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Audit - 2005/2006HOUSING AUTHORITY OF THE CITY OF SALI NA, KANSAS MANAGEMENT'S DISCUSSION AND ANALYSIS, FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTAL INFORMATION Year Ended June 30, 2006 TABLE OF CONTENTS Independent Auditor's Report Required Supplemental Information: Management's Discussion and Analysis Financial Statements: Statement of Net Assets — Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Assets, Proprietary Funds Statement of Cash Flows — Proprietary Funds Notes to Financial Statements Supplemental Data Required By HUD Financial Data Schedule SINGLE AUDIT SECTION Schedule of Expenditures of. Federal Awards Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Governmental Auditing Standards Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A -133 Summary Schedule of Prior Audit Findings Schedule of Findings and Questioned Costs Corrective Action Plan Page No. 1 3 9 10 11 13 24 26 27 29 31 32 34 INDEPENDENT AUDITOR'S REPORT Randal D. N iewedde, CIDA Jeffrey J, Wiens, CIDA Niewe d de WienQs CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT To the Board of Commissioners Housing Authority of the City of Salina, Kansas We have audited the accompanying financial statements of the major funds and the aggregate remaining fund information of the Housing Authority of the City of Salina, Kansas, as of and for the year ended June 30, 2006, which collectively comprise the Housing Authority of the City of Salina, Kansas' basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Housing Authority of the City of Salina, Kansas' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each major fund and the aggregate remaining fund information of the Housing Authority of the City of Salina, Kansas, as of June 30, 2006, and the respective changes in financial position and cash flows, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing _Standards, we have also issued our report dated October 24, 2006 on our consideration of the Housing Authority of the City of Salina, Kansas' internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants 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 internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The management's discussion and analysis as listed in the table of contents is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited P.O. box 98 a York, Nebraska 68467 • Ph; 402 - 362 -44 t0 • Fax: 402-362 -441.0 -, nwcpa @alltel.net procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Housing Authority of the City of Salina, Kansas' basic financial statements. The Financial Data Schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations, and is also not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation to the basic financial statements taken as a whole. �ieuiedde � W ew, �pj� October 24, 2006 2 MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the Housing Authority of the City of Salina, Kansas annual financial report presents our managements analysis of the Authority's financial performance during the fiscal year ended on June 30, 2006. This discussion and analysis is designed to assist the reader in focusing on the significant financial issues and activities and to identify any significant changes in financial position. Please read and consider the information presented in conjunction with the financial statements as a whole. FINANCIAL - HIGHLIGHTS The term "Net Assets" refers to the difference between assets and liabilities. The Authority's total net assets as of June 30, 2006 were $7,437,265.97. The net assets increased by $172,180.02, an increase of less than of 2% from the prior year. Of this amount, $847,658.47 was reported as "unrestricted net assets ". Unrestricted net assets represent the amount available to be used to meet the Authority's ongoing obligations to citizens, creditors and operations of facilities. Operating revenues for the Authority was $1,488,377.82 for the year ended June 30, 2006. This was an increase of 13% over the prior year. This is due mostly to how the Housing Choice Voucher program is funded which is discussed later. Operating expenses for the Authority were 1,994,801.48 for the year ended June 30, 2006. This was a decrease of 5% over the prior year. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report includes this Management Discussion and Analysis report, the Basic Financial Statements and the Notes to the Financial Statements. This report also contains the Financial Data Schedule (FDS) as referenced in the section of Supplemental Information Required by HUD. The Authority's financial statements are presented as fund level financial statements because the Authority only has proprietary funds. Required Financial Statements Proprietary Funds Financial Statements - The financial statements of the Housing Authority report information of the Authority using accounting methods similar to those used by private sector companies. These statements offer short- and longterm financial information about its activities. The Statement of Net Assets includes all the Authority's assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and obligations of the Authority creditors (liabilities). It also provides the basis for evaluating the capital structure of the Authority and assessing the liquidity and financial flexibility of the Authority. 469 South Fifth Street 1 P.O. Box 1202 I Salim, Kansas 67402 - 12021785.827.0441 1 fax 785.827.0442 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS MANAGEMENT'S DISCUSSION AND ANALYSIS Year Ended June 30, 2006 OVERVIEW of THE FINANCIAL STATEMENTS (CONT'D All of the. current year's revenues and expenses are accounted for in the Statement of Revenues, Expenses, and Changes in Fund Net Assets. This statement measures the success of the Authority's operations over the past year and can be used to determine whether the Authority has successfully recovered all its costs through its user fees and other charges, profitability and credit worthiness. The final required financial statement is the Statement of Cash Flows. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing and financing activities and provides answers to such questions as where did cash come from, what was cash used for, and what was the change in the cash balance during the reporting period. The Authority has two enterprise funds that are considered major proprietary funds for presentation purposes and the remaining funds are aggregated as nonmajor enterprise funds. The major enterprise funds are Public Housing program and Housing Choice Voucher program. The nonmajor funds were the Homeownership program, and the Tenant Based Rental Assistance program. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements and provide more detailed. data. Supplemental Information This report also contains the Financial Data Schedule (FDS) as referenced in the section of Supplemental Information Required By HUD. HUD has established Uniform Financial Reporting Standards that require Housing Authority's to submit. financial information electronically to HUD using the FDS format. This financial information was electronically transmitted to the Real Estate Assessment Center (REAL) for the year ended June 30, 2006 and is required to be included in the audit reporting package. FINANCIAL ANALYSIS Net assets may serve, over time, as a useful indicator of a government's financial position. In the case of the Authority, assets exceeded liabilities by $7,437,265.97 at the close of the year ended June 30, 2006. This represents an increase of $172,180.02. As can been seen in table on the subsequent page, current assets and other assets increased $210,028.43. This increase was made up of $228,795.86 increase in cash and cash equivalents and investments. Public Housing's increase in cash and cash equivalents and investments of $117,896.86 was a result of operations while the Section 8 Voucher program's increase of $110,171.75 was due to how the Voucher program is now funded. HUD determines the funding levels and advances the funds, however, the Authority is not allowed to overlease 4 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS MANAGEMENT'S DISCUSSION AND ANALYSIS Year Ended June 30, 2006 beyond its baseline number of units. Unused housing assistance payment advances stay with the Authority to be used in future periods. Capital assets decreased as current year depreciation expense exceeded current year capital additions. CONDENSED STATEMENTS OF NET ASSETS Dollar Percent FY 2006 FY 2005 Change Change Current and other assets $ 11347,921.09 $ 1,137,892.66 $ 210,028.43 18.5% Capital assets 61335,021.08 6,364;157.39 (29,136.31) -0.5% Total Assets 71682,942.17 7,502,050.05 1801892.12 2.4% Current liabilities 194,128.98 191,496.76 21632.22 1.4% Other noncurrent liabilities 51,547.22 45,467.34 61079.88 13.4% Total Liabilities 245,676.20 2361964.10 81712.10 3.7% Net Assets Invested in capital assets, net of related debt 61335,021.08 61364,157.39 (29,136.31) -0.5% Restricted 254,586.42 159,687.66 94,898.76 59.4% Unrestricted 847,658.47 741,240.90 106,417.57 14.4% Total Net Assets $ 7,437,265.97 $ 7,265,085.95 $ 172,180.02 2.4% While the Statement of Net Assets shows the change in financial position of net assets, the Statements of Revenues, Expenses, and Changes in Net Assets provides answers as to the nature and source of these changes. The Public Housing occupancy rate changed very little, in fact, it was 98.71 % in 2005 or 1,907 of 1,932 unit months to 98.45% or 1908 of 1,938 unit months in 2006. Beyond the Public Housing program, our business account reflects non - subsidized units that were 100% occupied both years. Occupancy rate for the Section 8 program was 99.57% in 2005 and 98.18% in 2006 with over half of the funds assisting one - bedroom qualified families. The Housing Choice Program funding for Housing Assistance Payments decreased by $6,689 from 2005 to 2006 (FDS line 706); however, this did not affect our ability to lease up vouchers or our ability to recruit decent landlords. Administrative funds decreased from $156,806 in 2005 to $150,243 in 2006 which is a 4.19% decrease. HUD decreased administrative funds and this was not based on performance. Housing Authorities were funded at 86.02% of their eligible funding in fiscal year 2006 compared to 98.1 % in fiscal year 2005. Despite this enormous unforeseen adjustment, our Housing Authority was able to decrease administrative expenses, absorb the work of previous employees and end the year with excess funding that will assure the long term viability of the agency and allow for the expansion of further low income housing. The Public Housing operating grant formula takes rental income into consideration along with the program costs. The operating grant increased from $308,396 in 2005 to $360,453 in 2006 which is a 14.44% increase. As rental income decreased and program expenses increased, the subsidy also HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS MANAGEMENT'S DISCUSSION AND ANALYSIS Year Ended June 30, 2006 increased. Rental income was $234,299 in 2004; $215,555 in 2005; and $210,710 in 2006 which was a 2.25% decrease the last year. $69,045 was transferred from the capital grant into the Public Housing program which is all related to Capital Fund administrative work or maintenance. Even with additional maintenance work charged to the Public Housing program in 2006, total salaries decreased from $397,415 to $375,321 which is a 5.6% decrease (admin - $42,623 and labor +$20,529). Typically our housing authority does not transfer capital funds to the public housing program for operations, however, some of the past allowable expense p p guidelines changed, therefore, it became necessary. Interest income increased as rates were higher and additional funds were invested. CONDENSED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Revenues Program revenues Rental HUD program contributions HUD operating grants Other grants Other General revenues Interest Total Revenues Expenses Depreciation Operating Nonoperating Total Expenses Excess (Deficiency) Before Contributions, and Special Items Contributions Special Items Changes in Net Assets 29,519.21 101612.73 Dollar Percent FY 2006 FY 2005 Change Change 216,427.96 214,621.78 $ 217,696.19 $ 223,089.01 $ (51392.82) -2.4% 11166,436.00 1, 332, 812.66 (166, 376.66) -12.5% 476,593.10 361,699.60 114,893.50 31.8% 40,042.31 40,447.14 (404.83) -1.0% 80,432.48 1301720.90 (50,288.42) -38.5% 29,519.21 101612.73 181906.48 2,0101719.29 210991382.04 (88,662.75) 216,427.96 214,621.78 1,806.18 11778,373.52 11887,971.27 (109,597.75) 16,229.16 149465.49 11763.67 21011,030.64 21117,058.54 106,027.90 (311.35) (17,676.50) 17,365.15 163,020.17 173,857.29 (10,837.12) 91471.20 51776.20 31695.00 172,180.02 161,956.99 10,223.03 Beginning net assets, as restated 712651085.95 71103,128.96 161,956.99 Ending net assets $ 7,437,265.97 $ 71265,085.95 $ 1721180.02 Public Housing "other income" decreased by 67% from $24,172 to $7,973 which were funds collected from the State of Kansas Setoff program for the collection of past due debts that former tenants owed the housing authority and federal government. Other tenant revenue decreased by 6% or $3,273 which is primarily funds collected from tenants for damages to property or late fees. Administrative salaries decreased by 13.62% which is $42,623, 0 178.1% --4.2% 0.8% -5.8% 12.2% -5.0% - 98.2% -6.2% 64.0% 6.3% 2.3% 2.4% approximately the salary of a position that was vacant during the fiscal year. Other operating expenses which includes: legal, travel, training, telephone, office supplies, postage, accounting and auditing fees decreased by 17% or $26,199. Total operating expenses this year were $835,062 compared to $879,421 in 2005, which is $44,359 less and 5% decrease. Excess operating revenue over operating expenses was $1,338,678 compared to 2005 at $1,234,260 or $104,418 (7.8 %), however, that includes excess HAP funds. After Housing Assistance Payments (HAP) and depreciation total expense were $2,011,030 compared to $2,117,058 in 2005 a decrease of $106,028 or 5 %. Again, this is due to the decrease in administrative expenses ($61,967) and HAP payments ($63,475) and an increase in income of $60,058. An additional factor in the increased net-assets is $9,471 insurance proceeds from hail damage to vehicles. HUD capital contributions were $163,020.17 for the year ended June 30, 2006. This was a decrease from the prior year of $10,837.12. The Authority is allocated capital grant money each year as determined by HUD and remains relatively consistent form year to year based on the Authority's number of units. The amount presented will vary from year to year depending on the timing of projects as outlined in the HUD approved capital grant budget. CAPITAL ASSET Capital Assets -- The Housing Authority of the City of Salina, Kansas' investment in capital assets as of June 30, 2006 amounts to $6,335,021.08 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, equipment and construction in progress. The total decrease in the Authority's investment in capital assets for the current fiscal year was 0.5% in terms of net book value. However, actual expenditures to purchase or construct capital assets were $187,291.65 for the year. These expenditures include the following: Gwava antivirus software $990 Replace tape drive $864 Memory upgrades, 2 computers $727 Desk d rawers$797 Computer & monitor $1,383 Laptop computer $2,125 Copier $5,209 Palm Pilot, Rent Reasonableness /HQS software $3,875 Carpentry $65,746 Roofs $6,991 Siding $6,063 Concrete $7,417 HVAC /Electrical $13,583 Plumbing $8,759 Doors $4,575 Grounds $12,000 for tree /shrub removal and lawn improvements 7 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS MANAGEMENT'S DISCUSSION AND ANALYSIS Year Ended June 30, 2006 The Authority has various contract commitments with contractors for the Implementation of the HUD capital grants as outlined by the HUD approved Capital Grant Budget. Depreciation charges for the year totaled $216,427.96. Additional information on the Authority's capital assets can be found in Note H of the notes to the financial statements of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES The Board of Commissioners and Management of the Housing Authority considered many factors when approving the fiscal year 2007 budget. The user charges are based on a tenant's income as established by HUD guidelines and are not adjustable in the Public Housing Program. Operating subsidy is based on rental income, other income and utility consumption and costs. The amount of funding is also established and approved by HUD. In projecting the amount of rental income, the Authority considered prior year rental income and occupancy rates. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the Authority's finances for all those with an interest in its finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to the Executive Director, Housing Authority of the City of Salina, Kansas, P.O. Box 1202, Salina, Kansas 67402 -1 202 � FINANCIAL STATEMENTS ASSETS CURRENT ASSETS: Cash and cash equivalents Investments Accounts receivable Interfunds receivable Due from other governments Accrued interest receivable Deferred charges Restricted. Cash and cash equivalents NONCURRENT ASSETS Restricted. Cash and cash equivalents Capital Assets, non - depreciable. Capital Assets, depreciable, net Mortgages receivable LIABILITIES CURRENT LIABILITIES: HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF NET ASSETS - PROPRIETARY FUNDS June 30, 2006 Public Section 8 Nonmajor - $ Housing Voucher Funds Totals $ 213,791.84 $ 1431675.63 $ 28,789.14 $ 386,256.61 286,103.09 - 217,515.00 503,618.09 11,860.78 - - 11,860.78 28,718.84 3,500.00 313.00 32,531.84 28,970.43 - 2,692.20 31,662.63 1,638.28 358.40 1,347.38 3,344.06 30,451.66 - - 30,451.66 64,556.53 - 113.00 64,669.53 TOTAL CURRENT ASSETS 666,091.45 147,534.03 250,769.72 1,0641395.20 - 260,118.19 - 260,118.19 1,974,805.04 25,000.00 3,000.00 2,002,805.04 4,260,290.48 11,071.08 60,854.48 4,332,216.04 - - 23,407.70 23,407.70 TOTAL NONCURRENT ASSETS 6,2351095.52 296,189.27 87,262.18 6,618,546.97 TOTAL ASSETS $ 6,901,186.97 $ 443,723.30 $ 338,031.90 $ 7,682,942.17 Accounts payable $ 231849.26 $ 5,304.09 $ - $ 29,153.35 Accrued wages and benefits payable 1,682.26 - - 1,682.26 Interfunds payable - 14,184.20 18,347.64 32,531.84 Due to other governments 19,689.60 37,155.66 - 56,845.26 Deferred revenue 4,133.92 - - 4,133.92 Compensated absences payable 3,626.46 1,326.84 159.52 5,112.82 Trust and deposit liabilities 64,556.53 - 113.00 64,669.53 TOTAL CURRENT LIABILITIES 1171538.03 57,970.79 18,620.16 194,128.98 NONCURRENT LIABILITIES Trust and deposit liabilities - 5,531.77 - 51531.77 Compensated absences payable 32,638.14 11,941.63 1,435.68 46,015.45 TOTAL NONCURRENT LIABILITIES 32,638.14 17,473.40 1,435.68 51,547.22 TOTAL LIABILITIES 150,176.17 75,444.19 20,055,84 245,676.20 NET ASSETS Invested in capital assets 6,235,095.52 36,071.08 63,854.48 6,335,021.08 Restricted - Housing Assistance Payments - 254,586.42 - 254,586.42 Unrestricted 5151915.28 77,621.61 254,121.58 847,658.47 TOTAL NET ASSETS $ 6,751,010.80 $ 368,279.11 $ 317,976.06 $ 7,437,265.97 See accompanying notes. 9 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - PROPRIETARY FUNDS Year Ended June 30, 2006 See accompanying notes. 10 Public Section 8 Nonmajor Housing Voucher Funds Totals OPERATING REVENUES Rental income $ 210,709.71 $ - $ 6,986.48 $ 217,696.19 HUD Section 8 contributions - 1,166,436.00 - 1,166,436.00 Tenant based rental assistance revenue - - 23,813.15 23,813.15 Other income 561820.99 23,611.49 - 80,432.48 TOTAL OPERATING REVENUES 267,530.70 1,1901047.49 30,799.53 1,488,377.82 OPERATING EXPENSES Administrative 328,889.93 154,894.42 8,571.11 492,355.46 Tenant services 3,750.00 - - 3,750.00 Utilities 14,247.69 - - 14,247.69 Ordinary maintenance and operations 222,385.41 - 3,422.47 225,807.88 General expense 78,839.08 1,196.13 2,636.54 82,671.75 Housing assistance payments - 937,004.74 - 937,004.74 Security deposit assistance payments - - 22,536.00 22,536.00 Depreciation 212,855.98 1,956.37 1,615.61 216,427.96 TOTAL OPERATING EXPENSES 8601968.09 1,095,051.66 38,781.73 1,994,801.48 OPERATING INCOME (LOSS) - (593,437.39) 94,995.83 (7,982.10) (506,423.66) NONOPERATING REVENUES (EXPENSES) HUD operating subsidy 3601453.00 - - 360,453.00 HUD capital grants - operations 116,140.10 - - 116,140.10 Nonfederal grant income 16,229.16 - - 16,229.16 Nonfederal grant expenditures (16,229,16) - - (16,229.16) Interest income 15,951.45 5,244.08 8,323.68 29,519.21 TOTAL NONOPERATING REVENUES (EXPENSES) 492,544.55 5,244.08 8,323.68 506,112.31 INCOME (LOSS) BEFORE CONTRIBUTIONS, TRANSFERS AND SPECIAL ITEMS (100,892.84) 100,239.91 341.58 (311.35) CAPITAL CONTRIBUTIONS HUD Capital Grants 163,020.17 - - 163,020.17 TRANSFERS IN (OUT) Transfer in 51,442.87 - - 51,442.87 Transfer out - - (51,442.87) (51,442.87) SPECIAL ITEMS Insurance proceeds 90471.20 - - 9,471.20 INCREASE (DECREASE) IN NET ASSETS 123,041.40 100,239.91 (51,101.29) 172,180.02 NET ASSETS: Net assets, beginning balance 6,627,969.40 1081351.54 369,207.10 7,105,528.04 Prior period adjustments - 159,687.66 (129.75)_ 159,557.91 Beginning balance, restated 6,627,969.40 268,039.20 369,077.35 7,265,085.95 TOTAL NET ASSETS -ENDING BALANCE $ 6,751,010.80 $ 368,279.11 $ 317,976.06 $ 7,437,265.97 See accompanying notes. 10 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS Year Ended June 30, 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Rental receipts HUD Section 8 receipts Tenant based rental assistance receipts Other receipts Tenant security deposits Cash payments for goods and services Cash payments to employees for services NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: HUD operating subsidy HUD capital grants- operations Nonfederal grant receipts Nonfederal grant expenditures Special items insurance proceeds Net change in interfund borrowing NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchases and construction of capital assets HUD - capital grants NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES Public Section 8 Nonmajor Housing Voucher Funds Totals 212,211.82 $ - $ 61986.48 $ 219,198.30 - 1,166,436.00 - 1,166,436.00 - - 21, 908.45 21, 908.45 63,538.87 32,480.83 - 96,019.70 (3,416.56) 1,566.87 (340.00) (2,189.69) (276,645.68) (967,937.94) (27,796.25) (1,272,379.87) . (362,791.0 (122,961.49)_ _ (6,137.89) (491,890.43) (367,102.60) 109,584.27 (5,379.21) (262,897.54) 360,453.00 - - 360,453.00 116,140.10 - - 116,140.10 17,444.74 - - 170444.74 (16,229.16) - - (16,229.16) 91471.20 - - 9,471.20 (1 ,116.85) 2,279.87 1,163.02 - 486,163.03 2,279.87 (1,163.02) 487,279.88 (181,103.58) (6,578.07) - (187,681.65) 164,235.54 - - 164,235.54 (16,868.04) (6,578.07) - (23,446.11) CASH FLOWS FROM INVESTING ACTIVITIES: Net (deposits) withdrawals to investments (28,951.15) 75,000.00 (4,621.81) 411427.04 Interest received 15,704.47 4,885.68 7,269.48 27,859.63 NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES _ (13,24fi.68) 19,885.68 2,647.67 69,286.67 NET INCREASE (DECREASE) IN CASH 88,945.71 185,171.75 (3,894.56) 270,222.90 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 189,402.66 218,622.07 32,796.70 440,821.43 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2781348.37 $ 403,793.82 $ 28,902.14 $ 711,044.33 See accompanying notes. 11 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS (CONT'D) Year Ended ,tune 30, 2006 Public Section 8 Housing .._ Voucher Nonmajor Funds Totals RECONCILIATION OF INCOME (LOSS) FROM OPERATIONS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) $ (593,437.39) $ 94,995.83 $ (7,982.10) $ (506,423.66) Adjustments to reconcile income from operations to net cash provided by operating activities: Depreciation 212,855.98 1,956.37 1,615.61 216,427.96 Change in assets and liabilities: (Increase) decrease in accounts receivable 6,420.31 - - 6,420.31 (Increase) decrease in deferred charges 7,481.55 933.52 - 81415.07 (Increase) decrease in due from other governments - 8,704.02 (1,904.70) 6,799.32 (Increase) decrease in mortgage receivables - - 2,636.54 2,636.54 Increase (decrease) in accounts payable 6,090.92 3,527.46 235.25 9,853.63 Increase (decrease) in trust and deposit liabilities (3,416.56) 1,566.87 (340.00) (2,189.69) Increase (decrease) in accrued wages and benefits payable (11,727.64) (2,848.85) - (14,576.49) Increase (decrease) in accrued leave 8,181.91 583.73 360.19 9,125.83 Increase (decrease) in due to other governments (1,351.36) - - (1,351.36) Increase (decrease) in deferred revenue 1,799.68 165.32 - 1,965.00 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (367,102.60) $ 109,584.27 $ (5,379.21) $ (262,897.54) See accompanying notes. 12 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2446 NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization, The Authority was created under the laws of the State of Kansas. The purpose of the Authority is to administer the Public Housing programs authorized by the United States Housing Act of 1937, as amended. These programs are subsidized by the Federal Government through the U.S. Department of Housing and Urban Development (HUD). The financial statements of the Authority have been prepared in accordance with accounting principles generally accepted in the United States of America as applied to governmental units. The Governmental Accounting Standards Board ( "GASB ") is the standard- setting body for governmental accounting and financial reporting. As allowed in Section P80 of GASB's Codification of Governmental Accounting- and Financial Reporting Standards the Authority has elected not to apply to its proprietary activities Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989. Financial Reoortina Entit In determining how to define the reporting entity, management has considered all potential component units. The decision to include a component unit in the reporting entity was made by applying the criteria set forth in Section 2100 and 2600 of the Government Accounting Standards Board Codification. These criteria state that the financial reporting entity consist of (a) the primary government, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but'for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Based on these criteria, there are no additional agencies or entities which should be included in the financial statements of the Authority. Basis of accounting, measurement focus and financial statement presentation The accounts of the Authority are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self - balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included in the Statement of Net Assets. The Statement of Revenues, Expenses and Changes in Fund Net Assets presents increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. 13 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) The Authority distinguishes between operating and nonoperating revenues and expenses in its Statement of Revenues, Expenses and Changes in Fund Net Assets., For this purpose, the Authority's operating revenues result from providing low- income housing services such as tenant rent, HUD Section S funds earned and other tenant charges. Operating expenses include the cost attributed to administration, tenant services, utilities, maintenance and operations, housing assistance payments and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses. Proprietary Fund Financial Statements include a Statement of Net Assets, a Statement of revenues, Expenses and Changes in Fund Net Assets, and a Statement of Cash Flows for each major proprietary fund and non -major funds aggregated. Statement No. 34 established criteria (percentage of the assets, liabilities, revenues or expend itureslexpenses of either fund category or the governmental and enterprise combined) for determination of major Funds. If non -major funds exist, these funds are combined in a single column in the fund financial statements. The Authority reports the following major enterprise funds: Public Housing Programs This fund accounts for the operation, maintenance, and development of housing units which are owned by the Authority. The development of the projects were funded primarily by the U.S. Department of Housing and Urban Development through loans and bonds. The loans have been forgiven by HUD and the bond debt service and repayment requirements are the responsibility of HUD and therefore no outstanding liabilities are recorded. The program is subsidized annually by operating subsidy from HUD and through Capital Grants for capital improvements. Housing Choice Voucher. This fund accounts for the operation of the Housing Choice Voucher program which is funded primarily by the U.S. Department of Housing and Urban Development. The program funds housing assistance payments to eligible low- income housing participants. The nonmajor enterprise funds consist of the Homeownership fund and the Tenant -Based rental assistance program. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues, expenditures, expenses, and other disclosures. Accordingly, actual results could differ from those estimates. 14 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTJD) Budg,etau Process The Authority establishes a budget for the fiscal year and is adopted by the Board of Commissioners. Cash and Investments All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. Cash and Cash Investments are available upon demand and are considered to be It equivalents" when preparing these financial statements. In addition, any marketable securities that are owned by a specific amount and that are purchased with a maturity of ninety days or less are also considered to be "cash equivalents ". The Authority's deposits can only be invested in the following HUD approved investments: direct obligations of the federal government backed by the full faith and credit of the United States, obligations of federal government agencies, securities of government- sponsored agencies, demand and savings deposits, money - market deposit accounts, municipal depository fund, super now accounts, certificate of deposit, repurchase agreements, sweep accounts, separate trading of registered interest and principal securities (STRIPS), and mutual funds that consist of securities purchased from the HUD approved list. Accounts Receivable All receivables are current and therefore due within one year. Receivables are reported net of an allowance for uncollectible account and revenues net of uncollectibles. Allowances are reported when account are proven to be uncollectible. Prepaid Items Prepaid balances are for payments made by the Authority in the current year to provide services occurring in the subsequent fiscal year. Capital Assets and Depreciation Property and equipment are stated at actual or estimated historical cost, net of accumulated depreciation. Contributions of assets are recorded at fair market value at the date donated. The Authority generally capitalized assets with a cost of $500 or more as purchases and construction outlays occur. Depreciation has been calculated on each class of depreciable property using the straight - line method. Estimated useful lives are as follows: Buildings 20-40 years Building improvements 10-40 years Furniture and fixtures 5 -10 years Equipment 3 -10 years 15 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTYD) Use of Restricted /Unrestricted Net Assets When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the Authority's policy is to apply restricted assets first. Due to and Due from Other Funds Interfund receivables and payables arise from interfund transactions and are recorded by all funds affected in the period in which transactions are executed. The balances result from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds. Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. Grant Revenue The Authority, a recipient of grant revenues, recognizes revenues (net of estimated uncollectible amounts, if any), when all applicable eligibility requirements, including time requirements are met in accordance with GASB Statement No. 33. Resources transmitted to the Authority before the eligibility requirements are met are reported as deferred revenue. Investment Income Investment income from pooled cash and investments is allocated monthly based on the percentage of a fund's average pooled cash and investments balance. Compensated Absences The Authority's policy allows employees to accumulate unused vacation leave. Sick leave may be accrued but is not paid upon termination, except upon retirement. Income Taxes The Authority is a governmental subdivision of the State of Kansas and is exempt from Federal and State income taxes. Leases The majority of leases and subleases are short -term operating leases. 16 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) Schedule of Expenditures of Federal Awards The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the Housing Authority .of the City of Salina, Kansas and is presented in accordance with generally accepted accounting principles. The information in this schedule is presented in accordance with the requirements of Office of Management and Budget Circular A -133, Audits of States, Local Governments and Non - Profit Organizations. NOTE B - DEPOSITS AND INVESTMENTS Deposits At June 30, 2006, the reported amount of the Authority's deposits was $690,978.15 and the bank balance was $710,124.00. $632,105.47 of the bank balance was covered by federal depository insurance or by collateral held by Authority's agent in the Authority's name. $78,018.53 of the bank balance was neither insured or collateralized against loss. The Authority had cash on hand of $50 at June 30, 2006. Investments At June 30, 2006, the Authority had the following investments and maturities: Investment T pe Kansas Pooled Money Investment Fair Value 523,634.27 523,634.27 Investment Maturities Less Than 1 Year 523,634.27 523,634.27 Interest Rate Risk: The Authority does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk: The Authority has no investment policy that would limit its investment choices. At June 30, 2006, the Authority had $523,634.27 invested in the pool. At June 30, 2006, the Authority's investment in the Kansas Municipal Investment Pool was rated AAAFISI+ by Standard & Poor's. The State of Kansas offers a Local Government Investment Pool (LGIP) entitled "State of Kansas Municipal Investment Pool" which is a voluntary investment alternative for municipalities in the state of Kansas and is governed by the State of Kansas Pooled Money Investment Board. 17 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE B - DEPOSITS AND INVESTMENTS (CONT'D) All investments made for the Portfolio must comply with Kansas Statutes and the Rules and Regulations of the Pooled Money Investment Board. The Portfolio primarily consists of government securities (including U.S. Treasuries and Federal Agencies), certificates of deposit in Kansas banks, and top -rated domestic commercial paper. U.S. Government securities carry the highest industry ratings and are considered among the safest investments in the world. Portfolio investments in commercial paper, are restricted to top - rated (A!/P1 or better), highly credit - worthy corporations. All of these investments present very limited risk to the investor. The maximum final maturity of any security purchased for the portfolio is limited to four years. The Pool owns no securities itself, but rather all securities are part of the Pooled Money Investment Portfolio. Pool deposits are not insured or otherwise guaranteed by the State of Kansas. A reconciliation of cash and investments as shown on the Statement of Net Assets is as follows: Statement of Net Assets Cash and cash equivalents $ 386,256.61 Investments 503161-8.09 Restricted cash 324,787.72 $ 1, 214, 662.42 Bank deposits $ 6901978.15 Investments 5237634.27 Cash on hand 50.00 $ 1, 214, 662.42 NOTE C-- ACCOUNTS RECEIVABLE A summary of accounts receivable as presented in the Statement of Net Assets at June 30, 2006 is as follows: Public Housing Tenants $ 939.65 Fraud recoveries 12, 580.00 Repayment agreements 925.50 14,445.15 Allowance for uncollectible accounts (2,584.37} $ 11, 860.78 18 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE D - INTERFUND RECEIVABLE /PAYABLE The following is a summary of interfund receivable /payables at June 30, 2006: Public Housing $ Section 8 Voucher Nonmajor Funds Receivable 28,718.84 31500.00 313.00 Payable 14,184.20 18, 347.64 $ 32, 531.84 $ 32, 531.84 The balances are a result of normal operating transactions and are expected to be paid within one year. NOTE E — DUE FROM OTHER GOVERNMENTS A summary of due from other governments as presented in the Statement of Net Assets at June 30, 2006 is as follows: HUD — Capital Funds Other NOTE F DEFERRED CHARGES Public Housing $ 28,970.43 $ Nonmajor Funds Total - - $ 28,970.43 21692.20 21692.20 $ 281970,43 $ 21692.20 $ 31,662.63 A summary of deferred charges as presented in the Statement of Net Assets at of June 30, 2006 is as follows: Prepaid insurance Materials inventory Miscellaneous Public Housini $ 22, 752.88 7,513.78 185.00 Total $ 301451.66 NOTE G — RESTRICTED ASSETS Cash and cash equivalents of $64,556.53 at June 30, 2006 is restricted for Tenant Security Deposits in the Public Housing Program. Cash and cash equivalents of $5,531.77 are restricted for the Family Self- Sufficiency program in the Section 8 Voucher program. The Housing Choice Voucher program had additional restricted cash and cash equivalents of $254,586.42 which consisted of fund which 19 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE G — RESTRICTED ASSETS (CONT'D) are restricted for future housing assistance payments in accordance with HUD PIH Notice 2006 -3. The restricted cash and cash equivalents in the Nonmajor Fund is restricted for security deposits. NOTE H -- CAPITAL ASSETS Capital assets consist of the following: Balance Balance July 1, 2005 Increases Decreases June 30, 2006 Non - depreciable assets; Land $ 11481,890.23 $ -- $ - $ 1 1481 t890.23 Construction in progress 533,636.72 168,324.17 (181,046.08) 520,914.81 21015,526.95 168,324.17 (181,046.08) 21002,805.04 Depreciable assets Land improvements 4661190.45 27,097.49 - 493,287.94 Buildings 51443,580.64 153,558.59 - 51597,139.23 Equipment - Dwelling 32,788.72 - - 32,788.72 .Equipment - Administration 259,956.23 19,357.48 - 279,313.71 61202,516.04 200,013.56 - 6,402,529.60 Capital Assets 81218,042.99 3681337.73 (181,046.08) 8,405,334.64 Accumulated depreciation Land improvements 2081825.99 289922.34 - 237748.33 Buildings 11460,984.69 154,724.89 - 11615,709.58 Equipment - Dwelling 91189.84 4,684.06 - 13,873.90 Equipment - Administration 1741885.08 28,096.67 - 202,981.75 11853,885.60 216,427.96 - 21070,313.56 Depreciable assets, net 413482630.44 (161414.40) - 4,332,216.04 Capital assets, net $ 61364,157.39 $ 151,909.77 $ (181,046.08) $ 61335,021.08 NOTE I —ACCOUNTS PAYABLE A summary of accounts payable as presented in the Statement of Net Assets at June 30, 2006 is as follows: Public Section 8 Housing Voucher Totals Vendors and contractors $ 23,849.26 $ 51304.09 $ 29,163,35 20 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE J — DUE TO OTHER GOVERNMENTS A summary of due to other governments as presented in the Statement of Net Assets at- June 30, 2006 is as follows: Payments in lieu of taxes HUD NOTE K-- DEFERRED REVENUES Public Housing $ 19, 689.60 $ - - - - 37,155.66 $ 19, 689.60 $ 377155.66 Section 8 Voucher Total $ 191689-60 37,155.66 $ 561845.26 A summary of deferred revenues as presented in the Statement of Net Assets at June 30, 2006 is as follows: Prepaid rents Local grants Public Housing $ 11799.68 2,334.24 $ 41133.92 NOTE L--- ACCRUED COMPENSATED ABSENCES A summary of accrued compensated absences as presented in the Statement of Net Assets as of June 30, 2006 is as follows: Beginning Net Ending Due within Balance Increase Balance C)n Year Compensated absences $ 42,002.44 $ 91125.83 $ 51,128.27 $ 511 12.82 NOTE M- PENSION PLAN Plan description. The non - school municipality participates in the Kansas Public Employees Retirement System (KPERS), a cost - sharing multiple- employer defined benefit pension plan as provided by K.S.A. 74 -4901, et seq. KPERS provides retirement benefits, life insurance, disability income benefits, and death benefits. Kansas law establishes and amends benefit provisions. KPERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing KPERS (400 W 8th Avenue, Suite 200, Topeka, KS 66603 -3925) or by calling 1- 800 -228- 0366. Funding Policy. K.S.A. 74 -4919 establishes the KPERS member - employee contribution rate at 4% covered salary. The employer collects and remits member - employee contributions 21 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE M- PENSION PLAN (CONT'D) according to the provisions of section 414(h) of the Internal Revenue Code. State law provides that the employer contribution rate be determined annually based on the results of an annual actuarial valuation. KPERS is funded on an actuarial reserve basis. State law sets a limitation on annual increases in the contributions rates for KPERS employers. The non - school municipality employer contributions to KPERS for the period. of July 1, 2005 through December 31, 2005 was 4.09 %, and from January 1, 2006 through June 30, 2006 was 4.61 %, equal to the statutory required contributions for each period. The total covered payroll for the fiscal year ended June 30, 2006 was $379,559.00. The employer and employee contributions were $17,046.84 and $15,152.36, respectively. NOTE N NET ASSETS The fund financial statements utilize a net assets presentation. Net assets are categorized as invested capital assets (net of related debt), restricted and unrestricted. • Invested in Capital Assets, Net of Related Debt -- This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation and the outstanding balances of debt attributable to the acquisition, construction or improvement of these assets reduce the balance in this category. • Restricted Net assets — This category represents net assets of the Agency which are restricted externally by creditors, grantors, contributors, laws or regulations of other governments, imposed by law through constitutional provisions or enabling legislation. • Unrestricted Net Assets -- This category represents net assets of the Agency, not restricted for any project or other purposes. NOTE O -- COMMITMENTS The Authority has various contract commitments with contractors for the implementation of HUD Capital Grants as outlined by the HUD approved Capital Grant Budget. NOTE P - RISK MANAGEMENT The Authority is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets, errors and omissions; injuries to employees; and natural disasters for which the Authority purchases commercial insurance. During the year ended June 30, 2006, the Authority did not reduce insurance coverage from levels in place during the prior year. No settlements have exceeded coverage levels in place during the past three fiscal years. 22 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS June 30, 2006 NOTE Q — TRANSFERS The Authority received HUD approved to transfer a house from the Homeownership program to Public Housing. The book value of the home transferred was $81,442.87. NOTE R -- PRIOR PERIOD ADJUSTMENTS Prior period adjustment of $159,687.66 recorded to Housing Choice Voucher Net Assets relates to an adjustment to the previous year -end settlement by HUD. In January, 2006, HUD released HUD Notice 2006-3 which changed how the program is funded. This change effected payments received staring January 1, 2005. Excess funds advanced are no longer recaptured but are retained by the Agency for future housing assistance payments. 23 SUPPLEMENTAL INFORMATION - REQUIRED BY HUD HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS FINANCIAL DATA SCHEDULE June 30, 2006 Line Item # Account Description Public Housing 14.850 Capital Fund 14.872 State/Local Housing Choice Voucher 14.871 Business Activities HOME 14.239 TOTAL ASSETS: CURRENT ASSETS: Cash: 111 Cash - unrestricted 211,468 - - 143,676 14,493 14,296 383,922 113 Cash - other restricted - 2,334 260,118 - - 262,452 114 Cash - tenant security deposits 64,557 - - - 113 - 64,670 100 Total cash 276,014 - 2,334 403,794 14,606 14,296 711,044 Accounts and notes receivables: 122 Accounts receivable - HUD other projects - 28,970 - - - - 28,970 124 Accounts receivable - other government - - - 2,692 2.692 126 Accounts receivable- tenants - dwelling rents 940 - - - - 940 126.1 Allowance for doubtful accounts - dwelling rents (1,699) - - - - (1,699) 128 Fraud recovery 13,506 - - - - - 13,506 128.1 Allowance for doubtful accounts - fraud (885) - - - - - (885) 129 Accrued interest receivable 1,638 - - 358 1,347. - 3,344 120 Total receivables, net of allowances for doubtful accounts 13,499 28,970 - 358 1,347 2,692 46,867 Current investments 131 Investments - unrestricted 286,103 - - - 217,515 " 503,618 142 Prepaid expenses and other assets 22,938 - - - - 22,938 143 Inventories 7,514 - - - - - 7,514 144 Interprogram - due from 57,669 - - 3,500 - 313 61,502 150 TOTAL CURRENT ASSETS 663,757 28,970 2,334 407,652 233,468 17,301 1,353,484 NONCURRENT ASSETS: Fixed assets: 161 Land _ 1,453,890 - - 25,000 3,000 - 1,481,890 162 Buildings 5,532,515 - - - 64,624 - 5,597.139 163 Furniture, equipment & machinery - dwellings 30,596 2,193 - - - - 32,789 164 Furniture, equipment & machinery - administration 228,584 15,876 - 34,853 - - 279,314 165 Leasehold improvements 493,288 - - - 493,288 166 Accumulated depreciation (2,033,037) (9,724) - (23,782) (3,770) - (2,070,314) 167 Construction in progress 5,304 515,611 - - - " 520,915 160 Total fixed assets, net of accumulated depreciation 5,711,140 523,956 - 36,071 63,854 - 6,335,021 171 Notes and mortgages receivable - non- current - - - - 23,408 - 23,408 180 TOTAL NONCURRENT ASSETS 5,711,140 523,956 - 36,071 87,262 - 6,358,429 190 TOTAL ASSETS 6,374,897 552,926 2,334 443,723 320,731 17,301 7,711,913 LIABILITIES AND EQUITY: LIABILITIES: CURRENT LIABILITIES 312 Accounts payable < 90 days 23,849 - - 5,304 - - 29,153 321 Accrued wagelpayroll taxes payable 1,682 - - - - " 1,682 322 Accrued compensated absences 3,626 - - 1,327 160 - 5,113 331 Accounts payable - HUD PHA programs - - - 36,990 - - 36,990 333 Accounts payable - other government 19,690 - - 165 - - 19,855 341 Tenant security deposits 64,557 - - - 113 - 64,670 342 Deferred revenues 1,800 - 2,334 - - - 4,134 347 Inter- program - due to - 28,970 - 14,184 947 17,401 61,502 310 TOTAL CURRENT LIABILITIES 115,204 28,970 2,334 57,971 1,219 17,401 223,099 NONCURRENT LIABILITIES: 353 Noncurrent liabilities- other - - - 5,532 - - 5,532 354 Accrued compensated absences - noncurrent 32,638 - - 11,942 1,436 - 46,015 350 TOTAL NONCURRENT LIABILITIES 32,638 - - 17,473 1,436 51,547 300 TOTAL LIABILITIES 147,842 28,970 2,334 75,444 2,655 17,401. 274,647 EQUITY: 508.1 Invested in Capital Assets, Net of Realted Debt 5,711,140 523,956 - 36,071 63,854 - 6,335,021 511.1 Restricted net assets - - - 254,586 - - 254,586 512.1 Unrestricted net assets 515,915 - - 77,622 254,221 (100) 847,659 513 TOTAL EQUITY 6,227,055 523,956 - 368,279 318,076 (100) 7,437,266 600 TOTAL LIABILITIES AND EQUITY 6,374,897 552,926 2,334 443,723 320,731 17,301 7,711,913 24 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS FINANCIAL DATA SCHEDULE Year Ended June 30, 2006 Public Housing Capital Fund Housing Choice Business Line Item # Account Description 14.850 14.872 StatelLocal Voucher 14.871 Activities HOME 14.239 TOTAL REVENUE: 703 Net tenant rental revenue 210,710 - - - 6,986 - 217,696 704 Tenant revenue - other 48,848 - - - - - 48,848 705 Total tenant revenue 259,558 - - - 6,986 - 266,544 706 HUD PHA grants 360,453 116,140 - 1,166.436 - 23,813 1,666,842 7061 Capital grants - 163,020 - - - - 163,020 708 Other government grants - - 16,229 - - - 16,229 711 Investment income - unrestricted 15,951 - - 3,438 8,236 88 27,713 714 Fraud recovery - - 9,707 - - 9,707 715 Other revenue 7,973 - - 13,905 - - 21,878 720 Investment income - restricted - - - 1,807 - - 1,807 700 TOTAL REVENUE 643,935 279,160 16,229 1,195,292 15,222 23,901 2,173,739 EXPENSES: Administrative 911 Administrative salaries 142,254 29,155 - 93,571 4,169 1,147 270,296 912 Auditing fees 2,725 - - 2,725 - - 5,450 914 Compensated absences 8,182 - - 584 360 - 9,126 915 Employee benefit contributions- administrative 43,028 9,433 - 26,542 947 88 80,038 916 Other operating- administrative 94,113 - - 31,473 1,730 130 127,446 Tenant services 921 Tenant services - salaries - - 14,347 - - - 14,347 923 Employee benefit contributions- tenant services - - 1,098 - - - 1,098 924 Tenant services - other 3,750 - 784 - - - 4,534 Utilities 931 Water 2,166 - - - - - 2,166 932 Electricity 6,092 - - - - - 6.092 933 Gas 5,179 - - - - 5,179 938 Other utilities expense 811 - - - - - 811 Ordinary maintenance & operation 941 Ordinary maintenance and operations - labor 104,342 - - - 683 - 105,025 942 Ordinary maintenance and operations - materials & other 40,538 8,503 - 116 - 49,157 943 Ordinary maintenance and operations - contract costs 46,151 - - - 2,573 - 48,724 945 Employee benefit contributions- ordinary maintenance 22,852 - - - 50 - 22,902 General expenses 961 Insurance premiums 59,149 - - 934 - 60,083 962 Other General Expenses - - - 263 2,637 2,899 963 Payments in lieu of taxes 19,690 - - - - - 19,690 969 TOTAL, OPERATING EXPENSES 601,G21 47,091 16,229 156,091 13,265 1,365 835,062 970 EXCESS OPERATING REVENUE OVER OPERATING EXPENSES 42,914 232,069 - 1,039,201 1,957 22,536 1,338,678 973 Housing assistance payments - - - 937,004 - 22,536 959,540 974 Depreciation expense 209,932 2,924 - 1,956 1,616 - 216,428 900 TOTAL EXPENSES 810,953 50,015 16,229 1,095,051 14,881 23,901 2,011,030 OTHER FINANCING SOURCES (USES) 1001 Operating transfers in 69,049 - - - - - 69,049 1002 Operating transfers out - (69,049) - - - - (69,049) 1008 Special items (net gain /loss) 9,471 - - - - - 9,471 1010 TOTAL OTHER FINANCING SOURCES (USES) 78,520 69,049) - _ - - 9,471 1000 EXCESS (DEFICIENCY) OF TOTAL REVENUE OVER (UNDER) TOTAL EXPENSES (88,49) 160,096 - 100,241 342 (0) 172,181 MEMO account information 1103 Beginning equity 6,074,516 553,453 - 108,352 369,177 30 7,105,528 1104 Prior period adjustments - - 159.687 - (130) 159,557 1104 Equity transfers 241,037 (189,593) - - (51,443) - 1 1113 Maximum annual contributions commitment (per ACC) - - - 1,166,436 - 1,166,436 1114 Prorata maximum annual contributions applicable to a period of less than twelve months - - - - _ 1115 Contingency reserve, ACC program reserve - - - - 1116 Total annual contributions available - - - 1,166,436 - - 1,166,436 1120 Unit months available 1,938 - - 3,664 18 60 5,680 1121 Number of unit months leased 1,908 - - 3,664 18 60 5,650 25 SINGLE AUDIT SECTION HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2006 Federal Grantor U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Public and Indian Housing; Public Housing Capital Fund Grant Public Housing Section 8 Housing Choice Voucher Section 8 Voucher Home Investment Partnership Program Passed through Kansas Housing Resources Corporation Contract Number KC -1029 KC -1029 KC 7015V Federal CFDA Federal Number Expenditures 14.850 $ 360,453.00 14.872 279,160.27 14.871 1,166,436.00 Nonmajor funds - - 14.239 23,813.15 Total Federal Awards Expended $ 1,829,862.42 Significant Accounting Policies - The Schedule of Expenditures of Federal Awards was prepared in accordance with the basis of accounting described in Note A to the financial statements. 26 Qandal D. Niewedde, CPA Jeffrey J. dens, CPA N cide W1en� CERTIFIED PUBLIC ACCOUNTANTS 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 Commissioners Housing Authority of the City of Salina, Kansas We have audited the financial statements of the major funds and the aggregate remaining fund information of the Housing Authority of the City of Salina, Kansas, as of and for the year ended June 30, 2006, which collectively comprise the Housing Authority of the City of Salina, Kansas' basic financial statements and have issued our report thereon dated October 24, 2006. 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. Internal Control Over Financial Re ortin r In planning and performing our audit we considered the Housing Authority of the City of Salina, p g p g g Kansas' internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Compliance As part of obtaining reasonable assurance about whether the Housing Authority of the City of Salina, Kansas' financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have 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. 27 P.O. box 98 • York, Nebraska 68467 • Ph: 402 -362 -4410 • Fax: 402 -362 -4410 • nwcpa @alltel.neL However, we noted certain immaterial instances of noncompliance that we have reported to management of the Housing Authority of the City of Salina, Kansas in a separate letter dated October 24, 2006. This report is intended solely for the information and use of the Board of Commissioners, management, others within the organization and the U.S. Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties. �ieuiedde � W eW, l,pjl October 24, 2006 28 Qandal D. Niewedde, CPI Jeffrey J. Wiens, CIDA Niewecide, W1en� CERTIFIED PUBLIC ACCOUNTANTS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A -133 To the Board of Commissioners Housing Authority of the City of Salina, Kansas Compliance We have audited the compliance of the Housing Authority of the City of Salina, Kansas with the types of compliance requirements described in the U. S. Office of Management and Budget OMB Circular A -133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2006. The Housing Authority of the City of Salina, Kansas' major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable_ to each of its, major federal programs is the responsibility of the Housing Authority of the City of Salina, Kansas' management. Our responsibility is to express an opinion on the Housing Authority of the City of Salina, Kansas' compliance based on our audit. 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 Auditinq Standards issued by t[-ie Comptroller General of the United States; and OMB Circular A -133, Audits of States Local Governments and Non - Profit Organizations. Those standards and OMB Circular A -133 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 the Housing Authority of the City of Salina, Kansas' compliance with those requirements and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the Housing Authority of the City of Salina, Kansas' compliance with those requirements. In our opinion, the Housing Authority of the City of Salina, Kansas complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2006. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements that are required to be reported in accordance with OMB Circular A -133 and which are described in the accompanying schedule of findings and questioned costs as Finding 2006 -1. 29 P.U. Box 98 • York, Nebraska 68467 • Ph: 402- 362 -4410 • Fax: 402 - 362 -44t0 * nwcPa @alltel.net Internal Control Over Compliance The management of the Housing Authority of the City of Salina, Kansas is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the Housing Authority of the City of Salina, Kansas' internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A -133. We noted certain matters involving the internal control over compliance and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over compliance that, in our judgment, could adversely affect the Housing Authority of the City of Salina, Kansas' ability to administer a major federal program in accordance with applicable requirements of laws, regulations, contracts and grants. Reportable conditions are described in the accompanying schedule of findings and questioned costs as Finding 2006 -1. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. This report is intended solely for the information and use of the Board of Commissioners, management, others within the organization and the U.S. Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties. �iewedde � W ew, CPJI October 24, 2006 30 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS June 30, 2006 The audit report for the year ended June 30, 2005 contained no findings and no questioned costs. 31 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2006 Section 1- Summary of Auditors Results: • We issued unqualified opinions on the financial statements of the Housing Authority of the City of Salina, Kansas for the fiscal year ended June 30, 2006. Financial Statements: • The results of our audit procedures disclosed no noncompliance which is material to the financial statements for the fiscal year ended June 30, 2006. Federal Awards: • We issued an unqualified opinion on compliance for major programs for the fiscal year ended June 30, 2006. • The results of our audit procedures disclosed one reportable condition that is not considered to be material weaknesses in internal control over major programs for the fiscal year ended June 30, 2006. This reportable condition is summarized in Section III of this schedule. • The results of our audit procedures disclosed one audit findings that is required to be reported under code section .51 0(a) of the OMB A -133 Circular. • The programs identified and audited as major are as follows: Housing Choice Voucher program -- 14.871 • The dollar threshold used to distinguish between Type A and Type B programs was $3001000. • For the fiscal year ended June 30, 2006, the Housing Authority of the City of Salina, Kansas qualified as a low -risk auditee. Section 11- Financial Statement Findin s: NONE 32 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2006 Section 111 - Federal award Findin s and Questioned Costs: Finding 2006 -1 Section 8 Housing Choice Voucher Program, CFDA 14.871 Compliance Requirement— Special Tests and Provisions Reportable Condition Criteria: The Authority is required perform a rent reasonableness determination at the time of the initial lease and any increase in the rent to the owner. The Authority must maintain records to document the basis for the determination that the rent to the owner is a reasonable rent. Condition: During our audit, we tested 40 housing assistance payment transactions. We noted 17 where the rent to the owner had increased and a rental reasonableness certification was not performed. The Authority has a checklist to ensure all items are included in the tenant file but we noted numerous instances of where the rental reasonableness box was not checked. . Effect: The Authority did. not adequately document that the rent to owners was reasonable. Further, the internal control being used to ensure completeness in the tenant file was being bypassed. Cause: The Authority was not completing the checklist to ensure all items were completed and documented in the tenant file. Recommendation: We recommend the Authority review this with staff to stress the importance of the checklist being completed to ensure all requirements are met. 33 December 5, 20o6 As Executive Director of the Salina. Housing Authority, I agree with the audit finding regarding the incomplete documentation which is a compliance requirement for the Housing Choice Voucher program. The 17 files without the Rent Reasonableness form were immediately updated. Additionally, all the files for new move -in tenants and annual recertifications have been reviewed and corrected, if necessary, for the time period July 1 through Nov 1, 2006. This year, the Housing Authority invested in software that automatically produces and prints the statements. Staff did not understand that rent reasonableness statements were required in the files when landlords request rent increases. The housing authority established a spreadsheet with all rent increases requested by landlords to serve as a method of verifying file accuracy. During each annual recertification, files will be reviewed for accuracy and the checklist will be updated. Sincerely, Ann Rollins Executive Director 469 South Fifth Street 1 P.O. Box 1202 I Salia Kansas 67402 -1202 l 785.827.0441 I fax 785.827.0442 Qandat D. N iewedde, CIDA Jeffrey J. Wiens, CPA To the Board of Commissioners Housing Authority of Salina 469 South 5th Street Salina, Kansas 67402 -1202 RE: Management Letter N owe,dde _�� Wiens CERTIFIED PUBLIC ACCOUNTANTS In planning and performing our audit of the financial statements of the Housing Authority of the City of Salina, Kansas, for the year ended June 30, 2006, we considered the Authority's internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure. However, during our audit we became aware of the following matter that is an immaterial instance of noncompliance of noncompliance with HUD regulations. Collateral: The Authority shall require their depositories to continuously and fully secure all deposits whether regular, savings, or time that are in excess of the $100,000 insured amount as required by HUD PIH Notice 96 -33 which has been reinstated by HUD PIH Notice 2000 -7. This- notice further states that this may be accomplished by the pledging or setting aside collateral of identifiable U.S. Government securities as detailed in that notice. We noted during our audit that the Authority did have collateral at the financial institution where the bank balance exceeded the FDIC insurance, however, the collateral was not adequate as $78,018.53 was uninsured and uncollateralized when compared to the market value of the collateral at June 30, 2006. We recommend the Authority review this with its financial institution. We will review the status of this comment during our next audit engagement. We have already discussed this comment and suggestion with the Authority's management, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. �iecuedde � UVien�, cpjf October 24, 2006 P.O. box 98 • York, Nebraska 68467 • Ph: 402 -362 -4410 • Fax: 402 -362 -4410 • nwcpa @atttet.net Qandat D. Niewedde, CPI Jeffrey J. Wiens, CPA December 11, 2006 Ann Rollins, Executive Director Housing Authority of Salina, Kansas PO Box 1202 Salina, Kansas 67402 -1202 Re: Audit Report We have enclosed the following: 1. Eight (8) bound copies of the audit report along with the management letter for your housing authority for the year ended June 30, 2006. 2 2. One (1) stapled copy of the audit report along with the management letter and adjusting journal entries for your fee accountant. 3. One (1) copy of the schedule of adjustments made. The required number of copies have been forwarded for your convenience to: Federal Audit Clearing House Bureau of the Census 1201 E. 10th Street Jeffersonville, Indiana 47132 US Dept of HUD Gateway Tower II 400 State Avenue Room 200 Kansas City, KS 66101 -2406 Should you have any questions, please feel free to contact our office. niewedde & wienj, CPAIJ N I EWEDDE & WI ENS Certified Public Accountants P.O. Box 98 e York, Nebraska 68467 • Ph: 402 -362 -4410 e Fax: 402 -362 -4410 - nwcpa @alltel.net