INDEX TO AUDITED FINANCIAL STATEMENTS AND SINGLE AUDIT REPORTS AND SCHEDULES June 30, 2017 and 2016 AUDITED FINANCIAL STATEMENTS Independent auditor s report 1 Statements of financial position 3 Statements of activities 4 Statements of cash flows 5 Notes to financial statements 6 SUPPLEMENTARY INFORMATION Supplementary data required by HUD 11 SINGLE AUDIT REPORTS AND SCHEDULES 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 16 Independent Auditor s report on compliance for each major program and on internal control over compliance required by the Uniform Guidance 18 Schedule of findings and questioned costs 20 Schedule of expenditures of federal awards 22 Notes to schedule of expenditures of federal awards 23 Summary schedule of prior year audit findings 24 Certificate of Mortgagor 25-26 Certificate of Management Agent and Auditor Information 27 Independent accountant s report on applying agreed-upon procedure 28
To the Board of Directors PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 Tucson, Arizona IN D E P E N D E N T A UD ITO R S RE P O RT Reporton the FinancialS tatem ents We have audited the accompanying financial statements of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, (a nonprofit organization), which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for 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 of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 5431 N. Oracle Road, Suite 101, Tucson, Arizona 85704 (520) 887-1120 Fax (520) 887-1122 firm@addingtoncpa.com Member of the American Institute of Certified Public Accountants Private Companies Practice Section -1-
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 11 to 15 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 of 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 of 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 the 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. O therreportingrequ ired bygovernment Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2017, on our consideration of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 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 PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s internal control over financial reporting and compliance. September 29, 2017 A D D IN GTO N & A S S O C IA TE S,P L L C -2-
STATEMENTS OF FINANCIAL POSITION June 30, 2017 and 2016 2017 2016 ASSETS Current assets: Cash $ 6,131 $ 11,521 Accounts receivable - operations 725 1,830 Prepaid expense and deposits 6,649 5,474 Total current assets 13,505 18,825 Restricted deposits: Tenant security deposits 10,212 9,110 Other reserve - debt service savings escrow - Note 4 101,176 88,083 Replacement reserve - Note 4 106,506 66,692 Residual receipts - Note 4 23,592 25,226 Total restricted deposits 241,486 189,111 Property and equipment - Notes 2 and 3 626,313 650,151 Total assets $ 881,304 $ 858,087 LIABILITIES AND NET ASSETS (DEFICIT) Current liabilities: Trade accounts payable $ 20,901 $ 25,603 Accrued interest 5,017 5,238 Current portion of mortgage payable 17,966 17,010 Total current liabilities 43,884 47,851 Tenant security deposits 7,657 9,209 Mortgage payable, less current portion - Note 3 1,014,358 1,029,763 Total liabilities 1,065,899 1,086,823 Unrestricted net assets (deficit) (184,595) (228,736) Total liabilities and net assets (deficit) $ 881,304 $ 858,087 See Accompanying Notes. -3-
STATEMENTS OF ACTIVITIES For the years ended June 30, 2017 and 2016 2017 2016 Income Rent $ 286,178 $ 290,980 Interest and other 6,124 18,192 292,302 309,172 Expenses Administrative 63,572 58,746 Utilities 33,113 34,171 Operating and maintenance 45,727 100,101 Taxes and insurance 10,386 11,698 Depreciation and amortization 27,390 26,019 Financial expenses 67,973 69,162 248,161 299,897 Increase in net assets 44,141 9,275 Unrestricted net assets (deficit), beginning of year (228,736) (238,011) Unrestricted net assets (deficit), end of year $ (184,595) $ (228,736) See Accompanying Notes. -4-
STATEMENTS OF CASH FLOWS For the years ended June 30, 2017 and 2016 2017 2016 Cash flows from operating activities Receipts Rental receipts $ 287,283 $ 286,939 Interest receipts 208 206 Other operating receipts 5,916 17,986 Total receipts 293,407 305,131 Disbursements Administrative expenses (22,511) (20,460) Management fees (20,700) (20,700) Utilities (30,862) (34,171) Salaries and wages (38,229) (29,419) Operating and maintenance (35,161) (75,591) Property insurance (7,272) (10,324) Miscellaneous taxes and insurance (3,940) (3,802) Tenant security deposits (2,654) 1,623 Interest expense (60,717) (61,622) Mortgage insurance premiums (4,916) (4,979) Total disbursements (226,962) (259,445) Net cash provided (used) by operating activities 66,445 45,686 Cash flows from investing activities Net (deposits to) withdrawals from reserve account (39,814) 29,640 Net (deposits to) withdrawals from other reserves - debt service savings (13,093) (13,081) Net (deposits to) withdrawals from residual receipts 1,634 (17,467) Purchase of fixed assets (3,551) (53,141) Net cash provided (used) by investing activities (54,824) (54,049) Cash flows from financing activities: Mortgage principal payments (17,011) (16,105) Net cash provided (used) by financing activities (17,011) (16,105) Net increase (decrease) in cash (5,390) (24,468) Cash, beginning of year 11,521 35,989 Cash, end of year $ 6,131 $ 11,521 Reconciliation of increase (decrease) in net assets to net cash provided by (used in) operating activities: Increase (decrease) in net assets $ 44,141 $ 9,275 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 27,390 26,019 Amortization of loan costs 2,561 2,561 (Increase) decrease in assets: Accounts receivable 1,105 (887) Prepaid expense (1,175) (4,041) Cash restricted for tenant security deposits (1,102) (44) Increase (decrease) in liabilities: Accounts payable (4,702) 14,295 Accrued payroll Accrued interest (221) Tenants security deposits (1,552) 1,667 Miscellaneous current liabilities 0 (3,159) Net cash provided (used) by operating activities $ 66,445 $ 45,686 See Accompanying Notes. -5-
NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 1. Summary of significant accounting policies Organization and operations PPEP Senior Housing Services Corporation (PSHSC) is an Arizona non-profit corporation. Ramona Morales Memorial Apartments (the Project) consists of a 31-unit apartment complex located in Benson, Arizona and is operated under Section 223(f) of the National Housing Act. The Project s major program is its Section 223(f) direct loan. Such projects are regulated by HUD as to rent charges and operating methods. The Project's primary sources of revenue are from HUD subsidies and tenant rents. Federally subsidized rent income The Project also is subject to Section 8 Housing Assistance Payments 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 project s non-major program is its Section 8 rent subsidy. Basis of Accounting The financial statements of the Project have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. Basis of Presentation The Project is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Unrestricted net assets represent those assets available to the Project for normal operations. Temporarily restricted net assets carry donor-imposed restrictions, which limit their use. temporarily restricted net assets existed at June 30, 2017 or 2016. No Permanently restricted net assets possess donor-imposed restrictions, which limits their use to investment in perpetuity to provide a permanent source of income for Project operations. No permanently restricted net assets existed at June 30, 2017 or 2016. Recognition of Revenue Contributions are recognized as revenue when they are received or unconditionally pledged. The Project reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated asset. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activities as a reclassification of net assets. -6-
NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 1. Summary of significant accounting policies - continued Recognition of revenue continued The Project reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. The Project recognizes the value of contributed services which either create or enhance a nonfinancial asset or services requiring specialized skills performed by persons possessing those skills. Cash and cash equivalents The Project considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Property and equipment Property and equipment are recorded at cost. Donated property and equipment are recorded at fair market value at the date of the donation. Depreciation is calculated using the straight-line method over the estimated useful lives of the individual asset. The lives range from five years for property and equipment to fifty years for buildings and tenant improvements. Upon sale or retirement of depreciable properties, the related cost and accumulated depreciation are removed from the amounts. All gains or losses are reflected in revenue in the year of disposition. Property and equipment acquisitions greater than $2,500 are capitalized. Depreciation for the years ended June 30, 2017 and 2016 were $27,390 and $26,019, respectively. Income taxes PSHSC is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization that is not a private foundation under Section 509(a)(2). PSHSC is also exempt from Arizona income tax. Management s opinion is that no uncertain income tax positions have been taken and no adjustments have been recorded for potential related tax liabilities. Any penalties or interest which may be charged on tax examinations would be deducted in the year the assessment was made. The Organization's tax returns are generally subject to examination by the IRS for three years and the Arizona Department of Revenue for four years, respectively, after the date the returns were filed. There are no current or pending IRS examinations. Distributions The Project's regulatory agreement with HUD stipulates, among other things, that the Project will not make distributions of assets or income to any of its officers or directors. -7-
NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 1. Summary of significant accounting policies - continued Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. 2. Property and equipment Property and equipment are summarized as follows: June 30, 2017 2016 3. Mortgage payable Land and improvements $ 64,448 $ 68,548 Buildings 1,073,421 1,073,421 Furniture and equipment 119,337 217,419 1,257,206 1,359,388 Less accumulated depreciation 630,893 709,237 $ 626,313 $ 650,151 The outstanding balance of the mortgage payable to HUD, plus cash of $205,414 for renovation of the Project, and the costs associated with obtaining the new mortgage were refinanced on August 27, 2009 through Lancaster Pollard Mortgage Company under Section 223(f) of the National Housing Act. The note is collateralized by the Project land and building which is used in the lowincome housing program. The HUD-insured mortgage note is summarized as follows: June 30, 2017 2016 Note payable to financial institution, payable in monthly $ 1,098,677 $ 1,115,687 installments of $6,477, 5.48% interest, due September, 2044 Less: Unamortized debt issuance costs (66,353) (68,914) Long-term debt, less unamortized debt issuance costs 1,032,324 1,046,773 Less: current portion 17,966 17,010 Mortgages payable, less current portion $ 1,014,358 $ 1,029,763 Amortization of the debt issuance costs of $2,561 is reported as interest expense in the income statement for the years ended June 30, 2017 and 2016. -8-
NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 3. Mortgage payable - continued In addition, monthly deposits for taxes, insurance and replacement of depreciable assets are required. Principal repayments for each of the next five years are as follows: 4. Restricted balances June 30, 2018 $17,966 2019 18,976 2020 20,042 2021 21,168 2022 22,358 Thereafter 998,167 $ 1,098,677 Replacement reserve: Under the terms of the Regulatory Agreement, the Project is required to set aside specified amounts for the replacement of property and other project expenditures as approved by HUD. Restricted funds held in the Replacement Reserve account at June 30, 2017 and 2016 were $106,506 and $66,692, respectively, and are held in a separate account and generally are not available for operating purposes. Residual receipts: Under the terms of the Regulatory Agreement, the Project is required to deposit annually Surplus Cash, as defined in the HUD Regulatory Agreement, into the Residual Receipts account for the replacement of property and other project expenditures and uses as approved by HUD. Restricted funds in the Residual Receipts at June 30, 2017 and 2016 were $23,592 and $25,226, respectively, and are held in a separate account and generally are not available for operating purposes. During the year ended June 30, 2017, HUD approved the withdrawal of $1,659 from the Residual Receipts account in lieu of payment of the HUD Housing Assistance Payment due for June 2017. Subsequent to June 30, 2017, HUD approved the withdrawal of $16,067 from the Residual Receipts account in lieu of payment of the HUD Housing Assistance Payment due for May 2017. Other reserve: In addition, as part of the mortgage refinance in August 2009, the Project is required to deposit $1,083 each month with the mortgage company into a debt service savings escrow account. Withdrawal and use of the funds are subject to HUD s approval. The balance in the account at June 30, 2017 and 2016 was $101,176 and $88,083, respectively. 5. Management fees On October 1, 2005, PPEP began management of the Project. During the years ended June 30, 2017 and 2016, PPEP charged a management fee of $20,700 and $20,700 to the Project with HUD s approval, respectively. -9-
NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 6. Rent increases Under the regulatory agreement, the Project may not increase rents charged to tenants without HUD approval. 7. Concentrations The Project receives substantial revenues from rent subsidies from the Department of Housing and Urban Development. A reduction or discontinuation of the subsidy could have a material effect on the operations of the Project. 9. Subsequent events In preparing the financial statements, the Project has evaluated subsequent events and transactions for potential recognition or disclosure through September 29, 2017, the date that the financial statements were available to be issued. -10-
SUPPLEMENTARY INFORMATION
SUPPLEMENTARY DATA REQUIRED BY HUD For the year ended June 30, 2017 RESERVE FOR REPLACEMENTS 1320P Balance, July 1 $ 66,692 1320DT Monthly deposits ($3,251*2)+($3,323*10) 39,727 1320INT Interest 87 1320WT Withdrawals - 1320 Balance, June 30 $ 106,506 The reserve account is held in cash by the mortgage company. RESIDUAL RECEIPTS 1340P Balance, July 1 $ 25,226 1340DT Total deposits - 1340INT Interest on residual receipts account 25 1340WT Approved withdrawals (1,659) 1340 Balance, June 30 $ 23,592 The residual receipts account is held in cash by the mortgage company. COMPUTATION OF SURPLUS CASH S1300-010 Cash $ 16,343 S1300-040 Total cash 16,343 Current obligations: S1300-050 Accrued mortgage interest payable 5,017 S1300-075 Accounts payable due within 30 days 20,901 S1300-110 Other current obligations - miscellaneous 4,783 2191 Tenant security deposits 7,657 S1300-140 Total current obligations 38,358 S1300-150 Surplus cash (deficiency) $ (22,015) S1300-210 Deposit due to residual receipts $ - CHANGES IN FIXED ASSETS ACCOUNTS Land and Furniture improvements Building and equipment TOTAL Costs Balance, June 30, 2016 $ 68,548 $ 1,073,421 $ 217,419 $ 1,359,388 Net addtions (deletions) (4,100) (98,082) (102,182) Balance, June 30, 2017 64,448 1,073,421 119,337 1,257,206 Accumulated Depreciation Balance, June 30, 2016 7,248 632,268 69,721 709,237 Net addtions (deletions) (7,248) (23,911) (47,185) (78,344) Balance, June 30, 2017-608,357 22,536 630,893 Net book value, June 30, 2017 $ 64,448 $ 465,064 $ 96,801 $ 626,313-11-
STATEMENT OF FINANCIAL POSITION - DATA June 30, 2017 ASSETS Current assets: 1120 Cash $ 6,131 1200 Miscellaneous prepaid expenses 6,649 1130 Tenant accounts receivable 725 1130N Net tenant accounts receivable 725 1100T Total current assets 13,505 1191 Tenant deposits held in trust 10,212 Restricted deposits: 1320 Replacement reserve 106,506 1330 Other reserve - debt service savings escrow 101,176 1340 Residual receipts 23,592 1300T Total deposits 231,274 Property, plant and equipment: 1410 Land 64,448 1420 Building 1,073,421 1450 Furniture for project/tenant use 119,337 1400T Total fixed assets 1,257,206 1495 Accumulated depreciation 630,893 1400N Net fixed assets 626,313 1000T Total assets $ 881,304 LIABILITIES AND NET ASSETS Current liabilities: 2110 Account payable - operations $ 20,901 2131 Accrued interest payable - first mortgage 5,017 2170 Mortgage payable 17,966 2122T Total current liabilities 43,884 Other Liabilities: 2191 Tenant deposits held in trust 7,657 Long-term debt: 2320 Mortgage payable - first mortgage 1,014,358 2300T Total long-term liabilities 1,014,358 2000T Total liabilities 1,065,899 Net assets: 3131 Unrestricted net assets (deficit) (184,595) 3130 Total net assets (deficit) (184,595) 2033T Total liabilities and net assets $ 881,304-12-
Revenues: 5120 Rent revenue - gross potential $ 92,417 5121 Tenant assistance payments 195,633 Expenses: STATEMENT OF ACTIVITIES - DATA For the year ended June 30, 2017 5100T Total rent revenue 288,050 5220 Apartments 1,872 5200T Total vacancies 1,872 5152N Net rental revenue 286,178 5430 Revenue from investments - residual receipts 25 5440 Revenue from investments - replacement reserve 87 5490 Revenue from investments - miscellaneous 96 5400T Total financial revenue 208 5910 Laundry and vending revenue 5,916 5900T Total other revenue 5,916 5000T Total revenue 292,302 6210 Advertising and marketing 2,103 6311 Office expenses 3,409 6320 Management fee 20,700 6330 Manager salaries 19,308 6350 Audit expense 11,200 6370 Bad debts 3,351 6390 Miscellaneous administrative expenses 3,501 6263T Total administrative expenses 63,572-13-
STATEMENT OF ACTIVITIES - DATA -continued For the year ended June 30, 2017 6450 Electricity $ 22,567 6451 Water 10,546 6400T Total utilities expense 33,113 Operating and maintenance 6510 Payroll 20,088 6590 Miscellaneous operating and maintenance expenses 25,639 6500T Total operating and maintenance expenses 45,727 6711 Payroll taxes (project's share) 3,014 6720 Property and liability insurance (hazard) 6,097 6722 Workmen's compensation 457 6723 Health insurance and other employee benefits 818 6700T Total taxes and insurance 10,386 6820 Interest on mortgage payable 63,057 6850 Mortgage insurance 4,916 6800T Total financial expenses 67,973 6000T Total cost of operations before depreciation 220,771 5060T Profit (loss) before depreciation 71,531 6600 Depreciation expenses 27,390 5060N Operating profit or (loss) 44,141 3250 Change in total net assets from operations $ 44,141 S1000-010 Total mortgage principal payments required during the audit year $ 17,010 S1000-020 Total of 12 monthly deposits in the audit year into the replacement reserve account, as required by the regulatory regulatory agreement. $ 39,727 S1000-030 Replacement reserves, or residual receipts and releases which are included as expense items on this Profit and Loss Statement $ 1,659 S1100-060 Previous year unrestricted net assets (deficit) $ (228,736) 3247 Change in unrestricted net assets from operations 44,141 3131 Unrestricted net assets (deficit) $ (184,595) S1100-050 Previous year total net assets (deficit) $ (228,736) 3250 Change in total net assets from operations 44,141 3130 Total net assets (deficit) $ (184,595) -14-
STATEMENT OF CASH FLOWS - DATA For the year ended June 30, 2017 Cash flows from operating activities: S1200-010 Rental receipts $ 287,283 S1200-020 Interest receipts 208 S1200-030 Other operating receipts 5,916 S1200-040 Total receipts 293,407 S1200-050 Administrative expenses (22,511) S1200-070 Management fees (20,700) S1200-090 Utilities (30,862) S1200-100 Salaries and wages (38,229) S1200-110 Operating and maintenance (35,161) S1200-140 Property insurance (7,272) S1200-150 Miscellaneous taxes and insurance (3,940) S1200-160 Tenant security deposits (2,654) S1200-180 Interest expense (60,717) S1200-210 Mortgage insurance premium (4,916) S1200-230 Total disbursements (226,962) S1200-240 Net cash provided (used) by operating activities 66,445 Cash flows from investing activities: S1200-250 Net (deposits to) withdrawals from reserve account (39,814) S1200-255 Net (deposits to) withdrawals from other reserve account (13,093) S1200-260 Net (deposits to) withdrawals from residual receipts account 1,634 S1200-330 Purchase of fixed assets (3,551) S1200-350 Net cash provided (used) by investing activities (54,824) Cash flows from financing activities: S1200-360 Mortgage principal payments (17,011) S1200-460 Net cash provided (used) by financing activities (17,011) S1200-470 Net increase (decrease) in cash (5,390) S1200-480 Cash, beginning of year 11,521 S1200T Cash, end of year $ 6,131 Reconciliation of increase (decrease) in net assets to net cash provided by (used in) operating activities: 3250 Increase (decrease) in net assets $ 44,141 Adjustments to reconcile change in net assets to net cash provided by operating activities: 6600 Depreciation 27,390 S1200-486 Amortization of debt issuance cost 2,561 S1200-490 Accounts receivable 1,105 S1200-520 Prepaid expense (1,175) S1200-530 Cash restricted for tenant security deposits (1,102) S1200-540 Accounts payable (4,702) S1200-570 Accrued interest (221) S1200-580 Tenant security deposits held in trust (1,552) Total adjustments 22,304 S1200-610 Net cash provided (used) by operating activities $ 66,445-15-
SINGLE AUDIT REPORT AND SCHEDULES
IN D E P E N D E N T A UD ITO R S RE P O RT O N IN TE RN A L C O N TRO L O V E R FIN A N C IA L RE P O RTIN G A N D O N C O M P L IA N C E A N D O TH E R M A TTE RS B A S E D O N A N A UD IT O F FIN A N C IA L S TA TE M E N TS P E RFO RM E D IN A C C O RD A N C E W ITH GOVERNMENT AUDITING STANDARDS To the Board of Directors PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 Tucson, Arizona 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 PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 (a nonprofit organization), which comprise the statement of financial position as of June 30, 2017, 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 September 29, 2017. InternalC ontroloverfinancialreporting In planning and performing our audit of the financial statements, we considered PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 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 PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s internal control. Accordingly, we do not express an opinion on the effectiveness of the PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 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 of 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. 5431 N. Oracle Road, Suite 101, Tucson, Arizona 85704 (520) 887-1120 Fax (520) 887-1122 firm@addingtoncpa.com Member of the American Institute of Certified Public Accountants Private Companies Practice Section -16-
C ompliance and O therm atters As part of obtaining reasonable assurance about whether PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s financial statements are free from material misstatement, we performed tests of 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. P u rpose 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 organization 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 organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. September 29, 2017 A D D IN GTO N & A S S O C IA TE S,P L L C -17-
IN D E P E N D E N T A UD ITO R S RE P O RT O N C O M P L IA N C E FO R E A C H M A JO R P RO GRA M A N D O N IN TE RN A L C O N TRO L O V E R C O M P L IA N C E RE Q UIRE D B Y TH E UN IFO RM GUID A N C E To the Board of Directors PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 Tucson, Arizona Reporton C om pliance fore achm ajorfed eralp rogram We have audited PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s major federal program for the year ended June 30, 2017. PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s major federal program is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for the of PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s major federal program 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 of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for 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 PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 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 the major federal program. However, our audit does not provide a legal determination of PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s compliance. 5431 N. Oracle Road, Suite 125, Tucson, Arizona 85704 (520) 887-1120 Fax (520) 887-1122 firm@addingtoncpa.com Member of the American Institute of Certified Public Accountants Private Companies Practice Section -18-
Opinion on Each Major Federal Program In our opinion, PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2017. Reporton InternalC ontroloverc om pliance Management of PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 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 PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s internal control over compliance with the types of requirements that could have a direct and material effect on its major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of 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 PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of 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 may 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. September 29, 2017 A D D IN GTO N & A S S O C IA TE S,P L L C -19-
SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended June 30, 2017 Section I - Summary of Auditor s Results Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(ies) identified that are not considered to be material weaknesses? yes X no Federal Awards Noncompliance material to financial statements noted? yes X no Internal control over major programs: Material weakness(es) identified? yes X no Significant deficiency(ies) identified that are not considered to be material weakness(es)? yes X no Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR section 200.516(a) reported in this schedule? yes X no Identification of major programs: CFDA Number Name of Federal Program 14.155 Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? X yes no -20-
SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended June 30, 2017 Section II Findings - Financial Statement Audit None. Section III Findings and Questioned Costs Major Federal Award Programs Audit None. -21-
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended June 30, 2017 Federal Grantor/ Federal Pass-through Grantor CFDA Grantor's Expenditures Program Title number Number Federal Other Department of Housing and Urban Development Direct programs: Lower income housing assistance program - Section 8 14.856 AZ20T851002 $ 195,633 $ 0 Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects - Loan 14.155 123-EH061 1,098,677 0 Total U.S. Department of Housing and Urban Development $ 1,294,310 $ 0 See Accompanying Notes to Schedule of Expenditures of Federal Awards. -22-
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended June 30, 2017 NOTE 1 - BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 under programs of the federal government for the year ended June 30, 2017. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of 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 PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, it is not intended to and does not present the financial position, changes in net assets, or cash flows of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 and/or OMB Circular A- 122, Cost Principles for Non-profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. NOTE 3 OTHER CONTRACTS In the event that the grantor was either unable to or did not confirm the source of federal funds all amounts were assumed to be federal for purposes of the schedule of expenditures of federal awards. NOTE 4 MAJOR PROGRAM Major programs are identified in the Summary of Auditor s Results section of the Schedule of Findings and Questioned Costs. NOTE 5 RECONCILIATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS TO STATEMENT OF ACTIVITIES Total Federal expenditures $ 1,294,310 Total Non-Federal expenditures SEFA 0 Total governmental financial assistance 1,294,310 Less: Loan balances 1,098,677 Housing assistance payments Section 8 195,633 Plus: Tenant rent receipts 91,650 Total rental receipts Statement of Activities $ 287,283 NOTE 6 INDIRECT COST RATE PPEP Senior Housing Corporation has elected not to use the 10% deminimus indirect cost rate allowed under the Uniform Guidance. -23-
SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS For the year ended June 30, 2017 There were no prior year findings. -24-
PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartment HUD PROJECT NO. 123-EH061 CERTIFICATE OF MORTGAGOR We hereby certify that we have examined the accompanying financial statements and supporting schedules of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, for the year ended June 30, 2017 and, to the best of our knowledge and belief, the same is complete and accurate.. presiders s Signature September 29, 2017 Date PPEP Senior Housing Services Corporation EIN 94-2945287
PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartment HUD PROJECT NO. 123-EH061 CERTIFICATE OF MORTGAGOR We hereby certify that we have examined the accompanying financial statements and supporting schedules of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, for the year ended June 30, 2017 and, to the best of our knowledge and belief, the same is complete and accurate. % Alif-111-1 Secretary's Signature September 29, 2017 Date PPEP Senior Housing Services Corporation EIN 94-2945287
PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartment HUD PROJECT NO. 123-EH061 CERTIFICATE OF MANAGEMENT AGENT We hereby certify that we have examined the accompanying financial statements and supporting schedules of PPEP Senior Housing Services Corporation, Ramona Morales Memorial Apartments, HUD Project No. 123-E11061, for the year ended June 30, 2017, and, to the best of our knowledge and belief, the same is complete and accurate. Portable Practical Educational Pre aration, Inc. EIN # -723 227 Signature Title September 29, 2017 Date AUDITOR INFORMATION Addington & Associates, PLLC 5431 North Oracle Rd., Suite 101 Tucson, Arizona 85704 (520) 887-1120 ID 86-1010758 Member: Paul D. Addington, CPA -27-
IN D E P E N D E N T A C C O UN TA N T S RE P O RT O N A P P L Y IN G A GRE E D -UP O N P RO C E D URE To the Board of Directors PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 1. We have performed the procedure described in the second paragraph of this report, which was agreed to by PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 and the U.S. Department of Housing and Urban Development, Real Estate Assessment Center (REAC), solely to assist them in determining whether the electronic submission of certain information agrees with the related hard copy documents included within the Uniform Guidance reporting package. PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061 is responsible for the accuracy and completeness of the electronic submission. This agreed-upon procedure engagement was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants and the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States. The sufficiency of the procedure is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedure described below either for the purpose for which this report has been requested or for any other purpose. 2. We compared the electronic submission of the items listed in the UFRS Rule Information column with the corresponding printed documents listed in the Hard Copy Documents column. The results of performance of our agreed-upon procedure indicate agreement or non-agreement of the electronically submitted information and hard copy documents as shown in the attached chart. 3. We were engaged to perform an audit in accordance with OMB s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), by PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, as of and for the year ended June 30, 2017, and have issued our reports thereon dated September 29, 2017. The information in the Hard Copy Documents column was included within the scope, or was a by-product of that audit. Further, our opinion on the fair presentation of the supplemental financial data templates dated September 29, 2017, was expressed in relation to the basic financial statements of PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, taken as a whole. 4. A copy of the reporting package required by the Uniform Guidance, which includes the auditor s reports, is available in its entirety from PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061. We have not performed any additional auditing procedures since the date of the aforementioned audit reports. Further, we take no responsibility for the security of the information transmitted electronically to the U.S. Department of Housing and Urban Development, PIH-REAC. 5. This report is intended solely for the information and use of PPEP Senior Housing Services Corporation Ramona Morales Memorial Apartments, HUD Project No. 123-EH061, and the U.S. Department of Housing and Urban Development, PIH-REAC, and is not intended to be and should not be used by anyone other than these specified parties. September 29, 2017 A D D IN GTO N & A S S O C IA TE S,P L L C 5431 N. Oracle Road, Suite 101, Tucson, Arizona 85704 (520) 887-1120 Fax (520) 887-1122 firm@addingtoncpa.com Member of the American Institute of Certified Public Accountants Private Companies Practice Section -28-
ATTACHMENT TO INDEPENDENT ACCOUNTANT S REPORT ON APPLYING AGREED-UPON PROCEDURE UFRS Rule Information Hard Copy Document(s) Findings Supplemental Information with Agrees Financial Statement Data Balance Sheet, Revenue and Expense and Cash Flow Data (account numbers 1120 to 7100T and the S1100 and S1200 series) Surplus Cash (S1300 series of accounts) Footnotes (S3100 series of accounts) Type of Opinion on the Financial Statements and Auditor Reports (S3400, S3500 and S3600 series of accounts) Type of Opinion on Supplemental Data (account S3400-100) Audit Findings Narrative (S3700 and S3800 series of accounts) Expenditures of Federal Awards (S3300 series of accounts) and Notes to Schedule General Information (S3700, and S3800 series of accounts) Computation of Surplus Cash, Distributions and Residual Receipts (Annual) Notes to the Audited Financial Statements Auditor s Reports on the Financial Statements, Compliance, and Internal Control Auditor s Report on Supplementary Information Schedule of Findings and Questions Costs. Schedule of Expenditures of Federal Awards and Notes to Schedule Schedule of Findings and Questioned Costs and OMB Data Collection Form Agrees Agrees Agrees Agrees Agrees Agrees Agrees -29-