but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. The carrying amount of the Project s cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses approximates fair value primarily because o f the short maturity o f these instruments. The Board of Directors reviews and approves the Project s fair value measurement policies and procedures annually. At least annually, the finance committee and the Board determine if the valuation techniques used in fair value measurements are still appropriate. (3) Reserve for Replacements The Project was required by a regulatory agreement to deposit $2,965 per month into the reserve for replacements account. Disbursements from this reserve may be made only after written consent by HUD. In the event o f a default in the terms o f the mortgage, HUD may demand the full or partial application of the balance in this fund to the amount due on the mortgage debt. (4) Residual Receipt The Project was required by a regulatory agreement to deposit $3,068 per month into the residual receipt account. Disbursements from this reserve may be made only after written consent from HUD. In the event of a default in the terms of the mortgage, HUD may demand the full or partial application of the balance in this fund to the amount due on the mortgage debt. During 2016, the Project made all current required deposits. Additionally, the Project made $24,000 o f extra deposits.,9

13 GOODWILL PLAZA, INC. Notes to the Financial Statements, continued December 31, 2016 Restricted Cash As described in footnotes 3 and 4, the terms of the Regulatory Agreement specify that the Project is required to set aside certain amounts for the replacement of property and other project expenditures as approved by HUD. Restricted cash funds of $198,280 at December 31, 2016 are held in separate accounts and use of these funds is contingent upon HUD s prior written approval. Prepaid Expenses Prepaid expenses consisted of the following as o f December 31,2016: Prepaid insurance $11,718 Prepaid real estate taxes 2,500 Prepaid maintenance contracts $ Related Party Transactions Goodwill Plaza, Inc., Summerdale Court, Inc., Warren Plaza, Inc., Jefferson Courtyard, Inc., Goodwill Villa, Inc. and Goodwill of Southwestern Pennsylvania are related entities. These entities have aspects of common control through management and board functions. Existence of such control could result in operating results or financial position of Goodwill Plaza, Inc. significantly different from those that would have been obtained if the companies were autonomous. Goodwill of Southwestern Pennsylvania (Goodwill) performs certain accounting and administrative functions for Goodwill Plaza, Inc. and charges a management fee for services provided. The amount o f management fees paid to Goodwill for the year ended December 31, 2016 was $40,000. Intercompany accounts payable are disclosed in Note 8. Accounts Payable - Related Party The related party accounts payable consisted of the following as of December 31, 2016: Various operating expenses - Goodwill o f Southwestern Pennsylvania $

14 GOODWILL PLAZA, INC. Notes to the Financial Statements, continued December 31, 2016 (9) Tenant Deposits Held in Trust: Cash Custodial - Tenant Security Deposits Goodwill Plaza, Inc. deposits all tenant security deposits into a restricted interest bearing cash account whose balance must always equal or exceed the related liability account. The balance in the cash account at December 31,2016 is $17,828 while the related liability balance is $17,046. (10) Compensated Absences Vacations and other compensated absences are not accrued on the financial statements because the amount cannot be reasonably estimated. (11) Current Vulnerability Due to Certain Concentrations The Project s sole asset is a 73-unit apartment project. The Project s operations are concentrated in the suburban Pittsburgh multifamily real estate market. In addition, the Project operates in a heavily regulated environment. 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 with inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change. (12) Rental Income The Project charges the maximum rental allowed by HUD. The tenants pay a portion of the rent and the balance is paid under the Housing Assistance Program subsidy. HUD will also reimburse the Project for 80% o f vacancy rents under certain circumstances. (13) Mortgage Payable Mortgage payable consisted of the following at December 31, 2016: Mortgage note payable: Due September 1, 2042, payable in monthly installments of $15,767 including interest at 4.85%. The mortgage is insured by HUD. The mortgage is collateralized by property, plant and equipment. $2,779,350 Less current portion ( 55,631) $

15 GOODWILL PLAZA, INC. Notes to the Financial Statements, continued December 31, 2016 (13) Mortgage Payable, continued Maturities of the mortgage note are as follows: Year Thereafter Amount Due $. 55,631 58,390 61,286 64,325 67, (14) Financial Status Goodwill Plaza, Inc. currently has a net deficiency in net assets and has experienced recurring losses. A member of management has been appointed to monitor the deficit issue. Management has implemented strategies to reduce rent vacancies and operating losses. Additionally, Goodwill Industries of Southwestern Pennsylvania continues to provide support when needed. (15) Concentrations Credit of Risk Goodwill Plaza, Inc. maintains its cash balances in financial institutions located in Pittsburgh, Pennsylvania and North Wales, Pennsylvania. These accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per financial institution. None o f the accounts exceeded the federally funded insured limit at December 31,2016. (16) Tenant Accounts Receivable Tenant accounts receivable are recorded at the amounts original billed, less payments received and are non-interest bearing. The potential risk is limited to the amount recorded in the financial statements. The allowance for doubtful accounts is based upon historical collections and the amount of past due receivables for accounts whose collectability is in doubt. Management has recorded a $10,000 allowance at December 31, Balances are written o ff once management determines collectability is not possible. (17) Subsequent Events Subsequent events were evaluated through the Independent Auditor s Report date, which is the date the financial statements were available to be issued. No subsequent events were noted. 12

16 SUPPLEMENTARY INFORMATION

17 Goodwill Plaza, Inc. Statements of Financial Position Data December 31 Account Number Assets Current assets: Cash - operations $ 17,108 $ 14, Tenant accounts receivable 16,872 5, Allowance for doubtful accounts (10,000) Prepaid expenses 24,662 45, Miscellaneous current assets - 19,664 HOOT Total current assets 48,642 85, Tenant deposits held in trust 17,828 18, Restricted deposits and funded reserves: Real estate and insurance escrow 35,219 11, Reserve for replacements 123,599 74, Other reserves - sinking fund Residual receipts reserve 39, , T Total restricted deposits and funded reserves 198, , Property and equipment: Land 166, , Buildings 3,469,321 3,469, Furnishings 206, , T Total property and equipment 3,842,799 3,842, Less allowance for depreciation 2,827,200 2,720, N Net property and equipment 1,015,599 1,122,340 Other assets 1590 Loan origination fees, net 91,200 94, T Total other assets 91,200 94, T Total assets $ 1,371,549 $ 1,430,646 Liabilities and Net Assets Liabilities: Current liabilities: 2110 Accounts payable - operations $ 19,532 $ 7, Accounts payable - related party 251, , Accrued wages payable 4,060 4, Accrued payroll taxes payable Mortgage payable - first mortgage (current portion) 55,631 53, Miscellaneous current liabilities 9,777 9, T Total current liabilities 340, , Tenant deposits held in trust 17,046 17,692 Non-current liabilities: 2320 Mortgage payable - first mortgage (less current portion) 2,723,719 2,779, T Total non-current liabilities 2,723,719 2,779, T Total liabilities 3,081,552 3,058, Net assets: Unrestricted (1,710,003) (1,627,748) 2033T Total liabilities and net assets $ 1,371,549 $ 1,430,646 13

18 Goodwill Plaza, Inc. Statements of Activities Data For the Year Ended December 31 Account Number T N T T 5000T T T Revenues: Rental income: Rent revenue - gross potential S 266,272 $ 258,550 Tenant assistance payments 513, ,222 Total potential rental income 779, ,772 Vacancies - apartments (29,698) (21,159) Net rental income 749, ,613 Financial income: Revenue from investments - operations Revenue from investments - residual receipts Revenue from investments - reserve for replacements Revenue from investments - sinking fund - 5 Total financial income Other revenue: Laundry and vending income 3,804 4,229 Tenant charges Miscellaneous revenue 20,010 21,179 Total other revenue 23,814 25,530 Total revenues 773, ,411 Expenses: Administrative expenses: Conventions and meetings 2,014 4,455 Advertising and marketing 1, Office salaries 38,305 37,968 Office expense 7,225 7,987 Management fee 40,000 40,000 Manager salaries 37,486 34,251 Legal expense - project 18,323 13,353 Accounting services 23,175 22,949 Bad debt expense 18,877 6,698 Miscellaneous administrative expense 7,039 7,342 Total administrative expenses 194, ,597 Utility expenses: Electricity 56,883 60,303 Water 31,771 20,194 Gas 16,048 21,235 Sewer 27,581 6,754 Total utilities expenses 132, ,486 14

19 Goodwill Plaza, Inc. Statements of Activities Data, continued For the Year Ended December 31 Account Number Expenses (continued): Operating and maintenance expenses: Payroll 44,841 41, Supplies 22,701 22, Contracts 39,891 39, Trash removal 16,035 13, Security payroll Heating/cooling repairs and maintenance 24,320 13, Snow removal 2,840 5, Miscellaneous maintenance expenses 47,432 52, T Total operating and maintenance expenses 198, , Taxes and insurance:- Real estate taxes 5,000 2, Payroll taxes 13,672 12, Property and liability insurance 37,779 36, Workmen's compensation insurance 6,443 5, Employee benefits 21,720 20, T Total taxes and insurance 84,614 76, Interest on mortgage payable 136, , T Total cost of operations before depreciation 745, , T Change in net assets before depreciation 28,044 84, Depreciation expense 106, , Amortization expense 3,558 3,502 Total depreciation and amortization 110, , N/3250 Change in net assets (82,255) (26,665) SI Net assets at beginning of year (1,627,748) (1,601,083) 3131 Net assets at end of year $(1,710,003) $(1,627,748) SI SI Total mortgage principal payments required during the audit year (12 monthly payments) $ 53,003 $ 50,498 Required total of 12 monthly deposits during the year into the reserve replacement account $ 35,580 $ 35,580 15

20 Goodwill Plaza, Inc. Statements of Cash Flows Data For the Year Ended December 31 Account Number 20X SI Cash flows from operating activities: Revenues: Rental income $ 748,264 $ 750,265 S Financial income S Other income 23,814 25,530 S Total revenues 772, ,063 S Expenses: Administrative 121, ,583 SI Utilities 128, ,766 S Operating and maintenance 178, ,654 SI Real estate taxes 5,000 5,000 S Property insurance 17,068 32,211 S Miscellaneous taxes and insurance 41,301 37,941 S Interest on mortgage payable 136, ,705 SI Tenant security and other deposits 1 - SI Total expenses 628, ,860 S Net cash provided by operating activities 143,903 77,203 S Cash flows from investing activities: Net deposits to the reserve for replacement account (48,678) 12,412 S Net deposits to the other reserves (23,907) 14,420 S Net deposits to the residual receipts account (16,027) 28,001 S Net purchases of property and equipment - (65,250) S Net cash used by investing activities (88,612) (10,417) Cash flows from financing activities: S Mortgage principal payments (53,003) (50,498) S Loan origination fees - (5,580) SI Net cash used by financing activities (53,003) (56,078) SI Net increase in cash 2,288 10,708 S Cash at beginning of year 14,820 4,112 S1200T Cash at end of year $ 17,108 $ 14,820 16

21 Goodwill Plaza, Inc. Statements o f Cash Flows Data, continued For the Year Ended December 31 Account Num ber Cash flows from operating activities: 3250 Change in net assets $ (82,255) $ (26,665) Adjustment to reconcile change in net assets to net cash provided by operating activities: 6600 Depreciation 106, , Amortization 3,558 3,502 SI (Increase) decrease in tenant accounts receivable (1,636) 3,652 S Decrease (increase) in miscellaneous current assets 19,664 (19,664) S I Decrease (increase) in prepaid expenses 21,025 (4,671) S Decrease in tenant deposits held in trust SI Increase (decrease) in accounts payable - operations 12,162 (7,242) SI Increase in accounts payable - related party 64,070 16,673 SI Increase in miscellaneous current liabilities 24 2,397 S Increase in accrued wages payable 17 1,906 SI Increase (decrease) in accrued payroll taxes payable 534 (557) SI Decrease in tenants deposits held in trust (646) (42) Total adjustments 226, ,868 S I Net cash provided by operating activities $ 143,903 $ 77,203 17

22 Goodwill Plaza, Inc. Other Supporting Data Required by HUD December 31, 2016 Computation of Surplus Cash. Distributions, and Residual Receipts S I Cash S I Accounts payable (due within 30 days) 2191 Tenant deposits held in trust $ 34, ,379 17,046 S I Total current obligations 292,425 S Surplus cash (deficiency) $ (257,489) S Deposits due residual receipts $ 18

23 GOODWILL PLAZA, INC. Other Supporting Data Required by HUD December 31,2016 Schedule o f Changes in Fixed Asset Accounts Account Number 1410P 1420P 1460P Land Building Furnishings Beginning Account Balance Number Additions $ 166, AT $ 0 3,469, AT 0 206, AT 0 Account Ending Deletions Number Balance $ $ 166, ,469, PT Total AT 0 0 HOOT P Accumulated depreciation 2.720, N Total net book value $ N $1,015,599 19

24 GOODWILL PLAZA, INC. Other Supporting Data Required by HUD, continued December 31, 2016 Schedule of Reserve for Replacements. Other Reserves and Residual Receipts Accounts In accordance with HUD regulations, monies are deposited in a separate account (including investments) to be used for replacement of property with approval of HUD as follows: Schedule o f Reserve for Replacement: Account Number P Balance at beginning o f year $ 74, DT Total monthly deposits 35, INT Interest earned ODT Other deposits 13200D Description - withdrawn in error prior 19,664 year 13200D Amount - $ 19, WT Other withdrawals (18) 13200W Description - bank fee 13200W Amount - $ WT Less: HUD approved disbursements Balance at end o f year, confirmed by depositories SI Schedule of Other Reserves Sinking Fund: Account Number 1330P Balance at beginning o f year $ INT Interest income WT Less: HUD approved disbursements -IQ) 1330 Balance at end o f year, confirmed by depositories $177 Schedule of Residual Receipts: Account Number 1340P Balance at beginning o f year $ 23, DT Total monthly deposits 60, INT Interest earned WT Less: HUD approved disbursements Balance at end o f year, confirmed by depositories $

25 GOODWILL PLAZA, INC. Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2016 Federal Grantor/ Pass-through Grantor/ Program Title Federal CFDA# Agency or Pass-through Number Federal Exoenditures U.S. Department of Housing and Urban Development: Section 8 Housing Assistance N/A $ 513,326 Mortgage insurance for refinancing of existing multi-family housing project N/A Total federal awards $3,345,679 See accompanying notes to Schedule o f Expenditures o f Federal Awards 21

26 GOODWILL PLAZA, INC. Notes to the Schedule of Expenditures of Federal Awards December 31, 2016 NOTE 1: BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of Goodwill Plaza, Inc.,, under programs of the federal government for the year ended December 31, The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code o f 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 Goodwill Plaza, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Goodwill Plaza, Inc. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a.) Expenditures reported on the Schedule are reported on the accrual basis of accounting. 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. NOTE 3: LOAN BALANCE OUTSTANDING AT DECEMBER 31,2016 Mortgage insurance for refinancing o f existing multi-family housing project $2,779,350 NOTE 4: INDIRECT COSTS Only direct costs are charged to the federal program. Therefore, the Organization did not elect to use the 10% de minimis indirect cost rate. 22

27 MM] McGee Maruca & Associates, P.C. Certified Public Accountants 3111 Banksville Road, Suite 200 Pittsburgh, PA Ph Fax Website: mcgeemaruca.com Leslie A. McGee, C.P.A. Lisa Maruca DiPardo, C.P.A. Independent Auditor s 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 Board of Directors Goodwill Plaza, Inc. 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 Goodwill Plaza, Inc., 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 15, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Goodwill Plaza, Inc. 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 Goodwill Plaza, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Goodwill Plaza, Inc. 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 a 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 a 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 o f 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. 23 Members of the American and Pennsylvania Institutes of Certified Public Accountants

28 Board of Directors Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether Goodwill Plaza, Inc. s financial statements are free from material misstatement, we performed tests o f 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 results of that testing, and not to provide an opinion on the effectiveness of the entity 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 entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Pittsburgh, Pennsylvania March 15,

29 MED McGee Maruca & Associates, P.C. Certified Public Accountants 3111 Banksville Road, Suite 200 Pittsburgh, PA Ph Fax Website: mcgeemaruca.com Leslie A. McGee, C.P.A. Lisa Maruca DiPardo, C.P.A. Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Board of Directors Goodwill Plaza, Inc. Report on Compliance for Each Major Federal Program We have audited Goodwill Plaza, Inc. s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Goodwill Plaza, Inc. s maj or federal programs for the year ended December 31,2016. Goodwill Plaza, Inc. s major federal programs are identified in the summary o f auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the federal statutes, regulations, and the terms and conditions o f its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Goodwill Plaza, Inc. s major federal programs 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 o f Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements fo r 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 Goodwill Plaza, Inc. 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 each major federal program. However, our audit does not provide a legal determination of Goodwill Plaza, Inc. s compliance. 25 Members of the American and Pennsylvania Institutes of Certified Public Accountants

30 Board of Directors Page 2 Opinion on Each Major Federal Program In our opinion, Goodwill Plaza, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, Report on Internal Control Over Compliance Management of Goodwill Plaza, Inc. 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 Goodwill Plaza, Inc. 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 o f expressing an opinion on compliance for each 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 Goodwill Plaza, Inc. s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation o f 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 a 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 m ay 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. Pittsburgh, Pennsylvania March 15,

31 GOODWILL PLAZA, INC. Schedule o f Findings and Questioned Costs For the Year Ended December 31, 2016 Summary of Audit Results 1. The auditor s report expresses an unmodified opinion on whether the financial statements o f Goodwill Plaza, Inc. were prepared in accordance with GAAP. 2. No significant deficiencies relating to the audit of the financial statements are reported in the Independent Auditor s 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. 3. No instances of noncompliance material to the financial statements of Goodwill Plaza, Inc., which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit. 4. There were no significant deficiencies relating to the audit of the major federal award programs reported in the Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance. 5. The auditor s report on compliance for the major federal programs for Goodwill Plaza, Inc. expresses an unmodified opinion on all major federal programs. 6. There were no audit findings that are required to be reported in accordance with 2 CFR Section (a). 7. The programs tested as major programs included: Program a. M ortgage insurance $2,832,353 Federal CFDA Number The dollar threshold used to distinguish Types A and B programs was $750, Goodwill Plaza, Inc. qualified as a low-risk auditee. 27

32 GOODWILL PLAZA, INC. Schedule of Findings and Questioned Costs, continued For the Year Ended December 31,2016 Findings - Financial Statements Audit None Findings and Questioned Costs - Major Federal Award Programs Audit None 28

33 GOODWILL PLAZA, INC. HUD Project-No Summary Schedule of Prior Year Audit Findings For the Year Ended December 31, 2016 There were no findings for the year ended December 31,

34 CERTIFICATIONS

35 GOODWILL PLAZA, INC. Certification o f Project Owner December 31, 2016 We hereby certify that we have examined the accompanying financial statements and supplementary data o f Goodwill Plaza, Inc., and, to the best of our knowledge and belief, the same are accurate and complete. We also certify that to the best of our knowledge and belief, the project complied with the U.S. Department of Housing and Urban Development Regulations. GOODWILL PLAZA, INC. EIN: By: Name Date: Title Name Date: Title Mailing Address: Street ' Pittsburgh, Pennsylvania Phone:

36 GOODWILL PLAZA, INC. Management Agent s Certification December 31,2016 We hereby certify that we have examined the accompanying financial statements and supplementary data of Goodwill Plaza, Inc., and, to the best of our knowledge and belief, the same are accurate and complete. GOODWILL PLAZA, INC. BIN: By: Date: Name Title Name Date: Title Mailing Address: nd Street Pittsburgh, Pennsylvania Phone: