LAS BOUGAINVILLEAS SENIOR HOUSING, INC. HUD PROJECT NO. 121-EE061-NP-WAH FINANCIAL STATEMENTS SEPTEMBER 30, 2012

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1 HUD PROJECT NO. 121-EE061-NP-WAH FINANCIAL STATEMENTS SEPTEMBER 30, 2012

2 HUD PROJECT NO. 121-EE061-NP-WAH TABLE OF CONTENTS SEPTEMBER 30, 2012 Independent auditor s report 2-3 Financial statements: Statement of financial position 4 Statement of activities 5 Statement of changes in net assets 6 Statement of cash flows 7-8 Notes to financial statements 9-12 Supplementary Information (For the Year Ended September 30, 2012): Computation of Surplus Cash, Distributions and Residual Receipts 14 Schedule of Restricted Deposits and Fund Reserves 15 Schedule of Changes in Property and Equipment Accounts 16 Statement of Profit and Loss Notes to Statement of Profit and Loss 19 Schedule of Expenditures of Federal Awards 20 Notes to Schedule of Expenditures of Federal Awards 21 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 22 Independent Auditor s Report on Compliance with Requirements that could have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A Independent Auditor s Report on Compliance with Specific Requirements Applicable 25 to Fair Housing and Nondiscrimination Schedule of Findings and Questioned Costs 26 Certificate of Trustee 27 Management Agent's Certification 28 Auditor's Transmittal Letter 29 1

3 RINA accountancy corporation th Street, Suite 1200, Oakland, CA phone: fax: RINA.CPA web: The Board of Directors Spanish Speaking Unity Council of Alameda County, Inc. Independent Auditors Report We have audited the accompanying statement of financial position of Las Bougainvilleas Senior Housing, Inc., HUD Project No. 121-EE061-NP-WAH (Project) of the Spanish Speaking Unity Council of Alameda County, Inc. as of September 30, 2012, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the Project s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Las Bougainvilleas Senior Housing, Inc., HUD Project No. 121-EE061-NP-WAH as of September 30, 2012, and the changes in its net assets and its 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 issued our report dated December 28, 2012 on our consideration of the Project 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 the internal control over financial reporting or 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. 2

4 Our audit was conducted for the purpose of' forming rn opinion on the basic financia] statements as a whole. '[he accompanying supplenientaiy information shown on pages 13 to 29 is presented for the purposes ol additional analysis as required by the Consolidated Audit Guide for Audits of JIUD programs issued by the U.S. Depailment of Housing and Urban Development. Office of the Inspector General, and is 'lot a required of the tinancial 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-Proflt Organizations, and is not a required pan of the financial statements. Such inforniat ion is the responsibility of management and was derived from and relates directly to the underlying aceounti flg and other records used to prepare the financial statements. 1 he information has been subjected to auditing procedures applied in the audit of the haic financial statemenis and certain additional procedures, ineludiag comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or the financial statements themselves and other additional procedures in accordance with auditing standards general]y accepted in the United States of America. In our opinion the information is fairly stated and in all material aspects in relation to the financial stateineiits as a whole, It (U Certified Public Accountants Oakland, California December 28, 2012

5 HUD PROJECT NO. 121-EE061-NP-WAH STATEMENT OF FINANCIAL POSITION - SEPTEMBER 30, 2012 ASSETS CURRENT: 1120 Cash - Operations $ 113, Tenant accounts receivable 68 TOTAL CURRENT ASSETS 113, Tenant security deposits 18,635 RESTRICTED DEPOSITS AND FUNDED RESERVE: 1320 Reserve for replacements 359, Residual receipts 41,729 PROPERTY AND EQUIPMENT-net 4,566,837 TOTAL ASSETS $ 5,100,256 LIABILITIES AND NET ASSETS CURRENT: 2110 Accounts payable - Operations $ 28, Accrued vacation payable 7,833 TOTAL CURRENT LIABILITIES 36, Tenant security deposits 16,334 LONG-TERM: 2320 Mortgage payable 803, Accrued interest payable 705,095 TOTAL LIABILITIES 1,560,599 NET ASSETS: 3131 Unrestricted 3,138, Temporarily restricted 401,567 TOTAL NET ASSETS 3,539,657 TOTAL LIABILITIES AND NET ASSETS $ 5,100,256 See notes to financial statements. 4

6 HUD PROJECT NO. 121-EE061-NP-WAH STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2012 UNRESTRICTED: Revenues: Rents $ 674,010 Interest income 736 Other revenue 4,733 Total revenue 679,479 Expenses: Administrative 197,789 Operating and maintenance 184,602 Depreciation 165,154 Taxes and insurance 115,751 Utilities 49,567 Interest 48,230 Elderly care expenses 35,619 Total expenses 796,711 DECREASE IN UNRESTRICTED NET ASSETS $ (117,232) See notes to financial statements. 5

7 HUD PROJECT NO. 121-EE061-NP-WAH STATEMENT OF CHANGES IN NET ASSETS YEAR ENDED SEPTEMBER 30, 2012 Temporarily Unrestricted Restricted Total Net assets, September 30, 2011 $ 3,304,824 $ 352,065 $ 3,656,889 Decrease in net assets (117,232) - (117,232) Appropriations reserves - net (49,502) 49,502 - Net assets, September 30, 2012 $ 3,138,090 $ 401,567 $ 3,539,657 See notes to financial statements. 6

8 HUD PROJECT NO. 121-EE061-NP-WAH STATEMENT OF CASH FLOWS YEAR ENDED SEPTEMBER 30, 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received: Rental receipts $ 673,795 Interest receipts 736 Other receipts 4,733 Total cash received 679,264 Expense paid: Administrative expenses paid (194,997) Utilities expenses paid (49,566) Operating and maintenance expenses paid (184,602) Taxes and insurance expenses paid (102,138) Elderly care expenses paid (35,619) Total expenses paid (566,922) NET CASH PROVIDED BY OPERATING ACTIVITIES 112,342 CASH FLOWS FROM INVESTING ACTIVITIES: Interest deposited into reserve for replacements (701) Deposits into reserve for replacements (29,950) Increase in tenant security deposit (41) Deposits into residual receipts (18,851) Increase in tenant security deposit liability 724 NET CASH USED BY INVESTING ACTIVITIES (48,819) CASH FLOWS FROM FINANCING ACTIVITIES - NET INCREASE IN CASH 63,523 CASH, beginning of year 49,626 CASH, end of year $ 113,149 See notes to financial statements. 7

9 HUD PROJECT NO. 121-EE061-NP-WAH STATEMENT OF CASH FLOWS YEAR ENDED SEPTEMBER 30, 2012 RECONCILIATION OF DECREASE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Decrease in net assets $ (117,232) Adjustments to reconcile decrease in net assets to net cash provided by operating activities: Depreciation 165,154 Decrease (increase) in: Accounts receivable 251 Prepaid insurance 13,613 Increase (decrease) in: Accounts payable 10,740 Accrued vacation payable (7,898) Accrued interest expense 48,180 Prepaid rent (466) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 112,342 SUPPLEMENTAL DISCLOSURE: Interest expense paid $ - See notes to financial statements. 8

10 PROJECT NO. 121-EE061-NP-WAH NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Nature of business: Las Bougainvilleas Senior Housing, Inc. (Project) is a 68-unit apartment complex located in Oakland, California. The Project is a non-profit corporation and is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23071(d) of the California Revenue and Taxation Code. The Project operates under Section 202 of the National Housing Act, as amended, utilizing a U.S. Department of Housing and Urban Development (HUD) tenant housing assistance program. Accordingly, the Project is subject to compliance with HUD regulations regarding rental rates, tenant certification for rental rates, tenant certification for rental assistance, financial reporting requirements and management of Project operations. The Project has a seven-member Board of Directors, of which a majority also sit on the Board of Directors of the Spanish Speaking Unity Council of Alameda County, Inc. (SSUC). SSUC is also a non-profit corporation exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23071(d) of the California Revenue and Taxation Code. Basis of accounting: The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Under the basis of accounting, revenues are recognized in the period in which they are earned and become measurable. Expenses are recognized in the period incurred. Cash and cash equivalents: The Project s policy is to include all cash accounts, excluding deposits held in trust and reserve for replacements, as cash and cash equivalents for purposes of the statement of cash flows. Accounts receivable: Uncollectible tenant accounts receivable are expensed using the direct write-off method. Uncertain tax positions The Project recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a more-likely-than-not threshold, the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of September 30, 2012, the Project has had no uncertain tax positions. The Project recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense. Income tax returns for the year prior to 2007 are no longer subject to examination by tax authorities. The Project is relying on its tax-exempt status and its adherence to all applicable laws and regulations to preserve that status. Fixed assets: Fixed assets are recorded at cost and depreciated using the straight-line method. Estimated useful lives for depreciation purposes are as follows: Buildings and improvements Land improvements Furnishings 40 years 20 years 10 years 9

11 PROJECT NO. 121-EE061-NP-WAH NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Fixed assets (Continued): The Project capitalizes expenditures greater than $5,000 for building and building improvements. Long-lived assets: The Agency evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Tenant security deposits: Tenant security deposits are held in separate bank accounts in the name of the Project and restricted in use to payment of tenant damages, payment of delinquent rents, or refunds to tenants upon their leaving the Project. Reserve for replacements: In accordance with the Regulatory Agreement with HUD, the project is required to make monthly transfers of funds from its operating bank account to a separate bank account(s). The funds deposited therein are restricted and written approval from HUD is required for release of the funds to make replacements of or major repairs to fixed assets of the apartment complex. Reserve for Replacements funds have been classified as "temporarily restricted." Residual receipts reserve: In accordance with the Regulatory Agreement with HUD, the Project is required to transfer excess funds, as defined by HUD into a separate bank account. Subsequent use of these funds is subject to the supervision and approval of HUD. Residual Receipts Reserve funds have been classified as "temporarily restricted." Concentration of credit risk: Certain financial instruments potentially subject the Project to concentrations of credit risk. These financial instruments consist primarily of cash, cash equivalents and receivables. The Project places its cash with high credit quality financial institutions. At times, the account balances may exceed the institution s federally insured limits. The Project has not experienced any losses in such accounts. Concentrations of credit risk with respect to receivables are generally diversified due to the number of individuals owing the Project. The Project writes off uncollectible amounts as they become known. Vulnerability due to certain concentrations: The Project s primary asset is its 68-unit apartment complex, and the Project s operations are concentrated in the multifamily real estate market. In addition, the operations of the Project are subject to the administrative directives, rules and regulations of HUD. Such administrative directives, rules and regulations are subject to change by an act of congress, or an administrative change mandated by HUD; and such changes may occur with little notice or inadequate funding to pay the related costs, including the additional administrative burden to comply with mandated changes. 10

12 PROJECT NO. 121-EE061-NP-WAH NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Financial statement presentation: Basis of Presentation the Project presents its financial statements in accordance with professional accounting standards. Under professional accounting standards, an 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. Accordingly, net assets of the Project and changes therein are classified and reported as follows: Unrestricted net assets Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Project and/or passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. At September 30, 2012, the Project has $401,567 temporarily restricted net assets equal to the total restricted deposits and fund reserve. Permanently restricted net assets - Net assets subject to donor-imposed stipulations that may be maintained permanently by the Project. Generally, the donors of these assets permit the Project to use all or part of the income earned on any related investments for general or specific purposes. At September 30, 2012, the Project has no permanently restricted net assets. Subsequent events: Management has evaluated subsequent events through December 28, 2012, the date which the financial statements were available for issuance. Note 2. Note 3. NATURE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. NOTE PAYABLE: The Project has a mortgage payable, a direct financing loan payable to the City of Oakland Redevelopment Agency (Agency), which is a nonrecourse note secured by a first deed of trust. The original note amount is for an amount not to exceed $803,000, a 6% annual interest rate that is deferred until April 1, At September 30, 2012, the outstanding amount is $803,000 with additional accrued interest payable of $705,095. This loan is secured by the Organization s real property. The accrued interest is paid to the Agency if the Project has surplus cash and HUD approves the use of surplus cash for debt repayment. However, the Agency has indicated that any cash surplus should be used by the organization to reinforce its reserves. The City of Oakland note is secured by the Las Bougainvilleas senior housing rental project, which has a net book value of $4,566,837 as of September 30,

13 PROJECT NO. 121-EE061-NP-WAH NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 Note 4. Note 5. Note 6. RELATED PARTY TRANSACTIONS: Casitas of Hayward, Inc. (COH) is a 501c3 nonprofit support corporation formed and controlled by SSUC. During the fiscal year, the management agent for the Project changed from Christian Church Homes of Northern California (CCH) to COH. As of May 1, 2012, COH provides property management services for the Project under contract with the Project. COH itself further contracts with SSUC to provide property management and site employees to manage the Project. The management fee charged to the Project is 6.58% of residential income collected. For the year ended September 30, 2012, the Project paid $13,093 in management fees to COH. PENSION PLAN: Project employees worked for the previous management agent for the Project, Christian Church Homes of Northern California (CCH) from October 1, 2011 through April 30, CCH offered site employees a pension plan. That pension plan was a defined contribution plan covering all eligible Project employees who were at least 21 years old and who worked on site at the Project for more than one year. Pursuant to CCH s contribution plan, the Project s contribution, made monthly, was 10% of each participant salary. As of May 1, 2012, COH took over management of the Project, and site employees were eligible to participate in SSUC s pension plans. The Unity Council adopted two retirement plan options effective January 1, The retirement plan options are the 403(b)(7) employee voluntary contribution plan and the Simplified Employee Pension Plan (SEPP). The 403(b)(7) employee voluntary contribution plan is available to all employees who wish to designate pre-tax compensation to the plan through the Fidelity Investments Tax-Exempt Services Company. On January 1, 2009, the Unity Council introduced an employer matching program for employee contributions under the plan, dollar for dollar up to 5% of the employee s salary. SEPP allows the employer to make discretionary contributions on an annual basis for those employees meeting eligibility guidelines (who are over 21 years of age, have worked one day or more in any three of the preceding five years, and have earned at least $400 in the year of contribution). As a result of its introduction of the employer match to 403 (b) (7) employee contributions, the Unity Council made no SEPP contributions for the fiscal year ended September 30, Total pension costs were $11,964 for the year ending September 30, MANAGEMENT FEE: From October 1, 2011 through April 30, 2012, the Project was managed by CCH. Since May 1, 2012, the Project has been managed by COH, a related entity. The management fee for CCH was earned at 9.6% of residential income collected. The management fee COH was earned at a rate of 6.58% of residential income collected. For the year ended September 30, 2012, the Project paid $38,056 in management fees to CCH and $13,093 in management fees to COH. 12

14 HUD PROJECT NO. 121-EE061-NP-WAH SUPPLEMENTAL INFORMATION 13

15 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HOUSING - FEDERAL HOUSING COMMISSIONER OFFICE OF MULTIFAMILY HOUSING MANAGEMENT AND OCCUPANCY COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS PROJECT NAME LAS BOUGAINVILLEAS SENIOR HOUSING FISCAL PERIOD ENDED September 30, 2012 Project Number 121-EE-061-NP-WAH PART A COMPUTE SURPLUS CASH 1. Cash (Accounts 1120, 1125 and 1190, 1191) $ 131, Tenant subsidy vouchers due for period covered by financial statements 3. Other -(Reimbursement on replacement reserve approved by HUD not received) (a)total Cash (Add Lines 1, 2, and 3) $ 131, Accrued mortgage interest payable 5. Delinquent mortgage principal payments 6. Delinquent deposits to reserve for replacements 7. Accounts payable (due within 30 days) 28, Loans and notes payable (due within 30 days) 9. Deficient Tax, Insurance or MIP Escrow Deposits Deposit Due to Excess Income Account (R & R) 10. Accrued expenses (not escrowed) 7, Prepaid Rents (Account 2210) Tenant security deposits liability (Account 2191) 16, Other (describe) (b) Less Total Current Obligations (Add lines 4 through 13) 52,503 (c) Surplus Cash (Deficiency)(Line (a) minus line (b)) $ 79,281 PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS 1. Surplus Cash $ 79,281 2a. Annual Distribution Earned During Fiscal Period Covered by the Statements $ 2b. Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period $ 2c. Distributions Paid During Fiscal Period Covered by statements $ 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (line 2a plus 2b minus 2c) - 4. Amount Available for Distribution During Next Fiscal Period 5. Deposit Due Residual Receipts (N/A for profit-motivated projects) $ 79,281 (Must be deposited with Mortgagee within 90 days after Fiscal Period ends) See notes to financial statements. 14

16 SCHEDULE OF RESTRICTED DEPOSITS AND FUND RESERVES LAS BOUGAINVILLEAS SENIOR HOUSING, INC. PROJECT NO. 121-EE061-NP-WAH YEAR ENDED SEPTEMBER 30, 2012 Reserve for Replacement Residual Receipts Reserve Balances, October 1, 2011 $ 329,187 $ 22,878 Deposits 30,000 * 18,816 ** Interest earned Bank fees (50) - Balances, September 30, 2012 $ 359,838 $ 41,729 * 12 $2,500 ** Residual Receipts for the year ending 9/30/11 See notes to financial statements. 15

17 SCHEDULE OF CHANGES IN PROPERTY AND EQUIPMENT ACCOUNTS LAS BOUGAINVILLEAS SENIOR HOUSING, INC. PROJECT NO. 121-EE061-NP-WAH Property and Equipment Balance Balance 9/30/11 Additions Disposal 9/30/12 Land $ 470,691 $ - $ - $ 470,691 Buildings and improvements 6,245, ,245,470 Furniture, fixtures and equipment 60, ,769 Total property and equipment 6,776, ,776,930 Accumulated depreciation 2,044, ,154-2,210,093 Net book value $ 4,731,991 $ 4,566,837 See notes to financial statements. 16

18 STATEMENT OF PROFIT AND LOSS LAS BOUGAINVILLEAS SENIOR HOUSING INC. PROJECT NO. 121-EE061-NP-WAH YEAR ENDED SEPTEMBER 30, 2012 Part I Description of Account Acct. No. Amount RENTAL INCOME Rent Revenue - Gross Potential 5120 $ 221,815 Tenant Assistance Payments ,905 Miscellaneous Rent Revenue (Specify) 5190 Total Rent Revenue 5100 $ 678, VACANCIES Apartments ,710 Miscellaneous (Specify) Total Vacancies ,710 Net Rental Revenue Rent Revenue Less Vacancies 674, FINANCIAL REVENUE Revenue from Investments-Residual Receipts Revenue from Investments-Reserve for Replacements Total Financial Revenue OTHER REVENUE Laundry and Vending Revenue ,412 Cleaning Tenant Charges Miscellaneous Revenue ,321 Total Other Revenue ,733 Total Revenue , / ADMINISTRATIVE EXPENSES Conventions and Meetings ,437 Office Salaries ,669 Office Expenses ,600 Telephone and Answering Service ,115 Management Fees ,149 Manager Salaries ,357 Administrative rent free unit ,032 Legal Expenses Audit Expense ,500 Bookkeeping Fees/Accounting Services ,120 Bad Debts Miscellaneous Administrative Expenses ,110 Occupancy Fees ,700 Total Administrative Expenses , UTILITIES EXPENSES Electricity ,775 Water ,066 Gas ,725 Sewer Total Utilities Expenses ,566 See notes to financial statements. 17

19 STATEMENT OF PROFIT AND LOSS LAS BOUGAINVILLEAS SENIOR HOUSING INC. PROJECT NO. 121-EE061-NP-WAH YEAR ENDED SEPTEMBER 30, 2012 Part I Description of Account Acct. No. Amount OPERATING AND MAINTENANCE EXPENSES Payroll (Operating and Maintenance) 6510 $ 63,716 Supplies (Operating and Maintenance) ,716 Contracts (Operating and Maintenance) ,074 Garbage and Trash Removal ,481 Security Payroll/Contract ,897 Heating/Cooling Repairs and Maintenance ,629 Vehicle and Maint. Equip. Operation and Repairs ,764 Miscellaneous Operating and Maintenance Expenses ,325 Total Operating and Maintenance Expenses 6500 $ 184, TAXES AND INSURANCE Real Estate Taxes ,567 Payroll Taxes ,538 Property and Liability Insurance (Hazard) ,286 Fidelity Bond Insurance Workers' Compensation Insurance ,139 Health Insurance and Other Employee Benefits ,901 Misc. Taxes, Licenses, Permits and Insurance ,320 Total Taxes and Insurance , FINANCIAL EXPENSES Interest on Mortgage Payable ,180 Miscellaneous Financial Expenses Total Financial Expenses 48,230 Elderly Care Expenses ,619 TOTAL COST OF OPERATIONS BEFORE DEPRECIATION ,557 PROFIT (LOSS) BEFORE DEPRECIATION ,922 Depreciation Expense ,154 Amortization Expense NET PROFIT OR (LOSS) 3250 $ (117,232) PART II 1. Total mortgage principal payments required during the audit period (12 monthly payments first mortgage only) $ - 2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto, even if payments may be temporarily suspended or waived $ 30, Replacement, Painting or Residual Receipts, Reserve releases which are included as expense items on this Profit and Loss Statement $ - 4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. None See notes to financial statements. 18

20 NOTES TO STATEMENT OF PROFIT AND LOSS LAS BOUGAINVILLEAS SENIOR HOUSING, INC. PROJECT NO. 121-EE061-NP-WAH Details for various income and expense accounts SEPTEMBER 30, 2012 Account No. 5910, 5940, 5990 Laundry $ 3,412 Other revenue 1,107 Forfeited security deposits 214 Total $ 4,733 Account No Misc. administrative expenses $ 1,110 Total $ 1,110 Account No Cable T.V. $ 1,441 Janitor Payroll 2,600 Drapery Replacement 3,284 Total $ 7,325 Account No Licenses and Permits $ 1,164 Other Insurance 2,156 Total $ 3,320 Account No Social service coordinator salaries $ 27,196 Social service coordinator contract 2,083 Social service coordinator program 2,865 Social service coordinator Other 3,475 Total $ 35,619 See notes to financial statements 19

21 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS LAS BOUGAINVILLEAS SENIOR HOUSING, INC. PROJECT NO. 121-EE061-NP-WAH FOR THE YEAR ENDED SEPTEMBER 30, 2012 Federal Outstanding Federal Grantor/Pass-through CFDA Federal Loan Grantor/Program Title Number Expenditures Balances U.S. Department of Housing and Urban Development: Lower Income Housing Assistance Program Section 8 Moderate Rehabilitation * $ 456,905 Supportive Housing for the Elderly (202) * 1,508,095 $ 1,508,095 Capital Advance 5,816,077 5,816,077 Capital Advance $ 7,781,077 $ 7,324,172 As of September 30, 2012, capital advance balance is $5,816,077. Continued compliance related to this advance is required, hence it is included when determining total annual expenditures. The capital advance is not reflected in the financial statements because it is to be forgiven in 2038, 40 years after Las Bougainvilleas entered into a HUD regulatory agreement. * Major program determined in accordance with OMB Circular A-133. See accompanying notes to schedule of expenditures of federal awards 20

22 PROJECT NO. 121-EE061-NP-WAH NOTES TO SCHEDULE OF EXPENDITURSE OF FEDERAL AWARDS FOR YEAR ENDED SEPTEMBER 30, 2012 NOTE A. BASIS OF PRESENTATION: The accompanying schedule of expenditures of federal awards includes the federal grant activity of Las Bougainvilleas Senior Housing, Inc Project No. 121-EE061-NP-WAH (the Project), and is presented in accordance with the requirements of OMB-Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Because the Schedule presents only a selected portion of the operations of the Project, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Project. 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 OMB Circular A-122, Cost Principles for Non-profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. See notes to financial statements. 21

23 B RINA a accountancy C corporation th 1 Street,, Suite 1200, Oakland, CA pjgm phone: 510,893, f,ix fax: ,834, RINA.CPA web: wth: REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ANYI) ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFOJ W1) IN ACCORDANCE WITH GO VERNMENTA UDIThVG STANDARDS The Board of Directors Spanish Speaking Unity Council of Alai:ncda County, Inc. We. have audited the financial statements of Las Bougainvilleas Senior liou.s ing, Inc., HUD Project No H.b06 1 -NIP- WAH (the Project), as of and for the year ended September 30, 2012, and have Issued our report thereon dated December 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 Stales. Internal Control over Financial Renorting Management of the Project is responsible for establishing and maintaining effrctive internal control over flnancial reporting. In planning and performing oar audit, we considered the Project's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the I>roject's internal control over tin ancial reporting. Accordingly, we do not. express an opinion on the effectiveness of the Project's internal control over financial reportil:lg. A deficiency in internal control exists when the design or operation of a control does not allow management or omployees in i:he 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. Our consideration of internal control over financial reporting was for tl'ie limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting thai: might be deticiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. (:onipliiince and Other Matters AS part of obtaining reasonable assurance about whether the Project's 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 a direct and material effect on the determination of financial statement amounts. l":lowever, providing mm opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. 'l'he results of our tests disclosed no instances of noncompliance or other matters that arc required to he reported under Government Auditing Standards. 'This report is intended solely for the information and use of the audit committee, board of directors. management, others within the organization, and the U.S. Department of Housing and Urban Development and is riol: intended to he and should not he used by anyone other than these specified paiies. I N (fertilied Public Accountants Oakland, California. December28,

24 RINA accountancy corporation th Street, Suite 1200, Oakland, CA phone: fax: RINA.CPA web: INDEPENDENT AUDITORS REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 The Board of Directors Spanish Speaking Unity Council of Alameda County, Inc. Compliance We have audited Las Bougainvilleas Senior Housing, Inc., HUD Project HUD Project No. 121-EE061-NP-WAH (the Project) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Project s major federal programs for the year ended September 30, The Project s 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 Project s management. Our responsibility is to express an opinion on the Project s 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 Auditing Standards, issued by the 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 Project s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the Project s compliance with those requirements. In our opinion, the Project complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30, Internal Control Over Compliance Management of the Project is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the Project's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the 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, 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 the Project's internal control over compliance. 23

25 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 nominal course of performing their assigned flinetions, to preveni. or detect and eorrcct noncompliance with a type of compliance requirement of a federal program on a imely 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 compl iance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. 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 identil\ all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies. or material weaknesses, We did not identift any deficiencies in internal control over compliance that we consider to he material weaknesses, as defined above. Ihe purpose of this report is solely to describe the scope of our testing of corn pliance with the types of compliance requirements applicable to each of the Project's major programs anti our testing of intcrnal control over comp iance and the results of our testing. and to provide an opinion on the Project's compliance bul not to provide an opinion on the effectiveness of the Projects internal control over compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Project's comnpl ianee with requirements applicable to each major program and its internal cojitml over compliance. Accordingly. di is report is not suitable for any other purposes. Ri VJ Pr wxkwt. co-vpcta.w Certified Public Accountants Oakland, California December 28,

26 B RINA a accountancy C corporation th Street,, Suite 1200, Oakland, CA pjgm phone: ,893,6938 fax: ,834, RINA.CPA web: wel': INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPEC WIC REQUIREMENTS APPLICABLE TO FAIR HOUS G AJ NONI)ISCRIMINATION The Board of.i)irectors Spanish Speaking tinily Council of Alameda County, Inc. We have audited the financial statements of Las Bougainvilleas Senior Housing, Inc., HUD Project No EE.061-NP-WAH (Project), as of and for the year ended September 30, 2012, and have issued our report thereon dated December We have also applied procedures to test the Project's compliance with the Fair 1. - lousing and Nondiscrimination req uircxneifl.s applicable to its T-IUD-assisted programs for the year ended September 30, Our procedures were limited to the applicable compliance requirements described iii the Consolidated Audit Guide /hr Audits of JIUD Programs ("the Guide"), issued by the U.S. Department of housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the Project's compliance with Fair Housing and Nondiscrimination requirements; Accordingly, we do not expres such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide. This report is intended for the information of the board of directors, management, and the U.S. Department of Housing and Urban Development and is not intended to he and should not be used by anyone other than these specified parties. 49WVIJW7 c,( 1, Z?;1' ::ertified Public Accountants Oakland, California December 28,

27 A. SUMMARY OF AUDIT RESULTS LAS BOUGAINVILLEAS SENIOR HOUSING, INC. HUD PROJECT NO. 121-EE061-NP-WAH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, The auditor's report expresses an unqualified opinion on the Project's financial statements. 2. No significant deficiencies relating to the audit of the financial statements were reported in the Report on Internal Control over Financial Reporting and on Compliance and other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the Project s financial statements were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award program are reported in the Independent Auditor s Report on Compliance with Requirements that could have a Direct and Material effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A The auditor's report on compliance for the Project's major federal award programs expresses an unqualified opinion. 6. No audit findings are reported relative to the Project's major federal award programs. 7. Major programs included: Name 26 CFDA No. Supportive Housing for the Elderly (202) Lower Income Housing Assistance Program The threshold for distinguishing Type A and B programs was $300, The Organization was determined to be a low-risk auditee. B. FINDINGS FINANCIAL STATEMENTS AUDIT NONE C. FINDINGS AND QUESTIONED COSTS MAJOR FEDERAL AWARD PROGRAMS AUDIT NONE D. CURRENT FINDINGS There are no current year audit findings. E. QUESTIONED COST NONE F. AUDITOR S COMMENTS ON RESOLUTION MATTERS RELATING TO HUD PROGRAMS G. STATUS OF PRIOR YEAR AUDIT FINDINGS There were no prior year audit findings. H. STATUS OF OTHER REVIEW REPORTS NONE

28 HUD PROJECT NO.I2l-EE061-NP-WAH CERTIFICATE OF TRUSTEE YEAR ENDED SEPTEMBER We hereby certify that we have examined the accompanying financial statements and supplemental data of Las Bougainvilleas Senior Housing, Inc., and, to the best of our knowledge and belief, the same is complete and accurate. /Ohf1 Casas, Treasurer /2, '1... Date Corporate EIN

29 HUD PROJECT N0.121-EE061-NP-WAH MANAGEMENT AGENT'S CERTIFICATION YEAR ENDED SEPTEMBER 30, 2012 We hereby certify that we have examined the accompanying financial statements and supplemental data of Las Bougainvilleas Senior Housing, Inc., and, to the best of our knowledge and belief, the same is complete and accurate. ~/~- 1 eff Pace, Chief Operating Officer Date Management Agent Casitas of Hayward, Inc. EIN

30 HUD PROJECT NO. 121-EE061-NP-WAH AUDITOR S TRANSMITTAL LETTER YEAR ENDED SEPTEMBER 30, 2012 S Audit Firm ID (UII) S Audit Firm RINA accountancy corporation S Lead Auditor First Name Howard S Lead Auditor Last Name Zangwill S Auditor Street Address Line th Street S Auditor Street Address Line 2 Suite 1200 S Auditor City Oakland S Auditor State California S Auditor Zip Code S Telephone Number S Audit Firm TIN S Date of Independent Auditor s Report December 28,