comprehensive annual financial report · pdf filewe are pleased to present the durham housing...

THE HOUSING AUTHORITY OF THE CITY OF DURHAM

Comprehensive Annual Financial Report

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013 WITH COMPARATIVE DATA FOR THE YEAR ENDED DECEMBER 31, 2012

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THE HOUSING AUTHORITY OF THE CITY OF DURHAM,

NORTH CAROLINA

Comprehensive Annual Financial Report For the fiscal year ended December 31, 2013 with comparative data for the year ended December 31, 2012

Issued by Department of Finance & Administration Jeffrey G. Causey, CFO

The Housing Authority of the City of Durham

North Carolina

Section I - Introductory Section ................................................................................................................. 7

Principal Officials ................................................................................................................................. 9

Organizational Chart ........................................................................................................................... 10

Transmittal Letter ................................................................................................................................ 11

Section II - Financial Section ................................................................................................................... 17

Independent Auditors' Report ............................................................................................................. 19

Management's Discussion and Analysis ............................................................................................. 22

Basic Financial Statements ................................................................................................................... 29

Exhibit A - Statement of Net Position ................................................................................................. 30

Exhibit B – Statement of Revenues, Expenses, and Changes in Net Position .................................... 32

Exhibit C - Statement of Cash Flows .................................................................................................. 33

Notes to Basic Financial Statements ................................................................................................... 34

Combining Financial Statements ......................................................................................................... 61

Combining Statement of Net Position – Major Funds ........................................................................ 62

Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Major Funds ... 63

Combining Statement of Cash Flows – Major Funds ......................................................................... 64

Combining Statement of Net Position – Nonmajor Funds .................................................................. 65

Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Nonmajor Funds ............................................................................................................................................................ 66

Combining Statement of Cash Flows – Nonmajor Funds ................................................................... 67

Section III – Statistical Section ................................................................................................................ 68

Table 1 – Net Position ......................................................................................................................... 70

Table 2 – Changes in Net Position ...................................................................................................... 71

Table 3 – Operating Revenues By Source ........................................................................................... 72

Table 4 – Nonoperating Revenues By Source ..................................................................................... 73

Table 5 – Debt Service Coverage ........................................................................................................ 74

Table 6 – Ratio of Debt to Capital Assets ........................................................................................... 75

Table 7 – Property Characteristics and Unit Composition .................................................................. 76

Table 8 – Staff Headcount By Program .............................................................................................. 77

Section IV – Single Audit Section ............................................................................................................ 79

Schedule of Expenditures of Federal Awards ..................................................................................... 85

Notes to Schedule of Expenditures of Federal Awards ....................................................................... 86

Schedule of Findings and Questioned Costs ....................................................................................... 87

Schedule of Prior Year Findings and Questioned Costs ...................................................................... 91

Section V – HUD Financial Data Schedule (FDS) .................................................................................. 92

Schedule of Net Position - FDS .......................................................................................................... 94

Schedule of Revenues and Expenses and Changes in Net Position – FDS ......................................... 96

HUD Cost Certificates ........................................................................................................................ 99

Section VI – Budgetary Information ..................................................................................................... 104

Statement of Revenues, Expenses and Changes in Net Position – Budget & Actual (Non-GAAP), Public Housing .................................................................................................................................. 105

Statement of Revenues, Expenses and Changes in Net Position – Budget & Actual (Non-GAAP), Housing Choice Voucher Program .................................................................................................... 106

Statement of Revenues, Expenses and Changes in Net Position – Budget & Actual (Non-GAAP), Central Office Cost Center ................................................................................................................ 107

SECTION I - INTRODUCTORY SECTION

List of Principal Officials

Organizational Chart

Letter of Transmittal

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North Carolina

Principal Officials Commissioners as of December 31, 2013

Name Term expires

Thomas M. Niemann, Chairman September 28, 2017

Gloria M. Nottingham, Member September 28, 2015

Barbara F. Lofton, Member September 28, 2017

George K. Quick, Member September 28, 2015

John S. Ramsey, Member September 28, 2014

Larry D. Yon, II, Member September 28, 2018

Steve Shewel, Council Liaison (no expiration date)

Administrative Staff as of December 31, 2013

Name Position

Dallas J. Parks Chief Executive Officer

Jeffrey G. Causey Chief Financial Officer

Elvert Dorsey Director of Resident Services

Vickie Ellis Capital Improvements/Strategic Plan Administrator

Shannon McLean Chief Development and Operations Officer

Sabrina Sinegal Director of Human Resources

Rhega Taylor Director of Housing Choice Voucher Program

Sherrod Banks, Esq. The Banks Law Firm

Outside Legal Counsel


North Carolina

Organizational Chart As of December 31, 2013

Director ofHuman

Resources

Chief ExecutiveOfficer

Chief FinancialOfficer

Human Resources

Public HousingAMPs

Technical Services

Resident Services

Affordable HousingCommunities

Housing Choice Voucher Program

Accounting

Procurement

InformationTechnology

CFP Admin

Chief Development and Operations

Officer

Other FundsHousing Choice

VoucherCentral Office Cost

Center

CEODepartment

Public Housing

Legend

Capital Funds/Strategic Plan Administrator

Director of HCV

Development Director of Resident Services

Learning Assistance

Recertification

Resident Selection

330 E. Main Street P.O. Box 1726

Durham, NC 27701 (919) 683-1551

FAX: (919) 683-1237 TDD/TTY: (800) 545-1833 ext. 774

durhamhousingauthority.org

A Commitment to Quality Living

May 27, 2014

Transmittal Letter Members of the Board of Commissioners Housing Authority of the City of Durham

Introduction

We are pleased to present the Durham Housing Authority Comprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2013. This report was prepared by the Authority's staff and was audited by the public accounting firm of CliftonLarsonAllen LLP.

The data presented in this report are the responsibility of the management of the Authority. To the best of our knowledge and belief, the data as presented are accurate in all material aspects; are presented in a manner designed to fairly state the financial position and results of operations of the Authority; and include all necessary disclosures to enable the reader to gain a complete understanding of the Authority's financial affairs. The financial statements are presented in conformity with U.S. Generally Accepted Accounting Principles (GAAP). GAAP requires that management provide a narrative introduction, overview and analysis to complement the basic financial statements in the form of Management's Discussion and Analysis (MD&A). The Authority's MD&A can be found immediately following the report of the independent auditors.

The Authority is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-profit Organizations. It is the Authority's policy to require the accounting firm to be independent certified public accountants with specific experience in auditing governmental entities. Information related to this single audit, including the Independent Auditors’ 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; the 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 Schedule of Expenditures of Federal Awards and related notes; Schedule of Findings and Questioned Costs; and the Schedule of Prior Year Findings and Questioned Costs are included in the single audit section of this report.

Government Profile

The Authority is an autonomous, non-profit municipal entity created by the City of Durham in 1949 pursuant to state law and the National Housing Act of 1937. Although it maintains close ties with the City in several respects, the Authority is not a component unit of the City, as defined by the pronouncements of the GASB, since the City is not financially accountable for the operations of the Authority, has no responsibility to fund its deficits or receive its surpluses, and has not guaranteed the Authority's debt. The governing body of the Authority is its Board of Commissioners (Board) and is comprised of six members appointed by city council of the City of Durham and one member appointed

by the mayor of the City of Durham. The Board appoints a Chief Executive Officer to administer the affairs of the Authority.

The Authority exists to provide safe, decent, and sanitary housing for low-income families of Durham in accordance with the rules and regulations prescribed by the U.S. Department of Housing and Urban Development (HUD) and other federal agencies. The primary source of external funding for the Authority is the U.S. Department of Housing and Urban Development (HUD) which provides funding for a variety of programs such as the Low Rent Housing Program (Public Housing) and the Housing Choice Voucher Program. In addition to the federal programs, the Authority has established Development Ventures Incorporated, Edgemont Elms Housing, Inc., Learning Assistance, Inc., Preiss-Steele Place Housing, Inc., and other smaller legal entities to explore and develop innovative techniques for providing alternative housing possibilities for the low- to moderate-income residents of Durham. These programs have allowed the Authority the flexibility to develop several private/public partnerships providing a variety of housing opportunities for Durham residents.

Economic Condition and Outlook

The Authority's financial position is directly affected by the level of federal appropriations and Congressional housing legislation. The impact of these federal actions impacts the Authority more than local economic factors since the Authority's primary source of funding is HUD. Nationwide there are approximately one million units of public housing. The Authority owns and operates approximately 1,800 Public Housing units, 160 units of affordable housing units, and administers approximately 2,700 Housing Choice Voucher Program vouchers. Similar to most housing authorities, approximately 80% of the Authority's operating and capital funding comes from federal dollars in the form of operating subsidies, capital grant funds, and Housing Choice Voucher Program housing assistance payments.

For the Housing Choice Voucher (HCV) Program, HUD provides housing authorities with an annual budget for Housing Assistance Payments (HAP) and for HCV administrative fees. HAP funding is pass-through funding intended for landlords. The funds pass through the Authority, which is responsible for administering the program at the local level, before payment to landlords. The Authority is required to account for any excess funds separately as they may only be used to fund HAP payments to landlords if a deficit exists in the funding providing by HUD. For 2013, HUD only provided funding for approximately 94% of the amounts due to landlords, the first time in history HAP funding has been prorated. HCV administrative fees are paid by HUD to the Authority to provide funding for the administrative costs to operate the program. During 2013, HUD only funded about 69% of the estimated amount their formulas indicate as being required to operate an effective program.

For the Public Housing program, housing authorities receive operating subsidies in accordance with an operating subsidy funding formula. In general, the calculated subsidy amount is the difference between an estimate of operating costs less an estimate of income from rents. Operating subsidies are subject to annual appropriation by Congress. For 2013, the amount funded was approximately 83% of the calculated subsidy eligibility amount.

According to the U.S. Department of Labor, Bureau of Labor Statistics, during 2013, employment in the Durham-Chapel Hill Metropolitan Statistical Area (MSA) improved dramatically. As of December 2013, the unemployment rate was 4.1% compared to 7.1% in December 2012 and an annual rate of 7.4% for 2012. The unemployment rate for the state of North Carolina was 6.6% in December 2013. On an annual basis, the unemployment decreased from 7.4% for 2012 to 6.4% for 2013.

Major Initiatives

The Authority has implemented a balanced scorecard to provide strategic guidance to staff. As part of the balanced scorecard framework, the Authority identified fifteen strategic objectives and created a corporate strategy map that helps users visualize the relationships between objectives.

In addition to work on the corporate strategic plan, the Authority pursued several other projects throughout 2013. A major rehabilitation project at Edgemont Elms was completed. With the construction phase completed, the Authority successfully negotiated a modification to the existing first mortgage on the property. The modification provides for resumption of principal and interest payments commencing in 2014. Based on a prior agreement, principal and interest payments on the second mortgage, held by the City of Durham, will also resume during 2014.

The Authority received funding approval from several sources, including the NC Housing Finance Agency and the City of Durham, to be used for a new 20-unit development referred to as Goley Pointe. This development will include public housing, project-based voucher, and market rate units and is targeted at homeless families. Construction on this community commenced during 2013 with a projected completion date in late 2014.

During June and July 2009, the local field office of HUD conducted a comprehensive monitoring review of the Authority. This review covered all areas and functions receiving federal funds. In addition to the already known problems with the HCV Program, the review also revealed significant problems with the procurement activities and functions of the Authority and generated comments related to other areas. In response to this, Authority staff were engaged in corrective action activities for much of the latter half of the year. The Authority also retained a firm to conduct an assessment of operations. During 2010, efforts were pursued to implement several of the recommendations identified by the firm. In the early part of

2011, the local field office lifted a set of controls that had been imposed on the Authority as a result of the monitoring review. Subsequent to the 2013 year end, the local field office issued a letter closing the matter, noting all concerns had been addressed.

During 2013, the Authority successfully negotiated with the U.S. Department of Housing and Urban Development’s Office of Inspector General to establish a repayment plan for amounts outstanding as questioned costs discovered during an audit in 2004. The Authority and HUD have entered into an agreement calling for repayment of approximately $3.6 million over a period of 100 years.

Financial Information

The Authority's management is responsible for establishing and maintaining an internal control structure designed to ensure that the Authority's assets are protected from loss, theft or misuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with GAAP. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the costs of a control should not exceed the benefits to be derived and (2) the valuation of costs and benefits require estimates and judgment by management.

Single Audit: As a recipient of federal awards, the Authority is also responsible for ensuring that an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to those programs. The internal control structure is subject to periodic evaluation by management, compliance staff of the Authority, and the Authority's independent auditors.

As part of the Authority's single audit, tests are made to determine the adequacy of the Authority's internal control structure, including that portion relative to federal awards, as well as to determine whether the Authority has complied with applicable laws, regulations, contracts, and grants. The Authority's single audit for the fiscal year ended December 31, 2013 resulted in two findings, including:

2013-001: Tenant Participation Program controls not adequate to review and monitor use of funds (internal control, noncompliance, significant deficiency);

2013-002: Housing Choice Voucher Program Eligibility, Reporting and Special Test (noncompliance and significant deficiency).

Component Units: The Authority has four (4) active component units as of December 31, 2013. These component units include:

• Development Ventures Incorporated

• Learning Assistance, Inc.

• Edgemont Elms Housing, Inc.

• Preiss-Steele Place Housing, Inc.

All of these component units have a December 31st fiscal year end. The component units are all considered blended component units as the Authority’s Board members also serve as the Board members for these units and the Authority’s management controls the activities of these units.

In addition to the above component units, the Authority is a party to or otherwise related to a variety of legal entities created for the purpose of facilitating development of affordable housing for the residents of Durham.

Debt Administration: A summary of the Authority's outstanding debt is provided under the MD&A following this report and also in Note P to the Basic Financial Statements.

Awards: The Government Finance Officers Association of the United States and Canada (GFOA) awards

Certificates of Achievement for Excellence in Financial Reporting to entities that publish an easily readable and efficiently organized comprehensive annual financial report whose contents conform to program standards and satisfy GAAP and applicable legal requirements. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports.

The Authority submitted the report for the fiscal year ended December 31, 2012 for consideration, but did not receive the award. This report incorporates changes and suggestions provided by the GFOA reviewers in an effort to produce a report that meets the program’s requirements.

Acknowledgments: The preparation of this report has been accomplished through the hard work of the Finance & Administration staff and the support of other staff members throughout the Authority. We wish to thank the management and staff of CliftonLarsonAllen LLP, who provided necessary expertise and technical assistance. We would also like to take this opportunity, on behalf of the staff and residents served by the Durham Housing Authority, to acknowledge the members of the Board of Commissioners for their tireless support and guidance.

Respectfully submitted,

Jeffrey G. Causey, CPA, CAPM Chief Financial Officer

SECTION II - FINANCIAL SECTION

Independent Auditors’ Report

Management's Discussion and Analysis

Basic Financial Statements

Combining Financial Statements

INDEPENDENT AUDITORS’ REPORT

Board of Commissioners Durham Housing Authority Durham, North Carolina Report on the Financial Statements

We have audited the accompanying financial statements of the Durham Housing Authority (the Authority), which comprise the statement of net position as of December 31, 2013 and 2012 and the related statements of revenues, expenses and change in net position for the years ended December 31, 2013 and 2012, 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. Auditors’ 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.

CliftonLarsonAllen LLP www.cliftonlarsonallen.com

An independent member of Nexia International

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority as of December 31, 2013 and 2012, and the changes in its financial position and, cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 22 ‐ 28 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Authority’s basic financial statements. The combining financial statements, budgetary information, financial data schedules and HUD cost certifications are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining financial statements, budgetary information, financial data schedules and HUD cost certifications are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Financial Data Schedules and HUD Cost Certifications are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and tables included in the statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 26, 2013 on our consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over

financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance.

CliftonLarsonAllen LLP Baltimore, Maryland May 27, 2014

Management's Discussion and Analysis December 31, 2013

Overview of the Financial Statements

Management of the Housing Authority of the City of Durham, North Carolina (the Authority) is pleased to offer readers of the Authority's financial statements this narrative overview and analysis of its basic financial statements for the fiscal year ended December 31, 2013, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). GAAP requires the inclusion of three basic financial statements: the statement of net position (balance sheet); the statement of revenues, expenses and changes in net position (income statement); and the statement of cash flows. In addition, GAAP requires the inclusion of management's discussion and analysis (MD&A) as required supplementary information.

This discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements and financial performance for the year ended December 31, 2013, with comparative data from the year ended December 31, 2012 and December 31, 2011. We suggest reading this in conjunction with the transmittal letter in the Introductory Section and the Authority's basic financial statements, which immediately follow this section.

Financial Highlights

Assets of the Authority exceeded liabilities at December 31, 2013 by $28.9 million (net position). Of this amount, $5.6 million (unrestricted net position) may be used to meet the Authority's on-going obligations.

Total net position decreased by $5,413,138 during 2013.

Capital assets decreased by $1,542,288 during the year. This decrease was due to depreciation.

Operating revenues decreased by $1,975,141 compared to the prior year. This was primarily due to reductions in funding from the U.S. Department of Housing and Urban Development.

During 2013, operating expenses increased by $2,623,797 compared to 2012.

The Authority experienced an operating loss of $7.2 million during 2013. The operating loss for 2012 was $2.6 million.

The Authority's total debt decreased from $3.1 million to $3.0 million, or about 4.2%, from 2012 to 2013.

Financial Analysis

Statement of Net Position

The statement of net position presents the assets, liabilities, and net position of the Authority at the end of the fiscal year. The purpose of the statement of net position is to give readers a snapshot of the fiscal condition of the Authority as of a certain point in time. It presents end-of-year data for assets, liabilities, and net position (assets minus liabilities). Also shown is the sum of total liabilities and total net position, which equals total assets.

Summary Statement of Net Position

2013 2012 2011

A SSETS

Current assets 7,541,328$ 9,338,874$ 11,570,267$

Noncurrent assets 7,062,901 9,578,658 9,234,313 Capital assets 19,641,600 21,183,888 19,815,238

Total Assets 34,245,829$ 40,101,420$ 40,619,818$

L IABILITIES

Current liabilities 3,055,530$ 2,107,661$ 2,717,840$ Noncurrent liabilities 2,335,897 3,726,219 3,779,871

Total Liabilities 5,391,427 5,833,880 6,497,711

N ET P OSITION

Net investment in capital assets 16,653,465 18,066,371 16,542,828

Restricted

HOPE VI loan reserves 5,569,780 8,080,661 9,483,408

Replacement reserve 98,627 - -

Operating reserve 119,853 5,352 -

Housing assistance payments 782,412 1,501,533 - Unrestricted 5,630,265 6,613,623 8,095,871

Total Net Position 28,854,402$ 34,267,540$ 34,122,107$

December 31

Table 1: Summary Statement of Net Position

Total Assets of the Authority at December 31, 2013 were $34,245,829. This represents a decrease of $5,855,591 or 14.6% compared to December 31, 2012.

The reduction in Total Assets for the Authority was comprised of a reduction of 19.2% ($1,797,546) in Current Assets. Approximately two-thirds of the reduction in current assets came in unrestricted cash, which declined to $4,616,869 from $5,824,793 during the year. Similar to 2012, much of this reduction was due to construction on major projects like Edgemont Elms, Goley Pointe, and Preiss-Steele Place during the year. Restricted Cash decreased by 18.9% during the year due to HCV program HAP payments to landlords exceeding the amounts received from HUD. This was primarily due to an unprecedented move by HUD to prorate funding for Housing Assistance Payments to approximately 95% of eligibility. The Authority is allowed to use restricted cash from prior years to make up the difference when payments exceed proceeds received. The Authority also experienced a decrease of approximately 40.0% in net accounts receivable from 2012 to 2013 due to reductions in grants

Figure 1: Total Assets

$-

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2013 2012 2011

Total Assets

outstanding. Non-Current Assets decreased by $2,515,757 (7.3%) due to increases in notes receivable in the HOPE VI grant program and recording a full allowance against the accrued interest balance in the amount of $3,363,403. Capital Assets decreased by $1,542,288, (7.3%) due to depreciation.

Total liabilities for the Authority are $5,391,427, a decrease of $442,453 or 7.6% compared to the prior year. Current liabilities include accounts payable, accrued expenses, unearned revenues, funds held for others in the form of tenant security deposits, other liabilities, and the current portion of long-term debt. As a whole, current liabilities increased 45% compared to the prior year. Most of the increase in due to an increase in current portion of long term debt. Unearned revenues decreased by $27,786 or 23.4% due to timing issues related to grants. Non-Current Liabilities decreased by 37.3% ($1,390,322) primarily due to reductions in long-term debt.

Net position for the Authority at December 31, 2013 decreased by $5,413,138 or 15.8%. Net position represents the Authority's equity and is divided up into three categories. The first category, Net investment in capital assets, represents the Authority's investment in capital assets including land, buildings, construction in progress, and equipment, net of any related capital debt outstanding. This category decreased by $1,412,906, with depreciation exceeding the value of new construction. The second category is Restricted Net Position which are assets that have some external limitations on the way in which they may be used. The Authority had an decrease in Restricted Net Position of $3,016,874 that was primarily the result of an decrease in the HOPE VI grant program. The decrease was also a result of a reduction in funds restricted for the HCV Program as the Authority used reserves to make housing assistance payments. The final category is Unrestricted Net Position which are assets available for use on any lawful and prudent purpose of the Authority. This category decreased by $983,358 or 14.9%. Most of this reduction is due to drawdowns of available funds for projects like the Edgemont Elms Apartments, the Goley Pointe project and pre-development related to Preiss-Steele Place.

Figure 2: Total Liabilities

Figure 3: Unrestricted Net Position

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5,000,000

10,000,000

2013 2012 2011

Total Liabilities

$-

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2013 2012 2011

Unrestricted Net Position

Statement of Revenues, Expenses, and Changes in Net Position

The statement of revenues, expenses and changes in net position is designed to present the revenues and expenses earned by the Authority, both operating and non-operating. Generally, operating revenues are amounts received for providing housing to the Authority's tenants and operating expenses are those expenses incurred to maintain the housing units and provide other services to those tenants. Non-operating revenues and expenses are funds received or spent for which goods and services are not provided.

Summary Statement of Revenues, Expenses and Changes in Net Position

2013 2012 2011

Operating Revenues

Tenant rent 4,863,093$ 4,669,756$ 4,505,300$

Operating grants & subsidies 28,981,902 31,025,492 32,006,237

Other revenues 241,826 366,714 253,559

Total operating revenues 34,086,821 36,061,962 36,765,096

Operating Expenses

Administration 6,189,557 6,616,733 7,057,586

Tenant services 917,109 1,060,938 1,189,793

Utilities 3,623,079 3,353,138 3,320,488

Maintenance & operations 4,126,390 4,634,990 5,542,093

Protective services 12,915 227,809 216,640

General expense 4,266,509 1,597,550 1,596,504

Housing assistance payments 18,580,286 17,759,833 18,536,427 Depreciation & amortization 3,534,487 3,375,544 3,042,024

Total operating expenses 41,250,332 38,626,535 40,501,555

Net operating loss (7,163,511) (2,564,573) (3,736,459)

Non-operating revenues (expenses)

Investment income 4,996 8,040 13,332

Mortgage interest income 358,168 353,876 353,876

Interest expense (98,432) (103,070) (118,083) Casualty Loss (4,147) (23,647) 36,932

Gain on sale of capital assets 2,212 - 42,095

Total non-operating revenues (expenses) 262,797 235,199 328,152

Change in net assets before contributions (6,900,714) (2,329,374) (3,408,307)

Capital grants contributions 1,487,576 2,474,808 2,434,769

Change in net position (5,413,138) 145,434 (973,538)

Net position - beginning of year 34,267,540 34,122,106 35,095,645

Net position - end of year 28,854,402$ 34,267,540$ 34,122,107$

Year Ended December 31

Table 2: Summary Statement of Revenues, Expenses and Changes in Net Position

During 2013, operating revenues decreased by $1,975,141, or 5.5% compared to the prior year. One major change occurred in the area of Operating grants & subsidies which experienced a reduction of $2,043,590 due to reductions in funding received from HUD. Other revenues increased primarily due to funds advanced to Development Ventures Incorporated for development projects.

Operating expenses increased by 6.8% during 2013, or $2,623,797. The majority of functional expenses declined during 2013. However, utilities increased by 8.1% or $269,941 during the year due to rate

increases and increased usage. Housing assistance payments increased by a sizable amount, $820,453, compared to 2012. Tenant services declined by 13.6% or $143,829 during 2013 as grants ended and associated expenses were eliminated. General expenses increased by 167.1% or $2,668,959 due to setting up an allowance against accrued interest receivables.

Non-operating revenues and expenses increased during 2013 by $27,598.

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2013 2012 2011

Total operating revenues

Figure 4: Operating revenues

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2013 2012 2011

Total operating expenses

Figure 5: Operating expenses

Capital Assets

Depreciation expense for the year ended December 31, 2013 was $3,534,487. The table below shows the Authority's capital assets and accumulated depreciation at the end of the fiscal year as compared to the end of the two previous fiscal years.

2013 2012 2011

Land 1,961,937$ 1,961,936$ 1,869,236$

Buildings & improvements 75,238,732 73,246,534 68,602,746 Equipment 1,777,790 1,832,689 1,838,750

Total capital assets 78,978,459 77,041,159 72,310,732 Accumulated depreciation (59,336,859) (55,857,271) (52,495,494)

Total capital assets net of depreciation 19,641,600$ 21,183,888$ 19,815,238$

December 31

Table 3: Statement of Capital Assets

Note G to the Authority's basic financial statements provides additional detail regarding the changes in capital assets during the year.

Debt Administration

The Authority uses short- and long-term borrowings to finance property acquisitions and to make improvements to properties. During 2013, long-term debt outstanding decreased by $129,382. The table below summarizes outstanding long-term debt at the end of the fiscal year as compared to the end of the two previous fiscal years.

2013 2012 2011

Notes Payable 2,988,135$ 3,117,517$ 3,272,410$

Total long-term debt 2,988,135$ 3,117,517$ 3,272,410$

December 31

Table 4: Statement of Long-Term Debt

Note O to the Authority's basic financial statements provide additional detail regarding the changes in debt during the fiscal year.

Economic Factors Affecting the Authority

The following key economic indicators and other factors are expected to impact the economic situation of the Authority:

Actions to make changes to the fundamental size of the Federal budget and deficit will continue to result in constraints on funding made available to the Authority;

The economic climate, which has shown only very slight positive changes in recent months, appears to have reached a new baseline, which will likely result in a new, unplanned level of demand for services despite funding reductions that limit the Authority’s ability to respond;

The possibility that Federal agencies and officials may make changes in programs to increase flexibility in the use of funds and Authority operational requirements in light of severe funding cutbacks will benefit the agency if they come to pass.

Requests for Information

This financial report is designed to provide a general overview of the Authority's finances for all those interested. Questions concerning any of the information presented in this report or requests for additional information should be directed to:

Jeffrey G. Causey Chief Financial Officer 330 East Main Street Durham, NC 27701 Phone: (919) 683-1551 ext. 320 TDD/TTY: (800) 545-1833 ext. 774 E-mail: [email protected]

BASIC FINANCIAL STATEMENTS

EXHIBIT A - STATEMENT OF NET POSITION Durham Housing AuthorityDurham, North Carolina

2013 2012

ASSETS

Current Assets

Cash & cash equivalents 4,616,869$ 5,824,793$

Cash & cash equivalents - restricted 1,871,753 2,308,776

Investments 728,136 727,604

Accounts receivable, net 229,242 382,070

Inventory & prepaid items 95,328 95,631

Total Current Assets 7,541,328 9,338,874

Noncurrent Assets

Capital Assets

Land 1,961,937 1,961,936

Buildings 75,238,732 73,246,534

Furniture, equipment & machinery 1,777,790 1,832,689 Accumulated depreciation (59,336,859) (55,857,271)

Total capital assets, net 19,641,600 21,183,888

Notes Receivable 6,865,766 9,378,751

Other assets 197,135 199,907

Total Noncurrent Assets 26,704,501 30,762,546

TOTAL ASSETS 34,245,829$ 40,101,420$

December 31,

The accompanying notes are an integral part of the financial statements.

Durham Housing AuthorityDurham, North Carolina

2013 2012

December 31,

LIABILITIESCurrent Liabilities

Accounts payable 817,162$ 1,103,801$

Accrued compensated absences, current portion 40,659 74,962

Accrued expenses 217,557 203,018

Unearned revenues 91,111 118,897

Tenant security deposits 399,076 394,133

Other current liabilities - 87,702 Current portion of long-term debt 1,489,965 125,148

Total Current Liabilities 3,055,530 2,107,661

Noncurrent Liabilities

Long-term debt, net of current portion 1,498,170 2,992,369

Other noncurrent liabilities 471,785 407,759 Accrued compensated absences, net of current portion 365,942 326,091

Total Noncurrent Liabilities 2,335,897 3,726,219

TOTAL LIABILITIES 5,391,427 5,833,880

NET POSITION

Net investment in capital assets 16,653,465 18,066,371

Restricted

HOPE VI loan reserves 5,569,780 8,080,661

Replacement reserve 98,627 -

Operating reserve 119,853 5,352

Housing assistance payments 782,412 1,501,533 Unrestricted 5,630,265 6,613,623

TOTAL NET POSITION 28,854,402$ 34,267,540$


EXHIBIT B – STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION Exhibit B - Statement of Revenues, Expenses, and Changes in Net AssetsDurham Housing AuthorityDurham, North Carolina

2013 2012

Operating Revenue

Tenant rent 4,863,093$ 4,669,756$

Operating grants 28,981,902 31,025,492 Other revenue 241,826 366,714

Total Operating Revenue 34,086,821 36,061,962

Operating Expenses

Administration 6,189,557 6,616,733

Tenant services 917,109 1,060,938

Utilities 3,623,079 3,353,138

Maintenance 4,126,390 4,634,990

Protective services 12,915 227,809

General expense 4,266,509 1,597,550 Housing assistance payments 18,580,286 17,759,833 Depreciation & amortization 3,534,487 3,375,544

Total Operating Expenses 41,250,332 38,626,535

Operating Loss (7,163,511) (2,564,573)

Nonoperating Revenues/(Expenses)

Investment income 4,996 8,040

Mortgage interest income 358,168 353,876

Interest expenses (98,432) (103,070)

Casualty losses (4,147) (23,647)

Gain/loss on sale of assets 2,212 -

Total Nonoperating Revenues/(Expenses) 262,797 235,199

Change in net position before capital contributions (6,900,714) (2,329,374) Capital contributions 1,487,576 2,474,808

Change in net position (5,413,138) 145,434

Total net position - beginning of year 34,267,540 34,122,106

Total net position - end of year 28,854,402$ 34,267,540$

For the year ended December 31,


EXHIBIT C - STATEMENT OF CASH FLOWS Durham Housing AuthorityDurham, North Carolina

2013 2012

Cash Flows from Operating Activities

Receipts from customers and users 5,244,741$ 8,367,893$

Receipts from grants and subsidies 28,914,878 31,025,492

Payments to suppliers (11,709,155) (15,441,434)

Payments for housing assistance (18,580,286) (17,759,833)

Payments to employees (4,721,404) (5,270,026)

Net cash provided/(used) by operating actvities (851,226) 922,092

Cash Flows from Non-Capital Financing Activities

Change in other liabilities - (2,414) Interest expense paid (98,432) (103,070)

Net cash provided/(used) by noncapital financing activities (98,432) (105,484)

Cash Flows from Investing Activities

Purchases of investments (532) (777)

(Decrease) Increase in Long Term Notes Receivable (67,960) 15,850 Interest received 4,996 8,040

Net cash provided/(used) by investing activities (63,496) 23,113

Cash Flows from Capital and Related Financing Activities

Proceeds from sales of assets 2,212 -

Changes in long term debt payable (129,382) (154,893)

Grant revenue - capital grants 1,487,576 2,474,808 Purchases of capital assets (1,992,199) (4,744,832)

Net cash provided/(used) by capital and related financing activities (631,793) (2,424,917)

Net Increase/(Decrease) in Cash (1,644,947) (1,585,196)

Cash at beginning of period 8,133,569 9,718,765

Cash at end of period 6,488,622 8,133,569

Reconciliation of operating income to net cash provided by/(used in) operating activities

Net income/(loss) from operations (7,163,511) (2,564,573)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Depreciation/Amortization 3,534,487 3,375,544

Casualty losses (4,147) (23,647)

Provisions for bad debt 3,076,616 -

Changes in assets and liabilities:

Decrease (Increase) in accounts receivable (67,024) 552,442

Decrease (Increase) in inventory & prepaid expenses 7,184 72,599

Decrease (Increase) in inventory (6,881) -

Decrease (Increase) in Interprogram Due From - (10,032)

Decrease (Increase) in other noncurrent assets 2,772 25,645

Increase (Decrease) in accounts payable (286,639) (436,624)

Increase (Decrease) in accrued expenses 20,086 52,986

Increase (Decrease) in unearned revenue (27,786) (158,048)

Increase (Decrease) in security/trust deposits 4,943 14,896

Increase (Decrease) in other current liabilities (5,352) 131

Increase (Decrease) in other noncurrent liabilities 64,026 20,773

Net cash provided/(used) by operating actvities (851,226)$ 922,092$

For the year ended December 31,



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Notes to Basic Financial Statements

December 31, 2013 and 2012

Notes to Basic Financial Statements Note A Summary of Organization, Significant Accounting Policies and Reporting Entity

1. Introduction

The financial statements of the Authority have been prepared in conformity with generally accepted accounting principles (GAAP). The Authority is required to follow all statements of the GASB. GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, was issued to incorporated GASB and AICPA guidance into GASB authoritative literature

The more significant of the government's accounting policies are described below.

2. Organization

The Durham Housing Authority is authorized by and operates under the provisions of Chapter 121B of the North Carolina General Statutes, as amended, which is known as the Housing and Urban Renewal Law. The Durham Housing Authority (the “Authority”) is a public body and a body corporate and politic organized under the laws of the State of North Carolina by the City of Durham for the purpose of providing adequate housing for qualified low-income individuals. The City provides no financial support to the Authority and is not responsible for the debts or entitled to the surpluses of the Authority. The Authority has the power to approve its own budget and maintains its own accounting system. Although the City of Durham appoints the governing board of the Authority, no other criteria established by Governmental Accounting Standards Board for inclusion of the Authority in the financial reports of the City of Durham are met. Therefore, a separate financial report is prepared for the Authority. Additionally, the Authority has entered into annual contribution contracts with the U.S. Department of Housing and Urban Development (“HUD”) to be the administrator of the housing and housing related programs described herein. The Authority is not subject to Federal or State income taxes and is not required to file Federal or State income tax returns.

The Authority is governed by a seven-member Board of Commissioners. The Board hires the Chief Executive Officer who is responsible for the daily administration of the Authority.

The Authority currently administers the following housing programs:

Low-Rent Public Housing Program

Section 8 Housing Choice Voucher Program

Capital Fund Program

Capital Fund Stimulus Program

HOPE VI Program

Shelter Plus Care Program

Resident Opportunities and Self-Sufficiency (ROSS) Program


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3. Description of the Authority

Funding for the Durham Housing Authority is primarily from the United States Department of Housing and Urban Development (HUD) and from payments received from tenants of the Authority owned housing. Under the Low Rent Housing Program, low income tenants pay a portion of the rental cost of public housing, based upon the income and need of the tenants. HUD funds the difference between the actual costs to operate the Low Rent Housing Program and the amounts paid by tenants through operating subsidies. These subsidies and debt service payments are made to or on behalf of the Authority under the terms and conditions of the annual contributions contract with HUD.

The Section 8 Housing Choice Voucher Program provides rental supplements to the owners of existing private housing who rent to qualifying individuals. The Authority processes all applicants for the Section 8 Housing Assistance Payments Program, places approved applicants in housing and pays the owner of the private housing a monthly rental supplement. Under the conditions of an annual contributions contract, HUD reimburses the Authority for the rental supplements and the administrative cost of managing the Program.

4. Reporting Entity

In determining how to define the reporting entity, management has considered all potential component units by applying the criteria set forth in Government Accounting Standards Board Statement Number 61, the Financial Reporting Entity: Omnibus – an amendment of GASB Statements No. 14 and No. 34:

• Financial Accountability - The Authority is responsible for its debts, does not impose a financial burden on the City of Durham and is entitled to all surpluses. No separate agency receives a financial benefit or imposes a financial burden on the Authority.

On the basis of the application of these criteria, the Authority is a legally separate entity that is fiscally independent of other governments, and there are no other entities that are to be reported as a component units, except as noted below, nor is the Authority to be included in the City of Durham financial reports; therefore, the Authority reports independently.

5. Basis of Presentation

Basis of Accounting - The Authority uses the accrual basis of accounting. Under this method, revenues are recorded when earned, and expenses are recorded when liabilities are incurred, regardless of when the related cash flow takes place.

Basis of Presentation – The statements of the Authority are presented as a single proprietary fund financial statement consisting of various programs. This financial statement presentation provides an indication of the financial performance of the Authority as a whole. The operations of the Authority are accounted for in the three basic financial statements: the statement of net assets; the statement of revenues, expenses and changes in net assets; and the statement of cash flows. These statements report information on all activities of the Authority and its component units.


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The Authority reports the following Major funds:

• Public Housing – The objective of the program is to provide decent, safe and sanitary housing and related facilities for eligible low-income families and the elderly.

• HOPE VI – The objective of the HOPE VI program is to build new low-income housing units and provide additional housing stock. The purpose of Urban Revitalization – HOPE VI is to revitalize distressed communities and joint venture with private lenders and partners in the development of mixed-financing and mixed income properties. Funding for this program is provided by grants from HUD.

• Housing Choice Voucher Program – The objective of the program is to help low-income families obtain decent, safe, and sanitary housing through a system of rental assistance. HUD has entered into an Annual Contributions Contract (ACC) with the Authority that reimburses the Authority for the rental supplements paid to private landlords and the administrative costs of managing the program.

• Central Office Cost Center – The objective of this program is to provide administrative, management, and supportive services to the other programs operated by the Authority as well as address functions at an Authority wide level. Funding for the program is received through a variety of management fees charged to the other programs or through fees for services for some functions.

• Edgemont Elms Housing, Inc. – The objective of this entity is to serve as the owner and manager of the Edgemont Elms Apartments community. Edgemont Elms is an affordable housing community comprised of a mix of public housing units, subsidized units via the Housing Choice Voucher Program, and “market rate” units that are unsubsidized.

• Preiss-Steele Place Housing, Inc. – The objective of this entity is to serve as the owner and manager of the Preiss-Steele Place community. Preiss-Steele Place serves elderly, near-elderly and disabled residents.

The Authority reports the following Nonmajor funds:

• Shelter Plus Care Program - The objective of this program is to provide housing for persons who are homeless and disabled through housing assistance payments to private landlords. The program is also designed to partner with local human services agencies to provide supportive services to clients in the program.

• ROSS Program – The objective of the ROSS (resident opportunities and self-sufficiency) Program is to enable participating families to increase earned income, reduce or eliminate the need for welfare assistance, make progress toward achieving economic independence and housing self-sufficiency, or, in the case of elderly or disabled residents, help improve living conditions and enable residents to age-in-place.

• State/Local – The Housing Authority of the City of Durham operates programs that receive grant funding from state and local sources which are not funded by HUD.

• Business activities – These funds consist of local operations and includes:


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◦ Turnkey III program - provides loans to various organizations in and around the City of Durham that provide sources of funding for the development and purchase of homes by low-income residents of the City of Durham;

◦ HOPE VI Program Income - accounts for non-Federal funds generated as a result of the Authority's participation in the HOPE VI grant program;

◦ Bond Fund - the objective is to improve the physical condition of the Low Income Public Housing units and upgrade the management of the program.

• Development Ventures Incorporated – This entity is the non-profit development arm of the Authority. The mission of Development Ventures Incorporated is to develop and operate affordable housing communities serving resident of Durham. Development Ventures Incorporated currently serves as the owner of Lincoln Apartments and the Goley Pointe project. The entity is involved in the development of 1010 Worth Street and is the developer for the Preiss-Steele Place redevelopment project.

• Learning Assistance, Inc. – This entity is a non-profit entity with the goal of improving education opportunities for residents of Authority properties. The primary source of funding comes from proceeds of an endowment maintained by The Triangle Foundation and is used to fund scholarships for individuals to pursue educational opportunities.

• Choice Neighborhoods Initiative Planning Grant – This fund is used to account for a planning grant the Authority received as part of the Choice Neighborhoods Initiative through the U.S. Department of Housing and Urban Development. Grant related activities commenced in 2013 and are expected to wrap up during 2014 when a recommended plan for the project area is finalized.

6. Component Units

The Housing Authority of the City of Durham financial statements also include programs which are not funded by HUD and are both major and nonmajor funds. These Component Units are treated as blended component units in the financial statements because:

the component units’ governing bodies are substantively the same as the governing body of the Authority, and

management of the Authority has operational responsibility for the component units.

The Authority engages in business-type activities and uses a single column format for presentation of financial information. Therefore, financial statement data for the component units are consolidated within the single column for the Authority. Condensed combining information for the component units is included on separate schedules.

The component units are as follows:

Development Ventures Incorporated - not for profit 501(c)(3)

Learning Assistance, Inc. - not for profit 501(c)(3)

Edgemont Elms Housing, Inc. - not for profit 501(c)(3)

Preiss-Steele Place Housing, Inc. - not for profit 501(c)(3)


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These component units help fulfill the original charter of the Authority in that they assist in purchasing land and buildings which are used to enhance the amount of affordable housing in the Durham communities, and they provide benefits and assistance to those qualifying individuals who are of low and moderate income.

7. Basis of Accounting and Measurement Focus

Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied.

The Proprietary Fund Types are accounted for on an economic resources measurement focus using the accrual basis of accounting. Under this method, revenues are recorded when earned, and expenses are recorded when liabilities are incurred.

8. Use of Estimates in Preparing Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

9. Encumbrances

Encumbrances represent commitments related to unperformed contracts for goods or services. The Authority does not utilize encumbrance accounting.

10. Revenues and Expenses

Revenues and expenses are recognized in essentially the same manner as used in commercial accounting. Revenues relating to the Authority's operating activities including rental related income, interest income and other sources of revenues are recognized in the accounting period in which they are earned. Other major sources of revenues include the operating subsidy from HUD and other HUD funding for capital and operating expenses.

11. Budgets

The Authority is required by its HUD Annual Contributions Contracts to adopt an annual budget for the Low Rent Housing Program. In addition, the Authority is required by its HUD Annual contributions Contracts to adopt annual budgets for the Section 8 Housing Choice Voucher Program. Annual budgets are not required for capital projects funds as their budgets are approved for the length of the project. Both annual and project length budgets require grantor approval.

Appropriations are authorized at the function level. Management may transfer budget authorizations between functions. All appropriations which are not used lapse at year end unless specifically re-appropriated by Board authorization. Budgeted amounts are as originally adopted or as amended by the Board.


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12. Cash & Investments

The Authority's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Investments are stated at market value, except for U. S. Treasury Bills, which are reported at amortized cost. The Authority reports all money market investments having a remaining maturity at time of purchase of one year or less at amortized cost. Investment securities are normally held to maturity at par value and adjustments are made to the investment portfolio to reflect increases/(decreases) in gains made.

13. Compensation for Futures Absences

It is the Authority's policy to permit employees to accumulate earned but unused vacation benefits which will be paid to the employees upon separation from Authority service. These benefits have been accrued and recorded in each respective program.

14. Prepaid Items

Payments made to vendors for services that will benefit periods beyond December 30, 2011, are recorded as prepaid items.

15. Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market. Inventories consist primarily of maintenance materials and supplies held for consumption. The cost of these supplies is regarded as an expense at the time the items are consumed. Inventories are classified as prepaid items on the Statement of Net Assets.

16. Capital Assets

All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are valued at their estimated market value on the date donated.

Capital assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of the respective assets ranging as follows: buildings, 15-27.5 years; equipment, 7 years; automobiles, 5 years; and site improvements, 10 years. The costs of assets retired or otherwise disposed of and the related accumulated depreciation have been eliminated from the respective accounts. Gains or losses resulting from such dispositions are recognized in current income.

The Capitalization Policy for the Authority is items purchased or betterments, not repairs, in excess of $5,000.00 and a useful life of one (1) year will be capitalized. The cost of maintenance and repairs are charged to operations as incurred. Costs of major additions, improvements, and betterments are capitalized.

Interest cost is capitalized on proprietary fund capital assets. Interest is not capitalized on assets acquired or constructed with gifts and grants (contributed capital) that are restricted by the donor or grantor to acquisition of those assets to the extent that funds are available from such grants and gifts. No interest was capitalized during the audit period.


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17. Operating Revenue

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Authority are charges to customers for rents. Operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Subsides received from HUD or other grantor agencies, for operating purposes, are recorded as operating revenue in the operating statement while capital grant funds are added to the net assets below the non-operating revenue and expense.

18. Reclassifications

Certain reclassifications have been made to prior year summarized balances in order to conform to current year presentation. The reclassifications did not affect net position or changes therein.

19. New Accounting Pronouncements

In fiscal year 2013, the Authority implemented GASB Statement No. 65:

GASB Statement No. 65, Items Previously Reported as Assets and Liabilities – This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The implementation of this new standard had no impact on the Authority’s financial statements.

In fiscal year 2012, the Authority implemented GASB Statements Nos. 61, 62, and 63 as follows:

GASB Statement No. 61, The Financial Reporting Omnibus – an amendment of GASB Statements No. 14 and No. 34 modifies certain requirements for inclusion of component units in the financial reporting entity. This includes the concept of financial burden or benefit on the relationship between the primary government and the component unit. The implementation of this new standard had no impact on the Authority’s 2012 financial statements.

GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements incorporates into GASB authoritative literature certain accounting and financial reporting guidance previously included in FASB, APB, and AICPA guidance issued before November 30, 1989. The implementation of this new standard modified certain language in disclosures related to the applicable basis of accounting in the Authority’s 2012 financial statements.


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GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position revised the financial reporting for elements of the financial statements as a consumption or acquisition of net assets that are applicable to a future reporting period. These items are distinct from assets and liabilities. This statements also identifies net position. The implementation of this new standard revised the presentation in the financial statements for those items identified as deferred outflows and inflows and revised the names of the statements presented and certain classifications within those statements.

Note B Accounts Receivable

Accounts receivable at December 31, 2013 and 2012, consisted of the following:

Note B - Accounts Receivable2013 2012

Acct. Rec. - PHA Projects 21,520$ -$

Acct. Rec. - HUD 113,227 179,764

Acct. Rec. - miscellaneous 29,944 95,171

Acct. Rec. - tenants 108,193 149,150

Allow. For doubtful accounts - tenants (50,713) (53,591)

Allow. For doubtful accounts - other (8,433) (8,433)

Notes & Mortgages Rec. 2,792 5,416

Fraud recovery 786,070 790,848 Allow. For doubtful accounts - fraud (773,358) (776,254)

Total Accounts/Notes Receivable (net) 229,242$ 382,071$

Note: The above receivable balance excludes $1,987,620 of interfund balances that have been eliminated as a result of financial statement consolidation.

Note C Cash and Investments

1. Cash

All the deposits of the Authority are either insured or collateralized using the Dedicated Method whereby all deposits that exceed the Federal depository insurance coverage level are collateralized with securities held by the Authority’s agents in these units' names. The Authority has no policy regarding custodial credit risk for deposits.

At December 31, 2013, the Authority's deposits had a carrying amount of $7,216,758 and bank balances of $7,359,564. Of the bank balances held in various financial institutions, $556,517 was covered by Federal depository insurance and the remainder was covered by collateral held under the Dedicated Method. At December 31, 2013, the Authority’s petty cash funds totaled $350.


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Bank balances at December 31, 2013 and 2012 were as follows:

2013 2012

Bank Balances

Checking accounts 6,108,158$ 7,741,046$

Money market accounts 522,920 522,529

Certificates of deposit 728,136 727,604 Petty cash funds 350 350

Total bank balances 7,359,564 8,991,529

Reconciliation to book balance:

Deposits in transit 11,985 4,643

Bank errors - - Outstanding checks (154,791) (134,999)

Total book balance 7,216,758$ 8,861,173$

2. Investments

At December 31, 2013, the Authority's investment balances were as follows:

Investment Type Fair Value Maturity Rating

Certificates of Deposit 728,136$ Various N/A

Interest rate risk- As a means of limiting its exposure to fair value losses arising from rising interest rates, the Authority’s typically limits its investment portfolio to maturities of 12 months or less. The Durham Housing Authority has no specific policy regarding interest rate risk.

Credit risk – The Authority has no policy regarding credit risk. The Authority investments were limited to savings and Certificates of Deposits that were 100% collateralized.

Custodial credit risk - For an investment, the custodial risk is the risk that in the event of the failure of the counterparty, the Authority will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. All investments in repurchase agreements are collateralized by the securities are held by the counterparty, or by its trust department. The Authority has no policy on custodial credit risk.

Concentration of credit risk – The Authority places no limit on the amount that the Authority may invest with any one issuer. As of December 31, 2013, 92% of the Authority’s investments were invested at Suntrust Bank and 8% of the investments were held by BB&T. The Authority has no policy regarding concentration of credit risk.


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3. Collateralization

As of December 31, 2013 the following securities were pledged as collateral to secure the deposits of the Authority:

Institution/ Instrument CUSIP Maturity Date Interest Rate Market Value

M&F Bank

GNMA 36225EXH0 02/20/2040 3.75% 421,571$

GNMA 36225EXJ6 02/20/2040 4.00% 401,051

GNMA 36225FHH5 09/20/2041 3.50% 1,089,083

GNMA 36225FHH5 09/20/2041 3.50% 644,274 GNMA 36225FC98 04/20/2041 4.00% 905,725

3,461,704$

SunTrust

FHLMC 31336RWS5 11/01/2031 2.37% 190,212$

FNMA 31377UHE6 04/01/2018 5.21% 379,203

FNMA 3138A4N76 01/01/2041 5.00% 319,665

FNMA 31412UTW0 09/01/2039 4.04% 3,407,932

FNMA 31412VH84 08/01/2033 5.00% 479,768

FNMA 31418X5R5 09/01/2040 5.00% 78,979

FNMA 31419EGH6 09/01/2040 5.00% 559,784

FNMA 31415AZ61 08/01/2037 1.94% 476,438

GNMA 36202DDH1 08/20/2014 6.50% 3,654 GNMA 38374FDR2 08/16/2032 4.81% -

5,895,635$

Note D Inventory & Prepaid Items

Inventory & Prepaid Items at December 31, 2013 and 2012, consisted of the following:

2013 2012

Prepaid expenses and other assets 63,488$ 70,672$

Inventories 31,840 24,959

Total Inventory & prepaid items 95,328$ 95,631$


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Note E Mortgages and Notes Receivable

At December 31, 2013 and 2012, the Authority had various notes receivable balances related to HOPE VI, Turnkey III, and Development Ventures Incorporated loans. The amounts due are as follows:

2013 2012

HOPE VI:

Notes receivable 5,569,780$ 5,497,092$

Accrued interest 3,302,627 2,583,569

Business Activities:

HOPE VI related entities 1,356,762 1,289,335

Home mortgages 2,792 11,546 Jonathan Self 8,433 8,433

Allowance for doubtful accounts (Self) (8,433) (8,433) Habitat for Humanity - 2,625

Total notes receivable 10,231,961 9,384,167 Less current portion (2,792) (5,416)

Total notes receivable - noncurrent portion 10,229,169$ 9,378,751$

1. HOPE VI

The HOPE VI program has various loans with the HOPE VI partnerships which are considered to be related entities but not component units. The loans outstanding at December 31, 2013, were $5,569,780 with accrued interest of $3,302,627, for a total of $8,872,407. There were no amounts considered to be currently receivable due to the nature of the arrangements. All accrued interest is considered long-term due to the fact that the notes will be collected off of future cash flows from operations and then the accrued interest will be due from the partnerships. These notes receivable consist of the following:

• Note Receivable from TCB-DVI Main Street Townhomes, LLC issued on January 1, 2004 in the amount $1,332,793 with interest at 1.38 times the applicable AFR (7.37% interest rate) with an outstanding balance at December 31, 2013 of $1,332,793, plus accrued interest of $976,980, with final maturity of December 31, 2049.

• Note Receivable from TCB-DVI Calvert Place, LLC issued on March 4, 2005 in the amount $822,346 with interest at 1.52 times the applicable AFR (7.34% interest rate) with an outstanding balance at December 31, 2013 of $822,346, plus accrued interest of $708,564, with final maturity of December 31, 2050.

• Note Receivable from TCB-DVI Morning Glory, LLC issued on December 29, 2004 in the amount of $710,473 with interest at 1.70 times the applicable AFR (9.08% interest rate) with an outstanding balance at December 31, 2013 of $710,473, plus accrued interest of $675,437, with final maturity of December 31, 2050.

• Notes Receivable from TCB-DVI Holman Homes, LLC issued on June 26, 2007 in the


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amount of $2,214,377 with an interest rate of 4.91% from the day of each advance. The outstanding balance at December 31, 2013 of $2,214,377, plus accrued interest of $754,486, with a final maturity of June 26, 2049.

• Notes Receivable from TCB-DVI Holman Homes, LLC (RHF) issued on June 26, 2007 in the amount of $789,791 with an interest rate of 5.31% from the day of each advance. The outstanding balance at December 31, 2013 of $489,791, plus accrued interest of $187,160, with a final maturity of June 26, 2049.

The following table summarizes these Notes Receivable related to HOPE VI:

Entity Issue Amount Issue Date

Interest

Rate

Maturity

Date Principal

Accrued

Interest

TCB-DVI Main Street Townhomes, LLC 1,332,793$ 01/01/2004 1.38 x AFR 12/31/2049 1,332,793$ 976,980$

TCB-DVI Calvert Place, LLC 822,346 03/04/2005 1.52 x AFR 12/31/2050 822,346 708,564

TCB-DVI Morning Glory, LLC 710,473 12/29/2004 1.70 x AFR 12/31/2050 710,473 675,437

TCB-DVI Holman Homes, LLC 2,214,377 06/26/2007 4.91% 06/26/2049 2,214,377 754,486

TCB-DVI Holman Homes (RHF) 489,791 06/26/2007 5.31% 06/26/2049 489,791 187,160

5,569,780$ 5,569,780$ 3,302,627$

December 31, 2013Original

2. Business Activities

The Authority is currently holding loans recorded in Business Activities related to the HOPE VI project. The loans outstanding are in the principal amount of $1,289,335 with $60,776 of accrued interest. There were no amounts considered to be currently receivable due to the nature of the arrangements. All accrued interest is considered long-term due to the fact that the notes will be collected from future cash flows from operations and then the accrued interest will be due from the partnerships. These notes receivable consist of the following:

• Note Receivable from TCB-DVI Calvert Place, LLC via the Durham Housing Authority – issued on March 4, 2005 in the amount of $575,000 with an annual interest rate of 1.13%. Final maturity will be March 4, 2052. Accrued interest totals $60,776.

• Note Receivable from TCB-DVI Morning Glory, LLC via the Durham Housing Authority – issued on December 29, 2004 in the amount of $200,000 at 0% interest with an outstanding balance at December 31, 2013 of $200,000.

• Note Receivable from TCB-DVI Main Street Townhomes, LLC via the Durham Housing Authority - issued on January 1, 2004 in the amount $514,335 at 0% interest with an outstanding balance at December 31, 2013 of $514,335.


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The following table summarizes these Notes Receivable:

Entity Issue Amount Issue Date

Interest

Rate

Maturity

Date Principal

Accrued

Interest

TCB-DHA Calvert Place, LLC 575,000$ 03/04/2005 1.13% 03/04/2052 575,000$ 60,776$

TCB-DHA Morning Glory, LLC 200,000 12/29/2004 0.00% 12/31/2052 200,000 -

TCB-DHA Main Street Townhomes, LLC 514,335 01/01/2004 0.00% 12/31/2051 514,335 -

1,289,335$ 1,289,335$ 60,776$

Original December 31, 2013

The Authority issued a note to Jonathan Self as a second mortgage for the purchase of a home; however, the note has not been properly paid for several years. At December 31, 2013, the balance was $8,433. The Authority has set up an allowance for the note and is working with the mortgagee on setting up different terms to satisfy the note requirements. The allowance of $8,433 is offset in the current portion.

The Authority issued a note to Habitat for Humanity for the rehabilitation of low-income housing. The note was paid in full during 2013.

The Authority has issued mortgages to three individuals as part of the HOPE VI program. Two of these notes carry a zero percent (0%) interest rate while the individuals remain in program compliance and a term of 10 to 17 years. The other note was issued with a 6.0% interest rate and a term of 10 years. All of these mortgages were issued in February 2007. The principal balance of the one remaining loan at December 31, 2012, was $2,791. Although connected to the HOPE VI program, these mortgages are accounted for in the HOPE VI Program Income fund as part of Business Activities.

Changes in Notes Receivable Balances are as follows:

2013 2012

Balance at prior year December 31 (current plus noncurrent) 9,384,167$ 9,040,725$

HOPE VI accured interest earned 719,058 353,876

Net change - HOPE VI Items 72,688 -

Business activities accrued interest earned 60,776 -

Net change - business activities items (4,728) (10,434)

Total Notes Receivable 10,231,961 9,384,167

Less current portion (2,792) (5,416)

Balance at December 31 (noncurrent) 10,229,169$ 9,378,751$

Included in notes receivable is $3,363,403 in accrued interest receivable that has been recognized on the note receivables. The Authority has recorded an allowance for the entire accrued interest balance.


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Note F Assets Held for Sale

At December 31, 2013, the Authority owned four single-family houses as part of the Turnkey III program in Birchwood Estates. These four houses are valued at $69,793. This amount is included in Other Noncurrent Assets (Note H).

Note G Capital Assets

A summary of changes in capital assets is as follows:

Note G - Capital Assets Beginning

Balances Increases Decreases

Ending

Balances

Capital assets not being depreciated:

Land 1,961,936$ 1$ -$ 1,961,937$

Total capital assets not being depreciated 1,961,936 1 - 1,961,937

Capital assets being depreciated:

Buildings & Improvements 73,246,534 1,992,198 - 75,238,732

Furniture, fixtures & equipment 1,832,689 - (54,899) 1,777,790

Total capital assets being depreciated 75,079,223 1,992,198 (54,899) 77,016,522

Less accumulated depreciation:

Buildings & Improvements (54,207,977) (3,481,380) - (57,689,357)

Furniture, fixtures & equipment (1,649,294) (53,107) 54,899 (1,647,502)

Total accumulated depreciation (55,857,271) (3,534,487) 54,899 (59,336,859)

Net capital assets being depreciated 19,221,952 (1,542,289) - 17,679,663

Total capital assets, net 21,183,888$ (1,542,288)$ -$ 19,641,600$

Increases in Land and in Buildings & Improvements were primarily due to capital improvements projects, including the redevelopment of Edgemont Elms Apartments and the commencement of work on the Goley Pointe project.


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Note H Other Noncurrent Assets

Other assets consisted of the following at December 31, 2013 and 2012:

2013 2012

Organization fees - Preiss-Steele Place 123,182$ 125,954$

Organization fees - Edgemont Elms 4,160 4,160 Assets held for sale 69,793 69,793

Total other noncurrent assets 197,135$ 199,907$

The organization fee for Preiss-Steele Place decreased during the year by $2,772 as a result of amortization.

Note I Accounts Payable

Accounts payable consisted of the following at December 31, 2013 and 2012:

2013 2012

Accounts payable (vendors and contractors) 769,360$ 1,045,677$ Accounts payable - HUD - 466 Accounts payable - other government 47,802 57,658

Total accounts payable 817,162$ 1,103,801$

Note J Accrued Expenses

Accrued expenses consisted of the following at December 31, 2013 and 2012:

2013 2012

Wages & taxes payable 142,636$ 125,734$

Accrued compensated absences 40,659 77,284$ Accrued interest payable 74,921 74,962

Total accrued expenses 258,216$ 277,980$

Note K Unearned Revenue

During the year, the Authority on occasion will receive proceeds prior to being earned. The most common type are tenant payments received in both the Public Housing program and at affordable housing properties. These payments are recognized as unearned revenue and the Authority recognizes these unearned revenues as income on a periodic basis as they are earned.

The Authority received other grant proceeds for which the corresponding expenditure had not yet been recorded at December 31, 2013 and 2012.


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Unearned revenue by program consisted of the following at December 31, 2013 and 2012:

2013 2012

Public housing prepaid rent 53,662$ 42,879$

Edgemont Elms prepaid rent 14,471 957

Preiss-Steele Place prepaid rent 21,665 13,238

Choice Neighborhood Planning Grant 661

HOPE VI Community & Supportive Services (CSS) Fun 602 57,641 FAME grant 50 4,182

Total unearned revenue 91,111$ 118,897$

Note L Tenant Security Deposits

The Authority collects security deposits from tenants in both the public housing communities and in the affordable housing communities operated by component units. The Authority holds these security deposits in trust until a tenant moves out of an Authority unit. At that point, the security deposit may be used to pay for amounts due by the tenant for repairs to the unit or the security deposit is returned to the tenant. These security deposits are treated as a liability. Tenant security deposits consisted of the following at December 31, 2013 and 2012:

2013 2012

Public housing security deposits 368,596$ 363,697$

Development Ventures Incorporated security deposits 654 654

Edgemont Elms security deposits 11,785 7,785

Preiss-Steele Place security deposits 18,041 21,997

Total tenant security deposits 399,076$ 394,133$

Note M Current Portion of Long-Term Debt

The Authority's component units have incurred long-term debt for capital improvements as explained in Note P – Notes Payable. Principal amounts due within one year are treated as the current portion of that long-term debt. As of December 31, 2013, the amount due within one year for the outstanding Notes Payable was $1,489,965.


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Note N Changes in Long-term Liabilities

The following is a summary of changes in Long-term liabilities as of the year ended December 31, 2013:

Beginning

Balances Increases Decreases

Ending

Balances

Current

Portion of

Balance

Long-term debt - capital 3,117,517$ -$ (129,382)$ 2,988,135$ 1,489,965$

Compensated absences 403,375 358,671 (355,445) 406,601 40,659

Other non-current liabilities 407,759 64,026 - 471,785 -

Total long-term liabilities 3,928,651$ 422,697$ (484,827)$ 3,866,521$ 1,530,624$

Additional information regarding Long-term debt – capital is available in Note O – Notes Payable.

Authority employees are eligible to accrue leave balances as an employee benefit (see Note A(12)). The Authority makes estimates regarding projected use of these balances and allocates the accrued balance between a current portion anticipated to be used within the next year and the non-current portion that will be used beyond the next year.

Other non-current liabilities consists of proceeds the Authority has received from participants in the Family Self-Sufficiency (FSS) Program. Participants in the program have a portion of the rent they pay, whether in the Public Housing program or in the Housing Choice Voucher program, placed into escrow accounts by the Authority to be used upon successful completion of the program to transition out of subsidized housing programs. The Authority accounts for these proceeds as a non-current liability since withdrawal by the participants is projected to occur more than one year from December 31, 2013. As of December 31, 2013, these proceeds were allocated between the two programs as follows:

2013 2012

Public housing FSS escrow accounts 149,746$ 105,858$

HCV Program FSS escrow accounts 316,686 301,901

Total other noncurrent assets 466,432$ 407,759$

Per the terms of the agreements for the Holman Homes development (one of the HOPE VI properties), the Authority continues to hold funds on behalf of The Community Builders, Inc., in the amount of $5,352 in Development Ventures Incorporated.


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Note O Notes Payable

1. Edgemont Elms Housing, Inc.

The Authority has three notes payable related to the Edgemont Elms property as follows:

• First mortgage with a balance at December 31, 2013, of $392,514 from Mechanics and Farmers Bank for a term of 317 months at 8.50% per annum adjustable annually by 1%, with the rate never to exceed 10.625%. In October 2011, this mortgage was modified to be an interest-only loan for a period of 25 months at 6.25% per annum, followed by 35 months of principal and interest payments in the amount of $3,515, and a final balloon payment of $358,856 due in January 2017. Subsequent to the year end, the loan was once again modified to implement a repayment schedule consisting of 59 consecutive equal payments of principal and interest equal to $2,765.75 and a final payment of all outstanding principal and accrued unpaid interest on January 5, 2019. The repayment schedule was calculated utilizing an amortization period of 20 years.

• Second mortgage in the amount of $1,055,499 for a term of 15 years, which may under certain conditions, be extended to 20 years, from the City of Durham bond sales proceeds at no interest to the project. The balance at December 31, 2013 was $390,315. The terms of this loan were modified during 2011. The Authority is not required to make any payments on the outstanding balance until January 2014. At that time, the loan will be amortized for a term of 120 months at 2.00% per annum.

• Third mortgage in the amount of $60,000 for a term of 20 years, at 5.0% from the North Carolina Housing Finance Agency. Principal and interest payments begin in year 15. All accrued interest from prior years has been forgiven and added to other income. The Note Agreement has been amended to extend the maturity date to November 1, 2018 with a 0% interest rate, at which time a single balloon payment in the amount of $60,000 will be due.

Principal payments due on all mortgages and notes payable in each of the following five years and subsequent maturities are as follows:

Year(s) Principal Interest Total

2014 46,948$ 29,263$ 76,211$

2015 48,305 27,904 76,209

2016 49,716 26,496 76,212

2017 51,179 25,034 76,213

2018 52,696 23,515 76,211

2019-2023 348,362 92,704 441,066

2024-2033 245,623 76,872 322,495

Total 842,829$ 301,788$ 1,144,617$


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2. Preiss-Steele Place Housing, Inc.

The Authority bought out the general partner and took over the operations and ownership of Oxford Commons, LP in April 2007. The property is now operated as Preiss-Steele Place and ownership has been vested in the component unit Preiss-Steele Place Housing, Inc. The Authority has three notes payable agreements and they are as follow:

• A $1,086,039 first mortgage note payable to Community Investment Corporation of North Carolina, collateralized by the project carried at $1,081,444. The note bears interest at 9.25%. Payments were made monthly for $8,935 until December, 2009, when the monthly payments of principal and interest are adjusted annually for the loan years 17 through 30 depending on prevailing interest rates. The balance of this loan at December 31, 2013 was $654,733. This loan will mature in December 2023.

• A second mortgage note with the City of Durham. The note accrues interest at 0.5% per annum. Annual payments began in 2001 and continue through 2014 with a balloon payment of $1,386,351 due in January 2014. In December 2013, this loan was modified to extend the schedule of annual payments until such time as closing occurred for a redevelopment project at the property. The balance of this loan is $1,386,351 as of December 31, 2013.

• A third mortgage in the amount of $300,000 payable to the North Carolina Housing Finance Agency. The note bears interest at 3% per annum on $200,000 and $100,000 is interest-free. In addition, $100,000 was eliminated from the amount due because the Authority met certain performance parameters defined within the loan agreement as of January 1, 2012. A balloon payment of the remaining principal balance will be due on February 1, 2016. The balance of this loan is $104,224 as of December 31, 2013.

The liability of the Authority under the mortgage notes is limited to the underlying value of the real estate collateral. Development Ventures Incorporated, as part of a tax credit project to rehabilitate the property, will be taking over ownership via a related entity during 2014. As a result, based on information provided by the parties investing in the project, only six months of payments on the mortgages were estimated for 2014 as the new owner entity will be assuming the loans.


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Principal payments due on all mortgages and notes payable in each of the following five years and subsequent maturities are as follows:

Year(s) Principal Interest Total

2014 1,443,017$ 61,555$ 1,504,572$

2015 61,073 56,883 117,956

2016 146,018 49,990 196,008

2017 62,182 45,038 107,220

2018 378,458 157,642 536,100

2019-2023 54,558 12,513 67,071

2024 - - -

Total 2,145,306$ 383,621$ 2,528,927$

3. Changes in capital debt obligations summary

Changes in capital debt obligations are as follows:

2013 2012

Balance at December 31 of prior year 3,117,517$ 3,272,410$

Less principal retirements (129,382) (154,893)

Balance at December 31 2,988,135$ 3,117,517$

Note P Economic Dependency

Both the Authority's Low Rent Public Housing Program and the Housing Choice Voucher Program are economically dependent on annual contributions and grants from HUD. Both programs operate at a loss prior to receiving the contributions and grants.

Note Q Pension Plan Obligations

The Authority contributes to the Durham Housing Authority Retirement Plan, which is a defined contribution plan.

A defined contribution pension plan provides pension benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s account are to be determined instead of specifying the amount of benefits the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant’s account, the returns earned on investments of those contributions, and forfeitures of other participants’ benefits that may be allocated to such participant’s account. As established by the Authority’s personnel policy, all full-time employees of the Authority must participate in the pension plan beginning the earliest of January 1st or July 1st following three months after the date they are hired. Contributions made by an employee vest immediately and contributions made by the Authority are fully vested after five years of full-time employment with 20% partial vesting


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each of those five years. Employees who leave the employment of the Authority are entitled to their contributions, the Authority’s contributions to the extent vested, and the earnings on these amounts. Through September 30, 2001, the Authority was required to contribute an amount equal to 12% of the employee’s base annual salary. Effective October 1, 2001 this rate was reduced to 7% of the base annual salary. Effective July 1, 2007, employees are required to contribute 2% of their annual base salary and the Authority contributes 5% of that annual base salary. In addition, if the employee chooses to voluntarily contribute an additional percentage of their annual base salary, the Authority will match up to 2% of that annual base salary. In this case, the employee is fully vested in the Authority's matched contribution without regard to term of service.

A loan provision is part of the retirement plan and allows employees to borrow money from their retirement accounts with a minimum of $1,000 and a maximum of the lessor of 50% of their vested balanced up to $50,000.00. Loans must meet one of four requirements which are 1) foreclosure on a home; 2) purchase of a home, 3) medical expenses, or 4) educational expenses.

During the year ended December 31, 2013, the Authority’s actual contributions amounted to $295,705. The total salaries for the year were $5,143,408, and covered salaries were $4,224,960.

Except for the changes described above, no pension plan provision charges occurred during the year which affected the required contributions to be made by the Authority or its employees.

The Durham Housing Authority Pension Plan held no securities of the Authority or of other related parties during the year or as of the close of the fiscal year ended December 31, 2013.


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Note R Operating Transfers

The following transfers were recognized for the period ended December 31, 2013:

Central Office Cost Center

Transfer from Development Ventures Incorporated for development fees 26,000$

Transfer from Turnkey III for Lincoln Apartments purchase 207,166 Transfer out to Choice Neighborhoods Initiative grant for matching funds (24,958)

Net transfer - Central Office Cost Center 208,208

Bond Fund

Transfer from Turnkey III for Lincoln Apartments purchase 56,334 Transfer to Edgemont Elms for redevelopment project (3,400)

Net transfer - Bond Fund 52,934

Choice Neighborhood Initiatives Planning Grant Transfer from Central Office Cost Center for matching funds 24,958

Net transfer - Bond Fund 24,958

Turnkey III Fund

Transfer to Edgemont Elms for redevelopment project expenses (245,795)

Transfer to Development Ventues Incorporated (Goley Point project) (9,999)

Transfer to Central Office Cost Center for Lincoln Apartments purchase (207,166) Transfer to Bond Fund for Lincoln Apartments purchase (56,334)

Net transfer - Turnkey III Fund (519,294)

Edgement Elms Housing, Inc.

Transfer from Turnkey III for redevelopment project 245,795 Transfer from Bond Fund for redevelopment project 3,400

Net transfer - Edgemont Elms Housing, Inc. 249,195

Preiss-Steele Place Housing, Inc. Transfer from Development Ventures Incorporated for redevelopment project 59,767

Net transfer - Preiss-Steele Place Housing, Inc. 59,767

Development Ventures Incorporated

Transfer to Central Office Cost Center for development fees (26,000)

Transfer to Preiss-Steele Place Housing, Inc. for redevelopment project (59,767) Transfer from Turnkey III for Goley Pointe project 9,999

Net transfer - Development Ventures Incorporated (75,768)

Net transfers -$


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Note S Contingencies

The entity is subject to possible examinations made by federal regulators who determine compliance with terms, conditions, laws and regulations governing grants given to the entity in the current and prior years. These examinations may result in required refunds by the entity to federal grantors and/or program beneficiaries. There are currently lawsuits ongoing; however, there are no amounts which are deemed as contingent liabilities which should be disclosed or accrued in the financial statements.

During 2004, the Authority was reviewed by the HUD's Office of Inspector General (OIG). The OIG issued an audit report – 2005-AT-1004 – examining procurement activities. As a result of this audit, the Authority was required to complete numerous corrective actions, including the repayment of monies to Federal programs. As of December 31, 2013, one finding remained unresolved. This finding involves questioned costs in the amount of $7,821,388. During 2013, the Authority and the U.S. Department of Housing and Urban Development agreed to reduce the amount to be repaid to $3,551,531.58, such amount to be repaid using non-Federal funds. The parties also agreed to establish a repayment schedule over a 100 year period with monthly payments equal to $2,959.61 starting in 2014. The Authority intends to repay this amount using proceeds from the Central Office Cost Center, though other non-Federal sources may be identified in future years.

During 2009, the Authority was reviewed by the local field office of HUD. The local field office issued a report covering the results of the review. As a result of that review, the Authority was required to complete several corrective actions. In addition, the local field office exercised its authority to require pre-approval for the obligation or expenditure of funds in excess of $25,000. The local field office released the Authority from this pre-approval requirement during 2011. No costs were questioned during the review, although the potential for costs to become questioned exists depending on the result of corrective actions undertaken by the Authority. As of December 31, 2013, the Authority believed all corrective actions had been completed. Subsequent to the end of the year, the local field office issued a letter to the Authority indicating all matters had been satisfactorily resolved and the review was considered closed.

Note T Related Party Transactions

The HOPE VI program has various loans with the HOPE VI partnerships which are considered to be related entities but not component units. Information regarding these loans is disclosed in Note E.1.

Note U Risk Management

The Authority is exposed to all common perils associated with the ownership and rental of real estate properties. A risk management program has been established to minimize loss occurrence and to transfer risk through various levels of insurance. Property, casualty, employee dishonesty and public official’s liability forms are used to cover the respective perils.


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In accordance with G.S. 159-29, the Authority’s employees that have access to $100 or more at any given time of the Authority’s funds, including the finance officer, are covered by a fidelity bond for the amount of $400,000.

There have been no significant reductions in insurance coverage in the prior year and settled claims have not exceeded coverage in any of the past three fiscal years.

No contingent liabilities requiring disclosure are believed to exist as of December 31, 2013.

Note V Condensed Combining Information for Blended Component Units

Condensed Combining Information for Blended Component Units is provided as follows:

Development

Ventures

Incorporated

Learning

Assistance,

Inc.

Edgemont

Elms Housing,

Inc.

Preiss-Steele

Place Housing,

Inc. Total

ASSETS

Current Assets 270,168$ 30,903$ 202,452$ 120,321$ 623,844$

Noncurrent Assets - - 4,160 123,182 127,342

Capital Assets 723,221 - 2,565,742 1,915,571 5,204,534

Total Assets 993,389$ 30,903$ 2,772,354$ 2,159,074$ 5,955,720$

LIABILITIES

Interprogram Liabilities 60,708$ 32,269$ 375,409$ 545,234$ 1,013,620$

Other Current Liabilities 654 361 75,772 1,638,309 1,715,096

Noncurrent Liabilities 5,352 388 796,220 702,655 1,504,615

Total Liabilities 66,714 33,018 1,247,401 2,886,198 4,233,331

NET POSITION

Net investment in capital assets 723,221 - 1,722,914 (229,736) 2,216,399

Restricted:

Reserves - - 153,067 65,413 218,480

Unrestricted 203,454 (2,115) (351,028) (562,801) (712,490)

Total Net Position 926,675$ (2,115)$ 1,524,953$ (727,124)$ 1,722,389$

December 31, 2013


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Operating Revenues

Tenant Revenues -$ -$ 281,388$ 416,965$ 698,353$ Other Revenues 309,743 17,922 3,612 30 331,307

Total Operating Revenues 309,743 17,922 285,000 416,995 1,029,660

Operating Expenses

Administration 35,774 14,458 68,404 86,805 205,441

Tenant Services - 32,864 - 2,568 35,432

Utilities 8,840 - 33,793 74,084 116,717

Maintenance 20,185 - 96,944 156,040 273,169

General Expenses - 2,869 87,971 100,048 190,888

Depreciation 38,428 - 342,304 172,313 553,045

Total Operating Expenses 103,227 50,191 629,416 591,858 1,374,692

Revenue Over/(Under) Operating Expenses 206,516 (32,269) (344,416) (174,863) (345,032)

Transfer of funds (75,768) - 249,195 59,767 233,194

Change in Net Position 130,748 (32,269) (95,221) (115,096) (111,838) Net Position - Beginning of Year 795,927 30,154 1,620,174 (612,028) 1,834,227

Net Position - End of Year 926,675$ (2,115)$ 1,524,953$ (727,124)$ 1,722,389$

Development

Ventures

Incorporated

Learning

Assistance,

Inc.

Edgemont

Elms Housing,

Inc.

Preiss-Steele

Place Housing,

Inc. Total

Net Cash Provided (Used) By:

Operating activites 302,984$ (1)$ (162,232)$ 197,773$ 338,524$

Non-Capital Financing Activities (75,768) - 223,387 (12,857) 134,762

Investing Activities 228 5 65 30 328

Capital and Related Financing Activities (387,937) - (61,154) (184,915) (634,006)

Net Increase/(Decrease) in Cash (160,493) 4 66 31 (160,392)

Cash - Beginning of Year 430,661 7,921 166,929 116,276 721,787

Cash - End of Year 270,168$ 7,925$ 166,995$ 116,307$ 561,395$

Year Ended December 31, 2013


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Development

Ventures

Incorporated

Learning

Assistance,

Inc.

Edgemont

Elms Housing,

Inc.

Preiss-Steele

Place Housing,

Inc. Total

ASSETS

Current Assets 430,661$ 30,876$ 202,743$ 136,851$ 801,131$

Noncurrent Assets - - 4,160 125,954 130,114

Capital Assets 373,712 - 2,851,126 2,028,117 5,252,955

Total Assets 804,373$ 30,876$ 3,058,029$ 2,290,922$ 6,184,200$

LIABILITIES

Interprogram Liabilities 2,440$ 237$ 576,266$ 439,341$ 1,018,284$

Other Current Liabilities 6,006 309 12,441 317,397 336,153

Noncurrent Liabilities - 176 849,148 2,146,212 2,995,536

Total Liabilities 8,446 722 1,437,855 2,902,950 4,349,973

NET POSITIONNet investment in capital assets 373,712 - 2,004,064 (242,338) 2,135,438

Restricted:

Reserves 5,352 - - - 5,352

Unrestricted 416,863 30,154 (383,890) (369,690) (306,563)

Total Net Position 795,927$ 30,154$ 1,620,174$ (612,028)$ 1,834,227$

December 31, 2012

Development

Ventures

Incorporated

Learning

Assistance,

Inc.

Edgemont

Elms Housing,

Inc.

Preiss-Steele

Place Housing,

Inc. Total

Operating Revenues

Tenant Revenues -$ -$ 191,204$ 477,754$ 668,958$ Other Revenues 56,874 21,317 603,805 33,372 715,368

Total Operating Revenues 56,874 21,317 795,009 511,126 1,384,326

Operating Expenses

Administration 4,880 1,230 60,104 64,220 130,434

Tenant Services - 41,548 - - 41,548

Utilities 2,244 - 43,066 85,305 130,615

Maintenance 85 - 73,043 174,834 247,962

General Expenses 60 291 80,460 116,291 197,102 Depreciation 3,790 - 210,919 172,313 387,022

Total Operating Expenses 11,059 43,069 467,592 612,963 1,134,683

Revenue Over/(Under) Operating Expenses 45,815 (21,752) 327,417 (101,837) 249,643

Transfer of funds 272,860 - 1,339,673 - 1,612,533

Change in Net Position 318,675 (21,752) 1,667,090 (101,837) 1,862,176 Net Position - Beginning of Year 477,252 51,906 (46,916) (510,191) (27,949)

Net Position - End of Year 795,927$ 30,154$ 1,620,174$ (612,028)$ 1,834,227$


North Carolina



Net Cash Provided (Used) By:

Operating activites (25,459)$ (21,561)$ 574,552$ 228,548$ 756,080$

Non-Capital Financing Activities 240,346 - 1,314,044 (77,441) 1,476,949

Investing Activities 370 17 97 39 523

Capital and Related Financing Activities (377,502) - (1,888,595) (151,107) (2,417,204)

Net Increase/(Decrease) in Cash (162,245) (21,544) 98 39 (183,652) Cash at Beginning of Period 592,906 29,465 166,831 116,237 905,439

Cash at End of Period 430,661$ 7,921$ 166,929$ 116,276$ 721,787$

Note W Subsequent Events

On February 28, 2014, Development Ventures Incorporated in partnership with RBC Capital Markets, utilizing various development specific entities, closed on the sale of Preiss-Steele Place from Preiss-Steele Place Housing, Inc. to a new entity. The majority of assets and liabilities related to Preiss-Steele Place were assumed by the new entity, although Preiss-Steele Place Housing, Inc. did provide approximately $1.5 million in seller financing to be repaid in future years from cash flow generated by the property.

As indicated earlier, subsequent to year end the local field office of the U.S. Department of Housing and Urban Development closed the 2009 review of the Authority.

Note X Supplemental Information

Supplemental information has been included in order to show the financial statements of the Housing Authority on the GAAP basis of accounting but in the format of the HUD Handbook 7476.3, Audit Guide. This is due to the fact that some supplemental information is reviewed by the field office and provides greater detail concerning the operations of the Authority.

This information in an integral part of the accompanying financial information.

COMBINING FINANCIAL STATEMENTS

Combining Statement of Net Position – Major Funds Durham Housing AuthorityDurham, North CarolinaAs of December 31, 2013

Public

Housing HOPE VI

Housing

Choice

Voucher

Program

Central

Office Cost

Center

Nonmajor

Funds

Edgemont

Elms

Housing,

Inc.

Preiss-

Steele Place

Housing,

Inc.

Eliminations Total

ASSETS

Current Assets

Cash & cash equivalents 3,673,238$ -$ 105,548$ -$ 803,087$ 2,143$ 32,853$ -$ 4,616,869$

Cash & cash equivalents - restricted 518,343 - 1,099,098 - 6,006 164,852 83,454 - 1,871,753

Investments 258,456 - - 446,702 22,978 - - - 728,136

Accounts receivable, net 148,554 - 30,936 82,679 22,992 24,256 2,175 (82,350) 229,242

Interprogram due from, net 3,242,485 (533,590) 4,232 (2,001,933) 209,449 (375,409) (545,234) - -

Inventory 27,095 2,902 4 1,839 - 31,840

Prepaid items 14,893 - - 37,398 - 11,197 - - 63,488

Total Current Assets 7,883,064 (533,590) 1,239,814 (1,432,252) 1,064,512 (172,957) (424,913) (82,350) 7,541,328

Noncurrent Assets

Capital Assets

Land 1,157,094 - - 288,401 92,700 101,500 322,242 - 1,961,937

Buildings 26,829,353 - - 1,412,934 672,739 3,068,850 4,922,355 - 36,906,231

Furniture, equipment & machinery 514,055 49,741 31,536 1,052,267 - - 130,191 - 1,777,790

Leasehold improvements 35,915,543 - 40,461 - - 2,234,380 142,117 - 38,332,501 Accumulated depreciation (50,670,339) (49,741) (66,600) (2,067,639) (42,218) (2,838,988) (3,601,334) - (59,336,859)

Total capital assets, net 13,745,706 - 5,397 685,963 723,221 2,565,742 1,915,571 - 19,641,600

Notes Receivable - 5,569,780 - - 1,295,986 - - - 6,865,766

Other assets 69,793 - - - - 4,160 123,182 - 197,135

Total Noncurrent Assets 13,815,499 5,569,780 5,397 685,963 2,019,207 2,569,902 2,038,753 - 26,704,501

TOTAL ASSETS 21,698,563$ 5,036,190$ 1,245,211$ (746,289)$ 3,083,719$ 2,396,945$ 1,613,840$ (82,350)$ 34,245,829$

LIABILITIES

Current Liabilities

Accounts payable 48,910$ -$ 37,978$ 728,405$ 1,869$ -$ -$ -$ 817,162$

Accrued compensated absences, curre 20,211 - 2,826 16,453 1,090 38 41 - 40,659

Accrued expenses 75,556 - 20,676 41,413 4,187 2,530 73,195 - 217,557

Unearned revenues 53,662 602 - - 711 14,471 21,665 - 91,111

Tenant security deposits 368,596 - - - 654 11,785 18,041 - 399,076

Other current liabilities - - - - - - 82,350 (82,350) - Long-term debt, current - - - - - 46,948 1,443,017 - 1,489,965

Total Current Liabilities 566,935 602 61,480 786,271 8,511 75,772 1,638,309 (82,350) 3,055,530


Long-term debt, noncurrent - - - - - 795,880 702,290 - 1,498,170

Other noncurrent liabilities 149,747 - 316,686 - 5,352 - - - 471,785 Accrued compensated absences, noncurrent 181,909 - 25,435 148,083 9,810 340 365 - 365,942

Total Noncurrent Liabilities 331,656 - 342,121 148,083 15,162 796,220 702,655 - 2,335,897

TOTAL LIABILITIES 898,591 602 403,601 934,354 23,673 871,992 2,340,964 (82,350) 5,391,427

NET POSITION

Net investment in capital assets 13,745,706 - 5,397 685,963 723,221 1,722,914 (229,736) - 16,653,465

Restricted for:

HOPE VI loan reserves - 5,569,780 - - - - - - 5,569,780

Replacement reserve - - - - - 98,627 - - 98,627

Operating reserve - - - - - 54,440 65,413 - 119,853

Housing assistance payments - - 782,412 - - - - - 782,412 Unrestricted 7,054,266 (534,192) 53,801 (2,366,606) 2,336,825 (351,028) (562,801) - 5,630,265

TOTAL NET POSITIOIN 20,799,972$ 5,035,588$ 841,610$ (1,680,643)$ 3,060,046$ 1,524,953$ (727,124)$ -$ 28,854,402$

Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Major Funds Durham Housing AuthorityDurham, North CarolinaFor the year ended December 31, 2013

Public

Housing HOPE VI

Housing

Choice

Voucher

Program

Central Office

Cost Center

Nonmajor

Funds

Edgemont

Elms Housing,

Inc.

Preiss-Steele

Place Housing,

Inc. Eliminations Total

OPERATING REVENUES

Tenant rent 4,164,740$ -$ -$ -$ -$ 281,388$ 416,965$ -$ 4,863,093$

Operating grants 9,208,377 87,467 19,229,336 - 456,722 - - - 28,981,902

Fee revenue - - - 2,678,208 - - - (2,678,208) -

Other revenue 64,300 122,429 16,180 77,985 327,781 3,546 - (370,395) 241,826

Total Operating Revenue 13,437,417 209,896 19,245,516 2,756,193 784,503 284,934 416,965 (3,048,603) 34,086,821

OPERATING EXPENSES

Administration 4,072,953 6,947 1,243,551 2,305,108 267,776 68,404 86,805 (1,861,987) 6,189,557

Tenant services 604,137 10,707 69,353 - 230,344 - 2,568 - 917,109

Utilities 3,457,834 - 20,099 28,429 8,840 33,793 74,084 - 3,623,079

Maintenance 4,190,121 - 51,817 485,139 20,185 96,944 156,040 (873,856) 4,126,390

Protective services 11,562 - - - - 1,353 - - 12,915

General expense 1,130,895 3,005,053 90,208 251,095 13,784 60,810 27,424 (312,760) 4,266,509

Housing assistance payments - - 18,513,617 - 66,669 - - - 18,580,286

Depreciation & amortization 2,807,009 - 1,542 172,891 38,428 342,304 172,313 - 3,534,487

Total Operating Expenses 16,274,511 3,022,707 19,990,187 3,242,662 646,026 603,608 519,234 (3,048,603) 41,250,332

Operating Income/(Loss) (2,837,094) (2,812,811) (744,671) (486,469) 138,477 (318,674) (102,269) - (7,163,511)

REVENUES/(EXPENSES)

Investment income - - 1,892 2,753 255 66 30 - 4,996

Mortgage interest income - 351,671 - - 6,497 - - - 358,168

Interest expenses - - - - - (25,808) (72,624) - (98,432)

Casualty losses (4,147) - - - - - - - (4,147) Gain/loss on sale of assets 1,244 - - 968 - - - - 2,212

Total Nonoperating Revenues/(Expens (2,903) 351,671 1,892 3,721 6,752 (25,742) (72,594) - 262,797

Increase/(Decrease) in net position before capital contributions (2,839,997) (2,461,140) (742,779) (482,748) 145,229 (344,416) (174,863) - (6,900,714)

Capital contributions 1,487,576 - - - - - - - 1,487,576

Net Increase/(Decrease) in net position (1,352,421) (2,461,140) (742,779) (482,748) 145,229 (344,416) (174,863) - (5,413,138)

Net position, beginning of year 18,805,333 7,496,728 1,524,744 2,145,429 3,287,160 1,620,174 (612,028) - 34,267,540

Transfers In/(Out) - - - 208,208 (517,170) 249,195 59,767 - -

Special Items Gain/(Loss) 3,347,060 - 59,645 (3,551,532) 144,827 - - - -

Net position, end of year 20,799,972$ 5,035,588$ 841,610$ (1,680,643)$ 3,060,046$ 1,524,953$ (727,124)$ -$ 28,854,402$

Combining Statement of Cash Flows – Major Funds Durham Housing AuthorityDurham, North CarolinaFor the year ended December 31, 2013

Public

Housing/

Formula

Capital Fund

Stimulus Grant HOPE VI

Housing

Choice

Voucher

Program

Central Office

Cost Center

Nonmajor

Funds

Edgemont

Elms Housing,

Inc.

Preiss-Steele

Place Housing,

Inc. Eliminations Total

Cash Flows from Operating ActivitiesReceipts from customers and users 4,339,405$ 122,429$ 16,180$ 2,756,193$ 327,781$ 314,327$ 417,029$ (3,048,603)$ 5,244,741$ Receipts from grants and subsidies 9,174,941 87,467 19,207,665 749 457,252 (25,816) 12,620 - 28,914,878 Payments to suppliers (14,536,294) (119,025) (835,301) 1,797,499 (406,001) (427,469) (206,334) 3,023,770 (11,709,155) Payments for housing assistance - - (18,513,617) - (66,669) - - - (18,580,286) Payments to employees (2,319,772) (18,183) (671,581) (1,502,526) (185,359) (23,274) (25,542) 24,833 (4,721,404)

Net cash provided/(used) by operating actvities (3,341,720) 72,688 (796,654) 3,051,915 127,004 (162,232) 197,773 - (851,226)

Cash Flows from Non-Capital Financing ActivitiesTransfers from/(to) other funds 3,347,060 - 59,645 (3,343,324) (372,343) 249,195 59,767 - - Interest expense paid - - - - - (25,808) (72,624) - (98,432)

Net cash provided/(used) by noncapital financing activities 3,347,060 - 59,645 (3,343,324) (372,343) 223,387 (12,857) - (98,432)

Cash Flows from Investing ActivitiesPurchases of investments (258,456) - - 257,947 (23) - - - (532) Decrease in Notes Receivable - (72,687) - - 4,727 - - - (67,960) Interest received - (1) 1,892 2,754 256 65 30 - 4,996

Net cash provided/(used) by investing activities (258,456) (72,688) 1,892 260,701 4,960 65 30 - (63,496)

Cash Flows from Capital and Related Financing Activities

Proceeds from sales of assets 1,244 - - 968 - - - - 2,212 Changes in long term debt payable - - - - - (4,234) (125,148) - (129,382) Grant revenue - capital grants 1,487,576 - - - - - - - 1,487,576 Purchases of capital assets (1,487,575) - - - (387,937) (56,920) (59,767) - (1,992,199)

Net cash provided/(used) by capital and related financing activities 1,245 - - 968 (387,937) (61,154) (184,915) - (631,793)

Net Increase/(Decrease) in Cash (251,871) - (735,117) (29,740) (628,316) 66 31 - (1,644,947) Cash at beginning of period 4,443,452 - 1,939,763 29,740 1,437,409 166,929 116,276 - 8,133,569

Cash at end of period 4,191,581$ -$ 1,204,646$ -$ 809,093$ 166,995$ 116,307$ -$ 6,488,622$

Reconciliation of operating income to net cash provided by/(used in) operating activities

Net income/(loss) from operations (2,837,094) (2,812,811) (744,671) (486,469) 138,477 (318,674) (102,269) - (7,163,511) Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Depreciation/Amortization 2,807,009 - 1,542 172,891 38,428 342,304 172,313 - 3,534,487 Casualty losses (4,147) - - - - - - - (4,147) Provisions for bad debts 105,466 2,935,240 6,497 25,393 4,020 - 3,076,616 Changes in assets and liabilities: -

Decrease (Increase) in accounts receivable (33,436) - (21,671) 749 530 (25,816) 12,620 - (67,024) Decrease (Increase) in prepaid items (794) - - 7,201 - 777 - - 7,184 Decrease (Increase) in inventory (5,066) - - (1,740) - 4 (79) - (6,881) Decrease (Increase) in Interprogram Due Fro (3,433,384) 7,827 (81,586) 3,657,335 (55,228) (200,857) 105,893 - - Decrease (Increase) in other noncurrent asse - - - - - - 2,772 - 2,772 Increase (Decrease) in accounts payable (9,254) - 37,978 (316,349) 986 - - - (286,639) Increase (Decrease) in accrued expenses 9,409 (529) (3,031) 18,297 785 (2,877) (1,968) - 20,086 Increase (Decrease) in unearned revenue 10,783 (57,039) - - (3,471) 13,514 8,427 - (27,786) Increase (Decrease) in security/trust deposits 4,899 - - - - 4,000 (3,956) - 4,943 Increase (Decrease) in other current liabilities - - - - (5,352) - - - (5,352) Increase (Decrease) in other noncurrent liabil 43,889 - 14,785 - 5,352 - - - 64,026

Net cash provided/(used) by operating actvities (3,341,720)$ 72,688$ (796,654)$ 3,051,915$ 127,004$ (162,232)$ 197,773$ -$ (851,226)$

Combining Statement of Net Position – Nonmajor Funds Durham Housing AuthorityDurham, North CarolinaAs of December 31, 2013

Business

Activities

Shelter Plus

Care ROSS State/Local

Development

Ventures

Incorporated

Learning

Assistance,

Inc.

Choice

Neighborhoo

ds Initiative

Planning

Grant Total

ASSETS

Current Assets

Cash & cash equivalents 531,000$ -$ -$ -$ 264,162$ 7,925$ -$ 803,087$

Cash & cash equivalents - restricted - - - - 6,006 - - 6,006

Investments - - - - - 22,978 - 22,978

Accounts receivable, net 2,792 3,158 17,042 - - - - 22,992

Interprogram due from, net 300,412 4,007 (2,704) 50 (60,708) (32,269) 661 209,449

Total Current Assets 834,204 7,165 14,338 50 209,460 (1,366) 661 1,064,512

Noncurrent Assets

Capital Assets

Land - - - - 92,700 - - 92,700

Buildings - - - - 672,739 - - 672,739 Accumulated depreciation - - - - (42,218) - - (42,218)

Total capital assets, net - - - - 723,221 - - 723,221

Notes receivable 1,295,986 - - - - - - 1,295,986

Total Noncurrent Assets 1,295,986 - - - 723,221 - - 2,019,207

TOTAL ASSETS 2,130,190$ 7,165$ 14,338$ 50$ 932,681$ (1,366)$ 661$ 3,083,719$

LIABILITIES

Current Liabilities

Accounts payable 1,869$ -$ -$ -$ -$ -$ 1,869$

Accrued compensated absences, current - 1,047 - 43 - 1,090

Accrued expenses - - 3,869 - - 318 - 4,187

Tenant security deposits - - - - 654 - - 654 Unearned revenue - - - 50 - - 661 711

Total Current Liabilities 1,869 - 4,916 50 654 361 661 8,511


Other noncurrent liabilities - - - - 5,352 - - 5,352 Accrued compensated absences, noncurrent - - 9,422 - - 388 - 9,810

Total Noncurrent Liabilities - - 9,422 - 5,352 388 - 15,162

TOTAL LIABILITIES 1,869 - 14,338 50 6,006 749 661 23,673

NET POSITION

Net investment in capital assets - - - - 723,221 - - 723,221 Unrestricted 2,128,321 7,165 - - 203,454 (2,115) - 2,336,825

TOTAL NET POSITION 2,128,321$ 7,165$ -$ -$ 926,675$ (2,115)$ -$ 3,060,046$

Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Nonmajor Funds Durham Housing AuthorityDurham, North CarolinaFor the year ended December 31, 2013

Business

Activities

Shelter Plus


Development

Ventures

Incorporated

Learning

Assistance,

Inc.

Choice

Neighborhoods

Initiative

Planning Grant Total

OPERATING REVENUES

Operating grants -$ 71,763$ 209,074$ 5,163$ -$ -$ 170,722$ 456,722$

Other revenue 32 - - - 309,515 17,895 339 327,781

Total Operating Revenue 32 71,763 209,074 5,163 309,515 17,895 171,061 784,503

OPERATING EXPENSES

Administration 4,092 5,094 12,339 - 35,774 14,458 196,019 267,776

Tenant services - - 192,317 5,163 - 32,864 - 230,344

Utilities - - - - 8,840 - - 8,840

Maintenance - - - - 20,185 - - 20,185

General expense 6,497 - 4,418 - - 2,869 - 13,784

Housing assistance payments - 66,669 - - - - - 66,669

Depreciation & amortization - - - - 38,428 - - 38,428

Total Operating Expenses 10,589 71,763 209,074 5,163 103,227 50,191 196,019 646,026

Operating Income/(Loss) (10,557) - - - 206,288 (32,296) (24,958) 138,477

NONOPERATING REVENUES

Investment income - - - - 228 27 - 255 Mortgage interest income 6,497 - - - - - - 6,497

Net Nonoperating Revenues 6,497 - - - 228 27 - 6,752

Net Increase/(Decrease) in Net Position (4,060) - - - 206,516 (32,269) (24,958) 145,229

Net Position, beginning of year 2,461,079 - - - 795,927 30,154 - 3,287,160

Transfers In/(Out) (466,360) - - - (75,768) - 24,958 (517,170)

Special items gain 137,662 7,165 - - - - - 144,827

Net Position, end of year 2,128,321$ 7,165$ -$ -$ 926,675$ (2,115)$ -$ 3,060,046$

Combining Statement of Cash Flows – Nonmajor Funds Combining Statement of Cash Flows - Nonmajor FundsDurham Housing AuthorityDurham, North CarolinaFor the year ended December 31, 2013

Business

Activities

Shelter Plus


Development

Ventures

Incorporated

Learning

Assistance,

Inc.

Neighborhoods

Initiative

Planning Grant Total

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers and users 32$ -$ -$ -$ 309,515$ 17,895$ 339$ 327,781$

Receipts from grants and subsidies - 68,915 212,452 5,163 - - 170,722 457,252

Payments to suppliers (143,888) (9,411) (72,459) (5,163) (6,531) (7,329) (161,220) (406,001)

Payments for housing assistance - (66,669) - - - - - (66,669)

Payments to employees - - (139,993) - - (10,567) (34,799) (185,359)

Net Cash Provided by Operating Activities (143,856) (7,165) - - 302,984 (1) (24,958) 127,004

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Transfers from/(to) other funds (328,698) 7,165 - - (75,768) - 24,958 (372,343)

Net Cash Used by Noncapital Financing Activities (328,698) 7,165 - - (75,768) - 24,958 (372,343)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investments - - - - - (23) - (23)

Decrease in Notes Receivable 4,727 - - - - - - 4,727

Interest received - - - - 228 28 - 256

Net Cash Provided/(Used) by Investing Activities 4,727 7,165 - - 228 5 - 4,960

CASH FLOWS FROM FINANCING ACTIVITIES

Purchases of capital assets - - - - (387,937) - - (387,937)

Net Cash Used by Financing Activities - - - - (387,937) - - (387,937)

Net Increase/(Decrease) in Cash & Cash Equivalents (467,827) - - - (160,493) 4 - (628,316)

Cash & Cash Equivalents - beginning of year 998,827 - - - 430,661 7,921 - 1,437,409

Cash & Cash Equivalents - end of year 531,000$ -$ -$ -$ 270,168$ 7,925$ -$ 809,093$

RECONCILIATION OF OPERATING INCOME/(LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Operating income/(loss) (10,557)$ -$ -$ -$ 206,288$ (32,296)$ (24,958)$ 138,477$

Adjustments to reconcile operating income/(loss) to Net Cash Provided by Operating Activities:

Depreciation - - - - 38,428 - - 38,428 Provisions for bad debt 6,497 - - - - - 6,497

Changes in assets and liabilities:Decrease (Increase) in accounts receivable - (2,848) 3,378 - - - - 530 Decrease (Increase) in Interprogram Due From (140,782) (4,317) (3,900) 4,132 58,268 32,032 (661) (55,228) Increase (Decrease) in accounts payable 986 - - - - - - 986 Increase (Decrease) in accrued expenses - - 522 - - 263 - 785 Increase (Decrease) in unearned revenue - - - (4,132) - - 661 (3,471) Increase (Decrease) in other current liabilities - - - - (5,352) (5,352)

Increase (Decrease) in other noncurrent liabilities - - - - 5,352 - - 5,352

Net Cash Provided by Operating Activities (143,856)$ (7,165)$ -$ -$ 302,984$ (1)$ (24,958)$ 127,004$

SECTION III – STATISTICAL SECTION

(Unaudited)

Table 1 – Net Position

Fiscal Year

Net investment

in capital assets Restricted Unrestricted Total

2004 23,510,451$ -$ 5,897,029$ 29,407,480$

2005 26,541,247 3,520,424 6,243,002 36,304,673

2006 17,076,470 4,539,234 6,689,938 28,305,642

2007 17,501,647 7,806,754 10,326,812 35,635,213

2008 16,264,639 2,850,642 16,649,778 35,765,059

2009 15,299,856 8,069,925 10,261,788 33,631,569

2010 16,623,533 8,516,047 9,956,065 35,095,645

2011 16,542,828 9,483,408 8,095,871 34,122,107

2012 18,066,371 9,587,546 6,613,624 34,267,541

2013 16,653,465 6,570,672 5,630,265 28,854,402

Source: previous and current year financial statements or CAFR

Table 1 - Net Assets

Durham Housing Authority

Durham, North Carolina

Last Ten Fiscal Years

(Unaudited)

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Net Position

Net investment in capital assets Restricted Unrestricted

Source: Previous years and current year financial statements or CAFR

Table 2 – Changes in Net Position

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Operating Revenue Tenant rent 3,708,834$ 4,268,058$ 4,418,996$ 4,337,520$ 4,718,335$ 4,790,391$ 4,589,815$ 4,505,300$ 4,669,756$ 4,863,093$ Operating grants 28,051,859 27,148,860 30,791,443 32,240,376 32,300,372 28,509,792 33,627,721 32,006,237 31,025,492 28,981,902 Fee revenue - - - - 2,478,512 2,879,241 3,662,408 - - - Other revenue 948,056 1,012,471 1,371,008 1,942,188 226,951 1,077,084 603,094 607,435 366,714 241,826

Total operating revenue 32,708,749 32,429,389 36,581,447 38,520,084 39,724,170 37,256,508 42,483,038 37,118,972 36,061,962 34,086,821 Operating Expenses

Administrative 6,147,328 5,333,034 8,162,287 9,369,846 11,192,023 8,950,119 10,799,488 7,057,585 6,616,095 6,189,557 Tenant Services 164,661 83,506 1,280,776 197,372 352,177 1,034,128 1,205,944 1,189,794 1,060,938 917,109 Utilities 2,908,059 3,081,255 2,997,254 3,109,330 3,286,604 3,131,647 3,499,841 3,320,488 3,353,138 3,623,079 Maintenance 3,563,011 3,342,132 4,140,189 4,276,793 5,040,622 5,371,804 6,027,077 5,542,093 4,634,990 4,126,390 Protective services 672,234 100,194 112,647 205,143 9,414 1,585 169,538 216,640 227,809 12,915 General expenses 47,814 1,472,644 1,577,957 1,174,841 954,731 991,409 1,564,042 1,596,504 1,597,550 4,266,509 Housing assistance payments 17,935,837 16,629,195 17,608,090 19,604,964 17,628,478 18,684,549 19,072,050 18,536,427 17,759,833 18,580,286 Depreciation & amortization 3,659,287 4,055,010 3,550,257 2,902,298 3,364,153 3,011,084 2,980,991 3,042,024 3,375,544 3,534,487

Total operating expenses 35,098,231 34,096,970 39,429,457 40,840,587 41,828,202 41,176,325 45,318,971 40,501,555 38,625,897 41,250,332

Operating loss (2,389,482) (1,667,581) (2,848,010) (2,320,503) (2,104,032) (3,919,817) (2,835,933) (3,382,583) (2,563,935) (7,163,511) Nonoperating revenues/expenses

Investment income 41,939 372,271 343,417 511,346 445,545 46,412 25,800 13,332 8,040 4,996 Mortgage interest income - - - - - - - - 353,876 358,168 Interest expense (171,528) (205,955) (210,380) (200,813) (162,787) (143,386) (137,184) (118,083) (103,070) (98,432) Casualty loss - - - - - - - 36,932 (23,647) (4,147) Gain on sale of assets - - 1,778,251 3,115,158 10,075 - 367,246 42,095 - 2,212

Total nonoperating revenues/expenses (129,589) 166,316 1,911,288 3,425,691 292,833 (96,974) 255,862 (25,724) 235,199 262,797

Change in net position before capital contributions (2,519,071) (1,501,265) (936,722) 1,105,188 (1,811,199) (4,016,791) (2,580,071) (3,408,307) (2,328,736) (6,900,714)

Capital contributions 8,647,229 12,150,897 2,582,058 6,304,383 1,965,237 1,796,721 4,044,147 2,434,769 2,474,808 1,487,576

Change in net position 6,128,158 10,649,632 1,645,336 7,409,571 154,038 (2,220,070) 1,464,076 (973,538) 146,072 (5,413,138) Special item - - - - (24,192) - - - - - Prior period adjustments 274,724 (3,752,439) (9,644,367) (80,000) - 86,580 - - - -

Net position - beginning of year 23,004,598 29,407,480 36,304,673 28,305,642 35,635,213 35,765,059 33,631,569 35,095,645 34,122,107 34,267,540 Net position - end of year 29,407,480$ 36,304,673$ 28,305,642$ 35,635,213$ 35,765,059$ 33,631,569$ 35,095,645$ 34,122,107$ 34,268,179$ 28,854,402$

Durham Housing Authority Durham, North Carolina Last Ten Fiscal Years

(Unaudited)


Table 3 – Operating Revenues By Source

Year Amount Total Amount Total Amount Total Amount Total Total

2004 3,708,834$ 11% 28,051,859$ 86% -$ 0% 948,056$ 3% 32,708,749$

2005 4,268,058 13% 27,148,860 84% - 0% 1,012,471 3% 32,429,389

2006 4,418,996 12% 30,791,443 84% - 0% 1,371,008 4% 36,581,447

2007 4,337,520 11% 32,240,376 84% - 0% 1,942,188 5% 38,520,084

2008 4,718,335 12% 32,300,372 81% 2,478,512 6% 226,951 1% 39,724,170

2009 4,790,391 13% 28,509,792 77% 2,879,241 8% 1,077,084 3% 37,256,508

2010 4,589,815 11% 33,627,721 79% 3,662,408 9% 603,094 1% 42,483,038

2011 4,505,300 12% 32,006,237 86% - 0% 607,435 2% 37,118,972

2012 4,669,756 13% 31,025,492 86% - 0% 366,714 1% 36,061,962

2013 4,863,093 14% 28,981,902 85% - 0% 241,826 1% 34,086,821




(Unaudited)


Tenant Rent Grants & subsidies Fee revenue Other revenues

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Operating Revenues By Source

Tenant Rent Grants & subsidies Fee revenue Other revenues


Table 4 – Nonoperating Revenues By Source

Year Amount Total Amount Total Amount Total Amount Total Total

2004 8,647,229$ 100% 41,939$ 0% -$ 0% -$ 0% 8,689,168$

2005 12,150,897 97% 372,271 3% - 0% - 0% 12,523,168

2006 2,582,058 55% 343,417 7% - 0% 1,778,251 38% 4,703,726

2007 6,304,383 63% 511,346 5% - 0% 3,115,158 31% 9,930,887

2008 1,965,237 81% 445,545 18% - 0% 10,075 0% 2,420,857

2009 1,796,721 97% 46,412 3% - 0% - 0% 1,843,133

2010 4,044,147 91% 25,800 1% - 0% 367,246 8% 4,437,193

2011 2,434,769 98% 13,332 1% - 0% 42,095 2% 2,490,196

2012 2,474,808 87% 8,040 0% 353,876 12% - 0% 2,836,724

2013 1,487,576 84% 4,996 0% 358,168 19% 2,212 0% 1,852,952

Gain on sale of assets





(Unaudited)

Capital contributions Interest revenue

Mortgage interest

income

$-

$10,000,000

$20,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Operating Revenues By Source

Capital contributions Interest revenue Gain on sale of assets


Table 5 – Debt Service Coverage

Revenues Expenses

Revenue

available for

debt service

Existing

Principal

Existing

Interest

Total Existing

Debt Service

Debt service

coverge

2004 32,785,202$ (35,098,231)$ (2,313,029)$ 76,453$ 171,528$ 247,981$ (9.33)

2005 32,573,489 (34,096,970) (1,523,481) 144,100 205,955 350,055 (4.35)

2006 38,592,590 (39,429,457) (836,867) 232,892 210,380 443,272 (1.89)

2007 41,804,831 (40,840,587) 964,244 169,589 200,813 370,402 2.60

2008 37,445,184 (41,828,202) (4,383,018) 189,451 162,787 352,238 (12.44)

2009 34,585,077 (41,176,325) (6,591,248) 207,810 143,386 351,196 (18.77)

2010 39,385,948 (45,318,971) (5,933,023) 198,072 137,184 335,256 (17.70)

2011 37,369,966 (43,162,575) (5,792,609) 151,107 118,083 269,190 (21.52)

2012 38,839,644 (41,403,579) (2,563,935) 125,148 103,070 228,218 (11.23)

2013 34,086,821 (41,250,332) (7,163,511) 115,076 90,818 205,894 (34.79)

Durham Housing Authority Durham, North Carolina Last Ten Fiscal Years (Unaudited)


Table 6 – Ratio of Debt to Capital Assets

Fiscal Year Notes payable Total debt Capital assets

Ratio of total debt

to capital assets

2004 851,051$ 851,051$ 25,740,286$ 3.3%

2005 3,360,898 3,360,898 29,977,944 11.2%

2006 4,815,047 4,815,047 22,077,230 21.8%

2007 4,349,481 4,349,481 22,029,419 19.7%

2008 4,338,314 4,338,314 20,602,953 21.1%

2009 4,130,504 4,130,504 19,430,361 21.3%

2010 3,519,629 3,519,629 20,143,162 17.5%

2011 3,272,410 3,272,410 19,815,238 16.5%

2012 3,117,517 3,117,517 21,183,888 14.7%

2013 2,988,135 2,988,135 19,641,600 15.2%





(Unaudited)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ratio of total debt to capital assets

Ratio of total debt to capital assets


Table 7 – Property Characteristics and Unit Composition

Name of development Address Number of units

Year built or

acquired

Public housing units:

Club Boulevard 2415 Glebrook Drive, Durham NC 77 1967

Cornwallis Road 3000 Weaver Street, Durham NC 200 1967

Damar Court 1034 Sherwood Drive, Durham NC 102 1967

Forest Hill Heights 700 South Mangum Street, Durham NC 55 1981

Hoover Road 1126 Hoover Road, Durham NC 54 1968

JJ Henderson Housing Center 807 South Duke Street, Durham NC 178 1978

Laurel Oaks 600 Laurel Oaks Drive, Durham NC 30 1981

Liberty Street 131 Commerce Street, Durham NC 108 1972

McDougald Terrace 1101 Lawson Street, Durham NC 360 1953

Morreene Road 3412 Glasson Street, Durham NC 224 1968

Oldham Towers 519 East Main Street, Durham NC 106 1969

Oxford Manor 3633 Keystone Place, Durham NC 172 1971

Scattered Sites 300 Gary Street, Durham NC 50 1962

HOPE VI Various 131 various

Birchwood Various 4 various

Total public housing units 1,851

Section 8 program:

Tenant-based vouchers 2,660

Project-based vouchers 24

VASH vouchers 60

Total Section 8 units 2,744

Other housing units:

Edgemont Elms 912 Angier Avenue, Durham NC 57 1990

Preiss-Steele Place 500 Pickwick Trail, Durham NC 102 1993

Total other housing units 159

Total units 4,754

Source: Authority internal database



(Unaudited)

Source: Authority internal database

Table 8 – Staff Headcount By Program

Fiscal Year Public housing

Housing Choice

Voucher program

Central Office

Cost Center

Other housing

programs Total

2004 unavailable unavailable unavailable unavailable unavailable

2005 107 23 - 9 139

2006 106 18 - 6 130

2007 100 21 - 6 127

2008 62 20 33 5 120

2009 65 21 33 2 121

2010 73 24 33 2 132

2011 81 21 35 - 137

2012 78 17 28 - 123

2013 73 15 30 - 118





(Unaudited)

Note - data not available for FY2004

-

20

40

60

80

100

120

140

160

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Staff Headcount By Program

Public housing Housing Choice Voucher program

Central Office Cost Center Other housing programs

Source: Authority budget documents

SECTION IV – SINGLE AUDIT SECTION

Independent Auditors’ Reports

Schedule of Expenditures of Federal Awards

Schedule of Findings and Questioned Costs

Schedule of Prior Year Findings and Questioned Costs

Independent Auditors’ 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 Board of Commissioners Durham Housing Authority Durham, North Carolina 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 the Durham Housing Authority (the Authority), which comprise the statement of net position as of December 31, 2013, and the related statements of revenues, expenses and changes in net position, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated May 27, 2014.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Authority'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 Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. 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. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs that we consider to be significant deficiencies. See item 2013-001

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Authority'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 an instance of noncompliance that is required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and questioned costs as item 2013-001. The Authority’s Response to Findings

The Authority’s response to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs. The Authority’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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 result of that testing, and not to provide an opinion on the effectiveness of the Authority’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 Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Baltimore, Maryland May 27, 2014

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

Board of Commissioners Durham Housing Authority Durham, North Carolina

Report on Compliance for Each Major Federal Program

We have audited the Durham Housing Authority (the Authority) 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 Authority’s major federal programs for the year ended December 31, 2013. The Authority’s major federal programs are identified in the summary of auditors’ 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. Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of the Authority’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 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 Authority’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 each major federal program. However, our audit does not provide a legal determination of the Authority’s compliance. Opinion on Each Major Federal Program

In our opinion, the Authority complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2013.



Other Matters

The results of our auditing procedures disclosed instances of noncompliance, which 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 item 2013-002. Our opinion on each major federal program is not modified with respect to these matters. The Authority’s response to the noncompliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Authority’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance

Management of the Authority 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 Authority’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with 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 Authority’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 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 preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we did identify a deficiency in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as item 2013-002, which we consider to be a significant deficiency. The Authority’s responses to the internal control over compliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Authority’s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. 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 result of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133

We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Authority as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements. We issued our report thereon dated May 27, 2014, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic 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 basic 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 basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditure of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

Baltimore, Maryland May 27, 2014

Schedule of Expenditures of Federal Awards Durham Housing Authority For the year ended December 31, 2013

Type

Federal

CFDA #

Expenditures

Federal Grantor

U.S. Department of Housing & Urban Development

Public Housing:

Low Income Public Housing Program A - Nonmajor 14.850 8,050,290$

Revitalization of Severely Distressed Public Housing A - Nonmajor 14.866 87,467

Resident Opportunities Supportive Services B - Nonmajor 14.870 209,074

Choice Neighborhood Grant B - Nonmajor 14.892 170,722

Capital Fund Program A - Major 14.872 2,645,663

Section 8 Housing Assistance Program:

Housing Choice Voucher A - Major 14.871 19,990,187

Other Programs: Shelter Plus Care B - Nonmajor 14.238 71,763

Total Federal Financial Awards 31,225,166$

Threshold for Type A and Type B 936,755$

Notes to Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2013

Basis of Presentation

The accompanying schedule of expenditures for Federal awards includes the Federal grant activity of the Authority and is presented on a full 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.

Sub-recipients

The Authority provided no Federal awards to sub-recipients during the fiscal year ending December 31, 2013.

Disclosure of Other Forms of Assistance

The Authority received no Federal awards of non-monetary assistance that are required to be disclosed for the fiscal year ended December 31, 2013.

The Authority had no loans, loan guarantees, or Federally restricted endowment funds required to be disclosed for the fiscal year ended December 31, 2013.

The Authority maintains the following limits of insurance as of December 31, 2013:

Property $ 40,000,000

Boiler & Machinery 40,000,000

Flood Insurance 1,551,900

Liability 5,000,000

Commercial Auto 5,000,000

Worker Compensation 500,000

Directors and Officers Liability 1,000,000

Public Employee Dishonesty 300,000

Settled claims have not exceeded the above commercial insurance coverage limits over the past three years.



Schedule of Findings and Questioned Costs Section I – Summary of Auditor's Results:

Unqualified

No

Yes

No

No

Yes

Unqualified

Yes

Identification of major programs:

CFDA #14.872 Capital Fund Program

CFDA #14.871 Housing Choice Voucher Program

936,755$

Yes

Material weakness(es) identified?

Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Seciton .510(a)?

Did the Authority qualify as a low-risk auditee?

Dollar threshold used to distinguish between Type A and Type B programs:

Type of report issued on compliance for major programs:

Significant deficiency(ies) identified not considered to be material weaknesses?

Internal controls over major programs:

Federal Awards

Financial Statements

Type of report issued on the financial statements:

Internal control over financial reporting:

Material weakness(es) identified?

Significant deficiency(ies) identified not considered to be material weaknesses?

Noncompliance material to the financial statements noted?

Section II – Financial Statement Findings

Findings related to financial statements in accordance with GAS: Finding 2013-001: Housing Choice Voucher Program, CFDA – 14.871

Condition/Context: During our review of the tenant participation funds, we noted that the resident councils are not properly maintaining documentation of expenditures of the funds. Several of the disbursements reviewed were missing or had inadequate documentation. Based on review of the resident council budgets and check request forms for the selected disbursements, several disbursements were used for non-allowable activities.

Criteria: Per PIH Notice 2013-21 as well as OMB A-133 CFDS 14.850 Part IV Supplement, HUD has strict requirements regarding the use of these funds including administering the funds formally per written agreements, reasonably and efficiently. The agreement must require the local resident council to account to the PHA for the use of the funds and permit the PHA to inspect and audit the resident council’s financial records related to the agreement (24 CFR section 964.150). 2 CFR part 225 appendix B 14 states, “Costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable.

Effect: The Authority is not in compliance with the Federal regulations governing the tenant participation program.

Cause: The Authority does not have adequate controls in place for reviewing and monitoring tenant participation funds.

Recommendation: We recommend that management review its policies and procedures over the tenant participation program to ensure adequate controls over the disbursement of funds and to ensure expenditures are allowable in accordance with approved resident council budgets.

Management's Response: The Authority agrees with the auditor regarding this finding. Management will develop and implement a set of policies and procedures to ensure compliance of the tenant participation program with applicable Federal regulations.

Contact: Questions and additional information regarding this finding may be directed to Jeffrey G. Causey, Chief Financial Officer.

Corrective Action/Anticipated Completion Dates: Implementation of new policies and procedures is anticipated to be completed no later than September 30, 2014.

Section III – Federal Award Findings and Questioned Costs

Findings and questioned costs for Federal Awards as defined in Section .510: Finding 2013-002: Housing Choice Voucher Program, CFDA – 14.871

Federal Agency: U.S. Department of Housing and Urban Development

Compliance Requirement: Eligibility, Special Test, Reporting

Type of Finding: Noncompliance, Significant Deficiency

Condition/Context: Testing of 40 Housing Choice Voucher files identified exceptions in 12 files, which included the following:

1 file could not be tested for eligibility, reporting, and special test compliance due to missing recertification and permanent file documentation

10 recertification’s were not performed timely

1 file did not contain a declaration of section 214

1 file did not support dependant relationship to head of household and a dependency deduction was taken on the 50058

1 file did not contain a completed general release form that was signed by all members of the household over 18

2 files were missing internal control action sheets

Test of the same population for Annual HQS inspections found 4 units did not have timely annual inspections.

Criteria: 24 CFR 985.516 requires PHAs to obtain third‐party verification of all income, assets, and expenses reported on the HUD‐50058. This information is then used to calculate the tenant payment and housing assistance payment. 24 CFR 982.405(a) states "The PHA must inspect the unit leased to a family prior to the initial term of the lease, at least annually during assisted occupancy, and at other times as needed, to determine if the unit meets the HQS.

Effect: The amount of housing assistance payments or tenant rent could be incorrect based on missing or inaccurate information. The Authority may make HAP payments to landlords for units that do not meet housing quality standards.

Cause: During review of tenant eligibility testing for the Housing Choice Voucher Program, it was noted that the Authority failed to perform annual recertifications in accordance with their stated policies and procedures and did not include all documentation to support eligibility and income.

Questioned Costs: Unable to determine.

Recommendation: We recommend that management increase the number of recertification’s reviewed on a monthly basis until they can ensure a majority of the files meet HUD's eligibility and reporting requirements. We also recommend that management identify the specialists responsible for the erroneous files and investigate whether findings represent a systemic problem or are limited to a few specialists. Additional training for housing specialists would also improve accuracy.

Management's Response: The Authority agrees with the auditor regarding this finding. Management will review existing quality control procedures for possible improvements and examine the number of files processed by staff. However, due to severe and chronic shortfalls in funding provided by the U.S. Department of Housing and Urban Development for the Housing Choice Voucher Program, specifically for administration of the program, the ability of the Authority to implement any improvements identified is compromised. The Authority will examine the results of file reviews to determine whether systemic improvements may be needed or if individual staff issues need to be addressed, possibly through additional training.

Contact: Questions and additional information regarding this finding may be directed to Rhega Taylor, Director of HCV Program.

Corrective Action/Anticipated Completion Dates: Monitoring of files for quality purposes will continue throughout the year. Specific changes related to this finding are anticipated to be completed no later than December 31, 2014.



Schedule of Prior Year Findings and Questioned Costs

The prior audit report for the period ended December 31, 2012, contained two (2) audit findings.

Finding 2012-01: Housing Choice Voucher Program, CFDA – 14.871


Compliance Requirement: Special Test – Reasonable Rent

Type of Finding: Internal Control, Noncompliance, Significant Deficiency

Condition/Context: Testing of 40 Housing Choice Voucher tenant files found exceptions in 9 files, which included the following:

7 of 40 reasonable rent determinations were not performed until after the effective date of the new rent increase;

1 of 40 files could not be tested due to missing or incomplete reasonable rent determination forms.

Recommendation: We recommend that management evaluate their quality control procedures over the rent determination process and consider increasing the total number of files reviewed by quality control personnel.

Current Status: This condition was cleared in fiscal year 2013.

Finding 2012-02: Housing Choice Voucher Program, CFDA – 14.871


Compliance Requirement: Special Test – HQS Inspections

Type of Finding: Internal Control, Noncompliance, Significant Deficiency

Condition/Context: Testing of 40 Housing Choice Voucher tenant files found exceptions in 3 files, which included the following:

3 of 40 HQS inspections were not performed annually.

Recommendation: We recommend that the Authority review their procedures over the HQS inspections and implement changes to ensure they are in compliance with federal guidelines.

Current Status: A similar finding was noted in fiscal year 2013. See Finding 2013-02.

SECTION V – HUD FINANCIAL DATA SCHEDULE (FDS)

(As required by HUD Uniform Financial Reporting Standards Sec. 24 CFR, Part 5)

HUD Financial Date Schedule

HUD Cost Certificates

Schedule of Net Position - FDS Schedule of Net Position - FDSDurham Housing Authority Schedule 1Durham, North CarolinaAs of December 31, 2013

Account Description

Public Housing

14.850

Housing Choice

Vouchers

14.871

Shelter Plus

Care

14.238

HOPE VI

14.866

ROSS

14.870

Choice

Neighborhoods

Initiative Planning

Grant

14.892

Business

Activities Central Office State/Local Component Units Eliminations Total

ASSETSCurrent Assets

CashCash - unrestricted 3,673,238$ 105,548$ -$ -$ -$ -$ 531,000$ -$ -$ 307,083$ -$ 4,616,869$ Cash - restricted 149,747 1,099,098 - - - - - - - 223,832 - 1,472,677 Cash - Security Deposits 368,596 - - - - - - - - 30,480 - 399,076

Total Cash 4,191,581 1,204,646 - - - - 531,000 - - 561,395 - 6,488,622

Accounts/Notes Receivable

Acct. Rec. - PHA Projects 3,000 - 1,478 - 17,042 - - - - - - 21,520 Acct. Rec. - HUD 113,227 - - - - - - - - - - 113,227

Acct. Rec. - other government - - - - - - - - - - - -

Acct. Rec. - miscellaneous - 21,182 - - - - 8,433 82,679 - - (82,350) 29,944

Acct. Rec. - tenants 52,228 - 1,680 - - - - - - 54,285 - 108,193

Allow. For doubtful accounts - tenants (22,859) - - - - - - - - (27,854) - (50,713)

Allow. For doubtful accounts - other - - - - - - (8,433) - - - - (8,433)

Notes & Mortgages Rec. - - - - - - 2,792 - - - - 2,792 Fraud recovery 210,384 567,137 - - - - - 8,549 - - - 786,070 Allow. For doubtful accounts - fraud (207,426) (557,383) - - - - - (8,549) - - - (773,358) Accrued interest receivable - - - - - - - - - - - -

Total Accounts/Notes Receivable (net) 148,554 30,936 3,158 - 17,042 - 2,792 82,679 - 26,431 (82,350) 229,242

Investments

Investments - unrestricted 258,456 - - - - - - 446,702 - 22,978 - 728,136 Investments - restricted - - - - - - - - - - - -

Total Investments 258,456 - - - - - - 446,702 - 22,978 - 728,136

Prepaid expenses and other assets 14,893 - - - - - - 37,398 - 11,197 - 63,488 Inventories 27,095 - - - - - - 2,902 - 1,843 - 31,840 Interprogram due from 3,347,060 59,645 7,165 - 661 300,412 1,549,599 50 - (5,264,592) -

Assets held for sale 69,793 - - - - - - - - - - 69,793

Total Current Assets 8,057,432 1,295,227 10,323 - 17,042 661 834,204 2,119,280 50 623,844 (5,346,942) 7,611,121

Noncurrent AssetsCapital Assets

Land 1,157,094 - - - - - - 288,401 - 516,442 - 1,961,937 Buildings 26,829,353 - - - - - - 1,412,934 - 8,663,944 - 36,906,231 Furniture, equipment & machinery 514,055 31,536 - 49,741 - - - 1,052,267 - 130,191 - 1,777,790

Leasehold improvements 35,915,543 40,461 - - - - - - - 2,376,497 - 38,332,501 Accumulated depreciation (50,670,339) (66,600) - (49,741) - - - (2,067,639) - (6,482,540) - (59,336,859)

Total Capital Assets (net) 13,745,706 5,397 - - - - - 685,963 - 5,204,534 - 19,641,600

Notes Receivable - - - 5,569,780 - - 1,295,986 - - - - 6,865,766 Other assets - - - - - - - - - 127,342 - 127,342

Total Noncurrent Assets 13,745,706 5,397 - 5,569,780 - - 1,295,986 685,963 - 5,331,876 - 26,634,708

Total Assets 21,803,138$ 1,300,624$ 10,323$ 5,569,780$ 17,042$ 661$ 2,130,190$ 2,805,243$ 50$ 5,955,720$ (5,346,942)$ 34,245,829$

Durham Housing AuthorityDurham, North Carolina Schedule 1Schedule of Net Assets - FDSDecember 31, 2012

Account Description

Public Housing

14.850

Housing Choice

Vouchers

14.871

Shelter Plus

Care

14.238

HOPE VI

14.866

ROSS

14.870

Choice

Neighborhoods

Initiative Planning

Grant

14.892

Business

Activities Central Office State/Local Component Units Eliminations Total

LIABILITIES & NET POSITIONLiabilities

Current LiabilitiesAccounts payable 1,108$ 37,978$ -$ -$ -$ -$ 1,869$ 728,405$ -$ -$ -$ 769,360$ Wages & taxes payable 75,556 20,676 - - 3,869 - - 41,413 - 1,122 - 142,636 Accrued compensated absences 20,211 2,826 - - 1,047 - - 16,453 - 122 - 40,659 Accrued interest payable - - - - - - - - - 74,921 - 74,921 Accounts payable - HUD - - - - - - - - - - - - Accounts payable - other government 47,802 - - - - - - - - - - 47,802 Tenant security deposits 368,596 - - - - - - - - 30,480 - 399,076 Unearned revenue 53,662 - - 602 - 661 - - 50 36,136 - 91,111 Current portion of long-term debt - - - - - - - - - 1,489,965 - 1,489,965 Other current liability - - - - - - - - - 82,350 (82,350) - Interprogram due to 104,575 55,413 3,158 533,590 2,704 - - 3,551,532 - 1,013,620 (5,264,592) -

Total Current Liabilities 671,510 116,893 3,158 534,192 7,620 661 1,869 4,337,803 50 2,728,716 (5,346,942) 3,055,530

Noncurrent LiabilitiesLong-term debt, net of current portion - - - - - - - - - 1,498,170 - 1,498,170 Other noncurrent liabilities 149,747 316,686 - - - - - - - 5,352 - 471,785 Accrued compensated absences, net of current portion 181,909 25,435 - - 9,422 - - 148,083 - 1,093 - 365,942

Total Noncurrent Liabilities 331,656 342,121 - - 9,422 - - 148,083 - 1,504,615 - 2,335,897 Total Liabilities 1,003,166 459,014 3,158 534,192 17,042 661 1,869 4,485,886 50 4,233,331 (5,346,942) 5,391,427

Net Position

Net invested in capital assets 13,745,706 5,397 - - - - - 685,963 - 2,216,399 - 16,653,465

Net position - restricted - 782,412 - 5,569,780 - - - - - 218,480 - 6,570,672 Net position - unrestricted 7,054,266 53,801 7,165 (534,192) - - 2,128,321 (2,366,606) - (712,490) - 5,630,265

Total Net Position 20,799,972 841,610 7,165 5,035,588 - - 2,128,321 (1,680,643) - 1,722,389 - 28,854,402

Total Liabilities and Net Position 21,803,138$ 1,300,624$ 10,323$ 5,569,780$ 17,042$ 661$ 2,130,190$ 2,805,243$ 50$ 5,955,720$ (5,346,942)$ 34,245,829$

Schedule of Revenues and Expenses and Changes in Net Position – FDS Durham Housing Authority Schedule 2Durham, North CarolinaFor the year ended December 31, 2013

Account Description

Public Housing

14.850

Housing Choice

Vouchers

14.871

Shelter

Plus Care

14.238

HOPE VI

14.866

ROSS

14.870

Choice

Neighborhoods

Initiative Planning

Grant

14.892

Business

Activities Central Office State/Local

Component

Units Eliminations Total

REVENUESTenant revenue

Net tenant rent 3,828,864$ -$ -$ -$ -$ -$ -$ -$ -$ 694,481$ -$ 4,523,345$ Tenant revenue - other 335,876 - - - - - - - - 3,872 - 339,748

Total Tenant Revenue 4,164,740 - - - - - - - - 698,353 - 4,863,093

HUD operating grants 9,208,377 19,229,336 71,763 87,467 209,074 170,722 - - - - - 28,976,739 HUD capital grants 1,487,576 - - - - - - - - - - 1,487,576 Fees -

Management fee - - - - - - - 1,445,244 - - (1,445,244) -

Asset management fee - - - - - - - 207,720 - - (207,720) - Bookkeeping fee - - - - - - - 151,388 - - (151,388) - Front line service fee - - - - - - - 873,856 - - (873,856) -

Total Fees - - - - - - - 2,678,208 - - (2,678,208) -

Other government grants - - - - - - - 5,163 - - 5,163 Investment income - unrestricted - - - - - - - 2,753 - 351 - 3,104 Investment income - restricted - 1,892 - - - - - - - - - 1,892 Fraud recovery - 10,007 - - - - - - - - - 10,007 Other revenue 64,300 6,173 - 122,429 - 339 32 77,985 - 330,956 (370,395) 231,819 Mortgage interest income - - - 351,671 - - 6,497 - - - - 358,168

assets 1,244 - - - - - - 968 - - - 2,212

Total Revenues 14,926,237$ 19,247,408$ 71,763$ 561,567$ 209,074$ 171,061$ 6,529$ 2,759,914$ 5,163$ 1,029,660$ (3,048,603)$ 35,939,773$

Durham, North Carolina Schedule 2Schedule of Revenues, Expenses and Changes in Net Position - FDSDecember 31, 2012

Account Description

Public Housing

14.850

Housing Choice

Vouchers

14.871

Shelter

Plus Care

14.238

HOPE VI

14.866

ROSS

14.870

Choice

Neighborhoods

Initiative Planning

Business

Activities Central Office State/Local

Component


EXPENSESAdministrative

Administrative salaries 1,024,005$ 613,894$ -$ 6,947$ -$ 34,799$ -$ 1,253,776$ -$ 41,953$ (24,833)$ 2,950,541$ Auditing fees 37,402 19,260 - - - - - 5,110 - 9,702 - 71,474 Management fee 1,262,862 133,768 - - - - - - - 48,614 (1,445,244) - Bookkeeping fee 151,388 - - - - - - - - - (151,388) - Advertising and marketing 1,590 975 - - - 422 - 12,330 - 1,629 - 16,946 Employee benefits 351,868 257,403 - - - 10,477 - 410,730 - 13,683 - 1,044,161 Office expenses 321,249 126,004 - - - 2,112 - 243,140 - 19,338 - 711,843 Legal expenses 86,129 9,810 - - - - - 203,143 - 15,317 - 314,399 Travel expenses 39,601 3,587 - - - 1,574 - 19,525 - 2,076 - 66,363 Allocated overhead 24,942 - - - - - - - - - - 24,942 Other expenses 564,197 78,850 5,094 - 12,339 146,635 4,092 157,354 - 53,129 (32,802) 988,888

Total Administrative 3,865,233 1,243,551 5,094 6,947 12,339 196,019 4,092 2,305,108 - 205,441 (1,654,267) 6,189,557

Asset management fee 207,720 - - - - - - - - (207,720) - Tenant Services

Tenant services salaries 316,639 54,656 - 10,707 140,515 - - - - 10,830 - 533,347 Relocation Expenses - - - - - - - - - - - - Employee benefits 92,470 14,697 - - 51,802 - - - - 4,019 - 162,988 Other expenses 195,028 - - - - - - - 5,163 20,583 - 220,774

Total Tenant Services 604,137 69,353 - 10,707 192,317 - - - 5,163 35,432 - 917,109

UtilitiesWater 1,262,074 454 - - - - - 877 - 51,352 - 1,314,757 Electricity 1,727,288 13,507 - - - - - 18,912 - 61,375 - 1,821,082 Gas 449,472 6,138 - - - - - 8,640 - 3,990 - 468,240 Other 19,000 - - - - - - - - - - 19,000

Total Utilities 3,457,834 20,099 - - - - - 28,429 - 116,717 - 3,623,079

Durham Housing AuthorityDurham, North Carolina Schedule 2Schedule of Revenues, Expenses and Changes in Net Position - FDSDecember 31, 2012

Account Description

Public Housing

14.850

Housing Choice

Vouchers

14.871

Shelter

Plus Care

14.238

HOPE VI

14.866

ROSS

14.870

Choice

Neighborhoods

Initiative Planning

Business

Activities Central Office

State/

Local

Component


Ordinary Maintenance & Operations

Maintenance salaries 984,390$ -$ -$ -$ -$ -$ -$ 267,047$ -$ 2,018$ -$ 1,253,455$ Materials 390,935 81 - - - - - 27,742 - 8,299 - 427,057 Contract costs 2,451,083 51,736 - - - - - 86,740 - 262,852 (873,856) 1,978,555 Employee benefits 363,713 - - - - - - 103,610 - - - 467,323

Total Ordinary Maintenance & Operations 4,190,121 51,817 - - - - - 485,139 - 273,169 (873,856) 4,126,390

Protective ServicesContract costs 11,562 - - - - - - - - 1,353 - 12,915

Total Protective Services 11,562 - - - - - - - - 1,353 - 12,915

InsuranceProperty insurance 268,957 2,996 - - - - - 10,439 - 22,575 - 304,967 Liability insurance 47,341 19 - - - - - 4,220 - 3,927 - 55,507 Worker's Compensation insurance 62,747 20,909 - - - - - 40,785 - 1,277 - 125,718 All other insurance 43,314 2,758 - - - - - 8,217 - 71 - 54,360

Total Insurance 422,359 26,682 - - - - - 63,661 - 27,850 - 540,552

General ExpensesOther general expenses 379,745 38,722 - 69,813 - - - 34,588 - 32,760 (312,760) 242,868 Compensated absences 175,523 24,804 - - 4,418 - - 152,846 - 1,080 - 358,671 Payments in lieu of taxes 47,802 - - - - - - - - - - 47,802 Bad debt - tenant rent 105,466 - - - - - - - - 29,413 - 134,879

Bad debt - mortgages - - - 2,935,240 - - 6,497 - - - - 2,941,737 Total General Expenses 708,536 63,526 - 3,005,053 4,418 - 6,497 187,434 - 63,253 (312,760) 3,725,957

Interest on mortgages payable - - - - - - - - - 98,432 - 98,432

Total Operating Expenses 13,467,502 1,475,028 5,094 3,022,707 209,074 196,019 10,589 3,069,771 5,163 821,647 (3,048,603) 19,233,991

Revenue Over/(Under) Operating Expenses 1,458,735 17,772,380 66,669 (2,461,140) - (24,958) (4,060) (309,857) - 208,013 - 16,705,782

Other ExpensesCapital outlays - - - - - - - - - - - - Casualty losses - non-capitalized 4,147 - - - - - - - - - - 4,147 Housing assistance payments - 18,513,617 66,669 - - - - - - - - 18,580,286 Depreciation expense 2,807,009 1,542 - - - - - 172,891 - 553,045 - 3,534,487

Total Other Expenses 2,811,156 18,515,159 66,669 - - - - 172,891 - 553,045 - 22,118,920 Total Expenses 16,278,658 19,990,187 71,763 3,022,707 209,074 196,019 10,589 3,242,662 5,163 1,374,692 (3,048,603) 41,352,911

Revenue Over/(Under) Expenses (1,352,421) (742,779) - (2,461,140) - (24,958) (4,060) (482,748) - (345,032) - (5,413,138)

Transfer of funds - - - - - 24,958 (466,360) 208,208 - 233,194 - - Special Items Gain/Loss 3,347,060 59,645 7,165 - - 137,662 (3,551,532) - - - -

Beginning Net Position 18,805,333 1,524,744 - 7,496,728 - - 2,461,079 2,145,429 - 1,834,227 - 34,267,540

Ending Net Position 20,799,972$ 841,610$ 7,165$ 5,035,588$ -$ -$ 2,128,321$ (1,680,643)$ -$ 1,722,389$ -$ 28,854,402$

HUD Cost Certificates

Statement and Certification of Actual Grant Fund CostsDurham Housing AuthorityDurham, North CarolinaFor the year ended December 31, 2013

1 The Actual Capital Fund Program Costs of Grant NC013RFS161A011

Funds Approved 69,000$

Funds Expended 69,000

Excess of Funds Approved -$

Funds Advanced $ 69,000

Funds Expended 69,000 Excess of Funds Advanced -$

2 The total program costs as stated on the Annual Statement/Performance and Evaluation Report is in agreement with the Actual Modernization Cost Certificate dated October 2, 2013, as submitted to HUD for approval.

3 All Capital Fund Program costs have been paid and all related liabilities have been discharged through payment.

Grant NC013RFS161A011 (Resident Opportunity & Self Sufficiency)


1 The Actual Capital Fund Program Costs of Grant NC013RNN034A007








Grant NC013RNN034A007 (Resident Opportunity & Self Sufficiency)


1 The Actual Capital Fund Program Costs of Grant NC013RPS078A009








Grant NC013RPS078A009 (Resident Opportunity & Self Sufficiency)

Statement and Certification of Actual Capital Fund CostsDurham Housing AuthorityDurham, North CarolinaFor the year ended December 31, 2013

1 The Actual Capital Fund Program Costs of Grant NC19P013501-09

Funds Approved 3,293,273$

Funds Expended 3,293,273


Funds Advanced $ 3,293,273

Funds Expended 3,293,273 Excess of Funds Advanced -$

2 The total program costs as stated on the Annual Statement/Performance and Evaluation Report is in agreement with the Actual Modernization Cost Certificate dated August 13, 2013, as submitted to HUD for approval.


Grant NC19P013501-09 (Capital Fund Grant)

Statement and Certification of Actual Capital Fund CostsDurham Housing AuthorityDurham, North CarolinaFor the year ended December 31, 2013

1 The Actual Capital Fund Program Costs of Grant NC19P013501-10

Funds Approved 2,971,245$

Funds Expended 2,971,245


Funds Advanced $ 2,971,245

Funds Expended 2,971,245 Excess of Funds Advanced -$

2 The total program costs as stated on the Annual Statement/Performance and Evaluation Report is in agreement with the Actual Modernization Cost Certificate dated September 10, 2013, as submitted to HUD for approval.


Grant NC19P013501-10 (Capital Fund Grant)

SECTION VI – BUDGETARY INFORMATION Year Ended December 31, 2013

Statement of Revenues, Expenses and Changes in Net Position (Non-GAAP), Public Housing

Statement of Revenues, Expenses and Changes in Net Position (Non-GAAP), Housing Choice Voucher Program

Statement of Revenues, Expenses and Changes in Net Position (Non-GAAP), Central Office Cost Center

Statement of Revenues, Expenses and Changes in Net Position – Budget & Actual (Non-GAAP), Public Housing Durham Housing AuthorityDurham, North CarolinaDecember 31, 2013

Account Description Budget Actual Over/(Under) Budget

Operating Revenue

Tenant rent 3,439,185$ 4,164,740$ 725,555$

Operating grants 9,282,533 9,208,377 (74,156)

Other revenue 467,022 64,300 (402,722)

Total Operating Revenue 13,188,740 13,437,417 248,677

Operating Expenses

Administration 3,546,205 4,072,953 526,748

Tenant services 280,734 604,137 323,403

Utilities 3,135,872 3,457,834 321,962

Maintenance 4,223,467 4,190,121 (33,346)

Protective services - 11,562 11,562

General expense 1,422,799 1,130,897 (291,902)

Total Operating Expenses 12,609,077 13,467,504 858,427

Operating Income/(Loss) 579,663 (30,087) (609,750)


Investment income - - -

Mortgage interest income - - -

Interest expenses - - -

Casualty losses - (4,147) (4,147) Gain/loss on sale of assets - 1,244 1,244

Total Nonoperating Revenues/(Expenses) - (2,903) (2,903)

Net Income excluding depreciation and capital contributions 579,663$ (32,990)$ (612,653)$

Statement of Revenues, Expenses and Changes in Net Position – Budget & Actual (Non-GAAP), Housing Choice Voucher Program Durham Housing AuthorityDurham, North CarolinaDecember 31, 2013


Operating Revenue

Operating grants 20,228,007$ 19,229,336$ (998,671)$

Other revenue 23,000 16,180 (6,820)

Total Operating Revenue 20,251,007 19,245,516 (1,005,491)

Operating Expenses

Administration 1,192,576 1,243,551 50,975

Tenant services - 69,353 69,353

Utilities 12,500 20,099 7,599

Maintenance 20,750 51,817 31,067

General expense 528,600 90,208 (438,392)

Housing assistance payments 18,600,000 18,513,617 (86,383)

Total Operating Expenses 20,354,426 19,988,645 (365,781)

Operating Income/(Loss) (103,419) (743,129) (639,710)


Investment income 2,000 1,892 (108)

Total Nonoperating Revenues/(Expenses) 2,000 1,892 (108)

Net Loss excluding depreciation and capital contributions (101,419)$ (741,237)$ (639,818)$

Statement of Revenues, Expenses and Changes in Net Position – Budget & Actual (Non-GAAP), Central Office Cost Center Durham Housing AuthorityDurham, North CarolinaDecember 31, 2013


Operating Revenue

Fee revenue 2,621,898$ 2,678,208$ 56,310$

Other revenue 15,000 77,985 62,985

Total Operating Revenue 2,636,898 2,756,193 119,295

Operating Expenses

Administration 1,841,810 2,305,108 463,298

Tenant services - - -

Utilities 30,938 28,429 (2,509)

Maintenance 328,689 485,139 156,450

General expense 566,942 251,094 (315,848)

Total Operating Expenses 2,768,379 3,069,770 301,391

Operating Income/(Loss) (131,481) (313,577) (182,096)


Investment income - 2,753 (2,753) Gain/loss on sale of assets - 968 (968)

Total Nonoperating Revenues/(Expenses) - 3,721 (3,721)

Transfers In/(Out) 29,300 208,208 (517,170)

Net Loss excluding depreciation & capital contributions (102,181)$ (101,648)$ (702,987)$

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