CHRISTIAN CONCERN, INC. HUD PROJECT NO. 034-SHOJO AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE YEARS ENDED JUNE 30, 2016AND 2015
CHRISTIAN CONCERN. INC. HUD PROJECT NO. 034-SHOJO TABLE OF CONTENTS Independent Auditor's Report Statements of Financial Position Statements of Activities Statements of Cash Flows Notes to Financial Statements Supplemental Data to Comply With U.S. Department of Housing and Urban Development (HUD) Consolidated Audit Guide for Audits of HUD Programs: Statement of Financial Position Data Statement of Activities Data Statement of Cash Flows Data Computation of Surplus Cash-Annual Schedule of Changes in Fixed Asset Accounts Schedule of Escrow Deposits - Reserve for Property Tax and Insurance Schedule of Reserve for Replacements Schedule of Residual Receipts Schedule of Other Reserves - Debt Service Reserve Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Summary Schedule of Prior Audit Findings 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 Independent Auditor's Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 1-2 3-4 5 6-7 8-13 14-15 16-18 19-20 21 21 22 22 22 22 23 24 25 26-27 28-29
Schedule of Findings and Questioned Costs Corrective Action Plan Certification of Officers Management Agent's Certification Independent Accountant's Report on Applying Agreed-Upon Procedure 30 31 32 33 34-36
Growth Advisors and Certified Public Accountants Guiding Success Christopher A. Hayden, CPA, CMA, CGMA Lowell Q. Miller, CPA Mark P. Nelson, CPA Norman Y. Yoder, CPA, CGMA To the Board of Directors Christian Concern, Inc., TIA Jefferson Apartments Norristown, PA INDEPENDENT AUDITOR'S REPORT Report on the Financial Statements We have audited the accompanying financial statements of Christian Concern, Inc., TIA Jefferson Apartments ("Jefferson Apartments") (a not-for-profit corporation), HUD Project No. 034-SHOlO, which comprise the statements of financial position as of June 30, 2016 and 2015, 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 tlze 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 audits. We conducted our audits 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 audits 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. I Hayden Miller Nelson & Yoder, P.C. + 182 W. Broad Street, Telford, PA 18969 Main Phone (215) 723-7714 +Fax (215) 721-0630
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 Jefferson Apartments as of June 30, 2016 and 2015, 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. Other Matters Other Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 14 to 22 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs 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 (CFR) 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 infonnation 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2016, on our consideration of Jefferson Apartment'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 Jefferson Apartment's internal control over financial reporting and compliance. t'ff,a;yl fj11 UL, ~ ~ ~ HAYDEN, MILLER, NELSON, & YODER, P.C. Certified Public Accountants Telford, PA September 30, 2016 2
CHRISTIAN CONCERN, INC HUD PROJECT NO. 034-SHOIO STATEMENTS OF FINANCIAL POSITION JUNE 30, 2016AND 2015 2016 2015 ASSETS Cash 9,746 Accounts Receivable 43,167 Prepaid Expenses 6,931 59,844 18,168 19,090 7,634 44,892 Property and Equipment: Land 123,000 Building 4,753,187 Building Equipment (Portable) 243,057 Furniture for Project/Tenant Use 51,675 Furnishings 162,813 Office Furniture and Equipment 12,917 Maintenance Equipment 8,733 Miscellaneous Fixed Assets 57,281 5,412,663 Accumulated Depreciation (3,802,609) 1,610,054 123,000 4,737,669 231,807 50,500 135,310 11,608 9,262 57,281 5,356,437 (3,688, 794) 1,667,643 Restricted Deposits: Escrow Deposits 30,875 Replacement Reserve 412,678 Other Reserves 84,000 Residual Receipts 100 Tenant Deposits Held in Trust 65,709 593,362 TOTAL ASSETS 2,263,260 22,068 376,949 84,000 100 63,824 546,941 2,259,476 The accompanying notes are an integral part of the financial statements. 3
CHRISTIAN CONCERN, INC HUD PROJECT NO. 034-SHOlO STATEMENTS OF FINANCIAL POSITION (CONCLUDED) JUNE 30, 2016 AND 2015 2016 2015 LIABILITIES AND NET ASSETS LIABILITIES Mortgage Payable - First Mortgage Mortgages Payable - Second Mortgages Accounts Payable Accrued Liabilities: Wages Interest Tenant Security Deposits 342,578 1,000,000 49,248 7,856 70,295 65,411 1,535,388 414,090 1,000,000 50,379 5,216 64,835 63,209 1,597,729 NET ASSETS 727,872 661,747 TOTAL LIABILITIES AND NET ASSETS 2,263,260 2,259,476 The accompanying notes are an integral part of the financial statements. 4
CHRISTIAN CONCE~ INC. HUD PROJECT NO. 034-SHOJO STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 2016 2015 REVENUES Rent 1,032,434 917,752 Elderly and Congregate Services 42,073 45,694 Financial 1,819 1,046 Other 9,550 11,981 TOTAL REVENUES 1,085,876 976,473 EXPENSES Administrative 232,236 230,423 Utilities 163,837 176,357 Operating and Maintenance 296,151 274,002 Taxes and Insurance 103,259 96,164 Depreciation 163,672 155,536 Interest 16,904 18,964 Elderly and Congregate Services 43,692 46,975 TOTAL EXPENSES 1,019,751 998,421 CHANGE IN NET ASSETS 66,125 (21,948) NET ASSETS AT BEGINNING OF YEAR 661,747 683,695 NET ASSETS AT END OF YEAR 727,872 661,747 The accompanying notes are an integral part of the financial statements. 5
CHRISTIAN CONCERN INC. HUD PROJECT NO. 034-SHOIO STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30. 2016 AND 2015 2016 2015 Cash Flows from Operating Activities: Rental Receipts 1,019,685 914,777 Elderly and Congregate Services 30,163 45,098 Interest Received 1,810 1,046 Other Cash Received 9,817 12,271 1,061,475 973, 192 Administrative (44,400) (35,251) Management Fees (94,956) (94,789) Utilities (163,134) (177,019) Salaries and Wages (194,888) (220,031) Operating and Maintenance (224,650) (183,733) Real Estate Tax.es (13,000) (13,000) Property Insurance (32,796) (32,986) Miscellaneous Taxes and Insurance (56,610) (50,843) Tenant Security Deposits 317 (439) Elderly and Congregate Services (10,017) (13,734) Interest on Mortgage (11,444) (13,556) (845,578) (835,381) Net Cash Provided By Operating Activities 215,897 137,811 Cash Flows from Investing Activities: Deposits into and Interest Retained in Escrow Deposits Account (37,855) (44,077) Withdrawals from Escrow Deposits Account 29,048 58,989 Deposits into and Interest Retained in Replacement Reserve Account (141,997) (97,003) Withdrawals from Replacement Reserve Account 106,268 117,996 Deposits into and Interest Retained in Residual Receipts Account (100) Purchase of Fixed Assets (108,271) (122,530) Net Cash Used In Investing Activities (152,807) (86,725) The accompanying notes are an integral part of the financial statements. 6
CHRISTIAN CONCERN INC. HUD PROJECT NO. 034-SHOJO STATEMENTS OF CASH FLOWS (CONCLUDED) FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 Cash Flows from Financing Activities: First Mortgage Repayments Net Cash Used In Financing Activities Net Increase (Decrease) in Cash Cash at Beginning of Year Cash at End of Year 2016 (71,512) (71,512) (8,422) 18,168 9,746 2015 (69,400) (69,400) (18,314) 36,482 18,168 Reconciliation of Change in Net Assets to Net Cash Provided By Operating Activities: Change in Net Assets Adjustments to Reconcile Change in Net Assets to Net Cash Provided By Operating Activities: Depreciation (Increase) Decrease in Assets: Accounts Receivable Prepaid Expenses Tenant Deposits Held in Trust Increase (Decrease) in Liabilities: Accounts Payable Accrued Wages Accrued Interest Tenant Security Deposits Net Cash Provided By Operating Activities 66,125 163,672 (24,077) 703 (1,885) 1,057 2,640 5,460 2,202 215,897 (21,948) 155,536 (3,598) (1,589) (1,465) 3,785 656 5,408 1,026 137,811 Supplemental Disclosures: Noncash Investing Transactions: Property and Equipment Included in Accounts Payable 2,188 The accompanying notes are an integral part of the financial statements. 7
CHRISTIAN CONCERN, INC HUD PROJECT NO. 034-SHOJ 0 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016AND 2015 Note 1 - Summary of Significant Accounting Policies: The summary of significant accounting policies of Christian Concern, Inc., TIA Jefferson Apartments, ("Jefferson Apartments") is presented to assist in understanding the organization's financial statements. The financial statements and notes are representations of the organization's management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Nature of Organization and Operations: Christian Concern, Inc. is a non-profit corporation, founded with the support of the Pennsylvania Southeast Conference of the United Church of Christ, which provides affordable housing for older adults and people with disabilities. It owns and operates a 164-unit apartment project for the elderly located in Norristown, Pennsylvania. The apartments are operated under Section 202 of the National Housing Act and regulated by the U S< Department of Housing and Urban Development (HUD) with respect to rental charges and operating methods. The organization's two major programs are a HUD Section 202 direct loan, and a HUD Home Investment Partnerships Program (HOME) loan. The HOME loan also regulates the rental of units based on a tenant's income as a percentage of the area median income. Jefferson Apartments also has two non-major programs funded by the U.S. Department of Housing and Urban Development (HUD). Thirty-two of the 164 units are covered by a Section 8 Housing Assistance Payments agreement, and a significant portion of the apartment's rental income is received from HUD. In addition, the second non-major program is a service coordinator grant, funded by HUD, to pay the cost of a service coordinator to link the residents of Jefferson Apartments to community support services. Use o{estimates: The preparation of financial statements in conformity with 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. Cash Equivalents: For the statements of cash flows, all unrestricted investment instruments with original maturities of three months or less are considered cash equivalents. 8
Notes to Financial Statements - Continued: Distributions: The regulatory agreement with HUD stipulates, among other things, that Jefferson Apartments will not make distributions of assets or income to any of its officers or directors. Tax Status: Jefferson Apartments is exempt from federal income taxes as a qualified organization under Internal Revenue Code Section 50l(c)(4) and from Pennsylvania taxation under the applicable provisions of the Commonwealth's nonprofit organization statutes. Pursuant to ASC 740-10, Accounting for Uncertainty in Income Taxes, management has reviewed its current and past federal and state tax positions, and has determined that the tax positions taken are certain and there is no likelihood that a material tax assessment would be made if the respective government agencies examined tax returns subject to audit. Accordingly, no provision for the effects of uncertain tax positions has been recorded, nor have any related interest and penalties been accrued. The IRS and state taxing authorities retain the right to review filed tax returns, generally for three years after they were filed. However, the organization is not currently under audit nor has the organization been contacted by any of these tax jurisdictions. Concentration of Credit Risk: Jefferson Apartments maintains its cash in bank accounts which, at times, may exceed federally insured limits. Management does not consider this a significant credit risk on cash balances and has not experienced any losses in such accounts. Basis of Accounting: The financial statements are presented on the accrual basis of accounting. Under this method, expenses are recorded when goods or services are received instead of when paid and revenue is recognized when earned rather than when received. Propertv and Equipment: Property and equipment are capitalized at cost. Major renewals and betterments are capitalized, while maintenance, repairs, and minor renewals are expensed as incurred. Depreciation: Depreciation is provided over the estimated useful lives (3 to 40 years) of the property and equipment on the straight-line method. 9
Notes to Financial Statements - Continued: Financial Statement Presentation: Under generally accepted accounting principles, the organization 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. None of the project's net assets are subject to donor-imposed restrictions. Accordingly, all net assets are accounted for as unrestricted net assets. Note 2 - First Mortgage Payable: The organization's primary source of financing the apartment complex is a Section 202 loan, payable to HUD, which is collateralized by the complex. The original amount of the mortgage was 2, 14 7,000. The mortgage bears annual interest of 3 % and is payable in monthly installments of6,913 over fifty years. Final maturity is scheduled for November 2020. Scheduled payments on the mortgage over the next five years follow: Note 3 - Second Mortgages Payable: Year Ending June 30, 2017 73,686 2018 75,928 2019 78,237 2020 80,617 2021 34,110 342,578 The organization received two grants of 500,000 each during the fiscal year ending June 30, 2003. While no repayment is expected to be required on either grant, management has elected to treat both as loans because of default clauses in the agreements which would necessitate repayment. In addition, both grantors have filed liens against the property as second mortgages. HOME Loan: A 500,000 loan was received from the County of Montgomery, Department of Housing and Community Development. Funds for this grant were federal funds passed through from the U.S. Department of Housing and Urban Development, Home Investment Partnerships Program (HOME). The funds received were used for the rehabilitation of the apartment complex, specifically to install a second elevator in compliance with local codes, and relocate thermostats and replace windows in the tenants' apartments. To secure the loan, a second mortgage was placed on the property subject to the first mortgage held by HUD. 10
Notes to Financial Statements - Continued: Terms of the loan call for interest to accrue at the rate of one percent (1 %) per annum, compounded annually, on the unpaid principal balance of the loan. Upon the thirtieth (30th) anniversary after the completion date of the renovations, the loan and all accrued interest on the loan shall be paid in full As of June 30, 2016 and 2015, Jefferson Apartments had accrued interest of 69,438 and 63,800, respectively. The loan agreements have several defaults and conditions, which if violated would cause the loan to be due in full at the time of the default. The project must be maintained as low income housing for the elderly for the thirty (30) year period of the loan. In addition, the rental of apartment units are restricted in that thirty two (32) of the one hundred sixty four (164) units must be available to elderly whose incomes do not exceed fifty percent (50%) of the area median income, one hundred eight (108) must be available to elderly whose incomes do not exceed sixty percent (60%) of the area median income, and thirteen (13) must be available to elderly whose incomes do not exceed eighty percent (80%) of the area median income. The undesignated eleven (11) units are available to elderly whose incomes exceed eighty percent (80%) of the area median income. FHLBLoan: A 500,000 loan was received from the Federal Home Loan Bank (FHLB) through their member bank Sovereign Bank. The funds received were used for the rehabilitation of kitchens and bathrooms in eighty (80) apartments. To secure the loan, a second mortgage was placed on the property subject to the first mortgage held by HUD. Terms of the loan state that except upon the occurrence of an event of default, the loan shall bear no interest, and no payment of principal shall be due or payable. Fifteen (15) years from the date of completion, or on June 30, 2018, the payee shall forgive the entire principal balance of this loan. The loan agreements have several defaults and conditions, which if violated would cause the loan to be due in full at the time of the default. Of the eighty (80) units renovated, seventy (70) must be available to elderly whose incomes do not exceed fifty percent (50%) of the area median income and ten (10) units must be available to elderly whose incomes do not exceed sixty percent ( 60%) of the area median income. Note 4 - Related Organizations: Jefferson Apartments is managed by Christian Concern Management and Development Corporation (CCMD), a nonprofit entity organized to serve as management agent for various assisted housing projects. The current management agent's certification, dated August 30, 2013, provides for a maximum fee of 10.67% ofresidential income collected, capped at 47 per unit per month, plus a Non-Profit status fee of 1.25 per unit per month. For the fiscal years ended June 30, 2016 and 2015, Jefferson Apartments incurred actual management fees of 94,956 and 94,956, respectively, to provide administrative services to the project. The management agent was also reimbursed 207,998 and 212,877, respectively, for site employee payroll, and 118,019 and 100,786, respectively, for payroll taxes, employee benefits, and the project's share of common costs. Accounts payable includes 14,036 at June 30, 2016 and 495 at June 30, 2015 in costs due to CCMD. 11
Notes to Financial Statements - Continued: The organization owned land upon which Jefferson East, Inc., another HUD assisted housing project managed by CCMD, was located. A long-term lease, which called for no rent to be due or paid by Jefferson East, Inc., was in effect. As required by the Section 223(f) refinance undertaken by Jefferson East, Inc., and with the approval of HUD, the property was sold by Jefferson Apartments to Jefferson East, Inc. on April 8, 2009, for the sum of 10. The property, with a basis of 27,000 to Jefferson Apartments, was treated as a contribution by the organization in the June 30, 2009 fiscal year. The two projects share certain common costs, which are allocated by the management company and paid on a monthly basis. Note 5 - Cable Television System: In order to provide for tenants who desire cable television, Jefferson Apartments installed a cable television system whose costs will be recovered through the subscription of tenants. The income derived is included in account #5140, "Rent Revenue - Stores and Commercial," and the costs are included in account #6590, "Miscellaneous Operating and Maintenance Expenses" for the monthly license fee and repairs. A breakdown of the cable television system income and expense for the years ended June 30, 2016 and 2015 is as follows: 2016 2015 Rental Income Collected from Tenants 30,924 31,382 Cable Television Costs: License Fee and Repairs 15,054 15,537 Net Excess 15,870 15,845 Note 6 - HUD-Restricted Dee_osits: Under the regulatory agreement and other HUD directives, the organization is required to establish reserves for certain specified purposes in separate accounts. These funds generally are not available for operating purposes. Escrow deposits-tax and insurance are restricted to pay for real estate taxes, or payments in lieu of real estate taxes, and property and liability insurance. Monthly payments are deposited into the account based on the estimated annual cost of taxes and insurance. The replacement reserve is restricted for property replacement and major repairs or betterments. Monthly deposits of 12,433 were required by HUD effective September 1, 2015. Withdrawals are made only after HUD written approval has been obtained. Residual receipts are restricted to uses approved by HUD. A computation of surplus cash is required on an annual basis, with the surplus cash required to be deposited into the Residual Receipts Account within sixty days of the end of the fiscal year. A deposit of 100 was made during the fiscal year ended June 30, 2015 in order to establish the account at HUD's request. 12
Notes to Financial Statements - Concluded: Other reserves are required by the HUD regulatory agreement to be maintained as a debt service reserve. The reserve approximates one year of payments on the HUD held mortgage. Note 7 - Rent Changes: Under the regulatory agreement, the project may not increase rents charged without HUD approval. During the fiscal years ended June 30, 2016 and 2015, HUD approved rent increases of approximately 55.3% and 1.3% on subsidized units effective September 1, 2015 and 2014, respectively, and rent increases of approximately 2.8% on non-subsidized units effective September 1, 2015. Note 8 - Current Vulnerability Due to Certain Concentrations: The organization's principal asset is a 164-unit apartment project. The operations are concentrated in the multifamily real estate market and the organization 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 inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change. Additionally, the organization maintains cash balances at several financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation ("FDIC"). At times, the organization's cash balances in one institution may exceed the FDIC limits. At June 30, 2016 and 2015, the organization had balances with one institution in excess of the FDIC limit by 34,000 and 8,500, respectively. Note 9 - Service Coordinator Grant: During the June 30, 2002 fiscal year, the organization obtained a grant from HUD to fund a service coordinator, who is responsible for linking residents of Jefferson Apartments to community support services, which will assist them to continue to live independently. The original grant term began on January 1, 2002 and has been extended through December 31, 2016. The grant is to be drawn down on a quarterly basis, based on actual approved costs. For the fiscal years ended June 30, 2016 and 2015, Jefferson Apartments reported revenue of 42,073 and 45,694, respectively, as elderly and congregate services revenue, and expenses of 43,692 and 46,975, respectively, as elderly and congregate services expenses. Note JO-Evaluation o(subsequent Events: Management has evaluated subsequent events through September 30, 2016, the date which the financial statements were available to be issued. 13
CHRISTIAN CONCERN,. INC HUD PROJECT NO. 034-SHOJO STATEMENT OF FINANCIAL POSITION DATA JUNE 30, 2016 Account No. ASSETS Current Assets: 1120 Cash - Operations 9,746 1135 Accounts Receivable - HUD 1140 Accounts and Notes Receivable - Operations 43,167 1200 Miscellaneous Prepaid Expenses 6,931 1100 T Total Current Assets 59,844 1191 Tenant Deposits Held in Trust 65,709 Restricted Deposits: 1310 Escrow Deposits 30,875 1320 Replacement Reserve 412,678 1330 Other Reserves 84,000 1340 Residual Receipts Reserve 100 1300 T Total Restricted Deposits 527,653 Property and Equipment: 1410 Land 123,000 1420 Building 4,753,187 1440 Building Equipment (Portable) 243,057 1450 Furniture for Project/Tenant Use 51,675 1460 Furnishings 162,813 1465 Office Furniture and Equipment 12,917 1470 Maintenance Equipment 8,733 1490 Miscellaneous Fixed Assets 57,281 1400 T Total Fixed Assets 5,412,663 1495 Accumulated Depreciation (3,802,609) 1400 N Net Fixed Assets 1,610,054 1000 T TOTAL ASSETS 2,263,260 14
CHRISTIAN CONCERN. INC HUD PROJECT NO. 034-SHOJO STATEMENT OF FINANCIAL POSITION DATA (CONCLUDED) JUNE 30, 2016 Account No. LIABILITIES AND NET ASSETS Current Liabilities: 2110 Accounts Payable - Operations 2116 Accounts Payable - Section 8 and Other 2120 Accrued Wages Payable 2131 Accrued Interest Payable - First Mortgage 2132 Accrued Interest Payable - Second Mortgage 2170 Mortgage Payable - First Mortgage (Short Term) 2122 T Total Current Liabilities 2191 Tenant Security Deposits Long-Term Liabilities: 2320 Mortgage Payable c First Mortgage 2322 M01tgage Payable.. Second Mortgage 2300 T Total Long-Term Liabilities 2000 T Total Liabilities 3130 Net Assets 2033 T TOTAL LIABILITIES AND NET ASSETS 48,993 255 7,856 857 69,438 73,686 201,085 65,411 268,892 1,000,000 1,268,892 1,535,388 727,872 2,263,260 15
CHRISTIAN CONCE~ INC HUD PROJECT NO. 034-SHOJO STATEMENT OF ACTIVITIES DATA FOR THE YEAR ENDED JUNE 30, 2016 Account No. REVENUES 5120 Rent Revenue - Gross Potential 854,433 5121 Tenant Assistance Payments 161,719 5140 Rent Revenue - Stores and Commercial 52,842 5100 T Total Rent Revenue 1,068,994 5220 Vacancies - Apartments (36,560) 5152 T Net Rental Revenue 1,032,434 5390 Service Coordinator Revenue 42,073 5300 Total Elderly and Congregate Services Income 42,073 5410 Financial Revenue - Project Operations 209 5440 Revenue from Investments - Replacement Reserve 1,610 5400 T Total Financial Revenue 1,819 5910 Laundry and Vending Revenue 8,948 5920 Tenant Charges 385 5990 Miscellaneous Revenue 217 5900 T Total Other Revenue 9,550 5000 T Total Revenue 1,085,876 EXPENSES 6203 Conventions and Meetings 555 6210 Advertising and Marketing 339 6250 Other Renting Expenses 973 6310 Office Salaries 48,249 6311 Office Expenses 13,684 6320 Management Fee 94,956 6330 Manager or Superintendent Salaries 46,092 6340 Legal Expense - Project 11,802 6350 Audit Expense 14,350 6351 Bookkeeping Fees/ Accounting Services 750 6390 Miscellaneous Administrative Expenses 486 6263 T Total Administrative Expenses 232,236 16
CHRISTIAN CONCERN 1 INC. HUD PROJECT NO. 034-SHOJO STATEMENT OF ACTIVITIES DATA (CONTINUEDi FOR THE YEAR ENDED JUNE 30, 2016 Account No. 6450 Electricity 60,348 6451 Water 36,046 6452 Gas 35,695 6453 Sewer 31,748 6400 T Total Utilities Expense 163,837 6510 Payroll 82,414 6515 Supplies 46,275 6520 Contracts 105,544 6525 Garbage and Trash Removal 12,859 6546 Heating/Cooling Repairs and Maintenance 16,356 6548 Snow Removal 16,998 6590 Miscellaneous Operating and Maintenance Expenses 15,705 6500 T Total Operating and Maintenance Expenses 296,151 6710 Real Estate Taxes 13,000 6711 Payroll Taxes (Project's Share) 13,522 6720 Property and Liability Insurance (Hazard) 32,773 6722 Workmen's Compensation 7,999 6723 Health Insurance and Other Employee Benefits 33,814 6790 Miscellaneous Taxes, Licenses, Permits and Insurance 2,151 6700 T Total Taxes and Insurance 103,259 6820 Interest on Mortgage Payable 16,904 6800 T Total Financial Expenses 16,904 6990 Service Coordinator Expense 43,692 6900 Total Elderly and Congregate Services Expenses 43,692 6000 T Total Cost of Operations Before Depreciation 856,079 5060 T Change in Net Assets Before Depreciation 229,797 6600 Depreciation Expenses 163,672 5060 N CHANGE IN NET ASSETS 66,125 17
CHRISTIAN CONCERN, INC. HUD PROJECT NO. 034-SHOJO STATEMENT OF ACTIVITIES DATA (CONCLUDED) FOR THE YEAR ENDED JUNE 30, 2016 Account No. Sl000-010 Sl000-020 s 1000-030 SI000-040 Total mortgage principal payments required during the year Total of 12 monthly deposits during the year into the replacement reserve account, as required by the regulatory agreement Replacement reserve or residual receipts releases which are included as expense items on this profit and loss statement. Project improvement reserve releases under the flexible subsidy program that are included as expense items on this profit and loss statement. 71,511 140,396 18
CHRISTIAN CONCERN, INC HUD PROJECT NO. 034-SHOJO STATEMENT OF CASH FLOWS DATA FOR THE YEAR ENDED JUNE 30, 2016 Account No. Cash Flows From Operating Activities: 81200-010 Rental Receipts 1,019,685 81200-020 Interest Receipts 1,810 81200-030 Other Operating Receipts 39,980 81200-040 Total Receipts 1,061,475 81200-050 Administrative (44,400) 81200-070 Management Fees (94,956) 81200-090 Utilities (163,134) Sl200-100 Salaries And Wages (194,888) Sl200-l 10 Operating And Maintenance (224,650) 81200-120 Real Estate Taxes (13,000) Sl200-140 Property Insurance (32,796) S1200-150 Miscellaneous Taxes And Insurance (56,610) 81200-160 Tenant Security Deposits 317 81200-170 Other Operating Expenses (10,017) Sl200-180 Interest On Mortgage (11,444) Sl200-230 Total Disbursements (845,578) 81200-240 Net Cash Provided By Operating Activities 215,897 Cash Flows From Investing Activities: 81200-250 Net Deposits To The Reserve For Replacement Account (35,729) 81200-255 Net Deposits To The Escrow Deposits Account (8,807) 81200-330 Net Purchase Of Fixed Assets (108,271) 81200-350 Net Cash Used In Investing Activities (152,807) Cash Flows From Financing Activities: 81200-360 Principal Payments - First Mortgage (71,512) 81200-460 Net Cash Used In Financing Activities (71,512) 81200-470 Net Increase (Decrease) In Cash And Cash Equivalents (8,422) 81200-480 Beginning Of Period Cash 18,168 81200 T End Of Period Cash 9,746 19
CHRISTIAN CONCERN, INC. HUD PROJECT NO. 034-SHOJO STATEMENT OF CASH FLOWS DATA (CONCLUDED) FOR THE YEAR ENDED JUNE 30, 2016 Account No. 3250 6600 81200-500 81200-520 81200-530 81200-540 s 1200-560 81200-570 81200-580 81200-610 Reconciliation Of Change In Net Assets To Net Cash Provided By Operating Activities: Change In Unrestricted Net Assets Adjustments To Reconcile Change In Net Assets To Net Cash Provided By Operating Activities: Depreciation Expenses Increase In Accounts Receivable - Other Increase In Prepaid Expenses Increase In Cash Restricted For Tenant Security Deposits Increase In Accounts Payable Increase In Accrued Liabilities Increase In Accrued Interest Payable Increase In Tenant Security Deposits Held In Trust Net Cash Provided By Operating Activities 66,125 163,672 (24,077) 703 (1,885) 1,057 2,640 5,460 2,202 215,897 20
CHRISTIAN CONCERN, INC. HUD PROJECT NO. 034-SHOJO SUPPLEMENTARY SCHEDULES TO COMPLY WITH U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REQUIREMENTS Computation of Surplus Cash-Annual: Cash Accounts Receivable - Operations Total Cash Current Obligations: Accrued Mortgage Interest Payable Accounts Payable Due Within 30 Days Accrued Expenses Tenant Security Deposits Liability Other Current Obligations: Mortgage Principal. Due 7/1/16 Insurance and Tax Escrow Due 711/16 Replacement Reserve Escrow Due 7/1/16 Total Current Obligations Surplus Cash (Deficiency) 75,455 43,167 118,622 70,295 49,248 7,856 65,411 6,057 2,995 12,433 214,295 (95,673) Schedule of Changes in Fixed Asset Accounts: Beginning Balance Land 123,000 Building 4,737,669 Building Equipment (Portable) 231,807 Furniture for Project/Tenant Use 50,500 Furnishings 135,310 Office Furniture and Equipment 11,608 Maintenance Equipment 9,262 Miscellaneous Fixed Assets 57,281 5,356,437 Additions Deductions 15,518 42,939 (31,689) 1,175 41,886 (14,383) 3,317 (2,008) 1,248 (1,777) 106,083 (49,857) Ending Balance 123,000 4,753,187 243,057 51,675 162,813 12,917 8,733 57,281 5,412,663 Accumulated Depreciation 3,688,794 163,672 (49,857) 3,802,609 Net Book Value 1,610,054 21
CHRISTIAN CONCERN, INC. HUD PROJECT NO. 034-SHOJ 0 SUPPLEMENTARY SCHEDULES TO COMPLY WITH U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REQUIREMENTS (CONCLUDED) Schedule of Escrow Deposits - Reserve for Property Tax and Insurance: Balance at beginning of year Total monthly deposits Interest income Withdrawals for real estate taxes, insurance, and bank fees Balance at end of year Estimated amount required as of June 30, 2016 for future payments of: Contributions in lieu of real estate taxes Property and liability insurance Balance in account 1310 - escrow deposits Amount in escrow account over estimated requirement Schedule of Reserve for Replacements: Balance at beginning of year Total monthly deposits Interest income HUD approved withdrawals Balance at end of year 22,068 37,815 40 59,923 (29,048) 30,875 6,500 6,219 12,719 30,875 18,156 376,949 140,396 1,601 518,946 (106,268) 412,678 Schedule of Residual Receipts: Balance at beginning of year Required addition for the year ended June 30, 2015 HUD approved withdrawals Balance at end of year Schedule of Other Reserves - Debt Service Reserve: Balance at beginning of year Required addition for the year ended June 30, 2015 Interest income Withdrawal of interest earned on account Balance at end of year 22 100 100 100 84,000 168 84,168 (168) 84,000
CHRISTIAN CONCERN, INC. HUD PROJECT NO. 034-SHOJO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Federal Grantor/Pass-Through Grantor/Program Title Federal CFDA Number Federal Expenditures U.S. Department of Housing and Urban Development: Section 202 Direct Loan Section 8 Housing Assistance Payments Service Coordinator Grant County of Montgomery Department of Housing and Community Development: U.S. Department of Housing and Urban Development Home Investment Partnerships Program (HOME) 14.157 14.195 14.191 14.239 414,090 161,719 42,073 500,000 Total 1,117,882 The accompanying notes are an integral part of the schedule of expensitures of federal awards. 23
CHRISTIAN CONCERN, INC HUD PROJECT NO. 034-SHOJO NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Note A - Basis of Presentation: The accompanying Schedule of Expenditures of Federal Awards includes the federal award activity of Christian Concern, Inc., TIA Jefferson Apartments, HUD Project No. 034-SHOlO, and is presented on the accrual basis of accounting. 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 Christian Concern, Inc., Tl A Jefferson Apartments, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Christian Concern, Inc., TIA Jefferson Apartments. Note B - 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, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Christian Concern, Inc., TI A Jefferson Apartments, has elected not to use the 10-percent De Minimis indirect cost rate allowed under the Uniform Guidance. Note C - U.S. Department of Housing and Urban Development Loan Program: Christian Concern, Inc., TIA Jefferson Apartments, has received a U.S. Department of Housing and Urban Development direct loan under Section 202 of the National Housing Act, and a U.S. Department of Housing and Urban Development pass-through loan under the Home Investment Partnerships Program (HOME), through the County of Montgomery Department of Housing and Community Development. The loan balances outstanding at the beginning of the year are included in the federal expenditures presented in the Schedule. Christian Concern, Inc., TIA Jefferson Apartments, received no additional loans during the year. The balance of the loans outstanding at June 30, 2016 consists of: CFDANumber 14.157 14.239 Program Name Section 202 Direct Loan Home Investment Partnerships Program Outstanding Balance at June 30, 2016 342,578 500,000 24
CHRISTIAN CONCERN, INC HUD PROJECT NO. 034-SHOJO SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS June 30, 2015 Findings: There were no findings or questioned costs identified for the year ended June 30, 2015. 25
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 To the Board of Directors Christian Concern, Inc. TIA Jefferson Apartments Norristown, PA 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 Christian Concern, Inc. TIA Jefferson Apartments, HUD Project No. 034-SHOlO, which comprise the statement of financial position as of June 30, 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 September 30, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Christian Concern, Inc. TIA Jefferson Apartments' 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 Christian Concern, Inc. TIA Jefferson Apartments' internal control. Accordingly, we do not express an opinion on the effectiveness of Christian Concern, Inc. Tl A Jefferson Apartments' 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. Hayden Miller Nelson & Yoder, P.C. + 182 W. Broad Street, Telford, PA 18969 Main Phone (215) 723-7714 + Fax (215) 721-0630 26
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. Compliance and Other Matters As part of obtaining reasonable assurance about whether Christian Concern, Inc. TIA Jefferson Apartments' 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. 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. 11,,h- //fj Ji-- ~ ~ ~ HAYDEN, MILLER, NELSON, & YODER, P.C. Certified Public Accountants Telford, PA September 30, 2016 27
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Directors Christian Concern, Inc. TI A Jefferson Apartments Norristown, PA Report on Compliance for Each Major Federal Program We have audited Christian Concern, Inc. TIA Jefferson Apartments', HUD Project No. 034-SHOlO, compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Christian Concern, Inc. TIA Jefferson Apartments' major federal programs for the year ended June 30, 2016. Christian Concern, Inc. TIA Jefferson Apartments' major federal programs are 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 the 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 each of Christian Concern, Inc. TI A Jefferson Apartments' 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 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 Christian Concern, Inc. TIA Jefferson Apartments' 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 Christian Concern, Inc. TIA Jefferson Apartments' compliance. Hayden Miller Nelson & Yoder, P.C. + 182 W. Broad Street, Telford, PA 18969 Main Phone (215) 723-7714 +Fax (215) 721-0630 28
Opinion on Each Major Federal Program In our opinion, Christian Concern, Inc. TIA Jefferson Apartments 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 June 30, 2016. Report on Internal Control Over Compliance Management of Christian Concern, Inc. TIA Jefferson Apartments is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In plam1ing and performing our audit of compliance, we considered Christian Concern, Inc. TIA Jefferson Apartments' 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 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 Christian Concern, Inc. TIA Jefferson Apartments' 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. 11~ 117:1&-~ t' ~ HAYDEN, MILLER, NELSON, & YODER, P.C. Certified Public Accountants Telford, PA September 30, 2016 29