hfa 2010 audited financial statements - welcome to … financial statements for the year ended...

HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA

AUDITED FINANCIAL STATEMENTS

For the Year Ended September 3D, 2010

HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA

SEPTEMBER 30, 2010

TABLE OF CONTENTS PAGE

Independenl Auditors' Report 1-2

Management's Discussion and Analysts 3-8

Authority-wide Financial Statements:

Statement of Nel Assets 9

Fund Financial Statements

Required Supplementary Information:

Statement of Activities 10

Balance Sheet 11

Statement of Revenues. Expend~ures and Change in Fund Balance 12

Notes to Financial Statements 13-22

Budget Comparison Schedule 23

Notes to Budget Comparison Schedule 24

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements 25-26 Performed in Accordance with Government Auditing Standards

Independent Auditors' Management LaUer 27-28

MOORE STEPHENS LOVELACE, P.A.

C'ER1U 1 ED PUBU C ",CCOU~'rAN'l'S

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors Housing Finance Authority

Broward County, Florida

We have audited the accompanying financial statements af the governmental activities and major fund of the Housing Finance Authority of BToward County, Florida (the "Authori[y"), a component unit of BToward County, Florida, as of and for the year ended September 30, 20 10, which collective ly comprise the Authority's basic fi nancial statements, as li sted in the table of contents. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financ ial 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 reasonab le assurance about whether the financial statements are f ree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financ ial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statemen t presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, tbe financia l positi on of the Authoriry as of September 30. 201 D, and the changes in financ ial position thereof for the year then ended in confonu;IY with accounting principles generally accepted in the United States of America.

In accordance with Governmenr Auditing Standard~, we have also issued our report dated February 3, 20 11 on our cons iderati on of the Authority's internal control over fi nancial reporting and on our tests of its compliance with certai n provisions of laws, regulations, contracts, and other matters. The purpose of that report is to describe the scope of our testing of internal control over fmancial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over fi nancial reporting or on compliance. That report is an in tegral part of an audit perfonncd in accordance with Govemmenf Auditing Standards and should be considered in assessing the results ofour audit.



Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and the required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a pan of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reponing for placing the basic financial statements in an appropriate operational, economic, or historical contex:t. We have applied certain limited procedures to the required supplementary information, as listed in the table of contents, 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 infonnation for consistency with management's responses to our inquiries. the basic financia l 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 proced ures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Certified Public Accountants

Orlando, Florida February 3, 2011

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HOUSING FINANCE AUTHORITY OF BROWARD COUNTY

Management's Discussion and Analysis of Financial Condition and Results of Operations

The Housing Finance Aulhorily of Broward Counly, Florida (HFA or Aulhorily) was eslablished in 1979 by Ordinance of Broward Counly, Florida, Board of Counly Commissioners, to provide funding for affordable housing to very low, low and moderate income households in the County. The Broward County Office of Housing Finance ("OHF") adminislers all programs of Ihe Housing Finance Aulhorily of Broward County as well as various affordable housing programs for Broward County. The HFA is a quasi-governmental agency governed by a nine (9) member board apPointed by the Broward County Board of County Commissioners in accordance with Florida State Statute. To date, the HFA has provided single family homes, town homes, condominiums and rental units to Broward County residents through the organization of single family and multi-family tax exempt bond issues and a consortium of local lenders.

Overview

A number of activities are administered by the HFA to accomplish the goals of the agency:

SINGLE FAMILY BOND PROGRAM

The Single Family Bond Program features low, fixed-rate mortgages and down payment assistance to qualified buyers. All options feature a 3D-year, fixed rate first mortgage. No origination fees or discounts are charged to the loans. The first mortgage and note are exempt from documentary stamps and intangible tax.

MORTGAGE CREDIT CERTIFICATES

The Mortgage Credrt Certificale Program (MCC) offers a federal income lax credi!, nol a loan, that may be used in conjunction with the first mortgage (except a mortgage revenue bond loan) to help qualify the buyer and provide additional income for the term the loan. An Mee helps qualify home buyers by increasing take home pay. This credit may be available to prospective homebuyers who meet income and sales price limits.

DISCUSSION OF FINANCIAL STATEMENTS

The financial section consists of three parts:

• Independent auditors' report • Management's discussion and analysis (this section) • Basic financial statements, including notes to financial statements.

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Management's Discussion and Analysis is being presented to provide additional information regarding the activities of the Authority and to meet the disclosure requirements of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. This analysis should be read in conjunction with the Independent Auditors' Report, financial statements and accompanying noles.

The Basic Financial Statements consist of:

Authority-wide Financial Statements • Statement of Net Assets • Statement ofActivities

Fund Financial Statements • Balance Sheet • Statement of Revenues, Expenditures and Change in Fund Balance

The Statement of Net Assets answers the question: ~What;s our financial position at the end of year? The statement indudes all assets and liabilities, both financial and capital , and short term and long term, using the accrual basis of accounting and is similar to the accounting presentation used by most private sector companies. All of the agency's current year's revenues and expenditures are accounted for in the Statement ofActivities. This statement measures the results of the agency's operations overthe past year and can be used to determine whether the agency has successfully recovered all of its costs through mortgages and loans, externally funded programs and other revenue sources.

The Balance Sheet and Statement of Revenues, Expenditures and Change in Fund Ba/ance presents the same information in a more traditional governmental presentation, using the modified accrual basis of accounting. Governmental funds' statements focus on (1) how cash and other financial assets can readily be converted to cash flow in and out. and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds ' statements provide a detailed short-term view that helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the Authority's programs.

The financial statements include Notes to Financial Statements which provide more detailed explanations of certain information contained in the financial statements.

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The following supplementary information is also provided:

• Budget Comparison Schedule (required)

The Budget Comparison Schedule measures the Authority's ability to plan its revenues and expenditures and generate sufficient cash to continue its programs.

The Authority is a self-supporting entity, with no laxing authority, and does not receive grants from any government entity. It is considered a component unit of Sroward County and is discretely presented in the County's financial statements.

Fiscal Year Highlights

Issued Mortgage Credit Certificates which provide tax credits to homeowners for a portion of their mortgage interest

More than 11,400 affordable housing units are currently available

Assets exceed liabilities by $12.4 million, of which $1.4 million is invested in capital assets, net of related debt, $1 .1 million is restricted and $9.9 million is unassigned.

Total program revenue was $1.3 million, a decrease of$.5 million which is attributed to lower bond issuances due to market conditions.

Total expenditures, excluding tangible property transactions, depreciation and interest were $108 thousand less than the prior year due primarily due to lower professional fees and a reduction in reimbursement to the primary government for budget under-runs.

Investment income increased $261 thousand from the prior year due to change in fair market value.

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1



Financial AnalYsis

Net assets may serve over time as a useful indicator a govemment's financial position. Net assets exceeded net liabilities by S12.4M.

Housina Finance Authority of Bfoward County Net Assets As of September 30, 2010 and 2009

2010 2009

Current and other assets 512,491,0« 511,817,902 CiplUI assets 1,'16,069 1.'63.2'3

Totahsstts ll,m ,lIl 1l,281,145

Noncurrenll,ablht!es 699,000 IIl,OOO Other ~abi lities 793,618 1.505,619

T0t3l liabtl : l~s 1,492,618 1,618.619

Net ilSseti: Invested In caprlll assets,

net of relat!d dtbt 1,'16.069 1.463,243 Rest ncted 1,103,767 1,028,160 Unnsigned 9,900,659 9,171,123

Total net iSsets 512,420,495 511,662.526

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Activities during the year increased net assets by $758,000. Key elements of this increase are as follows:

Changes In Net Assets

For the Year Ended September 30, 2010

Revenues: Program revenues:

Charges fo r services

Bond issuancl:', redempt ion

and transfer income Renta ls

General revenues:

Interest and Investment income

Total revenues

EKpendltures

Personal services

Professional fees General elIpl!nditures

Total e~penses

Increilse In net asseu Net assets. Beginning Net assets, Ending

$1,063,400 $1,048,036

111,496 652,954 106,000 106,000

613,633 642,832 219,450 263,756 451,657 485,837

1,284.740 1,392,435

757,969 915,785 11,662.526 10,746,741

$12,420,495 $11,662,526

Economic Factors and Financial Outlook

Housing finance agencies generally perform relatively poorly in low interest rate environments for a number of reasons:

• Interest income on investment securities is reduced • Normal operating cost increases become more difficult to absorb as

revenues decline • The agency's ability to issue tax-exempt debt is limited by federal tax law.

Annually prescribed amounts of private activity bond authority are allocated to each state.

In addition to the normal impediments faced by Housing Finance agencies, the housing sector has been particularly challenging due to a number of factors :

• Tightening credit as a result of rising foreclosures of sub-prime mortgages

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Managemenrs Discussion and Analysis of Financial Condition and Results of Operations

• High building costs and property taxes • Restrictions on rental rates • High unemployment and low consumer confidence.

The agency is employing a number of initiatives and strategies to increase fees, reduce costs and to maximize its investment Income while maintaining the safety of those investment dollars. The agency will remain opportunistic with these and other strategies.

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HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA STATEMENT OF NET ASSETS

September 30, 2010

Current assets:

Gash and cash equivalents $ 329,353

Restricted cash 358,672

Investments 10,275,616

Noles receivable ',103,767

Other receivables 429,636

Total current assets 12,497,044

Noncurrent assets:

Capital assets, net 1.416,069

Total noncurrent assets 1,416,069

Total assets 13,913,113

LIABILITIES

Currenlliabililies:

AccNed liabilities 87,446

Deposits in escrow 276,102

Advance from primary government 428,070

Total current liabilities 793,618

Noncurrent liabilities:

Due within one year 146,000

Due in more than one year 553,000

Tolal noncurrenl liabililies 699,000

Tolalliabi1ilies 1,492,618

NET ASSETS

Invested in capita l assets, net of re lated debt 1,416,069

Restricted 1,103,767

Unassigned 9,900,659

Total net assets $ 12,420,495

See notes to financial statements. 9

HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA STATEMENT OF ACTIVITIES

For the Year Ended Se pte mber 30, 2010

Program e~enses:

Personal services $ 613,633

Professional fees 219,450

General !41enSeS 376,896

Depreoation 48,5111

Intereste~nse 26,200

Total program ellpenses 1,284,740

Program rew:nues:

Charges fo( S!NceS 1,063,400

Bond Issuance,redemption and transfer income 111,496

Rentals 106,000

Totalprogramre\lenu!s 1,280,896

Program loss (3,844)

General rewnue

Interest and Imestment income 761,813

Change in net assets 757,969

Netassets· beginmng balance 11,662,526

Netassets- ending S 12,420,495


HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA BALANCE SHEET

September 30, 2010

ASSETS Cash and cash equivalents $ 329,353

Restricted cash 358.672

Investments 10,275,616

Notes receivable 1,103,767

Other receivables 429,636

Total assets $ 12.497,044

LIABILITIES AND FUND BALANCE

Accrued liabilities 79,60B

Due 10 other governments 435,908

Deposits In escrow 278,102

Total liabilities 793,618

Fund balance:

Restricted 1,103,767

Unassigned 10,599,659

Total fund balance 11 ,703,426

Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets used In governmental activUles are not financial resources and, therefore, are nol reported in the fund.

1.416,069

Some liabilities, including notes payable are not due and payable in the current period and, tnerefore, are nol reported In the fund.

Compensated absences (1 44,000)

Advance from primary government

Net assets of governmental activities • (555,000)

12,420,495


HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE

For the Year Ended September 3D, 2010

REVENUES:

Charges for services $

Bond issuance, redemption and transfer income Rentals Interest and inwstrnenl income

1,063,400 111,496

106,000 761,813

Total revenues 2,042,709

EXPENDITURES:

Personal ser.ices Professional fees General e:wpend ilures

Debt service: Net Principal Reduction Interest

CapitalouUay

582,633 2 19,450 376,896

100,000 26,200

1,387

Total expenditures 1,306,566

Net change in fund balance Fund balance, beginning afrhe )'ear Fund balance, end of )ear $

736,143 10,967,283 11,703,426

Net change In fund balance $

Amounts reported for governmental acti"';!ies In the statement of activities are different because:

Repa;ment of nole principal is an expenditure in the governm ental fund , but the repa~enl reduces long· term liabilities In the statem ent of nel assets. This Is the amount of principal repayments in the current period .

Governmental funds report capital outlays as expenditures. However, in the sta tement of acti\liUes, the cost of those assets is allocated over their estim ated usefulli...es and reported as depreciation eJq:lense . This is the net amount by which depreciation ($48.561) ellCeeds capital acqu isitions ($ 1,387)

Some expenses reported in the statement of acti-.ities d o not require the use of financial resources and therefore ara not reported as e:.cpenditures in governmental funds. This is the amount for compensated absences .

736,143

100,000

(47,174)

(3 1,000)

Cnange in net assets of governmental acli.... lies $ 757,969


HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA NOTES TO FINANCIAL STATEMENTS


NOTE 1-A REPORTING ENTITY

The Housing Finance Authority of Broward County, Florida (the Authority) was established in 1979 by Broward County, Florida (the County) for the purpose of encou raging the investment of private capital and stimulating the construction of residential housing for low and moderate income families through the use of public financing. The Authority's governing board is appointed by the County. Although the County does not have the authority to approve the Authority's budget, the Authority's contracts and negotiated bond issues must be approved by the County_

For financial statement reporting purposes, the Authority is considered a component unit of Ihe reporting entity of the Broward County Board of County Commissioners (the Board) due to the oversight responsibility exercised by the Board and because the public service provided by the Authority is for the benefit of County residents. The Authority is an integral part of the reporting entity and , thus, is included in the Comprehensive Annual Financial Report of the County.

NOTE 1-8 BASIS OF PRESENTATION, BASIS OF ACCOUNTING

Basis of Presentation

These financial statements have been prepared in conformity with reporting guidelines established by the Government Accounting Standards Board ("GASB") and accounting practices prescribed by the Auditor General, State of Florida. As such, the required financial statements used are described below.

Authority-wide financial statements: The statement of net assets and the statement of activities display information about the activities of the Authority using the accrual basis of accounting which is similar to the accounting presentation used by most private-sector companies.

Fund financial statements: The balance sheet and the statement of revenues, expenditures and change in fund balance show the degree to which expenditures are offset by program revenues. The Authority reports in a single fund the General Fund. Program revenues include 1) charges to applicants or bond issues for services provided and 2) rental income. These statements are presented in the traditional govemmental presentation which includes capital outlays as expenditures and excludes depreCiation and certain other non-current assets and liabilities, on a modified accrual basis.

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Measurement Focus

Authority-wide Financial Statements: The Authority follows the accrual basis of accounting for its authority-wide financial statements, and accordingly, recognizes revenues when earned and expenses at the time liabilities are incurred , regardless of when the related cash flows take place. The Authority also distinguishes program revenue and general revenue. Program revenue generally results from providing services in connection with the principal ongoing operations. The principal revenues of the Authority are charges to customers for services and fees for issuance of bonds.

Fund Financial Statements: The fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Authority considers all revenues reported in the General Fund to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred.

NOTE 1-C ASSETS, LIABILITIES AND EQUITY

Budgetary Requirements

The Authority prepares an annual operating budget for its General Fund which is reflected in the required supplementary information following these financial statements. The Authority's budgeting process is based on market feasibility studies and prior year's results and requires that all budgets, the original and any amendments, be approved by the Board of the Housing Finance Author~y of Broward County, Florida. The budget was approved and is presented on the accrual basis of accounting in accordance with GAAP.

Deposits and Investments

The cash balances of substantially all funds are pooled and invested for the purpose of increasing earnings through investment activities. The pooled investments are reported at fair value at September 30, 2010 based on market prices.

Capital Assets

Capilal assets, which include property, plant and equipment, are reported at cos!. Tangible personal property used in the operations of the Authority is recorded in the property records of the County and the Authority. Donated capital assets are recorded at their estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.

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Capital assets are depreciated using the straight-line method over the following estimated useful lives:

Building, structures and improvements 20-40 years Fumiture, fixtures and equipment 3-15 years

Encumbrances

Current year's appropriations are charged for encumbrances when purchase orders are issued . However, at fiscal year-end, only encumbrances relating to capital outlay items, if any, are retained. Appropriations for noncapital outlay items lapse at the end of the fiscal year and the succeeding year's budget is charged for these encumbrances. The encumbered appropriations for capital outlay which are carried forward at year-end are classified as reserved for encumbrances and re-appropriated in succeeding years.

Accrued Vacation and Sick Pay

Employees accumulate vacation and sick pay based on the number of years of continuous service. Upon termination of employment, employees can receive payment for accumulated leave in accordance with Florida Statutes, if they meet certain criteria. The cost of vested vacation and sick pay benefits is recognized when payments are made to employees. A liabili1y for earned but unused sick leave is accrued only to the extent tha1 the leave will result in cash payments at termination. A non-current liability for these accrued vacation and sick pay benefits at September 30, 2010 has been recorded.

Net Assets

Net assets are the resulting difference between the Authority's assets and its liabilities.

Bond Issuance Fees

In connection with the issuance of each housing revenue bond series, the Authority receives from the Bond Trustee an initial issuance fee at the time of issuance and an annual administrative fee each year thereafter in which any portion of the issue remains outstanding.

Issuance Costs

The Authority may elect to pay a commitment fee for single-family bond issues if there are insufficient commitments from lenders at the time of the bond closing. Alternatively, the Authority may elect to reduce the amount of the bond issue. The Authority records these fees as issuance cost expenditures. Reimbursements of these fees from lenders who elect to purchase additional allocations are netted against the fee expenditure if received in the

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For the Year Ended September 30,2010

same fiscal year as the bond's issuance. Any reimbursements received in subsequent years are recorded as miscellaneous revenue and included in other income.

Use of Estimates

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenditures during the reporting period . Actual results CQuid differ from those estimates.

NOTE 2 • CURRENT ASSETS

Restricted Cash

In 2004, the Housing Finance Aulhorrty revised its policies to substitute a $20,000 non· refundable indemnification fee for a $40,000 refundable indemnification fee required of Developers at bond closing. The Housing Finance Authority stated in its policy that it intended to maintain a separate fund with a minimum balance of $500,000. As a result of bond closings subsequent to the change in policy, the lund now totals $278,277 and is segregated from the operating account and on deposit at the Bank of New York. The fund includes Good Faith Deposits of $50,000 which will either be applied to bond issuance or returned to the developer. The liability is shown in Deposits in Escrow on the Balance Sheet and the Statement 01 Net Assets.

Investments

The Authority participates in the County's pooled cash program. Under the program, the County invests the cash of participating entities in, repurchase agreements, certificates of deposit. U.S. Treasury Bills and other U.S. government obligations. Pooled investments are carried at cost plus accrued interest, which approximates market value.

Interest earned on investments is allocated to the various participants based upon their equi1y balance in pooled cash and investments during the allocation period. Investments owned in the pooled cash program are in the name of the County. At September 30, 2010, the Authority had $80,395 in equity in the pool. This amount is included in restricted cash in these financial statements.

The Authority's and the County's investment practices are governed by Chapters 125 and 280 of the Florida Statutes. All time and demand deposits are held in banking institutions approved by the State Treasurer olthe State 01 Florida, to hold public funds. Under Florida Statutes, Chapter 280, "Florida Securi1y for Public Deposits Act,~ the State Treasurer requires all qualified public depositories to deposit wi1h the Treasurer or another banking

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institution eligible collateral having a market value equal to an amount from 50% to 125% of the average daily balance for each month of all public deposits in excess of any applicable deposit insurance held.

The percentage of eligible collateral (generally. U.S. Govemment and agency securities, state or local govemment debt, or corporate bonds) to public deposits is dependent upon the depository's financial history and its financial condition. Any losses to public depositors are covered by applicable deposit insurance, sale of securities pledged as collateral and, if necessary. assessments against other qualified public depositories of the same type as the depository in default. Therefore, for the purpose of disclosure in accordance with Government Accounting Standards Board (GASB) Slatement No. 40, such deposils are fully insured and collateralized and present no custodial risk.

The County's investments are managed by Karpus Investment Management and the assets held at US Bank. Karpus investments are in accordance with Broward County's investment policies as stated in Note 2 of the Broward County Comprehensive Annual Report (CAFR) The CAFR is available at YIWW.broward.org/accounting. The investment policy addresses Interest Rate Risk, Credit Risk, Concentration of Credit Risk and types of investments.

The Authority also invests funds principally in FNMA and FHLMC mortgage-backed securities. The fair value and carrying va lue of investments at September 30, 2010, is summarized as follows:

U.S Treasury and Money Market $ 4,253,823 U.S. Agency Mortgage-Backed Securities 5,869,557 Local Government Debt Obligations 152,236

$ 10,275,616

Notes Receivable

At September 30, 2010, notes receivable consists of the following:

Artspace $ 435,908 Mount Olive Development Corporation 356,156 HFA Mortgage Receivable 11,703

Gulfstream Associates 100,000

Broward County Community Development Corporation, Inc. 200,000

Total $ 1,103,767

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In March , 2009, the Housing Finance Authority ("HFA" enlered into a Pledge and Assignment of Interest in Developer's Fee agreement with Artspace Projects Inc. ("Artspace"), through its wholly owned subsidiary, Historic West Side School, LLC. Under the terms of the agreement, Artspace would lease facilities to Broward County for approximately 39 years. The facilities would house the Historical Commission and Artspace was required to renovate and restore the facilities. The Housing Finance Authority loaned Artspace $428,070 at the Prime rate on the anniversary of the loan and Broward County loaned the Housing Finance Authority $428,070, which is to be repaid as the HFA is repaid by Artspace. Artspace is to make payments to the HFA no later than May 1S1t1 of any year for any Collateral received during the year.

In December, 2004 the Housing Finance Authority modified the terms of two first mortgages on which Mount Olive Development Corporation (~MOOCO") was the mortgagor. Under the terms of the modification, the remaining balance of a $75,000 Mortgage signed on August 21, 1997 was added to the remaining balance of a $400,000 Mortgage signed on July 21,2000. The $75,000 Mortgage was paid in full and under the modified terms of the new note, $5,000 quarterly payments were to be made with the balance due on December 31 , 2011. On October 14, 2009, the Housing Finance Authority Board approved a modification which would provide an additional $88,000 to MOOCO for renovations to the property. Under terms of the modification, the balloon was el iminated, and MOOCO will continue paying $5,000 quarterly until the note is paid in full

The Authority has held a subordinate mortgage of $100,000 from RHF Gulfstream Associates, LTD. since July, 1998. The terms of the loan provide for $6,000 annual interest and repayment in full on July 21,2016. Interest accrued to date is $48,000.

The Authority has held a subordinate mortgage of $200,000 since August, 2003 from Broward County Community Development Corporation. The terms of the agreement provide for repayment in full in August 2018.

Other Receivables

At September 30, 2010, other receivables consist of the following:

Authority fees $ 367,Q68 Audit fees receivable 12,643 Other receivables 1,925 Interest receivable 48,000

Total $ 429,636

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NOTE 3 - CAPITAL ASSETS

The following is a summary of changes in capital assets for the year ended September 30, 2010:

Beginning Ending Balances Increases Decreases Balances 10/01109 9/30/10

Capita l assets not being depreciated: Land $ 653,104 $ $ $ 653,104

Total capital assets not being depreciated: 653,104 653,104

Capita l assets being depreciated: Bu ildings 1,11 5,000 1,1 15,000 Equipment 257,369 1,387 21,472 237,284

Total capital assets being depreciated: 1,372,369 1,387 21,472 1,352,284

Less accumulated depreciation for:

Buildings 414,175 27,875 442,050 Equipment 148,055 20,686 21,472 147,269

Total accumulated depreciation 562,230 48,561 21,472 589,319

Total capital assets being depreciated, net 810,139 (47,174) 762,965

Cap ital assets, net $ 1,463,243 $ (47,174) $ $ 1,416,069

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NOTE 4 -INTERFUND BALANCES AND ACTIVITY

Charges from the County for services provided to the Authority totaled approximately $879,000 during the year ended September 30, 2010. These services included office staff, attorney, auditing and printing services. The Authority utilizes the self-insurance program of the County for worker's compensation, group health, general and auto liability insurance.

NOTE 5 - DEPOSITS IN ESCROW

In 2004, the Housing Finance Authority revised its policies to substitute a $20,000 nonrefundable indemnification fee for a $40,000 refundable indemnification fee required of Developers at bond closing. The Housing Finance Authority stated in its policy that it intended to maintain a separate fund with a minimum balance of $500,000. As a result of bond closings subsequent to the change in policy, the fund now totals $278,102 and is segregated from the operating account and on deposIT at the Bank of New York. The fund includes Good Faith Deposits of $50,000 which will either be appl ied to bond issuance or returned to the developer. The liability is shown in Deposits in Escrow on the Balance Sheet and the Statement of Net Assets.

NOTE 6 - SHORT-TERM DEBT

Notes Payable to Primary Government

Line of Credit

In order to preserve single-family bond issuance capacity in October, 2002, the Authority obtained a line of credit with Federal Home Loan bank at a cost of 7-1/2 basis pOints. There is currently no balance on the Line. Proceeds from a borrowing are used to redeem bonds from the Authority's prior single family issues which would otherwise have been redeemed with principal payments, mortgage sale proceeds or other sources of funds. The credit facility allows the Authority to issue refunding bonds to provide new below·market mortgage loans. The proceeds of such refunding bonds are the source of repayment of the line of credit. This credit facility protects the Authority from negative arbitrage (the difference between interest received and interest paid) which would be incurred in periods of declining interest rates. The line of credit is renewed annually for a one-year term.

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NOTE 7 - LONG-TERM OBLIGATIONS

On March 15, 1995, a loan was secured from the County in the amount of $1.5 million to acquire a building. On April 16, 1997, the note to the County was refinanced wnh 1997 bonds in the amount 01$1 ,650,000. The bonds were refinanced on April 17, 2007 and the refunding resulted in a reduction of interest rate to 4% and a $175,000 reduction of debt owed to Broward County by the HFA.

At September 30, 2010, the amount owed was $555,000. Principal payments are made annually and interest is paid semi-annually with final payment due July 2015.

The changes in long term debt obligations for the year ended September 30, 2010, are summarized as follows:

Beginning Ending Due Balances Ba lances Within

10/1/09 Increases Decreases 9/30/10 one year

Broward County Promissory Note S 655,000 S S 100,000 S 555,000 S 100,000

Compensated Absences 113,000 31,000 144,000 46,000

Total S 768,000 S 31,000 $ 100,000 $ 699,000 $ 146,000

The debt service requirement for the note outstanding as of September 30, 201 D, is as follows:

Year ending September 30, Principal Interest

2011 100,000 22,200 2012 110,000 18,200 2013 110,000 13,800 2014 110,000 9,400 2015 125,000 5,000

$ 555,000 ,;:;$=~6:::;8,:::;60~0;,.

Conduit Debt Obligations

From time to time, the Authority has issued Housing Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and constru ction of residential housing facilities deemed to be in the public interest. The bonds are collaterilized by the

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property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the Authority, the County, the State of Ftorida (the State), nor any politicat subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in these financial statements.

As of September 3D, 2010, there were forty-eight series of Housing Revenue Bonds outstanding. with an aggregate principal amount of $546.1 million.

NOTE 8 - CONTRIBUTIONS TO PENStON PLAN

All employees of the Authority are employees of the County and, as such, participate in the Florida Retirement System ("FRS"), a cost-sharing , multiple-employer Public Employee Retirement System ("PERS"), which covers substantially all permanent full and part-time County employees. The FRS is non-contributory and is totally administered by the State.

Benefits are computed on the basis of age, average fina lcompensation and service credit. Average final compensation is the average of the five highest fiscal years of eamings. Prior to July 1, 2001 , the FRS provided vesting of benefits after ten years (eight for Elected State Officers' Class officials) of creditable service. Effective July 1, 2001, the FRS provides vesting of benefits after six years of creditable service for all members. Early retirement may be taken any time after vesting; however, there is a 5% benefit reduction for each year prior to normal retirement age or date. The FRS also provides death and disability benefits. Benefits are established by State statute.

FRS issues an annual financial report. A copy can be obtained by sending a written request to:

Division of Retirement Cedars Executive Center, Bldg. C

2639 North Monroe Street Tallahassee, Florida 32399-1560

The Authority's required contribution rate is established by State statute. Effective July 1st,

the contribution rate for employees was 10.77% of covered payroll, compared with 9.85% for the two previous fiscal years .. The required contribution by the Authority to the FRS for the fiscal year ended September 30, 2010, was approximately $47,524 compared to $68,000 for the year ended September 30, 2009, and $60,000 for the year ended September 30, 2008. The contribution is determined by taking the blended rate in effect for the fiscal year multiplied by the salary expense. Payroll cost declined this fiscal year, resulting in a lower contribution.

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HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION

September 30, 2010

HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA BUDGET COMPARISON SCHEDULE


Variance with Final Budgel

Positive Budgeted Amounts Actual Amounts (Negative)

Original Final REVENUES:

Charges for services $ 1,210,200 $ 1,210,200 $ 1,174,896 $ (35,304) Rental income 106,000 106,000 106,000 Interest and Investment income 200,000 200,000 76 1,813 561,813

Total revenues 1,516,200 1,516,200 2,042,709 526,509

EXPENDITURES: Personal services 776,840 776,840 582,633 194,207 Professional fees 247,000 247,000 219,450 27,550 General expenditures 358,260 358,260 376,896 (18,636)

Debt servi ce: Principal 100,000 100,000 100,000 Interest 28,100 28,100 26,200 1,900 Capita l outlay 6,000 6,000 1,387 4,613

Total expenditures 1,516,200 1,516,200 1,306,566 209,634

Net change in fund balance 736,143 736,143

Fund balance, beginning of the year 10,967,283 10,967,283 10,967,283 Fund balance, end of year $ 10,967,283 $ 10,967,283 $ 11,703,426 $ 736,143

See notes to budget comparison schedule.

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HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA NOTES TO BUDGET COMPARISON SCHEDULE


NOTE 1- BUDGETARY REQUIREMENTS

The Broward County Housing Finance Authority prepares an annual operating budget for the general fund which is included in these financial statements.

Budgets are prepared on the same basis of accounting as required for Governmental Fund Types. Expenditures may exceed the approved budget amounts for Individual categories as long as the total does not exceed the approved budget. Unencumbered appropriations within the General Fund lapse at year-end.

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----------------- ------------------------ --

MOORE STEPHENS LOVELACE, P.A.

CI'lITItI1Ell PUBUC J·.(XX)O:-IT~

REPORT OF INDEPENDE:'<T CERTIFIED PUBLIC ACCOUNTANTS ON INTERl'AL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

WJTR GOVERNMENTAUDITING STANDARDS

To the Board of Dire<:tors Housing Finance Authori ty


We have audited the fi nancial statements afthe governmemal activities afthe Housing Finance Authority of Bro.....nrd County, Florida (the "Authority'"), as of and for the year ended September 30, 2010, and have issued our report thereon dated February 3, 20 11. We conducted our audit in accordance with auditing standards generally accepted in the United Srates of America and the standards applicable to financial audits contained in Government Auditing Stalldards, issued by the Comptroller Geneml of the Uni led States.

Internal Control over Financial Reporting

In planning and perfonning our audit, we considered the Authority'S internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control over financia l reporting. Accordi ngly, we do not express an op inion on the effectiveness or the Authority's internal control over financial reporting.

A deficiency ill infernal control exists when the design or operation of a control does not allow management or employees, in the normal course of perfonning their ass igned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a defi ciency, or combination of defi ciencies, in internal control, such that there is a reasonab le possibi li ty that a material misstatement orlhe ent ity's financial statements will not be prevented, or detected and corrected on a timely basis.

Our cons ideration of internal conuol over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all defic iencies in internal contro l over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identity any defic·iencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

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To the Board of Directors Housing Finance Authori ty


Compliance and Otlle, MatteI'S

As part of obtain ing reasonable assurance about whether the Authority's financial statements are free of material misstatement, we perfonned tests of its compliance with certain provisions of laws, regu lations, and contracts, noncompliance with which could have a direct and material effect on the determi nation of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accord ingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are requi red to be reported under Governmem Audi(ing Standards.

This report is intended solely for the information and use of the Authority's Board of Commissioners, management, and the State of Florida Auditor General and is not intended to be, and should not be, used by anyone other than these specified parties.


Orlando, Florida February 3, 201 1

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MOORE SfEPHENS LOVELACE, P.A.

CElITIFlEV PU8WCAO.."OUS'!'ANTS

INDEPENDE1\"T AUDITOR'S MANAGEMENT LETTER



We have audi ted the fi nancial statements of the governmental activities of the Housing Finance Authority ofBroward County, Florida (the "Authority"), as of and for the year ended September 30, 201 O. and have issued our report thereon dated February 3, 201 I.

We conducted OUf audit in accordance with auditing standards generally accepted in the Uni ted States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Report of Independent Certified Pub lic Accountants on lnlemal Contro l Over Financial Reponing and Compliance and Other Matters. Disclosures in that report, which is dated February 3. 20 11, should be cons idered in conj unction w ith this management letter.

Additi onally, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the state of Florida. This letter includes the following infonnation, which is not included in the aforementioned auditor's repon:

j;. Section 10.554(1 )( i)l., Rules of the Auditor General, requires that we detennine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no prior year findings reported by the prior auditor.

j;. Section 10.554( 1 )(i)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section 2 18.4 15, Florida Statutes, regarding the investmen t of public funds. In connection with our audit, we determined that the Authority complied with Secti on 218 .41 5, Florida Statutes .

» Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit. we did not have any such recommendations.

)00 Section 10.554(I)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts or grant agreements. or abuse, that have occurred, or likely to have occurred, that have an e ffect on the financial statements that is less than material but not more than inconsequential. in connection with our aud it., we did not have any such frndings.

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To the Soard of Directors Housing Finance Authority

Sroward County, Florida

)- Section 1O.554(I)(i)5., Rules orthe Auditor General, provides thai the auditor, based on professional judgment, report the fo llowing matters that have an inconsequential effect on financial statements, considering both quant itat ive and qualitative factors: (I) violations of provisions of contracts or grant agreements. fraud, illegal acts, or abuse, and (2) deficiencies in internal contro l that are not significant deficiencies. In connection with our audit, we did not have any such findings.

)- Section 1O.554(1)(i)6. , Rules of the Auditor General, requires that the name or officia l title and legal authority fo r the primary government and each component unit of the reporting entity be disclosed in this management leiter, unless disclosed in the notes to the financial statements. The legal authority is disclosed in the notes to the fi nancial statements.

Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distri bution is not limited. Aud iting standards generany accepted in the United States of America require us to indicate that this letter is intended sole ly fo r the informati on and use orlhe Authority's management and the State of Florida Auditor General and is not intended to be, and should nol be, used by anyone other than these specified parties.


Orlando, Florida February 3, 201 1

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