Financial Statements and Independent Auditor s Report DDC Foothills Home June 30, 2014
TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT 4 FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION 6 STATEMENT OF ACTIVITIES 7 STATEMENT OF CASH FLOWS 8 NOTES TO FINANCIAL STATEMENTS 9 SUPPLEMENTARY INFORMATION STATEMENT OF FINANCIAL POSITION DATA 14 STATEMENT OF ACTIVITIES DATA 15 STATEMENT OF CHANGES IN NET ASSETS DATA 17 STATEMENT OF CASH FLOWS DATA 18 SCHEDULE OF REPLACEMENT RESERVE 19 SCHEDULE OF CHANGES IN FIXED ASSETS ACCOUNTS 19 COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS 20 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 21 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 22 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 24 Page
INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 25 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A 133 27 MORTGAGOR S CERTIFICATION 29 CERTIFICATE OF MANAGING AGENT 30
LTJ Logan, Thomas & Johnson, LLC Certified Public Accountants INDEPENDENT AUDITOR S REPORT To the Board of Directors DDC Foothills Home Report on the Financial Statements We have audited the accompanying financial statements of of DDC Foothills Home (the Project), which comprise the statement of financial position as of June 30, 2014, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 5023 W. 120 th Ave., #165, Broomfield, CO 80020 Calvin Logan Jan Thomas Pauline Davis Phone 303 532 1000 Phone 303 569 6030 Phone 719 937 4270 Fax 303 532 1080 Fax 303 569 6031 Fax 719 937 4271
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of of DDC Foothills Home as of June 30, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 14 through 20 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required by U.S. Office of Management and Budget Circular A 133, Audits of States, Local Governments, and Non Profit Organizations, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2014, 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 in considering the Project s internal control over financial reporting and compliance. Broomfield, Colorado September 30, 2014 Audit Partner: Jan Thomas EIN: 20 1943886 5
STATEMENT OF FINANCIAL POSITION June 30, 2014 ASSETS Current assets Cash and cash equivalents $ 139,953 Total current assets 139,953 Replacement reserve 31,759 Land and buildings, at cost: Buildings 589,274 Furnishings 8,825 Accumulated depreciation (226,254) 371,845 Land 102,460 474,305 Total assets $ 646,017 LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 150,484 Total current liabilities 150,484 NET ASSETS Net assets Unrestricted 495,533 Total liabilities and net assets $ 646,017 The accompanying notes are an integral part of this statement. 6
STATEMENT OF ACTIVITIES Year ended June 30, 2014 Unrestricted REVENUES Rent revenue $ 39,818 Interest revenue 94 Total revenue 39,912 EXPENSES Housing program services 36,048 Management and general supporting services 15,692 Total expenses 51,740 CHANGE IN NET ASSETS (11,828) Net assets, beginning of year 507,361 Net assets, end of year $ 495,533 The accompanying notes are an integral part of this statement. 7
STATEMENT OF CASH FLOWS Year ended June 30, 2014 Cash flows from operating activities: Change in net assets $ (11,828) Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation 17,054 Change in assets and liabilities Increase in accounts payable and accrued liabilities 11,650 Net cash provided by operating activities 16,876 Cash flows used in investing activities: Increase in restricted cash (2,274) NET INCREASE IN CASH AND CASH EQUIVALENTS 14,602 Cash and cash equivalents, beginning of year 125,351 Cash and cash equivalents, end of year $ 139,953 The accompanying notes are an integral part of this statement. 8
NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE A NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Organization DDC Foothills Home (the Project), a Colorado nonprofit corporation, was organized as a nonprofit corporation in January 1999 to acquire an interest in real property located in Boulder, Colorado and to construct and operate a residential facility for developmentally disabled adults, under Section 811 of the National Housing Act. Rent charges and operating methods are regulated by the U.S. Department of Housing and Urban Development (HUD). 2. Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. 3. Use 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 that affect the reported amounts of assets and liabilities and disclosures of contingent 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 those estimates. 4. Subsequent Events The Project has evaluated events and transactions occurring subsequent to the end of the fiscal year for potential recognition or disclosure through September 30, 2014, the date on which the financial statements were issued and the Project did not identify any events or transactions that would have a material impact on the financial statements. 5. Cash and Cash Equivalents For purposes of the statement of cash flows, the Project considers cash to be cash on hand and unrestricted cash in checking and money market accounts and considers cash equivalents to be short term investments with original maturities of three months or less. 9
NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE A NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 6. Fixed Assets Development costs and other fees related to the property during the construction period have been capitalized as part of the building cost. Fixed assets are stated at cost, if purchased, or at fair value at the date of donation, if donated. Any asset purchased for more than $5,000 that has a life expectancy of more than one year is capitalized. Depreciation of the building and related equipment is provided using the straight line method based on an estimated useful life of twenty to forty years. Depreciation of the furnishings is provided using the straight line method based on an estimated useful life of ten years. 7. Net Assets As a nonprofit corporation, there are no owners of the Project. The capital contributions made in the initial year of construction have not changed. 8. Income Taxes The Project is operated as a nonprofit organization exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. The Project recognizes tax liabilities when, despite the Projectʹs belief that its tax return positions are supportable, the Project believes that certain positions may not be fully sustained upon review by tax authorities. Benefits from tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. The Project has concluded there is no tax liability or benefit required to be recorded as of June 30, 2014. The Project is subject to routine audits by taxing jurisdictions; however, there are currently no audits in progress for any tax periods. The Project believes it is no longer subject to income tax examinations for the years prior to the year ended June 30, 2011. NOTE B RELATED PARTY TRANSACTIONS The Project is affiliated with another nonprofit corporation, Developmental Disabilities Center d.b.a. Imagine! (Imagine!). Imagine! organized and managed the construction of the Project and continues to manage the facility. The tenants of the Project are also consumers of Imagine!, and the staff of Imagine! provide on site supervision of the residents. All expenses are paid through Imagine!, who also provides the management and bookkeeping services for the Project. Total management fees and bookkeeping expenses were $3,024 and $1,008, respectively, for the year ended June 30, 2014. Accounts payable operations and accrued management fee payable of $147,296 and $3,024, respectively, are payable to Imagine! as of June 30, 2014. 10
NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE C PROJECT RENTAL ASSISTANCE CONTRACT The Project entered into a Project Rental Assistance Contract (PRAC) with HUD that expires October 3, 2014. Under the terms of this contract, the Project agrees to operate the facility as subsidized housing, and HUD agrees to make Rental Assistance Payments up to a yearly maximum of $40,320. Maximum payments are subject to change periodically by amendment to the PRAC. NOTE D CONTINGENCIES Section 811 Capital Advance The Project is contingently liable, as of June 30, 2014, to HUD for the funding of the construction of the Project in the amount of $532,500. The capital advance agreement provides that as long as the facility remains available for occupancy to very low income persons with disabilities, until the maturity date of July 1, 2041, the note will not become payable, and will be discharged on that date. If any default occurs, the capital advance bears interest at 6.25% accruing from October 4, 2001, and becomes immediately payable and HUD has first lien rights on the facility. State of Colorado Housing Grant Contract The Project is contingently liable, as of June 30, 2014, to the State of Colorado, Department of Local Affairs, Division of Housing for the funding of the construction of the Project in the amount of $105,000. The grant contract provides that as long as the facility is used to provide housing for lowincome persons at affordable rents for a period of not less than forty years from the date of initial occupancy of six or more tenants, the Project will not be required to repay any portion of the grant. If any default occurs, the grant becomes immediately payable in full, but bears no interest. Community Development Block Grant The Project is contingently liable, as of June 30, 2014, to the City of Boulder, Colorado for the funding of the construction of the Project in the amount of $60,000 from HUD Community Development Block Grant funds. The grant agreement provides that as long as the facility is used to provide housing for people with low incomes, the Project will not be required to repay any portion of the grant. However, if the building is sold to a party who does not agree to operate it as low income housing, or if the Project ceases to operate the facilities as low income housing, as defined, the grant becomes immediately payable in full, but bears no interest. If the building is sold to a party who agrees to operate it as low income housing as defined, the Project would be required to pass the grant on to the acquiring entity. 11
NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE E REPLACEMENT RESERVE The Project is required to set aside amounts for the replacement of property and other Project expenditures approved by HUD. Replacement reserves, which were $31,759 as of June 30, 2014, are held in a separate federally insured account, and generally are not available for operating purposes. 12
Supplementary Information 13
STATEMENT OF FINANCIAL POSITION DATA June 30, 2014 1000 ASSETS 1100 Current assets 1120 Cash operations $ 139,953 1100T Total current assets $ 139,953 1300 Deposits 1320 Replacement reserve 31,759 1300T Total deposits 31,759 1400 Fixed assets 1410 Land 102,460 1420 Buildings 589,274 1460 Furnishings 8,825 1400T Total fixed assets 700,559 1495 Accumulated depreciation (226,254) 1400N Net fixed assets 474,305 1000T Total assets $ 646,017 2000 LIABILITIES 2100 Current liabilities 2110 Accounts payable operations $ 147,296 2115 Accounts payable HUD 164 2123 Accrued management fee payable 3,024 2122T Total current liabilities $ 150,484 2000T Total liabilities 150,484 3000 NET ASSETS 3130 Net assets 3131 Unrestricted net assets 495,533 3130 Total net assets 495,533 2033T Total liabilities and net assets $ 646,017 14
STATEMENT OF ACTIVITIES DATA Year ended June 30, 2014 5000 REVENUES 5100 Rent revenue 5120 Rent revenue $ 23,685 5121 Tenant assistance payments 16,635 5100T Total rent revenue $ 40,320 5200 Vacancies 5220 Apartments (502) 5200T Total vacancies (502) 5152N Net rental revenue 39,818 5400 Financial revenue 5410 Revenue from investments project operations 59 5440 Revenue from investments replacement reserve 35 5400T Total financial revenue 94 5000T Total revenue 39,912 6000 EXPENSES 6200/ 6300 Administrative expenses 6311 Office expenses 2,047 6320 Management fee 3,024 6350 Audit expense 9,613 6351 Bookkeeping fees/accounting services 1,008 6263T Total administrative expenses 15,692 6400 Utilities expense 6450 Electricity 5,355 6451 Water 680 6452 Gas 1,383 6453 Sewer 978 6400T Total utilities expense 8,396 (continued) 15
STATEMENT OF ACTIVITIES DATA (CONTINUED) Year ended June 30, 2014 6000 EXPENSES CONTINUED 6500 Operating and maintenance expense 6520 Contracts $ 7,398 6525 Garbage and trash removal 2,056 6500T Total operating and maintenance expenses $ 9,454 6700 Taxes and insurance 6710 Real estate taxes 75 6720 Property insurance 1,069 6700T Total taxes and insurance 1,144 6000T Total cost of operations before depreciation 34,686 5060T Income before depreciation 5,226 6600 Depreciation expense 17,054 5060N Net loss $ (11,828) OTHER INFORMATION REQUIRED BY HUD S1000 010 Total principal payments required under the mortgage $ S1000 020 The total of all monthly reserve for replacement deposits (usually 12 months) required during the audit period even if deposits have been temporarily waived or suspended 2,239 S1000 030 Replacement reserve releases included in expense items on this Statement of Activities S1000 040 Profit improvement reserve releases under the Flexible Subsidy Program that are included as expense items on the Statement of Activities 16
STATEMENT OF CHANGES IN NET ASSETS DATA Year ended June 30, 2014 S1100 060 Unrestricted net assets, June 30, 2013 $ 507,361 3247 Change in unrestricted net assets (11,828) 3131 Unrestricted net assets, June 30, 2014 495,533 S1100 050 Total net assets, June 30, 2013 507,361 3250 Change in total net assets (11,828) 3130 Total net assets, June 30, 2014 $ 495,533 17
STATEMENT OF CASH FLOWS DATA Year ended June 30, 2014 Cash flows from operating activities S1200 010 Rental receipts $ 39,964 S1200 020 Interest 94 S1200 040 Total receipts $ 40,058 S1200 050 Administrative (8,065) S1200 070 Management fee (3,024) S1200 090 Utilities (5,345) S1200 110 Operating and maintenance (6,019) S1200 120 Real estate taxes (48) S1200 140 Property insurance (681) S1200 230 Total disbursements (23,182) S1200 240 Net cash provided by operating activities 16,876 Cash flows from investing activities S1200 250 Net deposits to the reserve for replacement account (2,274) S1200 350 Net cash used in investing activities (2,274) S1200 470 NET INCREASE IN CASH AND CASH EQUIVALENTS 14,602 S1200 480 Cash and cash equivalents, beginning of period 125,351 S1200 T Cash and cash equivalents, end of period $ 139,953 Reconciliation of change in total net assets from operations to net cash provided by operating activities 3250 Change in total net assets from operations $ (11,828) Adjustments to reconcile change in total net assets from operations to net cash provided by operating activities 6600 Depreciation $ 17,054 S1200 540 Increase in accounts payable 11,504 S1200 550 Increase in accounts payable HUD 146 28,704 S1200 610 Net cash provided by operating activities $ 16,876 18
SUPPORTING DATA REQUIRED BY HUD June 30, 2014 SCHEDULE OF REPLACEMENT RESERVE 1320P Balance June 30, 2013 $ 29,485 1320DT Monthly deposits 2,239 1320INT Interest 35 1320 Balance June 30, 2014 $ 31,759 1320R Deposits suspended or waived (Y/N) N SCHEDULE OF CHANGES IN FIXED ASSETS ACCOUNTS 1410P Beginning balance for 1410 $ 102,460 1410 Land 102,460 1420P Beginning balance for 1420 589,274 1420 Building 589,274 1460P Beginning balance for 1460 8,825 1460 Furnishings 8,825 1400PT Total beginning balance for fixed assets 700,559 1400T Total fixed assets 700,559 1495P Beginning balance for 1495 209,200 6600 Total provisions 17,054 1495 Ending balance for accumulated depreciation 226,254 1400N Total net book value $ 474,305 19
U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner Office of Multifamily Housing Management and Occupancy Computation of Surplus Cash, Distributions and Residual Receipts PROJECT NAME FISCAL PERIOD ENDING PROJECT NUMBER DDC Foothills Home 06/30/14 101 HD023 NP PD DD PART A COMPUTE SURPLUS CASH Cash S1300 010 Cash (Accounts 1120, 1170, 1191 ) $ 139,953 1135 Accounts Receivable HUD $ S1300 030 Other (Describe ) $ S1300 040 (a) Total Cash $ 139,953 Current Obligations S1300 050 Accrued Mortgage (or Bond) Interest Payable $ S1300 060 Delinquent Mortgage (or Bonds) Principal Payments $ S1300 070 Delinquent Deposits to Reserve for Replacements $ S1300 075 Accounts Payable (due within 30 days ) $ 147,460 S1300 080 Loans and Notes Payable (due within 30 days ) $ S1300 090 Deficient Tax Insurance or MIP Escrow Deposits $ S1300 100 Accrued Expenses (not escrowed ) $ 3,024 2210 Prepaid Revenue (Account 2210 ) $ 2191 Tenant/Patient Deposits Held In Trust Contra (Account 2191 ) $ S1300 110 Other (Describe ) $ S1300 140 (b) Total Current Obligations $ 150,484 S1300 150 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b) ) $ (10,531) PART B COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS Surplus Cash (Deficiency) $ (10,531) Limited Dividend Projects S1300 160 (1) Annual Distribution earned during fiscal period covered by the statement * N/A S1300 170 (2) Distribution Accrued and Unpaid as of the end of the prior fiscal period * N/A S1300 180 (3) Distributions and Entity Expenses paid during fiscal period covered by the statement * N/A S1300 190 Distribution Earned but Unpaid (Line (1) plus (2) minus (3) ) * N/A S1300 200 Amount Available for distribution during next fiscal period $ S1300 210 Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after fiscal period ends ) $ * Not a HUD limited dividend project. 20
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended June 30, 2014 Federal Grantor/Pass Through Grantor/Program or Cluster Title U.S. Department of Housing and Urban Development: Federal CFDA Number Federal Expenditures Section 811 Project Rental Assistance Contract 14.181 $ 16,635 Section 811 Supportive Housing for Persons with Disabilities Capital Advance. Capital Advance matures July 1, 2041 14.181 532,500 Total Direct Awards 549,135 Total Expenditures of Federal Awards $ 549,135 The accompanying note is an integral part of this schedule. NOTE 1 BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of DDC Foothills Home and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A 133, Audits of States, Local Governments, and Non Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. 21
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended June 30, 2014 Section I Summary of Auditor s Results Financial Statements Type of auditor s report issued: Unmodified Qualified Adverse Disclaimer Internal control over financial reporting: Material weakness(es) identified? Yes No Significant deficiency(ies) identified? Yes None reported Noncompliance material to financial statements noted? Yes No Federal Awards Internal control over major federal programs: Material weakness(es) identified? Yes No Significant deficiency(ies) identified? Yes None reported Type of auditor s report issued on compliance for major federal programs: Unmodified Qualified Adverse Disclaimer Any audit findings disclosed that are required to be reported in accordance with Section.510(a) of OMB Circular A 133? Yes No Identification of major federal programs: CFDA Number Name of Federal Program or Cluster 14.181 U.S. Department of Housing and Urban Development Section 811 Supportive Housing for Persons with Disabilities Dollar threshold used to distinguish between type A and type B programs: $ 300,000 Auditee qualified as low risk auditee? Yes No (continued) 22
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) Year ended June 30, 2014 Section II Financial Statement Findings No matters were reported. Section III Federal Award Findings and Questioned Costs No matters were reported. 23
FHA PROJECT NO. 101 HD023 NP PD DD SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS Year ended June 30, 2014 No matters were reported. 24
LTJ Logan, Thomas & Johnson, LLC Certified Public Accountants INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors DDC Foothills Home We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of of DDC Foothills Home (the Project), which comprise the statement of financial position as of June 30, 2014, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated September 30, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Project s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Project s internal control. Accordingly, we do not express an opinion on the effectiveness of the Project s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 5023 W. 120 th Ave., #165, Broomfield, CO 80020 Calvin Logan Jan Thomas Pauline Davis Phone 303 532 1000 Phone 303 569 6030 Phone 719 937 4270 Fax 303 532 1080 Fax 303 569 6031 Fax 719 937 4271 25
Compliance and Other Matters As part of obtaining reasonable assurance about whether the Project s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Project s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Project s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Broomfield, Colorado September 30, 2014 26
LTJ Logan, Thomas & Johnson, LLC Certified Public Accountants INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A 133 To the Board of Directors DDC Foothills Home Report on Compliance for Each Major Federal Program We have audited of DDC Foothills Home s (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 its major federal program for the year ended June 30, 2014. The Project s major federal program is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for the Project s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 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 on compliance for the major federal program. However, our audit does not provide a legal determination of the Project s compliance. 5023 W. 120 th Ave., #165, Broomfield, CO 80020 Calvin Logan Jan Thomas Pauline Davis Phone 303 532 1000 Phone 303 569 6030 Phone 719 937 4270 Fax 303 532 1080 Fax 303 569 6031 Fax 719 937 4271 27
Opinion on Each Major Federal Program In our opinion, the Project complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2014. Report on Internal Control Over Compliance Management of the Project is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Project s internal control over compliance with types of requirements that could have a direct and material effect on its major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program 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. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A 133. Accordingly, this report is not suitable for any other purpose. Broomfield, Colorado September 30, 2014 28
FHA Project No. 101-HD023-NP-PD-DD MORTGAGOR'S CERTIFICATION June 30, 2014 We hereby certify that we have examined the accompanying financial statements and supporting data of DDC Foothills Home and, to the best of our knowledge and belief, the same is complete and accurate. DDC FOOTHILLS HOME Officers Date 3/ic^_ Date f/sjl EIN: 31-1653564 29
FHA Project No. 101-HD023-NP-PD-DD CERTIFICATE OF MANAGING AGENT June 30, 2014 I hereby certify that I have examined the accompanying financial statements and supporting data of DDC Foothills Home and, to the best of my knowledge and belief, the same is complete and accurate. IMAGINE! Date f-> <k/>i EIN: 84-0526620 30